Exhibit (d)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 26th day of July, 2002 between ETF Advisors
LP, a limited liability company formed under the laws of the State of Delaware
(the "Adviser"), and ETF Advisors Trust, a business trust organized under the
laws of the State of Delaware (the "Trust").
WHEREAS, the Adviser is principally engaged in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act"); and
WHEREAS, the Trust proposes to engage in the business of an investment
company and is registered as such under the Investment Company Act of 1940 (the
"1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust intends initially to offer shares representing interests
in each of the separate series listed on Schedule A attached hereto (each, an
"Initial Fund" and collectively, the "Initial Funds"); and
WHEREAS, the Trust desires to appoint the Adviser to serve as the
investment adviser with respect to each of the Initial Funds; and
WHEREAS, the Trust may, from time to time, offer shares representing
interests in one or more additional series (each, an "Additional Fund" and
collectively, the "Additional Funds"); and
WHEREAS, the Trust may desire to appoint the Adviser as the investment
adviser with respect to one or more of the "Additional Funds" (each such
Additional Fund and Initial Fund being referred to herein individually as a
"Fund" and collectively as the "Funds");
NOW THEREFORE, the parties hereto hereby agree as follows:
1. APPOINTMENT OF ADVISER
The Trust hereby appoints the Adviser to act as investment adviser for the
Initial Funds for the period and on terms set forth herein. The Adviser accepts
such appointment and agrees to render such services for the compensation set
forth herein. In the event that the Trust desires to retain the Adviser to
render investment advisory services hereunder with respect to an Additional
Fund, and the Adviser is willing to render such services,
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Schedule A shall be amended in accordance with Section 8, paragraph b herein,
whereupon such Additional Fund shall become a Fund hereunder.
2. DUTIES OF THE ADVISER
The Adviser, at its own expense shall: (i) furnish continuously an investment
program for each Fund; (ii) manage the investment and reinvestment of Fund
assets; (iii) determine what investments shall be purchased, held, sold or
exchanged for each Fund and what portion, if any, of the assets of each Fund
shall be held uninvested; (iv) make changes on behalf of the Trust in the
investments for each Fund; (v) provide the Trust with records concerning the
Adviser's activities that the Trust is required to maintain; and (vi) render
reports to the Trust's officers and Board of Trustees concerning the Adviser's
discharge of the foregoing responsibilities. In addition, the Adviser will
arrange for other necessary services, including custodial, transfer agency and
administration. The Adviser shall furnish to the Trust all office facilities,
equipment, services and executive and administrative personnel necessary for
managing the investment program of the Trust for each Fund. The Adviser may at
its expense employ others to provide all or any part of such facilities and
personnel.
The Adviser shall discharge the foregoing responsibilities subject to the
control of the Board of Trustees of the Trust and in compliance with such
policies as the Trustees may from time to time establish, each Fund's investment
objective and policies, as set forth in the then current prospectus and
statement of additional information for such Fund contained in the Trust's
Registration Statement on Form N-1A, as such prospectus and statement of
additional information is amended or supplemented from time to time, and
applicable laws and regulations.
3. CERTAIN RECORDS AND REPORTS
Any records required to be maintained and preserved pursuant to the provisions
of Rule 31a-1 and Rule 31a-2 under the 1940 Act that are prepared or maintained
by the Adviser (or any sub-adviser) on behalf of the Trust are the property of
the Trust and will be surrendered promptly to the Trust at its request (the
"Records"). The Adviser agrees to preserve the Records for the periods
prescribed in Rule 31a-2 under the 1940 Act. The Trust and the Adviser agree to
furnish to each other, if applicable, current prospectuses, proxy statements,
reports to shareholders, certified copies of their financial statements, and
such other information with regard to their affairs as each may reasonably
request.
