Exhibit (h)(4)
CHIEF COMPLIANCE OFFICER SERVICES AGREEMENT
CHIEF COMPLIANCE OFFICER SERVICES AGREEMENT (this "Agreement") dated
September 6, 2007 between REALTY FUNDS, INC. (the "Fund"), and ALPS FUND
SERVICES, INC. ("ALPS"), a Colorado corporation. The "Effective Date" of this
Agreement is September 6, 2007.
In an effort to ensure that the Fund is in compliance with Rule 38a-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "1940
Act"), ALPS has agreed to render services to the Fund on behalf of each
portfolio series of the Fund (each such series, a "Portfolio") as listed on
Exhibit C hereto, which is hereby incorporated into and made a part of this
Agreement and which may be updated from time to time, by entering into a written
agreement with respect thereto effective from and after the Effective Date.
ACCORDINGLY, in consideration of the foregoing premises and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Fund and ALPS hereby agree as set forth below.
SECTION 1. Term of Agreement.
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The Fund hereby retains ALPS, on behalf of each Portfolio, for a period
beginning on the Effective Date and ending September 30, 2008 subject to early
termination as provided in Sections 8 and 9 (collectively, with each successive
one-year period as renewed below, the "Term"). This Agreement shall be
automatically renewed for an additional one year Term commencing on October 1,
2008 and ending on September 30, 2009 unless the Fund, for any or no reason,
notifies ALPS in writing prior to the commencement of such additional one year
term that this Agreement will not be renewed. This Agreement may be renewed for
additional one-year periods beyond the Term by mutual agreement, which agreement
shall be in writing signed by both ALPS and Fund and shall be entered into no
later than the last day of the Term.
SECTION 2. Duties.
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(a) ALPS shall designate, subject to the Fund's approval, one of its
own employees to serve as Chief Compliance Officer of the Fund and each
Portfolio of the Fund within the meaning of the Rule (such individual, the
"CCO"). The CCO shall render to the Fund such advice and services ("Services")
as are required to be performed by a CCO under the Rule and as are set forth on
Exhibit A hereto, as such exhibit may be modified from time to time by written
agreement of the parties hereto. Exhibit A is hereby incorporated into and made
a part of this Agreement. The Fund acknowledges that other employees of ALPS
will assist the CCO in the performance of his duties hereunder. Xxxx Xxxxxxx
will lead the engagement and will have overall supervisory responsibility for
the ongoing obligations hereunder. A brief biography for Xxxx Xxxxxxx is
attached as Exhibit B hereto.
(b) During the Term, the CCO shall report to such individuals as may be
designated from time to time by the Board of the Fund, subject to the provisions
of Exhibit A. Upon designation by ALPS and approval of the Fund, each CCO,
before commencing provision of the Services, shall acknowledge in writing having
read and understood this Agreement in its entirety.
(c) The parties agree that only employees of ALPS shall act as CCO or
otherwise perform services to the Fund under this Agreement unless otherwise
agreed in writing by the Fund. Notwithstanding his other duties for ALPS or any
other investment company, the CCO shall perform the Services in a professional
manner and shall devote appropriate time, energies and skill to the Services.
(d) The Fund acknowledges that the CCO may act as Chief Compliance
Officer within the meaning of the Rule for other investment companies, and
nothing herein shall be construed to prohibit the CCO from acting in such
capacity; provided, however, that during the Term neither ALPS nor the CCO shall
enter into any agreement, arrangement or understanding which would conflict with
this Agreement or prevent ALPS or the CCO from performing its or his obligations
hereunder.
(e) In connection with the Fund's approval of any CCO and with the
Fund's ongoing evaluation of any CCO then in service, ALPS shall cooperate in
good faith and provide any documentation reasonably requested by the Fund and
shall make its relevant employees available to the Fund for consultation.
(f) The Fund shall cooperate in good faith with ALPS and the CCO in
order to assist in the performance of the Services. In furtherance of this
agreement to cooperate, the Fund shall make those of its and its Affiliates'
officers, employees and outside counsel available for consultation with ALPS and
the CCO and shall communicate with the board of directors of the Fund (the
"Board") and the service providers(1) of the Fund (for purposes of this
Agreement, the Board and such other service providers collectively, the "Service
Providers") in each case as ALPS or the CCO may reasonably request. The Fund
shall provide ALPS and the CCO with the names of appropriate contact people at
the Service Providers and shall make introductions and otherwise assist ALPS and
the CCO in obtaining the cooperation of the Service Providers. The Fund shall
provide ALPS and the CCO with such books and records regarding the Fund as ALPS
and the CCO may reasonably request.
SECTION 3. Fee.
