Exhibit (h)(1)
FUND ACCOUNTING AND ADMINISTRATION AGREEMENT
AGREEMENT made as of this day of , 2002 by and between ETF
Advisors Trust, a Delaware business trust having its principal place of business
at 000 Xxxx 00 Xxxxxx, 00/xx/ Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, hereinafter
called the "Fund") and The Bank of New York, a New York corporation authorized
to do a banking business, having its principal place of business at Xxx Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter called the "Bank").
W I T N E S S E T H:
In consideration of the mutual agreements herein contained, the Fund
and the Bank hereby agree as follows:
1. The Fund hereby appoints the Bank to perform the duties hereinafter
set forth.
2. The Bank hereby accepts appointment and agrees to perform the
duties hereinafter set forth.
3. Subject to the provisions of paragraphs 4 and 5 below, the Bank
shall compute the net asset value per share of each Series of shares listed on
Schedule I hereto (the "Series") of the Fund and shall value the securities held
by the Fund (the "Securities") at such times and dates and in the manner
specified in the then currently effective Prospectus of the Fund.
4. To the extent valuation of Securities or computation of a Series'
net asset value as specified in the Fund's then currently effective Prospectus
is at any time inconsistent with any applicable laws or regulations, the Fund
shall immediately so notify the Bank in writing and thereafter shall either
furnish the Bank at all appropriate times with the values of such Securities and
each Series' net asset value, or subject to the prior approval of the Bank,
instruct the Bank in writing to value Securities and compute each Series' net
asset value in a manner which the Fund then represents in writing to be
consistent with all applicable laws and regulations. The Fund may also from time
to time, subject to the prior approval of the Bank, instruct the Bank in writing
to compute the value of the Securities or a Series' net asset value in a manner
other than as specified in paragraph 3 of this Agreement. By giving such
instruction, the Fund shall be deemed to have represented that such instruction
is consistent with all applicable laws and regulations and the then currently
effective Prospectus of the Fund. The Fund shall have sole responsibility for
determining the method of valuation of Securities and the method of computing
each Series' net asset value.
5. The Bank shall use the securities pricing services agreed upon with
the Fund from a list of securities pricing services reasonably believed by the
Bank to be reliable supplied by Bank, and shall apply the priorities agreed upon
with the Fund. From time to time the Bank may supply a revised list to the Fund,
and shall supply such list upon request of the Fund.
6. The Fund shall furnish the Bank with any and all instructions,
explanations, information, specifications and documentation deemed necessary by
the Bank in the performance of its duties hereunder, including, without
limitation, the amounts or written formula for calculating the amounts and times
of accrual of Fund liabilities and expenses. The Bank shall not be required to
include as Fund liabilities and expenses, nor as a reduction of net asset value,
any accrual for any federal, state, or foreign income taxes unless the Fund
shall have specified to the Bank the precise amount of the same to be included
in liabilities and expenses or used to reduce net asset value. The Fund shall
also furnish the Bank with bid, offer, or market values of Securities if the
Bank notifies the Fund that same are not available to the Bank from a security
pricing or similar service utilized, or subscribed to, by the Bank which the
Bank in its judgment deems reliable at the time such information is required for
calculations hereunder. At any time and from time to time, the Fund also may
furnish the Bank with bid, offer, or market values of Securities and instruct
the Bank to use such information in its calculations hereunder. The Bank shall
maintain a securities pricing or similar service which the Bank in its judgment
deems reliable at the time such information is required for calculations
hereunder.
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7. The Bank (a) shall advise NSCC, the Fund, the Fund's custodian, the
Fund's transfer agent, and the Fund's investment adviser of the net asset value
of each Series upon completion of the computations required to be made by the
Bank pursuant to this Agreement, and (b) if requested by the Fund, provide to
the Fund's investment adviser the market value of the Securities of each Series.
