INVESTMENT ADVISORY AGREEMENT
CLAYMORE EXCHANGE-TRADED FUND TRUST
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as of May 27, 2008,
between Claymore Exchange-Traded Fund Trust, a Delaware statutory trust (the
"Trust"), and Claymore Advisors, LLC, a Delaware limited liability company (the
"Adviser").
WHEREAS, the Trust, an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), is authorized
to issue an unlimited number of shares with each series; and in separate series
representing interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Trust intends to offer its shares in one or more such series, as
listed in Exhibit A hereto, which may be amended from time to time to add or
remove a series (each, a "Fund"), and invest the proceeds in securities,
WHEREAS, the Trust desires to retain the Adviser to render investment advisory
services hereunder with respect to each Fund;
WHEREAS, this Agreement has been approved in accordance with the provisions of
the 1940 Act, and the Adviser is willing to furnish such services upon the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual premises and covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General. The Adviser agrees, all as more fully set forth herein, to
act as investment adviser to the Trust with respect to the investment of each
Fund's assets and to supervise and arrange for the day-to-day operations of each
Fund and the purchase of securities for and the sale of securities held in the
investment portfolio of each Fund.
2. Duties and Obligations of the Adviser with Respect to Investment of
Assets of each Fund. Subject to the succeeding provisions of this section and
subject to the direction and control of the Trust's Board of Trustees, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of each Fund's assets and, in connection therewith,
have complete discretion in purchasing and selling securities and other assets
for each Fund and in voting, exercising consents and exercising all other rights
appertaining to such securities and other assets on behalf of each Fund; (ii)
supervise the investment program of each Fund and the composition of its
investment portfolio; and (iii) arrange, subject to the provisions of paragraph
3 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of each Fund. In performing its duties under this Section
2, the Adviser may delegate some or all of its duties and obligations under this
Agreement to one or more investment sub- advisers, including but not limited to
delegating the voting of proxies relating to a Fund's portfolio securities in
accordance with the proxy voting policies and procedures of such investment
sub-adviser; provided, however, that any such delegation shall be pursuant to an
agreement with terms agreed upon by the Trust and approved in a manner
consistent with the 1940 Act and provided, further, that no such delegation
shall relieve the Adviser from its duties and obligations of management and
supervision of the management of each Fund's assets pursuant to this Agreement
and to applicable law. The Adviser shall initially determine and make such
modifications to the identity and number of shares of the securities to be
accepted pursuant to each Fund's benchmark index in exchange for "Creation
Units" for each Fund and the securities that will be applicable that day to
redemption requests received for each Fund as may be necessary as a result of
rebalancing adjustments and corporate action events (and may give directions to
the Trust's custodian with respect to such designations).
3. Covenants. In the performance of its duties under this Agreement, the
Adviser:
(a) shall at all times conform to, and act in accordance with, any
requirements imposed by: (i) the provisions of the 1940 Act and the
Investment Advisers Act of 1940, as amended, and all applicable Rules and
Regulations of the Securities and Exchange Commission (the "SEC"); (ii) any
other applicable provision of law; (iii) the provisions of the Declaration
of Trust and By-Laws of the Trust, as such documents are amended from time
to time; (iv) the investment objectives and policies of each Fund as set
forth in the Trust's Registration Statement on Form N-1A; and (v) any
policies and determinations of the Board of Trustees of the Trust;
(b) will place orders either directly with the issuer or with any
broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Adviser will attempt to obtain
the best price and the most favorable execution of its orders. In placing
orders, the Adviser will consider the experience and skill of the firm's
securities traders as well as the firm's financial responsibility and
administrative efficiency. Consistent with this obligation, the Adviser may
select brokers on the basis of the research, statistical and pricing
services they provide to each Fund and other clients of the Adviser.