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(a) As compensation for the timely and satisfactory performance of the
Services on behalf of each index fund Portfolio that has been seeded, up to
twenty (20) Portfolios of the Fund, with the same Service Providers and
investment strategy as the Portfolios, the Fund shall pay to ALPS, or shall
cause the Fund to pay to ALPS, during the Term an annual fee of: $175,000
commencing on the Effective Date paid 1/12 on a monthly basis (or a pro rata
portion thereof for a partial month) (the "Fee"). For each additional Portfolio
added to the Fund in excess of twenty (20) Portfolios, an additional fee of
$10,000 per year per such additional Portfolio (with an appropriate proration of
such $10,000 in the first 12 month period that such additional
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(1) Includes the Fund's investment adviser, XShares Advisors LLC, the Fund's
administrator, transfer agent and investment subadviser, and the Fund's
distributor, ALPS Distributors, Inc.
Portfolio is added to the Fund, on the basis of the number of days that the
added Portfolio(s) is in existence during such first 12 month period) shall be
added to the annual fee set forth in the preceding sentence. The Fee shall be
payable by the Fund within 30 days of its receipt of an invoice from ALPS, which
invoices shall include amounts for any expenses reimbursable under Section 4
hereof. In the event that the Funds are not made available to the public within
6 months of the date of this Agreement a fee of $175,000 will be immediately due
and payable to compensate ALPS for the substantial amount of work and resources
devoted to creating and developing the compliance program contracted for under
the terms of this Agreement.
(b) The CCO shall not receive and shall not make any claim under this
Agreement or otherwise against the Fund for compensation, workers' compensation,
unemployment insurance compensation, or life insurance, social security
benefits, disability insurance benefits or any other benefits. ALPS is solely
responsible for payment of any such compensation or benefits to the CCO, and
ALPS shall withhold on behalf of the CCO the required sums for income tax,
unemployment insurance or social security pursuant to any law or requirement of
any government agency including, without limitation, unemployment tax, federal,
state or foreign income tax, federal social security (FICA) payments and
disability insurance taxes; provided, that the Board, including a majority of
the directors who are not interested persons of the Fund, shall have the power
to approve any and all compensation to the CCO provided by ALPS. ALPS and the
CCO shall make such tax payments as may be required by applicable law and shall
indemnify and hold the Fund harmless from any liability that the Fund may incur
as a consequence of ALPS's or the CCO's failure to make any such tax payment(s).
(c) ALPS and the CCO shall perform the services hereunder as
independent contractors and not as employees of the Fund, although the CCO shall
be an employee of ALPS. As independent contractors, neither ALPS nor the CCO is,
and neither shall represent itself or himself to third parties as being, the
agent or representative of the Fund, except as specifically set forth herein.
Neither ALPS nor the CCO have, and shall not represent itself or himself to
third parties as having, actual or apparent power or authority to do or take any
action for or on behalf of the Fund, as its agent, representative or otherwise,
except as specifically set forth herein.
SECTION 4. Reimbursement of Expenses.
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During the Term, the Fund shall reimburse ALPS for all reasonable and
customary travel and lodging expenses and other out-of-pocket disbursements
incurred by ALPS for or on behalf of the Fund in connection with the performance
of ALPS's or the CCO's duties hereunder; provided, that ALPS provide the Fund
with appropriate receipts and other reasonable documentation as the Fund may
request; and further provided, that the Fund is not obligated to reimburse ALPS
for any portion of such expenses or disbursements that the Fund deems to be
unreasonable or excessive.
SECTION 5. Disclosure of Information.
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(a) From and after the date hereof, neither ALPS nor the CCO shall use
or disclose to any Person, except as required in connection with the performance
of the Services and in compliance with the terms of this Agreement and as
required by law, regulation or judicial process, any Confidential Information
(as defined in Section 5(b)), for any reason or purpose whatsoever, nor
shall ALPS or the CCO make use of any Confidential Information for ALPS's or the
CCO's purposes or for the benefit of any Person (as defined below) except the
Fund or the Fund's Affiliates (as defined below). ALPS shall maintain
commercially reasonable information security policies and procedures for
protecting Confidential Information. For purposes of this Agreement, an
"Affiliate" is an individual or entity (collectively, "Person") controlling or
controlled by or under common control with the Fund.
