FOCUSSHARES TRUST COMPLIANCE SERVICES AGREEMENT
AGREEMENT made as of the 16 of November, 2007 by and between FocusShares Trust, with its
principal office and place of business at 000 Xxxxxx Xxxxxx, Xxxxx X-00, Xxxxxxxx, XX 00000 (the
“Fund”), and Foreside Compliance Services, LLC, a Delaware limited liability company with its
principal office and place of business at Two Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx 00000 (“FCS”).
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as amended (the
“1940 Act”), as an open-end management investment company; and
WHEREAS, the Fund desires that FCS perform certain compliance services and FCS is willing to
provide those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained
herein, the Fund and FCS hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Fund hereby appoints FCS, and FCS hereby agrees, to provide a Chief Compliance Officer
(“CCO”), as described in Rule 38a-1 of the 1940 Act (“Rule 38a-1”) and an Anti-Money Laundering
Officer, to the Fund for the period and on the terms and conditions set forth in this Agreement.
(b) In connection therewith, the Fund has delivered to FCS copies of: (i) the Fund’s Articles
of Incorporation and Bylaws (collectively, as amended from time to time, “Organizational
Documents”); (ii) the Fund’s current Registration Statement, as amended or supplemented, filed with
the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as
amended (the “Securities Act”), or the 1940 Act (the “Registration Statement”); (iii) the Fund’s
current Prospectus and Statement of Additional Information (collectively, as currently in effect
and as amended or supplemented, the “Prospectus” or “SAI”, as the case may be, or the “Disclosure
Documents”); (iv) each plan of distribution or similar document adopted by the Fund under Rule
12b-1 under the 1940 Act (“Plan”) and each current shareholder service plan or similar document
adopted by the Fund (“Service Plan”); (v) copies of the Fund’s current annual and semi-annual
reports to shareholders; and (vi) all policies, programs and procedures adopted by the Fund with
respect to the Funds (e.g., repurchase agreement procedures), and shall promptly furnish FCS with
all amendments of or supplements to the foregoing. The Fund shall deliver to FCS a certified copy
of the resolution of the Board of Trustees of the Fund (the “Board”) appointing FCS hereunder and
authorizing the execution and delivery of this Agreement.
SECTION 2. DUTIES OF FCS
(a) Subject to the approval of the Board, FCS shall make available a qualified person to act
as the Fund’s CCO who is competent and knowledgeable regarding the federal securities laws. FCS’
responsibility for the activities of the CCO are limited to the extent that the Board shall make
all decisions regarding the designation, termination and level of compensation of the CCO as
provided by Rule 38a-1.
(b) With respect to the Fund, the CCO shall:
(i) Report directly to the Board;
(ii) Review and administer the Fund’s compliance program policies and procedures
including those policies and procedures of the Fund’s adviser, administrator,
principal underwriter and transfer agent (collectively, Service Providers”) that
relate to the Fund;
(iii) Conduct periodic reviews of the Fund’s compliance program to incorporate any
new or changed regulations, best practice recommendations or other guidelines that
may be appropriate;
(iv) Review no less frequently than annually, the adequacy of the policies and
procedures of the Fund and its Service Providers and the effectiveness of their
implementation;
(v) Apprise the Board of significant compliance events at the Fund or its Services
Providers;
(vi) Design testing methods for the Fund’s compliance program policies and
procedures;
(vii) Perform and document periodic testing of certain key control procedures (as
appropriate to the circumstances), including reviewing reports, investigating
exceptions, and making inquiries of Fund management and Service Providers;
(viii) Conduct periodic site visits to advisers and other Service Providers as
necessary;
(ix) Provide training and deliver updates to the Fund or its Service Providers, as
necessary;
(x) Establish a quarterly reporting process to the Board, including both written and
oral reports. The CCO will attend regularly scheduled board meetings as well as
special meetings on an as-needed basis.