Information and research received from such brokers will be in addition to,
and not in lieu of, the services required to be performed by the Adviser
hereunder. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same
transaction, provided that the Adviser determines in good faith that such
commission is reasonable in terms either of the transaction or the overall
responsibility of the Adviser to each Fund and its other clients and that
the total commissions paid by such Fund will be reasonable in
relation to the benefits to the Fund over the long-term. In no instance,
however, will a Fund's securities be purchased from or sold to the Adviser,
or any affiliated person thereof, except to the extent permitted by the SEC
or by applicable law; and
(c) will treat confidentially and as proprietary information of each
Fund all records and other information relative to each Fund, and each
Fund's prior, current or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to
and approval in writing by the applicable Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Adviser may be
exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities,
or when so requested by such Fund.
4. Services Not Exclusive. Nothing in this Agreement shall prevent the
Adviser or any officer, employee or other affiliate thereof from acting as
investment adviser for any other person, firm or corporation, or from engaging
in any other lawful activity, and shall not in any way limit or restrict the
Adviser or any of its officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the accounts of
others for whom it or they may be acting; provided, however, that the Adviser
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations under this Agreement.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for each Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any such records upon the Trust's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.
6. Agency Cross Transactions. From time to time, the Adviser or brokers or
dealers affiliated with it may find themselves in a position to buy for certain
of their brokerage clients (each an "Account") securities which the Adviser's
investment advisory clients wish to sell, and to sell for certain of their
brokerage clients securities which advisory clients wish to buy. Where one of
the parties is an advisory client, the Adviser or the affiliated broker or
dealer cannot participate in this type of transaction (known as a cross
transaction) on behalf of an advisory client and retain commissions from one or
both parties to the transaction without the advisory client's consent. This is
because in a situation where the Adviser is making the investment decision (as
opposed to a brokerage client who makes his own investment decisions), and the
Adviser or an affiliate is receiving commissions from both sides of the
transaction, there is a potential conflicting division of loyalties and
responsibilities on the Adviser's part regarding the advisory client. The
Securities and Exchange Commission has adopted a rule under the Investment
Advisers Act of 1940, as amended, which permits the Adviser or its affiliates to
participate on behalf of an Account in agency cross transactions if the advisory
client has given written consent in advance. By execution of this Agreement, the
Trust authorizes the Adviser or its affiliates to participate in agency cross
transactions involving an Account. The Trust may revoke its consent at any time
by written notice to the Adviser.
7. Expenses. During the term of this Agreement, the Adviser shall pay all
of the expenses of each Fund listed in Exhibit A hereto, except for the fee
payment under this Agreement, payments under each Fund's 12b-1 plan, if any,
brokerage expenses, taxes, interest, litigation expenses and other extraordinary
expenses.
8. Compensation of the Adviser. Each Fund agrees to pay to the Adviser and
the Adviser agrees to accept as full compensation for all services rendered by
the Adviser as such, a fee accrued daily and paid monthly in arrears at an
annual rate equal to the percentage of the Fund's average daily net assets set
forth on Exhibit A hereto. For any period less than a month during which this
Agreement is in effect, the fee shall be prorated according to the proportion
which such period bears to a full month of 28, 29, 30 or 31 days, as the case
may be.
9. Limitation on Liability.
(a) The Adviser will not be liable for any error of judgment or
mistake of law or for any loss suffered by Adviser or by the Trust in
connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation
for services or a loss resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from
reckless disregard by it of its duties under this Agreement.
(b) Each Fund may, but shall not be required to, make advance payments
to the Adviser in connection with the expenses of the Adviser in defending
any action with respect to which damages or equitable relief might be
sought against the Adviser under this Section (which payments shall be
reimbursed to the applicable Fund by the Adviser as provided below) if the
Fund receives (i) a written affirmation of the Adviser's good faith belief
that the standard of conduct necessary for the limitation of liability in
this Section has been met and (ii) a written undertaking to reimburse the
applicable Fund whether or not the Adviser shall be deemed to have
liability under this Section, such reimbursement to be due upon (1) a final
decision on the merits by a court or other body before whom the proceeding
was brought as to whether or not the Adviser is liable under this Section
or (2) in the absence of such a decision, upon the request of the Adviser
for reimbursement by a majority vote of a quorum consisting of trustees of
the Trust who are neither "interested persons" of the Trust (as defined in
Section 2(a)(19) of the 0000 Xxx) nor parties to the proceeding
("Disinterested Non-Party Trustees"). In addition, at least one of the
following conditions must be met: (A) the Adviser shall provide a security
for such Adviser undertaking, (B) each Fund shall be insured against losses
arising by reason of any lawful advance, or (C) a majority of a quorum of
the Disinterested Non-Party Trustees of the Trust or an independent legal
counsel in a written opinion, shall determine, based on a review of readily
available facts (as opposed to a full trial-type inquiry), that there is
reason to believe that the Adviser ultimately will be found not to be
liable under this Section.