(b) For purposes of this Agreement, "Confidential Information" means
(i) the non-public intellectual property rights of XShares Advisors, LLC, the
Board, the Fund and the Fund's Affiliates and (ii) all other information of a
proprietary or confidential nature in whatever form relating to XShares
Advisors, LLC, the Board, the Fund or the Fund's Affiliates, or the business or
assets of XShares Advisors, LLC, the Fund or the Fund's Affiliates, including,
without limitation, investment advisory contracts, portfolio holdings, xxxxxxx
xxxxxxx policies and procedures, best execution evaluations books, compliance
manuals and guidelines, records, customer and registered user lists, vendor
lists, supplier lists, customer agreements, vendor agreements, supplier
agreements, incentive and commission program information, distribution channels,
pricing information, cost information, business and marketing plans, strategies,
forecasts, financial statements, budgets and projections, technology, and all
information related to the quantitative securities benchmarks, along with
associated service marks, together with any applications or registrations now or
hereinafter issued on said service marks, on which each Portfolio's investment
strategy is based. Confidential Information does not include (i) information in
the public domain not as a result of a breach by ALPS or the CCO of this
Agreement, (ii) information lawfully received by ALPS or the CCO from a third
Person who had the legal or contractual right to disclose such information to
ALPS or to the CCO, and (iii) information developed by ALPS's or the CCO's own
independent knowledge, skill and know-how.
(c) ALPS and the CCO agree to promptly notify the Fund of any request
for records or any subpoena by any governmental agency or third party. In the
event that ALPS or the CCO is requested by legal process to disclose
Confidential Information, ALPS shall notify the Fund thereof and shall cooperate
with the Fund and the Board, as appropriate, at the expense of the Fund or the
Board, as appropriate, in any action that such entity may desire to take to
protect its Confidential Information.
SECTION 6. Assignment of Written Materials.
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During the Term, ALPS and the CCO shall promptly disclose, and hereby
grant and assign to the Fund for its sole use and benefit, any and all technical
information, data, procedures, records, suggestions and other materials, insofar
as they are reduced to writing, including without limitation the Compliance
Program of the Fund (as that term is defined in Exhibit A), that are reasonably
related to the Fund (collectively, the "Materials") which ALPS or the CCO may
develop or acquire during the Term (whether or not during usual working hours),
together with all copyrights and reissues thereof that may at any time be
granted for or with respect to the Materials. For the avoidance of doubt, the
Materials shall include all records referred to in Exhibit A. The Materials
shall constitute Confidential Information within the meaning of Section 5.
SECTION 7. Delivery of Materials Upon Termination of Term.
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ALPS shall promptly deliver to the Fund at the termination of the Term,
or at any time upon the Fund's request, the Materials and all memoranda, notes,
plans, records, reports, software and other documents and data (and copies
thereof existing in any media) relating to the Confidential Information,
inventions or the business of the Fund or any of its Affiliates that it or the
CCO may then possess or have under its or his control regardless of the location
or form of such material and, if requested by the Fund, will provide the Fund
with written confirmation that all such materials have been delivered to the
Fund.
SECTION 8. Termination.
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(a) The Fund shall have the right to terminate this Agreement, without
the payment of any penalty, as to each Portfolio immediately in the event of:
(i) a vote of the Board, including a majority of the directors
who are not interested persons of the Fund, upon ninety (90) days'
prior written notice to ALPS; provided however, that no prior notice is
required if termination is for Cause (defined below). For purposes of
this Agreement, "Cause" shall be defined as: (1) willful misfeasance,
bad faith or negligence in ----- connection with the performance of the
duties by the CCO under this Agreement, (2) failure of the CCO to
perform his duties under this Agreement, after written notice and a
thirty (30) day period to cure, (3) the CCO's indictment for,
conviction of, or entry of a plea of no contest with respect to, any
felony, (4) the CCO's resignation or (5) the determination by the
Board, including a majority of the directors who are not interested
persons of the Fund, in its sole discretion, that it has lost
confidence in the CCO's effectiveness as the CCO of the Trust. ALPS
agrees that it will report to the Fund's officers or the Board promptly
if ALPS learns that the CCO has engaged in any conduct or been subject
to any of the actions described in clauses (1) through (5) above;
(ii) the deregistration of the Fund under the 1940 Act;
(iii) a change in the 1940 Act, the Rule or other applicable law
or regulation, or the interpretation of any of the foregoing by the
Securities and Exchange Commission or other regulatory or judicial
authority with appropriate jurisdiction, that results in the
arrangement created by this Agreement no longer satisfying the Board or
the Fund's obligations under the Rule;
(iv) subject to the provisions of Section 2(d), any failure of
ALPS to employ a CCO for the Fund acceptable to the Fund; or
(v) any assignment of this Agreement. An internal reorganization
of any party (which does not result in a change in the nature, scope
and quality of services provided hereunder) shall not, by itself,
constitute an assignment of this Agreement.
In the event of the termination or dissolution of a particular
Portfolio, this Agreement shall be terminated as to that Portfolio and shall
continue with respect to the non-terminating or non-dissolving Portfolio.
