EXHIBIT 9.1
PORTFOLIO SUPPORT AND LICENSE AGREEMENT
This Agreement, dated as of April 10, 2014, is made by and between Xxx
Xxxxx Research, Inc, a Florida coporation ("Consultant/Licensor"), and
Guggenheim Funds Distributor, LLC., ("GFD" or "Licensee") as sponsor to, Rising
Rate UIT (the "Trust").
RECITALS
A. Consultant/Licensor is] an investment adviser federally registered or
exempt under the Investment Advisers Act of 1940, as amended.
B. GFD sponsors, underwrites and distributes a wide array of unit
investment trusts ("UITs").
C. Consultant/Licensor has developed an investment strategy (which includes
without limitation selection criteria and methodology) set forth in Schedule A
(the "Strategy"), and Consultant/Licensor owns rights in and to the Strategy and
the proprietary data relating to the Strategy (such rights, including without
limitation, copyright, trademark and proprietary rights and trade secrets, being
hereinafter collectively referred to as the "Intellectual Property").
D. The parties desire to enter into an agreement whereby
Consultant/Licensor, through its employee, Xxxxx Xxxxx , shall provide to GFD a
list of securities selected in accordance with the Strategy (any securities
selected in accordance with the Strategy are referred to herein as "Appropriate
Securities") for deposit by GFD, in its discretion, into the Trust.
E. Consultant/Licensor uses in commerce and has trade name, trademark
and/or service xxxx rights to the marks set forth in Schedule B (such rights are
individually and collectively referred to herein as the "Marks").
F. Licensee wishes to use the Strategy, Intellectual Property and the Marks
in connection with the Trust.
The parties agree as follows:
1. Consultant/Licensor Services.
(a) Selection of Securities. Prior to 12:00 p.m. (C.S.T.) on the third
business day before the April 10, 2014 (such prior day being the "Target Date"),
Consultant/Licensor shall provide GFD with a list of Appropriate Securities for
deposit by GFD, in its sole discretion, into the Trust. If Consultant/Licensor
fails to provide GFD with a list of Appropriate Securities prior to 12:00 p.m.
on the Target Date: (i) Consultant/Licensor shall be liable (and shall promptly
pay) for any costs and expenses incurred by GFD and the Trust resulting from
such delay and (ii) the Portfolio Fee and the License Fee set forth in Section
4, below, shall each be reduced by one (1) basis point for each 24-hour period
of delay following 12:00 p.m. on the Target Date. The date that the Appropriate
Securities are deposited is referred to herein as the "Deposit Date". GFD shall
provide to Consultant/Licensor the registration statement relating to the Trust
(the "Registration Statement"). Consultant/Licensor hereby covenants, represents
and warrants that, as of any Trust's Deposit Date, any list of Appropriate
Securities furnished pursuant to this Agreement shall be appropriate for
inclusion in such Trust based on the investment objectives and criteria set
forth in the Trust's Registration Statement. Consultant/Licensor further
covenants, represents and warrants that: (i) as of the Trust's Deposit Date, the
Appropriate Securities and any consultation it provides with respect to the
Trust will be consistent, and not conflict, with that provided to other
Consultant/Licensor clients with similar investment objectives and strategies
and a substantially similar investment program; (ii) the Appropriate Securities
shall be selected based on a completely objective, verifiable and
non-discretionary strategy; (iii) the historical performance results of
securities selected pursuant to the Strategy will be based on all of the
components of the Strategy; and (iv) Consultant/Licensor shall not tamper with
such results on a historical or "going forward" basis.
(b) Consultation. Consultant/Licensor shall:
(i) upon GFD's reasonable request, provide GFD with information about
the Appropriate Securities as reasonably necessary for use by GFD in preparing
and updating Registration Statement disclosures and marketing materials for the
Trust; and
(ii) promptly review for accuracy and completeness information
provided and disclosures made in the Registration Statement for the Trust in
which the Appropriate Securities are deposited.
(c) Key Personnel and Standard of Performance. Consultant/Licensor
represents and warrants that: (i) the services will be performed with that
degree of skill and care generally observed by companies performing the same or
similar services and (ii) the services will be provided in compliance with all
applicable statutes, acts, ordinances, laws, rules, regulations, codes and
standards.
(d) Non-disclosure. Neither Consultant/Licensor nor any if its officers,
directors, employees, members or agents shall disclose in any manner any
information concerning the Trust, including any Appropriate Securities, prior to
the Trust's Deposit Date.
