As filed with the Securities and Exchange Commission on October 19, 2012
Securities Act of 1933 Registration No. 333-132400
Investment Company Act of 1940 Registration No. 811-21866
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
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THE SECURITIES ACT OF 1933
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Post-Effective Amendment No. 34
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and/or
REGISTRATION STATEMENT
UNDER
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THE INVESTMENT COMPANY ACT OF 1940
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Pyxis Funds I
(Exact Name of Registrant as Specified in Charter)
c/o Pyxis
Capital, L.P.
200 Crescent Court, Suite 700
Dallas, Texas 75201
(Address of Principal Executive Office)
Registrant’s Telephone Number, including Area Code: 1-972-628-4100
Mr. Ethan Powell
c/o Pyxis Capital, L.P.
200 Crescent Court, Suite 700
Dallas, Texas 75201
(Name and Address of Agent for Service)
With copies
to:
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Mr. Brian Mitts
c/o Pyxis Capital, L.P.
200 Crescent Court, Suite 700
Dallas, Texas 75201
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Gregory D. Sheehan, Esq.
Ropes & Gray LLP
Prudential Tower
800 Boylston Street
Boston, Massachusetts 02199-3600
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It is proposed that this filing be effective:
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Immediately upon filing pursuant to paragraph (b) of Rule 485
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On October 22, 2012 pursuant to paragraph (b) of Rule 485
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60 days after filing pursuant to paragraph (a)(1) of Rule 485
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On (date) pursuant to paragraph (a)(1) of Rule 485
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75 days after filing pursuant to paragraph (a)(2) of Rule 485
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On (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
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This post-effective amendment relates solely to Pyxis/iBoxx Senior Loan ETF (the “Fund”), a new series of Pyxis Funds I (the
“Trust”). No information relating to any other series or shares of the Trust is amended or superseded hereby.
Pyxis/iBoxx Senior Loan ETF
Ticker: SNLN — NYSE Arca, Inc.
Prospectus
October 22, 2012
Although these securities have been registered with the
Securities and Exchange Commission (“SEC”), the SEC has not approved or disapproved any shares offered in this Prospectus or determined whether this Prospectus is truthful or complete. Any representation to the contrary is a criminal
offense.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Table of Contents
Pyxis/iBoxx Senior Loan ETF
Investment Objective
The investment objective of Pyxis/iBoxx Senior Loan ETF (the “Fund”) is to provide
investment results that, before fees and expenses, correspond generally to the price and yield performance of the Markit iBoxx USD Liquid Leveraged Loan Index (the “Underlying Index”).
Fees and Expenses
The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Fund.
Annual Fund Operating Expenses
(expenses that you pay each year as % of the value of your investment)
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Management Fees
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0.45%
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Other
Expenses
(1)
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0.10%
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Total Annual Fund Operating Expenses
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0.55%
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(1)
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“Other Expenses” are based on estimated amounts for the current fiscal year and include expenses indirectly incurred by the Fund through investments in certain pooled
investment vehicles (“Acquired Funds”) of 0.01% or less of the Fund’s average daily net assets.
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Expense
Example.
This Example helps you compare the cost of investing in the Fund to the cost of investing in other funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then sell or redeem all your
shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses, which exclude brokerage commissions, remain the same.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher
portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the
Fund’s performance. Prior to the date of this Prospectus, the Fund had not yet commenced operations. Accordingly, information on the Fund’s portfolio turnover rate is not available.
Principal Investment
Strategies
The Fund will, under normal circumstances, invest at least 80% of its assets (the “80% basket”) in component securities of the
Underlying Index (“Component Securities”). The Fund may invest the remaining 20% of its assets (the “20% basket”) in securities not included in the Underlying Index, but which Pyxis Capital L.P. (“Pyxis” or the
“Adviser”) believes will help the Fund track the Underlying Index. For example, the Fund may invest in securities that are not components of the Underlying Index to reflect various corporate actions (such as mergers) and other changes in
the Underlying Index (such as reconstitutions, additions and deletions). The Fund may invest in securities of any type and of companies of any market capitalization, market sector or industry. The Fund may use the 20% basket to invest in securities
issued by other investment companies, including other exchange-traded funds. The Fund also may invest in derivatives to track the Underlying Index, such as futures contracts, options on futures contracts, options, and swaps with the 20% basket. In
addition, the Fund’s 20% basket may be invested in cash and cash equivalents, including shares of money market funds advised by the Adviser or its affiliates.
Unlike many investment companies, the Fund does not try to “beat” the index it tracks. The Fund uses a passive management strategy designed to track the total return performance of the Underlying Index as
a proxy for the senior secured loan universe. The Underlying Index is a subset of the Markit iBoxx USD Leveraged Loan Index. “Leveraged Loans” are loans to companies that typically already have a high amount of debt and are often
characterized by lower credit ratings or higher interest rates. The Underlying Index is a rules-based index consisting of some of the largest, most liquid Leveraged Loans, as measured by the number of active market participants trading the security
and the dollar face amount of outstanding senior loans issued. Currently, loans eligible for inclusion in the Underlying Index are measured by type, size, liquidity, spread, credit rating and minimum time to maturity.
The Underlying Index is sponsored by Markit Indices Limited (the “Index Provider”), an organization that is independent of the Fund and the Adviser. The
Index Provider determines the composition and relative weightings of the securities in the Underlying Index and publishes information regarding the market value of the Underlying Index.
The Adviser uses a representative sampling indexing strategy to manage the Fund. “Representative sampling” is an indexing strategy that involves investing in a representative sample of securities that
collectively has an investment profile similar to the Underlying Index. The securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental
characteristics (such as return variability, duration, maturity or credit ratings and yield) and liquidity measures similar to those of the Underlying Index. The Fund may or may not hold all of the securities in the Underlying Index. “Tracking
error” is the difference between the performance (return) of the Fund’s portfolio and that of the Underlying Index. The Adviser expects that, over time, the Fund’s tracking error will not exceed 5%. Funds that employ a representative
sampling strategy may incur tracking error risk to a greater extent than funds that seek to replicate an index.
The Component Securities primarily
consist of senior loans (“Senior Loans”) to domestic or foreign corporations, partnerships and other entities that operate in a variety of industries and geographic regions (“Borrowers”). The Fund will, under normal
circumstances, invest at least 80% of its assets (i.e., net assets plus borrowings for investment purposes) in Senior Loans. Senior Loans, at the time of the Fund’s purchase, have the most senior position in a Borrower’s capital structure
or share the senior position with other senior debt securities of the Borrower. Senior Loans generally are arranged through
2
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
private negotiations between a Borrower and several financial institutions (the “Lenders”) represented in each case by one or more such Lenders acting as agent (the “Agent”)
of the several Lenders. On behalf of the Lenders, the Agent is primarily responsible for negotiating the loan agreement (“Loan Agreement”) that establishes the relative terms and conditions of the Senior Loan and rights of the Borrower and
the Lenders. The Component Securities in which the Fund will invest are expected to be below investment grade securities (also known as “high yield securities” or “junk securities”). Such securities are rated below investment
grade by a nationally recognized statistical rating organization (“NRSRO”) or are unrated but deemed by the Adviser to be of comparable quality. The Underlying Index may include, and the Fund may acquire and retain in its portfolio, below
investment grade or unrated securities, including loans of Borrowers that are insolvent or in default, provided that all criteria of the Underlying Index, including liquidity requirements, are met.
The Fund may invest in participations (“Participations”) in Senior Loans, may purchase assignments (“Assignments”) of portions of Senior Loans
from third parties, and may act as one of the group of Lenders originating a Senior Loan (“Primary Lender”). In such instances, a financial institution will generally serve as the Agent, originator, principal negotiator or administrator of
the Senior Loan. Senior Loans often are secured by specific assets of the Borrower, although the Fund may invest without limitation in Senior Loans that are not secured by any collateral. When the Fund acts as a Primary Lender, the Fund or the
Adviser could be subject to allegations of lender liability.
The Fund is non-diversified as defined in the Investment Company Act of 1940, as amended
(the “1940 Act”), but it intends to seek to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), which imposes diversification requirements
on the Fund that are different from, and generally less restrictive than, the requirements applicable to “diversified” investment companies under the 1940 Act. The Fund is not intended to be a complete investment program.
Principal Risks
When you sell Fund shares, they may be worth less than what you paid for them. Consequently, you can lose money by investing in the Fund. No assurance can be given
that the Fund will achieve its objective, and investment results may vary substantially over time and from period to period. An investment in the Fund is not appropriate for all investors.
Asset Class Risk.
Securities in the Underlying Index or in the Fund’s portfolio may underperform in comparison to the general securities markets or other asset classes.
Cash Transaction Risk.
Unlike most exchange-traded funds (“ETFs”), the Fund currently intends to effect creations and redemptions principally for
cash, rather than principally for in-kind securities, because of the nature of the Fund’s investments. As such, investments in shares may be less tax efficient than investments in conventional ETFs.
Counterparty Risk.
A counterparty (the other party to a transaction or an agreement or the party with whom the Fund executes transactions) to a transaction
with the Fund may be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations.
Credit
Risk.
The issuers of certain securities might not be able to make interest and principal payments when due. Debt securities are subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of
income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Fund’s Net Asset Value (“NAV”) and the market price of the Fund’s shares.
Debt Securities and Leveraged Loans Risk.
The market prices of debt securities generally fluctuate inversely with changes in interest rates so that the value
of investments in such securities can be expected to decrease as interest rates rise and increase as interest rates fall. Such changes may be greater among debt securities with longer maturities. Leveraged Loans are subject to the same risks
typically associated with debt securities. In addition, Leveraged Loans, which typically hold a senior position in the capital structure of a borrower, are subject to the risk that a court could subordinate such loans to presently existing or future
indebtedness or take other action detrimental to the holders of Leveraged Loans. Leveraged Loans are also especially subject to the risk that the value of the collateral, if any, securing a loan may decline, be insufficient to meet the obligations
of the borrower or be difficult to liquidate.
Derivatives Risk.
Derivatives, such as futures contracts, options on futures contracts, options,
and swaps, are subject to the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index. Derivatives also expose the Fund to the credit risk of the derivative counterparty, for example, if
the counterparty does not meet its obligations. Derivative contracts may expire worthless and the use of derivatives may result in losses to the Fund. Losses involving derivative instruments may be substantial, because a relatively small price
movement in the underlying asset, rate or index may result in a substantial loss for the Fund.
In addition, recent legislation has called for a new
regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund’s
ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund as well as the Fund’s ability to pursue its investment objective through the use of such instruments.
Exchange-Traded Funds Risk.
The price movement of an exchange-traded fund may not track the underlying index and may result in a loss. In addition,
shareholders bear both their proportionate share of the Fund’s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company.
Focused Investment Risk.
The Fund’s investments in Senior Loans arranged through private negotiations between a Borrower and several financial
institutions may expose the Fund to risks associated with the financial services industry.
3
The financial services industry is subject to extensive government regulation, which can limit both the amounts and types of loans and other financial commitments financial services companies can
make and the interest rates and fees they can charge. Profitability is largely dependent on the availability and cost of capital funds, and can fluctuate significantly when interest rates change. Because financial services companies are highly
dependent on short-term interest rates, they can be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations. Losses resulting from financial difficulties of Borrowers can negatively affect financial
services companies.
Illiquid Securities Risk.
The Adviser may not be able to sell illiquid securities at the price it would like or may have to
sell them at a loss.
Illiquidity Risk.
At times, a major portion of any portfolio security may be held by relatively few institutional
purchasers. Even if the Fund considers such securities liquid because of the availability of an institutional market, such securities may become difficult to value or sell in adverse market or economic conditions.
Industry Concentration Risk.
Because the Fund may invest 25% or more of the value of its assets in an industry or group of industries to the extent that the
Underlying Index concentrates in an industry or group of industries, the Fund’s performance largely depends on the overall condition of such industry or group of industries and the Fund is susceptible to economic, political and regulatory risks
or other occurrences associated with that industry or group of industries.
Intellectual Property Risk.
The Adviser relies on a license, which may
be terminated by the Index Provider, that permits the Fund to use the Underlying Index and associated trade names, trademarks and service marks (the “Intellectual Property”) in connection with the name and investment strategies of the
Fund.
Interest Rate Risk.
When interest rates decline, the value of fixed rate securities already held by the Fund can be expected to rise.
Conversely, when interest rates rise, the value of existing fixed rate portfolio securities can be expected to decline.
Junk Bond Risk
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Fund’s ability to invest in high-yield debt securities (also known as “junk bonds”) generally subjects the Fund to greater risk than its ability to invest in securities with higher ratings. High-yield securities are regarded by the
rating organizations as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation.
Lender Liability Risk.
A number of judicial decisions have upheld the right of Borrowers to sue lending institutions on the basis of various evolving legal theories founded upon the premise that an
institutional Lender has violated a duty of good faith and fair dealing owed to the Borrower or has assumed a degree of control over the Borrower resulting in a creation of a fiduciary duty owed to the Borrower or its other creditors or
shareholders. Because of the nature of certain of the Fund’s investments, the Fund or the Adviser could be subject to such liability.
Limited
Information Risk.
The types of Senior Loans in which the Fund will invest historically may not have been rated by a NRSRO, have not been registered with the SEC or any state securities commission, and have not been listed on any national
securities exchange. Although the Fund will generally have access to financial and other information made available to the Lenders in connection with Senior Loans, the amount of public information available with respect to Senior Loans will
generally be less extensive than that available for rated, registered or exchange-listed securities.
Loan Participation Risk
. In addition to
the risks typically associated with debt securities, Participations involve the risk that there may not be a readily available market for Participation interests and, in some cases, the Fund may have to dispose of such securities at a substantial
discount from face value. Participations also involve the credit risk associated with the underlying corporate borrower.
Management Risk.
The Fund relies on Pyxis’s ability to achieve its investment objective. As the Fund does not fully replicate the Underlying Index, it is subject to the risk that Pyxis’s investment management strategy may not produce the intended results.
Market Price Variance Risk.
Fund shares will be listed for trading on NYSE Arca, Inc. (the “Exchange”) and can be bought and sold
in the secondary market at market prices. The market prices of shares will fluctuate in response to changes in the NAV and supply and demand for shares. The Adviser cannot predict whether shares will trade above, below or at their NAV. Given the
fact that shares can be created and redeemed in Creation Units, the Adviser believes that large discounts or premiums to the NAV of shares should not be sustained. The Fund’s investment results are measured based upon the daily NAV of the Fund.
Investors purchasing and selling shares in the secondary market may not experience investment results consistent with those experienced by those creating and redeeming directly with the Fund.
Market Risk.
The Fund’s share price will fluctuate with changes in the market value of its portfolio securities. Many factors can affect this value and
you may lose money by investing in the Fund.
Non-Diversification Risk.
As a non-diversified fund for purposes of the 1940 Act, the Fund may
invest a larger portion of its assets in the securities of fewer issuers than a diversified fund. A non-diversified fund’s investment in fewer issuers may result in the Fund’s shares being more sensitive to the economic results of those
issuers. An investment in the Fund could fluctuate in value more than an investment in a diversified fund.
Non-Payment Risk.
Debt securities are
subject to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the obligation experiencing non-payment and a potential decrease in the Fund’s
NAV and the market price of the Fund’s shares.
Ongoing Monitoring Risk.
On behalf of the several Lenders, the Agent generally will be
required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. Financial difficulties of
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Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Agents can pose a risk to the Fund. Unless, under the terms of the loan, the Fund has direct recourse against the Borrower, the Fund may have to rely on the Agent or other financial intermediary
to apply appropriate credit remedies against a Borrower.
Options Risk.
Options, such as covered calls and covered puts, are subject to the risk
that significant differences between the securities and options markets that could result in an imperfect correlation between these markets.
Passive
Investment Risk.
The Fund is not actively managed and Pyxis does not attempt to take defensive positions under any market conditions, including during declining markets.
Prepayment Risk.
Borrowers may pay back principal before the scheduled due date. Such prepayments may require the Fund to replace a debt security with a lower-yielding security, resulting in a decrease in
the Fund’s income.
Regulatory Risk.
To the extent that legislation or state or federal regulators impose additional requirements or
restrictions with respect to the ability of financial institutions to make loans in connection with highly leveraged transactions, the availability of Senior Loan interests for investment by the Fund may be adversely affected.
Senior Loans Risk.
The risks associated with Senior Loans are similar to the risks of below investment grade securities. Senior Loans and other debt
securities are also subject to the risk of price declines and to increases in prevailing interest rates. The Fund’s investments in Senior Loans are typically below investment grade and are considered speculative because of the credit risk of
their issuers. The secondary market for loans is generally less liquid than the market for higher grade debt. Less liquidity in the secondary trading market could adversely affect the price at which the Fund could sell a loan, and could adversely
affect the Fund’s income. The volume and frequency of secondary market trading in such loans varies significantly over time and among loans. Although Senior Loans in which the Fund will invest will often be secured by collateral, there can be
no assurance that liquidation of such collateral would satisfy the Borrower’s obligation in the event of a default or that such collateral could be readily liquidated.
Tracking Error Risk.
The performance of the Fund may diverge from that of the Underlying Index. Because the Fund employs a representative sampling strategy, the Fund may experience tracking error to a
greater extent than a fund that seeks to replicate an index. The Adviser may not be able to cause the Fund’s performance to correlate to that of the Fund’s benchmark, either on a daily or aggregate basis. Because the Underlying Index
rebalances monthly but the Fund is not obligated to do the same, the risk of tracking error may increase following the rebalancing of the Underlying Index.
An investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. As with any investment company, there is no guarantee that the Fund will achieve its
goal.
Performance
Prior to the date of this Prospectus, the Fund had not yet commenced operations, and therefore the Fund currently has no investment performance information to
report. After the Fund has had operations for at least one full calendar year, its Prospectus will include a bar chart and a table that will provide an indication of the risks of investing in the Fund by showing how the Fund has performed and how
its performance has varied from year to year. Although past performance of the Fund is no guarantee of how it will perform in the future, historical performance may give you some indication of the risks of investing in the Fund.
Portfolio Management
Pyxis Capital, L.P. serves as the investment adviser to the Fund. The portfolio manager for the Fund is:
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Portfolio Manager
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Managed
the Fund
Since
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Title
with
Adviser
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Ethan Powell
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Inception
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Executive Vice President and Secretary
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Purchase and Sale of
Fund Shares
The Fund is an exchange-traded fund. The Fund will issue and redeem shares only to authorized participants who have entered into
agreements with the Fund’s distributor (“Authorized Participants”) in exchange for the deposit or delivery of a basket of assets (securities and/or cash) in large blocks, known as Creation Units, each of which comprises 100,000
shares. Retail investors may only purchase and sell shares on a national securities exchange through a broker-dealer. The price of Fund shares is based on market price, and because ETF shares trade at market prices rather than NAV, shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount).
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Important Additional Information
Tax Information
The Fund intends to make distributions that generally will be taxable to you as ordinary
income or capital gains, unless you are a tax-exempt investor or otherwise investing in the Fund through a tax-advantaged arrangement, such as a 401(k) plan or an individual retirement account. If you are investing in the Fund through a
tax-advantaged arrangement, you may be taxed later upon withdrawals from that account.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
Description of Principal Investments
The following is a description of principal
investment practices in which the Fund may engage. Any references to investments made by the Fund include those that may be made both directly by the Fund and indirectly by the Fund (e.g., through its investments in derivatives or other pooled
investment vehicles). Please see “Description of Principal Risks” below for the risks associated with each of the principal investment practices.
Assignments.
The Fund may purchase Assignments from Lenders. The purchaser of an Assignment typically succeeds to all the rights and obligations under the Loan Agreement of the assigning Lender and becomes a
Lender under the Loan Agreement with the same rights and obligations as the assigning Lender.
Borrower Credit Ratings.
The Fund may invest all or
substantially all of its assets in Senior Loans to Borrowers having outstanding debt securities rated below investment grade by a NRSRO and unrated debt securities of comparable quality. Debt securities rated below investment grade (or unrated debt
securities of comparable quality) commonly are referred to as “junk” securities. The Fund seeks to invest in those Senior Loans with respect to which the Borrower, in the judgment of the Adviser, demonstrates one or more of the following
characteristics: sufficient cash flow to service debt; adequate liquidity; successful operating history; strong competitive position; experienced management; and, with respect to collateralized Senior Loans, collateral coverage that equals or
exceeds the outstanding principal amount of the Senior Loan. The Fund may, however, invest without limitation in loans that do not exhibit all or any of these characteristics. In addition, the Adviser will consider, and may rely in part on, the
analyses performed by the Agent and other Lenders, including such persons’ determinations with respect to collateral securing a Senior Loan.
Bridge Financing.
The Fund may acquire interests in Senior Loans that are designed to provide temporary or “bridge” financing to a Borrower pending
the sale of identified assets or the arrangement of longer-term loans or the issuance and sale of debt obligations. A Borrower’s use of a bridge loan involves a risk that the Borrower may be unable to locate permanent financing to replace the
bridge loan, which may impair the Borrower’s perceived creditworthiness and increase the likelihood that an event of default would be declared.
Commitments to Make Additional Payments.
A Lender may have obligations pursuant to a Loan Agreement to make additional loans in certain circumstances. Such
circumstances may include, without limitation, obligations under revolving credit facilities and facilities that provide for further loans to Borrowers based upon compliance with specified financial requirements. The Fund currently intends to
reserve against any such contingent obligation by segregating a sufficient amount of cash and/or liquid securities (including liquid Senior Loans). The Fund will not purchase interests in Senior Loans that would require the Fund to make any such
additional loans if the aggregate of such additional loan commitments would exceed 20% of the Fund’s total assets or would cause the Fund to fail to meet the diversification requirements set forth under the heading “Investment
Restrictions” in the Fund’s Statement of Additional Information (“SAI”).
Debt Restructuring.
The Fund may purchase and
retain in its portfolio an interest in a Senior Loan to a Borrower that has filed for protection under the federal bankruptcy laws or has had an involuntary bankruptcy petition filed against it by its creditors. The Adviser’s decision to
purchase or retain such an interest will depend on its assessment of the suitability of such investment for the Fund, the Borrower’s ability to meet debt service on Senior Loan interests, the likely duration, if any, of a lapse in the scheduled
repayment of principal, and prevailing interest rates. At times, in connection with the restructuring of a Senior Loan either outside of bankruptcy court or in the context of bankruptcy court proceedings, the Fund may determine or be required to
accept equity securities or junior debt securities in exchange for all or a portion of a Senior Loan interest. Depending upon, among other things, the Adviser’s evaluation of the potential value of such securities in relation to the price that
could be obtained by the Fund at any given time upon sale thereof, the Fund may determine to hold such securities in its portfolio.
Debt Securities.
The Fund may invest in debt securities, including investment grade securities, below investment grade securities and other debt obligations.
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Investment Grade Securities.
The Fund may invest in a wide variety of bonds that are rated or determined by the Adviser to be of investment grade quality
of varying maturities issued by U.S. corporations and other business entities. Bonds are fixed or variable rate debt obligations, including bills, notes, debentures, money market instruments and similar instruments and securities. Bonds generally
are used by corporations and other issuers to borrow money from investors for a variety of business purposes. The issuer pays the investor a fixed or variable rate of interest and normally must repay the amount borrowed on or before maturity.
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6
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
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Below Investment Grade Securities
. The Fund may invest in below investment grade securities (also known as “high-yield securities” or “junk
securities”). See “Junk Bond Risk” below for more information.
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Derivatives.
The Fund may invest in various
instruments that are commonly known as derivatives. Generally, a derivative is a financial arrangement, the value of which is based on, or “derived” from, a traditional security, asset, or market index. Futures, forwards, swaps and options
are commonly used for traditional hedging purposes to attempt to protect the Fund from exposure to changing interest rates or securities prices and as a low cost method of gaining exposure to a particular securities market without investing directly
in those securities. The Fund may enter into credit derivatives, such as credit default swaps and credit default index investments, including loan credit default swaps and loan credit default index swaps. The Fund may use these investments
(i) as alternatives to direct long or short investment in a particular security, (ii) to adjust the Fund’s asset allocation or risk exposure, or (iii) for hedging purposes. The use by the Fund of credit default swaps may have the
effect of creating a short position in a security. These investments can create investment leverage, which tends to magnify the effects of an instrument’s price changes as market conditions change. Special tax considerations apply to the
Fund’s use of derivatives. See the “Taxation” section below.
Exchange-Traded Funds.
The Fund may invest in other ETFs. ETFs are
listed on various exchanges and typically seek to provide investment results that correspond generally to the performance of specified market indices.
Fees.
The Fund may be required to pay or may receive various fees and commissions in connection with purchasing, selling and holding interests in Senior
Loans. The fees normally paid by Borrowers may include three types: facility fees; commitment fees; and prepayment penalties. Facility fees are paid to the Lenders upon origination of a Senior Loan. Commitment fees are paid to Lenders on an ongoing
basis based upon the undrawn portion committed by the Lenders of the underlying Senior Loan. Lenders may receive prepayment penalties when a Borrower prepays all or part of a Senior Loan. The Fund will receive these fees directly from the Borrower
if the Fund is a Primary Lender, or, in the case of commitment fees and prepayment penalties, if the Fund acquires an interest in a Senior Loan by way of Assignment. Whether or not the Fund receives a facility fee from the Lender in the case of an
Assignment, or any fees in the case of a Participation, depends upon negotiations between the Fund and the Lender selling such interests. When the Fund is an assignee, it may be required to pay a fee to, or forgo a portion of interest and any fees
payable to it from, the Lender selling the Assignment. Occasionally, the assignor will pay a fee to the Fund based on the portion of the principal amount of the Senior Loan that is being assigned. A Lender selling a Participation to the Fund may
deduct a portion of the interest and any fees payable to the Fund as an administrative fee prior to payment thereof to the Fund. The Fund may be required to pay over or pass along to a purchaser of an interest in a Senior Loan from the Fund a
portion of any fees that the Fund would otherwise be entitled to.
Illiquid and Restricted Securities.
The Fund may invest in illiquid and
restricted securities. Restricted securities generally may not be resold without registration under the Securities Act of 1933, as amended (the “Securities Act”), except in transactions exempt from the registration requirements of the
Securities Act. A security that may be restricted as to resale under federal securities laws (or otherwise) will not be subject to the applicable percentage limitation if the Adviser determines that the security is, at the time of acquisition,
readily marketable. Illiquid securities are those that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the securities. Illiquid and restricted securities may offer
higher returns and yields than comparable publicly-traded securities. However, the Fund may not be able to sell these securities when the Adviser considers it desirable to do so or, to the extent they are sold privately, may have to sell them at
less than the price of otherwise comparable securities. Restricted securities may be illiquid; however, some restricted securities such as those eligible for resale under Rule 144A under the Securities Act may be treated as liquid.
Options.
The Fund may utilize options on securities, indices and currencies as part of their principal investment strategies. An option on a security is a
contract that gives the holder of the option, in return for a premium, the right to buy from (in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or
“strike” price. The writer of an option on a security has the obligation upon exercise of the option to deliver the underlying security upon payment of the exercise price or to pay the exercise price upon delivery of the underlying
security. If an option written by the Fund expires unexercised, the Fund realizes on the expiration date a gain equal to the premium received by the Fund at the time the option was written. If an option purchased by the Fund expires unexercised, the
Fund realizes a loss equal to the premium paid. Prior to the earlier of exercise or expiration, an exchange-traded option may be closed out by an offsetting purchase or sale of an option of the same series (type, underlying security, exercise price
and expiration). There can be no assurance, however, that a closing purchase or sale transaction can be effected when the Fund desires. The Fund realizes an economic loss from a closing sale transaction if the premium received from the sale of the
option is less than the premium it initially paid to purchase the option (plus transaction costs). The Fund realizes an economic loss from a closing purchase transaction if the cost of the closing purchase transaction (premium plus transaction
costs) is greater than the premium initially received from writing the option.
Participations.
The Fund may invest without limit in
Participations. The selling Lenders and other persons interpositioned between such Lenders and the Fund with respect to Participations will likely conduct their principal business activities in the financial services industry. The Fund may be more
susceptible than an investment company that does not invest in Participations in Senior Loans to any single economic, political or regulatory occurrence affecting this industry. Persons engaged in this industry may be more susceptible than are
persons engaged in some other industries to, among other things, fluctuations in interest rates, changes
7
in the Federal Open Market Committee’s monetary policy, governmental regulations concerning such industries and concerning capital raising activities generally and fluctuations in the
financial markets generally.
Participation by the Fund in a Lender’s portion of a Senior Loan typically will result in the Fund having a
contractual relationship only with such Lender, not with the Borrower. As a result, the Fund may have the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the Participation and only
upon receipt by the Lender of payments from the Borrower. In connection with purchasing Participations, the Fund generally will have no right to enforce compliance by the Borrower with the terms of the Loan Agreement, nor any rights with respect to
any funds acquired by other Lenders through set-off against the Borrower, and the Fund may not directly benefit from the collateral supporting the Senior Loan in which it has purchased the Participation. As a result, the Fund may assume the credit
risk of both the Borrower and the Lender selling the Participation. In the event of the insolvency of the Lender selling a Participation, the Fund may be treated as a general creditor of the Lender, and may not benefit from any set-off between the
Lender and the Borrower. The Fund will only acquire Participations from counterparties that are judged by the Adviser to present acceptable credit risk to the Fund.
Portfolio Maturity.
Although the initial time to maturity for Component Securities in the Underlying Index will generally be at least one year, the Fund is not subject to any restrictions with respect to the
maturity of Senior Loans held in its portfolio. Senior Loans usually will have rates of interest that are redetermined periodically. Investment in Senior Loans with longer interest rate redetermination periods may increase fluctuations in the
Fund’s NAV and the market price of the Fund’s shares as a result of changes in interest rates. Because many Senior Loans in the investment portfolio will be subject to mandatory and/or optional prepayment and there may be significant
economic incentives for a Borrower to prepay its loans, prepayments of Senior Loans in the Fund’s investment portfolio may occur. Accordingly, the actual remaining maturity of the Fund’s investment portfolio invested in Senior Loans may
vary substantially from the average stated maturity of the Senior Loans held in the Fund’s investment portfolio.
Prepayments.
Pursuant
to the relevant Loan Agreement, a Borrower may be required, and may have the option at any time, to prepay the principal amount of a Senior Loan, often without incurring a prepayment penalty. In the event that like-yielding loans are not available
in the marketplace, the prepayment of and subsequent reinvestment by the Fund in Senior Loans could have a materially adverse effect on the yield of the Fund’s investment portfolio. Prepayments may have a beneficial impact on income due to
receipt of prepayment penalties, if any, and any facility fees earned in connection with reinvestment.
Primary Lender Transactions.
When the
Fund is a Primary Lender, it will have a direct contractual relationship with the Borrower, may enforce compliance by the Borrower with the terms of the Loan Agreement and may under contractual arrangements among the Lenders have rights with respect
to any funds acquired by other Lenders through set-off. A Lender also has full voting and consent rights under the applicable Loan Agreement. Actions subject to Lender vote or consent generally require the vote or consent of the holders of a
majority or some greater specified percentage of the outstanding principal amount of the Senior Loan. Certain decisions, such as reducing the amount or increasing the time for payment of interest on or repayment of principal of a Senior Loan, or
releasing collateral therefor, frequently require the unanimous vote or consent of all Lenders affected. When the Fund is a Primary Lender originating a Senior Loan, it may share in a fee paid by the Borrower to the Primary Lenders.