(b) ALPS shall have the right to terminate this Agreement, without the
payment of any penalty, as to each Portfolio immediately in the event of:
(i) a failure by the Fund to meet its obligations hereunder or a
breach of the Fund's representations and warranties hereunder, if such
failure or breach goes uncured for a period of thirty (30) days after
the Fund receives written notice of such failure from ALPS;
(ii) the termination or dissolution of the Fund, or the
deregistration of the Fund under the 1940 Act; or
(iii) a change in the 1940 Act, the Rule or other applicable law
or regulation, or the interpretation of any of the foregoing by the
Securities and Exchange Commission or other regulatory or judicial
authority with appropriate jurisdiction, that results in the
arrangement created by this Agreement being deemed impermissible.
(c) Upon termination of this Agreement, the Fund shall have no further
liability to ALPS with respect to ALPS's fees or expenses under this Agreement,
except payment of the Fee accrued but unpaid as of the date of termination paid
in a lump sum within sixty (60) days of termination.
(d) Upon termination of this Agreement, ALPS and the CCO each agrees
that it will cooperate in the smooth transition of Services and to minimize
disruption to the Fund. All payments and expense reimbursements in connection
with the termination of this Agreement are subject to the execution of a general
waiver and release of all known and unknown compensating and reimbursement
claims against the Fund by ALPS and the CCO. Any liability to ALPS or the CCO
with respect to any regulatory action or litigation pertaining to services
rendered by ALPS or the CCO under this Agreement, will survive the termination
of this Agreement.
SECTION 9. BOARD ACTION UNDER THE RULE
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(a) The Board may dismiss a CCO at any time and for any or no reason.
If the Board dismisses the CCO, this Agreement will either end immediately, or,
at the sole discretion of the Board, ALPS shall promptly present another CCO
candidate for Board consideration and approval, which may be given or withheld
for any or no reason, to continue the Services under this Agreement.
(b) If ALPS wishes to dismiss the CCO under the terms of ALPS's
contract or arrangement with the CCO, then ALPS will make its case to the Board
before taking such action. Under such circumstances, ALPS may, at its own
discretion, offer to present another CCO candidate to the Board that would be
employed by ALPS, provided however, that the Board of the Fund is not obligated
to approve such other proposed CCO candidate to serve as CCO of the Fund and
each Portfolio of the Fund. If the Board (including a majority of the directors
who are not interested persons of the Fund) approves the new CCO, this Agreement
will continue in
effect, as amended to reflect the new CCO. If the Board chooses to engage CCO
who is not an employee of ALPS as a result of ALPS dismissing the CCO under this
Agreement, this Agreement will terminate.
(c) ALPS covenants that it shall not retaliate against the CCO should
the CCO either (i) inform the Board of a compliance failure or (ii) take
aggressive action to ensure compliance with any rule, regulation or law by the
Fund, a Portfolio or a Service Provider.
(d) If the Board decides to increase the CCO's compensation or provide
a bonus to the CCO, then either the fees paid to ALPS by the Fund will increase
proportionately or the Fund will separately compensate the CCO for any amounts
it deems due to the CCO above the amounts due to ALPS under this Agreement.
(e) If the CCO voluntarily resigns, at the discretion of both parties,
ALPS may present an alternative CCO candidate for Board consideration and
approval, which may be given or withheld for any or no reason, to continue the
Services under this Agreement. If the Board chooses to terminate this Agreement
with ALPS as a result of such voluntary resignation by the CCO, ALPS will make
every effort to assist the Board in a smooth transition during this period.
SECTION 10. Representations and Warranties.
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(a) ALPS hereby represents and warrants to the Fund that (a) the
execution, delivery and performance of this Agreement by ALPS does not breach,
violate or cause a default under any agreement, contract or instrument to which
ALPS is a party or any judgment, order or decree to which ALPS is subject; (b)
the execution, delivery and performance of this Agreement by ALPS has been duly
authorized and approved by all necessary action; and (c) upon the execution and
delivery of this Agreement by ALPS and the Fund, this Agreement will be a valid
and binding obligation of ALPS.
(b) The Fund hereby represents and warrants to ALPS that (a) the
execution, delivery and performance of this Agreement by the Fund does not
breach, violate or cause a default under any agreement, contract or instrument
to which the Fund is a party or any judgment, order or decree to which the Fund
is subject; (b) the execution, delivery and performance of this Agreement by the
Fund has been duly authorized and approved by all necessary action; and (c) upon
the execution and delivery of this Agreement by ALPS and the Fund, this
Agreement will be a valid and binding obligation of the Fund.
SECTION 11. Entire Agreement; Amendment and Waiver.
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This Agreement and the other writings referred to herein contain the
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof and supersede any prior agreement between ALPS and the Fund.
