EXHIBIT (D)(2)
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/DOW XXXXX ETHICAL MARKET 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
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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.
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(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.
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(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
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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.
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(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.
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(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. RIGHTS TO THE USE OF THE DOW XXXXX ISLAMIC INDEX. The Fund
acknowledges that the Adviser holds a license from the Dow Xxxxx with respect to
the use of the Dow Xxxxx Market Extra Liquid Index, a sub-index of the Dow Xxxxx
Islamic Market Index, and that this Agreement does not grant any rights to the
Fund in that License. To the extent this Agreement is terminated, the Fund will
have no further rights to the use of that license and agrees to immediately take
steps to discontinue use thereof.
18. 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.
19. 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.
20. 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.
21. 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.
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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/Dow Xxxxx Ethical Market Fund
By: By:
------------------------- -------------------------
Xxx Xxxx Xxxxxx Xxxxx
President President
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SCHEDULE A
ANNUAL FEE RATE
Azzad/Dow Xxxxx Ethical Market Fund Fund: 1.00% of average daily net assets
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