Senior Loans.
The Fund may invest in Senior Loans. Senior Loans generally are arranged through private negotiations between a Borrower and Lenders
represented in each case by one or more Agents of the several Lenders. On behalf of the several Lenders, the Agent, which is frequently a commercial bank or other entity that originates the Senior Loan and the person that invites other parties to
join the lending syndicate, will be primarily responsible for negotiating the Loan Agreement that establishes the relative terms, conditions and rights of the Borrower and the several Lenders. In larger transactions it is common to have several
Agents; however, generally only one such Agent has primary responsibility for documentation and administration of a Senior Loan.
In a typical Senior
Loan, the Agent administers the terms of the Loan Agreement and is responsible for the collection of principal and interest and fee payments from the Borrower and the apportionment of those payments to the credit of all Lenders that are parties to
the Loan Agreement. The Fund generally will rely on the Agent to collect its portion of the payments on a Senior Loan. Furthermore, the Fund will rely on the Agent to use appropriate creditor remedies against the Borrower. Typically, under a Loan
Agreement, the Agent is given broad discretion in monitoring the Borrower’s performance under the Loan Agreement and is obligated to use only the same care it would use in the management of its own property. Upon an event of default, the Agent
typically will act to enforce the Loan Agreement after instruction from Lenders holding a majority of the Senior Loan. The Borrower compensates the Agent for the Agent’s services. This compensation may include special fees paid on structuring
and funding the Senior Loan and other fees paid on a continuing basis. The practice of an Agent relying exclusively or primarily on reports from the Borrower may involve a risk of fraud by the Borrower.
Loan Agreements typically provide for the termination of the Agent’s agency status in the event that it fails to act as required under the relevant Loan
Agreement, becomes insolvent, enters receivership of the Federal Deposit Insurance Corporation (“FDIC”), or, if not FDIC insured, enters into bankruptcy. Should an Agent, Lender or any other institution interpositioned between the Fund and
the Borrower become insolvent or enter FDIC receivership or bankruptcy, any interest in the Senior Loan of any such interpositioned institution and any loan payment held by any such interpositioned institution for the benefit of the Fund should not
be included in the estate of such interpositioned institution. If, however, any such amount were included in such
8
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
interpositioned institution’s estate, the Fund would incur costs and delays in realizing payment or could suffer a loss of principal or interest. In such event, the Fund could experience a
decrease in NAV.
It is anticipated that the proceeds of the Senior Loans in which the Fund will acquire interests primarily will be used to finance
leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, and, to a lesser extent, to finance internal growth and for other corporate purposes of Borrowers. Senior Loans have the most senior position in a Borrower’s
capital structure, although some Senior Loans may hold an equal ranking with other senior securities and certain other obligations of the Borrower. The capital structure of a Borrower may include Senior Loans, senior and junior subordinated debt
securities (which may include “junk” securities) and preferred and common stock issued by the Borrower, typically in descending order of seniority with respect to claims on the Borrower’s assets. Senior and junior subordinated debt is
collectively referred to in this Prospectus as “junior debt securities.”
Senior Loans generally are secured by specific collateral. The Fund
may invest without limitation in Senior Loans that are not secured by any collateral and, to the extent that the Fund invests a portion of its assets in Senior Loans that are not secured by specific collateral, the Fund will not enjoy the benefits
associated with collateralization with respect to such Senior Loans, and such Senior Loans may pose a greater risk of nonpayment of interest or loss of principal than do collateralized Senior Loans. As discussed below, the Fund may also acquire
warrants, equity securities and junior debt securities issued by the Borrower or its affiliates as part of a package of investments in the Borrower or its affiliates. The Fund may acquire interests in warrants, other equity securities or junior debt
securities through a negotiated restructuring of a Senior Loan or in a bankruptcy proceeding of the Borrower.
In order to borrow money pursuant to a
collateralized Senior Loan, a Borrower will typically, for the term of the Senior Loan, pledge assets as collateral. In addition, in the case of some Senior Loans, there may be additional collateral pledged in the form of guarantees by and/or
securities of affiliates of the Borrowers. In some instances, a collateralized Senior Loan may be secured only by stock in the Borrower or its subsidiaries. Collateral may consist of assets that are not readily liquidated, and there is no assurance
that the liquidation of such assets would fully satisfy a Borrower’s obligations under a Senior Loan. Similarly, in the event of bankruptcy proceedings involving the Borrower, the Lenders may be delayed or prevented from liquidating collateral
or may choose not to do so as part of their participation in a plan of reorganization of the Borrower. Senior Loans’ higher standing in an issuer’s capital structure has historically resulted in generally higher recoveries than other below
investment grade securities in the event of a corporate reorganization or other restructuring, but there can be no assurance that this will be the case with respect to any particular Senior Loan.
Loan Agreements may also include various restrictive covenants designed to limit the activities of the Borrower in an effort to protect the right of the Lenders to
receive timely payments of interest on and repayment of principal of the Senior Loans. Breach of such a covenant, if not waived by the Lenders, is generally an event of default under the applicable Loan Agreement and may give the Lenders the right
to accelerate principal and interest payments. The Adviser will consider the terms of restrictive covenants in deciding whether to invest in Senior Loans for the Fund’s investment portfolio. When the Fund holds a Participation in a Senior Loan,
it may not have the right to vote to waive enforcement of a restrictive covenant breached by a Borrower. Lenders voting in connection with a potential waiver of a restrictive covenant may have interests different from those of the Fund, and such
Lenders will not consider the interests of the Fund in connection with their votes.
Senior Loans in which the Fund will invest generally pay
interest at rates that are periodically redetermined by reference to a base lending rate plus a premium. These base lending rates generally are the London Interbank Offered Rate (“LIBOR”), the prime rate offered by one or more major United
States banks (“Prime Rate”) or the certificate of deposit (“CD”) rate or other base lending rates used by commercial Lenders. LIBOR generally is an average of the interest rates quoted by several designated banks as the rates at
which such banks would offer to pay interest to major financial institution depositors in the London interbank market on U.S. dollar denominated deposits for a specified period of time. The CD rate generally is the average rate paid on large
certificates of deposit traded in the secondary market. Senior Loans traditionally have been structured so that Borrowers pay higher premiums when they elect LIBOR, in order to permit Lenders to obtain generally consistent yields on Senior Loans,
regardless of whether Borrowers select the LIBOR option or the Prime Rate option. Because their interest rates are adjusted for changes in short-term interest rates, Senior Loans generally have less interest rate risk than other high yield
investments, which typically pay fixed rates of interest.
The Fund may invest in Participations in Senior Loans, may purchase Assignments of
portions of Senior Loans from third parties and may act as one of the group of Primary Lenders.
Senior Loan Ratings.
The Fund may invest all or
substantially all of its assets in Senior Loans that are rated below investment grade, including Senior Loans rated CCC or below by S&P or Caa or below by Moody’s, and unrated Senior Loans of comparable quality.
Additional Information
. The foregoing percentage limitations in the Fund’s investment strategies apply at the time of purchase of securities. The Board
of Trustees may change any of the foregoing investment policies, including its investment objective, the Underlying Index and its 80% investment policy, without shareholder approval. For example, if the Fund’s Underlying Index is discontinued
by its Index Provider, the license agreement for the Underlying Index is terminated by the Index Provider or the Board of Trustees determines that it would not be beneficial to shareholders for the Fund to continue operations using the Underlying
Index, the Board of Trustees may change the Underlying Index as described in the “Investment Restrictions” section of the Fund’s SAI.
Notwithstanding its 80% investment policy, the Fund is subject to the SEC’s “names rule” (Rule 35d-1 under the 1940 Act), and
9
therefore commits to invest at least 80% of its assets (i.e., net assets plus borrowings for investment purposes), under normal circumstances, in Senior Loans. Senior Loans, at the time of the
Fund’s purchase, have the most senior position in a Borrower’s capital structure or share the senior position with other senior debt securities of the Borrower. The Fund will provide shareholders with written notice at least 60 days prior
to committing less than 80% of its assets, under normal circumstances, in Senior Loans.
If the Fund’s shares are delisted, the Board of
Trustees may seek to list its shares on another exchange, merge with another ETF or traditional mutual fund or redeem its shares at NAV.
Description of Principal Risks
Factors that may affect the Fund’s portfolio as a whole are called “principal risks” and are summarized in this section. This summary
describes the nature of these principal risks and certain related risks, but is not intended to include every potential risk. Each principal risk summarized below applies to the Fund. The Fund could be subject to additional risks because the types
of investments they make may change over time. The SAI includes more information about the Fund and its investments. The Fund is not intended to be a complete investment program.
Asset Class Risk.
The securities in the Underlying Index or in the Fund’s portfolio may underperform the returns of other securities or indices that track other countries, regions, industries, groups of
industries, markets, asset classes or sectors. Various types of securities or indices tend to experience cycles of outperformance and underperformance in comparison to general securities markets.
Cash Transaction Risk.
Unlike most ETFs, the Fund effects creations and redemptions principally for cash, rather than for in-kind securities, because of the
nature of the Fund’s investments. ETFs generally are able to make in-kind redemptions and avoid being taxed on gain on the distributed portfolio securities at the fund level. Because this Fund currently intends to effect redemptions principally
for cash, rather than principally for in-kind securities, it may be required to sell portfolio securities in order to obtain the cash needed to distribute redemption proceeds. The Fund may recognize a capital gain on these sales that might not have
been incurred if the Fund had made a redemption in-kind, and this may decrease the tax efficiency of the Fund compared to ETFs that utilize an in-kind redemption process.
Counterparty Risk.
The Fund may engage in transactions in securities and financial instruments that involve counterparties. Under certain conditions, a counterparty to a transaction could default or the
market for certain securities and/or financial instruments may become illiquid. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund’s income may decrease. The Fund may
experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding and the Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
Credit Risk.
The value of debt securities owned by the Fund may be affected by the ability of issuers to make principal and interest payments. If an issuer
cannot meet its payment obligations or if its credit rating is lowered, the value of its debt securities may decline. This risk varies depending upon whether the issuers of the securities are corporations or domestic or foreign governments or their
sub-divisions or instrumentalities and whether the particular note or other instrument held by the Fund has a priority in payment of principal and interest. U.S. government securities are subject to varying degrees of credit risk depending upon
whether the securities are supported by the full faith and credit of the United States, supported by the ability to borrow from the U.S. Treasury, supported only by the credit of the issuing U.S. government agency, instrumentality, or corporation,
or otherwise supported by the United States. Obligations issued by U.S. government agencies, authorities, instrumentalities or sponsored enterprises, such as Government National Mortgage Association, are backed by the full faith and credit of the
U.S. Treasury, while obligations issued by others, such as Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Federal Home Loan Banks (“FHLBs”), are backed solely
by the ability of the entity to borrow from the U.S. Treasury or by the entity’s own resources. No assurance can be given that the U.S. government would provide financial support to U.S. government agencies, authorities, instrumentalities or
sponsored enterprises if it is not obligated to do so by law.
Debt Securities and Leveraged Loans Risk.
The market prices of debt securities
generally fluctuate inversely with changes in interest rates so that the value of investments in such securities can be expected to decrease as interest rates rise and increase as interest rates fall. Such changes may be greater among debt
securities with longer maturities. Securities issued to finance corporate restructurings may have special credit risks because of the highly-leveraged conditions of the issuers, and such securities usually are subordinate to securities subsequently
issued by the issuer. In addition, such issuers may lose experienced management as a result of the restructurings. Finally, the market price of such securities may be more volatile and expected benefits from restructuring may not materialize.
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Investment Grade Securities.
Although more creditworthy and generally less risky than below investment grade securities, investment grade securities are
still subject to market and credit risk. Investment grade securities are generally considered medium and high-quality securities. Some, however, may possess speculative characteristics, and may be more sensitive to economic changes and to changes in
the financial condition of issuers.
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Below Investment Grade Securities.
Below investment grade securities (also known as “high-yield securities” or “junk bonds”) should be
considered speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. Below investment grade securities have greater credit and liquidity risk than more highly rated obligations and are
generally unsecured and may be subordinate to other obligations of the obligor. The lower rating of high-yield securities reflects a greater possibility that adverse changes in the financial condition of
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10
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
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the issuer or in general economic conditions (including, for example, a substantial period of rising interest rates or declining earnings) or both may impair the ability of the issuer to make
payment of principal and interest. Many issuers of high-yield securities are highly leveraged and their relatively high debt to equity ratios create increased risks that their operations might not generate sufficient cash flow to service their
obligations. Overall declines in the below investment grade bond and other markets may adversely affect such issuers by inhibiting their ability to refinance their obligations at maturity. Investments in obligations of issuers that are generally
trading at significantly higher yields than had been historically typical of the applicable issuer’s obligations may include debt obligations that have a heightened probability of being in covenant or payment default in the future. Such
investments generally are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer
might not make any interest or other payments. Typically such workout or bankruptcy proceedings result in only partial recovery of cash payments or an exchange of the defaulted security for other debt or equity securities of the issuer or its
affiliates, which may in turn be illiquid or speculative. High-yield securities will be subject to certain additional risks to the extent that such obligations may be unsecured and subordinated to substantial amounts of senior indebtedness, all or a
significant portion of which may be secured. Moreover, such obligations may not be protected by financial covenants or limitations upon additional indebtedness and are unlikely to be secured by collateral. See “Income Tax Considerations”
in the SAI for a discussion of special tax consequences associated with certain below investment grade securities.
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Leveraged Loans are
subject to the same risks typically associated with debt securities. In addition, Leveraged Loans, which typically hold a senior position in the capital structure of a borrower, are subject to the risk that a court could subordinate such loans to
presently existing or future indebtedness or take other action detrimental to the holders of Leveraged Loans. Leveraged Loans are also especially subject to the risk that the value of the collateral, if any, securing a loan may decline, be
insufficient to meet the obligations of the borrower, or be difficult to liquidate.
Derivatives Risk.
There are several risks
associated with derivatives transactions. For example, there are significant differences between the securities and derivatives markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when and how to use derivatives involves the exercise of skill and judgment, and even a well conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. The use
of derivative transactions may result in losses greater than if they had not been used, may require the Fund to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of
appreciation the Fund can realize on an investment or may cause the Fund to hold a security that it might otherwise sell. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying asset,
rate or index may result in a substantial loss for the Fund. The Fund may enter into credit derivatives, such as credit default swaps and credit default index investments, including loan credit default swaps and loan credit default index swaps. The
use by the Fund of credit default swaps may have the effect of creating a short position in a security. These investments can create investment leverage and may create additional investment risks that may subject the Fund to greater volatility than
investments in more traditional securities. Derivative contracts may expire worthless. Special tax considerations apply to the Fund’s use of derivatives. See the “Taxation” section below.
In addition, recent legislation has called for a new regulatory framework for the derivatives market. The impact of the new regulations are still unknown, but has
the potential to increase the costs of using derivatives, may limit the availability of some forms of derivatives or the Fund’s ability to use derivatives, and may adversely affect the performance of some derivative instruments used by the Fund
as well as the Fund’s ability to pursue its investment objective through the use of such instruments.
Exchange-Traded Funds Risk.
The
value of ETFs can be expected to increase and decrease in value in proportion to increases and decreases in the indices that they are designed to track. The volatility of different index tracking stocks can be expected to vary in proportion to the
volatility of the particular index they track. ETFs are traded similarly to stocks of individual companies. Although an ETF is designed to provide investment performance corresponding to its index, it may not be able to exactly replicate the
performance of its index because of its operating expenses and other factors. In addition, shareholders bear both their proportionate share of the Fund’s expenses and similar expenses of the underlying investment company when the Fund invests
in shares of another investment company.
Focused Investment Risk.
The Fund’s investments in Senior Loans arranged through private
negotiations between a Borrower and several financial institutions may expose the Fund to risks associated with the financial services industry. Financial services companies are subject to extensive government regulation, which can limit both the
amounts and types of loans and other financial commitments they can make and the interest rates and fees they can charge. Profitability is largely dependent on the availability and cost of capital funds and can fluctuate significantly when interest
rates change. Because financial services companies are highly dependent on short-term interest rates, they can be adversely affected by downturns in the U.S. and foreign economies or changes in banking regulations. Credit losses resulting from
financial difficulties of Borrowers can negatively affect financial services companies. Insurance companies can be subject to severe price competition. The financial services industry is currently undergoing relatively rapid change as existing
distinctions between financial service segments become less clear. For instance, recent business combinations have included insurance, finance, and securities brokerage under single ownership. Some primarily retail corporations have expanded into
the securities and insurance industries.
11
Moreover, the federal laws generally separating commercial and investment banking have been repealed. These changes may make it more difficult for the Adviser to analyze loans in this industry.
Additionally, the recently increased volatility in the financial markets and implementation of the recent financial reform legislation may affect the financial services industry as a whole in ways that may be difficult to predict.
Illiquid Securities Risk.
Illiquid securities may offer higher returns and/or yields than comparable publicly traded securities. The Fund, however, may not
be able to sell these securities when the Adviser considers it desirable to do so or, to the extent they are sold privately, may have to sell them at less than the price of otherwise comparable securities. Disposing of illiquid securities may
involve time-consuming negotiation and legal expenses, and selling them promptly at an acceptable price may be difficult or impossible.
Illiquidity Risk
. At times, a major portion of any portfolio security may be held by relatively few institutional purchasers. Although the Fund generally
considers such securities to be liquid because of the availability of an institutional market for such securities, under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the Fund may
find it more difficult to sell such securities when the Adviser believes it advisable to do so or may be able to sell such securities only at prices lower than if the securities were more widely held. In such circumstances, the Fund also may find it
more difficult to determine the fair value of such securities for purposes of computing the Fund’s NAV. The Fund, in most instances, utilizes market transactions or an independent pricing service to determine the value of its securities.
However, quotations from a pricing service (or other quotations) may not be a reliable indicator of the price the Fund could realize upon sale due to many factors, including, but not limited to, the number of active purchasers and sellers, variable
economic and market conditions and changes in the financial condition (or perceived financial condition) of the issuer at the time of sale. As a result, pricing of the Fund’s securities does not rely solely on a price determined by an
independent pricing service; other relevant information is also monitored and other valuation methodologies may be used as appropriate.
Industry
Concentration Risk.
Because the Fund may invest 25% or more of the value of its assets in an industry or group of industries to the extent that the Underlying Index concentrates in an industry or group of industries, the Fund’s performance
largely depends on the overall condition of such industry or group of industries and the Fund is susceptible to economic, political and regulatory risks or other occurrences associated with that industry or group of industries. The performance of
the Fund if it invests a significant portion of its assets in a particular sector or industry may be closely tied to the performance of companies in a limited number of sectors or industries. Companies in a single sector often share common
characteristics, are faced with the same obstacles, issues and regulatory burdens and their securities may react similarly to adverse market conditions. The price movements of investments in a particular sector or industry may be more volatile than
the price movements of more broadly diversified investments.
Intellectual Property Risk.
The Fund relies on a license that permits the Adviser to
use the Intellectual Property in connection with the name and investment strategies of the Fund. Such license may be terminated by the Index Provider, and, as a result, the Fund may lose its ability to use the Intellectual Property. There is also no
guarantee that the Index Provider has all rights to license the Intellectual Property. Accordingly, in the event the license is terminated or the Index Provider does not have rights to license the Intellectual Property, it may have a significant
effect on the operation of the Fund.
Interest Rate Risk.
When interest rates decline, the value of fixed rate securities already held by the Fund
can be expected to rise. Conversely, when interest rates rise, the value of existing fixed-rate portfolio securities can be expected to decline. To the extent the Fund invests in fixed-rate debt securities with longer maturities, the Fund is subject
to greater interest rate risk than funds investing solely in shorter-term fixed-rate debt securities. In addition, in a period of rising interest rates, the higher cost of any leverage employed by the Fund and/or increasing defaults by issuers of
high-yield securities would likely exacerbate any decline in the Fund’s NAV and the market price of the Fund’s shares. If an issuer of a debt security containing a redemption or call provision exercises either provision in a declining
interest rate market, the Fund would likely replace the security with a security having a lower interest rate, which could result in a decreased return for shareholders.
To the extent that changes in market rates of interest are reflected not in a change to a base rate (such as LIBOR) but in a change in the spread over the base rate, which is payable on loans of the type and
quality in which the Fund invests, the Fund’s income could be adversely affected. This is because the value of a Senior Loan is partially a function of whether the Senior Loan is paying what the market perceives to be a market rate of interest,
given its individual credit and other characteristics. However, unlike changes in market rates of interest for which there is generally only a temporary lag before the portfolio reflects those changes, changes in a Senior Loan’s value based on
changes in the market spread on Senior Loans in the Fund’s portfolio may be of longer duration.
Junk Bond Risk.
Below investment grade
securities, also known as “high yield securities” or “junk bond securities,” may be fixed or variable rate obligations and are rated below investment grade (Ba/BB or lower) by a nationally recognized statistical rating
organization or are unrated but deemed by the Adviser to be of comparable quality. High-yield debt securities are frequently issued by corporations in the growth stage of their development, but also may be issued by established companies. These
bonds are regarded by the rating organizations, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. Such securities also are generally considered to be
subject to greater risk than securities with higher ratings with regard to default rates and deterioration of general economic conditions. High-yield securities held by the Fund may include securities received as a result of a corporate
reorganization or issued as part of a corporate takeover.
12
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Lender Liability Risk.
A number of judicial decisions in the United States and
elsewhere have upheld the right of Borrowers to sue lending institutions on the basis of various evolving legal theories (collectively termed “lender liability”). Generally, lender liability is founded upon the premise that an
institutional Lender has violated a duty (whether implied or contractual) of good faith and fair dealing owed to the Borrower or has assumed a degree of control over the Borrower resulting in a creation of a fiduciary duty owed to the Borrower or
its other creditors or shareholders. Because of the nature of certain of the Fund’s investments, the Fund or the Adviser could be subject to allegations of lender liability.
In addition, under common law principles that in some cases form the basis for lender liability claims, if a lending institution (i) intentionally takes an action that results in the under capitalization of a
Borrower to the detriment of other creditors of such Borrower, (ii) engages in other inequitable conduct to the detriment of such other creditors, (iii) engages in fraud with respect to, or makes misrepresentations to, such other creditors
or (iv) uses its influence as a stockholder to dominate or control a Borrower to the detriment of other creditors of such Borrower, a court may elect to subordinate the claim of the offending lending institution to the claims of the
disadvantaged creditor or creditors, a remedy termed “equitable subordination.” As an owner of bank debt in reorganizing companies, the Fund could be subject to claims from creditors of a company that the Fund’s claim should be
equitably subordinated, including as a result of actions or omissions by the Fund’s predecessors in interest.
Limited Information Risk.
The
types of Senior Loans in which the Fund will invest may not have been rated by a NRSRO, have not been registered with the SEC or any state securities commission, and have not been listed on any national securities exchange. Although the Fund will
generally have access to financial and other information made available to the Lenders in connection with Senior Loans, the amount of public information available with respect to Senior Loans will generally be less extensive than that available for
rated, registered or exchange-listed securities.
Loan Participation Risk
. In addition to the risks typically associated with debt
securities, Participations involve the risk that there may not be a readily available market for Participation interests and, in some cases, the Fund may have to dispose of such securities at a substantial discount from face value. Participations
also involve the credit risk associated with the underlying corporate borrower. Participations also carry the risk of insolvency of the lending bank or other intermediary.
Management Risk.
The Fund does not fully replicate the Underlying Index and may hold securities not included in the Underlying Index. As a result, the Fund is subject to the risk that Pyxis’s investment
management strategy, the implementation of which is subject to a number of constraints, may not produce the intended results.
Market Price Variance
Risk.
Individual shares of the Fund will be listed for trading on the Exchange and can be bought and sold in the secondary market at market prices. The market prices of shares will fluctuate in response to changes in NAV and supply and demand
for shares. The Adviser cannot predict whether shares will trade above, below or at their NAV. Differences between secondary market prices and NAV for shares may be due largely to supply and demand forces in the secondary market, which may not be
the same forces as those influencing prices for securities or instruments held by the Fund at a particular time. Given the fact that shares can be created and redeemed in Creation Units, the Adviser believes that large discounts or premiums to the
NAV of shares should not be sustained. There may, however, be times when the market price and the NAV vary significantly and you may pay more than NAV when buying shares on the secondary market, and you may receive less than NAV when you sell those
shares. While the creation/redemption feature is designed to make it likely that shares normally will trade close to their NAV, disruptions to creations and redemptions may result in trading prices that differ significantly from the NAV. The market
price of shares, like the price of any exchange-traded security, includes a “bid-ask spread” charged by the exchange specialist, market makers or other participants that trade the particular security. In times of severe market disruption,
the bid-ask spread often increases significantly. This means that shares may trade at a discount to NAV, and the discount is likely to be greatest when the price of shares is falling fastest, which may be the time that you most want to sell your
shares. The Fund’s investment results are measured based upon the daily NAV of the Fund. Investors purchasing and selling shares in the secondary market may not experience investment results consistent with those experienced by those creating
and redeeming directly with the Fund.
Market Risk.
The performance of any investment is subject to numerous factors that are neither within the
control of, nor predictable by, the Adviser. Such factors include a wide range of economic, political, competitive and other conditions that may affect investments in general or specific industries or companies. Certain events, such as terrorist
attacks, wars and other geopolitical events, may have disruptive negative effects on securities markets and the Fund. Historically, the securities markets have moved in cycles, and the value of the Fund’s securities may change drastically from
day to day. In recent years, the securities markets have become increasingly volatile, which may adversely affect the ability of the Fund to realize profits. As a result of the nature of the Fund’s investment activities, it is possible that the
Fund’s financial performance may fluctuate substantially from period to period. Additionally, at any point in time an investment in the Fund may be worth less than the original investment, even after taking into account the reinvestment of
dividends and distributions.
Non-Diversification Risk.
Due to the nature of the Fund’s investment strategy and its non-diversified status
(for purposes of the 1940 Act), it is possible that a material amount of the Fund’s portfolio could be invested in the securities of one or a few issuers. Investing a significant portion of the Fund’s portfolio in one or a few issuers may
result in the Fund’s shares being more sensitive to the economic results of those few issuers.
Non-Payment Risk.
Debt securities are subject
to the risk of non-payment of scheduled interest and/or principal. Non-payment would result in a reduction of income to the Fund, a reduction in the value of the security experiencing
13
non-payment and a potential decrease in the Fund’s NAV and the market price of the Fund’s shares. There can be no assurance that the liquidation of any collateral would satisfy the
Borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that such collateral could be readily liquidated. Moreover, as a practical matter, most Borrowers cannot satisfy their debts by selling their
assets. Borrowers pay their debts from the cash flow they generate. This is particularly the case for Borrowers that are highly leveraged. Many of the debt securities purchased by the Fund will be to highly leveraged Borrowers. If the
Borrower’s cash flow is insufficient to pay its debts as they come due, the Borrower is far more likely to seek to restructure its debts than it is to sell off assets to pay its Senior Loans. Borrowers may try to restructure their debts either
by seeking protection from creditors under Chapter 11 of the U.S. Bankruptcy Code (the “Bankruptcy Code”) or negotiating a work out. In the event of bankruptcy of a Borrower, the Fund could experience delays or limitations with
respect to its ability to realize the benefits of the collateral securing a debt security. The Agent generally is responsible for determining that the Lenders have obtained a perfected security interest in the collateral securing the debt security.
If a Borrower files for protection from creditors under Chapter 11 of the Bankruptcy Code, the Bankruptcy Code will impose an automatic stay that prohibits the Agent from liquidating collateral. The Agent may ask the bankruptcy court to lift
the stay. As a practical matter, the court is unlikely to lift the stay if it concludes that the Borrower has a chance to emerge from the reorganization proceedings and the collateral is likely to hold most of its value. If the Lenders have a
perfected security interest, the debt security will be treated as a separate class in the reorganization proceedings and will retain a priority interest in the collateral. Chapter 11 reorganization plans typically are the product of negotiation
among the Borrower and the various creditor classes. Successful negotiations may require the Lenders to extend the time for repayment, change the interest rate or accept some consideration in the form of junior debt or equity securities. A work out
outside of bankruptcy may produce similar concessions by senior Lenders.
Ongoing Monitoring Risk.
On behalf of the several Lenders, the Agent
generally will be required to administer and manage the Senior Loans and, with respect to collateralized Senior Loans, to service or monitor the collateral. In this connection, the valuation of assets pledged as collateral will reflect market value
and the Agent may rely on independent appraisals as to the value of specific collateral. The Agent, however, may not obtain an independent appraisal as to the value of assets pledged as collateral in all cases. The Fund normally will rely primarily
on the Agent (where the Fund is a Primary Lender or owns an Assignment) or the selling Lender (where the Fund owns a Participation) to collect principal of and interest on a Senior Loan. Furthermore, the Fund usually will rely on the Agent (where
the Fund is a Primary Lender or owns an Assignment) or the selling Lender (where the Fund owns a Participation) to monitor compliance by the Borrower with the restrictive covenants in the Loan Agreement and notify the Fund of any adverse change in
the Borrower’s financial condition or any declaration of insolvency. Collateralized Senior Loans will frequently be secured by all assets of the Borrower that qualify as collateral, which may include common stock of the Borrower or its
subsidiaries. Additionally, the terms of the Loan Agreement may require the Borrower to pledge additional collateral to secure the Senior Loan, and enable the Agent, upon proper authorization of the Lenders, to take possession of and liquidate the
collateral and to distribute the liquidation proceeds pro rata among the Lenders. If the terms of a Senior Loan do not require the Borrower to pledge additional collateral in the event of a decline in the value of the original collateral, the Fund
will be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the Borrower’s obligations under the Senior Loan. Lenders that have sold Participation interests in such Senior Loan will
distribute liquidation proceeds received by the Lenders pro rata among the holders of such Participations. Unless, under the terms of the loan, the Fund has direct recourse against the Borrower, the Fund may have to rely on the Agent or other
financial intermediary to apply appropriate credit remedies against a Borrower. The Adviser will also monitor these aspects of the Fund’s investments and, where the Fund is a Primary Lender or owns an Assignment, will be directly involved with
the Agent and the other Lenders regarding the exercise of credit remedies.
Options Risk.
There are several risks associated with transactions in
options on securities. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. A
transaction in options or securities may be unsuccessful to some degree because of market behavior or unexpected events.
When the Fund writes a covered
call option, the Fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security covering the call option above the sum of the premium and the strike price of the call, but retains the risk
of loss should the price of the underlying security decline. The writer of an option has no control over the time when it may be required to fulfill its obligation and once an option writer has received an exercise notice, it must deliver the
underlying security at the exercise price.
When the Fund writes a covered put option, the Fund bears the risk of loss if the value of the underlying
stock declines below the exercise price minus the put premium. If the option is exercised, the Fund could incur a loss if it is required to purchase the stock underlying the put option at a price greater than the market price of the stock at the
time of exercise plus the put premium the Fund received when it wrote the option. While the Fund’s potential gain in writing a covered put option is limited to distributions earned on the liquid assets securing the put option plus the premium
received from the purchaser of the put option, the Fund risks a loss equal to the entire exercise price of the option minus the put premium.
