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Exhibit 5(a)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ____________ day of _______, 1997, between
ProFunds, a Delaware business trust (the "Trust"), and ProFunds 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 six 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, Ultra Bull ProFund, Bear ProFund, Ultra
Bear ProFund and UltraOTC ProFund (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
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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.
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2. DUTIES OF ADVISOR
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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 and
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;
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(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
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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.
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4. EXPENSES AND COMPENSATION
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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 at the annual rate of .75% of the average
daily net asset value of each Portfolio, payable 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.
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5. LIABILITY OF ADVISOR
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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
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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
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(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.
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(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", "Bull ProFund", "Ultra Bull ProFund", "Bear ProFund",
"Ultra OTC ProFund", and "Money Market ProFund", (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.
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8. SERVICES NOT EXCLUSIVE.
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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
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(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.
PROFUNDS ADVISORS LLC, A MARYLAND
LIMITED LIABILITY COMPANY
ATTEST: by:
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PROFUNDS, A DELAWARE BUSINESS TRUST
ATTEST: by:
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