4. ADVISORY FEES
For the services to be provided by the Adviser hereunder with respect to each
Fund, the Trust shall pay to the Adviser a fee at the rate set forth on Schedule
A attached hereto. The Adviser agrees to pay all expenses incurred by the Trust
except for interest, taxes, brokerage expenses and other expenses connected with
the execution of portfolio transactions, extraordinary expenses, and
distribution fees and expenses paid by the Trust under any distribution plan
adopted pursuant to rule 12b-1 under the 1940 Act. Schedule
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A shall be amended from time to time to reflect the addition and/or termination
of any Fund as a Fund hereunder and to reflect any change in the advisory fees
payable with respect to any Fund duly approved in accordance with Section 8,
paragraph b hereunder. All fees payable hereunder shall be accrued daily and
paid as soon as practical after the last day of each month.
In any case of commencement or termination of this Agreement with respect to any
Fund during any calendar quarter, the fee with respect to such Fund for that
quarter shall be reduced proportionately based upon the number of calendar days
during which it is in effect, and the fee shall be computed upon the average
daily net assets of such Fund for the days during which it is in effect.
5. PORTFOLIO TRANSACTIONS
In connection with the management of the investment and reinvestment of Fund
assets pursuant to this Agreement, the Adviser, acting by its own officers,
directors or employees, is authorized to select the brokers or dealers
(including brokers and dealers that are affiliated with the Adviser or the
Trust's principal underwriter) that will execute purchase and sale transactions
for the Trust. In executing portfolio transactions and selecting brokers or
dealers, if any, the Adviser will use its best efforts to seek on behalf of a
Fund the best overall terms available, as described from time to time, in the
Trust's Registration Statement. In assessing the best overall terms available
for any transaction, the Adviser shall consider all factors it deems relevant,
including the breadth of the market in and the price of the security, the
financial condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any (for the specific transaction and on a
continuing basis). In evaluating the best overall terms available, and in
selecting the broker or dealer, if any, to execute a particular transaction, the
Adviser may also consider the brokerage and research services (as those terms
are defined in Section 28(e) of the 0000 Xxx) provided to any fund of the Trust.
The Adviser 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 the transaction if, but only if, the Adviser determines in good
faith that such commission was reasonable in relation to the value of the
brokerage and research services provided. The Trust acknowledges that any such
research may be useful to the Adviser in connection with other accounts managed
by it. Brokerage transactions for the Trust may be effected through affiliates
of the Adviser if approved by the Board of Trustees, subject to applicable rules
and regulations. he Adviser will promptly communicate to the officers and the
Trustees of the Trust such information relating to Fund transactions as they may
reasonably request.
6. LIABILITY OF ADVISER
Neither the Adviser nor its officers, directors, employees, agents, affiliated
persons or controlling persons or assigns shall be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust or its
shareholders in connection with the matters to which this Agreement relates;
provided that no provision of this Agreement shall be
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deemed to protect the Adviser against any liability to the Trust or its
shareholders resulting from any willful misfeasance, bad faith or gross
negligence in the performance of its duties or obligations hereunder, the
reckless disregard of its duties or obligations hereunder, or breach of its
fiduciary duty to the Trust, any Fund or its shareholders, and no provision of
this Agreement shall be deemed to waive any rights shareholders of a Fund may
have under federal or state securities laws.
7. FORCE MAJEURE
Notwithstanding any other provision of this Agreement, Adviser shall not be
liable for any loss suffered by the Trust or its shareholders caused directly or
indirectly by circumstances beyond Adviser's reasonable control including,
without limitation, government restrictions, exchange or market rulings,
suspensions of trading, acts of civil or military authority, national
emergencies, labor difficulties, fires, earthquakes, floods or other
catastrophes, acts of God, wars, riots or failures of communication or power
supply.
8. DURATION, TERMINATION AND AMENDMENT
a. DURATION. This Agreement shall become effective with respect to each Initial
Fund on the date hereof and, with respect to any Additional Fund, on the date
Schedule A is amended to reflect such Additional Fund in accordance with
paragraph b below. Unless terminated in accordance with this Section 8, the
Agreement shall remain in full force and effect for two years from the date
hereof with respect to each Initial Fund and, with respect to each Additional
Fund, for two years from the date on which such Fund becomes a Fund hereunder.