No waiver, amendment or modification of this Agreement shall be valid unless it
is in writing and signed by each party hereto. The waiver by either party of a
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by such other party.
SECTION 12. Notices.
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All notices or other communications pursuant to this Agreement shall be
in writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to the Fund, to:
Realty Funds, Inc.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile:
Telephone:
with a copy to:
Xxxxxxxx Xxxxxxxx
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
00 Xxxx 00xx Xxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to ALPS, to:
ALPS Fund Services, Inc.
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
All such notices and other communications shall be deemed to have been
given and received (a) in the case of personal delivery or delivery by
facsimile, on the date of such delivery if delivered during business hours on a
business day or, if not so delivered, on the next following business day, (b) in
the case of delivery by nationally-recognized, overnight courier, on the
business day following dispatch, and (c) in the case of mailing, on the third
business day following such mailing.
SECTION 13. Headings.
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The section headings in this Agreement are for convenience only and
shall not control or affect the meaning of any provision of this Agreement.
SECTION 14. Severability.
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In the event that any provision of this Agreement is determined to be
partially or wholly invalid, illegal or unenforceable in any jurisdiction, then
such provision shall, as to such jurisdiction, be modified or restricted to the
extent necessary to make such provision valid, binding and enforceable, or if
such provision cannot be modified or restricted, then such provision shall, as
to such jurisdiction, be deemed to be excised from this Agreement; provided,
however, that the binding effect and enforceability of the remaining provisions
of this Agreement, to the extent the economic benefits conferred upon the
parties by virtue of this Agreement remain substantially unimpaired, shall not
be affected or impaired in any manner, and any such invalidity, illegality or
unenforceability with respect to such provisions shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 15. Remedies.
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(a) Each of the parties hereto acknowledges and understands that certain
provisions of this Agreement are of a special and unique nature, the loss of
which cannot be adequately compensated for in damages by an action at law, and
thus, the breach or threatened breach of such provisions of this Agreement would
cause the non-breaching party irreparable harm. Each of the parties hereto
further acknowledges that, in the event of a breach of Section 5 of this
Agreement, the non-breaching party shall be entitled to immediate relief
enjoining such violations in any court or before any judicial body having
jurisdiction over such a claim. All remedies hereunder are cumulative, are in
addition to any other remedies provided for by law or in equity and may, to the
extent permitted by law, be exercised concurrently or separately, and the
exercise of any one remedy shall not be deemed to be an election of such remedy
or to preclude the exercise of any other remedy.
(b) ALPS shall indemnify and hold the Fund and its employees, the members of the
Board, and each applicable Portfolio and its employees harmless from and against
any and all losses, damages, costs, charges, reasonable attorneys' fees,
payments, expenses and liability, as incurred, arising out of or attributable to
any refusal or failure to comply with the terms of this Agreement or applicable
rules, regulations or laws by ALPS or the CCO, or which arise out of a lack of
good faith, negligence or willful misconduct by ALPS or the CCO with respect to
the performance by ALPS or the CCO under or in connection with this Agreement or
by reason of the reckless disregard by ALPS or the CCO of its or his obligations
and duties under this Agreement.
SECTION 16. Distinction of Portfolios.
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Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Portfolio of the Fund are separate
and distinct from the assets and liabilities of each other Portfolio and that no
Portfolio shall be liable or shall be charged for any debt, obligation or
liability of any other Portfolio, whether arising under this Agreement or
otherwise.
SECTION 17. Benefits of Agreement; Assignment.
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The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
assigns, representatives, heirs and estate, as applicable. This Agreement shall
not be assignable by ALPS without the express written consent of the Fund. Any
purported assignment in violation of the immediately preceding sentence shall be
void and of no effect.
SECTION 18. Survival.
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Anything to the contrary contained in this Agreement notwithstanding,
the provisions of Sections 5 through 7, and 15 through 17 of this Agreement
shall survive the termination of the Term.
SECTION 19. Counterparts and Facsimile Execution.
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This Agreement may be executed in two counterparts, all of which shall
be considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered (by
facsimile or otherwise) to the other party, it being understood that all parties
need not sign the same counterpart. Any counterpart or other signature hereupon
delivered by facsimile shall be deemed for all purposes as constituting good and
valid execution and delivery of this Agreement by the party delivering it.
SECTION 20. Governing Law; Mutual Waiver of Jury Trial; Jurisdiction.
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(a) All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed and enforced in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether in the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York. In furtherance of the
foregoing, the law of the State of New York will control the interpretation and
construction of this Agreement, even if under such jurisdiction's choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily or necessarily apply.
