EXHIBIT 99(e)(2)
PARTICIPANT AGREEMENT
This Participant Agreement (the "Agreement") is entered into by and
between ALPS Distributors, Inc. (the "Distributor"), The Bank of New York, as
transfer agent (the "Transfer Agent") and ____________________________________ (
the "Participant") and is subject to acceptance by Sector Funds Trust (the
"Trust"). The Distributor has been retained to provide certain services with
respect to acting as principal underwriter of the Trust in connection with the
creation and distribution of shares of series of the Trust (each a "Fund" and
together, the "Funds"). The Transfer Agent has been retained to provide certain
services with respect to the creation and redemption of shares of the Funds. As
specified in the Trust's prospectus and Statement of Additional Information
(together, the "Prospectus"), shares of each Fund may be created or redeemed
only in aggregations of _______ shares, referred to therein and herein as a
"Creation Unit". The Prospectus provides that Creation Units shall be issued in
exchange for a Fund Deposit delivered by the Participant on behalf of the
investor (which may be the Participant) to the Trust. The Prospectus also
provides that Creation Units shall be redeemed in exchange for Fund Securities
and an amount of cash. Capitalized terms not otherwise defined herein are used
herein as defined in the Prospectus.
This Agreement is intended to set forth certain premises and the
procedures by which the Participant may create and/or redeem Creation Units (i)
through the Continuous Net Settlement ("CNS") clearing process of NSCC as such
processes have been enhanced to effect creations and redemptions of Creation
Units, such processes being referred to herein as the "Clearing Process", or
(ii) outside the Clearing Process (i.e., through the facilities of The
Depository Trust Company ("DTC"). The parties hereto in consideration of the
premises and of the mutual agreements contained herein agree as follows:
1. Status of Participant. The Participant hereby represents, covenants and
warrants that (i) with respect to orders for the creation or redemption
of Creation Units by means of the Clearing Process, it is a member of
NSCC and a participant in the CNS System of NSCC (as defined in the
Prospectus, a "Participating Party"); and (ii) with respect to orders
for the creation or redemption of Creation Units outside the Clearing
Process, it is a DTC Participant (as defined in the Prospectus, a "DTC
Participant"). The Participant may place orders for the creation or
redemption of Creation Units either through the Clearing Process or
outside the Clearing Process, subject to the procedures for creation
and redemption referred to in paragraph 2 of this Agreement ("Execution
of Orders"). Any change in the foregoing status of Participant shall
terminate this Agreement and Participant shall give notice to the
Distributor, Transfer Agent and the Trust of such change.
2. Execution of Orders. All orders for the creation or redemption of
Creation Units shall be handled by each party hereto in accordance with
the terms of the Prospectus and the procedures described in Attachment
A to this Agreement. Each party hereto agrees to comply with the
provisions of such documents to the extent applicable to it. In the
event the procedures include the use of recorded telephone lines, the
Participant hereby consents to such use. The Trust reserves the right
to issue additional or other procedures relating to the manner of
creating or redeeming Creation Units and the Participant, the Transfer
Agent and the Distributor each agrees to comply with such procedures as
may be issued from time to time.
-1-
3. NSCC. Solely with respect to orders for the creation or redemption of
Creation Units through the Clearing Process, the Participant as a
Participating Party hereby authorizes the Transfer Agent to transmit to
NSCC on behalf of the Participant such instructions, including share
and cash amounts as are necessary with respect to the creation and
redemption of Creation Units consistent with the instructions issued by
the Participant to the telephone representative of the Distributor for
purchases and the telephone representative of the Transfer Agent for
redemption. The Participant agrees to be bound by the terms of such
instructions issued by the Transfer Agent (or the Distributor on behalf
of the Trust) and reported to NSCC as though such instructions were
issued by the Participant directly to NSCC.
4. Role of Participant. The Participant shall have no authority in any
transaction to act as agent of the Distributor, Transfer Agent or the
Trust.
5. Fees. In connection with the creation or redemption of Creation Units,
the Trust shall charge and the Participant agrees to pay on behalf of
the investor to the Trust the Transaction Fee prescribed in the
Prospectus applicable to creation or redemption through the Clearing
Process, or the Transaction Fee and such additional fee as may be
prescribed pursuant to the Prospectus applicable to creation or
redemption outside the Clearing Process. The Trust reserves the right
to adjust the Transaction Fee subject to any limitation as prescribed
in the Prospectus.
