AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 28th day of October, 1997 and amended as of
February 18, 1998 and amended and restated as of October 15, 1999, January 24,
2000, May 5, 2000, August 24, 2000, and November __, 2000 between ProFunds, a
Delaware business trust (the "Trust"), and ProFund Advisors LLC, a Maryland
limited liability company (the "Advisor"). WHEREAS, the Advisor is registered as
an investment adviser under the Investment Advisers Act of 1940, as amended, and
is engaged principally in the business of rendering investment management
services; and
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended, (the"1940 Act");
and WHEREAS, the Trust is authorized to issue shares of beneficial interest
("shares") in separate series with each such series representing interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Trust currently offers sixty-eight series of shares, and
may offer additional portfolios in the future; and
WHEREAS, the Trust desires to retain the services of the Advisor to
provide a continuous program of investment management for the following
portfolios of the Trust: Bull ProFund, UltraBull ProFund, Bear ProFund,
UltraBear ProFund, Ultra OTC ProFund, UltraShort OTC ProFund, UltraEurope
ProFund, ProFund VP Bull, ProFund VP UltraBull, ProFund VP UltraOTC, ProFund VP
Europe 30, ProFund VP UltraEurope, ProFund VP SmallCap, ProFund VP Bear, ProFund
VP UltraBear, ProFund VP UltraShort OTC, ProFund VP UltraShort Europe, ProFund
VP Money Market, UltraSmall-Cap ProFund, UltraMid-Cap ProFund, UltraJapan
ProFund, Airline UltraSector ProFund, Banking UltraSector ProFund, Basic
Materials UltraSector ProFund, Biotechnology UltraSector ProFund, Consumer
Cyclical UltraSector ProFund, Consumer Non-Cyclical UltraSector ProFund, Energy
UltraSector ProFund, Entertainment and Leisure UltraSector ProFund, Financial
UltraSector ProFund, Healthcare UltraSector ProFund, Industrial UltraSector
ProFund, Internet UltraSector ProFund, Oilfield Equipment and Services
UltraSector ProFund, Pharmaceuticals UltraSector ProFund, Precious Metals
UltraSector ProFund, Real Estate UltraSector ProFund, Semiconductor UltraSector
ProFund, Technology UltraSector ProFund, Telecommunications UltraSector ProFund,
Utilities UltraSector ProFund, Wireless Communications UltraSector ProFund, OTC
ProFund, ProFund VP OTC, ProFund VP Small-Cap, ProFund VP Japan, Airlines Sector
ProFund VP, Banking Sector ProFund VP, Basic Materials Sector ProFund VP,
Biotechnology Sector ProFund VP, Consumer Cyclical Sector ProFund VP, Consumer
Non-Cyclical Sector ProFund VP, Energy Sector ProFund VP, Entertainment and
Leisure Sector ProFund VP, Financial Sector ProFund VP, Healthcare Sector
ProFund VP, Industrial Sector ProFund VP, Internet Sector ProFund VP, Oilfield
Equipment and Services Sector ProFund VP, Pharmaceuticals Sector ProFund VP,
Precious Metals Sector ProFund VP, Real Estate Sector ProFund VP, Semiconductor
Sector ProFund VP, Technology Sector ProFund VP, Telecommunications Sector
ProFund VP, Utilities Sector ProFund VP and the Wireless Communications Sector
ProFund VP (each referred to hereinafter as a "Portfolio" and collectively as
the "Portfolios"); and
WHEREAS, the Advisor is willing, in accordance with the terms and
conditions hereof to provide such services to the Trust on behalf of such
Portfolios.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and intending to be legally bound hereby, it is agreed between the
parties as follows:
1. APPOINTMENT OF ADVISOR
----------------------
The Trust hereby appoints Advisor to provide the advisory services set
forth herein to the Portfolios and Advisor agrees to accept such appointment and
agrees to render the services set forth herein for the compensation herein
provided. In carrying out its responsibilities under this Agreement, Advisor
shall at all times act in accordance with the investment objectives, policies
and restrictions applicable to the Portfolios as set forth in the then-current
Registration Statement of the Trust, applicable provisions of the 1940 Act and
the rules and regulations promulgated thereunder and other applicable federal
securities laws and regulations.
2. DUTIES OF ADVISOR
-----------------
Advisor shall provide a continuous program of investment management
for each Portfolio. Subject to the general supervision of the Trust's Board of
Trustees, Advisor shall have sole investment discretion with respect to the
Portfolios, including investment research, selection of the securities to be
purchased and sold and the portion of the assets of each Portfolio, if any, that
shall be held uninvested, and the selection of broker-dealers through which
securities transactions in the Portfolios will be executed. Advisor shall manage
the Portfolios in accordance with the objectives, policies and limitations set
forth in the Trust's current Prospectus and Statement of Additional Information.
