INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 8th day of April, 2011, by and
between FIRST TRUST EXCHANGE-TRADED ALPHADEX FUND, a Massachusetts business
trust (the "Trust"), and FIRST TRUST ADVISORS L.P., an Illinois limited
partnership (the "Adviser") registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act").
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company;
WHEREAS, the Trust is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets;
WHEREAS, the Trust intends to offer shares in series set forth on Schedule
A attached hereto and any other series as to which this Agreement may hereafter
be made applicable and set forth on Schedule A, which may be amended from time
to time (each such series being herein referred to as a "Fund," and collectively
as the "Funds"); and
WHEREAS, the Trust desires to retain the Adviser as investment adviser, to
furnish certain investment advisory and portfolio management services to the
Trust with respect to the Funds, and the Adviser is willing to furnish such
services.
WITNESSETH:
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby engages the Adviser to act as the investment
adviser for, and to manage the investment and reinvestment of the assets
of, each Fund in accordance with each Fund's investment objective(s) and
policies and limitations, and to administer each Fund's affairs to the
extent requested by and subject to the supervision of the Board of
Trustees of the Trust for the period and upon the terms herein set forth.
The investment of each Fund's assets shall be subject to the Fund's
policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's then current registration statement
under the l940 Act, and all applicable laws and the regulations of the
Securities and Exchange Commission relating to the management of
registered open-end management investment companies.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and
clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Funds' transfer agent, administrator or
other service providers) for the Funds, to permit any of its officers or
employees to serve without compensation as trustees or officers of the
Trust if elected or appointed to such positions, and to assume the
obligations herein set forth for the compensation herein provided. The
Adviser shall at its own expense furnish all executive and other
personnel, office space, and office facilities required to render the
investment management and administrative services set forth in this
Agreement. In the event that the Adviser pays or assumes any expenses of a
Fund not required to be paid or assumed by the Adviser under this
Agreement, the Adviser shall not be obligated hereby to pay or assume the
same or similar expense in the future; provided, that nothing contained
herein shall be deemed to relieve the Adviser of any obligation to a Fund
under any separate agreement or arrangement between the parties.
2. The Adviser shall, for all purposes herein provided, be deemed
to be an independent contractor and, unless otherwise expressly provided
or authorized, shall neither have the authority to act for nor represent
the Trust in any way, nor otherwise be deemed an agent of the Trust.
3. For the services and facilities described in Section 1, each
Fund will pay to the Adviser, at the end of each calendar month, and the
Adviser agrees to accept as full compensation therefor, a fee equal to the
annual rate of such Fund's average daily net assets as set forth on
Schedule A so long as the Adviser has not waived all or a portion of such
compensation.
For the month and year in which this Agreement becomes effective, or
terminates, there shall be an appropriate proration on the basis of the
number of days that the Agreement shall have been in effect during the
month and year, respectively. The services of the Adviser to the Trust
under this Agreement are not to be deemed exclusive, and the Adviser shall
be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
4. During the term of this Agreement, the Adviser shall pay all of
the expenses of each Fund of the Trust (including the cost of transfer
agency, custody, fund administration, legal, audit and other services and
license fees) but excluding the fee payment under this Agreement,
interest, taxes, brokerage commissions and other expenses connected with
the execution of portfolio transactions, distribution and service fees
payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses.
5. The Adviser shall arrange for suitably qualified officers or
employees of the Adviser to serve, without compensation from the Trust, as
trustees, officers or agents of the Trust, if duly elected or appointed to
such positions, and subject to their individual consent and to any
limitations imposed by law.
6. For purposes of this Agreement, brokerage commissions paid by a
Fund upon the purchase or sale of a Fund's portfolio securities shall be
considered a cost of securities of the Fund and shall be paid by the Fund.