2
(xi) Prepare a written annual report for the Board. Such report shall, at a
minimum, address (A) the operation of the Fund’s and its Service Providers’ policies
and procedures since the last report to the Board; (B) any material changes to such
policies and procedures since the last report; (C) any recommendations for material
changes to the policies and procedures as a result of the periodic or annual reviews
referred to in Sections 2(b)(iii) and (iv) above; and (D) any “material compliance
matters” (as defined in Rule 38a-1) since the date of the last report; and
(xii) No less than annually, the CCO shall meet separately with the Fund’s
independent Trustees.
(c) With respect to the Fund, FCS shall
(i) Subject to the approval of the Board, make available a qualified person to act
as the Fund’s Anti-Money Laundering Officer who is competent and knowledgeable
regarding the anti-money laundering rules and regulations applicable to mutual
funds;
(ii) Assist the Fund with compliance matters as requested.
(d) FCS shall provide such other services and assistance relating to the affairs of the Fund
as the Fund may, from time to time, reasonably request pursuant to mutually acceptable compensation
and implementation agreements.
(e) FCS shall maintain records relating to its services, such as compliance policies and
procedures, relevant Board presentations, annual reviews, and other records, as are required to be
maintained under the 1940 Act and Rule 38a-1 thereunder. Such reports shall be maintained in the
manner and for the periods as are required under the applicable rule or regulation. The books and
records pertaining to the Fund that are in the possession of FCS shall be the property of the Fund.
The Fund, or the Fund’s authorized representatives, shall have access to such books and records at
all times during FCS’ normal business hours. Upon the reasonable request of the Fund, copies of
any such books and records shall be provided promptly by FCS to the Fund or the Fund’s authorized
representatives at the Fund’s expense.
(f) Nothing contained herein shall be construed to require FCS to perform any service that
could cause FCS to be deemed an investment adviser for purposes of the 1940 Act or the Investment
Advisers Act of 1940, as amended, or that could cause the Fund to act in contravention of the
Fund’s Prospectus or any provision of the 1940 Act. Except with respect to FCS’ duties as set
forth in this Section 2 and except as otherwise specifically provided herein, the Fund assumes all
responsibility for ensuring that the Fund complies with all applicable requirements of the
Securities Act, the Exchange Act, the 1940 Act and any laws, rules and regulations of governmental
authorities with jurisdiction over the Fund. All references to any law in this Agreement shall be
deemed to include reference to the applicable rules and
regulations promulgated under authority of the law and all official interpretations of such law or
rules or regulations.
3
(g) In order for FCS to perform the services required by this Section 2, the Fund (i) shall
take reasonable steps to encourage all Service Providers to furnish any and all information to FCS
as reasonably requested by FCS, and assist FCS as may be required and (ii) shall take reasonable
steps to obtain the result that FCS has access to all records and documents maintained by the Fund
or any service provider to the Fund.
SECTION 3. STANDARD OF CARE; LIMITATION OF LIABILITY; INDEMNIFICATION
(a) FCS shall be under no duty to take any action except as specifically set forth herein or
as may be specifically agreed to by FCS in writing. FCS shall use its best judgment and efforts in
rendering the services described in this Agreement. FCS shall not be liable to the Fund or any of
the Fund’s stockholders for any action or inaction of FCS relating to any event whatsoever in the
absence of bad faith, reckless disregard, gross negligence or willful misfeasance in the
performance of FCS’ duties or obligations under this Agreement. Further, FCS shall not liable to
the Fund or any of the Fund’s stockholders for any action taken or failure to act in good faith
reliance upon:
(i) the advice and opinion of Fund counsel; and
(ii) any certified copy of any resolution of the Board;
and FCS shall not be under any duty or obligation to inquire into the validity or invalidity or
authority or lack thereof of any statement, oral or written instruction, resolution, signature,
request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice,
consent, order, or any other document or instrument which FCS reasonably believes in good faith to
be genuine.