8. The Bank shall, subject to the supervision and direction of the
Board of the Fund, as administrator, conduct various aspects of the Fund's
administrative operations and undertakes to perform the services described in
Appendix B hereto.
9. The Bank shall, as agent for the Fund, maintain and keep current
the books, accounts and other documents, if any, listed in Appendix A hereto and
made a part hereof, as such Appendix A may be amended from time to time, and
preserve any such books, accounts and other documents in accordance with the
applicable provisions of Rule 31a-2 of the General Rules and Regulations under
the Investment Company Act of 1940, as amended (the "Rules"). Such books,
accounts and other documents shall be made available upon reasonable request for
inspection by officers, employees and auditors of the Fund during the Bank's
normal business hours.
10. All records maintained and preserved by the Bank pursuant to this
Agreement which the Fund is required to maintain and preserve in accordance with
the above-mentioned Rules shall be and remain the property of the Fund and shall
be surrendered to the Fund promptly upon request in the form in which such
records have been maintained and preserved. Upon reasonable request of the Fund,
the Bank shall provide in hard copy or on micro-film, whichever the Bank shall
elect, any records included in any such delivery which are maintained by the
Bank on a computer disc, or are similarly maintained, and the Fund shall
reimburse the Bank for its expenses of providing such hard copy or micro-film.
11. The Bank shall reconcile transfer agent records, records of
custodian assets, accounting records and DTC records monthly.
12. The Bank, in performing the services required of it under the terms
of this
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Agreement, shall be entitled to rely fully on the accuracy and validity of any
and all instructions, explanations, information, specifications and
documentation furnished to it by the Fund and shall have no duty or obligation
to review the accuracy, validity or propriety of such instructions,
explanations, information, specifications or documentation, including, without
limitation, evaluations of Securities; the amounts or formula for calculating
the amounts and times of accrual of Series' liabilities and expenses; the
amounts receivable and the amounts payable on the sale or purchase of
Securities; and amounts receivable or amounts payable for the sale or redemption
of Fund shares effected by or on behalf of the Fund. In the event the Bank's
computations hereunder rely, in whole or in part, upon information, including,
without limitation, bid, offer or market values of Securities or other assets,
or accruals of interest or earnings thereon, from a pricing or similar service
utilized, or subscribed to, by the Bank which the Bank in its judgment deems
reliable, the Bank shall not be responsible for, under any duty to inquire into,
or deemed to make any assurances with respect to, the accuracy or completeness
of such information.
13. The Bank shall not be required to inquire into any valuation of
Securities or other assets by the Fund or any third party described in preceding
paragraph 9 hereof, even though the Bank in performing services similar to the
services provided pursuant to this Agreement for others may receive different
valuations of the same or different securities of the same issuers.
14. The Bank, in performing the services required of it under the terms
of this Agreement, shall not be responsible for determining whether any interest
accruable to the Fund is or will be actually paid, but will accrue such interest
until otherwise instructed by the Fund.
15. The Bank shall not be responsible for delays or errors which occur
by reason of circumstances beyond its control in the performance of its duties
under this Agreement, including, without limitation, labor difficulties within
or without the Bank, mechanical breakdowns, flood or catastrophe, acts of God,
failures of transportation, communication or power supply, or other similar
circumstances, provided the Bank has
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established and is maintaining a disaster recovery plan and back-up system
satisfying at all times the requirements of all applicable law, rules, and
regulations and which is reasonable under the circumstances, or if not, that
such delay or failure would have occurred even if Bank had established and was
maintaining such a plan and system and provided further that upon the occurrence
of any such delay or failure Bank shall use commercially reasonable best efforts
to resume performance as soon as practicable under the circumstances Nor shall
the Bank be responsible for delays or failures to supply the information or
services specified in this Agreement where such delays or failures are caused by
the failure of any person(s) other than the Bank to supply any instructions,
explanations, information, specifications or documentation deemed necessary by
the Bank in the performance of its duties under this Agreement.
