QUANTITATIVE INVESTMENT ADVISORS, INC.
ADVISORY CONTRACT
Advisory Contract ("Contract") dated as of October 20,
2003, between QUANTITATIVE INVESTMENT ADVISORS, INC., a Delaware
corporation (the "Manager") and PanAgora Asset Management, Inc.,
a Delaware corporation (the "Advisor").
Witnesseth:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY ADVISOR TO TRUST.
(a) Subject always to the control of the trustees (the
"Trustees") of Quantitative Group of Funds, a Massachusetts business
trust (the "Trust"), and the Manager, the Advisor, at its expense,
will furnish continuously an investment program for the Quantitative
Emerging Markets Fund d/b/a Quant Emerging Markets Fund (the "Fund")
of the Trust. The Advisor will determine what securities shall be
purchased, held, sold or exchanged by the Fund and what portion, if
any, of the assets of the Fund shall be held uninvested and shall,
on behalf of the Fund, make changes in the Fund's investments. In
the performance of its duties, the Advisor will comply with the provisions
of the Agreement and Declaration of Trust and By-Laws of the Trust, as
amended, and the stated investment objectives, policies and restrictions
of the Fund as set forth in the then current Prospectus and/or Statement
of Additional Information of the Trust and with other written policies
which the Trustees or the Manager may from time-to-time determine and of
which the Advisor has received notice. In furnishing an investment program
to the Fund and in determining what securities shall be purchased, held,
sold or exchanged by the Fund, the Advisor shall (1) comply in all material
respects with all provisions of applicable law governing its duties and
responsibilities hereunder, including, without limitation, the Investment
Company Act of 1940 (the "1940 Act"), and the Rules and Regulations
thereunder; the Investment Advisors Act of 1940, and the Rules and
Regulations thereunder; the Internal Revenue Code of 1986, as amended (the
"Code"), relating to regulated investment companies and all Rules and
Regulations thereunder; the Xxxxxxx Xxxxxxx and Securities Fraud Enforcement
Act of 1988; and such other laws as may be applicable to its activities as
Advisor to the Fund and (2) use its best efforts to manage the Fund so that
the Fund will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Code and regulations issued thereunder.
The Advisor shall make its officers and employees available to the Manager
or Trustees from time-to-time at reasonable times to review investment
policies of the Fund and to consult with the Manager or Trustees regarding
the investment affairs of the Fund.
(b) The Advisor, at its expense, will (1) furnish all necessary
investment and management facilities, including salaries of personnel, required
for it to execute its duties hereunder, (2) keep records relating to the
purchase, sale or current status of portfolio securities, (3) provide clerical
personnel and equipment necessary for the efficient rendering of investment
advice to the Fund, (4) furnish to the Manager such reports and records
regarding the Fund and the Advisor as the Manager or Trustees shall from
time-to-time request, and, (5) upon reasonable notice, review written
references to the Advisor, or its methodology, whether in a Prospectus,
Statement of Additional Information, sales material or otherwise. The Advisor
shall have no obligation with respect to the determination of the Fund's net
asset value, except to provide the Trust's custodian with information as to
the securities held in the Fund's portfolio. The Advisor shall not be
obligated to provide shareholder accounting services.
(c) The Advisor shall place all orders for the purchase and sale
of portfolio investments for the Fund's account with brokers or dealers
selected by the Advisor. In the selection of such brokers or dealers and the
placing of such orders, the Advisor shall use its best efforts to obtain for
the Fund the most favorable price and execution available, except to the extent
that it may be permitted to pay higher brokerage commissions for brokerage and
research services as described below. In using its best efforts to obtain for
the Fund the most favorable price and execution available, the Advisor, bearing
in mind the Fund's best interests at all times, shall consider all factors it
deems relevant, including by way of illustration, price, the size of the
transaction, the nature of the market for the security, the amount of the
commission, if any, the timing of the transaction taking into account market
prices and trends, the reputation, experience and financial stability of the
broker or dealer involved and the quality of service rendered by the broker or
dealer in other transactions. Subject to such written policies as the Trustees
or the Manager may determine, and of which the Advisor has received notice and
which the Advisor has accepted in writing, the Advisor shall not be deemed to
have acted unlawfully or to have breached any duty created by this Contract or
otherwise solely by reason of its having caused the Fund to pay a broker or
dealer that provides brokerage and research services to the Advisor and/or the
Manager an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Advisor determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Advisor's and/or Manager's overall responsibilities with respect to the Trust
and to other clients as to which the Advisor and/or Manager or persons
controlled by or under common control with the Advisor and/or Manager
exercise investment discretion. The Advisor agrees that in connection with
purchase or sales of portfolio instruments for the Fund's account, neither
the Advisor nor any officer, director, employee or agent of the Advisor shall
act as principal or receive any commission other than as provided in Section 3.