Passive
Investment Risk.
The Fund is not actively managed and may be affected by a general decline in loan market segments included in the Underlying Index. The Fund invests in securities included in, or representative of, the Underlying Index
regardless of their investment merits. Pyxis does not attempt to take defensive positions under any market conditions, including during declining markets.
14
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Portfolio Turnover Risk.
A high rate of portfolio turnover (i.e., 100% or
more) will result in increased transaction costs for the Fund in the form of increased dealer spreads and brokerage commissions. High portfolio turnover also could result in increased realization of net short-term capital gains (which are taxable to
shareholders as ordinary income when distributed to them), produce higher taxable distributions, and lower the Fund’s after-tax performance.
Prepayment Risk.
Borrowers may pay back principal before the scheduled due date. Such prepayments may require the Fund to replace a debt security with a
lower-yielding security. This may adversely affect the NAV of the Fund’s shares.
Regulatory Risk.
To the extent that legislation or state or
federal regulators impose additional requirements or restrictions with respect to the ability of financial institutions to make loans in connection with highly leveraged transactions, the availability of Senior Loan interests for investment by the
Fund may be adversely affected. In addition, such requirements or restrictions may reduce or eliminate sources of financing for affected Borrowers. Further, to the extent that legislation or federal or state regulators require such institutions to
dispose of Senior Loan interests relating to highly leveraged transactions or subject such Senior Loan interests to increased regulatory scrutiny, such financial institutions may determine to sell Senior Loan interests in a manner that results in a
price that, in the opinion of the Adviser, is not indicative of fair value. Were the Fund to attempt to sell a Senior Loan interest at a time when a financial institution was engaging in such a sale with respect to the Senior Loan interest, the
price at which the Fund could consummate such a sale might be adversely affected. See “Industry Concentration Risk” above.
Senior Loans
Risk.
The risks associated with Senior Loans are similar to the risks of below investment grade securities.
The Fund’s investments in
Senior Loans are typically below investment grade and are considered speculative because of the credit risk of their issuers. Moreover, any specific collateral used to secure a loan may decline in value or lose all its value or become illiquid,
which would adversely affect the loan’s value. Economic and other events, whether real or perceived, can reduce the demand for certain Senior Loans or Senior Loans generally, which may reduce market prices and cause the Fund’s NAV per
share to fall. The frequency and magnitude of such changes cannot be predicted.
The secondary market in which these investments are traded is generally
less liquid than the market for higher-grade debt. Less liquidity in the secondary trading market could adversely affect the price at which the Fund could sell a high yield Senior Loan, and could adversely affect the market price and NAV of the
Fund’s shares. At times of less liquidity, it may be more difficult to value high yield Senior Loans because this valuation may require more research, and elements of judgment may play a greater role in the valuation since there is less
reliable, objective data available. Investments in Senior Loans and other securities may result in greater NAV and market price fluctuation of the Fund’s shares than if the Fund did not make such investments. See “Taxation” below for
a discussion of special tax consequences associated with any investment by the Fund in below investment grade securities.
Senior Loans and other debt
securities are also subject to the risk of price declines and to increases in prevailing interest rates, although floating rate debt instruments are less exposed to this risk than fixed rate debt instruments. Conversely, the floating rate feature of
Senior Loans means the Senior Loans will not generally experience capital appreciation in a declining interest rate environment. Declines in interest rates may also increase prepayments of debt obligations and require the Fund to invest assets at
lower yields. No active trading market may exist for certain Senior Loans, which may impair the ability of the Fund to realize full value in the event of the need to liquidate such assets. Adverse market conditions may impair the liquidity of some
actively traded Senior Loans.
Although Senior Loans in which the Fund will invest will often be secured by collateral, there can be no assurance that
liquidation of such collateral would satisfy the Borrower’s obligation in the event of a default or that such collateral could be readily liquidated. In the event of bankruptcy of a Borrower, the Fund could experience delays or limitations in
its ability to realize the benefits of any collateral securing a Senior Loan. The Fund may also invest in Senior Loans that are not secured.
Tracking Error Risk.
Imperfect correlation between the Fund’s portfolio securities and those in the Underlying Index, rounding of prices, changes to the
Underlying Index and regulatory requirements may cause tracking error, which is the divergence of the Fund’s performance from that of the Underlying Index. This risk may be heightened during times of increased market volatility or other unusual
market conditions. Tracking error also may result because the Fund incurs fees and expenses, while the Underlying Index does not. Because the Fund employs a representative sampling strategy, the Fund may experience tracking error to a greater extent
than a fund that seeks to replicate an index. The Adviser may not be able to cause the Fund’s performance to correlate to that of the Fund’s benchmark, either on a daily or aggregate basis. Because the Underlying Index rebalances monthly
but the Fund is not obligated to do the same, the risk of tracking error may increase following the rebalancing of the Underlying Index.
Management of the Fund
Board of Trustees and Investment Adviser
The
Board of Trustees (the “Board”) has overall management responsibility for the Fund. See “Management” in the SAI for the names of and other information about the Trustees and officers of the Fund.
Pyxis Capital, L.P. serves as the investment adviser to the Fund. The address of the Adviser is 200 Crescent Court, Suite 700, Dallas, Texas 75201. Pyxis
provides the day-to-day management of the Fund’s portfolio of securities, which includes buying and selling securities for the Fund and conducting investment research. Additionally, Pyxis furnishes offices, necessary facilities, equipment and
personnel and pays the compensation of the Trustee of the Fund who is an employee of Pyxis.
The Fund has entered into an investment advisory
agreement with Pyxis (the “Investment Advisory Agreement”), pursuant to
15
which Pyxis either provides the day-to-day management of the Fund’s portfolio of securities, which includes buying and selling securities for the Fund and conducting investment research, or
hires a sub-adviser to do so, subject to Pyxis’s general oversight.
In return for its advisory services, the Fund will pay the Adviser a monthly
fee, computed and accrued daily, based on an annual rate of 0.45% of the Fund’s “Average Daily Managed Assets.” “Average Daily Managed Assets” of the Fund shall mean the average daily value of the total assets of the Fund,
less all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings constituting financial leverage). A discussion regarding the Board of Trustees’ approval of the Investment Advisory Agreement for the Fund
will be included in the Trust’s semi-annual report to shareholders for the period ended December 31, 2012. The Investment Advisory Agreement may be terminated by the Fund or by vote of a majority of the outstanding voting securities of the
Fund, without the payment of any penalty, on 60 days’ written notice. In addition, the Investment Advisory Agreement automatically terminates in the event of its “assignment” (as defined in the 1940 Act).
Organized in February 2009, Pyxis is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. As of September 1, 2012,
Pyxis has approximately $2.4 billion in assets under management.
Multi-Manager Structure
On October 26, 2010, the SEC issued a multi-managers’ exemptive order (the “Order”) granting exemptive relief to Pyxis Funds I (the
“Trust”) and the Adviser from certain provisions of the 1940 Act, pursuant to which the Adviser will, subject to the oversight of the Fund’s Board of Trustees, be permitted to enter into and materially amend sub-advisory agreements on
behalf of the Fund with sub-advisers unaffiliated with the Adviser without such agreements being approved by the shareholders of the Fund. The Fund’s Board of Trustees and the Adviser will therefore have the right to hire, terminate or replace
sub-advisers without first obtaining shareholder approval, including in the event that a sub-advisory agreement has automatically terminated as a result of an assignment. The Adviser will continue to have the ultimate responsibility to oversee each
sub-adviser and recommend its hiring, termination and replacement. The Fund has obtained approval of the Fund’s reliance on the Order from the Board and from the initial shareholder of the Fund. The Trust and the Adviser will be subject to
certain conditions imposed by the Order, including the condition that within 90 days of hiring of a new non-affiliated sub-adviser, the Fund will provide shareholders with an information statement containing information about the sub-adviser.
Shareholders of the Fund retain the right to terminate a sub-advisory agreement for the Fund at any time by a vote of the majority of the outstanding securities of the Fund.
Portfolio Manager
The Fund’s portfolio is managed by Ethan Powell. Mr. Powell has managed the portfolio since its inception.
Ethan Powell.
Mr. Powell is the Executive Vice President and Secretary of the Adviser and was previously a Senior Retail Fund Analyst at Pyxis and its
predecessor since 2007. He has served as the Secretary of the funds in the Pyxis Fund Complex since November 2010 and as the Executive Vice President of the funds in the Pyxis Fund Complex since June 2012. Prior to joining Pyxis and its predecessor,
Mr. Powell was the manager in the Merger and Acquisitions Division at Ernst & Young from 1999 to 2007.
The SAI provides additional
information about the portfolio manager’s compensation, other accounts managed by the portfolio manager and the portfolio manager’s ownership of securities issued by the Fund.
Distributor of the Fund
The Fund’s shares are offered for sale through SEI Investments Distribution Co. (the “Distributor”), One Freedom Valley Drive, Oaks, PA 19456. The
Distributor does not maintain a secondary market in shares of the Fund. The Distributor has no role in determining the policies of the Fund or the securities that are purchased or sold by the Fund.
Distribution (12b-1) Plan
Under a Rule 12b-1 Distribution Plan (the “Plan”) adopted by the Board, the Fund may pay the Distributor and financial intermediaries, such as
broker-dealers and investment advisors, up to 0.25% on an annualized basis of the average daily net assets of the Fund as reimbursement or compensation for distribution related activities with respect to the Fund. Because these fees are paid out of
the Fund’s assets on an on-going basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. As of the date of this Prospectus, no payments have been made by the Fund
under the Plan.
Disclosure of Portfolio Holdings
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available (i) in the SAI and
(ii) on the Fund’s website at http://www.pyxisais.com.
How to Buy and Sell Shares
The Trust issues and redeems shares of the Fund only in
aggregations of Creation Units. A Creation Unit is comprised of 100,000 shares. The value of such Creation Unit was $2,000,000 at the Fund’s inception. See the section of this Prospectus entitled “Creation and Redemption of Shares”
for more information.
Shares of the Fund are listed on the Exchange for trading on any day that the Exchange is open for business. Shares can be
bought and sold throughout the trading day like shares of other publicly-traded companies. The Trust does not impose any minimum investment for shares of the Fund purchased on an exchange. Buying or selling Fund shares on an exchange involves two
types of costs that may apply to all securities
16
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
transactions. When buying or selling shares of the Fund through a broker, you will likely incur a brokerage commission or other charges determined by your broker. In addition, you may incur the
cost of the “spread” — that is, any difference between the bid price and the ask price. The commission is frequently a fixed amount and may be a significant proportional cost for investors seeking to buy or sell small amounts of
shares. The spread varies over time for shares of the Fund based on its trading volume and market liquidity, and is generally lower if the Fund has a lot of trading volume and market liquidity and higher if the Fund has little trading volume and
market liquidity. The Fund’s shares trade under the trading symbol “SNLN.”
The Board has adopted a policy of not monitoring for
frequent purchases and redemptions of Fund shares (“frequent trading”) that appear to attempt to take advantage of a potential arbitrage opportunity presented by a lag between a change in the value of the Fund’s portfolio securities
after the close of the primary markets for the Fund’s portfolio securities and the reflection of that change in the Fund’s NAV (“market timing”), because the Fund’s shares are listed for trading on a national securities
exchange. Because secondary market trades do not involve the Fund directly, it is unlikely those trades would cause many of the harmful effects of market timing, including dilution, disruption of portfolio management, increases in the Fund’s
trading costs and the realization of capital gains.
Section 12(d)(1) of the 1940 Act restricts investments by investment companies in the
securities of other investment companies. Registered investment companies are permitted to invest in the Fund beyond the limits set forth in Section 12(d)(1), subject to certain terms and conditions set forth in SEC rules or in an SEC exemptive
order issued to the Trust. In order for a registered investment company to invest in shares of the Fund pursuant to the exemptive relief obtained by the Trust from the limitations of Section 12(d)(1), the company must enter into an agreement
with the Trust.
Book Entry
Shares of the Fund are held in book-entry form, which means that no stock certificates are issued. The Depository Trust Company (“DTC”) or its nominee is
the record owner of all outstanding shares of the Fund and is recognized as the owner of all shares for all purposes.
Investors owning shares of the
Fund are beneficial owners as shown on the records of DTC or its participants. DTC serves as the securities depository for shares of the Fund. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations and
other institutions that directly or indirectly maintain a custodial relationship with DTC. Beneficial owners of shares are not entitled to receive physical delivery of stock certificates or to have shares registered in their names, and they are not
considered a registered owner of shares. Therefore, to exercise any right as an owner of shares, a beneficial owner must rely upon the procedures of DTC and its participants. These procedures are the same as those that apply to any other securities
that a beneficial owner holds in book-entry or “street name” form.
Creation and Redemption of Shares
The Trust issues and sells Creation Units on a
continuous basis through the Distributor, without a sales load, at their NAV next determined after receipt of a purchase order, on any day that the Exchange is open for business. Creation Units of shares may be purchased only by or through a DTC
Participant that has entered into an Authorized Participant Agreement with the Distributor. Investors who are not Authorized Participants must make appropriate arrangements with an Authorized Participant. Due to the nature of the Fund’s
investments, Authorized Participants generally will deposit cash in exchange for a specified number of Creation Units, although the Fund may permit Authorized Participants to deposit a portfolio of securities approximating the holdings of the Fund
or a combination of cash and a portfolio of securities approximating the holdings of the Fund in exchange for a specified amount of Creation Units. To the extent practicable, the composition of such portfolio generally corresponds
pro rata
to
the holdings of the Fund.
Investors should be aware that their particular broker may not be a DTC Participant or may not have executed an Authorized
Participant Agreement, in which case orders to purchase Creation Units of shares may have to be placed by the investor’s broker through an Authorized Participant. As a result, purchase orders placed through an Authorized Participant may result
in additional charges to such investor. The Trust expects to enter into Authorized Participant Agreements with only a small number of DTC Participants.
Purchases through and outside the Clearing Process
An Authorized Participant may place an order to purchase (or redeem) Creation Units (i) through the Continuous Net Settlement clearing
processes of the National Securities Clearing Corporation (“NSCC”) as such processes have been enhanced to effect purchases (and redemptions) of Creation Units, such processes being referred to herein as the “Clearing Process,”
or (ii) outside the Clearing Process. To purchase or redeem through the Clearing Process, an Authorized Participant must be a member of NSCC that is eligible to use the Continuous Net Settlement system. For purchase orders placed through the
Clearing Process, the Authorized Participant Agreement authorizes the Distributor to transmit through the Fund’s transfer agent (the “Transfer Agent”) to NSCC, on behalf of an Authorized Participant, such trade instructions as are
necessary to effect the Authorized Participant’s purchase order. Pursuant to such trade instructions to NSCC, the Authorized Participant agrees to deliver the requisite deposit securities and the balancing amount to the Trust, together with the
Transaction Fee and such additional information as may be required by the Distributor. A purchase order must be received by the Distributor by 4:00 p.m. Eastern Time if transmitted by mail or by 3:00 p.m. Eastern Time if transmitted by telephone,
facsimile or other electronic means permitted under the Participant Agreement in order to receive that day’s Closing NAV per Share.
17
An Authorized Participant that wishes to place an order to purchase Creation Units outside the Clearing Process must state that it is not using the Clearing Process and that the purchase instead will be effected
through a transfer of securities and cash directly through DTC. Purchases (and redemptions) of Creation Units settled outside the Clearing Process will be subject to a higher Transaction Fee than those settled through the Clearing Process.
Purchase orders effected outside the Clearing Process are likely to require transmittal by the Authorized Participant earlier on the Transmittal Date
than orders effected using the Clearing Process. Those persons placing orders outside the Clearing Process should ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the
broker or depository institution effectuating such transfer.
Rejection of Purchase Orders
The Trust reserves the absolute right to reject a purchase order transmitted
to it by the Distributor in respect of the Fund if (a) the purchaser or group of purchasers, upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of the Fund; (b) the deposit securities delivered are
not as specified by the Adviser and the Adviser has not consented to acceptance of an in-kind deposit that varies from the designated deposit securities; (c) acceptance of the purchase transaction order would have certain adverse tax
consequences to the Fund; (d) the acceptance of the purchase transaction order would, in the opinion of counsel, be unlawful; (e) the acceptance of the purchase order transaction would otherwise, in the discretion of the Trust or the
Adviser, have an adverse effect on the Trust or the rights of beneficial owners; (f) the value of a cash purchase amount, or the value of the balancing amount to accompany an in-kind deposit, exceeds a purchase authorization limit extended to
an Authorized Participant by the custodian and the Authorized Participant has not deposited an amount in excess of such purchase authorization with the custodian prior to the relevant cut-off time for the Fund on the Transmittal Date; or (g) in
the event that circumstances outside the control of the Trust, the Distributor and the Adviser make it impractical to process purchase orders. The Trust shall notify a prospective purchaser of its rejection of the order of such person. The Trust and
the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of purchase transaction orders nor shall either of them incur any liability for the failure to give any such notification.
Redemptions
Similarly, shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in good order by the Distributor on any
day on that the Exchange is open for business. The Fund reserves the right to reject any redemption request that is not in good order. The specific requirements for good order depend on the type of account and the method of redemption. Contact Pyxis
if you have any questions about your particular circumstances. Generally, “good order” means that the redemption request meets all applicable requirements described in this Prospectus.
The Trust will not redeem shares in amounts less than Creation Units.
Beneficial owners also may sell shares in the secondary market, but must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by the Trust. There can be no assurance,
however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit of shares. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number
of shares to constitute a redeemable Creation Unit.
The Fund, however, may suspend the right of redemption and postpone payment for more than seven
days: (i) during periods when trading on the Exchange is closed on days other than weekdays or holidays; (ii) during periods when trading on the Exchange is restricted; (iii) during any emergency which makes it impractical for the
Fund to dispose of its securities or fairly determine the NAV of the Fund; and (iv) during any other period permitted by the SEC for your protection.
Because new shares may be created and issued on an ongoing basis, at any point during the life of the Fund a “distribution,” as such term is used in the Securities Act, may be occurring. Broker-dealers
and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner that could render them statutory underwriters and subject to the
prospectus delivery and liability provisions of the Securities Act. Any determination of whether one is an underwriter must take into account all the relevant facts and circumstances of each particular case.
Broker-dealers should also note that dealers who are not “underwriters” but are participating in a distribution (as contrasted to ordinary secondary
transactions), and thus dealing with shares that are part of an “unsold allotment” within the meaning of Section 4(3)(C) of the Securities Act, would be unable to take advantage of the prospectus delivery exemption provided by
Section 4(3) of the Securities Act. For delivery of prospectuses to exchange members, the prospectus delivery mechanism of Rule 153 under the Securities Act is available only with respect to transactions on a national securities exchange.
Redemption Proceeds
A redemption request received by the Fund will be effected at the NAV per share next determined after the Fund receives the request in good order. While the Fund
will generally pay redemptions proceeds in cash, the Fund may pay your redemption proceeds wholly or partially in portfolio securities. In this event, the portfolio of securities the Fund will deliver upon redemption of Fund shares may differ from
the portfolio of securities required for purchase of a Creation Unit. You will be exposed to market risk until you convert these portfolio securities into cash, you will likely pay commissions upon any such conversion, and you may recognize taxable
gain or loss resulting from fluctuations in value of the portfolio securities between the conversion date and the redemption date. If you receive illiquid securities, you could find it more difficult to sell such securities and may not be able to
sell such securities at
18
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
prices that reflect the Adviser’s or your assessment of their fair value or the amount paid for them by the Fund. Illiquidity may result from the absence of an established market for such
securities as well as legal, contractual or other restrictions on their resale and other factors.
Transaction Fees
Authorized Participants are charged
standard creation and redemption transaction fees (“Transaction Fees”) to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. Purchasers and redeemers of Creation Units for cash are
required to pay an additional variable charge (up to the maximum amount shown below) to compensate for brokerage and market impact expenses. The standard creation and redemption transaction fees are set forth below. The standard creation transaction
fee is charged to each purchaser on the day such purchaser creates a Creation Unit. The standard creation transaction fee is the same regardless of the number of Creation Units purchased by an investor on the applicable business day. Similarly, the
standard redemption transaction fee is the same regardless of the number of Creation Units redeemed on the same day. Creations and redemptions through DTC for cash (when cash creations and redemptions are available or specified) are also subject to
an additional variable charge up to the maximum amounts shown in the table below. In addition, purchasers of shares in Creation Units are responsible for payment of the costs of transferring securities to the Fund and redeemers of shares in Creation
Units are responsible for the costs of transferring securities from the Fund. Investors who use the services of a broker or other financial intermediary may pay fees for such services.
The following table shows, as of the date of this Prospectus, the approximate value of one Creation Unit, standard fees and maximum additional charges for creations and redemptions:
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Approximate
Value of
a
Creation Unit
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Creation Unit
Size
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Standard
Creation/
Redemption
Transaction
Fee
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Maximum
Additional
Charge for
Creations*
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Maximum
Additional
Charge for
Redemptions*
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$2,000,000
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100,000 shares
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$
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500
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1.0
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%
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1.0
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%*
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* As a
percentage of the net asset value per Creation Unit, inclusive of the standard transaction fee.
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Net Asset Value
The NAV per
share of the Fund is calculated as of the close of regular trading on the Exchange, normally 4:00 p.m., Eastern Time, on each day that the Exchange is open for business. The NAV per share is computed by dividing the value of the Fund’s net
assets (i.e., the value of its securities and other assets less its liabilities, including expenses payable or accrued but excluding capital stock and surplus) attributable to the Fund by the total number of shares of the Fund outstanding at the
time the determination is made.
The Fund’s portfolio securities are valued in accordance with the Fund’s valuation policies approved by the
Board. The value of the Fund’s investments is generally determined as follows:
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Portfolio securities for which market quotations are readily available are valued at their current market value, except that debt securities that are not
credit-impaired and have remaining maturities of 60 days or less will be valued at amortized cost, a method of fair valuation.
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•
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Foreign securities listed on foreign exchanges are valued based on quotations from the primary market in which they are traded and are translated from the local
currency into U.S. dollars using current exchange rates. Foreign securities may trade on weekends or other days when the Fund does not calculate NAV. As a result, the market value of these investments may change on days when you cannot buy or redeem
shares of the Fund.
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•
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Investments by the Fund in any mutual fund are valued at their respective NAVs as determined by those mutual funds each business day. The prospectuses for those
mutual funds explain the circumstances under which those funds will use fair value pricing and the effects of using fair value pricing.
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•
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All other portfolio securities, including derivatives and cases where market quotations are not readily available, are valued at fair value as determined in good
faith pursuant to procedures established by the Board. Pursuant to the Fund’s pricing procedures, securities for which market quotations are not readily available may include securities that are subject to legal or contractual restrictions on
resale, securities for which no or limited trading activity has occurred for a period of time, or securities that are otherwise deemed to be illiquid (i.e., securities that cannot be disposed of within seven days at approximately the price at which
the security is currently priced by the Fund which holds the security). Market quotations may also be not “readily available” if an event occurs after the close of the principal exchange on which a portfolio security trades (but before the
time for calculation of the Fund’s NAV) if that event affects or is likely to affect (more than minimally) the NAV per share of the Fund. Fair value pricing involves judgments that are inherently subjective and inexact; as a result, there can
be no assurance that fair value pricing will reflect actual market value, and it is possible that the fair value determined for a security will be materially different from the value that actually could be or is realized upon the sale of that asset.
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Valuing the Fund’s investments using fair value pricing will result in using prices for those investments that may differ from
current market valuations. Use of fair value prices and certain current market valuations could result in a difference between the prices used to calculate the Fund’s NAV and the prices used by the Underlying Index, which, in turn, could result
in a difference between the Fund’s performance and the performance of the Underlying Index.
Share Prices
The trading prices of
the Fund’s shares in the secondary market generally differ from the Fund’s daily NAV and are
19
affected by market forces such as supply and demand, economic conditions and other factors. Information regarding the intraday value of shares of the Fund, also known as the “indicative
optimized portfolio value” (“IOPV”), is disseminated every 15 seconds throughout the trading day by the national securities exchange on which the Fund’s shares are listed or by market data vendors or other information providers.
The IOPV is based on the current market value of the securities and/or cash required to be deposited in exchange for a Creation Unit. The IOPV does not necessarily reflect the precise composition of the current portfolio of securities held by the
Fund at a particular point in time or the best possible valuation of the current portfolio. Therefore, the IOPV should not be viewed as a “real-time” update of the Fund’s NAV, which is computed only once a day. The IOPV is generally
determined by using both current market quotations and/or price quotations obtained from broker-dealers that may trade in the portfolio securities held by the Fund. The quotations of certain Fund holdings may not be updated during U.S. trading hours
if such holdings do not trade in the U.S. The Fund is not involved in, or responsible for, the calculation or dissemination of the IOPV and makes no representation or warranty as to its accuracy.
Premium/Discount Information
The Fund’s website has information about the premiums and discounts for the Fund. Premiums or discounts are the differences between the NAV and market price of
the Fund on a given day, generally at the time NAV is calculated. A premium is the amount that the Fund is trading above the NAV. A discount is the amount that the Fund is trading below the NAV.
Dividends and Other
Distributions
The Fund intends to declare and pay dividends of net investment income monthly and to pay any capital gain distributions on an annual
basis. There is no fixed dividend rate, and there can be no assurance that the Fund will pay any dividends or make any capital gain distributions.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by beneficial owners of the Fund for reinvestment of their dividend distributions. Beneficial owners
should contact their broker to determine the availability and costs of the service and the details of participation therein. Brokers may require beneficial owners to adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and realized gains will be automatically reinvested in additional whole shares of the Fund purchased in the secondary market. Dividends and other taxable distributions are taxable to you, whether received
in cash or reinvested in additional shares of the Fund pursuant to DTC’s Dividend Reinvestment Service. Shareholders using the Dividend Reinvestment Service should consult their broker-dealer for more information about the specific terms
of the service, including potential tax consequences to such shareholders in light of their particular circumstances.
Index Provider
The Pyxis/iBoxx
Senior Loan ETF is based on the Markit iBoxx USD Liquid Leveraged Loan Index, provided by Markit, Inc., a leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the financial markets. The Index Provider is
not affiliated with the Trust, the Adviser, the Distributor, or any of their respective affiliates. Further information about the Index Provider and the Underlying Index is available at http://www.markit.com.
The Underlying Index referenced herein is the property of Markit Indices Limited and has been licensed for use in connection with the Fund. Each party acknowledges
and agrees that the Fund is not sponsored, endorsed or promoted by the Index Provider. The Index Provider makes no representation whatsoever, whether express or implied, and hereby expressly disclaim all warranties (including, without limitation,
those of merchantability or fitness for a particular purpose or use), with respect to the Underlying Index or any data included therein or relating thereto, and in particular disclaim any warranty either as to the quality, accuracy and/or
completeness of the Underlying Index or any data included therein, the results obtained from the use of the Underlying Index and/or the composition of the Underlying Index at any particular time on any particular date or otherwise and/or the
creditworthiness of any entity, or the likelihood of the occurrence of a credit event or similar event (however defined) with respect to an obligation, in the Underlying Index at any particular time on any particular date or otherwise.
The Index Provider shall not be liable (whether in negligence or otherwise) to the parties or any other person for any error in the Underlying Index, and the Index
Provider is under no obligation to advise the parties or any person of any error therein. The Index Provider makes no representation whatsoever, whether express or implied, as to the advisability of purchasing or selling the Fund, the ability of the
Underlying Index to track relevant markets’ performances, or otherwise relating to the Underlying Index or any transaction or product with respect thereto, or of assuming any risks in connection therewith. The Index Provider has no obligation
to take the needs of any party into consideration in determining, composing or calculating the Underlying Index. No party purchasing or selling the Fund, nor the Index Provider, shall have any liability to any party for any act or failure to act by
the Index Provider in connection with the determination, adjustment, calculation or maintenance of the Underlying Index. The Index Provider and its affiliates may deal in any obligations that compose the Underlying Index, and may, where permitted,
accept deposits from, make loans or otherwise extend credit to, and generally engage in any kind of commercial or investment banking or other business with the issuers of such obligations or their affiliates, and may act with respect to such
business as if the Underlying Index did not exist, regardless of whether such action might adversely affect the Underlying Index or the Fund.
20
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Taxation
The following discussion is a summary of some of the important U.S.
federal income tax considerations generally applicable to investments in the Fund. Your investment may have other tax implications. The discussion reflects provisions of the Code, existing Treasury regulations, rulings published by the Internal
Revenue Service (“IRS”), and other applicable authorities, as of the date of this Prospectus. These authorities may be changed, possibly with retroactive effect, or subject to new legislative, administrative or judicial interpretations. No
attempt is made to present a detailed explanation of all U.S. federal, state, local and foreign tax law concerns affecting the Fund and its shareholders (including shareholders owning large positions in the Fund), and the discussion set forth herein
does not constitute tax advice. Please consult your tax advisor about foreign, federal, state, local or other tax laws applicable to you. For more information, please see “Income Tax Considerations” in the SAI.
The Fund intends to elect to be treated and intends to qualify annually as a RIC under Subchapter M of the Code including by complying with the applicable
qualifying income and diversification requirements applicable to RICs under Subchapter M of the Code. If the Fund so qualifies and satisfies certain distribution requirements, the Fund generally will not be subject to U.S. federal income tax on
income and gains that the Fund distributes to its shareholders in a timely manner in the form of dividends or capital gain dividends (as defined below). As described in “Dividends and Other Distributions” above, the Fund intends to
distribute at least annually all or substantially all of its income and capital gains. The Fund will be subject to a Fund-level income tax at regular corporate income tax rates on any taxable income or gains that it does not distribute to its
shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year distribution requirement will be subject to a
nondeductible 4% U.S. federal excise tax at the Fund level. To avoid the tax, the Fund must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year, (ii) 98.2% of its capital gains in excess of its capital losses (adjusted for certain ordinary losses) for a one-year period ending on October 31 of the calendar year, and (iii) any undistributed amounts
described in (i) and (ii) above from the prior year on which the Fund paid no U.S. federal income tax. While the Fund intends to distribute any income and capital gain in the manner necessary to minimize imposition of the 4% U.S. federal
excise tax, there can be no assurance that sufficient amounts of the Fund’s taxable income and capital gain will be distributed to avoid entirely the imposition of the tax. In that event, the Fund will be liable for the excise tax only on the
amount by which it does not meet the foregoing distribution requirement.
Additionally, if for any taxable year the Fund were not to qualify as a
RIC, all of its taxable income would be subject to a Fund-level tax at regular corporate income tax rates without any deduction for distributions to shareholders. This treatment would reduce the Fund’s net income available for investment or
distribution to its shareholders. In addition, all distributions from earnings and profits, including any net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the
dividends-received deduction in the case of corporate shareholders or, for taxable years beginning before January 1, 2013 (as described below), to be treated as “qualified dividend income” in the case of individual shareholders. The
Fund also could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a RIC that is accorded special tax treatment.