16. No provision of this Agreement shall prevent the Bank from offering
services similar or identical to those covered by this Agreement to any other
corporations, associations or entities of any kind. Any and all operational
procedures, techniques and devices developed by the Bank in connection with the
performance of its duties and obligations under this Agreement, including those
developed in conjunction with the Fund, shall be and remain the property of the
Bank, and the Bank shall be free to employ such procedures, techniques and
devices in connection with the performance of any other contract with any other
person whether or not such contract is similar or identical to this Agreement.
17. The Bank may, with respect to questions of law, apply to and obtain
the advice and opinion of counsel to the Fund or its own counsel and shall be
entitled to rely on the advice or opinion of such counsel. The reasonable costs
of any such advice or opinion shall be borne by the Fund.
18. The Bank shall be entitled to rely upon any oral instructions
received by the Bank and reasonably believed by the Bank to be given by or on
behalf of the Fund, even if the Bank subsequently receives written instructions
contradicting such oral instructions. The books and records of the Bank with
respect to the content of any oral instruction shall be binding and conclusive.
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19. Notwithstanding any other provision contained in this Agreement, the
Bank shall have no duty or obligation with respect to, including, without
limitation, any duty or obligation to determine, or advise or notify the Fund
of: (a) the taxable nature of any distribution or amount received or deemed
received by, or payable to, the Fund; (b) the taxable nature or effect on the
Fund or its shareholders of any corporate actions, class actions, tax reclaims,
tax refunds, or similar events; (c) the taxable nature or taxable amount of any
distribution or dividend paid, payable or deemed paid, by the Fund to its
shareholders; or (d) the effect under any federal, state, or foreign income tax
laws of the Fund making or not making any distribution or dividend payment, or
any election with respect thereto.
20. The Bank shall not be liable for any loss, damage or expense,
including counsel fees and other costs and expenses of a defense against any
claim or liability, resulting from, arising out of, or in connection with its
performance hereunder, including its actions or omissions, the incompleteness or
inaccuracy of any specifications or other information furnished by the Fund, or
for delays caused by circumstances beyond the Bank's control, unless such loss,
damage or expense arises out of the negligence or willful misconduct of the
Bank.
21. Except for the Fund's obligation to indemnify the Bank for all
Losses (as defined herein) to third parties, including Losses constituting
special, indirect or consequential damages to third parties, neither the Fund
nor the Bank shall otherwise be liable for special, indirect or consequential
damages, or lost profits or loss of business, arising in connection with this
Agreement even if such party has been advised of the likelihood of such loss or
damage and regardless of the form of action
22. The Fund shall not be responsible for, and the Bank shall indemnify
and hold the Fund harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(i) The Bank's negligence or willful misconduct.
(ii) The breach of any representation or warranty of the
Bank hereunder.
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23. Without limiting the generality of the foregoing, the Fund shall
indemnify the Bank against and save the Bank harmless from any loss, damage or
expense, including counsel fees and other costs and expenses of a defense
against any claim or liability, arising from any one or more of the following
("Losses"):
(a) Errors in records or instructions, explanations, information,
specifications or documentation of any kind, as the case may be, supplied to the
Bank by any third party described in preceding paragraph 12 hereof or by or on
behalf of the Fund;
(b) Action or inaction taken or omitted to be taken by the Bank
pursuant to written or oral instructions of the Fund or otherwise without
negligence or willful misconduct;
(c) Any action taken or omitted to be taken by the Bank in good
faith in accordance with the advice or opinion of counsel for the Fund or its
own counsel;
(d) Any improper use by the Fund or its agents, distributor or
investment advisor of any valuations or computations supplied by the Bank
pursuant to this Agreement;
(e) The method of valuation of the Securities and the method of
computing each Series' net asset value; or
(f) Any valuations of Securities or net asset value provided by the
Fund.