(d) The assets of the Fund shall be held by the Trust's custodian
in an account which the Trust has directed the Custodian to open. The Advisor
shall at no time have custody or physical control of any of the assets of the
Fund. The Manager shall cause such custodian to provide the Advisor with such
information and reports concerning the Fund or its assets as the Advisor may
from time to time reasonably request and to accept instructions from the
Advisor with respect to such assets and transactions by the Fund in the
performance of the Advisor's duties hereunder. The Advisor shall have no
liability or obligation to pay the cost of such custodian or any of its
services.
(e) Advice rendered to the Fund shall be confidential and may not
be used by any shareholder, Trustee, officer, director, employee or agent of
the Trust or of the Manager or by the advisor of any other fund of the Trust.
Non-public information provided to the Manager on a confidential basis
regarding the methodology of the Advisor shall not be made publicly available
by the Manager, except that such information may be disclosed to the Trustees
and may be disclosed to the extent necessary to comply with the federal and
state securities laws and, after notice to the Advisor, upon order of any
court or administrative agency or self regulatory organization of which the
Manager or its affiliates are members.
(f) The Advisor shall not be obligated to pay any expenses of or
for the Fund not expressly assumed by the Advisor pursuant to this Section 1.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, partner, director, officer or
employee of, or be otherwise interested in, the Advisor, and in any person
controlled by or under common control with the Advisor, and that the Advisor
and any person controlled by or under common control with the Advisor may have
an interest in the Trust. It is also understood that the Advisor and persons
controlled by or under common control with the Advisor have and may have
advisory, management, service or other contracts with other organizations
(including other investment companies and other managed accounts) and persons,
and may have other interests and businesses.
Nothing in this Contract shall prohibit the Advisor or any of its
affiliates from providing any services for any other person or entity or limit
the services which the Advisor or any such affiliate can provide to any person
or entity. The Manager understands and agrees that the Advisor and its
affiliates perform investment advisory and investment management services for
various clients other than the Manager and the Trust. The Manager agrees that
the Advisor and its affiliates may give advice and take action in the
performance of duties with respect to any other client which may differ from
advice given, or the timing or nature of action taken, with respect to the
Fund. Nothing in this Contract shall be deemed to impose upon the Advisor
any obligation to purchase or sell or to recommend for purchase or sale for
the Fund any security or other property which the Advisor or any of its
affiliates may purchase or sell for its own account or for the account of
any other client, so long as it continues to be the policy and practice of
the Advisor not to favor or disfavor consistently or consciously any client
or class of clients in the allocation of investment opportunities, so that
to the extent practical, such opportunities will be allocated among clients
over a period of time on a fair and equitable basis.
3. COMPENSATION TO BE PAID BY THE MANAGER TO THE ADVISOR
The Manager will pay to the Advisor, as compensation for the Advisor's
services rendered and for the expenses borne by the Advisor pursuant to Section
1, a fee, computed and paid monthly at the annual rate of 0.40% of the
aggregate average daily net asset value of the Fund. Such fee shall be paid
by the Manager and not by the Fund out of the management fee paid by the Trust
to the Manager pursuant to the Management Contract between the Manager and the
Trust or out of any other funds available to the Manager. Such average daily
net asset value of the Fund shall be determined by taking an average of all the
determinations of such net asset value during such month at the close of
business on each business day, and for non-business days, the net asset value
determined on the previous business day, during such month while this Contract
is in effect. Such fee shall be payable for each month within 30 days after
the end of each month.