Certain of the Fund’s investment practices, including derivative transactions and hedging activities, generally, as well as the Fund’s investments in
certain types of securities, including Component Securities, may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or
deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) accelerate the recognition of income; (iv) convert short-term losses into long-term losses; (v) cause
the Fund to recognize income or gain without a corresponding receipt of cash; (vi) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vii) cause adjustments in the holding periods of the Fund’s
securities; or (vii) otherwise adversely alter the characterization of certain complex financial transactions. These U.S. federal income tax provisions could therefore affect the amount, timing and/or character of distributions to Fund
shareholders. In particular, a substantial portion of the Fund’s investments in Component Securities and similar debt instruments will be treated as having “market discount” and/or “original issue discount” for
U.S. federal income tax purposes, which, in some cases, could be significant, and could cause the Fund to recognize income in respect of these investments before, or without receiving, cash representing such income. The Fund intends to monitor
its transactions, may make certain tax elections, and may be required to, among other things, dispose of securities (including at a time when it is not advantageous to do so) to mitigate the effect of these provisions, prevent the Fund’s
disqualification as a RIC, or avoid incurring Fund-level U.S. federal income and/or excise tax.
Investments in below investment grade Component
Securities and other debt instruments that are at risk of or in default present special tax issues for the Fund. Tax rules are not entirely clear about issues such as whether and to what extent the Fund should recognize market discount on a
distressed debt obligation, when the Fund may cease to accrue interest, original issue discount or market discount, when and to what extent the Fund may take deductions for bad debts or worthless securities and how the Fund should allocate payments
received on obligations in default between principal and income. These and other related issues will be addressed by the Fund as necessary, in order to seek to ensure that it distributes sufficient income to preserve its status as a RIC and that it
does not become subject to Fund-level U.S. federal income and/or excise taxes.
Interest and other income received by the Fund from investments
outside the U.S. may be subject to withholding and other taxes imposed by foreign countries. Tax treaties
21
between the U.S. and other countries may reduce or eliminate such taxes. Foreign taxes paid by the Fund will reduce the return from the Fund’s investments. The Fund does not expect that it
will be eligible to elect to treat any foreign taxes it paid as paid by its shareholders, who therefore will not be entitled to credits or deductions for such taxes on their own returns.
Distributions paid to you by the Fund from net capital gain (that is, the excess of any net long-term capital gain over net short-term capital loss) that the Fund reports as capital gain dividends (“capital
gain dividends”) generally are taxable to you as long-term capital gain, regardless of how long you have held your shares. Long-term capital gain rates applicable to individuals have been temporarily reduced — in general, to 15% with a 0%
rate applying to taxpayers in the 10% and 15% rate brackets — for taxable years beginning before January 1, 2013. These reduced rates will expire for taxable years beginning on or after January 1, 2013, unless Congress enacts
legislation providing otherwise. All other dividends paid to you by the Fund (including dividends from short-term capital gain (that is, the excess of any net short-term capital gain over any net long-term capital loss)) from its current or
accumulated earnings and profits generally are taxable to you as ordinary income. For taxable years beginning before January 1, 2013, distributions of investment income reported by the Fund as derived from “qualified dividend income”
will be taxed in the hands of individuals at the rates applicable to long-term capital gains, provided holding periods and other requirements are met at both the shareholder and Fund level. This provision will expire for taxable years beginning on
or after January 1, 2013, unless Congress enacts legislation providing otherwise. The Fund generally does not expect that a significant portion of Fund distributions will qualify for favorable tax treatment as “qualified dividend
income” for individual shareholders or as income eligible for the dividend-received deduction for corporate shareholders.
Effective for taxable
years beginning on or after January 1, 2013, a new Medicare contribution tax will be imposed on the “net investment income” of individuals, estates and trusts whose income exceeds certain threshold amounts. Net investment income
generally includes for this purpose dividends paid by the Fund, including any capital gain dividends, and capital gains recognized on the sale or exchange of shares of the Fund. Shareholders are advised to consult their tax advisors regarding the
possible implications of this additional tax on their investment in the Fund.
If, for any taxable year, the Fund’s total distributions exceed
both current earnings and profits and accumulated earnings and profits, the excess will generally be treated as a tax-free return of capital up to the amount of your tax basis in the shares. The amount treated as a tax-free return of capital will
reduce your tax basis in the shares, thereby increasing your potential gain or reducing your potential loss on the subsequent sale of the shares. Any amounts distributed to you in excess of your tax basis in the shares will be taxable to you as
capital gain (assuming the shares are held as a capital asset).
Dividends and other taxable distributions are taxable to you, whether received in
cash or reinvested in additional shares of the Fund pursuant to DTC’s Dividend Reinvestment Service (see “Dividends and Other Distributions”). Dividends and other distributions paid by the Fund generally are treated as received by you
at the time the dividend or distribution is made. If, however, the Fund pays you a dividend in January that was declared in the previous October, November or December and you were a shareholder of record on a specified record date in one of those
months, then such dividend will be treated for tax purposes as being paid by the Fund and received by you on December 31 of the year in which the dividend was declared.
The price of shares purchased at any time may reflect the amount of a forthcoming distribution. If you purchase shares just prior to the ex-dividend date for a distribution, you generally will receive a
distribution that will be taxable to you even though it represents in part a return of your invested capital.
The Fund (or your broker or other
financial intermediary through which you own your shares) will send information after the end of each calendar year setting forth the amount and tax status of any dividends or other distributions paid to you by the Fund. Dividends and other
distributions may also be subject to state, local and other taxes.
If you sell or otherwise dispose of any of your shares of the Fund (including through
a redemption), you will generally recognize a gain or loss in an amount equal to the difference between your tax basis in such shares of the Fund and the amount you receive upon disposition of such shares. If you hold your shares as capital assets,
any such gain or loss will be long-term capital gain or loss if you have held (or are treated as having held) such shares for more than one year at the time of sale. All or a portion of any loss you realize on a taxable sale or exchange of your
shares of the Fund will be disallowed if you acquire other shares of the Fund (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after your sale or
exchange of the shares. In such case, the basis of the shares acquired will be adjusted to reflect the disallowed loss. In addition, any loss realized upon a taxable sale or exchange of Fund shares held (or deemed held) by you for six months or less
will be treated as long-term, rather than short-term, to the extent of any capital gain dividends received (or deemed received) by you with respect to those shares. Present law taxes both long-term and short-term capital gains of corporations at the
rates applicable to ordinary income.
The Fund (or your broker or other financial intermediary through which you own your shares) may be required to
withhold, for U.S. federal backup withholding tax purposes, a portion of the dividends, distributions and redemption proceeds payable to you if: (i) you fail to provide the Fund (or the intermediary) with your correct taxpayer
identification number (in the case of an individual, generally, such individual’s social security number) or to make the required certification; or (ii) the Fund (or the intermediary) has been notified by the IRS that you are subject to
backup withholding. Certain shareholders are exempt from backup withholding. Backup withholding is not an additional tax and any amount withheld may be refunded or credited against your U.S. federal income tax liability, if any, provided that
you furnish the required information to the IRS.
22
Pyxis/iBoxx Senior Loan ETF Prospectus
October 22, 2012
Special Considerations for Purchase and Redemption of Creation Units
An Authorized Participant that purchases Creation Units in exchange for cash, portfolio securities or a combination thereof generally will recognize
a gain or a loss on the exchange. The gain or loss generally will be equal to the difference between the market value of the Creation Units at the time and the sum of the cash paid by the Authorized Participant and the Authorized Participant’s
aggregate basis in any securities surrendered by the Authorized Participant. An Authorized Participant that redeems Creation Units for cash and/or portfolio securities generally will recognize a gain or loss equal to the difference between the
Authorized Participant’s basis in the Creation Units surrendered and the sum of the cash received by the Authorized Participant and the aggregate market value of any securities received by the Authorized Participant. In certain cases, however,
the IRS may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing “wash sales,” or on the basis that there has been no significant change in economic position.
Authorized Participants exchanging securities should consult their own tax advisor with respect to whether or when a loss might be deductible.
Gain or
loss recognized by an Authorized Participant upon a purchase of Creation Units in exchange for Component Securities or other debt instruments may be capital or ordinary gain or loss depending on the circumstances. Any capital gain or loss realized
upon a purchase of Creation Units in exchange for Component Securities or other debt instruments generally will be treated as long-term capital gain or loss if the securities have been held for more than one year. Any capital gain or loss realized
upon a redemption of Creation Units generally will be treated as long-term capital gain or loss if the Creation Units have been held for more than one year. Otherwise, such capital gain or loss generally will be treated as short-term capital gain or
loss. Authorized Participants should consult their own tax advisor with respect to the tax treatment to them of any creation or redemption transaction.
THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE CODE AND THE TREASURY REGULATIONS IN EFFECT AS THEY DIRECTLY GOVERN THE TAXATION OF
THE FUND AND ITS SHAREHOLDERS. THESE PROVISIONS ARE SUBJECT TO CHANGE BY LEGISLATIVE OR ADMINISTRATIVE ACTION, AND ANY SUCH CHANGE MAY BE RETROACTIVE. A MORE COMPLETE DISCUSSION OF THE TAX RULES APPLICABLE TO THE FUND AND ITS SHAREHOLDERS,
INCLUDING FOREIGN SHAREHOLDERS, CAN BE FOUND IN THE STATEMENT OF ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING SPECIFIC QUESTIONS AS TO
U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME OR OTHER TAXES.
Financial Highlights
Because the Fund had not yet commenced operations as of the
date of this Prospectus, financial highlights are not yet available.
23
http://www.pyxisais.com
More information about Pyxis/iBoxx Senior Loan ETF, an investment portfolio of Pyxis Funds I, is available without charge upon request through the following:
Statement of Additional Information (SAI)
The SAI, as it may be amended or supplemented from time to time, includes more detailed information about the Fund and is available, free of
charge, on the Fund’s website at http://www.pyxisais.com. The SAI is on file with the SEC and is incorporated by reference into this Prospectus. This means that the SAI, for legal purposes, is a part of this Prospectus.
Annual and Semi-Annual Reports
Additional information about the Fund’s investments will be available in the Fund’s annual and semi-annual reports to shareholders, which will be
available, free of charge, on the Fund’s website at http://www.pyxisais.com. In the Fund’s annual report, once available, you will find a discussion of the market conditions and investment strategies that significantly affected the
Fund’s performance during its initial fiscal period.
To Obtain More Information:
By Internet:
http://www.pyxisais.com
By Telephone:
Call (855) 799-4757
By Mail:
Pyxis Funds I - Pyxis/iBoxx Senior Loan ETF
200 Crescent Court, Suite 700
Dallas, TX 75201
By Overnight Mail:
Pyxis Funds I - Pyxis/iBoxx Senior Loan ETF
200 Crescent Court,
Suite 700
Dallas, TX 75201
From the SEC:
You can also obtain the SAI or the annual and semi-annual reports, as well as other information about the Fund, from the EDGAR Database on the
SEC’s website (http://www.sec.gov). You may review and copy documents at the SEC Public Reference Room in Washington, DC. For information on the operation of the Public Reference Room, call 1-202-551-8090. You may request documents from the
SEC, upon payment of a duplicating fee, by e-mailing the SEC at publicinfo@sec.gov or by writing to:
Securities and Exchange Commission
Public Reference Section
Washington, DC 20549-1520
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The Trust’s Investment Company Act
Registration Number: 811-21866
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Statement of Additional Information Dated October 22, 2012
INVESTMENT PORTFOLIO OF PYXIS FUNDS I
PYXIS/iBOXX SENIOR LOAN ETF
Ticker: SNLN
This Statement of Additional Information (“SAI”)
is not a prospectus. It relates to the prospectus of the Pyxis/iBoxx Senior Loan ETF (the “Fund”), dated October 22, 2012, and any supplements thereto (the “Prospectus”), and should be read in conjunction therewith.
Information from the Prospectus and the annual report to shareholders of the Fund, once available, is incorporated by reference into this SAI. Copies of the Fund’s Prospectus and the annual report to shareholders of the Fund, once available,
are available free of charge by calling the Fund at (855) 799-4757, visiting the Fund’s website (http://www.pyxisais.com) or writing to Pyxis/iBoxx Senior Loan ETF, 200 Crescent Court, Suite 700, Dallas, TX 75201. Capitalized terms used in
this SAI and not otherwise defined have the meanings given them in the Fund’s Prospectus. The principal U.S. national stock exchange on which the Fund is listed is NYSE Arca, Inc. (the “Exchange”).
TA
BLE OF CONTENTS
THE FUND
Pyxis/iBoxx Senior Loan ETF (the “Fund”) is a non-diversified series of Pyxis Funds I (the “Trust”), an open-end
management investment company organized as a Delaware statutory trust on February 28, 2006. The Fund will commence investment operations on or about the date of this SAI. This SAI relates only to the Fund.
The Fund is an exchange-traded fund (“ETF”) and its shares are listed on the Exchange. The shares trade on the Exchange at
market prices that may differ to some degree from the shares’ net asset values (“NAV”). The Fund issues and redeems shares on a continuous basis at NAV in large, specified numbers of Shares called “Creation Units.” Creation
Units are issued and redeemed in-kind for securities included in the Markit iBoxx USD Liquid Leveraged Loan Index (the “Underlying Index”) and/or for cash at the discretion of the Fund. Except when aggregated in Creation Units, shares are
not redeemable securities of the Fund. Retail investors, therefore, generally will not be able to purchase the shares directly. Rather, most retail investors will purchase shares in the secondary market with the assistance of a broker.
Exchange Listing and Trading
There can be no assurance that the requirements of the Exchange necessary to maintain the listing of shares of the Fund will continue to be met. The Exchange may remove the Fund from listing under certain
circumstances.
As in the case of all equities traded on the Exchange, brokers’ commissions on transactions in the
Fund will be based on negotiated commission rates at customary levels for retail customers.
In order to provide current share
pricing information, the Exchange, market data vendors or other information providers disseminate an updated Indicative Optimized Portfolio Value (“IOPV”) for the Fund. The Trust is not involved in, or responsible for, any aspect of the
calculation or dissemination of the IOPV and makes no warranty as to the accuracy of the IOPV. The IOPV is expected to be disseminated every 15 seconds during regular trading hours of the Exchange. The Fund’s IOPV disseminated during the
Exchange’s trading hours should not be viewed as a real-time update of the Fund’s NAV, which is calculated only once a day.
DESCRIPTION OF NON-PRINCIPAL INVESTMENTS AND RISK FACTORS
The following information supplements the discussion of the investment policies and strategies of the Fund described in the Prospectus. In pursuing its objective, the Fund will invest as described in the
Prospectus and as described below with respect to the following non-principal investment policies and strategies.
The
Underlying Index is sponsored by Markit Indices Limited (the “Index Provider”), an organization that is independent of the Fund. The Underlying Index is calculated at the end of each business day and re-balanced at the end of each month.
The Index Provider annually reviews the parameters used in the selection of component securities of the Underlying Index (“Component Securities”), including the target number of loans and the eligibility criteria, to ensure that the
Underlying Index continues to reflect the underlying loans market. The review consists of a qualitative and quantitative assessment of any developments in the loans market in terms of market size, depth and overall liquidity conditions of the
market.
The Fund may change its benchmark or the Underlying Index at any time, including if, for example, the Underlying
Index becomes unavailable; the Board of Trustees believes that the Underlying Index no longer serves the investment needs of a majority of shareholders or that another index may better serve their needs; or if the financial or economic environment
makes it difficult for the Fund’s investment results to correspond sufficiently to its current benchmark or the Underlying Index. The Fund may specify a benchmark index that is “leveraged” or proprietary. There can be no assurance
that a Fund will achieve its objective.
The Fund engages in representative sampling, which is investing in a sample of
securities selected by Pyxis Capital, L.P. (“Pyxis” or the “Adviser”) to have a collective investment profile similar to that of the Underlying Index. Securities selected have aggregate investment characteristics (based on market
capitalization and industry
1
weightings), fundamental characteristics (such as yield, credit rating, maturity and duration) and liquidity measures similar to those of the Underlying Index. Because the Fund uses
representative sampling, it generally does not hold all of the securities that are in the Underlying Index.
The Fund
generally invests at least 80% of its assets in Component Securities. The Fund may invest the remainder of its assets in securities not included in the Underlying Index, but which the Adviser believes will help the Fund track the Underlying Index.
For example, the Fund may invest in securities that are not components of the Underlying Index to reflect various corporate actions (such as mergers) and other changes in the Underlying Index (such as reconstitutions, additions and deletions). The
Fund also may invest its other assets in futures contracts, options on futures contracts, options and swaps, as well as cash and cash equivalents.
In addition, the Adviser may also invest some of the Fund’s assets in short-term U.S. government obligations, certificates of deposit, commercial paper and other money market instruments to enable
the Fund to make investments quickly and to serve as collateral with respect to certain of its investments. The Fund may purchase securities on a when-issued or forward commitment basis. The Fund may also invest its assets in high yield bonds (also
known as “junk bonds”) which are bonds typically rated below investment grade by one or more nationally recognized statistical ratings organizations (“NRSROs”). NRSROs generally regard high-yield debt securities as predominately
speculative with respect to ability to pay interest and repay principal and riskier than higher-rated debt securities. Appendix A contains additional information concerning the characteristics of the ratings used by certain NRSROs. From time to
time, in the sole discretion of the Adviser, cash balances of the Fund may be placed in a money market fund or investments may be made in shares of other investment companies, including other ETFs, subject to the applicable limits under the
Investment Company Act of 1940, as amended (the “1940 Act”).
Limited Role in Affairs of Portfolio Companies.
Although the Adviser does not take an active role in the affairs of the companies in which the Fund has positions other than voting proxies with respect to the Fund’s portfolio holdings, it will be the policy of the Fund to take such steps
as are necessary to protect its economic interests. If the opportunity presents itself, the Adviser reserves the option for any of its partners to accept a role on the board of directors of any company, regardless of whether the Fund holds any of
the company’s securities.
Financial Futures.
The Fund has claimed an exclusion from the term “commodity pool
operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.
Fixed-Income and Other Debt Securities
Fixed-income and other debt
instrument securities include all bonds, high yield or “junk” bonds, municipal bonds, debentures, U.S. Government securities, mortgage-related securities, zero coupon securities and custodial receipts. The market value of fixed-income
obligations of the Fund will be affected by general changes in interest rates, which will result in increases or decreases in the value of the obligations held by the Fund. The market value of the fixed-income obligations held by the Fund can be
expected to vary inversely to changes in prevailing interest rates. As a result, the market value of the fixed-income obligations held by the Fund generally will increase when prevailing interest rates are declining and generally will decrease when
prevailing interest rates are rising. In addition, in periods of declining interest rates, the Fund’s yield will tend to be somewhat higher than prevailing market rates and, in periods of rising interest rates, the Fund’s yield will tend
to be somewhat lower. Also, when interest rates are falling, the inflow of net new money to the Fund from the continuous sale of its shares will tend to be invested in instruments producing lower yields than the balance of its portfolio, thereby
reducing the Fund’s current yield. In periods of rising interest rates, the opposite can be expected to occur. In addition, securities in which the Fund may invest may not yield as high a level of current income as might be achieved by
investing in securities with less liquidity, less creditworthiness or longer maturities.
Ratings made available by NRSROs are
relative and subjective and are not absolute standards of quality. The Index Provider will assign each loan it considers for inclusion in the Underlying Index a composite index rating based on the ratings from Moody’s and Standard &
Poor’s. If more than one agency publishes a rating for a loan, the average of the ratings determines the composite rating. These ratings comprise part of its criteria for selection of Component Securities. The Index Provider will consider other
factors as well, such as the loan’s type, size, liquidity, spread and time to maturity.
2
Fixed-income securities may be purchased on a when-issued or delayed-delivery basis. See
“When-Issued Securities and Forward Commitments” below.
Commercial Paper.
Commercial paper consists of
short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations. A variable amount master demand note (which is a type of commercial paper) represents a direct borrowing
arrangement involving periodically fluctuating rates of interest under a letter agreement between a commercial paper issuer and an institutional lender pursuant to which the lender may determine to invest varying amounts.
Medium-, Lower-Rated and Unrated Securities
. Securities rated in the fourth highest category by a NRSRO, although considered
investment grade, may possess speculative characteristics, and changes in economic or other conditions are more likely to impair the ability of issuers of these securities to make interest and principal payments than is the case with respect to
issuers of higher grade bonds.
Generally, medium- or lower-rated securities and unrated securities of comparable quality,
sometimes referred to as “junk bonds,” offer a higher current yield than is offered by higher rated securities, but also (i) will likely have some quality and protective characteristics that, in the judgment of the rating
organizations, are outweighed by large uncertainties or major risk exposures to adverse conditions and (ii) are predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the
terms of the obligation. The yield of junk bonds will fluctuate over time.
The market values of certain of these securities
also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher quality bonds. In addition, medium- and lower-rated securities and comparable unrated securities generally present a higher degree of
credit risk. The risk of loss due to default by these issuers is significantly greater because medium- and lower-rated securities, and unrated securities of comparable quality, generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness.
In addition, the market for securities in lower-rated categories is more volatile than that
for higher-rated securities, and the markets in which medium- and lower-rated or unrated securities are traded are more limited than those in which higher-rated securities are traded. The existence of limited markets may make it more difficult for
the Fund to obtain accurate market quotations for purposes of valuing its portfolio and calculating its net asset value. Moreover, the lack of a liquid trading market may restrict the availability of securities for the Fund to purchase and may also
have the effect of limiting the ability of the Fund to sell securities at their fair value either to meet redemption requests or to respond to changes in the economy or the financial markets.
Lower-rated debt obligations also present risks based on payment expectations. If an issuer calls the obligation for redemption, the Fund
may have to replace the security with a lower yielding security, resulting in a decreased return. Also, as the principal value of bonds moves inversely with movements in interest rates, in the event of rising interest rates the value of the
securities held by the Fund may decline relatively proportionately more than a portfolio consisting of higher rated securities. Investments in zero coupon bonds may be more speculative and subject to greater fluctuations in value due to changes in
interest rates than bonds that pay interest currently.
Subsequent to its purchase by the Fund, an issue of securities may
cease to be rated or its rating may be reduced. Neither event will require sale of these securities by the Fund, but the Index Provider will consider this event in its determination of whether the securities will be removed from the Underlying
Index.
The market for lower-rated debt securities may be thinner and less active than that for higher rated debt securities,
which can adversely affect the prices at which the former are sold. If market quotations are not available, lower-rated debt securities will be valued in accordance with procedures established by the Board of Trustees, including the use of outside
pricing services. Judgment plays a greater role in valuing high yield corporate debt
3
securities than is the case for securities for which more external sources for quotations and last sale information is available. Adverse publicity and changing investor perception may affect the
ability of outside pricing services to value lower-rated debt securities and the ability to dispose of these securities.
The
Fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as a security holder to seek to protect the interest of security holders if it determines this to be in the best interest of the
Fund.
Investments in high-yield debt obligations or other debt obligations that are at risk of, or are in, default present
special tax issues for the Fund investing in or holding such securities. See “Income Tax Considerations” below.
Certificates of Deposit, Bankers’ Acceptances and Time Deposits.
Certificates of deposit are receipts issued by a depository
institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior
to maturity. Bankers’ acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or
an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance
may then be held by the accepting bank as an earning asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances can be as long as 270 days, most acceptances have
maturities of six months or less.
Time deposits are non-negotiable deposits maintained in a banking institution for a
specified period of time at a stated interest rate. Investments in time deposits maturing in more than seven days will be subject to the Securities and Exchange Commission’s (“SEC”) restrictions that limit investments in illiquid
securities to no more than 15% of the value of the Fund’s net assets.
U.S. Government Securities.
U.S. Government
securities are obligations issued or guaranteed by the U.S. Government, its agencies, authorities or instrumentalities. Some U.S. Government securities, such as U.S. Treasury bills, Treasury notes and Treasury bonds, which differ only in their
interest rates, maturities and times of issuance, are supported by the full faith and credit of the United States. Others are supported by: (i) the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home
Loan Banks; (ii) the discretionary authority of the U.S. Government to purchase the agency’s obligations, such as securities of the Federal National Mortgage Association or (iii) only the credit of the issuer, such as securities of
the Student Loan Marketing Association. No assurance can be given that the U.S. Government will provide financial support in the future to U.S. Government agencies, authorities or instrumentalities that are not supported by the full faith and credit
of the United States. To the extent the Fund invests in U.S. Government securities that are not backed by the full faith and credit of the U.S. Treasury, such investments may involve a greater risk of loss of principal and interest since the Fund
must look principally or solely to the issuing or guaranteeing agency or instrumentality for repayment.
Securities guaranteed
as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities include: (i) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S.
Government or any of its agencies, authorities or instrumentalities; and (ii) participation interests in loans made to foreign governments or other entities that are so guaranteed. The secondary market for certain of these participation
interests is limited and, therefore, may be regarded as illiquid.
U.S. Treasury Bills
. U.S. Treasury Bills
are issued with maturities of up to one year. Three month bills are currently offered by the Treasury on a 13-week cycle and are auctioned each week by the Treasury. Bills are issued in bearer form only and are sold only on a discount basis, and the
difference between the purchase price and the maturity value (or the resale price if they are sold before maturity) constitutes the interest income for the investor.
Mortgage-Related Securities.
There are several risks associated with mortgage-related securities. One is that the monthly cash inflow from the underlying loans may not be sufficient to meet the
monthly payment requirements of the mortgage-related security. Prepayment of principal by mortgagors or mortgage foreclosures will shorten the
4
term of the underlying mortgage pool for a mortgage-related security. Early returns of principal will affect the average life of the mortgage-related securities remaining in the Fund. The
occurrence of mortgage prepayments is affected by factors including the level of interest rates, general economic conditions, the location and age of the mortgage and other social and demographic conditions. In periods of rising interest rates, the
rate of prepayment tends to decrease, thereby lengthening the average life of a pool of mortgage-related securities. Conversely, in periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the average life of a
pool. Reinvestment of prepayments may occur at higher or lower interest rates than the original investment, thus affecting the yield of the Fund. Because prepayments of principal generally occur when interest rates are declining, it is likely that
the Fund will have to reinvest the proceeds of prepayments at lower interest rates than those at which the assets were previously invested. If this occurs, the Fund’s yield will correspondingly decline. Thus, mortgage-related securities may
have less potential for capital appreciation in periods of falling interest rates than other fixed-income securities of comparable maturity, although these securities may have a comparable risk of decline in market value in periods of rising
interest rates. To the extent that the Fund purchases mortgage-related securities at a premium, unscheduled prepayments, which are made at par, will result in a loss equal to any unamortized premium.
Zero Coupon Securities.
Zero coupon U.S. Government securities are debt obligations that are issued or purchased at a significant
discount from face value. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity or the particular interest payment date at a rate of interest reflecting the market rate of the
security at the time of issuance. Zero coupon securities do not require the periodic payment of interest. These investments benefit the issuer by mitigating its need for cash to meet debt service, but also require a higher rate of return to attract
investors who are willing to defer receipt of cash. These investments may experience greater volatility in market value than U.S. Government securities that make regular payments of interest. The Fund accrues income on these investments for tax and
accounting purposes, which is distributable to shareholders and which, because no cash is received at the time of accrual, may require the liquidation of other portfolio securities (including when not advantageous to do so) to satisfy the
Fund’s distribution obligations (see “Income Tax Considerations” below), in which case the Fund will forego the purchase of additional income producing assets with these funds. Zero coupon securities include Separately Traded
Registered Interest and Principal Securities (“STRIPS”). STRIPS are securities underwritten by securities dealers or banks that evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by
the U.S. Government, its agencies, authorities or instrumentalities. They also include Coupons Under Book Entry Safekeeping (“CUBES”), which are component parts of U.S. Treasury bonds and represent scheduled interest and principal payments
on the bonds.
Custodial Receipts
. Custodial receipts or certificates include Certificates of Accrual on Treasury
Securities (“CATS”), Treasury Investment Growth Receipts (“TIGRs”) and Financial Corporation certificates (“FICO STRIPS”). CATS, TIGRs and FICO STRIPS are securities underwritten by securities dealers or banks that
evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities. The underwriters of these certificates or receipts purchase a U.S.
Government security and deposit the security in an irrevocable trust or custodial account with a custodian bank, which then issues receipts or certificates that evidence ownership of the periodic unmatured coupon payments and the final principal
payment on the U.S. Government security. Custodial receipts evidencing specific coupon or principal payments have the same general attributes as zero coupon U.S. Government securities, described above. Although typically under the terms of a
custodial receipt the Fund is authorized to assert its rights directly against the issuer of the underlying obligation, the Fund may be required to assert through the custodian bank such rights as may exist against the underlying issuer. Thus, if
the underlying issuer fails to pay principal and/or interest when due, the Fund may be subject to delays, expenses and risks that are greater than those that would have been involved if the Fund had purchased a direct obligation of the issuer. In
addition, if the trust or custodial account in which the underlying security has been deposited were determined to be an association taxable as a corporation, instead of a non-taxable entity, the yield on the underlying security would be reduced in
respect of any taxes paid.
Payment-in-Kind Securities.
The value of payment-in-kind securities (“PIKs”) held
by the Fund may be more sensitive to fluctuations in interest rates than other securities. PIKs pay all or a portion of their interest or dividends in the form of additional securities. Federal tax law requires that the interest on PIK bonds be
accrued as income to the Fund regardless of the fact that the Fund will not receive cash until such securities mature. Since the income must be distributed to shareholders, the Fund may be forced to liquidate other securities in order to make the
required distribution.
5
Loans and Other Direct Debt Instruments.
These are instruments in amounts owed by a
corporate, governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables) or to other parties.
Direct debt instruments purchased by the Fund may have a maturity of any number of days or years, may be secured or unsecured, and may be of any credit quality. Direct debt instruments involve the risk of loss in the case of default or insolvency of
the borrower. Direct debt instruments may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Direct
debt instruments also may include standby financing commitments that obligate the Fund to supply additional cash to the borrower on demand at a time when the Fund would not have otherwise done so, even if the borrower’s condition makes it
unlikely that the amount will ever be repaid.
These instruments will be considered illiquid securities and so will be limited
in accordance with the Fund’s restrictions on illiquid securities.
Illiquid Securities
Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the “1933 Act”), securities that are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities that have not been
registered under the 1933 Act are referred to as “private placements” or “restricted securities” and are purchased directly from the issuer or in the secondary market. Investment companies do not typically hold a significant
amount of these restricted securities or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and an
investment company might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. An investment company might also have to
register such restricted securities in order to dispose of them, which would result in additional expense and delay. Adverse market conditions could impede such a public offering of securities. The Fund may not invest more than 15% of its net assets
in securities that are illiquid or otherwise not readily marketable.
In recent years, however, a large institutional market
has developed for certain securities that are not registered under the 1933 Act, including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily resold or on an issuer’s ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their liquidity.
•
Rule 144A Securities.
The
SEC has adopted Rule 144A, which allows a broader institutional trading market for securities otherwise subject to restriction on their resale to the general public. Rule 144A establishes a “safe harbor” from the registration requirements
of the 1933 Act on resales of certain securities to qualified institutional buyers. The Index Provider will monitor the liquidity of Rule 144A securities in the Underlying Index and will re-balance each month as necessary based on the
security’s liquidity and other eligibility criteria.
The Fund may purchase securities in the United States that are not
registered for sale under federal securities laws but which can be resold to institutions under SEC Rule 144A or under an exemption from such laws. Provided that a dealer or institutional trading market in such securities exists, these restricted
securities or Rule 144A securities are treated as exempt from the Fund’s limit on illiquid securities. The Index Provider will determine the liquidity of restricted securities or Rule 144A securities by looking at factors such as sources quote,
frequency of quotes, number of sources with size, bid-offer spreads, average quote size and movers count. If institutional trading in restricted securities or Rule 144A securities were to decline, the Fund’s illiquidity could increase and the
Fund could be adversely affected.
6
•
Section 4(2) Commercial Paper.
The Fund may invest in commercial paper
issued in reliance on the exemption from registration afforded by Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as to disposition under federal securities laws and is generally sold to institutional investors
who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) commercial paper is normally resold to other
institutional investors through or with the assistance of the issuer or investment dealers who make a market in Section 4(2) commercial paper, thus providing liquidity. The Adviser believes that Section 4(2) commercial paper and possibly
certain other restricted securities that meet the criteria for liquidity established by the Board of Trustees are quite liquid. The Fund intends therefore, to treat the restricted securities which meet the criteria for liquidity established by the
Board of Trustees, including Section 4(2) commercial paper, as determined by the Adviser, as liquid and not subject to the investment limitation applicable to illiquid securities. In addition, because Section 4(2) commercial paper is
liquid, the Fund does not intend to subject such paper to the limitation applicable to restricted securities. The Fund will not invest more than 10% of its total assets in restricted securities (excluding Rule 144A securities).
Borrowing and Lending
Borrowing.
The Fund may borrow money from banks (including its custodian bank) or from other lenders to the extent permitted under applicable law. The 1940 Act requires the Fund maintain asset
coverage of at least 300% for all such borrowings, and should such asset coverage at any time fall below 300%, the Fund would be required to reduce its borrowings within three days to the extent necessary to meet the requirements of the 1940 Act. No
Fund will make any borrowing that would cause its outstanding borrowings to exceed one-third of the value of its total assets. To reduce its borrowings, the Fund might be required to sell securities at a time when it would be disadvantageous to do
so. In addition, because interest on money borrowed is the Fund expense that it would not otherwise incur, the Fund may have less net investment income during periods when its borrowings are substantial. The interest paid by the Fund on borrowings
may be more or less than the yield on the securities purchased with borrowed funds, depending on prevailing market conditions.
Derivatives
The Fund may invest in various instruments that are commonly known as derivatives. Generally, a derivative is a financial arrangement, the value of which is based on, or “derived” from, a
traditional security, asset or market index. There are, in fact, many different types of derivatives and many different ways to use them. There is a range of risks associated with those uses. Futures and options are commonly used for traditional
hedging purposes to attempt to protect the Fund from exposure to changing interest rates, securities prices or currency exchange rates and as a low cost method of gaining exposure to a particular securities market without investing directly in those
securities. However, some derivatives are used for leverage, which tends to magnify the effects of an instrument’s price changes as market conditions change. Leverage involves the use of a small amount of money to control a large amount of
financial assets, and can in some circumstances lead to significant losses. Tax considerations may limit the Fund’s ability to invest in certain derivatives. See “Income Tax Considerations” below.
Options.
An option on a security is a contract that gives the holder of the option, in return for a premium, the right to buy from
(in the case of a call) or sell to (in the case of a put) the writer of the option the security underlying the option at a specified exercise or “strike” price.
The Fund may write (sell) covered call and put options (“covered options”) on stocks, securities, indices and foreign currencies in an attempt to track the performance of the Underlying Index.
When the Fund writes a covered call option, it gives the purchaser of the option the right to buy, and obligates the writer to sell, the underlying security at the price specified in the option (the “exercise price”) by exercising the
option at any time during the option period. If the option expires unexercised, the Fund will realize income in an amount equal to the premium received for writing the option. If the option is exercised, a decision over which the Fund has no
control, the Fund
7
must sell the underlying security to the option holder at the exercise price. By writing a covered call option, the Fund foregoes, in exchange for the premium less the commission (“net
premium”), the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price.
When the Fund writes a covered put option, it gives the purchaser of the option the right to sell, and obligates the writer to buy, the underlying security to the Fund at the specified exercise price at
any time during the option period. If the option expires unexercised, the Fund will realize income in the amount of the premium received for writing the option. If the put option is exercised, a decision over which the Fund has no control, the Fund
must purchase the underlying security from the option holder at the exercise price. By writing a covered put option, the Fund, in exchange for the net premium received, accepts the risk of a decline in the market value of the underlying security
below the exercise price.
The Fund may terminate its obligation as the writer of a call or put option by purchasing an option
with the same exercise price and expiration date as the option previously written. This transaction is called a “closing purchase transaction.” With respect to writing covered options, the Fund will realize a profit or loss for a closing
purchase transaction if the amount paid to purchase an option is less or more, as the case may be, than the amount received from the sale thereof. To close out a position as a purchaser of an option, the Fund may make a “closing sale
transaction” which involves liquidating the Fund’s position by selling the option previously purchased. Where the Fund cannot effect a closing purchase transaction, it may be forced to incur brokerage commissions or dealer spreads in
selling securities it receives or it may be forced to hold underlying securities until an option is exercised or expires.
When the Fund writes a call option, it will “cover” its obligation by owning and earmarking the underlying security or other
assets on the books of the Fund’s custodian. When the Fund writes a put option, it will “cover” its obligation by earmarking assets at the Fund’s custodian.
The Fund may purchase call and put options on any securities in which it may invest. The purchase of a call option would entitle the
Fund, in exchange for the premium paid, to purchase a security at a specified price during the option period. The Fund would ordinarily have an economic gain if the value of the securities increased above the exercise price sufficiently to cover the
premium and would have an economic loss if the value of the securities remained at or below the exercise price during the option period.
The purchase of a put option would entitle the Fund, in exchange for the premium paid, to sell a security, which may or may not be held in the Fund’s portfolio, at a specified price during the option
period. Put options also may be purchased by the Fund for the purpose of affirmatively benefiting from a decline in the price of securities which the Fund does not own. Upon exercise, the Fund would ordinarily realize a gain if the value of the
securities decreased below the exercise price sufficiently to cover the premium and would realize a loss if the value of the securities remained at or above the exercise price. Gains and losses on the purchase of put options would tend to be offset
by countervailing changes in the value of underlying portfolio securities.
The Fund’s activities in options may also be
restricted by the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), for qualification as a regulated investment company (“RIC”).
Options on Securities Indices
. The Fund may purchase and write put and call options on securities indices listed on domestic and on foreign exchanges. Such options give the holder the right to
receive a cash settlement during the term of the option based upon the difference between the exercise price and the value of the index. Options on securities indices entail risks in addition to the risks of options on securities. The absence of a
liquid secondary market to close out options positions on securities indices is more likely to occur. Use of options on securities indices also entails the risk that trading in such options may be interrupted if trading in certain securities
included in the index is interrupted.
Because options on securities indices require settlement in cash, the Adviser may be
forced to liquidate portfolio securities to meet settlement obligations. When a Fund writes a put or call option on a securities index, it will cover the position by earmarking assets with the Fund’s custodian.
8
Futures Contracts and Related Options.
To the extent consistent with applicable law,
the Fund may invest in futures contracts on, among other things, individual equity securities, securities indices, interest rates, currencies, and inflation indices. The sale of a futures contract creates an obligation by the Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at a specified future time for a specified price. At the time a futures contract is purchased or sold, the Fund must allocate cash or securities as a deposit payment
(“initial margin”). It is expected that the initial margin that the Fund will pay may range from approximately 1% to approximately 5% of the value of the securities or commodities underlying the contract. In certain circumstances, however,
such as periods of high volatility, the Fund may be required by an exchange to increase the level of its initial margin payment. Certain futures contracts are physically settled (i.e., involve the making and taking of delivery of a specified amount
of an underlying security or other asset). Some futures contracts, however, are cash settled, which means that the purchase price is subtracted from the current market value of the instrument and the net amount, if positive, is paid to the purchaser
by the seller of the futures contract and, if negative, is paid by the purchaser to the seller of the futures contract.
Options on futures contracts are similar to options on securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put).
The Fund’s ability to engage in the futures and options on futures strategies depends on the liquidity of the markets in those instruments. Trading interest in various types of futures and options on
futures cannot be predicted. Therefore, no assurance can be given that the Fund will be able to utilize these instruments effectively. In addition, there can be no assurance that a liquid market will exist at a time when the Fund seeks to close out
a futures or option on a futures contract position, and that Fund would remain obligated to meet margin requirements until the position is closed. The liquidity of a secondary market in a futures contract may be adversely affected by “daily
price fluctuation limits” established by commodity exchanges to limit the amount of fluctuation in a futures contract price during a single trading day.
The Fund that purchases or sells a futures contract is only required to deposit initial and variation margin as required by relevant regulations and the rules of the contract market. Because the purchase
of a futures contract obligates the Fund to purchase the underlying security or other instrument at a set price on a future date, the Fund’s net asset value will fluctuate with the value of the security or other instrument as if it were already
in the Fund’s portfolio. Futures transactions have the effect of investment leverage to the extent the Fund does not maintain liquid assets equal to the face amount of the contract. If the Fund combines short and long positions, in addition to
possible declines in the values of its investment securities, the Fund will incur losses if the index underlying the long futures position underperforms the index underlying the short futures position.
Other Investment Policies
Swap Agreements.
To help enhance the value of its portfolio or manage its exposure to different types of investments, the Fund may enter into credit default swap agreements, interest rate, currency
and mortgage swap agreements and may purchase and sell interest rate “caps,” “floors” and “collars.”
In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) on different currencies, securities, baskets of currencies or securities,
indices or other instruments, which returns are calculated with respect to a “notional value,” (i.e., the designated reference amount of exposure to the underlying instruments). The Fund intends to enter into swaps primarily on a net
basis, i.e., the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. If the other party to a swap contract entered into on net basis defaults, the Fund’s risk of
loss will consist of the net amount of payments that the Fund is contractually entitled to receive. The net amount of the excess, if any, of the Fund’s obligations over its entitlements will be maintained in a segregated account by the
Fund’s custodian. The Fund will not enter into swap agreements unless the claims-paying ability of the other party thereto is considered to be an acceptable credit risk to such Fund by the Adviser. If there is a default by the other party to
such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction. Swap instruments are not exchange-listed securities and may be traded only in the over-the-counter market.
9
In a typical interest rate swap agreement, one party agrees to make regular payments equal
to a floating interest rate on a specified amount (the “notional principal amount”) in return for payments equal to a fixed interest rate on the same amount for a specified period. If a swap agreement provides for payment in different
currencies, the parties may also agree to exchange the notional principal amount. Mortgage swap agreements are similar to interest rate swap agreements, except that notional principal amount is tied to a reference pool of mortgages. In a cap or
floor, one party agrees, usually in return for a fee, to make payments under particular circumstances. For example, the purchaser of an interest rate cap has the right to receive payments to the extent a specified interest rate exceeds an agreed
level; the purchaser of an interest rate floor has the right to receive payments to the extent a specified interest rate falls below an agreed level. A collar entitles the purchaser to receive payments to the extent a specified interest rate falls
outside an agreed range.
Investments in swaps involve the exchange by the Fund with another party of their respective
commitments. Use of swaps subjects the Fund to risk of default by the counterparty. If there is a default by the counterparty to such a transaction, there may be contractual remedies pursuant to the agreements related to the transaction although
contractual remedies may not be sufficient in the event the counterparty is insolvent. However, the swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and agents
utilizing standardized swap documentation. As a result, the swap market has become relatively liquid in comparison with the markets for other similar instruments which are traded in the interbank market. Swap agreements are sophisticated financial
instruments that typically involve a small investment of cash relative to the magnitude of risks assumed. Swaps may involve leverage and can be highly volatile and may have a considerable impact on the Fund’s performance, as the potential gain
or loss on any swap transaction is not necessarily subject to any fixed limit. All swap agreements are considered as illiquid securities and, therefore, will be limited, along with all of the Fund’s other illiquid securities, to 15% of the
Fund’s net assets.
The Fund may enter into credit default swap agreements. The “buyer” in a credit default
contract is obligated to pay the “seller” a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay
the buyer the “par value” (full notional value) of the reference obligation in exchange for the reference obligation. The Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no event of default occurs, the
Fund loses its investment and recovers nothing. However, if an event of default occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, the Fund receives income throughout the term of
the contract, which typically is between six months and three years, provided that there is no default event.
Credit default
swap agreements are subject to greater risk than direct investment in the reference obligation. Like all swap agreements, credit default swaps are subject to liquidity, credit and counterparty risks. A buyer in a credit default swap contract will
lose its investment and recover nothing should no event of default occur. If an event of default were to occur, the value of the reference obligation received by the seller, coupled with the periodic payments previously received, may be less than
the full notional value it pays to the buyer, resulting in a loss of value to the seller. In addition, collateral posting requirements are individually negotiated and there is no regulatory requirement that a counterparty post collateral to secure
its obligations under a credit default swap. Furthermore, there is no requirement that a party be informed in advance when a credit default swap agreement is sold. Accordingly, the Fund may have difficulty identifying the party responsible for
payment of its claims. The notional value of credit default swaps with respect to a particular investment is often larger than the total par value of such investment outstanding and, in event of a default, there may be difficulties in making the
required deliveries of the reference investments, possibly delaying payments.
The market for credit default swaps has become
more volatile recently as the creditworthiness of certain counterparties has been questioned and/or downgraded. If a counterparty’s credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could
increase the risk that the Fund may not receive adequate collateral. The Fund generally may exit its obligations under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting
credit default swap position, which may cause the Fund to incur more losses. If the Fund uses credit default swaps to leverage its portfolio, it will be exposed to additional risks, including the risk that the Fund’s use of leverage will
magnify the effect of any losses the Fund incurs since if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation.
10
When-Issued Securities and Forward Commitments
. The Fund may enter into forward
commitments for the purchase or sale of interests in Senior Loans and other portfolio securities, including on a “when-issued” or “delayed delivery” basis in excess of customary settlement periods for the type of security
involved. In some cases, a forward commitment may be conditioned upon the occurrence of a subsequent event, such as approval and consummation of a merger, corporate reorganization or debt restructuring (i.e., a when, as and if issued security). When
such transactions are negotiated, the price is fixed at the time of the commitment, with payment and delivery taking place in the future, generally a month or more after the date of the commitment. While the Fund will only enter into a forward
commitment with the intention of actually acquiring the security, the Fund may sell the security before the settlement date if it is deemed advisable. Securities purchased by the Fund under a forward commitment are subject to market fluctuation, and
no interest (or dividends) accrues to the Fund prior to the settlement date. For forward commitments that are cash settled, the Fund will designate or segregate liquid assets in an amount equal to the Fund’s daily marked-to-market value of such
commitments.
Purchases of securities on a forward commitment basis may involve more risk than other types of purchases.
Securities purchased on a forward commitment basis and the securities held in the Fund’s portfolio are subject to changes in value based upon the public’s perception of the creditworthiness of the issuer and changes, real or anticipated,
in the level of interest rates. Purchasing securities on a forward commitment basis can involve the risk that the yields available in the market when the delivery takes place may actually be higher or lower than those obtained in the transaction
itself. On the settlement date of the forward commitment transaction, the Fund will meet its obligations from then available cash flow, sale of securities reserved for payment of the commitment, sale of other securities or, although it would not
normally expect to do so, from sale of the forward commitment securities themselves (which may have a value greater or lesser than the Fund’s payment obligations). The sale of securities to meet such obligations may result in the realization of
capital gains or losses. Purchasing securities on a forward commitment basis can also involve the risk of default by the other party on its obligation, delaying or preventing the Fund from recovering the collateral or completing the transaction.
Money Market Instruments.
The Fund may invest in money market instruments. Money market securities are
high-quality, dollar-denominated, short-term instruments. They consist of (i) bankers’ acceptances, certificates of deposit, notes and time deposits of highly-rated U.S. banks and U.S. branches of foreign banks; (ii) U.S. Treasury
obligations and obligations issued or guaranteed by agencies and instrumentalities of the U.S. Government; (iii) high-quality commercial paper issued by U.S. foreign corporations; and (iv) debt obligations with a maturity of one year or
less issued by corporations with outstanding high-quality commercial paper ratings.
Convertible Securities.
Convertible securities may offer higher income than the common stocks into which they are convertible and include fixed-income or zero coupon debt securities, which may be converted or exchanged at a stated or determinable exchange ratio into
underlying shares of common stock. Prior to their conversion, convertible securities may have characteristics similar to both non-convertible debt securities and equity securities. While convertible securities generally offer lower yields than
non-convertible debt securities of similar quality, their prices may reflect changes in the value of the underlying common stock. Convertible securities entail less credit risk than the issuer’s common stock.
Asset Coverage.
To assure that the Fund’s use of futures and related options, as well as when issued and delayed-delivery
transactions, forward currency contracts and swap transactions, are not used to achieve investment leverage, the Fund will cover such transactions, as required under applicable SEC interpretations, either by owning the underlying securities or by
earmarking liquid securities with its custodian in an amount at all times equal to or exceeding the Fund’s commitment with respect to these instruments or contracts.
Warrants and Rights.
Warrants are options to purchase equity securities at a specified price and are valid for a specific time period. Rights are similar to warrants, but normally have a
short duration and are distributed by the issuer to its shareholders. The Fund may purchase warrants and rights, provided that the Fund presently does not intend to invest more than 20% of its net assets at the time of purchase in warrants and
rights other than those that have been acquired in units or attached to other securities.
11
Equity Securities.
Because it may purchase common stocks and other equity securities,
the Fund is subject to the risk that stock prices will fall over short or long periods of time. In addition, common stocks represent a share of ownership in a company, and rank after bonds and preferred stock in their claim on the company’s
assets in the event of bankruptcy.
Securities of Other Investment Companies.
Such investments are subject to
limitations prescribed by the 1940 Act unless an SEC exemption is applicable or as may be permitted by rules under the 1940 Act or SEC staff interpretations thereof. The 1940 Act limitations currently provide, in part, that the Fund may not purchase
shares of an investment company if (a) such a purchase would cause the Fund to own in the aggregate more than 3% of the total outstanding voting stock of the investment company; (b) such a purchase would cause the Fund to have more than 5%
of its total assets invested in the investment company; or (c) more than 10% of the Fund’s total assets would be invested in the aggregate in all investment companies. These investment companies typically incur fees that are separate from
those fees incurred directly by the Fund. The Fund’s purchase of such investment company securities results in the layering of expenses, such that shareholders would indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund expenses.
Privately-Placed Securities.
The Fund may invest in securities that are neither listed on a stock exchange nor traded over-the-counter, including privately placed securities. Investing in such unlisted securities, including investments in new and early stage companies, may
involve a high degree of business and financial risk that can result in substantial losses. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Fund, or less than what may be considered the fair value of such securities. Further, companies whose
securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that might be applicable if their securities were publicly traded. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may be required to bear the expenses of registration.
Operating Deficits.
The expenses of operating the Fund (including the fees payable to the Adviser) may exceed its income, thereby requiring that the difference be paid out of the Fund’s
capital, reducing the Fund’s investments and potential for profitability.
Accuracy of Public Information.
To the
extent that the Fund invests any of its assets in securities not included in the Underlying Index, the Adviser selects investments for the Fund, in part, on the basis of information and data filed by issuers with various government regulators or
made directly available to the Adviser by the issuers or through sources other than the issuers. Although the Adviser evaluates all such information and data and ordinarily seeks independent corroboration when the Adviser considers it appropriate
and when such corroboration is reasonably available, the Adviser is not in a position to confirm the completeness, genuineness or accuracy of such information and data.
Trading Limitations.
For all securities listed on a securities exchange, including options listed on a public exchange, the exchange generally has the right to suspend or limit trading under
certain circumstances. Such suspensions or limits could render certain strategies difficult to complete or continue and subject the Fund to loss. Also, such a suspension could render it impossible for the Fund to liquidate positions thereby exposing
it to potential losses. Finally, to the extent that advisory personnel of the Adviser acquire material non-public information in the course of service on the board of directors or creditor’s committee of a company, the Fund may be prevented
from buying or selling securities of that company.
Risks of Inverse Floaters.
As interest rates rise, inverse floaters
produce less current income. A change in prevailing interest rates will often result in a greater change in the interest rate paid by an inverse floater. As a result, inverse floaters may have a greater degree of volatility than other types of
interest-bearing securities of similar credit quality.
12
Tracking and Correlation.
While the Fund does not expect that its daily returns will
deviate significantly from its daily investment objective, several factors may affect its ability to achieve this correlation. Among these factors are: (1) the Fund’s expenses, including brokerage (which may be increased by high portfolio
turnover) and the cost of the investment techniques employed by the Fund; (2) less than all of the securities in the benchmark index being held by the Fund and securities not included in the benchmark index being held by the Fund; (3) an
imperfect correlation between the performance of instruments held by the Fund, such as futures contracts, and the performance of the underlying securities in the cash market; (4) bid-ask spreads (the effect of which may be increased by
portfolio turnover); (5) holding instruments traded in a market that has become illiquid or disrupted; (6) the Fund’s share prices being rounded to the nearest cent; (7) changes to the benchmark index that are not disseminated in
advance; (8) the need to conform the Fund’s portfolio holdings to comply with investment restrictions or policies or regulatory or tax law requirements; (9) actual purchases and sales of the shares of the Fund may differ from
estimated transactions reported prior to the time share prices are calculated; (10) limit up or limit down trading halts on options or futures contracts which may prevent a Fund from purchasing or selling options or futures contracts; and
(11) early and unanticipated closings of the markets on which the holdings of the Fund trade, resulting in the inability of the Fund to execute intended portfolio transactions. While a close correlation of the Fund to its benchmark may be
achieved on any single trading day for certain Fund, over time the cumulative percentage increase or decrease in the NAV of the shares of the Fund may diverge significantly from the cumulative percentage decrease or increase in the benchmark due to
a compounding effect.
CONSTRUCTION AND MAINTENANCE STANDARDS FOR THE UNDERLYING INDEX
The Markit iBoxx USD Liquid Leveraged Loan Index measures the performance of senior secured bank loans from the
largest, most liquid issuers. The Underlying Index is a rules-based index consisting of approximately 100 liquid, U.S. dollar-denominated senior secured bank loans that seeks to maximize liquidity while maintaining representation of the broader
senior secured loan market. The Underlying Index is sponsored by Markit Indices Limited (the “Index Provider”), which is independent of the Fund and the Adviser.
Index Methodology.
The Underlying Index is a subset of the broader senior secured bank loan universe. The Index Provider will consider both fully funded term loans and defaulted loans. Loans in the
Underlying Index are selected from the universe of eligible loans using defined rules. More specifically, loans eligible for inclusion in the Underlying Index (“eligible loans”) must meet set criteria related to loan type, minimum size,
liquidity and depth of market, spread, credit rating and minimum time to maturity, including the following:
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the size of eligible loans must be at least $500 million;
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the number of prices available for an eligible loan and the length of time such number of prices have been available (a measure of liquidity of the
loan) must be, respectively, at least two and at least 50% of all trading days in the prior three-month period (or, for loans that have not yet traded for three months, there must be at least three prices available for at least 50% of all trading
days since its issue date);
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•
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eligible loans must be sub-investment grade, as measured either by a composite credit rating based on both Moody’s and Standard &
Poor’s ratings, or if unrated, must meet the credit spread described below;
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•
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eligible loans must have a minimum interest rate, which must be at least 125 basis points (1.25%) higher than the interest rate of the London
Interbank Offered Rate (“LIBOR”) (LIBOR is a floating rate that banks charge one another for the use of short-term money, and is often used as a peg for setting other interest rates); and
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eligible loans must have a minimum maturity of one year at the time of inclusion in the Underlying Index.
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If the number of loans eligible for inclusion in the index exceeds the target number of loans, then the final index constituents will be
determined by an additional liquidity ranking procedure that scores all loans in the MarkitWSO database daily based on metrics for sources quote, frequency of quotes, number of sources with size, bid-offer spreads, average quote size and movers
count. The Index Provider will calculate the Underlying Index daily on the basis of end-of-day prices provided by Markit Loan Pricing services and will re-balance the Underlying Index monthly. Additionally, the Index Provider will conduct an annual
review of the parameters used in the selection process, including the target number of loans and the eligibility criteria, with qualitative and quantitative assessment of any developments in the loans market in terms of market size, depth and
overall liquidity conditions.
13
The Index Provider will not provide any information relating to changes to the Underlying
Index’s methodology for the inclusion of Component Securities, the inclusion or exclusion of specific Component Securities, or methodology for the calculation of the return of Component Securities, in advance of a public announcement of such
changes by the Index Provider. In addition, the Index Provider will not provide recommendations to the Fund regarding the purchase or sale of specific securities.
PORTFOLIO TURNOVER
The frequency
and amount of portfolio purchases and sales (known as the “turnover rate”) will vary from year to year. The portfolio turnover rate may vary greatly from year to year and will not be a limiting factor when the Adviser deems portfolio
changes appropriate nor will it affect when the Index Provider deems re-balancing of the Underlying Index appropriate. Although the Fund generally does not intend to trade for short-term profits, the securities held by the Fund will be sold whenever
the Adviser believes it is appropriate to do so, without regard to the length of time a particular security may have been held. Higher portfolio turnover involves correspondingly greater transaction costs, including any brokerage commissions that
the Fund will bear directly, and can cause the Fund to recognize more short-term capital gains (which currently are taxable to shareholders at higher rates than long-term capital gains). Prior to the date of this SAI, the Fund had not yet commenced
operations. Accordingly, information on the Fund’s portfolio turnover rate is not available.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Board of Trustees. Fundamental
policies of the Fund may be changed only with the approval of a “vote of a majority of the outstanding voting securities” of the Fund. A “vote of a majority of the outstanding voting securities” of the Fund means the lesser of
(i) 67% or more of the shares at a meeting if the holders of more than 50% of the outstanding shares are present or represented by proxy or (ii) more than 50% of the outstanding shares. If a percentage policy set forth in the Prospectus or
one of the following percentage investment restrictions is adhered to at the time a transaction is effected, later changes in a percentage will not be considered a violation of the policy or restriction unless such change is caused by action of the
Fund or pertains to the Fund’s limitations on borrowing and investment in illiquid securities.
Fundamental Investment
Restrictions.
The following investment restrictions are fundamental policies and, as such, may not be changed without the approval of a “vote of a majority of the outstanding voting securities” (as previously defined in
“Description of Non-Principal Investments and Risk Factors”). The Fund may not:
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1.
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Purchase any security that would cause the Fund to concentrate (invest 25% or more of its total assets) in securities of issuers primarily engaged in any particular
industry or group of industries (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities), except that the Fund will concentrate to approximately the same extent that its Underlying Index
concentrates in the securities of such particular industry or group of industries. For purposes of this restriction as applied to the Fund, senior loans and loan participations will be considered investments in the industry of the underlying
borrower, rather than that of any agent that administers the senior loan or the seller of the loan participation;
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2.
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Issue senior securities or borrow in excess of the amounts permitted by the 1940 Act;
*
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*
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Under the 1940
Act, a Fund may not issue senior securities or borrow in excess of 33 1/3% of the Fund’s total assets (after giving effect to any such borrowing), which amount excludes borrowing for temporary purposes and in an amount not more than 5% of the
Fund’s total assets at the time borrowing is made.
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3.
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Underwrite securities of other issuers, except to the extent that the Fund, in disposing of Fund securities, may be deemed an underwriter within the meaning of the 1933
Act;
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4.
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Purchase or sell real estate, except that the Fund may (a) invest in securities or other instruments directly or indirectly secured by real estate, (b) invest
in securities or other instruments issued by issuers that invest in real estate, and (c) hold for prompt sale, real estate or interests in real estate to which it may gain an ownership interest through the forfeiture of collateral securing
loans or debt securities held by it;
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5.
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Purchase or sell commodities or commodity contracts, but this shall not prevent the Fund from purchasing, selling and entering into financial futures contracts
(including futures contracts on indices of securities, interest rates and currencies), options on financial futures contracts, swaps, forward contracts, foreign currency spot and forward contracts or other derivative instruments that are not related
to physical commodities; and
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6.
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Lend any property or make any loan if, as a result, more than 33 1/3% of its total assets would be loaned to other parties (including the value of
collateral received for loans of portfolio securities), but this limitation does not apply to the purchase of debt securities and other Senior Loans in which it is authorized to invest in accordance with its investment objective and policies or to
repurchase agreements.
†
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Non-Fundamental Investment Restrictions.
The Fund is also subject to the following non-fundamental investment restrictions and
policies that may be changed by the Board of Trustees without shareholder approval. The Fund may not:
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1.
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Acquire any illiquid securities if, as a result thereof, more than 15% of the market value of the Fund’s net assets would be in investments that are illiquid;
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2.
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Acquire securities of other investment companies, except as permitted by the 1940 Act (currently under the 1940 Act, the Fund may invest up to 10% of its total assets
in the aggregate in shares of other investment companies and up to 5% of its total assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such
shares are purchased);
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3.
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Borrow on margin, notwithstanding, fundamental investment restriction number 2, unless such activity is permitted by applicable law; and
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4.
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If the Fund is invested in by another series of the Trust or by a series of Pyxis Funds II, it may not acquire securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
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Other Information.
The following commentary is intended to help
investors better understand the meaning of the Fund’s fundamental policies by briefly describing limitations, if any, imposed by the 1940 Act. References to the 1940 Act below may encompass rules, regulations or orders issued by the SEC and, to
the extent deemed appropriate by the Fund, interpretations and guidance provided by the SEC staff. These descriptions are intended as brief summaries of such limitations as of the date of this SAI; they are not comprehensive and they are qualified
in all cases by reference to the 1940 Act (including any rules, regulations or orders issued by the SEC and any relevant interpretations and guidance provided by the SEC staff). These descriptions are subject to change based on evolving guidance by
the appropriate regulatory authority and are
not
part of the Fund’s fundamental policies.
The 1940 Act
currently permits an open-end investment company to borrow money from a bank so long as immediately after any such borrowing the ratio that the value of the total assets of the investment company (including the amount of any such borrowing), less
the amount of all liabilities and indebtedness (other than such borrowing) of the investment company, bears to the amount of such borrowing is at least 300%. A lender to the Fund may require that the Fund pledge its assets as collateral. If the Fund
were to default on a loan secured by pledged assets, the lender would be entitled to foreclose on and dispose of the pledged assets, but the lender could retain only the amount of assets (or the disposition proceeds of such assets) necessary to pay
off the defaulted loan.
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For avoidance of doubt, with respect to this Fundamental Investment Restriction number 6, the Fund has no current intention to engage in reverse
repurchase agreements and securities lending, but the Fund may change this intention at any time without shareholder approval.
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15
Under the 1940 Act, the Fund may not issue senior securities or borrow in excess of 33 1/3%
of the Fund’s total assets (after giving effect to any such borrowing), which amount excludes borrowing for temporary purposes and in an amount not more than 5% of the Fund’s total assets at the time the borrowing for temporary purposes is
made.
For purposes of non-fundamental investment restriction number 1 above, the purchase of Senior Loans, corporate debt
securities, and other investment assets with the proceeds of a permitted borrowing, as well as margin payments or other arrangements in connection with transactions in short sales, futures contracts, options, and other financial instruments are not
considered to constitute the purchase of securities on margin.
NON-DIVERSIFIED STATUS
The Fund’s classification as a “non-diversified” investment company means that the proportion of the
Fund’s assets that may be invested in the securities of a single issuer is not limited by the 1940 Act. The Fund, however, intends to seek to qualify as a RIC for purposes of the Code, which imposes diversification requirements on this Fund
that are less restrictive than the requirements applicable to the “diversified” investment companies under the 1940 Act. As a non-diversified fund, a relatively high percentage of the Fund’s assets may be invested in the securities of
a limited number of issuers, primarily within the same economic sector. The Fund’s portfolio securities, therefore, may be more susceptible to any single economic, political, or regulatory occurrence than the portfolio securities of a more
diversified investment company.
16
MANAGEMENT
The Board of Trustees (the “Board”) provides broad oversight of the operations and affairs of the Fund and protects the
interests of shareholders. The Board has overall responsibility to manage and control the business affairs of the Fund, including the complete and exclusive authority to establish policies regarding the management, conduct and operation of the
Fund’s business. The names and dates of birth of the Trustees and officers of the Fund, the year each was first elected or appointed to office, their principal business occupations during the last five years, the number of funds overseen by
each Trustee and other directorships or trusteeships they hold are shown below. The business address for each Trustee and officer of the Fund is c/o Pyxis Capital, L.P., 200 Crescent Court, Suite 700, Dallas, Texas 75201.
INDEPENDENT TRUSTEES
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Name and
Date of Birth
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Position(s)
with the
Fund
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Term of
Office and
Length
of
Time Served
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Principal Occupation(s)
During Past Five Years
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Number of
Portfolios in
Pyxis Fund
Complex
Overseen
by Trustee
1
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Other
Directorships/
Trusteeships
Held
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Experience, Qualifications, Attributes,
Skills for Board Membership
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Timothy K. Hui
(6/13/1948)
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Trustee
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Indefinite
Term; Trustee
since
inception in
2006
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Dean of Educational Resources since July 2012 and from July 2006 to January 2008, Vice President from February 2008 to June 2012, and Assistant Provost for Graduate Education from
July 2004 to June 2006 at Cairn University.
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21
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None
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Significant experience on this and/or other boards of directors/trustees; administrative and managerial experience; legal training and practice.
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Scott F. Kavanaugh (1/27/1961)
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Trustee and Chairman of the Board
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Indefinite
Term; Trustee
since
inception in
2006;
Chairman of
the Board
since June
2012
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Vice-Chairman, President and Chief Executive Officer at Keller Financial Group since September 2007; Chairman and Chief Executive Officer at First Foundation Bank since September
2007; Vice-Chairman, President and Chief Operating Officer of First Foundation, Inc. (holding company) since September 2007; and private investor since February 2004.
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21
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None
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Significant experience on this and/or other boards of directors/trustees; significant executive experience including current and past service as chairman and chief executive officer
of a bank; other financial industry and banking experience.
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and
Date of Birth
|
|
Position(s)
with the
Fund
|
|
Term of Office
and Length of
Time Served
|
|
Principal Occupation(s)
During Past Five Years
|
|
Number of
Portfolios in
Pyxis Fund
Complex
Overseen
by Trustee
1
|
|
Other
Directorships/
Trusteeships
Held
|
|
Experience, Qualifications, Attributes,
Skills for Board Membership
|
|
James F. Leary
(3/9/1930)
|
|
Trustee
|
|
Indefinite
Term; Trustee
since
inception in
2006
|
|
Managing Director, Benefit Capital Southwest, Inc. (a financial consulting firm) since January 1999.
|
|
21
|
|
Board Member
of Capstone
Group of Funds
(7 portfolios)
|
|
Significant experience on this and/or other boards of directors/trustees; significant executive experience including past service as chief financial officer of an operating company;
audit committee financial expert.
|
|
|
|
|
|
|
|
|
|
Bryan A. Ward
(2/4/1955)
|
|
Trustee
|
|
Indefinite
Term; Trustee
since
inception in
2006
|
|
Senior Manager, Accenture, LLP (a consulting firm) since January 2002.
|
|
21
|
|
None
|
|
Significant experience on this and/or other boards of directors/trustees; significant managerial and executive experience; significant experience as a management
consultant.
|
|
|
|
INTERESTED TRUSTEE
|
|
|
|
|
|
|
|
|
|
Ethan Powell
2
(6/20/1975)
|
|
Trustee; Executive Vice President and Secretary
|
|
Indefinite
Term; Trustee
and Executive
Vice
President
since June
2012;
Secretary
since
November
2010
|
|
Senior Retail Fund Analyst of HCM since 2007 and of Pyxis since its inception and Secretary of the funds in the Pyxis Fund Complex since November 2010; Manager in the Merger and
Acquisitions Division at Ernst &Young from 1999 to 2007.
|
|
21
|
|
None
|
|
Positions and experience at Pyxis and Highland Capital Management, L.P.; continuing service as Secretary of the Trust; significant executive and financial
experience.
|
18
|
|
|
|
|
|
|
|
|
OFFICERS
|
|
Name and
Date of Birth
|
|
Position(s)
with the Fund
|
|
Term of Office and Length of
Time Served
|
|
Principal Occupation(s)
During Past Five Years
|
|
Brian Mitts
(8/26/1970)
|
|
Treasurer (Principal Accounting Officer and Principal Financial Officer)
|
|
Indefinite Term; Treasurer since November 2010
|
|
Senior Retail Fund Analyst of Highland Capital Management, L.P. since 2007 and Pyxis since its inception; Principal Accounting Officer and Treasurer of the funds in the Pyxis Fund
Complex since November 2010; Manager of Financial Reporting at HBK Investments (a hedge fund) from 2005 to 2007.
|
|
|
|
|
|
|
Ethan Powell
(6/20/1975)
|
|
Trustee; Executive Vice President and Secretary
|
|
Indefinite Term; Trustee and Executive Vice President since June 2012; Secretary since November 2010
|
|
Senior Retail Fund Analyst of Highland Capital Management, L.P. since 2007 and Pyxis since its inception; and Secretary of the funds in the Pyxis Fund Complex since
November 2010; Manager in the Merger and Acquisitions Division at Ernst & Young from 1999 to 2007.
|
|
|
|
|
|
|
Alan Head
(8/5/1973)
|
|
Chief Compliance Officer
|
|
Indefinite Term;
Chief
Compliance Officer since January 2012
|
|
Compliance Director at Highland Capital Management and Chief Compliance Officer of NexBank Securities, Inc. (an affiliated broker-dealer) since November 2010; Vice President,
Manager of Reporting and Research from May 2008 to September 2010 and Compliance; Manager from August 2005 to May 2008 at Capital Institutional Services.
|
|
1
|
The “Pyxis
Fund Complex” consists of all of the registered investment companies overseen by the Board and advised by the Adviser or an affiliated person of the Adviser as of the date of this SAI.
|
|
2
|
Mr. Powell is
deemed to be an “interested person” of the Fund under the 1940 Act because of his position with the Adviser.
|
19
Qualifications of Trustees
The following provides an overview of the considerations that led the Board to conclude that each individual serving as a Trustee of the Trust should so serve. Among the factors the Board considered when
concluding that an individual should serve on the Board were the following: (i) the individual’s business and professional experience and accomplishments; (ii) the individual’s ability to work effectively with the other members
of the Board; (iii) the individual’s prior experience, if any, serving on company boards (including public companies and, where relevant, other investment companies) and the boards of other complex enterprises and organizations; and
(iv) how the individual’s skills, experiences and attributes would contribute to an appropriate mix of relevant skills and experience on the Board.
In respect of each current Trustee, the individual’s professional accomplishments and prior experience, including, in some cases, in fields related to the operations of the Trust, were a significant
factor in the determination that the individual should serve as a Trustee of the Trust. Each Trustee’s professional experience and additional considerations that contributed to the Board’s conclusion that an individual should serve on the
Board are summarized in the table above.
Trustees’ Compensation
The officers of the Trust and those of its Trustees who are “interested persons” (as defined in the 1940 Act) of the Fund
receive no direct remuneration from the Trust. The following table sets forth the aggregate compensation paid to each of the Trustees who is not an “interested person” (as defined in the 1940 Act) of the Trust (the “Independent
Trustees”) by the Trust and the total compensation paid to each of the Trustees by the Pyxis Fund Complex for the fiscal year ended June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of
Trustee
|
|
Aggregate
Compensation
From the Fund
*
|
|
|
Pension or Retirement
Benefits Accrued as
Part of the Fund’s
Expense
|
|
|
Estimated Annual
Benefits
Upon
Retirement
|
|
|
Total
Compensation
From the Fund and
the Pyxis Fund
Complex
|
|
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ethan Powell
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy K. Hui
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
Scott F. Kavanaugh
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
James F. Leary
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
Bryan A. Ward
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
150,000
|
|
|
|
*
|
Prior to the date of this SAI, the Fund had not yet commenced operations; hence no compensation was paid by the Fund during the fiscal year ended
June 30, 2011.
|
Each Independent Trustee receives an annual retainer of $150,000 payable in quarterly
installments and allocated among each portfolio in the Pyxis Fund Complex based on relative net assets.
Role of the Board
of Trustees, Leadership Structure and Risk Oversight
The Role of the Board of Trustees
The Board oversees the management and operations of the Trust. Like most registered investment companies, the day-to-day management and
operation of the Trust is performed by various service providers to the Trust, such as the Adviser, distributor, administrator, custodian, and transfer agent, each of which is discussed in greater detail in this Statement of Additional Information.
The Board has appointed senior employees of certain of these service providers as officers of the Trust, with responsibility to monitor and report to the Board on the Trust’s operations. The Board receives regular reports from these officers
and service providers regarding the Trust’s operations. For example, the Treasurer provides reports as to financial reporting matters and investment personnel report on the
20
performance of the Trust’s portfolios. The Board has appointed a Chief Compliance Officer who administers the Trust’s compliance program and regularly reports to the Board as to
compliance matters. Some of these reports are provided as part of formal in person Board meetings which are typically held quarterly, in person, and involve the Board’s review of, among other items, recent Trust operations. The Board also
periodically holds telephonic meetings as part of its review of the Trust’s activities. From time to time one or more members of the Board may also meet with management in less formal settings, between scheduled Board meetings, to discuss
various topics. In all cases, however, the role of the Board and of any individual Trustee is one of oversight and not of management of the day-to-day affairs of the Trust and its oversight role does not make the Board a guarantor of the
Trust’s investments, operations or activities.
Board Structure and Leadership
The Board has structured itself in a manner that it believes allows it to perform its oversight function effectively. The Board consists
of five Trustees, four of whom (including the Chairman) are not “interested persons” (as defined in the 1940 Act) of the Trust (the “Independent Trustees”). The remaining Trustee, Mr. Powell, also serves as Executive Vice
President and Secretary of the Trust, and as such he participates in the oversight of the Trust’s day-to-day business affairs. Mr. Powell is an “interested person” of the Trust (an “Interested Trustee”) because of his
position with Pyxis. The Trustees meet periodically throughout the year in person and by telephone to oversee the Trust’s activities, review contractual arrangements with service providers for the Trust and review the Trust’s performance.
The Board conducts much of its work through certain standing Committees, each of which is comprised exclusively of all of the Independent Trustees and each of whose meetings are chaired by an Independent Trustee. The Board has four committees, the
Audit Committee, the Governance Committee, the Litigation Committee and the Qualified Legal Compliance Committee, which are discussed in greater detail below.
Audit Committee.
Pursuant to the Audit Committee Charter adopted by the Board of Trustees, the function of the Audit Committee is to (1) oversee the Trust’s accounting and financial
reporting processes and the audits of the Trust’s financial statements and (2) assist in Board oversight of the integrity of the Trust’s financial statements, the Trust’s compliance with legal and regulatory requirements, and the
independent registered public accounting firm’s qualifications, independence and performance. The Audit Committee is comprised of Messrs. Hui, Kavanaugh, Leary and Ward. The Audit Committee met six times during the fiscal year ended
June 30, 2011. Mr. Kavanaugh acts as the Chairman of the Audit Committee.
Governance Committee.
The
Governance Committee’s function is to oversee and make recommendations to the full Board with respect to governance of the Fund, selection and nomination of Trustees, compensation of Trustees, and related matters. The Governance Committee will
consider recommendations for nominees from shareholders sent to the Secretary of the Trust, 200 Crescent Court, Suite 700, Dallas, Texas 75201. A nomination submission must include all information relating to the recommended nominee that is required
to be disclosed in solicitations or proxy statements for the election of Trustees, as well as information sufficient to evaluate the recommended nominee’s ability to meet the responsibilities of a Trustee of the Trust. Nomination submissions
must be accompanied by a written consent of the individual to stand for election if nominated by the Board of Trustees and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as
reasonably requested by the Governance Committee. The Governance Committee is comprised of all of the Fund’s Trustees. The Governance Committee was established in June 2012 to replace the Nominating Committee and did not meet during the fiscal
year ended June 30, 2011. The Nominating Committee did not meet during the fiscal year ended June 30, 2011. Mr. Kavanaugh acts as the Chairman of the Governance Committee.
Litigation Committee.
The Litigation Committee’s function is to seek to address any potential conflicts of interest among the
Trust and the Adviser in connection with any potential or existing litigation or other legal proceeding relating to securities held by the Trust and the Adviser or another client of the Adviser. The Litigation Committee is comprised of Messrs. Hui,
Kavanaugh, Leary and Ward. The Litigation Committee met eleven times during the fiscal year ended June 30, 2011. The Litigation Committee does not have a Chairman, although meetings of the Committee are chaired by an Independent Trustee.
21
Qualified Legal Compliance Committee.
The Qualified Legal Compliance Committee
(“QLCC”) is charged with compliance with Rules 205.2(k) and 205.3(c) of Title 17 of the Code of Federal Regulations regarding alternative reporting procedures for attorneys representing the Trust who appear and practice before the SEC on
behalf of the Trust. The QLCC is comprised of Messrs. Hui, Kavanaugh, Leary and Ward. The QLCC did not meet during the fiscal year ended June 30, 2011. The QLCC does not have a Chairman, although meetings of the Committee are chaired by an
Independent Trustee.
The Trust does not have a lead Independent Trustee. As noted above, the Board’s leadership
structure features all of the Independent Trustees serving as members of each Board Committee. Inclusion of all Independent Trustees in the Committees allows them to participate in the full range of the Board’s oversight duties, including
oversight of the risk management process. In addition, although the Independent Trustees recognize that having a lead Independent Trustee may in some circumstances help coordinate communications with management and otherwise assist a board in the
exercise of its oversight duties, the Independent Trustees believe that because of the relatively small size of the Board, the ratio of Independent Trustees to Interested Trustees and the good working relationship among the Board members, it has not
been necessary to designate a lead Independent Trustee.
The Board periodically reviews its leadership structure, including
the role of the Chairman. The Board also completes an annual self-assessment during which it reviews its leadership and committee structure and considers whether its structure remains appropriate in light of the Trust’s current operations. The
Board believes that its leadership structure, including having an Independent Chairman and the current percentage of the Board who are Independent Trustees, is appropriate given its specific characteristics. These characteristics include:
(i) the extent to which the work of the Board is conducted through the standing Committees, each of whose meetings are chaired by an Independent Trustee; (ii) the extent to which the Independent Trustees meet as needed, together with their
independent legal counsel, in the absence of members of management and members of the Board who are “interested persons” of the Trust; and (iii) Mr. Powell’s position with the Adviser, which enhances the Board’s
understanding of the operations of the Adviser.
Board Oversight of Risk Management
The Board’s role is one of oversight, rather than active management. This oversight extends to the Trust’s risk management
processes. These processes are embedded in the responsibilities of officers of, and service providers to, the Trust. For example, the Adviser and other service providers to the Trust are primarily responsible for the management of the Trust’s
investment risks. The Board has not established a formal risk oversight committee; however, much of the regular work of the Board and its standing Committees addresses aspects of risk oversight. For example, the Trustees seek to understand the key
risks facing the Trust, including those involving conflicts of interest; how management identifies and monitors these risks on an ongoing basis; how management develops and implements controls to mitigate these risks; and how management tests the
effectiveness of those controls.
In the course of providing that oversight, the Board receives a wide range of reports on
the Trust’s activities from the Adviser and other service providers, including reports regarding the Fund’s investment portfolios, the compliance of the Fund with applicable laws, and the Fund’s financial accounting and reporting. The
Board also meets periodically with the Trust’s Chief Compliance Officer to receive reports regarding the compliance of the Fund with the federal securities laws and the Trust’s internal compliance policies and procedures, and meets with
the Trust’s Chief Compliance Officer periodically, including at least annually, to review the Chief Compliance Officer’s annual report, including the Chief Compliance Officer’s risk-based analysis for the Trust. The Board’s Audit
Committee also meets regularly with the Treasurer and Trust’s independent public accounting firm to discuss, among other things, the internal control structure of the Trust’s financial reporting function. The Board also meets periodically
with the portfolio manager of the Fund to receive reports regarding the management of the Fund, including its investment risks.
22
Share Ownership
The following table shows the dollar range of equity securities beneficially owned by the Trustees in the Fund and the aggregate dollar range of equity securities owned by the Trustees in all funds
overseen by the Trustees in the Pyxis Fund Complex as of December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
Name of
Trustee
|
|
Dollar Range of Equity Securities
Owned in
the Fund
|
|
|
Aggregate Dollar Range of Equity
Securities Owned in All Funds
Overseen by Trustee
in the Pyxis
Fund Complex
|
|
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
Ethan Powell
|
|
$
|
0
|
|
|
$
|
1–$10,000
|
|
|
Independent Trustees
|
|
|
|
|
|
|
|
|
|
Timothy K. Hui
|
|
$
|
0
|
|
|
$
|
1–$10,000
|
|
|
Scott F. Kavanaugh
|
|
$
|
0
|
|
|
$
|
10,001–$50,000
|
|
|
James F. Leary
|
|
$
|
0
|
|
|
$
|
10,001–$50,000
|
|
|
Bryan A. Ward
|
|
$
|
0
|
|
|
$
|
1–$10,000
|
|
Trustee Positions
As of December 31, 2011, no Independent Trustee nor any of his immediate family members owned beneficially or of record any class of securities of the Adviser or Distributor or any person
controlling, controlled by or under common control with any such entities.
Other Interests
In the third quarter of 2012, certain trusts of which members of James Dondero’s family are beneficiaries (the “Family
Trust”) purchased approximately one million dollars of shares issued by First Foundation, Inc., a bank holding company of which Mr. Kavanaugh is the Vice Chairman, President, Chief Executive Officer and Chief Operating Officer. Following this
purchase, the Family Trust holds approximately three and a half million dollars, or less than 4%, of First Foundation, Inc. shares.
Code of Ethics
The
Fund and the Adviser have each adopted codes of ethics that essentially prohibit certain of their personnel, including the Fund’s portfolio manager, from engaging in personal investments that compete or interfere with, or attempt to take
advantage of a client’s, including the Fund’s, anticipated or actual portfolio transactions, and are designed to assure that the interests of clients, including Fund shareholders, are placed before the interests of personnel in connection
with personal investment transactions. Under the codes of ethics of the Fund and the Adviser, personal trading is permitted by such persons subject to certain restrictions; however, they are generally required to pre-clear most securities
transactions with the appropriate compliance officer and to report all transactions on a regular basis.
Anti-Money Laundering
Compliance
The Fund and its service providers may be required to comply with various anti-money laundering laws and
regulations. Consequently, the Fund and its service providers may request additional information from its Authorized Participants (as defined under “Policy on Disclosure of Portfolio Holdings” in this SAI) to verify the identity of its
Authorized Participants. If at any time the Fund believes an Authorized Participant may be involved in suspicious activity or if certain account information matches information on government lists of suspicious persons, the Fund may choose not to
establish a new account or may be required to “freeze” an Authorized Participant’s account. The Fund and its service providers also may be required to provide a governmental agency with information about transactions that have
occurred in an Authorized Participant’s account or to transfer monies received to establish a new account, transfer an existing account or transfer the proceeds of an existing account to a governmental agency. In some circumstances, the Fund or
its service providers may not be permitted to inform the Authorized Participant that it has taken the actions described above.
Proxy
Voting Policies
The Board has delegated voting of proxies in respect of the Fund’s portfolio holdings to the Adviser,
to vote the Fund’s proxies in accordance with the Adviser’s Proxy Voting Policy. Pursuant to the applicable Proxy Voting Policy, the Adviser will vote proxies related to Fund securities in the best interests of the Fund and its
shareholders. The Adviser’s Proxy Voting Policy is attached as Appendix B.
23
The Fund’s proxy voting record for the most recent 12-month period ended
June 30 will be available (i) without charge, upon request, by calling (855) 799-4757 and (ii) on the SEC’s website (http://www.sec.gov). Information as of June 30 each year will generally be available on or about the
following August 31.
Policy on Disclosure of Portfolio Holdings
The Trust has adopted a policy regarding the disclosure of information about the Fund’s portfolio holdings, which is reviewed on an
annual basis. The Board of Trustees must approve all material amendments to this policy. A complete schedule of the Fund’s portfolio holdings as of the end of each fiscal quarter will be filed with the SEC (and publicly available) within 60
days of the end of the first and third fiscal quarters and within 70 days of the second and fourth quarters. In addition, the Fund disseminates information about its portfolio holdings each day the Fund is open for business through the Exchange, the
NSCC and/or third party service providers.
The portfolio composition file (“PCF”) and the IOPV file, which
contain equivalent portfolio holdings information, will be made available as frequently as daily to the Fund’s service providers to facilitate the provision of services to the Fund and to certain other entities (“Entities”) in
connection with the dissemination of information necessary for transactions in Creation Units, as contemplated by exemptive orders issued by the SEC and other legal and business requirements pursuant to which the Fund creates and redeems shares.
Entities are generally limited to National Securities Clearing Corporation (“NSCC”) members and subscribers to various fee-based services, including large institutional investors (“Authorized Participants”) that have been
authorized by the Distributor to purchase and redeem Creation Units and other institutional market participants that provide information services. Each business day, Fund portfolio holdings information will be provided to the Distributor or other
agent for dissemination through the facilities of the NSCC and/or through other fee-based services to NSCC members and/or subscribers to the fee-based services, including Authorized Participants, and to entities that publish and/or analyze such
information in connection with the process of purchasing or redeeming Creation Units or trading shares of the Fund in the secondary market.
Daily access to the PCF and IOPV file is permitted (i) to certain personnel of those service providers that are involved in portfolio management and providing administrative, operational, or other
support to portfolio management, including Authorized Participants, and (ii) to other personnel of the Adviser and the Fund’s distributor, administrator, custodian and fund accountant who are involved in functions which may require such
information to conduct business in the ordinary course.
Portfolio holdings information may not be provided prior to its
public availability (“Non-Standard Disclosure”) in other circumstances except where appropriate confidentiality arrangements limiting the use of such information are in effect. Non-Standard Disclosure may be authorized by the Trust’s
Chief Compliance Officer or, in his absence, any other authorized officer of the Trust if he determines that such disclosure is in the best interests of the Fund’s shareholders, no conflict exists between the interests of the Fund’s
shareholders and those of the Adviser or Distributor and such disclosure serves a legitimate business purpose. The length of lag, if any, between the date of the information and the date on which the information is disclosed shall be determined by
the officer authorizing the disclosure.
Book Entry Only System
The Depository Trust Company (“DTC”) acts as securities depositary for the shares. The shares of the Fund are represented by
global securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Except as provided below, certificates will not be issued for shares.
DTC has advised the Trust as follows: it is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation”
within the meaning of the New York Uniform Commercial Code and a “clearing agency” registered pursuant to the provisions of Section 17A of the 1934 Act. DTC was created to hold securities of its participants (“DTC
Participants”) and to facilitate the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book-entry changes in accounts of the DTC Participants, thereby eliminating the need for
physical movement of securities
24
certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations, some of whom (and/or their representatives)
own DTC. More specifically, DTC is owned by a number of its DTC Participants and by the NYSE and the Financial Industry Regulatory Authority, Inc. Access to the DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly (“Indirect Participants”). DTC agrees with and represents to DTC Participants that it will administer its book-entry
system in accordance with its rules and by-laws and requirements of law. Beneficial ownership of shares is limited to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership
of beneficial interests in shares (owners of such beneficial interests are referred to herein as “Beneficial Owners”) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC
Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial Owners that are not DTC Participants).
Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase of shares. The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such laws may impair the ability of certain investors to acquire beneficial interests in shares. Beneficial Owners of shares are not entitled to have shares registered in their
names, will not receive or be entitled to receive physical delivery of certificates in definitive form and are not considered the registered holder thereof. Accordingly, each Beneficial Owner must rely on the procedures of DTC, the DTC Participant
and any Indirect Participant through which such Beneficial Owner holds its interests, to exercise any rights of a holder of shares. The Trust understands that under existing industry practice, in the event the Trust requests any action of holders of
shares, or a Beneficial Owner desires to take any action that DTC, as the record owner of all outstanding shares, is entitled to take, DTC would authorize the DTC Participants to take such action and that the DTC Participants would authorize the
Indirect Participants and Beneficial Owners acting through such DTC Participants to take such action and would otherwise act upon the instructions of Beneficial Owners owning through them. As described above, the Trust recognizes DTC or its nominee
as the owner of all shares for all purposes. Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the Trust and DTC, DTC is required to make
available to the Trust upon request and for a fee to be charged to the Trust a listing of shares holdings of each DTC Participant. The Trust shall inquire of each such DTC Participant as to the number of Beneficial Owners holding shares, directly or
indirectly, through such DTC Participant. The Trust shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC Participant may reasonably request, in order
that such notice, statement or communication may be transmitted by such DTC Participant, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant a fair and reasonable amount as reimbursement
for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.
Distributions of shares shall be made to DTC or its nominee, Cede & Co., as the registered holder of all shares. DTC or its
nominee, upon receipt of any such distributions, shall credit immediately DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in shares as shown on the records of DTC or its nominee.
Payments by DTC Participants to Indirect Participants and Beneficial Owners of shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a “street name,” and will be the responsibility of such DTC Participants. The Trust has no responsibility or liability for any aspects of the records relating to or notices to Beneficial Owners, or
payments made on account of beneficial ownership interests in such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between DTC and the DTC
Participants or the relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants.
DTC may determine to discontinue providing its service with respect to shares at any time by giving reasonable notice to the Trust and discharging its responsibilities with respect thereto under
applicable law. Under such circumstances, the Trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing
ownership of shares, unless the Trust makes other arrangements with respect thereto satisfactory to the Exchange.
25
No dividend reinvestment service is provided by the Trust. However, certain brokers may make
a dividend reinvestment service available to their clients. Brokers offering such services may require investors to adhere to specific procedures and timetables in order to participate. Investors interested in such a service should contact their
broker for availability and other necessary details.
INVESTMENT ADVISORY SERVICES
Pyxis serves as the Fund’s investment adviser pursuant to an Investment Advisory Agreement with the Fund.
Pyxis is owned by Highland Capital Management Services, Inc., a Delaware corporation (“HCM Services, Inc.”), and its general partner Strand Advisors XVI, Inc., of which James Dondero is the sole stockholder. HCM Services, Inc. is
controlled by Mr. Dondero and Mark Okada by virtue of their respective share ownership.
Under the Investment Advisory
Agreement, Pyxis receives a monthly fee, computed and accrued daily, at the annual rate of 0.45% of the Fund’s average daily managed assets. “Average Daily Managed Assets” of the Fund means the average daily value of the total assets
of the Fund, less all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings constituting financial leverage).
Under the Investment Advisory Agreement, Pyxis, among other things: (i) continuously furnishes an investment program for the Fund; (ii) places orders for the purchase and sale of securities for
the accounts of the Fund; and (iii) votes, exercises consents and exercises all other rights pertaining to such securities on behalf of the Fund.
Pyxis carries out its duties under the Investment Advisory Agreement at its own expense. The Fund pays its own ordinary operating and activity expenses, such as legal and auditing fees, investment
advisory fees, administrative fees, custodial fees, transfer agency fees, the cost of communicating with shareholders and registration fees, as well as other operating expenses such as interest, taxes, brokerage, insurance, bonding, compensation of
Independent Trustees of the Fund and extraordinary expenses.
The Investment Advisory Agreement provides that in the absence
of willful misfeasance, bad faith or gross negligence in the performance (or reckless disregard) of its obligations or duties thereunder on the part of Pyxis, Pyxis shall not be subject to liability to the Fund for any error of judgment or mistake
of law or for any loss suffered by the Fund in connection with the matters to which the Investment Advisory Agreement relates.
Conflicts of Interests.
Pyxis and/or its general partner, limited partners, officers, affiliates and employees provide investment
advice to other parties and manage other accounts and private investment vehicles. In connection with such other investment management activities, the Adviser and/or its general partner, limited partners, officers, affiliates and employees may
decide to invest the funds of one or more other accounts or recommend the investment of funds by other parties, rather than the Fund’s monies, in a particular security or strategy. In addition, the Adviser and such other persons will determine
the allocation of funds from the Fund and such other accounts to investment strategies and techniques on whatever basis they consider appropriate or desirable in their sole and absolute discretion.
The Adviser has built a professional working environment, a firm-wide compliance culture and compliance procedures and systems designed
to protect against potential incentives that may favor one account over another. The Adviser has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by
employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, the Adviser furnishes advisory services to numerous clients in addition to the Fund, and the
Adviser may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts that are hedge funds or have performance or higher fees paid to the Adviser or in which portfolio manager has a personal
interest in the receipt of such fees) that may be the same as or different from those made to the Fund. In addition, the Adviser, its affiliates and any of their partners, directors, officers, stockholders or employees may or may not have an
interest in the securities whose purchase and sale the Adviser recommends to the Fund. Actions with respect to securities of the same kind may be the same as or different from the action that the Adviser, or any of its affiliates, or any of their
partners, directors,
26
officers, stockholders or employees or any member of their families may take with respect to the same securities. Moreover, the Adviser may refrain from rendering any advice or services
concerning securities of companies of which any of the Adviser’s (or its affiliates’) partners, directors, officers or employees are directors or officers, or companies as to which the Adviser or any of its affiliates or partners,
directors, officers and employees of any of them has any substantial economic interest or possesses material non-public information. In addition to its various policies and procedures designed to address these issues, the Adviser includes disclosure
regarding these matters to its clients in both its Form ADV and investment advisory agreements.
The Adviser, its affiliates
or their partners, directors, officers or employees similarly serve or may serve other entities that operate in the same or related lines of business. Accordingly, these individuals may have obligations to investors in those entities or funds or to
other clients, the fulfillment of which might not be in the best interests of the Fund. As a result, the Adviser will face conflicts in the allocation of investment opportunities to the Fund and other funds and clients. In order to enable such
affiliates to fulfill their fiduciary duties to each of the clients for which they have responsibility, the Adviser will endeavor to allocate investment opportunities in a fair and equitable manner which may, subject to applicable regulatory
constraints, involve pro rata co-investment by the Fund and such other clients or may involve a rotation of opportunities among the Fund and such other clients.
While the Adviser does not believe there will be frequent conflicts of interest, if any, the Adviser and its affiliates have both subjective and objective procedures and policies in place designed to
manage the potential conflicts of interest between the Adviser’s fiduciary obligations to the Fund and their similar fiduciary obligations to other clients so that, for example, investment opportunities are allocated in a fair and equitable
manner among the Fund and such other clients. An investment opportunity that is suitable for multiple clients of the Adviser and its affiliates may not be capable of being shared among some or all of such clients due to the limited scale of the
opportunity or other factors, including regulatory restrictions imposed by the 1940 Act. There can be no assurance that the Adviser’s or its affiliates’ efforts to allocate any particular investment opportunity fairly among all clients for
whom such opportunity is appropriate will result in an allocation of all or part of such opportunity to the Fund. Not all conflicts of interest can be expected to be resolved in favor of the Fund.
INFORMATION REGARDING PORTFOLIO MANAGER
The portfolio manager of the Fund is Ethan Powell. The following tables provide information about funds and accounts, other than the
Fund, for which the portfolio manager is primarily responsible for the day-to-day portfolio management.
As of the date of
this SAI, Ethan Powell managed the following client accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type of Accounts
|
|
Total
# of
Accounts
Managed
|
|
|
Total
Assets
(millions)
|
|
|
# of
Accounts
Managed
with
Performance-Based
Advisory Fee
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|
|
Total Assets
with
Performance-Based
Advisory
Fee
(millions)
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Registered Investment Companies:
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0
|
|
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$
|
0
|
|
|
|
0
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|
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$
|
0
|
|
|
Other Pooled Investment Vehicles:
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|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
Other Accounts:
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|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
Compensation Structure – Pyxis
Pyxis’s financial arrangements with its portfolio manager, its competitive compensation and its career path emphasis at all levels
reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors, including the pre-tax relative performance of a portfolio manager’s
underlying account, the pre-tax combined performance of the portfolio manager’s underlying accounts, and the pre-tax relative performance of the portfolio manager’s underlying accounts measured against other employees. The principal
components of compensation include a base salary, a discretionary bonus, various retirement benefits and one or more of the incentive compensation programs established by Pyxis, such as its “Short-Term Incentive Plan” and its
“Long-Term Incentive Plan,” described below.
27
Base compensation.
Generally, portfolio managers receive base compensation based on
their seniority and/or their position with Pyxis, which may include the amount of assets supervised and other management roles within Pyxis. Base compensation is determined by taking into account current industry norms and market data to ensure that
Pyxis pays a competitive base compensation.
Discretionary compensation.
In addition to base compensation, portfolio
managers may receive discretionary compensation, which can be a substantial portion of total compensation. Discretionary compensation can include a discretionary cash bonus paid to recognize specific business contributions and to ensure that the
total level of compensation is competitive with the market, as well as participation in incentive plans, including one or more of the following:
Short-Term Incentive Plan—The purpose of this plan is to attract and retain the highest quality employees for positions of substantial responsibility, and to provide additional incentives to a select
group of management or highly-compensated employees of Pyxis in order to promote the success of Pyxis.
Long-Term Incentive Plan—The purpose of this plan is to create positive morale and teamwork, to attract and retain
key talent and to encourage the achievement of common goals. This plan seeks to reward participating employees based on the increased value of Pyxis.
Because each person’s compensation is based on his or her individual performance, Pyxis does not have a typical percentage split among base salary, bonus and other compensation. Senior portfolio
managers who perform additional management functions may receive additional compensation in these other capacities. Compensation is structured such that key professionals benefit from remaining with Pyxis.
Conflicts of Interest – Pyxis
Because the portfolio manager may manage other accounts, including accounts that may pay higher fees, potential conflicts of interest exist, including potential conflicts between the investment strategy
of the Fund and the investment strategy of the other accounts managed by the portfolio manager and potential conflicts in the allocation of investment opportunities between the Fund and the other accounts.
Ownership of Securities
The following table sets forth the dollar range of equity securities of the Fund beneficially owned by the portfolio manager. This information is provided as of June 30, 2011.
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Name of Portfolio Manager
|
|
Dollar Range of Fund Equity Securities
Beneficially Owned by Portfolio Manager
|
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Ethan Powell
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None
|
28
ADMINISTRATOR
Under the Administration Agreement with SEI Investments Global Funds Services, One Freedom Valley Drive, Oaks, PA 19456 (the
“Administrator”), the Administrator provides administration services to the Fund, as well as other services including fund accounting, shareholder services and a contact center. The Administrator receives a monthly administration fee from
the Fund, calculated and assessed in arrears based on the aggregate net assets of the Fund at an annual rate of 0.10% on the first $250,000,000 of net assets, 0.09% on the next $750,000,000 of net assets, and 0.08% on all net assets exceeding
$1,000,000,000, subject to an annual minimum fee of $85,000. The Fund pays all expenses not otherwise allocated under the Administration Agreement, including but not limited to printing and postage charges and securities registration and custodian
fees.
DISTRIBUTOR
Under a Distribution Agreement with SEI Investments Distribution Co., One Freedom Valley Drive Oaks, PA 19456 (the
“Distributor”), shares of the Fund are offered for sale on a continuous basis only in Creation Units, as described in the Prospectus and in the “Purchase and Redemption of Shares” section of this SAI below. Fund shares in amounts
less than Creation Units are not distributed by the Distributor.
The Fund has adopted a Rule 12b-1 Distribution Plan
(the “Plan”) pursuant to which payments of up to 0.25% may be made as reimbursement or compensation for distribution related activities with respect to the Fund. Under its terms, the Plan remains in effect from year to year, provided such
continuance is approved annually by vote of the Board, including a majority of the Independent Trustees. The Plan may not be amended to increase materially the amount to be spent for the services provided by the Distributor without approval by the
shareholders of the Fund, and all material amendments of the Plan also require Board approval. The Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Trustees, or, by a vote of a majority of the outstanding
voting securities of the Fund (as such vote is defined in the 1940 Act).
TRANSFER AGENT
State Street Bank and Trust Company, 200 Clarendon Street, 16th Floor, Boston, MA 02116 (“State
Street”) provides transfer agency and dividend disbursing services for the Fund. As part of these services, State Street maintains records pertaining to the sale, redemption and transfer of Fund shares and distributes the Fund’s securities
and cash distributions to shareholders.
CUSTODIAN
State Street is the custodian for the Fund. State Street is responsible for holding all securities, other investments and cash, receiving
and paying for securities purchased, delivering against payment securities sold, receiving and collecting income from investments, making all payments covering expenses and performing other administrative duties, all as directed by authorized
persons. State Street does not exercise any supervisory function in such matters as purchase and sale of portfolio securities, payment of dividends or payment of expenses.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund is PricewaterhouseCoopers LLP, located at 2001 Ross Avenue, Suite 1800, Dallas, TX 75201. The independent registered public accounting firm
audits and reports on the annual financial statements, reviews certain regulatory reports and U.S. federal income tax returns, and performs other professional accounting, auditing and tax services when engaged to do so.
29
PORTFOLIO TRANSACTIONS AND BROKERAGE
Selection of Broker-Dealers; Order Placement
Subject to the overall review of the Fund’s Board of Trustees, the Adviser is responsible for decisions to buy and sell securities and other portfolio holdings of the Fund, for selecting the broker
or dealer to be used and for negotiating any commission rates paid. In underwritten offerings, securities usually are purchased at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the
underwriter’s concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid.
The Adviser and its affiliates manage other accounts, including private funds and individual accounts that invest in Fund investments.
Although investment decisions for the Fund are made independently from those of such other accounts, investments of the type the Fund may make also may be made on behalf of such other accounts. When the Fund and one or more other accounts is
prepared to invest in, or desires to dispose of, the same investment, available investments or opportunities for each are allocated in a manner believed by the Adviser to be equitable over time. The Adviser may (but is not obligated to) aggregate
orders, which may include orders for accounts in which the Adviser or its affiliates have an interest, to purchase and sell securities to obtain favorable execution or lower brokerage commissions, to the extent permitted by applicable laws and
regulations. Although the Adviser believes that, over time, the potential benefits of participating in volume transactions and negotiating lower transaction costs should benefit all participating accounts, in some cases these activities may
adversely affect the price paid or received or the size of the position obtained by or disposed of for the Fund. Where trades are aggregated, the investments or proceeds, as well as the expenses incurred, will be allocated by the Adviser in a manner
designed to be equitable and consistent with the Adviser’s fiduciary duty to the Fund and its other clients (including its duty to seek to obtain best execution of client trades).
Commission Rates; Brokerage and Research Services
The Adviser seeks to
obtain “best execution,” considering the execution price and overall commission costs paid and other factors. The Adviser routes its orders to various broker-dealers for execution at its discretion. Factors involved in selecting brokerage
firms include the size, type and difficulty of the transaction, the nature of the market for the security, the reputation, experience and financial stability of the broker-dealer involved, the quality of service, the quality of research and
investment information provided and the firm’s risk in positioning a block of securities. Within the framework of the policy of obtaining the most favorable price and efficient execution, the Adviser does consider “brokerage and research
services” (as defined in the Securities Exchange Act of 1934, as amended) provided by brokers who effect portfolio transactions with the Adviser or the Fund. “Brokerage and research services” are services that brokerage houses
customarily provide to institutional investors and include statistical and economic data and research reports on particular issuers and industries.
Because the Fund had not yet commenced operations prior to the date of this SAI, information on brokerage commissions paid by the Fund is not included in this SAI.
Certain Affiliations
The Fund and Pyxis are currently affiliated with NexBank Securities, Inc. (“NexBank”), a FINRA member broker-dealer that is
indirectly controlled by the principals of Pyxis. Absent an exemption from the SEC or other regulatory relief, the Fund is generally precluded from effecting certain principal transactions with affiliated brokers. The Fund may utilize affiliated
brokers for agency transactions, subject to compliance with policies and procedures adopted pursuant to the 1940 Act and the rules promulgated thereunder. These policies and procedures are designed to provide that commissions, fees or other
remuneration received by any affiliated broker or its affiliates for agency transactions are reasonable and fair compared to the remuneration received by other brokers in comparable transactions.
In addition to the affiliation with NexBank, the Fund and Pyxis are currently affiliated with Barrier Advisors, Inc.
(“Barrier”), a restructuring and financial advisor, and Governance Re Ltd. (“Governance Re”), an insurance company, both of which are indirectly controlled by the principals of Pyxis. NexBank, Barrier and Governance Re may offer
certain services to portfolio companies whose securities, including loans, are owned by one or more registered investment companies advised by Pyxis (the “Portfolio Companies”). For example, NexBank may provide agent services for Portfolio
Companies under credit agreements pursuant to which the Fund may be a lender; Barrier may offer strategic, financial and operational advisory services to Portfolio Companies; and Governance Re may offer insurance services to the Portfolio
Companies. NexBank, Barrier, Governance Re and other affiliated service providers may receive fees from Portfolio Companies or other parties for services provided.
30
The Fund’s Board will, in accordance with specific procedures and policies adopted by
the Board, review any investment or operational decisions that are brought to the attention of the Board and that may present potential conflicts of interest between Pyxis and the Fund.
DESCRIPTION OF THE FUND’S SHARES
The Fund is a series of the Trust, a Delaware statutory trust formed on February 28, 2006. The Trust is authorized to issue an
unlimited number of its shares of beneficial interest in separate series and classes of each series. The Trust is not required to hold regular annual shareholder meetings, but may hold special meetings for consideration of proposals requiring
shareholder approval, such as changing fundamental policies or upon the written request of 10% of the Trust’s shares to replace its Trustees. The Trust’s Board of Trustees is authorized to classify or reclassify the unissued shares of the
Trust into one or more separate series of shares representing a separate, additional investment portfolio or one or more separate classes of new or existing series. Shares of all series will have identical voting rights, except where by law certain
matters must be approved by the requisite proportion of the shares of the affected series. Each share of any class when issued has equal dividend, liquidation (see “Purchase and Redemption of Shares”) and voting rights within the class for
which it was issued and each fractional share has those rights in proportion to the percentage that the fractional share represents a whole share. Shares will be voted in the aggregate except where otherwise required by law and except that each
class of each series will vote separately on certain matters pertaining to its distribution and shareholder servicing arrangements.
There are no conversion or preemptive rights in connection with any shares of the Fund. All shares, when issued in accordance with the terms of the offering, will be fully paid and nonassessable.
The shares of the Fund have noncumulative voting rights, which means that the holders of more than 50% of the shares
of the Trust can elect 100% of the Trustees if the holders choose to do so, and, in that event, the holders of the remaining shares will not be able to elect any person or persons to the Board of Trustees.
Description of the Trust
Under Delaware law, shareholders of a statutory trust shall have the same limitation of personal liability that is extended to
stockholders of private corporations for profit organized under Delaware law, unless otherwise provided in the trust’s governing instrument. The Trust’s Agreement and Declaration of Trust (the “Declaration of Trust”) provides
that shareholders shall not be personally liable to any person in connection with any and all property, real or personal, tangible or intangible, that at such time is owned or held by or for the account of a particular series. Moreover, the
Declaration of Trust expressly provides that the shareholders shall have the same limitation of personal liability that is extended to shareholders of a private corporation for profit incorporated in the State of Delaware.
The Declaration of Trust provides that no Trustee, officer, employee or agent of the Trust or any series of the Trust shall be subject in
such capacity to any personal liability whatsoever to any person, unless, as to liability to the Trust or its shareholders, the Trustees engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their offices.
The Trust shall continue without limitation of time subject to the provisions in the Declaration of
Trust concerning termination by action of the Trustees, and without any vote of the Trust’s shareholders, except as may be required under the 1940 Act.
Trust Matters
The Trust reserves the right to create and issue a number of
series shares, in which case the shares of each series would participate equally in the earnings, dividends and assets of the particular series and would vote separately to approve investment advisory agreements or changes in fundamental investment
policies, but shares of all series would vote together in the election or selection of Trustees and on any other matters as may be required by applicable law.
31
Upon liquidation of the Trust or any series, shareholders of the affected series would be
entitled to share pro rata in the net assets of their respective series available for distribution to such shareholders.
Shareholder
Approval
Other than elections of Trustees, which is by plurality, any matter for which shareholder approval is required by
the 1940 Act requires the affirmative “vote of a majority of the outstanding voting securities” of the Fund or the Trust at a meeting called for the purpose of considering such approval. For other matters, generally an affirmative vote of
a majority of the shares present in person or represented by proxy and entitled to vote on such matter (assuming a quorum is present) shall be required for approval of such matter.
Information for Shareholders
All shareholder inquiries regarding
administrative procedures, including the purchase and redemption of shares, should be directed to the Distributor, SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456. For assistance, call (855) 799-4757 or visit the
Fund’s website at http://www.pyxisais.com.
CONTROL PERSONS AND PRINCIPAL
SHAREHOLDERS
As of the date of this SAI, Pyxis owned of record 100% of the outstanding shares of the Fund, and
thus, until the public offering of the shares commences, will control the Fund.
As of the date of this SAI, the Trustees and
officers of the Fund as a group owned less than 1% of the then outstanding shares of the Fund.
PURCHASE AND REDEMPTION OF SHARES
The Fund issues and redeems shares only in aggregations of Creation Units.
A Creation Unit is comprised of 100,000 shares. The value of a Creation Unit at the Fund’s inception was $2,000,000.
The Board reserves the right to declare a split or a consolidation in the number of shares outstanding of the Fund, and may make a
corresponding change in the number of shares constituting a Creation Unit, in the event that the per shares price in the secondary market rises (or declines) to an amount that falls outside the range deemed desirable by the Board.
Purchase and Issuance of Creation Units.
The Fund issues and sells shares only in Creation Units on a continuous basis through the
Distributor, without a sales load, at their NAV next determined after receipt, on any Business Day (as defined herein), of an order in proper form. A “Business Day” with respect to the Fund is any day on which the Exchange is open for
business.
Creation Units of shares may be purchased only by or through a DTC Participant that has entered into an
Authorized Participant Agreement with the Distributor. Such Authorized Participant will agree pursuant to the terms of such Authorized Participant Agreement on behalf of itself or any investor on whose behalf it will act, as the case may be, to
certain conditions, including that such Authorized Participant will make available an amount of cash sufficient to pay the Balancing Amount (as defined below) if required and the Transaction Fee described in the Prospectus. The Authorized
Participant may require the investor to enter into an agreement with such Authorized Participant with respect to certain matters, including payment of the Balancing Amount. Investors who are not Authorized Participants must make appropriate
arrangements with an Authorized Participant. Investors should be aware that their particular broker may not be a DTC Participant or may not have executed an Authorized Participant Agreement, and that therefore orders to purchase Creation Units of
shares may have to be placed by the investor’s broker through an Authorized Participant. As a result, purchase orders placed through an Authorized Participant may result in additional charges to such investor. The Fund expects to enter into
Authorized Participant Agreements with only a small number of DTC Participants.
32
Creation Deposit.
The consideration for purchase of a Creation Unit of shares of the
Fund generally consists of cash only (including the appropriate Transaction Fee). However, the Fund also reserves the right to permit or require the in-kind deposit of a designated portfolio of securities (“Deposit Securities”)
constituting a representation of the Underlying Index, along with the Balancing Amount and the appropriate Transaction Fee (collectively, the “Creation Deposit”) as consideration for the purchase of a Creation Unit. The “Balancing
Amount” will be the amount equal to the differential, if any, between the total aggregate market value of the Deposit Securities and the NAV of the Creation Units being purchased and will be paid to, or received from, the Trust after the NAV
has been calculated.
The Custodian, using information provided by the Administrator, makes available through the NSCC on
each Business Day, either immediately prior to the opening of business on the Exchange or the night before, the list of the names and the required number of shares of each Deposit Security to be included in the current Creation Deposit (based on
information at the end of the previous Business Day). Such Creation Deposit is applicable, subject to any adjustments as described below, in order to effect purchases of Creation Units of shares the Fund until such time as the next-announced
Creation Deposit composition is made available. The Custodian, using information provided by the Administrator, will also make available through the NSCC on each Business Day information about the previous day’s Balancing Amount.
The identity and number of shares of the Deposit Securities required for a Creation Deposit for the Fund changes as rebalancing
adjustments and corporate action events are reflected from time to time by the Adviser with a view to the investment objective of the Fund. The composition of the Deposit Securities may also change in response to adjustments to the weighting or
composition of the securities constituting the relevant securities index. In addition, the Trust reserves the right to permit or require the substitution of an amount of cash (i.e., a “cash in lieu” amount) to be added to the Balancing
Amount to replace any Deposit Security or Deposit Securities which may not be available in sufficient quantity for delivery or for other similar reasons. The adjustments described above will reflect changes, known to the Adviser on the date of
announcement to be in effect by the time of delivery of the Creation Deposit, in the composition of the subject index being tracked by the Fund, or resulting from stock splits and other corporate actions.
In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Creation Deposit, on each
Business Day, the Balancing Amount effective through and including the previous Business Day, per outstanding share of the Fund, will be made available.
Shares may be issued in advance of receipt by the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a greater value
than the NAV of the shares on the date the order is placed in proper form since, in addition to the available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Balancing Amount, plus (ii) 105% of the
market value of the undelivered Deposit Securities (the “Additional Cash Deposit”). An additional amount of cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary
to maintain the Additional Cash Deposit with the Trust in an amount at least equal to 115% of the daily mark-to-market value of the missing Deposit Securities. The Participation Agreement will permit the Trust to buy the missing Deposit Securities
at any time. Authorized Participants will be liable to the Trust for the costs incurred by the Trust in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities
exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by the Distributor plus the brokerage and related transaction costs associated with such purchases. The Trust will return any unused portion of the
Additional Cash Deposit once all of the missing Deposit Securities have been properly received by the Custodian or purchased by the Trust and deposited into the Trust. In addition, a Transaction Fee, as listed below, will be charged in all cases.
The delivery of shares so purchased will occur no later than the third Business Day following the day on which the purchase order is deemed received by the Distributor.
33
All questions as to the number of shares of each security in the Deposit Securities and the
validity, form, eligibility and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trust’s determination shall be final and binding.
Purchases through and outside the Clearing Process.
An Authorized Participant may place an order to purchase (or redeem) Creation
Units (i) through the Continuous Net Settlement clearing processes of NSCC as such processes have been enhanced to effect purchases (and redemptions) of Creation Units, such processes being referred to herein as the “Clearing
Process,” or (ii) outside the Clearing Process. To purchase or redeem through the Clearing Process, an Authorized Participant must be a member of NSCC that is eligible to use the Continuous Net Settlement system. For purchase orders placed
through the Clearing Process, the Authorized Participant Agreement authorizes the Distributor to transmit through the Fund’s transfer agent (the “Transfer Agent”) to NSCC, on behalf of an Authorized Participant, such trade
instructions as are necessary to effect the Authorized Participant’s purchase order. Pursuant to such trade instructions to NSCC, the Authorized Participant agrees to deliver the requisite deposit securities and the Balancing Amount to the
Trust, together with the Transaction Fee and such additional information as may be required by the Distributor. A purchase order must be received by the Distributor at 4:00 p.m. Eastern time if transmitted by mail or by 3:00 p.m. Eastern time if
transmitted by telephone, facsimile or other electronic means permitted under the Participant Agreement in order to receive that day’s Closing NAV per Share.
An Authorized Participant that wishes to place an order to purchase Creation Units outside the Clearing Process must state that it is not using the Clearing Process and that the purchase instead will be
effected through a transfer of securities and cash directly through DTC. Purchases (and redemptions) of Creation Units settled outside the Clearing Process will be subject to a higher Transaction Fee than those settled through the Clearing Process.
Purchase orders effected outside the Clearing Process are likely to require transmittal by the Authorized Participant earlier on the Transmittal Date than orders effected using the Clearing Process. The Creation Deposit transfer must be ordered on
the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of the Fund by no later than 11:00 a.m. Eastern Time of the next Business Day immediately following such
Transmittal Date. The cash equal to the Cash Amount must be transferred directly to the Fund through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by the Fund no later than 2:00 p.m. Eastern Time on the next
Business Day immediately following the Transmittal Date. Those persons placing orders outside the Clearing Process should ascertain the deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of
the broker or depository institution effectuating such transfer.
Rejection of Purchase Orders.
The Trust reserves
the absolute right to reject a purchase order transmitted to it by the Distributor in respect to the Fund if (a) the order is not in proper form; (b) the purchaser or group of purchasers, upon obtaining the shares ordered, would own 80% or
more of the currently outstanding shares of the Fund; (c) the deposit securities delivered are not as specified by the Adviser and the Adviser has not consented to acceptance of an in-kind deposit that varies from the designated deposit
securities; (d) acceptance of the purchase transaction order would have certain adverse tax consequences to the Fund; (e) the acceptance of the purchase transaction order would, in the opinion of counsel, be unlawful; (f) the
acceptance of the purchase order transaction would otherwise, in the discretion of the Trust or the Adviser, have an adverse effect on the Trust or the rights of beneficial owners; (g) the value of a cash purchase amount, or the value of the
Balancing Amount to accompany an in-kind deposit, exceeds a purchase authorization limit extended to an Authorized Participant by the custodian and the Authorized Participant has not deposited an amount in excess of such purchase authorization with
the custodian prior to the relevant cut-off time for the Fund on the Transmittal Date; or (h) in the event that circumstances outside the control of the Trust, the Distributor and the Adviser make it impractical to process purchase orders. The
Trust shall notify a prospective purchaser of its rejection of the order of such person. The Trust and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of purchase transaction orders
nor shall either of them incur any liability for the failure to give any such notification.
34
Redemption of Creation Units.
Shares may be redeemed only in Creation Units at their
NAV next determined after receipt of a redemption request in proper form by the Distributor on any Business Day. The Trust will not redeem shares in amounts less than Creation Units. Beneficial owners also may sell shares in the secondary market,
but must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit
assembly of a Creation Unit of shares. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of shares to constitute a redeemable Creation Unit.
The Custodian, using information provided by the Administrator, through the NSCC, makes available prior to the opening of business on the
Exchange on each Business Day, the identity of the Fund securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Fund securities received in redemption may not be
identical to Deposit Securities that are applicable to creations of Creation Units. Redemption proceeds for a Creation Unit generally consist of cash; however, the Fund also reserves the right to make the redemptions entirely or partly in the
announced Fund securities plus or minus cash in an amount equal to the difference between the NAV of the shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund securities, less a redemption
transaction fee.
Redemptions of shares for Fund securities will be subject to compliance with applicable federal and
state securities laws, and the Fund reserves the right to redeem Creation Units for cash if the Trust could not lawfully deliver specific Fund securities upon redemptions or could not do so without first registering the Fund securities under such
laws. An Authorized Participant or an investor for which it is acting subject to a legal restriction with respect to a particular security included in the Fund securities applicable to the redemption of a Creation Unit may be paid an equivalent
amount of cash. This would specifically prohibit delivery of Fund securities that are not registered in reliance upon Rule 144A under the Securities Act to a redeeming investor that is not a “qualified institutional buyer,” as such term is
defined under Rule 144A of the Securities Act. The Authorized Participant may request the redeeming beneficial owner of the shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment.
The Fund, however, may suspend the right of redemption and postpone payment for more than seven days: (i) during periods
when trading on the Exchange is closed on days other than weekdays or holidays; (ii) during periods when trading on the Exchange is restricted; (iii) during any emergency which makes it impractical for the Fund to dispose of its securities
or fairly determine the NAV of the Fund; and (iv) during any other period permitted by the SEC for your protection.
Placement of Redemption Orders through and outside Clearing Process.
Orders to redeem Creation Units of the Fund through the
Clearing Process must be delivered through an Authorized Participant that is a member of NSCC that is eligible to use the Continuous Net Settlement System. A redemption order must be received by the Distributor prior to 4:00 p.m. Eastern Time if
transmitted by mail or by 3:00 p.m. Eastern Time if transmitted by telephone, facsimile or other electronic means permitted under the Participant Agreement in order to receive that day’s closing NAV per Share. All other procedures set forth in
the Participant Agreement must be followed in order for you to receive the NAV determined on that day. The requisite cash or Fund securities and the Balancing Amount will be transferred by the third NSCC Business Day following the date on which such
request for redemption is deemed received.
Orders to redeem Creation Units of the Fund outside the Clearing Process must be
delivered through a DTC Participant that has executed the Participant Agreement. A DTC Participant who wishes to place an order for redemption of Creation Units of a Fund to be effected outside the Clearing Process need not be a “participating
party” under the Authorized Participant Agreement, but such orders must state that the DTC Participant is not using the Clearing Process and that redemption of Creation Units will instead be effected through transfer of Shares directly through
DTC. A redemption order must be received by the Distributor prior to 4:00 p.m. Eastern Time if transmitted by mail or by 3:00 p.m. Eastern Time if transmitted by telephone, facsimile or other electronic means permitted under the Authorized
Participant Agreement in order to receive that day’s closing NAV per Share. All other procedures set forth in the Authorized Participant Agreement must be followed in order for you to receive the NAV determined on that day. The order must be
accompanied or preceded by the requisite number of shares of the Fund specified in such order, which delivery must be made through DTC to the Custodian no later than 11:00am Eastern Time on the next Business Day immediately following such
Transmittal Date (“DTC Cut-Off Time”). All other procedures set forth in the Authorized Participant Agreement must be properly followed. After the Transfer Agent has deemed an order for redemption outside the Clearing Process received, the
Transfer Agent will initiate procedures to transfer the requisite cash and, if applicable, Fund securities, which are expected to be delivered within three Business Days following the Transmittal Date on which such redemption order is deemed
received by the Transfer Agent.
35
Transaction Fees.
Authorized Participants are charged standard creation and
redemption transaction fees (“Transaction Fees”) to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units. There is a fixed and a variable component to the total Transaction Fee. A fixed
Transaction Fee is applicable to each creation or redemption transaction, regardless of the number of Creation Units purchased or redeemed. In addition, a variable Transaction Fee equal to a percentage of the value of each Creation Unit purchased or
redeemed is applicable to each creation or redemption transaction. An additional charge of up to 1% of the net asset value per Creation Unit, inclusive of the standard transaction fee, may be imposed for (i) in-kind creations effected outside
the normal Clearing Process, and (ii) cash creations (to offset the Trust’s brokerage and other transaction costs associated with using cash to purchase the requisite Deposit Securities).
Purchasers of shares in Creation Units are responsible for the costs of transferring the securities constituting the Deposit Securities
to the account of the Trust. Investors will also bear the costs of transferring securities from the Fund to their account or on their order. Investors who use the services of a broker or other such intermediary may be charged a fee for such
services.
Continuous Offering.
The method by which Creation Units of shares are created and traded may raise certain
issues under applicable securities laws. Because new Creation Units of shares are issued and sold by the Fund on an ongoing basis, at any point a “distribution,” as such term is used in the 1933 Act, may occur. Broker-dealers and other
persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus
delivery and liability provisions of the 1933 Act. For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent shares
and sells some or all of the shares comprising such Creation Units directly to its customers; or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for
shares. A determination of whether a person is an underwriter for the purposes of the 1933 Act depends upon all the facts and circumstances pertaining to that person’s activities. Thus, the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization as an underwriter. Broker-dealer firms should also note that dealers who are effecting transactions in shares, whether or not participating in the distribution of shares,
are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(3) of the 1933 Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. The Trust has
been granted an exemption by the SEC from this prospectus delivery obligation in ordinary secondary market transactions involving shares under certain circumstances, on the condition that purchasers of shares are provided with a product description
of the shares. Broker-dealer firms should note that dealers who are not “underwriters” but are participating in a distribution (as contrasted to ordinary secondary market transaction), and thus dealing with shares that are part of an
“unsold allotment” within the meaning of section 4(3)(C) of the 1933 Act, would be unable to take advantage of the prospectus delivery exemption provided by section 4(3) of the 1933 Act. Firms that incur a prospectus-delivery obligation
with respect to shares are reminded that under 1933 Act Rule 153 a prospectus delivery obligation under Section 5(b)(2) of the 1933 Act owed to a national securities exchange member in connection with a sale on the national securities exchange
is satisfied by the fact that the Fund’s Prospectus is available at the national securities exchange on which the shares of the Fund trade upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to
transactions on a national securities exchange and not with respect to “upstairs” transactions.
36
INCOME TAX CONSIDERATIONS
The following discussion of U.S. federal income tax consequences of investment in the Fund is based on the Code, U.S. Treasury
regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative, administrative, or judicial action, possibly with retroactive effect. The following discussion is only a summary of some
of the important U.S. federal tax considerations generally applicable to investments in the Fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisers regarding their
particular situation and the possible application of U.S. federal, state, local, foreign and other tax laws.
Taxation of the Fund
The Fund intends to elect to be treated as a regulated investment company under Subchapter M of the Code and intends
each year to qualify and to be eligible to be treated as such. In order to qualify for the special tax treatment accorded RICs and their shareholders, the Fund must, among other things:
(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect
to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies and (ii) net income derived from interests in “qualified publicly traded partnerships” (as described below);
(b) diversify its holdings so that, at the end of each quarter of the Fund’s taxable year, (i) at least 50% of
the market value of the Fund’s total assets consists of cash and cash items, U.S. government securities, securities of other RICs, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the
Fund’s total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the Fund’s total assets is invested (x) in the securities (other than those of the U.S.
government or other RICs) of any one issuer or of two or more issuers that the Fund controls and that are engaged in the same, similar or related trades or businesses, or (y) in the securities of one or more qualified publicly traded
partnerships (as described below); and
(c) distribute with respect to each taxable year at least 90% of the
sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term
capital losses) and net tax-exempt income, for such year.
