INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 1st day of November 2018, by and
between FIRST TRUST EXCHANGE-TRADED FUND III, a Massachusetts business trust
(the "Trust"), and FIRST TRUST ADVISORS L.P., an Illinois limited partnership
(the "Adviser").
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 as 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 set the overall investment strategy and manage the investment and
reinvestment of the assets of, each Fund in accordance with each Fund's
investment objectives 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 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 therefore, an investment management fee equal to the
annual rate of each Fund's average daily net assets as set forth on Schedule A.
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,
sub-advisory, custody, fund administration, legal, audit and other services and
license fees, if any) but excluding the fee payment under this Agreement,
interest, taxes, brokerage commissions, acquired fund fees, if any, and expenses
and other expenses connected with the execution of portfolio transactions (such
as dividend and distribution expenses from securities sold short and/or other
investment related costs), 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 or other assets shall
be considered a cost of the securities or assets of the Fund and shall be paid
by the Fund.
7. The Adviser is authorized to select the brokers, dealers, futures
commission merchants, banks, or any other agent or counterparty that will
execute the purchases and sales of a Fund's portfolio investments on behalf of
the Fund, and is directed to use its commercially reasonable efforts to 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
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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 under the 1940 Act), the
Adviser may select brokers, dealers, futures commission merchants or other
persons 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 the 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 determined 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
portfolio investments 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 a 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 or other assets 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 portfolio investments 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 or other
instruments of an issuer for one client and at approximately the same time
recommend selling or sell the same or similar types of securities, assets or
instruments for another client.
The Adviser will not arrange purchases or sales of portfolio investments
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 under the 0000 Xxx) and
the Trust's policies and procedures, (b) the Adviser determines the purchase or
sale is in the best interests of each Fund, and (c) the Trust's Board of
Trustees has approved these types of transactions.
To the extent a Fund seeks to adopt, amend or eliminate any objectives,
policies, restrictions or procedures in a manner that modifies or restricts
Adviser's authority regarding the execution of the Fund's portfolio
transactions, the Fund agrees to use reasonable commercial efforts to consult
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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 investments 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 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 and
Commodity Futures Trading 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, commodity pool operator and commodity trading
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 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 Investment Advisers
Act of 1940 or other applicable law.
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
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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 asset, 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 (after taking into effect any exemptive order,
no-action assurances or other relief, rule or regulation upon which the
respective Fund may rely), 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. In addition,
the Adviser may adjust from time to time the duties delegated to any
sub-adviser, the portion of portfolio assets of the Fund that the sub-adviser
shall manage and the fees to be paid to the sub-adviser pursuant to any
sub-advisory agreement or other arrangement entered into in accordance with this
Agreement, subject to the approvals set forth in Section 15 of the 1940 Act if
required after taking into account any exemptive order, no-action assurances or
other relief, rule or regulation upon which the respective Fund may rely.
Retention of one or more sub-advisers shall in no way reduce the
responsibilities or obligations of the Adviser under this Agreement and the
Adviser shall be responsible to a Fund for all acts or omissions of any
sub-adviser in connection with the performance of the Adviser's duties
hereunder. In addition, to the extent the respective Fund is relying on an
exemptive order or an amendment thereto permitting the Fund to hire one or more
sub-advisers or amend a sub-advisory agreement without shareholder approval, the
Adviser agrees to comply with any terms and conditions provided in such
exemptive order or amendment applicable to it.
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 sub-investment adviser to one or more other investment
companies that are not a 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 by a vote of a majority
of the outstanding voting securities of the respective Fund in accordance with
the requirements of the 1940 Act in the manner required by the 1940 Act (after
taking into effect any exemptive order, no action assurances, or other relief,
rule or regulation upon which the Trust may rely). This Agreement shall continue
in effect until the two-year anniversary of the date of its effectiveness as to
a Fund, 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
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by the 1940 Act (after taking into effect any exemptive order, no action
assurances, or other relief, rule or regulation upon which the Trust may rely).
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by a Fund or by the Adviser upon sixty (60) days' written notice to the other
party. Each Fund may affect 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 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 or a Fund 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 respective Fund, and
persons dealing with the Trust with respect to a Fund must look solely to the
assets of such 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.
18. None of the provisions of this Agreement shall be for the benefit of,
or enforceable by, any person or entity that is not a party hereto.
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19. Any action brought on or with respect to this Agreement or any other
document executed in connection herewith or therewith by a party to this
Agreement against another party to this Agreement shall be brought only in a
court of competent jurisdiction in Chicago, Xxxx County, Illinois, or if venue
does not lie in any such court only in a court of competent jurisdiction within
the State of Illinois (the "Chosen Courts"). Each party to this Agreement (a)
consents to jurisdiction in the Chosen Courts; (b) waives any objection to venue
in any of the Chosen Courts; and (c) waives any objection that any of the Chosen
Courts is an inconvenient forum. In any action commenced by a party hereto
against another party to the Agreement, there shall be no right to a jury trial.
THE RIGHT TO A TRIAL BY JURY IS EXPRESSLY WAIVED TO THE FULLEST EXTENT PERMITTED
BY LAW.
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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 FUND III
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President and CEO
ATTEST: /s/ Xxxx Xxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxx
Title: Assistant Secretary
FIRST TRUST ADVISORS L.P.
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
ATTEST: /s/ Xxxx Xxxxxxxx
--------------------------------
Name: Xxxx Xxxxxxxx
Title: Assistant General Counsel
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SCHEDULE A
(as of February 3, 2020)
FUND
ANNUAL RATE OF
AVERAGE DAILY EFFECTIVE
Series NET ASSETS DATE
--------------------------------------------------------------------------------
First Trust Short Duration Managed Municipal ETF 0.55% November 1, 2018
First Trust Ultra Short Duration Municipal ETF 0.45% November 1, 2018
First Trust Merger Arbitrage ETF 1.25% February 3, 2020