10. Duration and Termination. This Agreement shall become effective as of
the date hereof and, unless sooner terminated with respect to each Fund as
provided herein, shall continue in effect for a period of two years. Thereafter,
if not terminated, this Agreement shall continue in effect with respect to each
Fund for successive periods of 12 months, provided such continuance is
specifically approved at least annually by both (a) the vote of a majority of
the Trust's Board of Trustees or the vote of a majority of the outstanding
voting securities of each Fund at the time outstanding and entitled to vote, and
(b) the vote of a majority of the Trustees who are not parties to this Agreement
or interested persons of any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated by the Trust at any time, without
the payment of any penalty, upon giving the Adviser 60 days' notice (which
notice may be waived by the Adviser), provided that such termination by the
Trust shall be directed or approved by the vote of a majority of the Trustees of
the Trust in office at the time or by the vote of the holders of a majority of
the voting securities of each Fund at the time outstanding and entitled to vote,
or by the Adviser on 60 days' written notice (which notice may be waived by the
Trust). This Agreement will also immediately terminate in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested person" and "assignment" shall have the same
meanings of such terms in the 1940 Act.)
As additional series, other than the Funds, are established, the Agreement
shall become effective with respect to each such series listed in Exhibit A at
the annual fee set forth in such Exhibit upon the initial public offering of
such new series, provided that the Trust has previously approved this Agreement
for continuation as provided in this Section 10.
11. Notices. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
12. Amendment of this Agreement. This Agreement may only be amended by an
instrument in writing signed by the parties hereto. Any amendment of this
Agreement shall be subject to the 1940 Act.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware for contracts to be performed
entirely therein without reference to choice of law principles thereof and in
accordance with the applicable provisions of the 1940 Act.
14. Use of the Name Claymore. The Adviser has consented to the use by each
Fund of the name or identifying word "Claymore" in the name of each Fund. Such
consent is conditioned upon the employment of the Adviser as the investment
adviser to each Fund. The name or identifying word "Claymore" may be used from
time to time in other connections and for other purposes by the Adviser and any
of its affiliates. The Adviser may require a Fund to cease using "Claymore" in
the name of the Fund if such Fund ceases to employ, for any reason, the Adviser,
any successor thereto or any affiliate thereof as investment adviser of such
Fund.
15. Additional Limitation of Liability. The parties hereto are expressly
put on notice that a Certificate of Trust, referring to the Trust's Agreement
and Declaration of Trust (the "Certificate"), is on file with the Secretary of
the state of Delaware. The Certificate was executed by a trustee of the Trust on
behalf of the Trust as trustee, and not individually, and, as provided in the
Trust's Declaration of Trust, the obligations of the Trust are not binding on
the Trust's trustees, officers or shareholders individually but are binding only
upon the assets and property of the Trust, or the particular series in question,
as the case may be.
16. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
17. Counterparts. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by their duly authorized officers, all as of the day and the year
first above written.
CLAYMORE EXCHANGE-TRADED FUND TRUST
By: /s/Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Chief Legal Officer
CLAYMORE ADVISORS, LLC
By: /s/Xxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxx X. Xxxxxxxx
Title: Senior Managing Director
and General Counsel
EXHIBIT A
As consideration for the Adviser's services to each of the Funds listed below,
the Adviser shall receive from each Fund a unitary fee of the following annual
percentages of the Fund's average daily net assets during the month.
Annual Advisory Fee
Name of Series (as a % of average daily net assets)
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Claymore/Xxxxxxx James SB-1 Equity ETF 0.75%