Specifically, and without limiting the generality of the foregoing, Advisor
agrees that it will:
(a) promptly advise each Portfolio's designated custodian bank and
administrator or accounting agent of each purchase and sale, as the case
may be, made on behalf of the Portfolio, specifying the name and quantity
of the security purchased or sold, the unit and aggregate purchase or sale
price, commission paid, the market on which the transaction was effected,
the trade date, the settlement date, the identity of the effecting broker
or dealer and/or such other information, and in such manner, as may from
time to time be reasonably requested by the Trust;
(b) maintain all applicable books and records with respect to the
securities transactions of the Portfolio. Specifically, but without
limitation, Advisor agrees to maintain with respect to each Portfolio those
records required to be maintained under Rule 31a-1(b)(1), (b)(5) and (b)(6)
under the 1940 Act with respect to transactions in each Portfolio
including, without limitation, records which reflect securities purchased
or sold in the Portfolio, showing for each such transaction, the market on
which the transaction was effected, the trade date, the settlement date,
and the identity of the executing broker or dealer. Advisor will preserve
such records in the manner and for the periods prescribed by Rule 31a-2
under the 1940 Act. Advisor acknowledges and agrees that all such records
it maintains for the Trust are the property of the Trust and Advisor will
surrender promptly to the Trust any such records upon the Trust's request;
(c) provide, in a timely manner, such information as may be reasonably
requested by the Trust or its designated agents in connection with, among
other things, the daily computation of each Portfolio's net asset value and
net income, preparation of proxy statements or amendments to the Trust's
registration statement and monitoring investments made in the Portfolio to
ensure compliance with the various limitations on investments applicable to
the Portfolio, to ensure that the Portfolio will continue to qualify for
the tax treatment accorded to regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and to ensure that the Portfolios that serve as the investment medium for
variable insurance contracts are managed in conformity with the
requirements of Section 817 of the Code and Treasury Regulatory subsection
1.817-5 thereunder (or any successor or amended provision);
(d) render regular reports to the Trust concerning the performance by
Advisor of its responsibilities under this Agreement. In particular,
Advisor agrees that it will, at the reasonable request of the Board of
Trustees, attend meetings of the Board or its validly constituted
committees and will, in addition, make its officers and employees available
to meet with the officers and employees of the Trust at least quarterly and
at other times upon reasonable notice, to review the investments and
investment programs of the Portfolio;
(e) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations for the
Portfolios, the Advisor's personnel will not inquire or take into
consideration whether the issuers of securities proposed for purchase or
sale for the Trust's account are customers of the Advisor or of its
affiliates. In dealing with such customers, the Advisor and its affiliates
will not inquire or take into consideration whether securities of those
customers are held by the Trust; and
(f) review periodically and take responsibility for the material
accuracy and completeness of the information supplied by or at the request
of the Advisor for inclusion in Trust's registration statement under the
1940 Act and the Securities Act of 1933.
3. PORTFOLIO TRANSACTIONS
----------------------
Advisor shall be responsible for selecting members of securities
exchanges, brokers and dealers (herein after referred to as "brokers") for the
execution of purchase and sale transactions for the Portfolios. In executing
portfolio transactions and selecting brokers or dealers, if any, the Advisor
will use its best efforts to seek on behalf of a Portfolio the best overall
terms available. In assessing the best overall terms available for any
transaction, the Advisor shall consider all factors it deems relevant, including
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) provided to any Portfolio of the Trust
and/or other accounts over which the Advisor or an affiliate of the Advisor
exercises investment discretion. The Advisor may pay to a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if, but only
if, the Advisor determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided. The
Advisor will report to the Trustees from time to time regarding its portfolio
execution and brokerage practices.
4. EXPENSES AND COMPENSATION
-------------------------
a) Allocation of Expenses
----------------------
The Advisor shall, at its expense, employ or associate with itself
such persons as it believes appropriate to assist in performing its
obligations under this Agreement and provide all advisory services,
equipment, facilities and personnel necessary to perform its obligations
under this Agreement.
The Trust shall be responsible for all its expenses and liabilities,
including, without limitation, compensation of its Trustees who are not
affiliated with the Portfolios' Administrator or the Advisor or any of
their affiliates; taxes and governmental fees; interest charges; fees and
expenses of the Trust's independent accountants and legal counsel; trade
association membership dues; fees and expenses of any custodian (including
for keeping books and accounts and calculating the net asset value of
shares of each Portfolio, transfer agent, registrar and dividend disbursing
agent of the Trust; expenses of issuing, selling, redeeming, registering
and qualifying for sale the Trust's shares of beneficial interest; expenses
of preparing and printing share certificates (if any), prospectuses,
shareholders' reports, notices, proxy statements and reports to regulatory
agencies; the cost of office supplies; travel expenses of all officers,
trustees and employees; insurance premiums; brokerage and other expenses of
executing portfolio transactions; expenses of shareholders' meetings;
organizational expenses; and extraordinary expenses.
b) Compensation
------------
For its services under this Agreement, Advisor shall be entitled to
receive a fee calculated at the applicable annual rate set forth on
Schedule A hereto with respect to the average daily net asset value of each
Portfolio, which will be paid monthly. For the purpose of accruing
compensation, the net asset value of the Portfolios will be determined in
the manner provided in the then-current Prospectus of the Trust.
c) Expense Limitations
-------------------
Advisor may waive all or a portion of its fees provided for hereunder
and such waiver will be treated as a reduction in the purchase price of its
services. Advisor shall be contractually bound hereunder by the terms of
any publicity announced waiver of its fee, or any limitation of the
Portfolio's expenses, as if such waiver were fully set forth herein.