Subsequent to such initial periods of effectiveness, this Agreement shall
continue in full force and effect for periods of one year thereafter with
respect to each Fund so long as such continuance with respect to such Fund is
specifically approved at least annually (i) by either the Board of Trustees of
the Trust or by vote of a "majority of the outstanding voting securities" (as
defined in the 0000 Xxx) of such Fund, and (ii), 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. If the
shareholders of any Fund fail to approve the Agreement as provided herein, the
Adviser may continue to serve hereunder in the manner and to the extent
permitted by the 1940 Act and rules and regulations thereunder. The foregoing
requirement that continuance of this Agreement be "specifically approved at
least annually" shall be construed in a manner consistent with the 1940 Act and
the rules and regulations thereunder.
b. AMENDMENT. Any amendment to this Agreement shall become effective with
respect to a Fund upon approval of the Adviser, the Board of Trustees of the
Trust, including 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 such
approval and, if required under the 1940 Act, a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of the Fund.
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c. APPROVAL, AMENDMENT OR TERMINATION BY A FUND. Any approval, amendment or
termination of this Agreement with respect to a Fund will not require the
approval of any other Fund or the approval of a majority of the outstanding
voting securities of the Trust, unless such approval is required by applicable
law.
d. AUTOMATIC TERMINATION. This Agreement shall automatically and immediately
terminate in the event of its "assignment" (as defined in the 1940 Act).
e. TERMINATION. This Agreement may be terminated with respect to any Fund at
any time, without payment of any penalty, by vote of the Board of Trustees of
the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 0000 Xxx) of that Fund, or by the Adviser, in each case on not
less than 30 days' nor more than 60 days' prior written notice to the other
party; provided, that a shorter notice period shall be permitted for a Fund in
the event its shares are no longer listed on a national securities exchange.
9. SERVICES NOT EXCLUSIVE; USE OF NAME
The services of the Adviser to the Trust hereunder are not to be deemed
exclusive, and the Adviser shall be free to render similar services to others so
long as its services hereunder are not impaired thereby. The Adviser shall be
deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Trust in
any way or otherwise be deemed an agent of the Trust. The Adviser and its
affiliates reserve the right to grant, at any time, the use of the name "ETF
Advisors" or any approximation or abbreviation thereof, to any other investment
company or business enterprise. Upon termination of this Agreement by either
party, or by its terms, the Trust shall thereafter refrain from using any name
of the Trust or a Fund that includes "ETF Advisors" or any approximation or
abbreviation thereof, or is sufficiently similar to such name as to be likely to
cause confusion with such name, and shall not allude in any public statement or
advertisement to the former association.
10. MISCELLANEOUS
a. NOTICES. 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, statute, 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 the State of Delaware and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Delaware,
or any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
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d. EXECUTION BY COUNTERPART. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one agreement.
e. SURVIVAL AFTER TERMINATION. The rights and obligations set forth in
Paragraphs 4 and 6 shall survive the termination of this Agreement.
f. PERMISSIBLE INTERESTS. Trustees, officers, agents and shareholders of the
Trust are or may be interested in the Adviser (or any successor thereof) as
directors, partners, officers, agents, shareholders or otherwise; directors,
partners, officers, agents and shareholders of the Adviser are or may be
interested in the Trust as Trustees, officers, agents, shareholders or
otherwise; and the Adviser (or any successor thereof) is or may be interested in
the Trust as a shareholder or otherwise.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
as of the date first set forth above.
ETF ADVISORS TRUST
By: /s/ Xxxxxxxx Xxxxxx
-------------------------
Name: Xxxxxxxx Xxxxxx
Title: Director
ETF ADVISORS, LP
By: /s/ Xxxxxxxx Xxxxxx
-------------------------
Name: Xxxxxxxx Xxxxxx
Title: Director
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Schedule A dated July 26, 2002
to the
Investment Advisory Agreement dated July 26, 2002
between
ETF Advisors Trust
and
ETF Advisors, LP
Pursuant to Section 4, the Trust shall pay the Adviser compensation at an annual
rate as follows:
Fund Annual Fee
---- ----------
Treasury 1 FITR ETF 0.15%
Treasury 2 FITR ETF 0.15%
Treasury 5 FITR ETF 0.15%
Treasury 10 FITR ETF 0.15%
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