(b) The Fund agrees to indemnify and hold harmless FCS, its employees, agents, trustees,
officers and managers and any person who controls FCS within the meaning of section 15 of the
Securities Act or Section 20 of the Exchange Act (“FCS Indemnitees”), against and from any and all
claims, demands, actions, suits, judgments, administrative proceedings or investigations,
liabilities, losses, damages, costs, charges, reasonable counsel fees and other expenses of every
nature and character arising out of or in any way related to FCS’s actions taken or failures to act
with respect to the Fund in connection with the performance of any duties or obligations under this
Agreement (a “FCS Claim”); provided, however, that nothing contained herein shall entitle a FCS
Indemnitee to indemnification with respect to any FCS Claim arising from FCS’ own bad faith,
reckless disregard, negligence or willful malfeasance, or breach of this Agreement . For purposes
of this Agreement, FCS’ bad faith, willful malfeasance, or reckless disregard shall not include any
action taken or not taken by FCS consistent with the last sentence of Section 3(a). Further, the
Fund shall not be required to indemnify any FCS Indemnitee if, prior to confessing any FCS Claim
against the FCS Indemnitee, FCS or the FCS Indemnitee does
not give the Fund written notice of and reasonable opportunity to defend against the FCS Claim in
its own name or in the name of the FCS Indemnitee.
4
(c) FCS agrees to indemnify and hold harmless the Fund, its employees, agents, trustees,
officers and managers (“Fund Indemnitees”), against and from any and all claims, demands, actions,
suits, judgments, administrative proceedings and investigations, liabilities, losses, damages,
costs, charges, reasonable counsel fees and other expenses of every nature and character arising
out of or in any way related to (i) FCS’ actions taken or failures to act with respect to the Fund
that are not consistent with Section 3(a); (ii) any breach of this Agreement with FCS; or (iii) any
breach of FCS’ representations set forth in Section 4 (a “Fund Claim”). FCS shall not be required
to indemnify any Fund Indemnitee if, prior to confessing any Fund Claim against the Fund
Indemnitee, the Fund or the Fund Indemnitee does not give FCS written notice of and reasonable
opportunity to defend against the Fund Claim in its own name or in the name of the Fund Indemnitee.
(d) FCS shall not be liable for the errors of other service providers to the Fund or their
systems.
(e) The Fund, and not FCS, shall be solely responsible for approval of the designation and
approval of compensation of the Fund CCO, as well as for removing the CCO from his or her
responsibilities related to the Fund in accordance with Rule 38a-1. Therefore, notwithstanding the
provisions of this section 3, the Fund shall supervise the activities of the Fund CCO with regard
to such activities.
SECTION 4. REPRESENTATIONS AND WARRANTIES
(a) FCS represents and warrants to the Fund that:
(i) It is a limited liability company duly organized and existing and in good
standing under the laws of the State of Delaware;
(ii) It is duly qualified to carry on its business in the State of Maine;
(iii) It is empowered under applicable laws and by its Operating Agreement to enter
into this Agreement and perform its duties under this Agreement;
(iv) All requisite corporate proceedings have been taken to authorize it to enter
into this Agreement and perform its duties under this Agreement;
(v) It has access to the necessary facilities, equipment, and personnel to assist
the CCO in the performance of his or her duties and obligations under this
Agreement;
(vi) This Agreement, when executed and delivered, will constitute a legal, valid and
binding obligation of FCS, enforceable against FCS in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting the rights and remedies of creditors and
secured parties;
5
(vii) It shall make available a person who is competent and knowledgeable regarding
the federal securities laws and is otherwise reasonably qualified to act as a CCO
and who will, in the exercise of his or her duties to the Fund, act in good faith
and in a manner reasonably believed by him or her to be in the best interests of the
Fund ;
(viii) It shall compensate the CCO fairly, subject to the Board’s right under any
applicable regulation (e.g., Rule 38a-1) to approve the designation, termination and
level of compensation of the CCO. In addition, it shall not retaliate against the
CCO should the CCO inform the Board of a compliance failure or take aggressive
action to ensure compliance with the federal securities laws by the Fund or a
Service Provider;
(ix) It shall report to the Board promptly if FCS learns about CCO malfeasance or in
the event the CCO is terminated as a CCO by another Fund; and
(x) It shall report to the Board if at any time the CCO is subject to the “bad boy”
disqualifications as set forth in Section 15(b)(4) of the Exchange Act or Section 9
of the 0000 Xxx.