If the Advisor shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS TO THIS CONTRACT
This Contract shall automatically terminate, without the payment of
any penalty, in the event of its assignment or in the event that the Management
Contract between the Trust and the Manager is terminated generally, or with
respect to the Fund; and this Contract shall not be amended unless (i) such
amendment is approved at a meeting by an affirmative vote of a majority of
the outstanding shares of the Fund, and (ii) by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not interested persons of the Trust or of
the Manager or of the Advisor. Notwithstanding the foregoing, shareholder
approval will not be required for amendments to this Contract if the Fund
obtains an exemptive order from the Securities and Exchange Commission
permitting amendments to this Contract without shareholder approval.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective on October 31, 2003 or such
other time as shall be agreed upon by the Manager and the Advisor, and shall
remain in full force and effect as to the Fund continuously thereafter (unless
terminated automatically as set forth in Section 4) until terminated as
follows:
(a) The Trust or the Manager may at any time terminate
this Contract as to the Fund by not more than sixty days' or less than thirty
days' written notice delivered or mailed by registered mail, postage prepaid,
to the Advisor, or
(b) The Advisor may at any time terminate this Contract
as to the Fund by not less than one hundred fifty days' written notice
delivered or mailed by registered mail, postage prepaid, to the Manager, or
(c) If (i) the Trustees of the Trust, or the shareholders
by the affirmative vote of a majority of the outstanding shares of the Fund,
and (ii) a majority of the Trustees of the Trust who are not interested persons
of the Trust or of the Manager or of the Advisor, by vote cast in person at a
meeting called for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Contract, then this Contract
shall automatically terminate as to the Fund at the close of business on the
second anniversary of the effective date hereof or the expiration of one year
from the effective date of the last such continuance, whichever is later;
provided, however, that if the continuance of this Contract is submitted to the
shareholders of the Fund for their approval and such shareholders fail to
approve such continuance of this Contract as provided herein, the Advisor may
continue to serve hereunder in a manner consistent with the 1940 Act and the
Rules and Regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote
of a majority of its Trustees, or (ii) by the affirmative vote of a majority
of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 shall be
without the payment of any penalty.
6. CERTAIN DEFINITIONS
For the purposes of this Contract, the "affirmative vote of a
majority of the outstanding shares" means the affirmative vote, at a duly
called and held meeting of shareholders, (a) of the holders of 67% or more
of the shares of the Trust or the Fund, as the case may be, present (in person
or by proxy) and entitled to vote at such meeting, if the holders of more
than 50% of the outstanding shares of the Trust or the Fund, as the case may
be, entitled to vote at such meeting are present in person or by proxy, or
(b) of the holders of more than 50% of the outstanding shares of the Trust or
the Fund, as the case may be, entitled to vote at such meeting, whichever is
less.
For the purposes of this Contract, the terms "affiliated person",
"control", "interested person" and "assignment" shall have their respective
meanings defined in the 1940 Act and the Rules and Regulations thereunder,
subject, however, to such exemptions as may be granted by the Securities and
Exchange Commission ("SEC") under said Act; the term "specifically approve
at least annually" shall be construed in a manner consistent with the 1940
Act and the Rules and Regulations thereunder; and the term "brokerage and
research services" shall have the meaning given by the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NONLIABILITY OF ADVISOR.
Notwithstanding any other agreement to the contrary, in the absence
of willful misfeasance, bad faith or gross negligence on the part of the
Advisor, its partners, officers, directors, employees or agents or reckless
disregard of the Advisor's obligations and duties hereunder, neither the
Advisor nor its officers, directors, employees or agents shall be subject to
any liability to the Trust or to the Manager, or to any shareholder of the
Trust, for any act or omission in the course of, or connected with, rendering
services hereunder, unless the Advisor is claiming indemnity from any of them
in connection herewith, but then only to the extent of the indemnity obtained.
8. VOTING OF SECURITIES.
The Advisor shall have the power to vote, either in person or by
proxy, all securities in which assets of the Fund may be invested from time
to time and shall not be required to seek or take instructions from the
Manager or the Trustees of the Trust, or to take any action, with respect
thereto.