24. In consideration for all of the services to be performed by the Bank
as set forth herein the Bank shall be entitled to receive reimbursement for all
out-of-pocket expenses and such compensation as may be agreed upon in writing
from time to time between the Bank and the Fund.
25. Attached hereto as Appendix C is a list of persons duly authorized
by the Fund's Declaration of Trust and By-Laws to execute this Agreement and
give any written or oral instructions, or written or oral specifications, by or
on behalf of the Fund. From
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time to time the Fund (dually authorized by a Director or Managing Director of
the Fund) may deliver a new Appendix C to add or delete any person and the Bank
shall be entitled to rely on the last Appendix C actually received by the Bank.
26. The Fund represents and warrants to the Bank that it has all
requisite power to execute and deliver this Agreement, to give any written or
oral instructions contemplated hereby, and to perform the actions or obligations
contemplated to be performed by it hereunder, and has taken all necessary action
to authorize such execution, delivery, and performance.
27. This Agreement shall not be assignable by the Fund without the prior
written consent of the Bank, or by the Bank without the prior written consent of
the Fund.
28. The term of this Agreement shall be one year commencing upon the
date hereof (the "Initial Term") and shall automatically renew for additional
one year terms unless either party provides written notice of termination at
least ninety (90) days prior to the end of any one year term or, unless earlier
terminated as provided below:
(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party breaches any
material provision of this Agreement, provided that the non-breaching party
gives written notice of such breach to the breaching party and the breaching
party does not cure such violation within 90 days of receipt of such notice.
(b) The Fund may terminate this Agreement prior to the expiration of the
Initial Term upon ninety (90) days' prior written notice in the event that the
Board of the Fund votes to liquidate the Fund and terminate its registration
with the Securities and Exchange Commission other than in connection with a
merger or acquisition of the Fund or the Fund's investment advisor.
29. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, the Bank reserves the right to charge for any other
reasonable expenses
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associated with such termination. The terms of Sections 28 and 29 shall survive
the termination of this Agreement.
30. This Agreement may not be amended or modified in any manner except
by written agreement executed on behalf of both parties hereto.
31. This Agreement is executed in the State of New York and all laws and
rules of construction of the State of New York (other than those relating to
choice of laws) shall govern the rights, duties and obligations of the parties
hereto. The Fund and the Bank hereby consent to the exclusive jurisdiction of a
state or federal courts situated in New York City, New York in connection with
any dispute arising hereunder. The Fund hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection which it may now or
hereafter have to the laying of venue of any such preceding brought in such a
court and any claim that such proceeding brought in such a court has been
brought in an inconvenient form. The Fund and the Bank each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out
of or relating to this Agreement.
32. The performance and provisions of this Agreement are intended to
benefit only the Bank and the Fund, and no rights shall be granted to any other
person by virtue of this Agreement.
33. This agreement has been entered by the Fund and not individually by
the trustees of the Fund, and any obligation of the Fund shall be binding only
upon the assets of the Fund and shall not be binding upon any trustee, officer
or shareholder of the Fund. Neither the authorization of any action by the
trustees or shareholders of the Fund nor the execution of this agreement on
behalf of the Fund shall impose any liability upon any Trustee, officer or
shareholder of the Fund.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
ETF ADVISORS TRUST
By: _______________________
Attest:
__________________
THE BANK OF NEW YORK
By: _______________________
Attest:
__________________
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APPENDIX A TO FUND ACCOUNTING AGREEMENT
BETWEEN
THE BANK OF NEW YORK
AND
ETF ADVISORS TRUST
I. The Bank of New York (the "Bank"), as agent for ETF Advisors Trust
(the "Fund"), shall maintain the following records on a daily basis for each
Series.