7. The Adviser is authorized to select the brokers or dealers that
will execute the purchases and sales of a Fund's securities on behalf of
the Fund, and is directed to use its commercially reasonable efforts to
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obtain best execution, which includes most favorable net results and
execution of the Fund's orders, taking into account all appropriate
factors, including price, dealer spread or commission, size and difficulty
of the transaction and research or other services provided. Subject to
approval by the Trust's Board of Trustees and to the extent permitted by
and in conformance with applicable law and the rules and regulations
thereunder (including Rule 17e-1 of the 1940 Act), the Adviser may select
brokers or dealers affiliated with the Adviser. It is understood that the
Adviser will not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Trust, or be in breach of any obligation owing to
the Trust under this Agreement, or otherwise, solely by reason of its
having caused a Fund to pay a member of a securities exchange, a broker or
a dealer a commission for effecting a securities transaction for the Fund
in excess of the amount of commission another member of an exchange,
broker or dealer would have charged if the Adviser determines in good
faith that the commission paid was reasonable in relation to the brokerage
or research services provided by such member, broker or dealer, viewed in
terms of that particular transaction or the Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the Adviser may, to the extent permitted by applicable
law and the rules and regulations thereunder, aggregate purchase and sale
orders of securities with similar orders being made simultaneously for
other accounts managed by the Adviser or its affiliates, if in the
Adviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund, taking into consideration the selling or
purchase price, brokerage commissions and other expenses. In the event
that a purchase or sale of an asset of a Fund occurs as part of any
aggregate sale or purchase orders, the objective of the Adviser and any of
its affiliates involved in such transaction shall be to allocate the
securities so purchased or sold, as well as expenses incurred in the
transaction, among the Fund and other accounts in an equitable manner.
Nevertheless, each Fund acknowledges that under some circumstances, such
allocation may adversely affect the Fund with respect to the price or size
of the securities positions obtainable or salable. Whenever a Fund and one
or more other investment advisory clients of the Adviser have available
funds for investment, investments suitable and appropriate for each will
be allocated in a manner believed by the Adviser to be equitable to each,
although such allocation may result in a delay in one or more client
accounts being fully invested that would not occur if such an allocation
were not made. Moreover, it is possible that due to differing investment
objectives or for other reasons, the Adviser and its affiliates may
purchase securities of an issuer for one client and at approximately the
same time recommend selling or sell the same or similar types of
securities for another client.
The Adviser will not arrange purchases or sales of securities
between a Fund and other accounts advised by the Adviser or its affiliates
unless (a) such purchases or sales are in accordance with applicable law
and the rules and regulations thereunder (including Rule 17a-7 of the 0000
Xxx) and the Trust's policies and procedures, (b) the Adviser determines
the purchase or sale is in the best interests of the applicable Fund, and
(c) the Trust's Board of Trustees has approved these types of
transactions.
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To the extent a Fund seeks to adopt, amend or eliminate any
objectives, policies, restrictions or procedures in a manner that modifies
or restricts the Adviser's authority regarding the execution of the Fund's
portfolio transactions, the Fund agrees to use commercially reasonable
efforts to consult with the Adviser regarding the modifications or
restrictions prior to such adoption, amendment or elimination.
The Adviser will communicate to the officers and trustees of the
Trust such information relating to transactions for the Funds as they may
reasonably request. In no instance will portfolio securities be purchased
by or sold to the Adviser or any affiliated person of either the Trust or
the Adviser, except as may be permitted under the 1940 Act, the rules and
regulations thereunder or any applicable exemptive orders.
The Adviser further agrees that it:
(a) will use the same degree of skill and care in providing
such services as it uses in providing services to other fiduciary
accounts for which it has investment responsibilities;
(b) will (i) conform in all material respects to all
applicable rules and regulations of the Securities and Exchange
Commission, (ii) comply in all material respects with all policies
and procedures adopted by the Board of Trustees for the Trust and
communicated to the Adviser and, (iii) conduct its activities under
this Agreement in all material respects in accordance with any
applicable regulations of any governmental authority pertaining to
its investment advisory activities;
(c) will report regularly to the Board of Trustees of the
Trust (generally on a quarterly basis) and will make appropriate
persons available for the purpose of reviewing with representatives
of the Board of Trustees on a regular basis at reasonable times the
management of each Fund, including, without limitation, review of
the general investment strategies of each Fund, the performance of
each Fund's investment portfolio in relation to relevant standard
industry indices and general conditions affecting the marketplace
and will provide various other reports from time to time as
reasonably requested by the Board of Trustees of the Trust; and
(d) will prepare and maintain such books and records with
respect to each Fund's securities and other transactions as required
under applicable law and will prepare and furnish the Trust's Board
of Trustees such periodic and special reports as the Board of
Trustees may reasonably request. The Adviser further agrees that all
records which it maintains for each Fund are the property of the
Fund and the Adviser will surrender promptly to the Fund any such
records upon the request of the Fund (provided, however, that the
Adviser shall be permitted to retain copies thereof); and shall be
permitted to retain originals (with copies to the Fund) to the
extent required under Rule 204-2 of the Advisers Act or other
applicable law and the rules and regulations thereunder.
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8. Subject to applicable statutes and regulations, it is
understood that officers, trustees, or agents of the Trust are, or may be,
interested persons (as such term is defined in the 1940 Act and rules and
regulations thereunder) of the Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors, shareholders
and agents of the Adviser may be interested persons of the Trust otherwise
than as trustees, officers or agents.
9. The Adviser shall not be liable for any loss sustained by
reason of the purchase, sale or retention of any security, whether or not
such purchase, sale or retention shall have been based upon the
investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been selected with due care
and in good faith, except loss resulting from willful misfeasance, bad
faith, or gross negligence on the part of the Adviser in the performance
of its obligations and duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
10. Subject to obtaining the initial and periodic approvals
required under Section 15 of the 1940 Act, the Adviser may retain one or
more sub-advisers at the Adviser's own cost and expense for the purpose of
furnishing one or more of the services described in Section 1 hereof with
respect to a Fund. Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of the Adviser under this Agreement and
the Adviser shall be responsible to such Fund for all acts or omissions of
any sub-adviser in connection with the performance of the Adviser's duties
hereunder.
11. The Trust acknowledges that the Adviser now acts, and intends
in the future to act, as an investment adviser to other managed accounts
and as investment adviser or investment sub-adviser to one or more other
investment companies that are not series of the Trust. In addition, the
Trust acknowledges that the persons employed by the Adviser to assist in
the Adviser's duties under this Agreement will not devote their full time
to such efforts. It is also agreed that the Adviser may use any
supplemental research obtained for the benefit of the Trust in providing
investment advice to its other investment advisory accounts and for
managing its own accounts.
12. This Agreement shall be effective on the date provided on
Schedule A for each respective Fund, provided it has been approved in the
manner required by the 1940 Act. This Agreement shall continue in effect
until the two-year anniversary of the date of its effectiveness, unless
and until terminated by either party as hereinafter provided, and shall
continue in force from year to year thereafter, but only as long as such
continuance is specifically approved, at least annually, in the manner
required by the 1940 Act.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any
penalty as to a Fund by such Fund or by the Adviser upon sixty (60) days'
written notice to the other party. Each Fund may effect termination by
action of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund, accompanied by appropriate
notice. This Agreement may be terminated, at any time, without the payment
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of any penalty, by the Board of Trustees of the Trust, or by vote of a
majority of the outstanding voting securities of the Trust, in the event
that it shall have been established by a court of competent jurisdiction
that the Adviser, or any officer or director of the Adviser, has taken any
action which results in a breach of the material covenants of the Adviser
set forth herein. Termination of this Agreement shall not affect the right
of the Adviser to receive payments on any unpaid balance of the
compensation, described in Section 3, earned prior to such termination and
for any additional period during which the Adviser serves as such for the
Fund, subject to applicable law. The terms "assignment" and "vote of the
majority of outstanding voting securities" shall have the same meanings
set forth in the 1940 Act and the rules and regulations thereunder.
13. This Agreement may be amended or modified only by a written
instrument executed by both parties.
14. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the remainder
shall not be thereby affected.
15. 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 for receipt of such notice.
16. All parties hereto are expressly put on notice of the Trust's
Declaration of Trust and all amendments thereto, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained therein. This
Agreement is executed on behalf of the Trust by the Trust's officers as
officers and not individually and the obligations imposed upon the Trust
by this Agreement are not binding upon any of the Trust's trustees,
officers or shareholders individually but are binding only upon the assets
and property of the subject Fund, and persons dealing with the Trust must
look solely to the assets of the respective Fund for the enforcement of
any claims.
17. This Agreement shall be construed in accordance with applicable
federal law and (except as to Section 16 hereof which shall be construed
in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
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IN WITNESS WHEREOF, the Trust and the Adviser have caused this Agreement
to be executed on the day and year above written.
FIRST TRUST EXCHANGE-TRADED
ALPHADEX(R) FUND
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
FIRST TRUST ADVISORS L.P.
By: /s/ Xxxxx X. Xxxxx
-------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
-------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
SCHEDULE A
(as of May 10, 2011)
FUNDS
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ANNUAL RATE EFFECTIVE
OF AVERAGE DATE
INDEX SERIES DAILY NET
ASSETS
----------------------------------------------------- ----------- --------------
First Trust Mid Cap Growth AlphaDEX Fund 0.70% April 8, 2011
First Trust Mid Cap Value AlphaDEX Fund 0.70% April 8, 2011
First Trust Small Cap Growth AlphaDEX Fund 0.70% April 8, 2011
First Trust Small Cap Value AlphaDEX Fund 0.70% April 8, 2011
First Trust Mega Cap AlphaDEX Fund 0.70% May 10, 2011