(b) THE PARTIES IRREVOCABLY AND UNCONDITIONALLY AGREE THAT THE
EXCLUSIVE PLACE OF JURISDICTION FOR ANY ACTION, SUIT OR PROCEEDING ("ACTIONS")
RELATING TO THIS AGREEMENT SHALL BE IN THE COURTS OF THE UNITED STATES OF
AMERICA SITTING IN THE CITY OF NEW YORK, NEW YORK OR, IF SUCH COURTS SHALL NOT
HAVE JURISDICTION OVER THE SUBJECT MATTER THEREOF, IN XXX XXXXXX XX XXX XXXXX XX
XXX XXXX SITTING THEREIN, AND EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES TO SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR PURPOSES
OF ANY SUCH ACTIONS. IF ANY SUCH STATE COURT ALSO DOES NOT HAVE JURISDICTION
OVER THE SUBJECT MATTER THEREOF, THEN SUCH AN ACTION, SUIT OR PROCEEDING MAY BE
BROUGHT IN THE FEDERAL OR STATE COURTS LOCATED IN THE STATES OF THE PRINCIPAL
PLACE OF BUSINESS OF ANY PARTY HERETO. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY OBJECTION IT MAY HAVE TO THE VENUE OF ANY ACTION
BROUGHT IN SUCH COURTS OR TO THE CONVENIENCE OF THE FORUM. FINAL JUDGMENT IN ANY
SUCH ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE CONCLUSIVE
EVIDENCE OF THE FACT AND THE AMOUNT OF ANY INDEBTEDNESS OR LIABILITY OF ANY
PARTY THEREIN DESCRIBED.
SECTION 21. Mutual Contribution.
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The parties to this Agreement and their counsel have mutually
contributed to its drafting. Consequently, no provision of this Agreement shall
be construed against any party on the ground that a party drafted the provision
or caused it to be drafted.
IN WITNESS WHEREOF, each of the undersigned has executed this Chief
Compliance Officer Services Agreement as of the date first above written.
REALTY FUNDS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxx
Title: President
ALPS FUND SERVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Exhibit A
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Duties of Chief Compliance Officer
The Services shall include, but not be limited to, the following. Unless
otherwise stated, terms used in this Exhibit A shall have the meanings assigned
thereto in the Chief Compliance Officer Services Agreement to which this Exhibit
A is attached and into which this Exhibit A is incorporated by reference.
I. Drafting of Compliance Program. No later than September 6, 2007, the CCO
shall, with the assistance of the Fund, draft written compliance policies
and procedures (the "Compliance Program") of the Fund, which shall
address compliance with, and be reasonably designed to prevent violation
of, "Federal Securities Laws"(2) and the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 ("U.S.A. Patriot Act") (for the purposes of this
Exhibit A, "Federal Securities Laws" shall be include the U.S.A. Patriot
Act together with the "Federal Securities Laws" referred to in the Rule).
In addition to provisions of Federal Securities Laws that apply to the
Fund, the Compliance Program shall address compliance with, and be
reasonably designed to prevent violation of, the Fund's charter and
by-laws and all exemptive orders, no-action letters and other regulatory
relief received by the Fund from the Securities and Exchange Commission
(the "SEC") and NASD, Inc. (the "NASD") (all such items collectively,
"Regulatory Relief"); provided, however, that the Compliance Program
shall address only that Regulatory Relief afforded the Service Providers
or the Fund or relevant to compliance by the Service Providers or the
Fund, and shall not address the terms by which other parties may receive
the benefits of any Regulatory Relief. In drafting the Compliance
Program, the CCO shall engage in the following activities:
A. Evaluation of Internal Control Structure.
1. Conduct interviews with certain employees throughout the business
lines of the Fund that are responsible for the day-to-day
operations of the Fund in relation to compliance by the Fund and
its Service Providers (defined below) with the Federal Securities
Laws.
2. Assess from such interviews the operational risks and compliance
with stated policies and procedures of the Fund and its Service
Providers.
3. Review internal audit and other reports maintained by the Fund,
and to the extent practicable, its Service Providers, related to
compliance with the Federal Securities Laws.
_______________________
(2) "Federal Securities Laws" are defined by the Rule as the Securities Act of
1933, the Securities Exchange Act of 1934, the Xxxxxxxx-Xxxxx Act of 2002,
the Investment Company Act of 1940, the Investment Advisers Act of 1940,
Title V of the Xxxxx-Xxxxx-Xxxxxx Act, any SEC rules adopted under any of
the foregoing laws, the Bank Secrecy Act, as it applies to registered
investment companies, and any rules adopted thereunder by the SEC or the
Department of Treasury.
4. Review any written policies and procedures to assess the adequacy
of such policies and procedures with respect to compliance with
the Federal Securities Laws by the Fund and its Service
Providers.