6. Authorized Persons. Concurrently with the execution of this Agreement
and from time to time thereafter, the Participant shall deliver to the
Distributor, the Transfer Agent and the Trust, duly certified as
appropriate by its secretary or other duly authorized official, a
certificate, in the form set forth in Attachment B, setting forth the
names and signatures of all persons authorized to give instructions
relating to activity contemplated hereby or any other notice, request
or instruction on behalf of the Participant (each an "Authorized
Person"). Such certificate may be accepted and relied upon by the
Distributor and the Trust as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect until
delivery to the Distributor and the Trust of a superseding certificate
bearing a subsequent date. The Distributor shall issue to each
Authorized Person a unique personal identification number ("PIN
Number") by which such Authorized Person and the Participant shall be
identified and instructions issued by the Participant hereunder shall
be authenticated. Upon the termination or revocation of authority of
such Authorized Person by the Participant, the Participant shall give
immediate written notice of such fact to the Distributor and the Trust
and such notice shall be effective upon receipt by the Distributor and
the Trust.
-2-
7. Redemption. The Participant represents and warrants that it will not
obtain an Order Number (as described in Attachment A) for the purpose
of redeeming a Creation Unit unless it or the party for which it is
acting, as the case may be, first owns the requisite number of shares
to be redeemed as a Creation Unit.
8. Beneficial Ownership. The Participant represents and warrants to the
Distributor, Transfer Agent and the Trust that it does not hold for the
account of any single Beneficial Owner of shares of the given Fund 80
percent (80%) or more of outstanding shares of the Fund such as to
cause the Fund to have a basis in the Deposit Securities deposited with
the Trust different from the market value of such Deposit Securities on
the date of such deposit, pursuant to Section 351 of the Internal
Revenue Code. The Transfer Agent shall have the right to require
information from the Participant regarding share ownership, and to rely
thereon to the extent necessary to make a determination regarding
ownership of 80 percent (80%) or more of outstanding shares by a
Beneficial Owner as a condition to the acceptance of a Fund Deposit.
9. Indemnification. The Participant hereby agrees to indemnify and hold
harmless the Distributor, Transfer Agent and the Trust and their
respective subsidiaries, affiliates, directors, officers, employees and
agents (each an "Indemnified Party") from and against any loss,
liability, cost and expense incurred by such Indemnified Party as a
result of (i) any breach by the Participant of any provision of this
Agreement; or (ii) any actions of such Indemnified Party in reliance
upon any instructions issued in accordance with Attachment A (as may be
amended from time to time) believed by the Distributor and/or Trust to
be genuine and to have been given by the Participant. This paragraph
shall survive the termination of this Agreement.
10. Additional Payment on Redemption. In the event that the Participant
receives Fund Securities the value of which exceeds net asset value at
the time of redemption, the Participant agrees to pay, or cause the
beneficial owner(s) of the shares redeemed to pay, to the Trust an
amount in cash equal to the difference.
11. Acknowledgment. The Participant acknowledges receipt of the Prospectus
and represents it has reviewed such document and understands the terms
thereof. The Distributor agrees to process orders for creation in
accordance with the provisions of the Prospectus. The Transfer Agent
agrees to process orders for redemptions in accordance with the
provisions of the Prospectus.
12. Notices. Except as otherwise specifically provided in this Agreement,
all notices required or permitted to be given pursuant to this
Agreement shall be given in writing and delivered by personal delivery
or by postage prepaid registered or certified United States first class
mail, return receipt requested, or by telex, telegram or facsimile or
similar means of same day delivery (with a confirming copy by mail as
provided herein). Unless otherwise notified in writing, all notices to
the Trust shall be given or sent as follows: ALPS Mutual Funds
Services, Inc., 000 00xx Xxxxxx, Xxxxx 0000, Xxxxxx, XX 00000, Attn.:
General Counsel.
-3-
All notices to the Participant and the Distributor or the Transfer
Agent, as the case may be, shall be directed to the address or
telephone, facsimile or telex numbers indicated below the signature
line of such party.
13. Termination and Amendment. This Agreement shall become effective in
this form as of the date accepted by the Trust and may be terminated at
any time by any party upon thirty days prior notice to the other
parties (i) unless earlier terminated by the Trust in the event of a
breach of this Agreement or the procedures described herein by the
Participant or (ii) in the event that the Trust is terminated pursuant
to the Trust's Declaration of Trust, dated April 4, 2000. This
Agreement supersedes any prior such agreement between the parties. This
Agreement may be amended by the Trust from time to time by the
following procedure. The Trust will mail a copy of the amendment to the
Distributor, the Transfer Agent and the Participant. If neither the
Distributor, the Transfer Agent nor the Participant objects in writing
to the amendment within ten days after its receipt, the amendment will
become part of this Agreement in accordance with its terms.