(b) The Fund represents and warrants to FCS that:
(i) It is a corporation duly organized and existing and in good standing under the
laws of the State of Delaware and is qualified to do business and is in good
standing under the laws of the State of New Jersey;
(ii) It is empowered under applicable laws and by its Fund Documents to enter into
this Agreement and perform its duties under this Agreement;
(iii) All requisite corporate proceedings have been taken to authorize it to enter
into this Agreement and perform its duties under this Agreement;
(iv) It is an open-end management investment company registered under the 1940 Act;
(v) This Agreement, when executed and delivered, will constitute a legal, valid and
binding obligation of the Fund, enforceable against the Fund in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting the rights and remedies of creditors and secured
parties;
6
(vi) A registration statement under the Securities Act and the Exchange Act is
currently effective and will remain effective and appropriate State securities law
filings have been made and will continue to be made with respect the Fund; and
(vii) The CCO and AMLO shall be covered by the Fund’s Directors & Officers/Errors &
Omissions Policy (the “Policy”), and the Fund shall use reasonable efforts to ensure
that such coverage be (a) reinstated should the Policy be cancelled; (b) continued
after such officers ceases to serve as the Fund on substantially the same terms as
such coverage is provided for the Fund officers after such persons are no longer
officers of the Fund; or (c) continued in the event the Fund merges or terminates,
on substantially the same terms as such coverage is provided for the Fund officers
(but for a period no less than six years). The Fund shall provide FCS with proof of
current coverage, including a copy of the Policy, and shall notify FCS immediately
should the Policy be cancelled or terminated.
SECTION 5. COMPENSATION AND EXPENSES
(a) In consideration of the compliance services provided by FCS pursuant to this Agreement,
the Fund shall pay FCS the fees set forth in Appendix A hereto.
All fees payable hereunder shall be accrued daily by the Fund. The fees payable for the
services listed in Appendix A hereto shall be payable monthly in arrears on the first business day
of each calendar month for services performed during the prior calendar month. Any out-of-pocket
charges incurred by FCS as set forth in Appendix A shall be paid as incurred. If fees begin to
accrue in the middle of a month or if this Agreement terminates before the end of any month, all
fees for the period from that date to the end of that month or from the beginning of that month to
the date of termination, as the case may be, shall be prorated according to the proportion that the
period bears to the full month in which the effectiveness or termination occurs. Upon the
termination of this Agreement, the Fund shall pay to FCS such compensation, as shall be payable
prior to the effective date of termination.
(b) FCS may, with respect to questions of law relating to its services hereunder, apply to and
obtain the advice and opinion of Fund counsel. The costs of any such advice or opinion shall be
borne by the Fund.
(c) FCS shall not be responsible for and will not assume the obligation for payment of the
expenses of the Fund, including, without limitation: (i) the fee payable under this Agreement; (ii)
the fees payable to the investment adviser under an agreement between the investment adviser and
the Fund; (iii) expenses of issue, repurchase and redemption of Fund Shares; (iv) interest charges,
taxes and brokerage fees and commissions; (v) premiums of insurance for the Fund, the directors and
officers and fidelity bond premiums; (vi) fees, interest charges and expenses of third parties,
including Fund counsel, counsel to the Fund’s independent trustees, independent public accountants,
compliance audit firms, custodians, transfer agents, dividend disbursing agents and Fund
accountants; (vii) fees of pricing, interest, dividend, credit and other
reporting services; (viii) costs of membership in trade associations; (ix)
7
telecommunications
expenses; (x) transmission expenses; (xi) costs of maintaining the Fund’s existence; (xii) costs
of preparing, filing and printing the Fund’s Prospectus, subscription application forms and
stockholder reports and other communications and delivering them to existing stockholders, whether
of record or beneficial; (xiii) expenses of meetings of stockholders and proxy solicitations
therefor; (xiv) costs of maintaining books of original entry for portfolio and Fund accounting and
other required books and accounts and of calculating the net asset value of Shares; (xv) costs of
stationery, supplies and postage; (xvi) fees and expenses of the Fund’s trustees and officers
(except those incurred by officers affiliated with FCS); (xvii) costs of other personnel performing
services for the Fund; (xviii) costs of Board, Board committee, and other corporate meetings; (xix)
SEC registration fees and related expenses; and (xx) state, territory or foreign securities laws
registration fees and related expenses.