5. LIABILITY OF ADVISOR
--------------------
Neither the Advisor nor its officers, directors, employees, agents or
controlling person ("Associated Person") of the Advisor shall be liable for any
error of judgement or mistake of law or for any loss suffered by the Trust in
connection with the matters to which this Agreement relates including, without
limitation, losses that may be sustained in connection with the purchase,
holding, redemption or sale of any security or other investment by the Trust
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of Advisor or such Associated Persons in the performance of their
duties or from reckless disregard by them of their duties under this Agreement.
6. LIABILITY OF THE TRUST AND PORTFOLIOS
-------------------------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Declaration of Trust. The execution and
delivery of this Agreement have been authorized by the Trustees, and it has been
signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in its Declaration of Trust.
With respect to any obligation of the Trust on behalf of any Portfolio
arising hereunder, the Advisor shall look for payment or satisfaction of such
obligations solely to the assets and property of the Portfolio to which such
obligation relates as though the Trust had separately contracted with the
Advisor by separate written instrument with respect to each Portfolio.
7. DURATION AND TERMINATION OF THIS AGREEMENT
------------------------------------------
(a) Duration.
--------
This Agreement shall become effective on the date hereof. Unless
terminated as herein provided, this Agreement shall remain in full
force and effect for two years from the date hereof. Subsequent to
such initial period of effectiveness, this Agreement shall continue in
full force and effect for successive periods of one year thereafter
with respect to each Portfolio so long as such continuance with
respect to such Portfolio is approved at least annually (a) by either
the Trustees of the Trust or by vote of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of such Portfolio, and
(b), in either event, by the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement or "interested persons"
(as defined in the 0000 Xxx) of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
(b) Amendment.
---------
Any amendment to this Agreement shall become effective with
respect to a Portfolio upon approval by the Advisor and the Trustees,
and to the extent required by applicable law, a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of that
Portfolio.
(c) Termination.
-----------
This Agreement may be terminated with respect to any Portfolio at
any time, without payment of any penalty, by vote of the Trustees or
by vote of a majority of the outstanding voting securities (as defined
in the 0000 Xxx) of that Portfolio, or by the Advisor, in each case
upon sixty (60) days' prior written notice to the other party. Any
termination of this Agreement will be without prejudice to the
completion of transactions already initiated by the Advisor on behalf
of the Trust at the time of such termination. The Advisor shall take
all steps reasonably necessary after such termination to complete any
such transactions and is hereby authorization to take such steps. In
addition, this Agreement may be terminated with respect to one or more
Portfolios without affecting the rights, duties or obligations of any
of the other Portfolios.
(d) Automatic Termination.
----------------------
This Agreement shall automatically and immediately terminate in
the event of its assignment (as defined in the 1940 Act).
(e) Approval, Amendment or Termination by Individual Portfolio.
----------------------------------------------------------
Any approval, amendment or termination of this Agreement by the
holders of a majority of the outstanding voting securities (as defined
in the 0000 Xxx) of any Portfolio shall be effective to continue,
amend or terminate this Agreement with respect to any such Portfolio
notwithstanding (i) that such action has not been approved by the
holders of a majority of the outstanding voting securities of any
other Portfolio affected thereby, and (ii) that such action has not
been approved by the vote of a majority of the outstanding voting
securities of the Trust, unless such action shall be required by any
applicable law or otherwise.
(f) Use of Name.
-----------
The parties acknowledge and agree that the names "ProFunds", "VP
ProFunds" (collectively, the "ProFund Names") and any derivatives
thereof, as well as any logos that are now or shall hereafter be
associated with the ProFund Names are the valuable property of the
Advisor. In the event that this Agreement is terminated and the
Advisor no longer acts as Investment Advisor to the Trust, the Advisor
reserves the right to withdraw from the Trust and the Portfolios the
uses of the ProFund Names and logos or any name or logo misleadingly
implying a continuing relationship between the Trust of the Portfolios
and the Advisor or any of its affiliates.
8. SERVICES NOT EXCLUSIVE
----------------------
The services of the Advisor to the Trust hereunder are not to be
deemed exclusive, and the Advisor shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby.
9. MISCELLANEOUS
-------------
(a) Notice.
------
Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate in writing for the receipt
of such notices.
(b) Severability.
------------
If any provision of this Agreement shall be held or made invalid
by a court decision, statue, rule or otherwise, the remainder shall
not be thereby affected.
(c) Applicable Law.
--------------
This Agreement shall be construed in accordance with and governed
by the laws of Maryland.
ProFund Advisors LLC, a Maryland
limited liability company
ATTEST: ___________________________ By: ____________________________________
Xxxxxxx X. Xxxxx
Chairman and Chief Executive Officer
Date: November _, 2000
ProFunds, a Delaware business trust
ATTEST: ___________________________ By: ____________________________________
Xxxxxxx X. Xxxxx
Trustee and Chairman
Date: November _, 2000