14. Counterparts. This Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all shall
constitute but one and the same instrument.
15. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York.
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of this ____day in the year _____
ALPS MUTUAL FUNDS SERVICES, INC.
BY:
------------------------------------
TITLE:
----------------------------------
ADDRESS:
---------------------------------
TELEPHONE:
------------------------------
FACSIMILE:
------------------------------
TELEX:
----------------------------------
__________________________ (Participant)
BY:
------------------------------------
TITLE:
----------------------------------
ADDRESS:
---------------------------------
TELEPHONE:
------------------------------
FACSIMILE:
------------------------------
TELEX:
----------------------------------
ACCEPTED BY:
SECTOR FUNDS TRUST
BY:
-------------------------------------
TITLE:
----------------------------------
-5-
ATTACHMENT A
This document supplements the Prospectus with respect to the procedures
to be used by (i) the Distributor in processing an order for the creation of
Creation Units of the Trust (each a "Fund") and (ii) the Transfer Agent in
processing an order for redemption of Creation Units.
A Participant is required to have signed the Participant Agreement.
Upon acceptance of the Participant Agreement by the Trust, the Distributor will
assign a personal identification number to each Authorized Person authorized to
act for the Participant. This will allow a Participant through its Authorized
Person(s) to place an order with respect to Creation Units.
TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF CREATION UNITS
1. Call to Receive an Order Number. For creations, an Authorized Person
for the Participant will call the telephone representative at
____________ not later than the closing time of the regular trading
session on the New York Stock Exchange (the "NYSE Closing Time")
(ordinarily 4:00 p.m. New York time) to receive an Order Number. For
redemptions, an Authorized Person for the Participant will call the
telephone representative at ___________ not later than the NYSE Closing
Time to receive an Order Number.
Upon verifying the authenticity of the caller (as determined by the use
of the appropriate PIN Number) and the terms of the order, the
telephone representative will issue a unique Order Number. All orders
with respect to the creation or redemption of Creation Units are
required to be in writing and accompanied by the designated Order
Number. Incoming telephone calls are queued and will be handled in the
sequence received. Calls placed before the NYSE Closing Time will be
processed even if the call is taken after this cut-off time.
ACCORDINGLY, DO NOT HANG UP AND REDIAL. INCOMING CALLS THAT ARE
ATTEMPTED LATER THAN THE NYSE CLOSING TIME WILL NOT BE ACCEPTED.
NOTE THAT THE TELEPHONE CALL IN WHICH THE ORDER NUMBER IS ISSUED
INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN
ORDER IS ONLY COMPLETED AND PROCESSED UPON RECEIPT OF WRITTEN
INSTRUCTIONS CONTAINING THE DESIGNATED ORDER NUMBER AND PIN NUMBER AND
TRANSMITTED BY FACSIMILE OR TELEX (the "Order").
2. Place the Order. An Order Number is only valid for a limited time. The
Order for creation or redemption of Creation Units must be sent by
facsimile or telex to the telephone representative within 20 minutes of
the issuance of the Order Number. In the event that the Order is not
received within such time period, the telephone representative will
attempt to contact the Participant to request immediate transmission of
the Order. Unless the Order is received by the telephone representative
upon the earlier of (i) within 15 minutes of contact with the
Participant or (ii) 45 minutes after the NYSE Closing Time, the order
will be deemed invalid.
3. Await Receipt of Confirmation.
A. Clearing Process. The Distributor (in the case of creations)
or the Transfer Agent (in the case of redemptions) shall issue
a confirmation of Order acceptance within 15 minutes of its
receipt of an Order received in good form. In the event the
Participant does not receive a timely confirmation from the
Distributor or the Transfer Agent, it should contact the
telephone representative at the business number indicated.
B. Outside the Clearing Process. In lieu of receiving a
confirmation of Order acceptance, the DTC Participant will
receive an acknowledgment of Order acceptance. The DTC
Participant shall deliver on trade date plus one the Deposit
Securities and Cash Component (in the case of creations) or
the Creation Unit size aggregation of shares (in the case of
redemptions) to the Trust through DTC. The Trust shall settle
the transaction within three (3) Business Days.