B. Policies and Procedures of the Fund. Conduct a detailed review of the
Fund's Compliance Program pertaining to compliance by registered
investment companies with the Federal Securities Laws, among other
things:
1. Pricing of portfolio securities and Portfolio shares, with a
focus on the following items within the pricing polices and
procedures:
(a) monitoring for circumstances that may necessitate the use of
fair value prices;
(b) establishing criteria for determining when market quotations
are no longer reliable for a particular portfolio security;
(c) providing a methodology or methodologies by which the
Portfolios determine the current fair value of their
portfolio securities; and
(d) reviewing the appropriateness and accuracy of the
methodology used in valuing securities, including making any
necessary adjustments.
2. Processing of Portfolio shares, with a focus on the following
items:
(a) segregation of investor orders received before the
Portfolios price their shares from those that were received
after the Portfolios price their shares; and
(b) methodology used by the Portfolios to protect themselves and
their shareholders against late trading.
3. Identification of affiliated persons to ensure that any
transactions with affiliated persons are executed in compliance
with the 1940 Act.
4. Protection of nonpublic information, including:
(a) prohibitions against trading portfolio securities on the
basis of information acquired by analysts or portfolio
managers employed by the Fund or the Portfolios' investment
adviser ("Adviser") or the Portfolio's investment subadviser
("Subadviser") ;
(b) disclosure to third parties of material information about
the Portfolios' holdings, trading strategies or pending
transactions; and
(c) purchase or sale of Portfolio shares by the personnel of the
Fund or the Adviser or Subadviser based on material,
nonpublic information about the Portfolios.
5. Compliance with Portfolio governance requirements, including the
procedures to guard against:
(a) an improperly constituted Board of Directors;
(b) failure of the Board of Directors to properly consider
matters entrusted to it; and
(c) failure of the Board of Directors to request and consider
information required by the 1940 Act from the Fund and other
Service Providers.
6. The excessive short-term trading of mutual fund shares that may
be harmful to the Portfolios, including a focus on the following
areas:
(a) consistency of policies and procedures with the Portfolios'
disclosed policies regarding market timing;
(b) monitoring of shareholder trades or flows of money in and
out of the Portfolios in order to detect market timing
activity;
(c) enforcement of the Portfolios' policies regarding market
timing;
(d) prevention of waivers that would harm the Portfolios or
their shareholders, or subordinate the interests of the
Portfolios or their shareholders to those of the Fund or any
other affiliated person or associated person of the Fund;
and
(e) reporting to the Fund's Board regarding all waivers granted,
so that the Board can determine whether such waivers were
proper.
7. The distribution, marketing and advertising of the Portfolios'
shares.
8. The trading of securities by the Portfolios, including a focus on
enforcement of the Fund's policies with respect to brokerage,
soft dollars and allocation of trades.
9. The review of any electronic mail communications.
II. Administration of Compliance Program. The CCO shall administer and
enforce the Fund's Compliance Program.
III. Oversight of Service Providers. The CCO is responsible for overseeing, on
behalf of the Fund, adherence to the written compliance policies and
procedures of the Fund's service
1
providers, including the Fund's investment adviser, XShares Advisors, LLC
(the "Investment Adviser"), the Fund's administrator, transfer agent and
investment subadviser, and the Fund's distributor, ALPS Distributors,
Inc. (the "Distributor"), (for purposes of this Exhibit A, the Investment
Adviser, the Investment Subadviser and the Distributor, collectively, the
"Service Providers"). In furtherance of this duty,
A. No later than September 6, 2007, the CCO shall obtain and review the
written compliance policies and procedures of the Service Providers
or summaries of such policies that have been drafted by someone
familiar with them.
B. The CCO shall monitor the Service Providers' compliance with their
own written compliance policies and procedures, Federal Securities
Laws and the Fund's charter, by-laws and Regulatory Relief. In so
doing, the CCO shall interact with representatives of the Service
Providers as appropriate. Where deemed appropriate and in accordance
with pronouncements by the Staff of the SEC, ALPS may rely on
summaries that are prepared by a Service Provider or a third party,
instead of the actual policies and procedures of the Service
Provider.
C. The CCO shall attempt to obtain the following representations from
each Service Provider and, if it fails to obtain such
representations, shall report this fact to the Fund:
1. In connection with the documentation of its written policies and
procedures governing the provision of its services to the
relevant Fund, the Service Provider has prepared and delivered to
the Fund a summary of core services that it provides to the Fund
or, if no such summary is available, that it has delivered to the
Fund copies of the relevant policies and procedures.
2. The Service Provider will provide to the Fund and the CCO any
revisions to its written compliance policies and procedures on at
least an annual basis, or more frequently in the event of a
material revision.