9. REPRESENTATIONS AND COVENANTS OF THE MANAGER.
(a) The Manager represents that the terms of this
Contract do not violate any obligation by which it is bound, whether arising
by contract, operation of law or otherwise, and that it has the power,
capacity and authority to enter into this Contract and to perform in
accordance herewith. In addition, the Manager represents, warrants and
covenants to the Advisor that it has the power, capacity and authority to
commit the Trust to this Contract; that a true and complete copy of the
Agreement and Declaration of Trust and By-Laws of the Trust and the stated
objectives, policies and restrictions of the Fund have been delivered to the
Advisor; and that true and complete copies of every amendment thereto will
be delivered to the Advisor as promptly as practicable after the adoption
thereof. The Manager agrees that notwithstanding any other provision
of this Contract to the contrary, the Advisor will not be bound by any
such amendment until the Advisor has received a copy thereof and has had a
reasonable opportunity to review it.
(b) The Manager shall indemnify and hold harmless the
Advisor, its partners, officers, employees and agents and each person, if
any, who controls the Advisor within the meaning of any applicable law (each
individually an "Indemnified Party") from and against all losses, claims,
damages, liabilities and expenses (including, without limitation, reasonable
fees and other expenses of an Indemnified Party's counsel, other than
attorneys' fees and costs in relation to the preparation of this Contract;
each party bearing responsibility for its own such costs and fees), joint
or several, (other than liabilities, losses, expenses, attorneys' fees and
costs or damages arising from the failure of the Advisor to perform its
responsibilities hereunder or claims arising from its acts or failure to
act in performing this Contract) to which the Advisor or any other
Indemnified Party may become subject under any federal or state law as
a result of any failure of the Manager or, if caused by any failure of the
Manager, of the Trust or the Fund, to disclose a material fact, or any
omission by the Manager, or, if caused by any failure of the Manager, of
the Trust or the Fund, to disclose a material fact, in any document relating
to the Trust or the Fund, except any failure or omission caused solely by
(i) the incorporation in any such document of information relating to the
Advisor which is furnished to the Manager in writing by or with the consent
of the Advisor expressly for inclusion in such document or (ii) a breach,
of which the Manager was not aware, by the Advisor of its duties hereunder.
With respect to any claim for which an Indemnified Party is entitled to
indemnity hereunder, the Manager shall assume the reasonable expenses and
costs (including any reasonable attorneys' fees and costs) of the
Indemnified Party or investigating and/or defending any claim asserted or
threatened by any party, subject always to the Manager first receiving a
written undertaking from the Indemnified Party to repay any amounts paid on
its behalf in the event and to the extent of any subsequent determination
that the Indemnified Party was not entitled to indemnification hereunder
with respect of such claim.
(c) No public reference to, or description of, the
Advisor or its methodology or work shall be made by the Manager or the Trust,
whether in a prospectus, Statement of Additional Information or otherwise,
unless the Manager provides the Advisor with a reasonable opportunity to
review any such reference or description prior to the first use of such
reference or description.
10. REPRESENTATIONS AND COVENANTS OF THE ADVISOR.
(a) The Advisor represents that the terms of this
Contract do not violate any obligation by which it is bound, whether arising
by contract, operation of law, or otherwise, and that it has the power,
capacity and authority to enter into this Contract and to perform in
accordance herewith.
(b) The Advisor shall immediately notify the Manager in
the event that the Advisor or any of its affiliates: (1) becomes aware that
it is subject to a statutory disqualification that prevents the Advisor from
serving as investment advisor pursuant to this Contract; or (2) becomes aware
that it the subject of an administrative proceeding or enforcement action by
the SEC or any other regulatory authority. The Advisor further agrees to
notify the Manager immediately of any material fact known to the Advisor
respecting or relating to the Advisor that is not contained in the Trust's
Registration Statement regarding the Fund, or any amendment or supplement
thereto, but that is required to be disclosed therein, and of any statement
contained therein that becomes untrue in any material respect.