4. Ambiguous Instructions. In the event that an Order contains terms that
differ from the information provided in the telephone call at the time
of issuance of the Order Number, the telephone representative will
attempt to contact the Participant to request confirmation of the terms
of the order. If an Authorized Person confirms the terms as they appear
in the Order then the order will be accepted and processed. If an
Authorized Person contradicts its terms, the Order will be deemed
invalid and a corrected Order must be received by the telephone
representative not later than the earlier of (i) within 15 minutes of
such contact with the Participant or (ii) 45 minutes after the NYSE
Closing Time. If the telephone representative is not able to contact an
Authorized Person, then the Order shall be accepted and processed in
accordance with its terms notwithstanding any inconsistency from the
terms of the telephone information. In the event that an Order contains
terms that are illegible, as determined in the sole discretion of the
Distributor (in the case of creations) or the Transfer Agent (in the
case of redemptions), the Order will be deemed invalid and the
telephone representative will attempt to contact the Participant to
request retransmission of the Order. A corrected Order must be received
by the telephone representative not later than the earlier of (i)
within 15 minutes of such contact with the Participant or (ii) 45
minutes after the NYSE Closing Time.
5. Processing an Order. The Distributor reserves the right to suspend. an
Order in the event that its acceptance would appear to result in the
Participant or a Beneficial Owner owning 80 percent (80%) or more of
all outstanding shares of the Fund. In such event, the telephone
representative will attempt to contact an Authorized Person for
purposes of confirmation of the fact that with respect to such
Participant no Beneficial Owner would own 80 percent (80%) or more of
all outstanding shares of the Fund upon execution of the Order. In the
event that (i) the telephone representative is unable to contact an
Authorized Person or (ii) the Participant fails to transmit an
identical Order containing a representation and warranty as to such
fact, then the Order shall be deemed invalid.
6. Creation of Creation Units Prior to Receipt of Deposit Securities.
Creation Units may be created in advance of receipt by the Trust of all
or a portion of the applicable Deposit Securities, provided that the
Participant deposits an initial deposit of cash with the Trust having a
value greater than the net asset value of the shares on the date the
order is placed in proper form. In addition to available Deposit
Securities, cash must be deposited in an amount equal to the sum of (i)
the Cash Component, plus (ii) 115% of the market value of the
undelivered Deposit Securities (the "Additional Cash Deposit"). The
order shall be deemed to be received on the Business Day on which the
order is placed provided that the order is placed in proper form prior
to 4:00 p.m. eastern time such date and federal funds in the
appropriate amount are deposited with the Trust's Custodian by 11:00
a.m. eastern time the following Business Day. If the order is not
placed in proper form by 4:00 p.m. eastern time or federal funds in the
appropriate amount are not received by 11:00 a.m. eastern time the next
Business Day, then the order may be deemed to be rejected and the
investor shall be liable to the Trust for losses, if any, resulting
therefrom. An additional amount of cash shall be required to be
deposited with the Trust, pending delivery of the missing Deposit
Securities to the extent necessary to maintain an amount of cash on
deposit with the Trust at least equal to 115% of the daily marked to
market value of the missing Deposit Securities. To the extent that
missing Deposit Securities are not received by 1:00 p.m. eastern time
on the third Business Day following the day on which the purchase order
is deemed received by the Distributor or in the event a xxxx to market
payment is not made within one Business Day following notification by
the Distributor that such a payment is required, the Trust may use the
cash on deposit to purchase the missing Deposit Securities. The
Participant will be liable to the Trust for the costs incurred by the
Trust in connection with any such purchases. These costs will be deemed
to include the amount by which the actual purchase price of the Deposit
Securities exceeds the market value of such Deposit Securities on the
day the purchase order was deemed received by the Distributor plus the
brokerage and related transaction costs associated with such purchases.
The Trust will return any unused portion of the Additional Cash Deposit
once all of the missing Deposit Securities have been properly received
by the Custodian or purchased by the Trust and deposited into the
Trust. In addition, a transaction fee of $4,000 will be charged in all
cases. The delivery of Creation Units so created will occur no later
than the third Business Day following the day on which the purchase
order is deemed received by the Distributor.
ATTACHMENT B
The following individuals are Authorized Persons pursuant to Section 6
of the Participant Agreement between ALPS Mutual Funds Services, Inc., and
_______ ____________________:
Name Signature
1)
------------------------------- -----------------------------------
2)
------------------------------- -----------------------------------
3)
------------------------------- -----------------------------------
4)
------------------------------- -----------------------------------
5)
------------------------------- -----------------------------------
6)
------------------------------- -----------------------------------
7)
------------------------------- -----------------------------------
8)
------------------------------- -----------------------------------
[ ]
By: -------------------------------