2. Grant of License.
(a) Grant. Subject to the terms and conditions of this Agreement,
Consultant/Licensor hereby grants to the Licensee a non-transferable (except as
otherwise provided herein), license to use and refer to the Consultant/Licensor
Marks, Strategy and Intellectual Property (i) in connection with the creation,
issuance, sale, marketing and promotion of the Trust in order to indicate (x)
that the securities included in the Trust are determined through the use of the
Strategy, (y) the historical performance of the Strategy, and (z) that
Consultant/Licensor is the source of the Strategy; (ii) as may otherwise be
required by applicable laws, rules or regulations and court orders or under this
Agreement; and (iii) in the name of the Trust (collectively, the "License").
(b) Scope. Consultant/Licensor agrees that no person or entity (including
without limitation, the Trust) other than the Licensee shall need to obtain a
License in connection with the creation, issuance, sale, marketing and promotion
of the Trust and that Licensee has the right to sublicense the License to the
Trust or other appropriate party if necessary or helpful in achieving the intent
of this Agreement.
(c) Ownership and Retention of Rights. The Licensee acknowledges that the
Strategy and the Consultant/Licensor Marks are the exclusive property of
Consultant/Licensor and that Consultant/Licensor has and retains all
Intellectual Property rights therein. Except as otherwise specifically provided
herein, Consultant/Licensor reserves all rights to the Strategy and the
Consultant/Licensor Marks, and this Agreement shall not be construed to transfer
to the Licensee any ownership right to, or equity interest in, any of the
Strategy or the Consultant/Licensor Marks, or in any Intellectual Property or
other proprietary rights pertaining thereto.
(d) Duty to Maintain. During the term of this Agreement,
Consultant/Licensor shall use its best efforts to maintain in full force and
effect U.S. federal registrations for the Consultant/Licensor Marks.
3. Term. The term of this Agreement shall commence as of the date set forth
above and shall remain in full force and effect until the termination of the
Trust.
4. Fees. As consideration for the services and license granted herein, GFD
shall pay to Consultant/ Licensor the following fees (which fees are Trust costs
that GFD expects the Trust to reimburse pursuant to the applicable Trust
Indenture):
(a) a portfolio consulting fee equal to seven basis points (0.007%) of
the aggregate daily liquidation value of transactional sales (specifically
excluding fee-based sales) made during the primary offering period of the Trust
(the "Portfolio Fee"); and
(b) a license fee equal to seven basis points (0.007 of the aggregate
daily liquidation value of transactional sales (specifically excluding fee-based
sales) made during the primary offering period of the Trust (the "License Fee").
The Portfolio Fee and License Fee shall be paid on a one-time basis on or before
the 15th day of the second month after the close of the primary offering period.
Consultant/Licensor acknowledges that (a) GFD may at any time determine that it
does not wish to go forward with a primary offering of the Trust and, if it so
determines, GFD shall not be responsible for the payment of any Portfolio Fee or
License Fee under this Agreement, (b) GFD may delay the Deposit Date in its
discretion, and (c) GFD has full authority to determine the length of any
offering period, and may shorten or lengthen such offering period for any reason
in its sole discretion.
5. Relationship of the Parties. This Agreement shall not be deemed to
create any partnership or joint venture between GFD and Consultant/Licensor, and
the services provided by Consultant/Licensor shall be as an independent
contractor and not as an employee or agent of GFD. Consultant/Licensor shall
have no authority whatsoever to bind GFD on any agreement or obligation.
Consultant/Licensor agrees that it shall not hold itself out as an employee or
agent of GFD.
6. Confidentiality. A party may obtain proprietary, non-public information
concerning the other party ("Confidential Information") during the term of this
Agreement. Each party shall keep the other party's Confidential Information
confidential and shall not use such information in any manner except as required
to perform its obligations hereunder. In no event shall the following
information be deemed a disclosing party's Confidential Information: (a)
information that is or becomes generally available to the public other than as a
result of disclosure by the receiving party; (b) information that was within the
receiving party's possession prior to its being furnished by the disclosing
party; (c) information that becomes available to the receiving party from a
third party who is not, to the receiving party's knowledge, bound by an
obligation of confidentiality to the disclosing party and (d) information that
is independently developed by the receiving party without the receiving party
violating its obligations under this agreement. Notwithstanding the above, a
receiving party may disclose the disclosing party's confidential Information to
the receiving party's existing and potential affiliates and its and their
respective employees, agents, advisors, directors and officers (collectively,
"Representatives"), provided, however, such Representatives are made aware of
this Agreement and agree to comply with the terms of this Agreement as if they
were parties hereto. Each party acknowledges that a breach of this Section would
cause permanent and irreparable damage for which money damages would be an
inadequate remedy. Therefore, each party shall be entitled to seek equitable
relief in the event of any breach of the provisions of this Section in addition
to all other remedies available at law or in equity.
7. Indemnification. Each party shall defend, indemnify and hold harmless
the other party from any and all liabilities, losses, damages, costs and
expenses (including reasonable attorneys' fees) which the other party suffers by
reason of any claims, demands, actions or suits brought by a third party arising
from the other party's (a) failure to comply with this Agreement or (b) breach
of a representation or warranty contained in this Agreement.
8. Limitation of Liability. Neither party shall be liable to the other
party for any liabilities, damages, costs and expenses except for those
resulting from the other party's breach of a representation or warranty
contained in this Agreement, gross negligence or willful misfeasance.
Notwithstanding the above, in no event shall either party be liable to the other
party for any punitive, special, indirect, consequential, incidental or similar
damages or losses, regardless of how such damages or losses arise. Nothing in
this paragraph is intended to limit a party's right to indemnification under
Section 7.
9. Representations and Warranties.
(a) GFD. Guggenheim represents, warrants and covenants that it is a limited
liability company duly formed, existing and in good standing under the laws of
the state of Delaware, with full right, power and authority to enter into and
perform this Agreement, and the execution and performance of this Agreement does
not conflict with or violate any agreement to which it is a party, any court
order to which it is subject, or its governing documents.
(b) Consultant/Licensor. Consultant/Licensor represents, warrants and
covenants that it is a corporation duly formed, existing and in good standing
under the laws of the state of its incorporation, with full right, power and
authority to enter into and perform this Agreement, and the execution and
performance of this Agreement does not conflict with or violate any agreement to
which it is a party, any court order to which it is subject, or any of its
organizational documents. Consultant/Licensor further represents, warrants and
covenants that it is an investment adviser federally registered or exempt from
registration under the Investment Advisers Act of 1940, as amended, and any
applicable state statutes, (iii) the Strategy, Intellectual Property and
Consultant/Licensor Marks are the exclusive property of Consultant/Licensor and
(iv) neither the selection of Appropriate Securities pursuant to the Strategy
nor the Intellectual Property or the License granted pursuant to this Agreement
infringes or otherwise violates any third-party's intellectual property rights
or other proprietary rights.
10. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois without giving
effect to any conflict of laws principles.
(b) Arbitration. Except as to any matter as to which the parties may seek
equitable relief, any dispute arising out of this Agreement shall be settled by
arbitration in accordance with the Rules of the American Arbitration
Association. Any such arbitration shall be held in the city of Chicago, in the
State of Illinois. The arbitrator of any such controversy shall not have the
authority to modify or alter any express condition or provision of this
Agreement. Any arbitration award rendered under this Section shall be final and
binding, and judgment may be entered on the award in any court of competent
jurisdiction.
(c) Entire Agreement. This Agreement, including the Appendices and
Schedules hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior oral or written
agreements relating to the subject matter hereof.
(d) Assignment. Consultant/Licensor shall not assign any rights or delegate
any obligations under this Agreement without the prior written consent of GFD,
which consent shall not be unreasonably withheld. Any assignment in violation of
this provision shall be void. GFD may assign its rights and obligations under
this Agreement to any successor in interest to all or substantially all of GFD's
assets. This Agreement shall be binding upon the heirs, successors, legal
representatives and permitted assigns of the parties.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
(f) Survival. The provisions of Sections 6, 7, 8, 10(a), 10(b), and 10(f)
shall survive the termination of this Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first set forth above.
CONSULTANT/LICENSOR
By
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Operating Officer
GUGGENHEIM FUNDS DISTRIBUTOR, LLC. AS
SPONSOR OF THE TRUST
By
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Director
SCHEDULE A
THE STRATEGY
Investment Objective
The Rising Rate Trust seeks to maximize total return primarily through capital
appreciation.
Principal Investment Strategy
The Licensee selects securities for the portfolio that it believes possess the
potential to benefit from a multi-year period of rising interest rates.
Investors seeking to benefit from, or hedge a portfolio against, a period of
rising rates as a possible response to a steadily improving economy or any
perceived potential for a tapering of QE, might consider this portfolio. The
Licensee believes that this trust offers an opportunity to own a diversified
basket of domestic operating companies that possess characteristics for price
appreciation in relation to rising interest rates over an extended period of
time. However, there can be no assurance of a subsequent rise in interest rates,
nor assurance that any security held by the trust will meet this objective.
Source Universe
The portfolio source universe to be used for security selection will be the Xxx
Xxxxx Research (NDR) Multi-Cap Institutional Equity Series, which is a segment
of the NDR Broad Market Equity Series. A multi-step process is used to select
this source universe.
The following statements represent eligibility requirements for the initial
stock universe selected in the first step:
o Only companies that have one or more common stock issues are
considered for membership.
o Only companies that have one or more stocks trading on NYSE, NASDAQ,
or AMEX stock exchanges are considered.
o Only companies that are incorporated in the United States or its
territories are considered. ADR and GDR issues are not eligible.
Foreign issues that trade directly on U.S. exchanges and are based in
a U.S. territory are eligible.
Of the 18,000+ stocks that historically meet the above criteria, only about
two-thirds meet both of the following selection criteria. The resulting set is
termed the NDR All-Cap Equity Series membership:
o In the top 99% of market capitalization of the eligible stock
universe.
o In the top 99.5% of liquidity of the eligible stock universe, based
upon NDR's dollar volume-based liquidity factor.
The process for calculating both of these criteria involves sorting the entire
common stock universe at each rebalance period and choosing the stocks until the
market capitalization cut-off limit is reached. Rebalance and reconstitution of
the membership is performed semi-annually:
o The first change becomes effective each March 31st, with the selection
criteria applied as of the close of the last trading day of February.
o The second change becomes effective each September 30th, with the
selection criteria applied as of the close of the last trading day of
August.
The final selection step for the NDR Multi-Cap Institutional Equity Series is to
include only companies in the top 97% of market capitalization of the NDR
All-Cap Equity Series. This set of companies effectively represents the top 96%
of common stock, in conjunction with a trading liquidity screen.
Security Selection
The Licensee selects securities for the portfolio that it believes possess the
potential to achieve the trust's investment objective. The Licensee selects
domestically traded and domestically registered companies with common stock that
it believes are core holdings of a diversified portfolio of companies with
positive correlation to rising interest rates. The initial starting universe
consists of the current companies represented in the NDR Multi-Cap Institutional
Equity Series.
The Licensee then reduces the starting universe to 40 companies by performing
the following quantitative and qualitative screens, which have historically
produced a portfolio that outperforms the benchmark during periods of rising
interest rates .. These screens include:
Earnings Revision:
o Calculation: one-month change in perpetual FY1 mean earnings estimate
divided by week-end price.
o Indication: A higher score indicates an upward revision, which signals
an improved analyst outlook for the stock going forward.
Raw Materials Sensitivity:
o Calculation: Beta coefficient of a moving 60-month regression of
excess returns (vs. region's stock market returns) against a change in
the Reuters Continuous Commodity Index futures price.
o Indication: A higher score indicates a stronger relationship with the
upward movement of commodity prices, which are generally influenced
positively by an improving economy and rising rates.
Earnings Retention Rate:
o Calculation: Net income minus dividends as a percentage of net income.
o Indication: Measures the percentage of current earnings retained by
the company. A higher score indicates a higher rate of retained
earnings, and a lower need to take on debt in a rising rate
environment.
Cyclical vs. Consumer Sensitivity:
o Calculation: Beta coefficient of a moving 60-month regression of a
stock's excess returns (vs. region's stock market returns) against the
differential returns between the Xxxxxx Xxxxxxx Cyclical and Consumer
indexes.
o Indication: A higher number is preferred when cyclical stocks are
expected to outperform consumer stocks, generally associated with an
improving economy.
EBIT / Enterprise Value:
o Calculation: Earnings before interest, taxes, depreciation, and
amortization (EBITDA) divided by market value of equity plus debt
(Enterprise Value).
o Indication: A higher EBITDA/Enterprise Value signifies that each unit
of a stock's value is used to generate more EBITDA profits, which
normally leads to higher stock returns.
Screening Application
Stocks are screened as follows:
o Each stock must have the appropriate underlying data for all of the
screens used.
o Each stock in the source universe is sorted relatively to the other
stocks using the current value of each screen.
o Scores are then applied to the universe with 100 as the highest score
and 0 as the lowest score for the lowest stock. Fractional scores are
used.
o The individual scores for each stock are combined for an overall
score.
o All qualifying stocks are then sorted from highest to lowest.
o The top 40 stocks are then selected as the portfolio from the sorted
set.
o All stocks are then equal-weighted in the portfolio at the time of
selection.
SCHEDULE B
CONSULTANT/LICENSOR MARKS
