INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 5th day of March, 2010, by and between
FIRST TRUST EXCHANGE-TRADED FUND II, 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, including the three (3)
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 obtain best execution, which includes most favorable net
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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 of any penalty, by the Board of Trustees of the
Trust, or by vote of a majority of the outstanding voting securities
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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 FUND II
By: /s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
-----------------------------
Name: Xxxx X. Xxxxxxx
Title: Assistant Secretary
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: Assistant General Counsel
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SCHEDULE A
(as of March 5, 2010)
FUNDS
ANNUAL RATE OF
AVERAGE DAILY NET
SERIES ASSETS EFFECTIVE DATE
First Trust ISE Global Copper Index Fund 0.70% March 5, 2010
First Trust ISE Global Platinum Index Fund 0.70% March 5, 2010