(c) The Advisor agrees to maintain such books and records
with respect to its services to the Fund as are required under the 1940 Act,
and rules adopted thereunder, and by other applicable legal provisions, and
to preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Advisor also agrees that
records it maintains and preserves pursuant to Rule 31a-1 and Rule 31a-2 under
the 1940 Act and otherwise in connection with its services hereunder are the
property of the Trust and will be surrendered promptly to the Trust upon its
request. The Advisor further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
(d) The Advisor shall provide the Manager with quarterly
representations regarding the compliance of its' employees with the Advisor's
code of ethics governing personal securities transactions. The Advisor shall
provide the Manager with copies of any revisions to its code of ethics.
(e) The Advisor shall indemnify and hold harmless the
Manager, the Fund, their partners, officers, employees and agents and each
person, if any, who controls the Manager or Fund within the meaning of any
applicable law (each individually an "Indemnified Party") from and against
all losses, claims, damages, liabilities and expenses (including, without
limitation, reasonable fees and other expenses of an Indemnified Party's
counsel, other than attorneys' fees and costs in relation to the preparation
of this Contract; each party bearing responsibility for its own such costs
and fees), joint or several, (other than liabilities, losses, expenses,
attorneys' fees and costs or damages arising from the failure of the Manager
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Contract) arising from Advisor's (or its
respective agents and employees) failure to perform its duties and assume
its obligations hereunder, including any action or claim against the Manager
based on any alleged untrue statement or misstatement of a material fact
made or provided in writing by or with the consent of Advisor contained in
any registration statement, prospectus, shareholder report or other
information or materials relating to the Fund and shares issued by the Fund,
or the failure or alleged failure to state a material fact therein required
to be stated in order that the statements therein are not misleading, which
fact should have been made known or provided by the Advisor to the Manager.
With respect to any claim for which an Indemnified Party is entitled to
indemnity hereunder, the Advisor shall assume the reasonable expenses and
costs (including any reasonable attorneys' fees and costs) of the Indemnified
Party of investigating and/or defending any claim asserted or threatened by
any party, subject always to the Advisor first receiving a written
undertaking from the Indemnified Party to repay any amounts paid on its
behalf in the event and to the extent of any subsequent determination
that the Indemnified Party was not entitled to indemnification hereunder
with respect of such claim.
11. USE OF NAME.
It is understood that the name of the Fund (as it may be changed
from time to time while the Advisor provides services pursuant to this
Contract) or any derivative thereof or logo associated with that name is
the valuable property of the Trust and/or its affiliates, and that the
Advisor has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Advisor is Advisor to
the Trust and/or the Fund. Upon termination of this Contract the Advisor
shall forthwith cease to use such name (or derivative or logo).
12. GOVERNING LAW.
This Contract shall be governed by, and construed and enforced in
accordance with, the substantive laws of The Commonwealth of Massachusetts
without regard to its principles of conflicts of laws, except to the extent
such laws shall be preempted by the Investment Company Act of 1940 or by other
applicable laws.
13. INDEPENDENT CONTRACTOR.
Advisor shall for all purposes of this Contract be deemed to be an
independent contractor and, except as otherwise expressly provided herein,
shall have no authority to act for, bind or represent the Fund in any way or
otherwise be deemed to be an agent of the Fund. Likewise, the Fund, the
Manager and their affiliates, agents and employees shall not be deemed agents
of the Advisor and shall have no authority to bind the Advisor.
14. MISCELLANEOUS.
(a) The captions of this Contract are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(b) In the event that the Advisor or Manager is or
becomes a party to any action or proceedings in respect of which
indemnification may be sought hereunder, the party seeking indemnification
shall promptly notify the other party thereof. The party from whom
indemnification is sought shall not be liable hereunder for any settlement of
any action or claim effected without its written consent, which consent shall
not be reasonably withheld.
(c) This Contract may be executed in one or more
counterparts, all of which taken together shall be deemed to constitute one
and the same instrument.
IN WITNESS WHEREOF, QUANTITATIVE INVESTMENT ADVISORS, INC. and
PANAGORA ASSET MANAGEMENT, INC. have each caused this instrument to be signed
in duplicate in its behalf, all as of the day and year first above written.
QUANTITATIVE INVESTMENT ADVISORS, INC.
By___________________________
Xxxxxxxxx X. Marius
President
PANAGORA ASSET MANAGEMENT, INC.
By__________________________
Name:
Title:
