Portfolio Managers. Austin Wen, CFA, Portfolio Manager for VIA, and Rafael Zayas, CFA, SVP, Head of Portfolio Management and Trading for VIA, and Ryan Dofflemeyer, Senior Portfolio Manager for VIA, are jointly responsible for the day-to-day management of VUSE, VIDI, and PPTY. Messrs. Wen, Zayas, and Dofflemyer will contine to be responsible for the management of VUSE, VIDI, and PPTY after the close of the Transaction.2
Jeff Kernagis, CFA, Senior Portfolio Manager for VIA, and Jim Iredale, CFA, Senior Portfolio Manager for VIA, are jointly responsible for the day-to-day management of VBND. Messrs. Kernagis and Iredale will continue to be responsible for the management of VBND after the close of the Transaction.
Mr. Wen serves as Portfolio Manager for VIA. Mr. Wen has been a Portfolio Manager of VIA since 2016 and has over eight years of investment management experience. His focus at VIA is on portfolio management and trading, risk monitoring and investment analysis. Previously, he was an analyst for Vident Financial, beginning in 2014, working on the development and review of investment solutions. He began his career in 2011 as a State Examiner for the Georgia Department of Banking and Finance. Mr. Wen obtained a BA in Finance from the University of Georgia and holds the Chartered Financial Analyst (“CFA”) designation.
Mr. Zayas serves as Portfolio Manager for VIA. Mr. Zayas has over 15 years of trading and portfolio management experience in global equity products and ETFs. He is SVP, Head of Portfolio Management and Trading. Mr. Zayas specializes in managing and trading of developed, emerging, and frontier market portfolios. Prior to joining VIA in 2017, he was a Portfolio Manager at Russell Investments for over $5 billion in quantitative strategies across global markets, including emerging, developed, and frontier markets and listed alternatives. Before that, he was an equity Portfolio Manager at BNY Mellon Asset Management, where he was responsible for $150 million in internationally listed global equity ETFs and assisted in managing $3 billion of global ETF assets. Mr. Zayas holds a BS in Electrical Engineering from Cornell University. He also holds the Chartered Financial Analyst designation.
Mr. Dofflemeyer serves as Portfolio Manager for VIA. Mr. Dofflemeyer has over 16 years of trading and portfolio management experience across various asset classes including both ETFs and mutual funds. He is Senior Portfolio Manager for VIA, specializing in managing and trading of global equity and multi-asset portfolios. Prior to joining VIA in August 2020, he was a Senior Portfolio Manager at ProShare Advisors LLC (“ProShare”) for over $3 billion in ETF assets across global equities, commodities, and volatility strategies. Mr. Dofflemeyer held various positions with ProShare from October 2003 until August 2020. From 2001 to 2003, he was a Research Analyst at the Investment Company Institute in Washington DC. Mr. Dofflemeyer holds a BA from the University of Virginia and an MBA from the University of Maryland.
Mr. Kernagis serves as a Portfolio Manager for VIA. Mr. Kernagis has 32 years of investment experience. Prior to joining VIA in 2022, Mr. Kernagis was a Senior Vice President at Northern Trust Asset Management. Before that, Mr. Kernagis spent almost 14 years at Invesco/PowerShares, whereas Senior Portfolio Manager he directed the fixed income ETF PM team and helped grow assets to $40 billion in bond ETFs globally. Mr. Kernagis was also a PM at Claymore (Guggenheim) Securities where he managed both equity ETFs and bond Unit Investment Trusts. In addition, he was a senior bond trader at Mid-States (Alloya) Corporate Federal Credit Union. Prior to working in investment management, Mr. Kernagis held institutional derivative sales positions at ABN Amro, Bear Stearns, and Prudential Securities. Mr. Kernagis earned a BBA degree from the University of Notre Dame and an MBA from DePaul University. He also holds the CFA designation.
Mr. Iredale serves as a Portfolio Manager for VIA. Mr. Iredale became a Senior Portfolio Manager – Fixed Income at VIA in 2015 and has over 15 years of experience managing fixed income products. Prior to joining VIA, Mr. Iredale was a Manager – Fixed Income with Ronald Blue & Co., one of the largest independent wealth management firms in the U.S., where he started in 1999. Mr. Iredale graduated with a BBA from the University of Georgia, Terry College of Business and obtained his JD from the University of Georgia School of Law. He holds the CFA designation.
Executive Officers and Directors of VA. Information regarding the principal executive officers and directors of VA is set forth below. The address of VA and its executive officers and directors is 1125 Sanctuary Parkway, Suite 515, Alpharetta, Georgia 30009. The following individuals are the executive officers and directors of VA:
Name | Position with VA |
Deborah Kimery | Chief Executive Officer |
Erik Olsen | Chief Compliance Officer |
No Trustee or officer of the Trust currently holds any position with VA or its affiliated persons. No Trustee or officer of the Trust holds any position with Vident Capital Holdings, LLC or its affiliated persons.
Required Vote. Approval of the Proposal requires the affirmative “vote of the holders of a majority of the outstanding voting securities” of a Fund. Under the 1940 Act, the “vote of the holders of a majority of the outstanding voting securities” means the affirmative vote of the lesser of (a) 67% or more of the shares of a Fund present or represented by proxy at the Special Meeting if the holders of more than 50% of the outstanding shares are present or represented by proxy at the Special Meeting, or (b) more than 50% of the outstanding shares of a Fund. If the Proposal is approved by a Fund’s shareholders, the New Advisory Agreement is expected to become effective upon the closing of the Transaction. The Transaction is subject to customary closing conditions, including obtaining approval of a certain number of the new agreements by the Board of Trustees of the Trust and shareholders of each applicable Fund. If the shareholders of a Fund do not approve the Proposal at the Special Meeting, a condition to the closing of the Transaction may not be satisfied and VA will continue to serve as the investment adviser to the Fund and VIA will continue to serve as the investment sub-adviser to the Fund pursuant to the Current Advisory Agreement and Current Sub-Advisory Agreement. Accordingly, if the Proposal is not approved by each Fund’s shareholders, as applicable, at the Special Meeting, the Board will take such action as it deems necessary and in the best interests of each Fund and its respective shareholders, which may include further solicitation of a Fund’s shareholders with respect to the Proposal, solicitation of the approval of a different Proposal, or the liquidation of one or more Funds.
Recommendation of the Board of Trustees. The Board believes that the terms and conditions of the New AdvisorySub-Advisory Agreement are fair to, and in the best interests of, eachthe Fund and its shareholders. The Board believes that, upon shareholder approval of the Proposal, the AdviserVA (the “Sub-Adviser”) will provide at least the same level of services that it and its affiliate VIA currently provide eachprovides the Fund under the Current Agreements.Sub-Advisory Agreement. The Board was presented with information demonstrating that the New AdvisorySub-Advisory Agreement would enable the Funds’Fund’s shareholders to continue to obtain quality services at a cost that is fair and reasonable. At the Meeting, the Board, including all of the Independent Trustees, approved the New AdvisorySub-Advisory Agreement and recommends that shareholders of eachthe Fund approve the Proposal.
In considering the New AdvisorySub-Advisory Agreement, the Board focused on the effect that the Transaction could be expected to have on the Adviser’sSub-Adviser’s business and operations as they relate to the FundsFund and also took into consideration (i) the nature, extent, and quality of the services provided by VIA and to be provided by VA; (ii) the historical performance of eachthe Fund; (iii) the cost of the services provided and the profits realized by VAVIA or its affiliates from services rendered to the FundsFund as well as the estimated cost of the services to be provided by its affiliate VA and the profits expected to be realized by VA from providing such services, including any other financial benefits enjoyed by VIA, or that will be enjoyed by VA, or itstheir affiliates; (iv) comparative fee and expense data for the FundsFund and other investment companies with similar investment objectives, including a report prepared by Barrington Partners, an independent third party, that compares each Fund’s investment performance, fees and expenses to relevant market benchmarks and peer groups (the “Barrington Report”);objectives; (v) the extent to which any economies of scale realized by VIA or VA in connection with its services to the FundsFund are, or will be, shared with Fund shareholders; and (vi) other factors the Board deemed to be relevant.
The Board also considered that the Adviser and its affiliate VIA, along with other service providers of the Funds,Fund, had provided written and oral updates on the firm over the course of the year with respect to its role as investment adviser and sub-adviser to the Funds,Fund, and the Board considered that information alongside the written materials presented at the Meeting, as well as the quarterly Board meeting held on April 5-6, 2023, in its consideration of whether the New AdvisorySub-Advisory Agreement should be approved. In addition, the Board took into consideration performance and due diligence information related to VA, including the Barrington Report,VIA that was provided to the Board in advance of its annual reviewinitial approval of the Funds’ Current AdvisorySub-Advisory Agreement at its quarterly meeting on January 11-12, 2023 quarterly meeting.19-20, 2022. At both the Meeting and the April 5-6 meeting, representatives from VA provided an overview of the Transaction and the effect it would have on the management of the Funds.Fund. Representatives from the AdviserSub-Adviser also provided an overview of the Funds’Fund’s strategies, the services to be provided to eachthe Fund by the Adviser,Sub-Adviser, and additional information about the Adviser’sSub-Adviser’s personnel and business operations. Further, subsequent to the April 5-6 meeting, at the Board’s request, VA representatives provided additional information about the Transaction and discussed this information with Fund counsel prior to the Meeting. The Board then met with representatives of the AdviserSub-Adviser at the Meeting to further discuss the Transaction and the additional information the AdviserSub-Adviser had provided. The AdviserSub-Adviser confirmed that the Transaction would not result in changes to Funds’the Fund’s fees and expenses or the nature, extent and quality of services provided to the Funds,Fund, including their day-to-day management, or the personnel providing these services. The Board then discussed the materials and the Adviser’sSub-Adviser’s oral presentations that the Board had received and any other information that the Board received at the Meeting and at prior meetings, and deliberated on the approval of the New AdvisorySub-Advisory Agreement in light of this information. In its deliberations, the Board did not identify any single piece of information discussed below that was all-important or controlling.
Nature, Extent, and Quality of Services Provided. The Trustees considered the scope of services provided under the New AdvisorySub-Advisory Agreement, noting that the AdviserVIA had provided and VA, its affiliate, would continue to provide investment management services to the Funds.Fund. The Trustees also considered that the services to be provided under the New AdvisorySub-Advisory Agreement were identical in all material respects to those services provided under the Current Agreements.Sub-Advisory Agreement. The Trustees noted that although VIA will cease to exist upon the close of the Transaction, VIA personnel will become AdviserVA personnel at such time and continue to provide services to the FundsFund on behalf of the Adviser.VA. In considering the nature, extent, and quality of the services provided by the Adviser,VIA, and to be provided by VA, the Board considered the quality of the Adviser’sSub-Adviser’s compliance program and past reports from the Trust’s Chief Compliance Officer (“CCO”) regarding the CCO’s review of the Adviser’sVIA’s compliance program. The Board also considered its previous experience with the AdviserVIA providing investment management services to the Funds.Fund. The Board noted that it had received a copy of the Adviser’sVA’s registration form and financial statements, as well as the Adviser’sVA’s response to a detailed series of questions that included, among other things, information about the Adviser’sVA’s decision-making process, the background and experience of the firm’s key personnel, and the firm’s compliance policies, marketing practices, and brokerage information.
The Board noted the responsibilities that the Sub-Adviser will have as the Fund’s investment sub-adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Fund; determining the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of the Fund’s shares conducted on a cash-in-lieu basis; oversight of general portfolio compliance with applicable securities laws, regulations, and investment restrictions; responsibility for quarterly reporting to the Board; and implementation of Board directives as they relate to the Fund. The Board also considered the Adviser’sSub-Adviser’s resources and capacity with respect to portfolio management, compliance, and operations given the number of funds for which it provides sub-advisory services. The Board also considered VA’s statements that the scope and quality of services provided to the FundsFund by the AdviserSub-Adviser would not diminish as a result of the Transaction.
The Board also considered other services provided by the Adviser to the Funds, monitoring each Fund’s adherence to its investment restrictions and compliance with the Funds’ policies and procedures and applicable securities regulations, as well as monitoring the extent to which a Fund achieves its investment objective as a passively managed fund. Additionally, the Board considered that each Fund tracks an index created and owned by an affiliate of the Adviser. The Board noted the Adviser’s belief that shareholders invest in a Fund based on the investment principles incorporated into the index methodology of such Fund and the expectation that the Adviser will provide advisory services to such Fund based on its index methodology.
Historical Performance. The Trustees next considered eachthe Fund’s performance noting that itthe Fund commenced operations on February 1, 2022, and because the Current Sub-Advisory Agreement had recently undertakennot yet been subject to renewal by the Board, the Board had not received a comprehensive review of such matters at its January 11-12, 2023 meeting. Thereport prepared by Barrington Partners, an independent third party, that compares the Fund’s investment performance, fees and expenses to relevant market benchmarks and peer groups. However, the Board observed that information regarding eachthe Fund’s past investment performance, for periods ended September 30,December 31, 2022, had been included in the written materials previously providedFund’s most recent annual report to the Board, including the Barrington Report,shareholders, which compared the Fund’s performance results of each Fund with the returns of a group of ETFs selected by Barrington Partners as most comparable (the “Peer Group”) as well as with funds in each Fund’s Morningstar category – US Fund Real Estate, US Fund Intermediate Core-Plus Bond, US Fund Foreign Large Value, and US Fund Mid-Cap Value, respectively (each, a “Category Peer Group”). Additionally, at the Board’s request, the Adviser identified the funds the Adviser considered to be each Fund’s most direct competitors (each, a “Selected Peer Group”) and provided the Selected Peer Group’s performance results.
In addition, the Board noted that, for each applicable period ended September 30, 2022, each Fund’s performance on a gross of fees basis (i.e., excluding the effect of fees and expenses on Fund performance) was generally consistent with the performance of its underlying index indicating that eachand the S&P 500® Index. The Board noted the Fund’s and the related industry’s poor overall performance relative to the broader equity market, but the Board also noted the Fund closely tracked its underlying index closely andduring the same period. Accordingly, the Board concluded that the Fund’s since inception performance was not a significant factor in an appropriate manner.the context of the Board’s deliberations on the New Sub-Advisory Agreement.
U.S. Diversified Real Estate ETF: The Board noted that the Fund underperformed its broad-based benchmark, the MSCI US REIT Gross Index, for each of the one-year, three-year, and since inception periods. The MSCI US REIT Gross Index provides an indication of the performance of the U.S. REIT market. In comparing the Fund’s performance to that of the benchmark, the Board noted that the Fund, unlike its benchmark, screens out companies that are externally managed and companies that derive at least 85% of their income from ownership or management of real property.3
Vident U.S. Bond Strategy ETF: The Board noted that the Fund underperformed its broad-based benchmark, the FTSE Broad Investment Grade Bond Index, for the one-year, three-year, five-year, and since inception periods. The FTSE Broad Investment Grade Bond Index tracks the performance of the U.S. Dollar-denominated bonds issued in the U.S. investment-grade bond market. In comparing the Fund’s performance to that of the benchmark, the Board noted that the Fund provides more diversified exposure to the U.S. bond market, including exposure to non-investment grade bonds excluded from the benchmark.
The Board then noted that, for the one-year, three-year, five-year, and since inception periods ended September 30, 2022, the Fund slightly underperformed the median return of its Peer Group and Category Peer Group. The Board took into consideration that only a small percentage of the ETFs in the Peer Group have the flexibility, like the Fund, to invest in non-core fixed income sectors, such as high-yield corporate bonds (also known as “junk bonds”) and Treasury Inflation-Protected Securities (“TIPS”). The Board also noted that the Fund generally performed within the range of funds in the Selected Peer Group for the one-year, three-year and five-year periods ended September 30, 2022. The Board considered that the funds included in the Selected Peer Group were described by the Adviser as funds with similar objectives, investment universes, sector exposure, and average maturity.
Vident International Equity Strategy ETF: The Board noted that the Fund outperformed its broad-based benchmark, the Morningstar Global Markets ex-US Index, for the one-year period ended September 30, 2022, but the Fund underperformed its benchmark for each of the three-year, five-year, and since inception periods. The Morningstar Global Markets ex-US Index provides exposure to the top 97% market capitalization in each of two economic segments, developed markets, excluding the United States, and emerging markets. In comparing the Fund’s performance to that of the benchmark, the Board noted that the Fund, unlike the benchmark, invests in companies in emerging markets.
The Board noted that, for the one-year, three-year, five-year and since inception periods ended September 30, 2022, the Fund underperformed the median return of its Category Peer Group, but slightly outperformed its Peer Group over the one-year and three-year periods. The Board also noted that the Fund generally performed within the range of funds in the Selected Peer Group for the one-year and five-year periods and outperformed all of the funds from the Selected Peer Group over the three-year period ended September 30, 2022. The Board considered that the funds included in the Selected Peer Group were described by the Adviser as funds with similar objectives, investment universes, and average market capitalizations.
Vident U.S. Equity Strategy ETF: The Board noted that the Fund outperformed its broad-based benchmark, the Morningstar U.S. Market Total Return Index, for the one-year and three-year periods ended September 30, 2022, but the Fund underperformed this benchmark for the five-year and since inception periods. With respect to the Fund’s second benchmark, the S&P 500, the Board noted that the Fund outperformed the S&P 500 for the one-year period, but the Fund underperformed the S&P 500 for the three-year, five-year, and since inception periods. The Morningstar U.S. Market Total Return Index measures the performance of U.S. securities and targets 97% market capitalization coverage of the investable universe. The S&P 500 Index provides an indication of the performance of U.S. large-cap companies
The Board noted that, for the one-year and three-year periods ended September 30, 2022, the Fund outperformed the median return of its Peer Group, and the Fund outperformed the median return of its Category Peer Group over the three-year, five-year, and since inception periods. The Board also noted that the Fund generally performed within the range of funds in the Selected Peer Group for the one-year, three-year, and five-year periods ended September 30, 2022. The Board considered that the funds included in the Selected Peer Group were described by the Adviser as funds with similar objectives, investment universes, and quantitative approaches to security selection.
Cost of Services Provided and Economies of Scale. The Board observed that the Transaction would not result in an increase in the level of the advisorymanagement fee paid by eachthe Fund to the Adviser.Adviser or the sub-advisory fee paid by the Adviser to the Sub-Adviser. In this regard, the Board reviewed eachthe Fund’s fees and expenses, noting that the advisory fees to be paid to the AdviserVA for its services to the FundsFund under the New AdvisorySub-Advisory Agreement were identical to those inthe fees paid to VIA for its services under the Current AdvisorySub-Advisory Agreement. In addition, the Board took into consideration that the Adviser had charged, and would continue to charge, a “unified fee,” meaning each Fund pays no expenses other than the advisory fee and, if applicable, certain other costs such as interest, brokerage, acquired fund fees and expenses, extraordinary expenses, and, to the extent it is implemented, fees pursuant to a Distribution and/or Shareholder Servicing (12b‑1) Plan. The Board noted that the Adviser had been and would continue to be responsible for compensating the Trust’s other service providers and paying the Funds’ other expenses out of the Adviser’s own fee and resources.
The Board noted that eachthe Fund’s net expense ratio was equal to its unified fee (described above), except that the U.S. Diversified Real Estate ETF has a fee waiver of four basis points and, as a result, its net expense ratio is less than its unified fee. The fee waiver would terminate effective June 30, 2023. The Board further took into consideration that it had recently evaluated a comparison of eachthe Fund’s net expense ratio to its Peer Group and Category Peer Group, as shown in the Barrington Report, and its Selected Peer Group.
U.S. Diversified Real Estate ETF: The Board noted that the Fund’s net expense ratio was higher than the median net expense ratio, but within the range, of theother funds in its Morningstar category and a group of peer funds selected by the Peer GroupAdviser, and lower than the median net expense ratio of funds in the Category Peer Group. In addition, the Board notedhad found that the Fund’s net expense ratio was within the range of net expense ratios for each of funds in its Selected Peer Group.
Vident U.S. Bond Strategy ETF: The Board noted that the Fund’s net expense ratio was higher than the median net expense ratio, but within the range, of the funds in the Peer Group and lower than the median net expense ratio of funds in the Category Peer Group. In addition, the Board noted that the Fund’s net expense ratio was within the range of net expense ratios of funds in its Selected Peer Group.
Vident International Equity Strategy ETF: The Board noted that the Fund’s net expense ratio was higher than the median net expense ratio, but within the range, of the funds in the Peer Group and lower than the median net expense ratio of funds in the Category Peer Group. In addition, the Board noted that the Fund’s net expense ratio was slightly higher than the highest net expense ratio of the other funds in its Selected Peer Group.
Vident U.S. Equity Strategy ETF: The Board noted that the Fund’s net expense ratio was higher than the median net expense ratio, but within the range, of the funds in the Peer Group and lower than the median net expense ratio of funds in the Category Peer Group. In addition, the Board noted that the Fund’s net expense ratio was within the range of net expense ratios of funds in its Selected Peer Group.peer groups.
The Board then considered the Adviser’sSub-Adviser’s financial resources and information regarding the Adviser’sSub-Adviser’s ability to support its management of the Funds and obligations under the unified fee arrangement,Fund, noting that the AdviserSub-Adviser had provided its financial statements for the Board’s review. The Board also evaluated the compensation and benefits received, and expected to be received, by the AdviserSub-Adviser from its relationship with the Funds,Fund, taking into account an analysis of the Adviser’sVIA’s profitability, and VA’s expected profitability, with respect to eachthe Fund at various actual and projected Fund asset levels. In evaluating these matters, the Board considered the resources that would become available to the AdviserSub-Adviser as a result of the Transaction.
The Board expressed the view that it currently appeared that the AdviserSub-Adviser might realize economies of scale in managing the FundsFund as assets grow in size. The Board noted that shouldthe Fund’s sub-advisory fee rate schedule includes breakpoints that are initiated as Fund assets grow. The Board further noted that because the Fund pays the Adviser realizea unified fee, any benefits from such breakpoints in the sub-advisory fee schedule would accrue to the Adviser, rather than such Fund’s respective shareholders. Consequently, the Board determined that it would monitor fees as the Fund grows to determine whether economies of scale in the future, the Board would evaluate whether those economies were appropriatelybeing effectively shared with the Fund shareholders, whether through the structure and amount of the fee or by other means.its shareholders.
Conclusion. No single factor was determinative of the Board’s decision to approve the New AdvisorySub-Advisory Agreement; rather, the Board based its determination on the total mix of information available to it. Based on a consideration of all the factors in their totality, the Board, including the Independent Trustees, determined that the New AdvisorySub-Advisory Agreement, including the compensation payable under the agreement, was fair and reasonable to eachthe Fund. The Board, including the Independent Trustees, determined that the approval of the New AdvisorySub-Advisory Agreement was in the best interests of eachthe Fund and its shareholders.]
Expenses Related to the Proposal. All expenses associated with the Proposal will be borne by the Adviser or its affiliates and not by the Funds.
THE BOARD RECOMMENDS THAT SHAREHOLDERS OF EACHTHE FUND VOTE “FOR” THE PROPOSAL.
Importantly, approval of the Proposal will not result in any increase in shareholder fees or expenses.
OTHER INFORMATION
Section 15(f) of the 1940 Act.Because the Transaction may be considered to result in a change of control of the AdviserVIA under the 1940 Act resulting in the assignment of the Former AdvisoryCurrent Sub-Advisory Agreement, the AdviserSub-Adviser intends for the Transaction to come within the safe harbor provided by Section 15(f) of the 1940 Act, which permits an investment adviser of a registered investment company (or any affiliated persons of the investment adviser) to receive any amount or benefit in connection with a sale of an interest in the investment adviser that results in an assignment of an investment advisory contract, provided that the following two conditions are satisfied.satisfied:
First, an “unfair burden” may not be imposed on the investment company as a result of the sale of the interest, or any express or implied terms, conditions or understandings applicable to the sale of the interest. The term “unfair burden,” as defined in the 1940 Act, includes any arrangement during the two-year period following the transaction whereby the investment adviser (or predecessor or successor adviser), or any “interested person” of the adviser (as defined in the 1940 Act), receives or is entitled to receive any compensation, directly or indirectly, from the investment company or its security holders (other than fees for bona fide investment advisory or other services), or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of the investment company (other than ordinary fees for bona fide principal underwriting services). The AdviserSub-Adviser has confirmed for the Board that the Transaction will not impose an unfair burden on the Fund within the meaning of Section 15(f) of the 1940 Act.
Second, during the three-year period following the Transaction, at least 75% of the members of the investment company’s board of trustees cannot be “interested persons” (as defined in the 1940 Act) of the sub-adviser (or predecessor sub-adviser). At the present time, 75% of the Trustees are classified as Independent Trustees; i.e., not interested persons of the Trust. The Board has committed to ensuring that at least 75% of the Trustees will not be “interested persons” of the Sub-Adviser for a period of three years after the Transaction.
Expenses Related to the Proposal. All expenses associated with the Proposal will be borne by VA or its affiliates and not by the Fund.
Record Date/Shareholders Entitled to Vote. EachThe Fund is a separate series, or portfolio, of the Trust, a Delaware statutory trust and registered investment company under the 1940 Act. The record holders of outstanding shares of eachthe Fund are entitled to vote one vote per share (and a fractional vote per fractional share) on all matters presented at the Special Meeting with respect to eachthe Fund, including the Proposal.
Shareholders of eachthe Fund at the close of business on May 9,15, 2023, the Record Date, will be entitled to be present and vote at the Special Meeting. As of the close of business on the Record Date, the following shares of eachthe Fund were issued and outstanding:
Vident U.S. Bond Strategy ETF™ | 8,800,000 |
Vident U.S. Equity Strategy ETF™ | 11,300,000 |
Vident International Equity Strategy ETF™ | 15,700,000 |
U.S. Diversified Real EstateGrayscale Future of Finance ETF | 4,200,000[] |
Voting Proxies. You should read the entire Proxy Statement before voting. If you have any questions regarding the Proxy Statement, please call toll-free 866-839-1852. If you sign and return the accompanying proxy card, you may revoke it by giving written notice of such revocation to the Secretary of the Trust prior to the Special Meeting or by delivering a subsequently dated proxy card or by attending and voting at the Special Meeting in person. Proxies voted by telephone or internet may be revoked at any time before they are voted by proxy voting again through the website or toll-free number listed in the enclosed proxy card. Properly executed proxies will be voted, as you instruct, by the persons named in the accompanying proxy card. In the absence of such direction, however, the persons named in the accompanying proxy card intend to vote “FOR” the Proposal and may vote at their discretion with respect to other matters not now known to the Board that may be presented at the Special Meeting. Attendance by a shareholder at the Special Meeting does not, in itself, revoke a proxy.
If sufficient votes are not received for the Proposal by the date of the Special Meeting, the Special Meeting may be adjourned with respect to suchthe Proposal, once or more, by motion of the chair of the Special Meeting or by the vote of the holders of a majority of athe Fund’s shares present at the Special Meeting in person or by proxy to permit further solicitation of proxies. If there is a vote to adjourn, persons named as proxies will vote all proxies in favor of adjournment that voted in favor of the Proposal and vote against adjournment all proxies that voted against the Proposal.
Quorum Required. EachThe Fund must have a quorum of shares represented at the Special Meeting, in person or by proxy, to take action on any matter relating to such Fund. Under the Trust’s Agreement and Declaration of Trust, as amended, a quorum is constituted by the presence in person or by proxy of at least one-third of the outstanding shares of athe Fund entitled to vote at the Special Meeting.
Abstentions and broker non-votes (i.e., proxies from brokers or nominees indicating that they have not received instructions from the beneficial owners on an item for which the brokers or nominees do not have discretionary power to vote) will be treated as present for determining whether a quorum is present with respect to a particular matter. However, abstentions and broker non-votes will have the effect of a vote AGAINST the Proposal and any other matter that requires the affirmative vote of athe Fund’s outstanding shares for approval. Abstentions and broker non-votes will not be counted as voting on any other matter at the Special Meeting when the voting requirement is based on achieving a plurality or percentage of the “voting securities present.”
If a quorum is not present at the Special Meeting, or a quorum is present at the Special Meeting but sufficient votes to approve athe Proposal is not received, the chair of the Special Meeting or the holders of a majority of athe Fund’s shares present at the Special Meeting, in person or by proxy, may adjourn the Special Meeting with respect to suchthe Proposal to permit further solicitation of proxies.
Required Vote. Approval of the Proposal requires the affirmative “vote of the holders of a majority of the outstanding voting securities” of the Fund. Under the 1940 Act, the “vote of the holders of a majority of the outstanding voting securities” means the affirmative vote of the lesser of (a) 67% or more of the shares of the Fund present or represented by proxy at the Special Meeting if the holders of more than 50% of the outstanding shares are present or represented by proxy at the Special Meeting, or (b) more than 50% of the outstanding shares of the Fund. If the Proposal is approved by the Fund’s shareholders prior to the close of the Transaction, the New Sub-Advisory Agreement is expected to become effective at the closing of the Transaction. The Transaction is subject to customary closing conditions, including obtaining approval of a certain number of the new agreements by the Board of Trustees of the Trust and shareholders of each applicable Fund. If the shareholders of the Fund do not approve the Proposal at the Special Meeting, a condition to the closing of the Transaction may not be satisfied. Accordingly, if the Proposal is not approved by the Fund’s shareholders, as applicable, at the Special Meeting, the Board will take such action as it deems necessary and in the best interests of the Fund and its respective shareholders, which may include further solicitation of the Fund’s shareholders with respect to the Proposal or solicitation of the approval of a different proposal.
Method and Cost of Proxy Solicitation. Proxies will be solicited by the Trust, the Adviser, and/or Morrow Sodali Fund Solutions, LLC, a professional proxy solicitor (the “Proxy Solicitor”), primarily by mail. The solicitation may also include telephone, facsimile, electronic or oral communications by certain officers or employees of the Trust or the Adviser, none of whom will be paid for these services, or by the Proxy Solicitor. The Adviser will pay the costs of the Special Meeting and the expenses incurred in connection with the solicitation of proxies, including any expenses associated with the services of the Proxy Solicitor. The Trust may also request broker-dealer firms, custodians, nominees and fiduciaries to forward proxy materials to the beneficial owners of the shares of the FundsFund held of record by such persons. The estimated cost of the Proxy Solicitor for their services soliciting proxies from brokers, banks and other nominee holders is approximately $5,000 per Fund.$6,000. The Adviser may reimburse such broker-dealer firms, custodians, nominees, and fiduciaries for their reasonable expenses incurred in connection with such proxy solicitation, including reasonable expenses in communicating with persons for whom they hold shares of athe Fund.
Meeting Venue. We intend to hold the Special Meeting in person at the offices of U.S. Bank Global Fund Services, 615 East Michigan Street, Milwaukee, Wisconsin 53202. However, we are sensitive to the public health and travel concerns our shareholders may have and recommendations that public health officials may issue in light of the evolving COVID-19 pandemic. As a result, we may impose additional procedures or limitations on Special Meeting attendees or may decide to hold the Special Meeting in a different location or solely by means of remote communication. We plan to announce any such updates on our proxy website www.videntam.com,https://proxyvotinginfo.com/p/grayscale2023, and we encourage you to check this website prior to the Special Meeting if you plan to attend. We also encourage you to consider your options to vote by internet, telephone, or mail, as discussed in the enclosed proxy card, in advance of the Special Meeting in the event that, as of June 9,July 7, 2023, in-person attendance at the Special Meeting is either prohibited under a federal, state, or local order or contrary to the advice of public health care officials.
Distributor, Administrator and Transfer Agent. The Funds’Fund’s distributor and principal underwriter is ALPS Distributors, Inc.,Foreside Fund Services, LLC, located at 1290 Broadway, Suite 1000, Denver, Colorado 80203.Three Canal Plaza Portland, Maine, 04101. U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services, located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the Funds’Fund’s transfer agent and administrator.
Share Ownership. To the knowledge of the Trust’s management, as of the close of business on May 9,15, 2023, the officers and Trustees of the Trust, as a group, beneficially owned less than one percent of eachthe Fund’s outstanding shares and less than one percent of the Trust’s outstanding shares. To the knowledge of the Trust’s management, as of the close of business on May 9,15, 2023, persons owning of record more than 5% of the outstanding shares of athe Fund are as listed in the table below. The Trust believes that most of the shares referred to below were held by the persons indicated in accounts for their fiduciary, agency or custodial customers. Any shareholder listed below as owning 25% or more of the outstanding shares of athe Fund may be presumed to “control” (as that term is defined in the 1940 Act) the applicable Fund. Shareholders controlling athe Fund could have the ability to vote a majority of the shares of the applicable Fund on any matter requiring the approval of that Fund’s shareholders.
Vident U.S. Bond Strategy ETF™
Name and Address
| % Ownership
| Type of Ownership
|
National Financial Services, LLC
200 Liberty Street
New York, NY 10281
| 97.83% | Record |
Ronald Blue Trust
1000 Health Park Drive, Suite 180
Brentwood, TN 37027
| 92.90%* | Beneficial |
*This figure is based on information reported on Form 13F asGrayscale Future of March 31, 2023, the Trust believes Ronald Blue Trust owns a majority of the Fund’s shares as of Record Date.
Vident U.S. Equity Strategy ETF™
Name and Address
| % Ownership
| Type of Ownership
|
National Financial Services, LLC
200 Liberty Street
New York, NY 10281
| 96.86% | Record |
Ronald Blue Trust
1000 Health Park Drive, Suite 180
Brentwood, TN 37027
| 89.94%* | Beneficial |
*This figure is based on information reported on Form 13F as of March 31, 2023, the Trust believes Ronald Blue Trust owns a majority of the Fund’s shares as of Record Date.
Vident International Equity Strategy ETF™
Finance ETF
Name and Address | % Ownership | Type of Ownership |
National Financial Services, LLC
200 Liberty Street
New York, NY 10281
| 94.30% | Record |
Ronald Blue Trust
1000 Health Park Drive, Suite 180
Brentwood, TN 37027
| 91.65%* | Beneficial |
| | |
*This figure is based on information reported on Form 13F as of March 31, 2023, the Trust believes Ronald Blue Trust owns a majority of the Fund’s shares as of Record Date.5
U.S. Diversified Real Estate ETF
Name and Address
| % Ownership
| Type of Ownership
|
National Financial Services, LLC
200 Liberty Street
New York, NY 10281
| 85.01% | Record |
Ronald Blue Trust
1000 Health Park Drive, Suite 180
Brentwood, TN 37027
| 73.59%* | Beneficial |
Charles Schwab & Co., Inc.
211 Main Street
San Francisco, CA 94105
| 6.62% | Record |
*This figure is based on information reported on Form 13F as of March 31, 2023, the Trust believes Ronald Blue Trust owns a majority of the each Fund’s shares as of Record Date.
Reports to Shareholders. Copies of the Funds’Fund’s most recent annual and semi-annual reports may be requested without charge by writing to the Funds,Grayscale ETF, c/o U.S. Bank Global Fund Services, 615 East Michigan Street, Milwaukee, Wisconsin 53202 or by calling toll-free 1-800-617-0004.
Other Matters to Come Before the Special Meeting. The Trust’s management does not know of any matters to be presented at the Special Meeting other than the Proposal described above. If other business should properly come before the Special Meeting, the proxy holders will vote thereon in accordance with their best judgment.
Shareholder Proposal. The Agreement and Declaration of Trust, as amended, and the Amended and Restated By-laws of the Trust do not provide for annual meetings of shareholders, and the Trust does not currently intend to hold such meetings in the future. Shareholder proposal for inclusion in a proxy statement for any subsequent meeting of the Trust’s shareholders must be received by the Trust a reasonable period of time prior to any such meeting.
Householding. If possible, depending on shareholder registration and address information, and unless you have otherwise opted out, only one copy of this Proxy Statement will be sent to shareholders at the same address. However, each shareholder will receive separate proxy cards. If you would like to receive a separate copy of the Proxy Statement, please call 866-839-1852. If you currently receive multiple copies of Proxy Statements or shareholder reports and would like to request to receive a single copy of documents in the future, please call 1-800-617-0004 or write to the Funds,Grayscale ETF, c/o U.S. Bank Global Fund Services at 615 East Michigan Street, Milwaukee, Wisconsin 53202.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting.
This Proxy Statement is available on the internet at https://proxyvotinginfo.com/p/videntetfs2023.grayscale2023. Use the control number on your proxy card to vote by internet or by telephone. You may request a copy by mail (Vident Funds,(Grayscale ETF, c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, WI 53201-0701) or by telephone at 866-839-1852. You may also call for information on how to obtain directions to be able to attend the Special Meeting and vote in person.
EXHIBIT A
FORM OF
ETF SERIES SOLUTIONS
INVESTMENT ADVISORYSUB-ADVISORY AGREEMENT
with
Vident Advisory, LLC
This INVESTMENT ADVISORYSUB-ADVISORY AGREEMENT (the “Agreement”) is made as of this 6th day of April,XX, 2023 by and betweenamong GRAYSCALE ADVISORS, LLC, a Delaware limited liability company with its principal place of business at 290 Harbor Drive, 4th Floor, Stamford, Connecticut 06902 (the “Adviser”), ETF SERIES SOLUTIONS (the “Trust”), a Delaware statutory trust, and VIDENT ADVISORY, LLC, a Delaware limited liability company with its principal place of business located at 1125 Sanctuary Parkway, Suite 515, Alpharetta, Georgia 30009 (the “Adviser”“Sub-Adviser”).
WITNESSETH
W I T N E S S E T H
WHEREAS, the Trust is an open-end management investment company, and is registered as such under the Investment Company Act of 1940, as amended (the “1940 Act”);
and
WHEREAS, the Trust desires to appointAdviser is registered as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement dated January 20, 2022, as amended to serveadd additional series, with the Trust; and
WHEREAS, the Sub-Adviser is registered as thean investment adviser with respectunder the Investment Advisers Act of 1940 (the “Advisers Act”) and is engaged in the business of supplying investment advice as an independent contractor; and
WHEREAS, the Investment Advisory Agreement contemplates that the Adviser may appoint a sub-adviser to each seriesperform some or all of the Trust set forth on services for which the Adviser is responsible; and
WHEREAS, the Sub-Adviser is willing to furnish such services to the Adviser and each Fund listed in Schedule A to this Agreement (each a “Fund” and, collectively, the “Funds”);
WHEREAS,, as such Schedule may be amended from time to time upon mutual agreement of the Adviser is willing to provide management and investment advisory services to the Funds on the terms and conditions hereinafter set forth.
parties.
NOW, THEREFORE, in consideration of the mutual covenants and agreementsbenefits set out in this Agreement,forth herein, the Trust and the Adviserparties do hereby agree as follows:
1. | Investment Description; Appointment |
a. Duties of the Sub-Adviser. Investment Description. Each Fund will investSubject to supervision and reinvest its assetsoversight of the Adviser and the Board of Trustees (the “Board”), and in accordance with the terms and conditions of the Agreement, the Sub-Adviser shall manage all of the securities and other assets of the Funds entrusted to it hereunder (the “Assets”), including the purchase, retention and disposition of the Assets, in accordance with the Funds’ respective investment objective(s),objectives, guidelines, policies and limitations specifiedrestrictions as stated in theeach Fund’s prospectus and statement of additional information, (the “Prospectus”) relating to such Fund filed with the SEC as part of the Trust’s Registration Statement on Form N-1A,currently in effect and as it may be periodically amended or supplemented from time to time (referred to collectively as the “Prospectus”), and subject to the following:
(a)The Sub-Adviser shall, subject to subparagraph (b), determine from time to time what Assets will be purchased, retained or sold by the Funds, and what portion of the Assets will be invested or held uninvested in accordancecash as is permissible.
(b)In the performance of its duties and obligations under this Agreement, the Sub-Adviser shall act in conformity with the Prospectus, the Statement of Additional Information, the written instructions and directions of the Adviser (including but not limited to the Adviser’s Compliance Manual, Code of Ethics, ETF Policies and Procedures, as amended from time to time) and of the Board, the terms and conditions of exemptive orders and no-action letters issuedrelief granted to the Trust as amended from time to time and provided to the Sub-Adviser and the Trust’s policies and procedures provided to the Sub-Adviser and will conform to and comply with the requirements of the 1940 Act, the Advisers Act, the Commodity Exchange Act, the Internal Revenue Code of 1986, as amended (the “Code”), and all other applicable federal and state laws and regulations, as each is amended from time to time.
(c)The Sub-Adviser shall determine the Assets to be purchased or sold by the SECFunds as provided in subparagraph (a) and will place orders with or through such persons, brokers or dealers to carry out the policy with respect to brokerage set forth in the Funds’ Prospectus or as the Board or the Adviser may direct in writing from time to time, in conformity with all federal securities laws. In executing Fund transactions and selecting brokers or dealers, the Sub-Adviser will use its staff.
b. Appointment of Adviser. The Trust,best efforts to seek on behalf of each Fund hereby appoints the Adviserbest execution and overall terms available. In assessing the best overall terms available for any transaction, the Sub-Adviser shall consider all factors that it deems relevant, including the breadth of the market in the security, the price of the security, the financial condition and execution capability of the broker or dealer, and the reasonableness of the commission, if any, both for the specific transaction and on a continuing basis. In evaluating the best overall terms available, and in selecting the broker-dealer to actexecute a particular transaction, the Sub-Adviser may also consider the brokerage and research services provided (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)). Consistent with any guidelines established by the Board and Section 28(e) of the Exchange Act, as amended, the investment adviserSub-Adviser is authorized to pay to a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for a Fund which is in excess of each Fund and to furnish,the amount of commission another broker or arrangedealer would have charged for its affiliates or Sub-Advisers to furnish,effecting that transaction if, but only if, the investment advisory services described below, subjectSub-Adviser determines in good faith that such commission was reasonable in relation to the policies of, review by and overall controlvalue of the Boardbrokerage and research services provided by such broker or dealer viewed in terms of Trusteesthat particular transaction or in terms of the Trust (the “Board” or the “Trustees”), for the period and on the terms and conditions set forth in this Agreement. The Adviser hereby accepts such appointment and agrees during such period, at its own expense, to render, or arrange for the rendering of, such services and to assume the obligations set out in this Agreement for the compensation provided for herein. The Adviser and its affiliates for all purposes herein shall be deemed to be independent contractors and, unless otherwise expressly provided or authorized, shall have no authority to act for or represent the Funds in any way or otherwise be deemed agentsoverall responsibilities of the Funds.
a. SubjectSub-Adviser to its discretionary clients, including the supervision, direction and approval ofFund. In addition, the Board, the Adviser will conduct, or cause to be conducted, a continual program of investment, evaluation, sale, and reinvestment of each Fund’s assets. Subject to paragraph (c) below, the AdviserSub-Adviser is authorized in its sole discretion, to: (i) obtain and evaluate pertinent economic, financial, and other information affecting each Fund and its investment assets as such information relates to securities or other financial instruments that are purchased for or considered for purchase by the Funds; (ii) make investment decisions for the Funds; (iii) placeallocate purchase and sale orders for portfoliosecurities to brokers or dealers (including brokers and dealers that are affiliated with the Adviser, Sub-Adviser or the Trust’s principal underwriter) if the Sub-Adviser believes that the quality of the transaction and the commission are comparable to what they would be with other qualified firms. In no instance, however, will the Assets be purchased from or sold to the Adviser, Sub-Adviser, the Trust’s principal underwriter, or any affiliated person of the Trust, Adviser, the Sub-Adviser or the principal underwriter, acting as principal in the transaction, except to the extent permitted by the U.S. Securities and Exchange Commission (“SEC”) and the 1940 Act.
(d)The Sub-Adviser shall maintain all books and records with respect to transactions involving the Assets required by subparagraphs (b)(1), (5), (6), (7), (8), (9) and (10) and paragraph (f) of Rule 31a-1 under the 1940 Act. The Sub-Adviser shall keep the books and records relating to the Assets required to be maintained by the Sub-Adviser under this Agreement and shall timely furnish to the Adviser all information relating to the Sub-Adviser’s services under this Agreement needed by the Adviser to keep the other books and records of the Fund required by Rule 31a-1 under the 1940 Act, as requested by the Adviser. The Sub-Adviser agrees that all records that it maintains on behalf of a Fund are property of the Fund and the Sub-Adviser will surrender promptly to the Fund and Adviser as necessary any of such records upon the Fund’s or Adviser’s request; provided, however, that the Sub-Adviser may retain a copy of such records. In addition, for the duration of this Agreement, the Sub-Adviser shall preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are required to be maintained by it pursuant to this Agreement, and shall transfer said records to any successor sub-adviser upon the termination of this Agreement (or, if there is no successor sub-adviser, to the Adviser).
(e)The Sub-Adviser shall provide the Fund’s custodian on each business day with information relating to all transactions concerning the Assets and shall provide the Adviser with such information upon request of the Adviser and shall otherwise cooperate with and provide reasonable assistance to the Adviser, the Trust’s administrator, the Trust’s custodian and foreign custodians, the Trust’s transfer agent and pricing agents and all other agents and representatives of the Trust.
(f)The Adviser acknowledges that the Sub-Adviser performs investment advisory services for various other clients in addition to the Funds and, to the extent it is consistent with applicable law and the Sub-Adviser’s fiduciary obligations, the Sub-Adviser may give advice and take action with respect to any of those other clients that may differ from the advice given or the timing or nature of action taken for a particular Fund.
(g)The Sub-Adviser shall promptly notify the Adviser of any financial condition that is reasonably and foreseeably likely to impair the Sub-Adviser’s ability to fulfill its commitment under this Agreement.
(h)The Sub-Adviser will have no obligation to advise, initiate or take any other action on behalf of the Adviser, the Funds or the Assets in any legal proceedings (including, without limitation, class actions and manage otherwise uninvested cashbankruptcies) relating to the securities comprising the Assets or any other matter. Sub-Adviser will not file proofs of claims relating to the securities comprising the Assets or any other matter and will not notify the Adviser, the Funds or the Trust’s custodian of class action settlements or bankruptcies relating to the Assets.
(i)In performance of its duties and obligations under this Agreement, the Sub-Adviser shall not consult with any other sub-adviser to the Funds or a sub-adviser to a portfolio that is under common control with the Funds concerning the Assets, except as permitted by the policies and procedures of the Funds. The Sub-Adviser shall not provide investment advice to any assets of the Funds; (iv)Funds other than the Assets which it sub-advises.
(j)On occasions when the Sub-Adviser deems the purchase or sale of a security to be in the best interest of the Funds as well as other clients of the Sub-Adviser, the Sub-Adviser may, to the extent permitted by applicable law and regulations, aggregate the order for securities to be sold or purchased. In such event, the Sub-Adviser will allocate securities so purchased or sold, as well as the expenses incurred in the transaction, in a manner the Sub-Adviser reasonably considers to be equitable and consistent with its fiduciary obligations to the Fund and to such other clients under the circumstances.
(k)The Sub-Adviser shall maintain books and records with respect to the Funds’ securities transactions and keep the Board and the Adviser fully informed on an ongoing basis as agreed by the Adviser and the Sub-Adviser of all material facts concerning the Sub-Adviser and its key investment personnel providing services with respect to the Funds and the investment and the reinvestment of the Assets of the Funds. The Sub-Adviser shall furnish to the Adviser or the Board such reasonably requested regular, periodic and special reports, balance sheets or financial information, and such other information with regard to its affairs as the Adviser or Board may reasonably request and the Sub-Adviser will attend meetings with the Adviser and/or the Trustees, as reasonably requested, to discuss the foregoing. Upon the request of the Adviser, the Sub-Adviser shall also furnish to the Adviser any other information relating to the Assets that is required to be filed by the Adviser or the Trust with the SEC or sent to shareholders under the 1940 Act (including the rules adopted thereunder) or any exemptive or other relief that the Adviser or the Trust obtains from the SEC.
(l)The fair valuation of securities in a Fund may be required when the Adviser becomes aware of significant events that may affect the pricing of all or a portion of a Fund’s portfolio. The Sub-Adviser will provide assistance in determining the fair value of the Assets, as necessary and reasonably requested by the Adviser or its agent, and use reasonable efforts to arrange for the pricingprovision of Fund securitiesvaluation information or a price(s) from a party(ies) independent of the Sub-Adviser if market prices are not readily available, it being understood that the Sub-Adviser will not be responsible for determining the value of any such security.
(m)Subject to any other written instructions of the Adviser or the Trust, the Sub-Adviser is hereby appointed the Adviser’s and other financial instruments; (v) executethe Trust’s agent and attorney-in-fact for the limited purposes of executing account documentation, agreements, contracts and other documents as maythe Sub-Adviser shall be requested by brokers, dealers, counterparties and other persons in connection with the Adviser’sits management of the assetsAssets. The Sub-Adviser agrees upon request to provide the Adviser and the Trust with copies of any such agreements executed on behalf of the Funds (in such respect,Adviser or the Trust.
(n)The Sub-Adviser will provide information, as necessary and only for this limited purpose,reasonably requested by the Adviser will act as the Funds’or its agent, and attorney-in-fact); (vi) employ professional portfolio managers and analysts who provide research and other services to the Funds; and (vii) make decisions with respect to any component of the useliquidity risk management program adopted by the FundsFund(s) in accordance with SEC Rule 22e-4.
2.Duties of borrowing for leverage or other investment purposes as consistent with the Fund’s investment objective(s) and policies. The Adviser will in general take such action as is appropriate to effectively manage each Fund’s investment practices.
b.Adviser. The Adviser shall provide office space, facilities, equipmentcontinue to have responsibility for all services to be provided to the Funds pursuant to the Advisory Agreement and necessary personnelshall oversee and such other services asreview the Adviser, subjectSub-Adviser’s performance of its duties under this Agreement; provided, however, that in connection with its management of the Assets, nothing herein shall be construed to review byrelieve the Sub-Adviser of responsibility for compliance with the Prospectus, the Statement of Additional Information, the written instructions and directions of the Board from time to time shall determine to be necessary or useful to perform its obligations under this Agreement. Theand Adviser, generally shall monitor each Fund’s compliance with its investment policies and restrictions as set forth in filings made by the Trust, with respect to such Fund, under the federal securities laws. The Adviser shall make reports to the Boardrequirements of its performance of obligations hereunder and furnish advice and recommendations with respect to such other aspects of the business and affairs of each Fund as it shall determine to be desirable.
c. The Adviser will maintain and preserve the records specified in Section 17 of this Agreement and any other records related to each Fund’s transactions as are required under any applicable federal securities law or regulation, including: the 1940 Act, the CEA, the Securities Exchange ActCode, and all other applicable federal laws and regulations, as each is amended from time to time.
3.Delivery of 1934, as amended (the “Exchange Act”), and the Investment Advisers Act of 1940, as amended (the “Advisers Act”).
d. Documents. The Adviser will complyhas furnished the Sub-Adviser with procedurescopies of each of the Board (“Board Procedures”) provided to the Adviser by the Trust. following documents:
(a)The Adviser will notify theTrust’s Agreement and Declaration of Trust (such Agreement and Declaration of Trust, as soon as reasonably practicable upon detectionin effect on the date of any material breach of such Board Procedures with respect to any Fund.
e. The Adviser will maintain a written code of ethics (the “Code of Ethics”) that it reasonably believes complies with the requirements of Rule 17j-1 under the 1940 Act (“Rule 17j-1”), a copy of which will be provided to the Trust, and will institute procedures reasonably designed to prevent any “Access Person” (as defined in Rule 17j-1) from violating its Code of Ethics. The Adviser will follow such Code of Ethics in performing its services under this Agreement. Further, the Adviser represents that it will maintain policies and procedures regarding the detection and prevention of the misuse of material, nonpublic information by the Adviser and its employees, a copy of which it will provide to the Trust upon any reasonable request.
3. Sub-Advisers. In carrying out its responsibilities hereunder, the Adviser may, in its sole discretion to the extent permitted by applicable law, any exemptive orders issued by the SEC applicable to the Funds or any SEC or CFTC staff no-action or interpretive letter applicable to the Funds, employ, retain or otherwise avail itself of the services of other persons or entities (a “Sub-Adviser”) at the Adviser’s own cost and expense, including without limitation, affiliates of the Adviser, on such terms as the Adviser shall determine to be necessary, desirable or appropriate. Retention of one or more Sub-Advisers, or the employment or retention of other persons or entities to perform services, shall in no way reduce the responsibilities or obligations of the Adviser under this Agreement in connection with the performance of the Adviser’s duties hereunder.
4. | Information and Reports |
a. The Adviser will keep the Trust informed of developments relating to its duties as investment adviser of which the Adviser has knowledge that would materially affect the Funds. In this regard, the Adviser will provide the Trust and its officers with such periodic reports concerning the obligations the Adviser has assumed under this Agreement as the Trust may from time to time reasonably request. Additionally, upon the request of the Board, the Adviser will provide the Board, or cause any Sub-Adviser to provide the Board, with reports regarding the management of the Funds during the most recently completed quarter, including certifications that each Fund is in compliance with its respective investment objectives and practices, the 1940 Act and applicable rules and regulations thereunder, and the requirements of Subchapter M of the Code, if applicable, and other information in such form as may be mutually agreed upon by the Adviser and the Trust. The Adviser also will certify quarterly to the Trust that it and its Advisory Persons have complied materially with the requirements of Rule 17j-1 during the previous quarter or, if not, explain what the Adviser has done to seek to ensure such compliance in the future. Annually, the Adviser will furnish a written report, which complies with the requirements of Rule 17j-1 and Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Advisers Act, concerning the Adviser’s Code of Ethics and compliance program, respectively, to the Trust. Upon written request of the Fund with respect to violations of the Code of Ethics directly affecting any Fund, the Adviser will permit representatives of the Trust to examine reports (or summaries of the reports) required to be made by Rule 17j-1 (d)(1) relating to enforcement of the Code of Ethics.
b. The Adviser will provide the Trust with any information reasonably requested regarding its management of the Funds required for any shareholder report, amended registration statement, or prospectus supplement to be filed by the Trust with appropriate regulators. The Adviser will promptly inform the Trust if any information it has provided to the Trust to be included in a Fund’s Prospectus or Statement of Additional Information, as amended from time to time, (“SAI”herein called the “Declaration of Trust”),;
(b)Amended and Restated By-Laws of the Trust (such By-Laws, as in effect on the date of this Agreement and as amended from time to time, are herein called the Adviser’s knowledge is (or will become) inaccurate or incomplete.
“By-Laws”);5. | Adviser’s Duties Regarding Fund Transactions |
a. Placement(c)Prospectus and Statement of Orders. The Adviser will take, or cause to be taken, all actions that it considers necessary to implement the investment policiesAdditional Information of the Funds, and, in particular,as amended from time to place all orders for the purchase or sale of securities or other investments for the Funds with brokers, dealers or other persons that the Adviser, in its sole discretion, selects. To that end, the Adviser is authorized as the Funds’ agent to give instructions to the Funds’ custodian as to deliveries of securities or other investments and payments of cash for the Funds’ account. In connection with the selection of brokers or dealers and the placement of purchase and sale orders, the Adviser is subject to the supervisiontime;
(d)Resolutions of the Board approving the engagement of the Sub-Adviser as a sub-adviser to the Funds;
(e)Resolutions, policies and is directed at all times to seek to obtain best execution and price within the policy guidelines determinedprocedures adopted by the Board and set out in each Fund’s current Prospectus or SAI, subject to provisions (b), (c) and (d) of this Section 5.
b. Selection of Brokers and Dealers. To the extent permitted by the policy guidelines set out in each Fund’s current Prospectus or SAI, in connection with the selection of brokers and dealers to execute portfolio transactions, the Adviser is authorized to consider not only the available prices and rates of brokerage commissions, but also other relevant factors, which may include, without limitation: the execution capabilities of the brokers and dealers; the research, custody, and other services provided by the brokers and dealers that the Adviser believes will enhance its general portfolio management capabilities; the size of the transaction; the difficulty of execution; the operational facilities of these brokers and dealers; the risk to a broker or dealer of positioning a block of securities; and the overall quality of brokerage and research services provided by the brokers and dealers. In connection with the foregoing, the Adviser is specifically authorized to pay those brokers and dealers who provide brokerage and research services to the Adviser a higher commission than that charged by other brokers and dealers if the Adviser determines in good faith that the amount of the commission is reasonable in relation to the value of the services in terms of either the particular transaction or in terms of the Adviser’s overall responsibilities with respect to the FundsAssets to the extent such resolutions, policies and to any other client accounts or portfolios thatprocedures may affect the duties of the Sub-Adviser hereunder;
(f)A list of the Trust’s principal underwriter and each affiliated person of the Adviser, advises. the Trust or the principal underwriter; and
(g)The executionterms and conditions of exemptive and no-action relief granted to the Trust, as amended from time to time.
The Adviser shall promptly furnish the Sub-Adviser from time to time with copies of all amendments of or supplements to the foregoing. Until so provided, the Sub-Adviser may continue to rely on those documents previously provided. The Adviser shall not, and shall not permit any of the Funds to use the Sub-Adviser’s name or make representations regarding Sub-Adviser or its affiliates without prior written consent of Sub-Adviser, such transactions willconsent not to be consideredunreasonably withheld. Notwithstanding the foregoing, the Sub-Adviser’s approval is not required when the information regarding the Sub-Adviser used by the Adviser or the Fund is limited to represent an unlawful breachinformation disclosed in materials provided by the Sub-Adviser to the Adviser in writing specifically for use in the Fund’s registration statement, as amended or supplemented from time to time, or in Fund shareholder reports or proxy statements and the information is used (a) as required by applicable law, rule or regulation, in the Prospectus of any duty createdthe Fund or in Fund shareholder reports or proxy statements; or (b) as may be otherwise specifically approved in writing by the Sub-Adviser prior to use.
4.Compensation to the Sub-Adviser. For the services to be provided by the Sub-Adviser pursuant to this Agreement, or otherwise.
c. Soft Dollar Arrangements. On an ongoing basis, but not less often than annually, the Adviser will identify and provide a written description topay the Board of all “soft dollar” arrangements that the Adviser maintains with respect to the Funds or with brokers or dealers that execute transactions for the Funds, if any, and of all research and other services provided to the Adviser by a broker or dealer (whether prepared by such broker or dealer or by a third party), if any, as a result, in whole or in part, of the direction of Fund transactions to the broker or dealer.
d. Aggregated Transactions. On occasions when the Adviser deems the purchase or sale of a security or other financial instrument to be in the best interest of a Fund, as well as other clients, the Adviser is authorized, but not required, to aggregate purchase and sale orders for securities or other financial instruments held (or to be held) by the Fund with similar orders being made on the same day for other client accounts or portfolios that the Adviser manages. When an order is so aggregated, the Adviser may allocate the recommendations or transactions among all accounts and portfolios for whom the recommendation is made or transaction is effected on a basis that the Adviser reasonably considers equitable and consistent with its fiduciary obligations to the Fund and its other clients. The AdviserSub-Adviser, and the Funds recognize thatSub-Adviser agrees to accept as full compensation therefore, a sub-advisory fee at the rate specified in some cases this procedure may adversely affect the size of the position obtainable for a Fund.
6. Compensation. The Funds shall pay to the Adviser, as compensation for the Adviser’s services hereunder, a fee, determined as described in Schedule A that which is attached hereto and made a part hereof. Suchof this Agreement. The fee will be calculated based on the daily value of the Assets under the Sub-Adviser’s management (as calculated as described in the Fund’s registration statement), shall be computed daily, and will be paid to the Sub-Adviser not less than monthly in arrearsarrears. Except as may otherwise be prohibited by law or regulation (including any then current SEC staff interpretations), the Funds. The method for determining net assetsSub-Adviser may, in its sole discretion and from time to time, waive a portion of a Fund for purposes hereof shall be the same as the method for determining net assets for purposes of establishing the offering and redemption prices of Fund shares as described in the Fund’s prospectus. its fee.
In the event of termination of this Agreement, the fee provided in this Section shall be computed on the basis of the period ending on the last business day on which this Agreement is in effect subjecteffect; provided, however that any minimum annual fee for any Fund (as noted on Schedule A) will not be prorated if this Agreement is terminated with respect to a pro rata adjustment based onsuch Fund within twelve (12) months of its inception under this Agreement, but, rather, such minimum annual fee shall be paid by the numberAdviser in full (minus any investment management fees already paid during such period) at the time of days elapsed intermination.
5.Expenses. The Sub-Adviser will furnish, at its expense, all necessary facilities and personnel, including personnel compensation, expenses and fees required for the current month as a percentageSub-Adviser to perform its duties under this Agreement; administrative facilities, including operations and bookkeeping, and all equipment necessary for the efficient conduct of the total numberSub-Adviser’s duties under this Agreement. The Sub-Adviser may enter into an agreement with the Funds to limit the operating expenses of daysthe Fund.
6.Indemnification. The Sub-Adviser shall indemnify and hold harmless the Adviser, the Trust, all affiliated persons thereof (within the meaning of Section 2(a)(3) of the Investment Company Act) and all controlling persons (as described in such month. ExceptSection 15 of the Securities Act of 1933, as may otherwise be prohibited by lawamended) from and against any and all claims, losses, liabilities or regulationdamages (including reasonable attorney’s fees and other related expenses) however arising from or in connection with the performance of the Sub-Adviser’s obligations under this Agreement to the extent resulting from or relating to Sub-Adviser’s own willful misfeasance, fraud, bad faith or gross negligence, or to the reckless disregard of its duties under this Agreement.
The Adviser shall indemnify and hold harmless the Sub-Adviser and all affiliated persons thereof from and against any and all claims, losses, liabilities or damages (including reasonable attorney’s fees and other related expenses) however arising from or in connection with this Agreement (including any then current SEC staff interpretations),affiliated person relating to any index or index data provided to Sub-Adviser by the Adviser may,or Adviser’s agent and used by the Sub-Adviser in connection with performing its sole discretion and from timeduties under this Agreement); provided, however, that the Adviser’s obligation under this Section 6 shall be reduced to time, waive a portionthe extent that the claim against, or the loss, liability or damage experienced by the Sub-Adviser, is caused by or is otherwise directly related to the Sub-Adviser’s own willful misfeasance, fraud, bad faith or gross negligence, or to the reckless disregard of its fee.
duties under this Agreement.7. Allocation and Charges of Expenses. The Adviser will bear its own costs of providing services hereunder. The Adviser agrees to pay all expenses incurred by the Funds except for the fee paidNotwithstanding anything to the Adviser pursuantcontrary contained herein, no party to this Agreement interest charges onshall be responsible or liable for its failure to perform under this Agreement or for any borrowings, dividends and other expenses on securities sold short, taxes, brokerage commissions and other expenses incurred in placing orders forlosses to the purchase and saleAssets resulting from any event beyond the reasonable control of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (collectively, “Excluded Expenses”). The Trust acknowledges and agrees that the Adviser may delegatesuch party or its responsibility to pay some or all expenses incurred by the Funds, except for Excluded Expenses, to one or more third parties,agents, including, but not limited to, Sub-Advisers.
nationalization, expropriation, devaluation, seizure or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting the Assets; or the breakdown, failure or malfunction of any utilities or telecommunications systems; or any order or regulation of any banking or securities industry including changes in market rules and market conditions affecting the execution or settlement of transactions; or acts or war, terrorism, insurrection or revolution; or acts of God, or any other similar event. In no event, shall any party be responsible for incidental, consequential or punitive damages hereunder.The provisions of this Section shall survive the termination of this Agreement.
7.8. Services to Other CompaniesRepresentations and Accounts. Warranties of Sub-Adviser.The Trust understands that the AdviserSub-Adviser represents and its affiliates now act, will continue to act and may act in the future as investment manager or adviser to fiduciary and other managed accounts, and as an investment manager or adviser to other investment companies or to commodity pools, including any offshore entities or private accounts. The Funds have no objectionwarrants to the Adviser and its affiliatesthe Trust as follows:
(a)The Sub-Adviser is registered with the U.S. Securities and Exchange Commission as an investment adviser under the Advisers Act and will continue to be so acting. registered so long as this Agreement remains in effect;
(b)The Funds recognize that in some cases this procedure may adversely affectSub-Adviser will immediately notify the sizeAdviser of the position obtainableoccurrence of any event that would substantially impair the Sub-Adviser’s ability to fulfill its commitment under this Agreement or disqualify the Sub-Adviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act. The Sub-Adviser will also promptly notify the Trust and the Adviser if it, a member of its executive management or portfolio manager for the Assets is served or otherwise receives notice of any action, suit, proceeding or investigation, at law or in equity, before or by any court, government agency, self-regulatory organization, public board or body, involving the affairs of the Funds or relating to the investment advisory services of the Sub-Adviser (other than any routine regulatory examinations);
(c)The Sub-Adviser will notify the Adviser immediately upon detection of (a) any material failure to manage the Fund(s) in accordance with the Fund(s)’ stated investment objectives, guidelines and policies or any applicable law or regulation; or (b) any material breach of any of the Fund(s)’ or the Sub-Adviser’s policies, guidelines or procedures relating to the Funds.
(d)The Sub-Adviser is fully authorized under all applicable law and regulation to enter into this Agreement and serve as Sub-Adviser to the Funds and understand thatto perform the persons employed byservices described under this Agreement;
(e)The Sub-Adviser is a limited liability company duly organized and validly existing under the Adviser to assist in the performancelaws of the Adviser’s duties under this Agreement may not devote their full timestate of Delaware with the power to such service,own and that nothing contained in this Agreement will be deemed to limit or restrict the right of the Adviser to engage inpossess its assets and devote timecarry on its business as it is now being conducted;
(f)The execution, delivery and attention to other businesses or to render services of whatever kind or nature. This Agreement will not in any way limit or restrict the Adviser or any of its directors, officers, employees, or agents from buying, selling or trading any securities, commodities or other investment instruments for its or their own account or for the account of others for whom it or they may be acting, provided that such activities will not adversely affect or otherwise impair the performance by the AdviserSub-Adviser of this Agreement are within the Sub-Adviser’s powers and have been duly authorized by all necessary action on the part of its dutiescorporate members or board, and obligations underno action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Sub-Adviser for the execution, delivery and performance by the Sub-Adviser of this Agreement, and such activities are not otherwise prohibited by applicable law.
9. Affiliated Brokers. Adviser or any of its affiliates may act as broker or agent in connection with the purchase or sale of securities, commodities or other investments for the Funds, subject to: (i) the requirement that the Adviser seek to obtain best execution, delivery and price within the policy guidelines determinedperformance by the Board and set out in each Fund’s current ProspectusSub-Adviser of this Agreement do not contravene or SAI; (ii) the provisions of the 1940 Act, CEA and the Advisers Act, as applicable; (iii) the provisions of the Exchange Act, including, but not limited to, Section 11(a) thereof; and (iv) other provisions of applicable law. These brokerage services are not within the scope of the duties of the Adviserconstitute a default under this Agreement. Subject to the requirements(i) any provision of applicable law, rule or regulation, (ii) the Sub-Adviser’s governing instruments, or (iii) any agreement, judgment, injunction, order, decree or other instrument binding upon the Sub-Adviser;
(g)This Agreement is a valid and any procedures adopted bybinding agreement of the Board,Sub-Adviser;
(h)The Form ADV of the Sub-Adviser previously provided to the Adviser is a true and complete copy of the form filed with the SEC and the information contained therein is accurate, current and complete in all material respects as of its filing date, and does not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
(i)The Sub-Adviser shall not divert any Fund’s portfolio securities transactions to a broker or its affiliates may receive brokerage commissions, feesdealer in consideration of such broker or dealer’s promotion or sales of shares of the Fund, any other remuneration fromseries of the Funds for these services in addition to the Adviser’s fees for services under this Agreement.
Trust, or any other registered investment company.
(j)The Sub-Adviser agrees to maintain an appropriate level of errors and omissions or professional liability insurance coverage.
10. | Custody. Nothing in this Agreement shall permit the Adviser to take or receive physical possession of cash, securities or other investments of a Fund.
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8.Duration and Termination. The effectiveness and termination dates of this Agreement shall be determined separately for each Fund as described below.11. | Term of Agreement; Termination of Agreement; Amendment of Agreement |
a. (a)TermDuration. This Agreement shall become effective with respect to a Fund upon the latest of (i) the approval by a vote of a majority of those Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting called for the purpose of voting on such approval; (ii) the approval of a majority of the Fund’s outstanding voting securities, if required by the 1940 Act; and (iii) the commencement of the Adviser’sSub-Adviser’s management of the Fund. With respect to a Fund, thisThis Agreement shall continue in effect for a period of two years from the effective date described in this sub-paragraph, subject thereafter to being continued in force and effect from year to year if specifically approved each year by the Board or by the vote of a majority of the Fund’s outstanding voting securities. In addition to the foregoing, each renewal of this Agreement must be approved by the vote of a majority of the Board who are not parties to this Agreement or interested persons (as defined by the 1940 Act) of any such party, cast in person at a meeting called for the purpose of voting on such approval. Prior to voting on the renewal of this Agreement, the Board may request and evaluate, and the AdviserSub-Adviser shall furnish, such information as may reasonably be necessary to enable the Board to evaluate the terms of this Agreement.
b. (b)Termination. ThisNotwithstanding whatever may be provided herein to the contrary, this Agreement may be terminated without penalty,at any time with respect to a Fund, without payment of any Fund penalty:
(i) byBy vote of a majority of the Board, or by vote of holders of a majority of the outstanding sharesvoting securities of the FundFunds, or by the Adviser, in each case, upon sixty (60) days’ written (including notice delivered electronically) notice to the Sub-Adviser;
(ii)By the Adviser upon breach by the Sub-Adviser of any representation or warranty contained in Section 7 and Section 9 hereof, which shall not have been cured within twenty (20) days of the Sub-Adviser’s receipt of written notice of such breach;
(iii)By the Adviser immediately upon written (including notice delivered electronically) notice to the Sub-Adviser if the Sub-Adviser becomes unable to discharge its duties and obligations under this Agreement; or
(iv)By the Sub-Adviser upon ninety (90) days’ written notice to the Adviser and (ii) by the Adviser upon sixty (60) days’ written notice to the Trust in respect of the Fund. Board.
This Agreement also willshall terminate automatically and immediately in the event of its assignment.
c. Amendment. This Agreement may be amended byassignment, or in the parties only if the amendment is specifically approved by: (i)event of a majority of those Trusteestermination of the Advisory Agreement with the Trust who are not partiesupon notice to the Sub-Adviser. As used in this Agreement or “interested persons” of any party cast in person at a meeting called forSection 8, the purpose of voting on the Agreement’s approval;terms “assignment” and (ii) if required by applicable law, the vote“vote of a majority of the outstanding sharesvoting securities” shall have the respective meanings set forth in the 1940 Act and the rules and regulations thereunder, subject to such exceptions as may be granted by the SEC under the 1940 Act.
9.Regulatory Compliance Program of the Fund.
12. | Representations and Covenants of the Trust. The Trust represents and covenants to the Adviser as follows:
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a.Sub-Adviser. The TrustSub-Adviser hereby represents and warrants that:
(a)in accordance with Rule 206(4)-7 under the Advisers Act, the Sub-Adviser has adopted and implemented and will maintain written policies and procedures reasonably designed to prevent violation by the Sub-Adviser and its supervised persons (as such term is defined in the Advisers Act) of the Advisers Act and the rules the SEC has adopted under the Advisers Act; and
(b)the Sub-Adviser has adopted and implemented and will maintain written policies and procedures that are reasonably designed to prevent violation of the “federal securities laws” (as such term is defined in Rule 38a-1 under the 1940 Act) by the Funds and the Sub-Adviser (the policies and procedures referred to in this Section 9(b), along with the policies and procedures referred to in Section 9(a), are referred to herein as the Sub-Adviser’s “Compliance Program”). To ensure proper oversight, the Adviser shall be permitted to review and test the Sub-Adviser’s written policies and procedures as necessary; at minimum such review will be conducted on a trustquarterly basis.
10.Confidentiality. Subject to the duty of the Adviser or Sub-Adviser to comply with applicable law and regulation, including any demand or request of any regulatory, governmental or tax authority having jurisdiction, the parties hereto shall treat as confidential all non-public information pertaining to the Funds and the actions of the Sub-Adviser and the Funds in respect thereof. It is understood that any information or recommendation supplied by the Sub-Adviser in connection with the performance of its obligations hereunder is validly existingto be regarded as confidential and for use only by the Adviser, the Funds, the Board, or such persons as the Adviser may designate in good standingconnection with the Funds. It is also understood that any information supplied to the Sub-Adviser by the Adviser in connection with the performance of its obligations hereunder is to be regarded as confidential and for use only by the Sub-Adviser, its affiliates and agents in connection with its obligation to provide investment advice and other services to the Funds and to assist or enable the effective management of the Adviser’s and the Funds’ overall relationship with the Sub-Adviser and its affiliates. The parties acknowledge and agree that all nonpublic personal information with regard to shareholders in the Funds shall be deemed proprietary and confidential information of the Adviser, and that the Sub-Adviser shall use that information solely in the performance of its duties and obligations under this Agreement and shall take reasonable steps to safeguard the confidentiality of that information. Further, the Sub-Adviser shall maintain and enforce adequate security and oversight procedures with respect to all materials, records, documents and data relating to any of its responsibilities pursuant to this Agreement including all means for the effecting of investment transactions.
11.Reporting of Compliance Matters.
(a)The Sub-Adviser shall promptly provide to the Trust’s Chief Compliance Officer (“CCO”) the following:
(i) a report of any material violations of the Sub-Adviser’s Compliance Program or any “material compliance matters” (as such term is defined in Rule 38a-1 under the 1940 Act) that have occurred with respect to the Sub-Adviser’s Compliance Program;
(ii) on a quarterly basis, a report of any material changes to the policies and procedures that compose the Sub-Adviser’s Compliance Program;
(iii) a copy of the Sub-Adviser’s chief compliance officer’s report (or similar document(s) which serve the same purpose) regarding his or her annual review of the Sub-Adviser’s Compliance Program, as required by Rule 206(4)-7 under the Advisers Act; and
(iv) an annual (or more frequently as the Trust’s CCO may reasonably request) representation regarding the Sub-Adviser’s compliance with Section 7 and Section 9 of this Agreement.
(b)The Sub-Adviser shall also provide the Trust’s CCO with reasonable access, during normal business hours, to the Sub-Adviser’s facilities for the purpose of conducting pre-arranged on-site compliance related due diligence meetings with personnel of the Sub-Adviser.
12.Index Data. The Adviser has obtained all licenses and permissions necessary for the Sub-Adviser to use any index data provided to it by the Adviser or Adviser’s agent under this Agreement and the Sub-Adviser is not required to obtain any such licenses or permissions itself.
13.Governing Law. This Agreement shall be governed by the laws of the State of Delaware. Each Fund is a duly established, separate seriesDelaware, without regard to conflict of the Trust. The Trust is duly authorized to transact business in the State of Delaware and is qualified to do business in all jurisdictions in which it is required tolaw principles; provided, however, that nothing herein shall be so qualified, except jurisdictions in which the failure to so qualify would not have a material adverse effect on the Trust or any Fund. The Trust is registeredconstrued as an open-end management investment company underbeing inconsistent with the 1940 Act, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect, and each Fund’s shares are (or will be prior to commencing operations with respect toAct.
14.Severability. Should any Additional Funds) registered under the Securities Act of 1933, as amended, and under any applicable state securities laws.
b. The execution, delivery and performance by the Trust, on behalf of the Funds,part of this Agreement are within the Trust’s powers and have been duly authorizedbe held invalid by all necessary actions of the Board, and the execution, delivery and performance of this Agreement by the parties to this Agreement do not contravene or constitute a default under (i) any provision of applicable law,court decision, statute, regulation, rule or regulation, (ii)otherwise, the Trust’s governing instruments, or (iii) any agreement, judgment, injunction, order, decree or other instruments binding upon the Trust or any Fund.
13. | Representations and Covenants of the Adviser. The Adviser represents and covenants to the Trust as follows:
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a. | It is duly organized and validly existing under the laws of the state of its organization or incorporation with the power to own and possess its assets and carry on its business as this business is now being conducted. |
b. Each Fund is an “eligible contract participant” as defined in Section 1a(18) of the U.S. Commodity Exchange Act (the “CEA”) and U.S. Commodity Futures Trading Commission (“CFTC”) Rule 1.3(m) thereunder and a “qualified eligible person” as defined in Rule 4.7 of the CFTC. The Adviser consents to each Fund being treated as an exempt account under Rule 4.7 of the CFTC.
c. | The Adviser is registered with the National Futures Association as a commodity pool operator or commodity trading advisor or is not required to be registered. |
d. The execution, delivery and performance by the Adviser of this Agreement are within the Adviser’s powers and have been duly authorized by all necessary action on the part of its board of directors, and no action by or in respect of, or filing with, any governmental body, agency or official is required on the part of the Adviser for the execution, delivery and performance of this Agreement by the parties to this Agreement, and the execution, delivery and performance of this Agreement by the parties to this Agreement does not contravene or constitute a default under (i) any provision of applicable law, rule or regulation, (ii) the Adviser’s governing instruments, or (iii) any agreement, judgment, injunction, order, decree or other instruments binding upon the Adviser.
e. | It is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement. |
f. It will maintain registration with the SEC as an investment adviser under the Advisers Act and will promptly notify the Trust of the occurrence of any event that would disqualify it from serving as an investment adviser to an investment company pursuant to Section 9(a) of the 1940 Act.
g. | It has provided the Trust with a copy of its Form ADV and will, promptly after making any amendment to its Form ADV, furnish a copy of such amendment to the Trust. |
h. It will carry out its responsibilities under this Agreement subject to (i) federal and state law, including securities laws, governing its provision of advisory services under this Agreement; (ii) each Fund’s investment objective, policies, and restrictions, as set out in the Prospectus and SAI, as amended from time to time; (iii) the applicable exemptive orders or no-action letters issued by the SEC or the CFTC or their respective staff governing the Funds, as such orders or letters may be amended from time to time; (iv) the provisions of the governing documents of the Trust, as such documents are amended from time to time; and (v) any policies or directives as the Board may from time to time establish or issue and communicate to the Adviser in writing. The Trust, on behalf of the Funds, will promptly notify the Adviser in writing of changes to (ii), (iii), (iv) or (v) above.
i. It will treat confidentially and as proprietary information of the Funds all records and other information relative to the Funds, and the Funds’ 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 each 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 the Funds.
j. It is not the subject of any proceeding, investigation or inquiry brought by the SEC, CFTC, Financial Industry Regulatory Authority (“FINRA”) (or any other self-regulatory organization) or any other federal or state regulator with respect to the types of services for which it is being appointed herein or which could have a material impact on its ability to fully perform any of the services to be rendered hereunder.
k. It maintains errors and omissions insurance coverage in an appropriate amount and shall provide prior written notice to the Trust (i) of any material changes in its insurance policies or insurance coverage; or (ii) if any material claims will be made on its insurance policies with respect to providing advisory services to the Funds. Furthermore, the Adviser shall upon reasonable request provide the Trust with information it may reasonably require concerning the amount of or scope of such insurance.
14. | Indemnification and Limitation of Liability |
a. The Adviser shall indemnify and hold harmless the Trust and all affiliated persons (within the meaning of Section 2(a)(3) of the 1940 Act) and all controlling persons (as described in Section 15 of the 1933 Act) thereof (collectively, the “Trust Indemnitees”) against any and all losses, claims, damages, liabilities or litigation to the extent that a Trust Indemnitee incurs actual losses, damages, or liabilities (including reasonable legal and other expenses) by reason of or arising out of the Adviser’s willful misfeasance, bad faith, or gross negligence in the performance of its duties hereunder or its reckless disregard of its obligations and duties under this Agreement. The Adviser shall have no responsibility or liability for the accuracy or completeness of sections of the Trust’s registration statement under the 1940 Act or the 1933 Act that directly relate to Items 11-13, 17-18, 22-30, and 32-35 of Form N-1A, except for information provided by the Adviser for inclusion therein.
b. The Trust agrees to indemnify and hold harmless the Adviser and all affiliated persons (within the meaning of Section 2(a)(3) of the 1940 Act) and all controlling persons (as described in Section 15 of the 1933 Act) thereof (collectively, the “Adviser Indemnitees”) against any and all losses, claims, damages, liabilities or litigation to the extent that an Adviser Indemnitee incurs actual losses, damages, or liabilities (including reasonable legal and other expenses) by reason of or arising out of the Trust’s willful misfeasance, bad faith, or gross negligence in the performance of its duties hereunder or its reckless disregard of its obligations and duties under this Agreement, provided that any such indemnification by the Trust shall be no greater than that permitted by the Trust’s Declaration of Trust or other organizational documents.
c. Neither the Adviser nor its directors, officers, employees, agents or controlling persons or assigns shall be liable for any error of judgment or mistake of law or for any loss suffered by the Trust, any Fund or its shareholders in connection with the matters to which this Agreement relates; provided, however, that no provisionremainder of this Agreement shall not be deemed to protect the Adviser against any liability to the Trust, any Fund or its shareholders to which it might otherwise be subject directly arising from or based upon the Adviser’s own willful misfeasance, bad faith or gross negligence in the performance of its duties or the reckless disregard of its obligations and duties under this Agreement.
d. Notwithstanding anything to the contrary contained herein, no party to this Agreement nor its affiliates or its affiliated persons shall be responsible or liable for its failure to perform under this Agreement or for any losses to a Fund’s assets resulting from any event beyond the reasonable control of such party or its agents, including, but not limited to, nationalization, expropriation, devaluation, seizure or similar action by any governmental authority, de facto or de jure; or enactment, promulgation, imposition or enforcement by any such governmental authority of currency restrictions, exchange controls, levies or other charges affecting a Fund’s assets; or the breakdown, failure or malfunction of any utilities or telecommunications systems; or any order or regulation of any banking or securities industry including changes in market rules and market conditions affecting the execution or settlement of transactions; or acts or war, terrorism, insurrection or revolution; or acts of God, or any other similar event. In no event, shall any party be responsible for incidental, consequential or punitive damages hereunder.
e. | The provisions of this Section shall survive the termination of this Agreement. |
15. No Liability for Other Funds. This Agreement is made by the Trust, on behalf of its Funds, pursuant to authority granted by the Trustees, and the obligations created hereby are not binding on any of the Trustees or shareholders of the Funds individually, but bind only the property of that Fund and no other Funds of the Trust.
16. | Cooperation with Regulatory Authorities or Other Actions. The parties to this Agreement each agree to cooperate in a reasonable manner with each other in the event that any of them should become involved in a legal, administrative, judicial or regulatory action, claim, or suit as a result of performing its obligations under this Agreement.
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a. Maintenance of Records. The Adviser hereby undertakes and agrees to maintain for the Trust, in the form and for the period required by Rule 31a-2 under the 1940 Act, all records relating to the Funds’ investments that are required to be maintained by the Funds pursuant to the 1940 Act with respect to the Adviser’s responsibilities under this Agreement (the “Funds’ Books and Records”).
b. Ownership of Records. The Adviser agrees that the Funds’ Books and Records are the Trust’s property and further agrees to provide them promptly to the Trust upon the request of the Trust; provided, however, that the Adviser may retain copies of the Funds’ Books and Records at its own cost. Upon request of the Trust, the Funds’ Books and Records will be made available as soon as reasonably practicable, or as otherwise mutually agreed by the Trust and the Adviser, to the Funds’ accountants or auditors during regular business hours at the Adviser’s offices or another designated location as mutually agreed by the Trust and the Adviser. The Trust or its authorized representatives will have the right to copy any records in the Adviser’s possession that pertain to any Fund. These books, records, information, or reports will be made available to properly authorized government representatives consistent with federal law and/or regulations. In the event of the termination of this Agreement, the Funds’ Books and Records will be returned to the Trust. The Adviser agrees that the policies and procedures it has established for managing the Funds, including, but not limited to, all policies and procedures designed to comply with federal securities laws governing the provision of advisory services to the Funds, will be made available for inspection by the Fund or its authorized representatives upon reasonable written request as soon as reasonably practicable or as otherwise mutually agreed by the Trust and the Adviser.
18. Use of the “Vident” Name. The Adviser has consented to the use by the Trust of the name or identifying word “Vident” in the name of certain Funds. Such consent is conditioned upon the employment of the Adviser or an affiliate of the Adviser as the investment adviser to the Fund. The Adviser may require the Trust to cease using “Vident” in the name of a Fund if the Fund ceases to employ, for any reason, the Adviser, any successor thereto or any affiliate thereof as investment adviser of the Fund.
19. | Use of Trust and Fund Name. The Adviser is authorized to disclose the Trust and the Fund’s identities as clients of the Adviser in any representative client list prepared by the Adviser for use in marketing materials.
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20. Survival. All representations and warranties made by the Adviser and the Trust, on behalf of the Funds, in this Agreement will survive for the duration of this Agreement and the parties to this Agreement will notify each other in writing promptly upon becoming aware that any of the foregoing representations and warranties are no longer true.
21. Governing Law. affected thereby. This Agreement shall be governed bybinding upon and construed in accordance withshall inure to the substantive lawsbenefit of the state of Delawareparties hereto and the Trust and the Adviser consent to the jurisdiction of courts, both state or federal, in Delaware, with respect to any dispute under this Agreement.
their respective successors.22. | Severability. If any provision of this Agreement is held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.
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15.23. Notice. Definitions. The terms “assignment,” “affiliated person,” and “interested person,” when used in this Agreement, will have the respective meanings specified in Section 2(a) of the 1940 Act. The term “majority of the outstanding shares” means the lesser of (a) sixty-seven percent (67%) or more of the shares present at a meeting if more than fifty percent (50%) of these shares are present or represented by proxy, or (b) more than fifty percent (50%) of the outstanding shares. The term “including” means “including without limitation.”
24. Notice. Any notice, advice, document, report or other client communication to be given pursuant to this Agreement shall be deemed sufficient if delivered or mailed by registered, certified or overnight mail, postage prepaid or electronically addressed by the party giving notice to the other party at the last address furnished by the other party. By consenting to the electronic delivery of any notice, advice, document, report or other client communication in respect of this Agreement or as required pursuant to applicable law, the TrustAdviser authorizes the AdviserSub-Adviser to deliver all communications by email or other electronic means.
| To the Adviser at: | Vident Advisory,Grayscale Advisors, LLC 290 Harbor Drive, 4th Floor Stamford, Connecticut 06902 Attention: Legal Department Email: legal@grayscale.com
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| | 1125 Sanctuary Parkway, Suite 515, |
| | Alpharetta, Georgia 30009 Attention: Deborah Kimery |
| | Email: dkimery@videntfinancial.com |
| | |
| | |
| To the Trust at: | ETF Series Solutions |
| | c/o U.S. Bank GlobalBancorp Fund Services, LLC 615 East Michigan Street |
| | MK--T10F |
| | Milwaukee, Wisconsin 53202 Attention: Email:
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| | Attention: |
| | Email: |
| 25.To the Sub-Adviser at: | Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of such counterparts together will constitute one and the same instrument.Vident Advisory, LLC
1125 Sanctuary Parkway, Suite 515 Alpharetta, GA 30009 Attention: Amrita Nandakumar Email: anandakumar@videntam.com |
16.Amendment of Agreement. This Agreement may be amended only by written agreement of the Adviser, the Sub-Adviser and the Trust, and only in accordance with the provisions of the 1940 Act and the rules and regulations promulgated thereunder.
[The Remainder17.Representations and Warranties of This Page Is Intentionally Left Blank]the Adviser.
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(a)The execution, delivery and performance by the Adviser and the Funds of this Agreement have been duly authorized by all necessary action on the part of the Adviser and the Board (including full authority to bind the Funds to the terms of this Agreement); and
IN WITNESS WHEREOF,(b)The Adviser will notify the Sub-Adviser as soon as reasonably practicable if any of the above representations in this Section are no longer true and accurate.
18.Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto, have causedand supersedes all prior agreements and understandings relating to this instrumentAgreement’s subject matter. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be signedan original, but such counterparts shall, together, constitute only one instrument.
19.Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act will be resolved by reference to such term or provision of the 1940 Act and to interpretations thereof, if any, by the United States courts or, in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC validly issued pursuant to the 1940 Act. Specifically, the terms “vote of a majority of the outstanding voting securities,” “interested persons,” “assignment,” and “affiliated persons,” as used herein will have the meanings assigned to them by Section 2(a) of the 1940 Act. In addition, where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is relaxed by a rule, regulation or order of the SEC, whether of special or of general application, such provision will be deemed to incorporate the effect of such rule, regulation or order.
20.Headings. The headings in the sections of this Agreement are inserted for convenience of reference only and will not constitute a part hereof.
In the event the terms of this Agreement are applicable to more than one Fund of the Trust as specified in Schedule A attached hereto, the Adviser is entering into this Agreement with the Sub-Adviser on their behalf of the respective Funds severally and not jointly, with the express intention that the provisions contained in each numbered paragraph hereof shall be understood as applying separately with respect to each Fund as if contained in separate agreements between the Adviser and Sub-Adviser for each such Fund. In the event that this Agreement is made applicable to any additional Funds by their duly authorized officers asway of a Schedule executed subsequent to the date first indicated above, written.provisions of such Schedule shall be deemed to be incorporated into this Agreement as it relates to such Fund so that, for example, the execution date for purposes of Section 8 of this Agreement with respect to such Fund shall be the execution date of the relevant Schedule.
21.Miscellaneous.
(a)A copy of the Certificate of Trust is on file with the Secretary of State of Delaware, and notice is hereby given that the obligations of this instrument are not binding upon any of the Trustees, officers or shareholders of the Fund or the Trust.
(b)Where the effect of a requirement of the 1940 Act or Advisers Act reflected in any provision of this Agreement is altered by a rule, regulation or order of the SEC, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN CONNECTION WITH ACCOUNTS OF QUALIFIED ELIGIBLE PERSONS, THIS BROCHURE OR ACCOUNT DOCUMENT IS NOT REQUIRED TO BE, AND HAS NOT BEEN, FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A TRADING PROGRAM OR UPON THE ADEQUACY OR ACCURACY OF COMMODITY TRADING ADVISORADVISER DISCLOSURE. CONSEQUENTLY, THE COMMODITY FUTURES TRADING COMMISSION HAS NOT REVIEWED OR APPROVED THIS TRADING PROGRAM OR THIS BROCHURE OR ACCOUNT DOCUMENT.
[Signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day first set forth above.
ETF SERIES SOLUTIONS | Vident Advisory, LLC |
on behalf of the series listed on Schedule A | |
| |
GRAYSCALE ADVISORS, LLC By: | By: Name: Title: |
| VIDENT ADVISORY, LLC By: Name: Title: |
ETF SERIES SOLUTIONS By: Name: Joshua Hinderliter | Name: Deborah Kimery |
| |
Title: Secretary | Title: Chief Executive Officer |
Signature Page to Investment Advisory
Sub-Advisory Agreement
SCHEDULE A
to the
INVESTMENT ADVISORYSUB-ADVISORY AGREEMENT
Dated XX, 2023 by and among
Dated April 6, 2023 between ETF SERIES SOLUTIONS
GRAYSCALE ADVISORS, LLC
and
VIDENT ADVISORY, LLC
and
ETF SERIES SOLUTIONS
The TrustAdviser will pay to the AdviserSub-Adviser as compensation for the Adviser’sSub-Adviser’s services rendered, a fee, computed daily at an annual rate based on the averagegreater of (1) the minimum fee or (2) the daily net assets of the respective Fund in accordance with the following fee schedule:
Fund
| Rate
| | | | | | | |
Vident International Equity Strategy ETF Fund | 0.61%Minimum Fee | Rate(s) |
Vident U.S. Equity StrategyGrayscale Future of Finance ETF
| 0.50%$20,000 annually |
Vident U.S. Bond Strategy ETF0.045% on the first $250 million;
| 0.41% |
U.S. Diversified Real Estate ETF0.035% on the next $250 million; and
| 0.53%0.025% on all assets thereafter (subject to the annual minimum) |