SECTION 6. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
(a) This Agreement shall become effective on the date indicated above or such time FCS
commences providing services under this Agreement, whichever is later. Upon effectiveness of this
Agreement, this Agreement shall constitute the entire agreement between the parties and shall
supersede all previous agreements between the parties, whether oral or written relating to the
Fund.
(b) This Agreement shall continue in effect until terminated.
(c) This Agreement may be terminated at any time, without the payment of any penalty (i) by
the Board on sixty (60) days’ written notice to FCS or (ii) by FCS on sixty (60) days’ written
notice to the Fund; provided that the provisions of this Agreement related to services pursuant to
Section 2, may be terminated at any time by the Board, effective upon written notice to FCS,
without the payment of any penalty; the remaining portions of this Agreement shall be considered
severable and not affected.
(d) The provisions of Sections 3, 6(d), 6(e), 7, 8, 10, 11, and 12 shall survive any
termination of this Agreement.
(e) This Agreement and the rights and duties under this Agreement otherwise shall not be
assignable by either FCS or the Fund except by the specific written consent of the other party.
All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto.
SECTION 7. CONFIDENTIALITY
Each Party shall comply with the laws and regulations applicable to it in connection with its
use of Confidential Information, including, without limitation, Regulation S-P (if applicable).
FCS agrees to treat all records and other information related to the Fund as proprietary
information of the Fund and, on behalf of itself and its employees, to keep confidential all such
information, except that FCS may
8
(a) Release such other information (i) as approved in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where FCS is advised by counsel that it
may be exposed to civil or criminal contempt proceedings for failure to release the information
(provided, however, that FCS shall seek the approval of the Fund as promptly as possible so as to
enable the Fund to pursue such legal or other action as it may desire to prevent the release of
such information) or (ii) when so requested by the Fund.
SECTION 8. FORCE MAJEURE
FCS shall not be responsible or liable for any failure or delay in performance of its
obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances
beyond its reasonable control including, without limitation, acts of civil or military authority,
national emergencies, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection,
war, riots or failure of the mails, transportation, communication system or power supply. In
addition, to the extent FCS’ obligations hereunder are to oversee or monitor the activities of
third parties, FCS shall not be liable for any failure or delay in the performance of FCS’ duties
caused, directly or indirectly, by the failure or delay of such third parties in performing their
respective duties or cooperating reasonably and in a timely manner with FCS.
SECTION 9. ACTIVITIES OF FCS
(a) Except to the extent necessary to perform FCS’ obligations under this Agreement, nothing
herein shall be deemed to limit or restrict FCS’ right, or the right of any of FCS’ managers,
officers or employees who also may be a trustee, officer or employee of the Fund, or who are
otherwise affiliated persons of the Fund, to engage in any other business or to devote time and
attention to the management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation, trust, firm,
individual or association.
(b) Upon notice to the Fund, FCS may subcontract any or all of its functions or
responsibilities pursuant to this Agreement to one or more persons, which may be affiliated persons
of FCS, who agree to comply with the terms of this Agreement; provided, that any such
subcontracting shall not relieve FCS of its responsibilities hereunder. FCS may pay those persons
for their services, but no such payment will increase FCS’ compensation or reimbursement of
expenses from the Fund.
SECTION 10. COOPERATION WITH INDEPENDENT PUBLIC ACCOUNTANTS
FCS shall cooperate with the Fund’s independent public accountants and shall take reasonable
action to make all necessary information available to the accountants for the performance of the
accountants’ duties.
9
SECTION 11. LIMITATION OF STOCKHOLDER AND TRUSTEE LIABILITY
The trustees of the Fund and the stockholders of the Fund shall not be liable for any
obligations of the Fund under this Agreement, and FCS agrees that, in asserting any rights or
claims under this Agreement, it shall look only to the assets and property of the Fund.
SECTION 12. MISCELLANEOUS
(a) Neither party to this Agreement shall be liable to the other party for consequential,
special or indirect damages under any provision of this Agreement.
(b) This Agreement shall be governed by, and the provisions of this Agreement shall be
construed and interpreted under and in accordance with, the laws of the State of Delaware.
(c) This Agreement may be executed by the parties hereto in any number of counterparts, and
all of the counterparts taken together shall be deemed to constitute one and the same instrument.
(d) If any part, term or provision of this Agreement is held to be illegal, in conflict with
any law or otherwise invalid, the remaining portion or portions shall be considered severable and
not be affected, and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to be illegal or
invalid. This Agreement shall be construed as if drafted jointly by both FCS and Fund and no
presumptions shall arise favoring any party by virtue of authorship of any provision of this
Agreement.
(e) Section headings in this Agreement are included for convenience only and are not to be
used to construe or interpret this Agreement.
(f) Notices, requests, instructions and communications received by the parties at their
respective principal places of business, or at such other address as a party may have designated in
writing, shall be deemed to have been properly given.
(g) Nothing contained in this Agreement is intended to or shall require FCS, in any capacity
hereunder, to perform any functions or duties on any day other than a Fund business day. Functions
or duties normally scheduled to be performed on any day which is not a Fund business day shall be
performed on, and as of, the next Fund business day, unless otherwise required by law.
(h) The term “affiliate” and all forms thereof used herein shall have the meanings ascribed
thereto in the 1940 Act.
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their
names and on their behalf by and through their duly authorized officers, as of the day and year
first above written.
| FOCUSSHARES TRUST | ||||||||
| By: | /s/ Xxxxxxx Xxxxxxx | |||||||
| Name: | Xxxxxxx Xxxxxxx | |||||||
| Title: | President | |||||||
| FORESIDE COMPLIANCE SERVICES, LLC | ||||||||
| By: | /s/ Xxxxx Xxxxxxx | |||||||
| Name: | Xxxxx Xxxxxxx | |||||||
| Title: | President | |||||||
11
Appendix A
As of November 16, 2007
As of November 16, 2007
(1) Compliance Services
| One-time Fees | One-time | |||
Once-only setup fee for Fund compliance program setup, |
$ | 15,000 | ||
including hosting on workflow system |
||||
| Recurring Monthly Fees* | Per Month* | |
(i) Registrant/Advisor maintenance fee
|
$3000 | |
(ii) BP fee on aggregate assets 0.48bp
|
annual 0.4bp | |
(iii) Per Fund per month (single registrant, single advisor) includes all compliance workflow system license fees |
$675 | |
(iv) Per appointed sub-advisor per month (assume one)
|
$750 |
| * | Aggregate fee schedule for compliance, PFO/Treasurer and distributor services |
| • | Fees to be invoiced in 12 equal monthly payments | |
| • | Compliance services subject to a monthly minimum of $4,500 per month |
(2) Out-Of-Pocket and Related Expenses
The Fund shall reimburse FCS for the following out-of-pocket and ancillary expenses:
| (i) | communications | ||
| (ii) | postage and delivery services | ||
| (iii) | record storage and retention (imaging, microfilm and shareholder record storage) | ||
| (iv) | reproduction | ||
| (v) | reasonable travel expenses for the CCO incurred in connection with her oversight of the compliance programs of the Service Providers | ||
| (vi) | reasonable travel expenses incurred in connection with travel requested by the Board | ||
| (vii) | other expenses incurred in connection with providing the services described in this Agreement if approved by the Fund |
12