3. The Service Provider's written compliance policies and procedures
have been reasonably designed to prevent, detect and correct
violations of the applicable Federal Securities Laws and critical
functions related to the services performed by Service Provider
pursuant to the applicable agreement between the Service Provider
and the Fund.
4. The Service Provider has established monitoring procedures, and
shall review, no less frequently than annually, the adequacy and
effectiveness of its written compliance policies and procedures
to check that they are reasonably designed to prevent, detect and
correct violations of those applicable Federal Securities Laws
and critical functions related to the services performed by the
Service Provider pursuant to the applicable agreement between the
Service Provider and the Fund.
IV. Annual Review. The CCO will monitor the Fund's Compliance Program for
effectiveness, including ongoing dialogue with key compliance personnel
at the Fund's Service Providers. Such monitoring will include risk-based
compliance testing of the Fund's Compliance Program. The Rule requires
that, at least annually, the Fund review its Compliance Program and that
of its Service Providers and the effectiveness of their respective
implementations (the "Annual Review"). The CCO shall perform the Annual
Review for the Fund. The first Annual Review shall be completed no later
than December 1, 2007.
V. Reports to the Fund; Escalation
-------------------------------
A. The CCO shall make quarterly reports to the Fund regarding its
administration and enforcement of the Compliance Program. These
regular reports shall address compliance by the Fund and the Service
Providers and such other matters as the Fund may reasonably request.
B. In addition, at least annually, the CCO shall submit a written report
to the Board addressing the following issues:
1. the operation of the Compliance Program, and the written
compliance policies and procedures of the Service Providers;
2. any material changes made to the Compliance Program and the
written compliance policies and procedures of the Service
Providers since the date of the such last report;
3. any material changes to the Compliance Program and the written
compliance policies and procedures of the Service Providers
recommended as a result of the Annual Review; and
4. each "Material Compliance Matter" that occurred since the date of
the last report.(3)
This written report shall be based on the Annual Review. The
first written report shall be presented to the Fund no later than
sixty (60) days after the date of the first Annual Review.
_________________________
(3) "Material Compliance Matter" is defined as "any compliance matter about
which the Fund's board would reasonably need to know to oversee fund
compliance," which involves any of the following (without limitation): (i)
a violation of Federal Securities Laws by the Fund or a Service Provider
(or an officer, director, employee or agent of such Service Provider; (ii)
a violation of the Compliance Program of the Fund, or the written
compliance policies and procedures of its Service Providers; or (iii) a
weakness in the design or implementation of the Compliance Program policies
and procedures of the Fund, or the written compliance policies and
procedures of its Service Providers.
C. In the event that the CCO reports a Material Compliance Matter and is
not reasonably satisfied with the Fund's efforts to address and
remedy the same, the CCO shall report such Material Compliance Matter
to the Board.
D. At least annually, the CCO shall meet separately with the Board's
directors who are not interested persons of the Fund.
VI. Recordkeeping. The CCO shall maintain the books and records for the Fund
that are required to be retained by the Rule, which books and records may
be maintained electronically but which shall, in any event, be backed-up
and safeguarded in accordance with ALPS's regular practices for record
retention.
VII. Meeting with Regulators. The CCO shall meet with, and reply to inquiries
from, the SEC, the NASD and other legal and regulatory authorities with
responsibility for administering Federal Securities Laws as necessary or
as reasonably requested by the Board.
VIII. Amendments to the Compliance Program. The CCO shall consult with the
Board and its representatives as necessary to amend, update and revise
the Compliance Program as necessary, but no less frequently than
annually. Additionally, the CCO will recommend amendments and draft
policies and procedures as they pertain to:
A. consistency with regulatory expectations of risk-based policies and
procedures;
B. maintenance of compliance with the Federal Securities Laws; and
C. consistency within the structure, organization and format of the
policies and procedures.
Any amendments to the Fund's policies and procedures will be based on
industry best practices and regulatory expectations. In addition, on a
quarterly basis, the CCO, in consultation with the Fund's counsel, will
provide the Fund with updates, if any, to the Fund's policies and
procedures to reflect changing regulatory requirements.
Exhibit B
---------
See attached
Exhibit C
---------
Portfolio Series of the Fund
(as of September 6, 2007)
Adelante Shares RE Growth Exchange-Traded Fund
Adelante Shares RE Value Exchange-Traded Fund
Adelante Shares RE Classics Exchange-Traded Fund
Adelante Shares RE Kings Exchange-Traded Fund
Adelante Shares RE Yield Plus Exchange-Traded Fund
Adelante Shares RE Shelter Exchange-Traded Fund
Adelante Shares RE Composite Exchange-Traded Fund