1. Report of priced portfolio securities
2. Statement of net asset value per share
II. The Bank shall maintain the following records on a monthly basis for
each Series:
1. General Ledger
2. General Journal
3. Cash Receipts Journal
4. Cash Disbursements Journal
5. Subscriptions Journal
6. Redemptions Journal
7. Accounts Receivable Reports
8. Accounts Payable Reports
9. Open Subscriptions/Redemption Reports
10. Transaction (Securities) Journal
11. Authorized Participant Net Trade Reports
12. Monthly Performance Report
III. The Bank shall prepare a Holdings Ledger on a quarterly basis, and a
Buy-Sell Ledger (Broker's Ledger) on a semiannual basis for each Series.
Schedule D shall be produced on an annual basis for each Series.
The above reports may be printed according to any other required frequency
to meet the requirements of the Internal Revenue Service, The Securities and
Exchange Commission and the Fund's Auditors.
IV. For internal control purposes, the Bank uses the Account Journals
produced by The Bank of New York Custody System to record daily settlements of
the following for each Series:
1. Securities bought
2. Securities sold
3. Interest received
4. Dividends received
5. Capital stock sold
6. Capital stock redeemed
7. Other income and expenses
All portfolio purchases for the Fund are recorded to reflect expected
maturity value and total cost including any prepaid interest.
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ADMINISTRATIVE SERVICES
1. Maintain each Fund's minute book and its general corporate records
(other than accounting books and records).
2. Monitor and document compliance by each Fund with its policies and
restrictions as delineated in its Prospectus.
3. Participate in the periodic updating of each Fund's Registration
Statement and Prospectus and, subject to approval by such Fund's Treasurer and
legal counsel, coordinate the preparation, filing, printing and dissemination of
periodic reports and other information to the SEC and the Fund's shareholders,
including annual and semi-annual reports to shareholders, annual and semi-annual
Form N-SAR, notices pursuant to Rule 24(f)-2 and proxy materials.
4. Prepare federal, state and local income tax returns for each Fund and
Series and file such returns upon approval of the Fund's respective independent
accountants; monitor and report on Sub-Chapter M qualifications; prepare and
file all Form 1099s with respect to each Fund's directors or trustees; monitor
compliance with Section 4982 of the Internal Revenue Code; calculate and
maintain records pertaining to original issue discount and premium amortization
as required; perform on-going wash sales review (i.e., purchases and sales of
Fund investments within 30 days of each other).
5. Prepare and, subject to approval of each Fund's Treasurer, disseminate
to such Fund's Board quarterly unaudited financial statements and schedules of
such Fund's investments, and make presentations to the Board, as appropriate.
6. Subject to approval of each Fund's Board, assist such Fund in
obtaining and updating fidelity bond and E&O/D&O insurance coverage.
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7. Prepare statistical reports for outside information services (e.g.,
IBC/Xxxxxxxx, ICI, Lipper Analytical and Morningstar). Prepare responses to
major industry questionnaires as necessary.
8. Attend shareholder and Board meetings as requested from time to time.
Prepare agenda and Board materials for Board meetings.
9. Establish appropriate expense accruals, maintain expense files and
coordinate the payment of invoices.
10. Calculate periodic dividend rates to be declared in accordance with
management guidelines.
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APPENDIX C
I, , of ETF Advisors Trust, a Delaware business trust
(the "Fund"), do hereby certify that:
The following individuals serve in the following positions with the Fund,
and each has been duly elected or appointed by the Board of Trustees of the Fund
to each such position and qualified therefor in conformity with the Fund's
Declaration of Trust and By-Laws, and the signatures set forth opposite their
respective names are their true and correct signatures. Each such person is
authorized to give written or oral instructions or written or oral
specifications by or on behalf of the Fund to the Bank.
Name Position Signature
Xxxx X. Xxxxxxxxx Managing Director _______________________
Xxxxxxx X. Xxxxxx Vice President _______________________
Xxxx X. Xxxxxxx Secretary _______________________
Xxxxxxxx X. Xxxxxx Director _______________________
SCHEDULE I
SERIES
Treasury 1 FITR ETF
Treasury 2 FITR ETF
Treasury 5 FITR ETF
Treasury 10 FITR ETF