In general, for purposes of the 90% gross income requirement
described in (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized directly by the
RIC. However, 100% of the net income derived from an interest in a “qualified publicly traded partnership” (generally, a partnership (x) the interests in which are traded on an established securities market or are readily tradable on
a secondary market or the substantial equivalent thereof, and (y) that derives less than 90% of its income from the qualifying income sources described in paragraph (a)(i) above) will be treated as qualifying income. In general, such entities
will be treated as partnerships for U.S. federal income tax purposes because they meet the passive income requirement under Code Section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to RICs, such
rules do apply to a RIC with respect to items attributable to an interest in a qualified publicly traded partnership.
For
purposes of meeting the diversification requirement described in (b) above, the term “outstanding voting securities of such issuer” will include the equity securities of a qualified publicly traded partnership. Also, for purposes of
the diversification requirement described in (b) above, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In some cases, identification of
the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the Internal Revenue Service (“IRS”) with respect to issuer identification for a particular type of investment may adversely affect
the Fund’s ability to meet diversification test in (b) above.
37
If the Fund qualifies as a RIC that is accorded special tax treatment, the Fund will not be
subject to U.S. federal income tax on income distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).
If the Fund were to fail to meet the income, diversification or distribution test (described respectively in (a), (b) and (c) above), the Fund could in some cases cure such failure, including by
paying a Fund-level tax, paying interest, making additional distributions or disposing of certain assets. If the Fund were ineligible to or otherwise did not cure such failure for any taxable year, or if the Fund were otherwise to fail to qualify as
a RIC accorded special tax treatment for such year, the Fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions might be eligible for the dividends received deduction in the case of corporate shareholders and to be treated as “qualified dividend
income” and thus taxable at the lower long-term capital gain rate in the case of shareholders taxed as individuals, provided in both cases, the shareholder meets certain holding period and other requirements in respect of the Fund’s shares
(as described below). In addition, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a RIC that is accorded special tax treatment.
The Fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income
(computed without regard to the dividends-paid deduction) and may distribute its net capital gain. Any investment company taxable income retained by the Fund will be subject to Fund-level tax at regular corporate rates. The Fund may also retain for
investment its net capital gain. If the Fund retains any net capital gain, it will be subject to Fund-level tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gain in a timely notice
to its shareholders who would then, in turn, be (i) required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) entitled to credit their proportionate
shares of the tax paid by that Fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. If the Fund makes
this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the Fund would be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included
in the shareholder’s gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The Fund is not required to, and there can be no assurance the Fund
will, make this designation if it retains all or a portion of its net capital gain in a taxable year.
In determining its net
capital gain, including in connection with determining the amount available to support a Capital Gain Dividend, its taxable income and its earnings and profits, the Fund generally may elect to treat part or all of any post-October capital loss
(defined as the greatest of net capital loss, net long-term capital loss or net short-term capital loss, in each case attributable to the portion of the taxable year after October 31) or late-year ordinary loss (generally, (i) net ordinary
loss from the sale, exchange or other taxable disposition of property, attributable to the portion of the taxable year after October 31, plus (ii) other net ordinary loss attributable to the portion of the taxable year after
December 31) as if incurred in the succeeding taxable year.
If the Fund were to fail to distribute in a calendar year at
least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending October 31 of such year, plus any such amounts retained from the prior year, the Fund would be
subject to a nondeductible 4% excise tax on the undistributed amounts. For purposes of the required excise tax distribution, the Fund’s ordinary gains and losses from the sale, exchange or other taxable disposition of property that would
otherwise be taken into account after October 31 of a calendar year generally are treated as arising on January 1 of the following calendar year. Also for these purposes, the Fund will be treated as having distributed any amount on which
it has been subject to corporate income tax in the taxable year ending within the calendar year.
38
A dividend paid to shareholders in January of a year generally is deemed to have been paid
by the Fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The Fund intends generally to make distributions sufficient
to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so. In that event, the Fund will be liable for the excise tax only on the amount by which it does not meet the foregoing distribution
requirement.
Capital losses in excess of capital gains (“net capital losses”) are not permitted to be deducted
against the Fund’s net investment income. Instead, subject to certain limitations, the Fund may carry net capital losses forward to subsequent taxable years to offset capital gains, if any, realized during such subsequent taxable year. Capital
loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the Fund retains or distributes such gains. Carryforward losses may be carried forward to one or more subsequent taxable years without
expiration. Any such carryforward losses will retain their character as short-term or long-term. The Fund’s ability to use net capital losses to offset gains may be limited as a result of certain (i) acquisitive reorganizations and
(ii) shifts in the ownership of the Fund by a shareholder owning or treated as owning 5% or more of the stock of the Fund. The Fund’s available capital loss carryforwards will be set forth in its annual shareholder report for each fiscal
year.
Fund Distributions
Distributions are taxable to shareholders even if they are paid from gains earned by the Fund before a shareholder’s investment (and thus were included in the price the shareholder paid).
Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares pursuant to DTC’s Dividend Reinvestment Service (see “Dividends and Other Distributions” in the Fund’s Prospectus).
The Fund (or broker or other financial intermediary through which you own your shares) will send information after the end of
each calendar year setting forth the amount and tax status of any distributions paid to you by the Fund. Ordinary income dividends and Capital Gain Dividends (defined below) may also be subject to state, local or other taxes.
For U.S. federal income tax purposes, distributions of investment income are generally taxable to shareholders as ordinary income. Taxes
on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long a shareholder has owned his or her shares. In general, the Fund will recognize long-term capital gain or loss on
investments it has owned (or is deemed to have owned) for more than one year, and short-term capital gain or loss on investments it has owned (or is deemed to have owned) for one year or less. Distributions of net capital gain (that is, the excess
of net long-term capital gain over net short-term capital loss, in each case determined with reference to loss carryforwards) that are properly reported by the Fund as capital gain dividends (“Capital Gain Dividends”) will be taxable to
shareholders as long-term capital gains. Long-term capital gain rates applicable to individuals have been temporarily reduced—in general, to 15% with a 0% rate applying to taxpayers in the 10% and 15% rate brackets—for taxable years
beginning before January 1, 2013. These reduced rates will expire for taxable years beginning on or after January 1, 2013, unless Congress enacts legislation providing otherwise. Distributions of net short-term capital gain (as reduced by
any net long-term capital loss for the taxable year) will be taxable to shareholders as ordinary income. For taxable years beginning before January 1, 2013, distributions of investment income reported by the Fund as derived from “qualified
dividend income” will be taxed in the hands of individuals at the rates applicable to long-term capital gain, provided holding period and other requirements are met at both the shareholder and Fund level. This provision will expire for taxable
years beginning on or after January 1, 2013, unless Congress enacts legislation providing otherwise. The Fund does not expect a significant portion of Fund distributions to be eligible for treatment as qualified dividend income.
Dividends of net investment income received by corporate shareholders of the Fund generally will qualify for the 70% dividends-received
deduction generally available to corporations to the extent of the amount of eligible dividends received by that Fund from domestic corporations for the taxable year, provided holding period and other requirements are met at both the shareholder and
Fund level. The Fund does not expect a significant portion of Fund distributions to be eligible for the corporate dividends-received deduction.
39
For taxable years beginning on or after January 1, 2013, Section 1411
of the Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals whose income exceeds certain threshold amounts, and of certain trusts and estates under similar rules. The details of the
implementation of this tax and of the calculation of net investment income, among other issues, are currently unclear and remain subject to future guidance. For these purposes, “net investment income” generally includes, among other
things, (i) distributions paid by the Fund of net investment income and capital gains as described above, and (ii) any net gain from the sale, redemption or exchange of Fund shares. Shareholders are advised to consult their tax advisors
regarding the possible implications of this additional tax on their investment in the Fund.
Return of Capital Distributions
If the Fund makes a distribution to a shareholder in excess of that Fund’s current and accumulated earnings and
profits in any taxable year, the excess distribution will be treated as a return of capital to the extent of such shareholder’s tax basis in its shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a
shareholder’s tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares.
Dividends and distributions on the Fund’s shares are generally subject to U.S. federal income tax as described herein to the extent they do not exceed that Fund’s realized income and gains, even
though such dividends and distributions may economically represent a return of a particular shareholder’s investment. Such distributions are likely to occur in respect of shares purchased at a time when the Fund’s net asset value reflects
either unrealized gains or realized but undistributed gains that were therefore included in the price that the shareholder paid. Such distributions may reduce the fair market value of the Fund’s shares below the shareholder’s cost basis in
those shares. As described above, the Fund is required to distribute realized income and gains regardless of whether that Fund’s net asset value also reflects unrealized losses.
Tax Implications of Certain Fund Investments
Some debt obligations
with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) will be treated as debt obligations that are issued originally
at a discount. Generally, the amount of the original issue discount (“OID”) is treated as interest income and is included in the Fund’s income (and required to be distributed by the Fund) over the term of the debt security, even
though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security.
Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the Fund in the secondary market may be treated as having market discount. Very
generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its “revised issue price”) over the purchase price of such obligation. Generally, any gain
recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the “accrued market discount” on
such debt security. Alternatively, the Fund may elect to accrue market discount currently and thus distribute it over the term of the debt security, even though the payment of that amount is not received until a later time, upon partial or full
repayment or disposition of the debt security. The rate at which the market discount accrues, and thus is included in the Fund’s income, will depend upon which of the permitted accrual methods the Fund elects.
Some debt obligations with a fixed maturity date of one year or less from the date of issuance may be treated as having OID or
“acquisition discount” (very generally, the excess of the stated redemption price over the purchase price). Generally, the Fund will be required to include the OID or acquisition discount in income (as ordinary income) over the term of the
debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which OID or acquisition discount accrues, and thus is included in the Fund’s
income, will depend upon which of the permitted accrual methods the Fund elects.
40
A substantial portion of the Fund’s investments in loans and other debt obligations
may be treated as having market discount and/or OID, which, in some cases, could be significant.
Some preferred
securities may include provisions that permit the issuer, at its discretion, to defer the payment of distributions for a stated period without any adverse consequences to the issuer. If the Fund owns a preferred security that is deferring the
payment of its distributions, the Fund may be required to report income for U.S. federal income tax purposes to the extent of any such deferred distribution even though the Fund has not yet actually received the cash distribution.
If the Fund holds the foregoing kinds of securities, it may be required to pay out as an income distribution each year an amount which is
greater than the total amount of cash interest that Fund actually received. Such distributions may be made from the cash assets of the Fund or, if necessary, by liquidation of portfolio securities (including at a time when it may not be advantageous
to do so). The Fund may realize gains or losses from such liquidations. In the event the Fund realizes net long-term or short-term capital gains from such transactions, its shareholders may receive a larger capital gain distribution or ordinary
dividend, respectively, than they would in the absence of such transactions.
Investments in high-yield debt obligations or
other distressed debt obligations that are at risk of or in default present special tax issues for the Fund investing in or holding such securities. Tax rules are not entirely clear about issues such as whether or to what extent the Fund should
recognize market discount on a debt obligation, when the Fund may cease to accrue interest, OID or market discount, when and to what extent the Fund may take deductions for bad debts or worthless securities and how the Fund should allocate payments
received on obligations in default between principal and income. These and other related issues will be addressed by the Fund as necessary, in order to seek to ensure that it distributes sufficient income to preserve its status as a RIC and does not
become subject to U.S. federal income or excise tax.
A portion of the OID paid or accrued on certain high-yield discount
obligations owned by the Fund may not be deductible to the issuer and will instead be treated as a dividend paid by the issuer for purposes of the dividends-received deduction. In such cases, if the issuer of the obligation is a domestic
corporation, dividend payments by the Fund may be eligible for the dividends-received deduction to the extent of the deemed dividend portion of such OID.
The Fund may invest directly or indirectly in residual interests in real estate mortgage investment conduits (“REMICs”) (including by investing in residual interests in collateralized mortgage
obligations with respect to which an election to be treated as a REMIC is in effect) or equity interests in taxable mortgage pools (“TMPs”). Under a notice issued by the IRS in October 2006 and Treasury regulations that have yet to be
issued but may apply retroactively, a portion of the Fund’s income (including income allocated to the Fund from a pass-through entity) that is attributable to a residual interest in a REMIC or an equity interest in a TMP (referred to in the
Code as an “excess inclusion”) will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a RIC will be allocated to shareholder of the
RIC in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related interest directly. As a result, the Fund investing in such interests may not be a suitable investment for charitable
remainder trusts. See “Tax-Exempt Shareholders” below.
In general, excess inclusion income allocated to
shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income (“UBTI”) to entities (including a qualified
pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be
required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax.
41
Any transactions by the Fund in foreign currencies, foreign currency-denominated debt
obligations or certain foreign currency options, futures contracts or forward contracts (or similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign
currency concerned. Such ordinary income treatment may accelerate Fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by the Fund to
offset income or gains earned in subsequent years.
Any equity investments by the Fund in certain “passive foreign
investment companies” (“PFICs”) could potentially subject that Fund to a U.S. federal income tax (including interest charges) on distributions received from the PFIC or on proceeds received from the disposition of shares in the PFIC.
This tax cannot be eliminated by making distributions to Fund shareholders. However, the Fund may elect to avoid the imposition of that tax. For example, the Fund may elect to treat a PFIC as a “qualified electing fund” (i.e., make a
“QEF election”), in which case that Fund will be required to include its share of the PFIC’s income and net capital gains annually, regardless of whether it receives any distribution from the PFIC. The Fund also may make an election
to mark the gains (and to a limited extent losses) in such holdings “to the market” as though it had sold and repurchased its holdings in those PFICs on the last day of that Fund’s taxable year. Such gains and losses are treated as
ordinary income and loss. The QEF and mark-to-market elections may accelerate the recognition of income (without the receipt of cash) and increase the amount required to be distributed by the Fund to avoid taxation. Making either of these elections
therefore may require the Fund to liquidate other investments (including when it is not advantageous to do so) to meet its distribution requirement, which also may accelerate the recognition of gain and affect that Fund’s total return.
Dividends paid by PFICs will not be eligible to be treated as “qualified dividend income.” Because it is not always possible to identify a foreign corporation as a PFIC, the Fund may incur the tax and interest charges described above in
some instances.
Income received by the Fund from sources within foreign countries may be subject to withholding and other
taxes imposed by such countries. These withholding and other taxes will decrease the Fund’s yield on the securities subject to such taxes. Tax treaties between certain countries and the U.S. may reduce or eliminate such taxes. Shareholders of
the Fund generally will not be entitled to claim a credit or deduction with respect to foreign taxes paid by or withheld from the Fund.
The Fund’s derivatives transactions, as well as any hedging, straddle and short sale transactions, generally are subject to one or more special tax rules (including, for instance, notional principal
contract, mark-to-market, constructive sale, straddle, wash sale and short sale rules). These rules may affect whether gains and losses recognized by the Fund are treated as ordinary or capital and/or as short-term or long-term, accelerate the
recognition of income or gains to the Fund, defer losses to the Fund, and cause adjustments in the holding periods of the Fund’s securities. These rules could therefore affect the amount, timing and/or character of distributions to
shareholders. In addition, because these and other tax rules applicable to derivative financial instruments are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which
determination or guidance could be retroactive) may affect whether the Fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a RIC and avoid a Fund-level tax.
In addition, certain derivatives transactions and investments in foreign currency-denominated debt instruments as well as any
transactions in foreign currencies or hedging activities, to the extent used by the Fund, are likely to produce a difference between the Fund’s book income and the sum of its taxable income and net tax-exempt income (if any). If the Fund’s
book income exceeds the sum of its taxable income (including net realized capital gains) and net tax-exempt income (if any), the distribution (if any) of such excess generally will be treated as (i) a dividend to the extent of that Fund’s
remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter, as a return of capital to the extent of the recipient’s basis in its shares, and (iii) thereafter, as gain from the sale
or exchange of a capital asset. If the Fund’s book income is less than the sum of its taxable income and net tax-exempt income (if any), that Fund could be required to make distributions exceeding book income to qualify as a RIC that is
accorded special tax treatment.
42
Backup Withholding
The Fund (or a broker or other financial intermediary through which shares are held) generally is required to withhold and remit to the
U.S. Treasury a percentage of the taxable distributions and redemption proceeds paid to any individual shareholder who fails to properly furnish the Fund (or intermediary) with a correct taxpayer identification number (“TIN”), who has
under-reported dividend or interest income, or who fails to certify to the Fund (or intermediary) that he or she is not subject to such withholding. The backup withholding tax rate is 28% for amounts paid through 2012. This rate will expire and the
backup withholding rate will be 31% for amounts paid after December 31, 2012, unless Congress enacts tax legislation providing otherwise. Backup withholding is not an additional tax. Any amounts withheld may be credited against the
shareholder’s U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.
Sale or Exchange of
Fund Shares
The sale or exchange of Fund shares may give rise to a gain or loss to the shareholder. In general, any gain
or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise, the gain or loss on the taxable disposition of Fund shares will be treated as
short-term capital gain or loss. However, any loss realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received (or deemed
received) by the shareholder with respect to those shares. In addition, all or a portion of any loss realized upon a taxable disposition of Fund shares will be disallowed under the “wash-sale” rule of the Code if other substantially
identical shares of the Fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.
Shareholders may be entitled to offset their Capital Gain Dividends with capital loss. The Code contains a number of statutory provisions
affecting the circumstances under which capital loss may be offset against capital gain and limiting the use of loss from certain investments and activities. Accordingly, shareholders that have capital losses are urged to consult their tax advisers.
Tax Shelter Reporting Regulations
Under Treasury regulations, if a shareholder recognizes a loss of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder, the shareholder must file with the
IRS a disclosure statement on Form 8886. Direct holders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a RIC are not excepted. Future guidance may extend the current
exception from this reporting requirement to shareholders of most or all RICs. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper.
Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.
Non-U.S. Shareholders
Distributions properly reported as Capital Gain Dividends generally will not be subject to withholding of U.S. federal income tax. In
general, dividends other than Capital Gain Dividends paid by the Fund to a shareholder that is not a “U.S. person” within the meaning of the Code (a “foreign shareholder”) are subject to withholding of U.S. federal income tax at
a rate of 30% (or lower applicable treaty rate) even if they are funded by income or gains (such as portfolio interest, short-term capital gains, or foreign-source dividend and interest income) that, if paid to a foreign shareholder directly, would
not be subject to withholding.
43
However, effective for taxable years of a RIC beginning before January 1, 2012, the
RIC was not required to withhold any amounts (i) with respect to distributions (other than distributions to a foreign shareholder (w) that had not provided a satisfactory statement that the beneficial owner was not a U.S. person,
(x) to the extent that the dividend was attributable to certain interest on an obligation if the foreign shareholder was the issuer or is a 10% shareholder of the issuer, (y) that was within certain foreign countries that had inadequate
information exchange with the United States, or (z) to the extent the dividend was attributable to interest paid by a person that was a related person of the foreign shareholder and the foreign shareholder was a controlled foreign corporation)
from U.S.-source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, to the extent such distributions were properly reported as such by the RIC in a written notice
to shareholders (“interest-related dividends”), and (ii) with respect to distributions (other than (a) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183
days or more during the year of the distribution and (b) distributions subject to special rules regarding the disposition of U.S. real property interests (“USRPIs” as defined below)) of net short-term capital gains in excess of net
long-term capital losses to the extent such distributions were properly reported by the RIC in a written notice to shareholders (“short-term capital gain dividends”). A RIC was permitted to report such part of its dividends as
interest-related or short-term capital gain dividends as were eligible, but was not required to do so. In the case of shares held through an intermediary, the intermediary may have withheld even if a RIC reported all or a portion of a payment as an
interest-related or short-term capital gain dividend to shareholders. The exemption from withholding for interest-related and short-term capital gain dividends has expired for distributions with respect to taxable years of the Fund beginning on or
after January 1, 2012. It is currently unclear whether Congress will extend these exemptions for distributions with respect to taxable years of a RIC beginning on or after January 1, 2012, or what the terms of such an extension would be,
including whether such extension would have retroactive effect.
Foreign shareholders should contact their intermediaries
regarding the application of these rules to their accounts.
A foreign shareholder is not, in general, subject to U.S.
federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the Fund or on Capital Gain Dividends unless (i) such gain or dividend is effectively connected with the conduct of a trade or business
carried on by such holder within the United States, (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale or the receipt of the
Capital Gain Dividend and certain other conditions are met, or (iii) the special rules relating to gain attributable to the sale or exchange of USRPIs apply to the foreign shareholder’s sale of shares of the Fund or to the Capital Gain
Dividend the foreign shareholder received (as described below).
Foreign shareholders with respect to whom income from the
Fund is effectively connected with a trade or business conducted by the foreign shareholder within the United States will, in general, be subject to U.S. federal income tax on the income derived from the Fund at the graduated rates applicable to
U.S. citizens, residents or domestic corporations, whether such income is received in cash or reinvested in shares of the Fund and, in the case of a foreign corporation, may also be subject to a branch profits tax.
If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject
to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty
with the United States may obtain different tax results than those described herein and are urged to consult their tax advisors.
Special rules apply to distributions to certain foreign shareholders from a RIC that is either a “U.S. real property holding corporation” (“USRPHC”) or former USRPHC or would be a
USRPHC absent certain exclusions from the definition thereof. Additionally, special rules apply to the sale of shares in a RIC that is a USRPHC or former USRPHC. Very generally, a USRPHC is a domestic corporation that holds USRPIs — USRPIs are
defined generally as any interest in U.S. real property or any equity interest in a USRPHC — the fair market value of which, during specified testing periods, equals or exceeds 50% of the sum of the fair market values of the corporation’s
USRPIs, interests in real property located outside the United States and other assets. The Fund generally does not expect that it will be a USRPHC or would be a USRPHC but for the operation of the special exceptions referred to above, and thus does
not expect these special tax rules to apply.
44
In order to qualify for any exemption from withholding described above (to the extent
applicable) or for lower withholding tax rates under applicable income tax treaties, or to establish an exemption from backup withholding, a foreign shareholder must comply with applicable certification requirements relating to its non-U.S. status
(including, in general, furnishing an IRS Form W-8BEN or substitute form). Foreign shareholders should contact their tax advisers in this regard.
A foreign shareholder may be subject to state and local tax and to the U.S. federal estate tax in addition to the U.S. federal tax on income referred to above.
Tax-Exempt Shareholders
Under current law, the Fund serves to “block” (that is, prevent the attribution to shareholders of) unrelated business taxable
income (“UBTI”) from being realized by tax-exempt shareholders. Notwithstanding this “blocking” effect, a tax-exempt shareholder could realize UBTI by virtue of its investment in the Fund if shares in that Fund constitute
debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b).
A
tax-exempt shareholder may also recognize UBTI if the Fund recognizes excess inclusion income derived from direct or indirect investments in residual interests in REMICS or equity interests in TMPs if the amount of such income recognized by the Fund
exceeds the Fund’s investment company taxable income (after taking into account deductions for dividends paid by the Fund).
In addition, special tax consequences apply to charitable remainder trusts (“CRTs”) that invest in RICs that invest directly or indirectly in residual interests in REMICs or equity interests in
TMPs. Under legislation enacted in December 2006, a CRT (as defined in section 664 of the Code) that realizes any UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a
CRT will not recognize UBTI as a result of investing in the Fund to the extent it recognizes “excess inclusion income.” Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the
United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of the Fund and that Fund recognizes “excess inclusion income,” then the Fund will be subject to
a tax on that portion of its “excess inclusion income” for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the
December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the Fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder’s distributions for the year
by the amount of the tax that relates to such shareholder’s interest in the Fund.
CRTs and other tax-exempt investors
are urged to consult their tax advisers concerning the consequences of investing in the Fund.
Shareholder Reporting Obligations With
Respect to Foreign Bank and Financial Accounts
Shareholders that are U.S. persons and own, directly or indirectly, more
than 50% of the Fund could be required to report annually their “financial interest” in the Fund’s “foreign financial accounts,” if any, on Treasury Department Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
(FBAR). Shareholders should consult a tax advisor, and persons investing in the Fund through an intermediary should contact their intermediary, regarding the applicability to them of this reporting requirement.
45
Other Reporting and Withholding Requirements
The Foreign Account Tax Compliance Act (“FATCA”) requires the reporting to the IRS of direct and indirect ownership of foreign
financial accounts and foreign entities by U.S. persons. Failure to provide this required information can result in a 30% withholding tax on certain payments of U.S. source income (“withholdable payments”); this withholding tax will be
phased in beginning with certain withholdable payments made on January 1, 2014. Specifically, withholdable payments subject to this 30% withholding tax include payments of U.S.-source dividends or interest and payments of gross proceeds from
the sale or other disposal of property that can produce U.S.-source dividends or interest.
The IRS has issued preliminary
guidance with respect to these rules; this guidance is potentially subject to material change. Pursuant to this guidance, distributions made by the Fund to a shareholder subject to the phase in noted above, including a distribution in redemption of
shares and a distribution of income or gains otherwise exempt from withholding under the rules applicable to non-U.S. shareholders described above (e.g., Capital Gain Dividends and short-term capital gain and interest-related dividends (if such
treatment is extended), as described above), will be withholdable payments subject to withholding. Payments to shareholders will generally not be subject to withholding, so long as such shareholders provide the Fund with such certifications or other
documentation as the Fund requires to comply with these rules, including, to the extent required, with regard to their direct and indirect owners. In general, it is expected that a shareholder that is a U.S. person or foreign individual will be able
to avoid being withheld upon by timely providing the Fund with a valid IRS Form W-9 or W-8, respectively. Payments to a foreign shareholder that is a “foreign financial institution” (as defined under these rules) will generally be subject
to withholding unless such shareholder (i)(a) enters into a valid agreement with the IRS to, among other requirements, report required information about certain direct and indirect U.S. investors or accounts, or (b) qualifies for an exception
from entering into such an agreement and (ii) provides the Fund with appropriate certifications or other documentation concerning its status.
The Fund may disclose the information that it receives from its shareholders to the IRS or other parties as necessary to comply with FATCA. Each prospective investor is urged to consult its tax adviser
regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor’s own situation.
Shareholders purchasing shares on an exchange or otherwise investing in the Fund through a broker or other intermediary should contact their intermediary regarding the application of this reporting and
withholding regime to their investments in the Fund.
Creation and Redemption of Creation Units
An Authorized Participant that purchases Creation Units in exchange for cash, portfolio securities or a combination thereof generally will
recognize a gain or a loss on the exchange. The gain or loss generally will be equal to the difference between the market value of the Creation Units at the time and the sum of the cash paid by the Authorized Participant and the Authorized
Participant’s aggregate basis in any securities surrendered by the Authorized Participant. An Authorized Participant that redeems Creation Units for cash and/or portfolio securities generally will recognize a gain or loss equal to the
difference between the Authorized Participant’s basis in the Creation Units surrendered and the sum of the cash received by the Authorized Participant and the aggregate market value of any securities received by the Authorized Participant. In
certain cases, however, the IRS may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing “wash sales,” or on the basis that there has been no significant
change in economic position. Authorized Participants exchanging securities should consult their own tax advisor with respect to whether or when a loss might be deductible.
Gain or loss recognized by an Authorized Participant upon a purchase of Creation Units in exchange for Component Securities or other debt instruments may be capital or ordinary gain or loss depending on
the circumstances. Any capital gain or loss realized upon a purchase of Creation Units in exchange for Component Securities or other debt instruments generally will be treated as long-term capital gain or loss if the securities have been held for
more than one year. Any capital gain or loss realized upon a redemption of Creation Units generally will be treated as long-term capital gain or loss if the Creation Units have been held for more than one year. Otherwise, such capital gain or loss
generally will be treated as short-term capital gain or loss. Authorized Participants should consult their own tax advisor with respect to the tax treatment to them of any creation or redemption transaction.
46
Substantial Share Purchases by Authorized Participants
The Fund has the right to reject an order for a purchase of shares of the Fund if the purchaser (or group of purchasers) would, upon
obtaining the shares so ordered, own 80% or more of the outstanding shares of the Fund and if, pursuant to Section 351 of the Code, the Fund would have a basis in the securities different from the market value of such securities on the date of
deposit. The Fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination.
Shares Purchased Through Tax Qualified Plans
Special tax rules apply to
investments through defined contribution plans and other tax-qualified plans. Shareholders should consult their tax advisers to determine the suitability of shares of the Trust as an investment through such plans and the precise effect of an
investment on their particular tax situation.
General Considerations
The U.S. federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax
advisers regarding the specific U.S. federal tax consequences of purchasing, holding, and disposing of shares of the Fund, as well as the effects of state, local, foreign and other tax law and any proposed tax law changes.
47
FINANCIAL STATEMENTS
Because the Fund had not commenced operations prior to the date of this SAI, financial highlights are not yet available.
48
APPENDIX A — RATINGS CATEGORIES
Ratings in General.
A rating of a rating service represents the service’s opinion as to the credit quality of the security
being rated. However, the ratings are general and are not absolute standards of quality or guarantees as to the creditworthiness of an issuer. Consequently, the Adviser believes that the quality of debt securities should be continuously reviewed and
that individual analysts give different weightings to the various factors involved in credit analysis. A rating is not a recommendation to purchase, sell or hold a security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one service, each rating should be evaluated independently. Ratings are based on current information furnished by the issuer or obtained by the rating services from other
sources that they consider reliable. Ratings may be changed, suspended or withdrawn as a result of changes in or unavailability of such information, or for other reasons. The following is a description of the characteristics of ratings used by
Moody’s Investors Service (“Moody’s”) and Standard & Poor’s (“S&P”).
Moody’s
Long-term Obligation Ratings
Moody’s long-term ratings are opinions of the relative credit risk of financial obligations with an original maturity of one year or more. They address the possibility that a financial obligation
will not be honored as promised. Such ratings use Moody’s Global Scale and reflect both the likelihood of default and any financial loss suffered in the event of default.
Aaa
Obligations rated Aaa are judged to be of the highest quality, with minimal credit
risk.
Aa
Obligations rated
Aa are judged to be of high quality and subject to very low credit risk.
A
Obligations rated A are considered upper-medium grade and are subject to low credit risk.
Baa
Obligations rated Baa are subject to moderate credit risk. They are considered medium grade and as such may possess certain speculative
characteristics.
Ba
Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B
Obligations rated B are considered
speculative and are subject to high credit risk.
Caa
Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca
Obligations rated Ca are highly
speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C
Obligations rated C are the lowest rated class and are typically in default, with little prospect for recovery of principal or interest.
A-1
Note: Moody’s appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa
through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
Short-Term Obligation Ratings
Moody’s short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers,
short-term programs, or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:
P-1
Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay
short-term debt obligations.
P-2
Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay
short-term obligations.
NP
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Note: Canadian issuers rated P-1 or P-2 have their short-term ratings enhanced by the senior-most long-term rating of the issuer, its guarantor or
support-provider.
S&P
Long-term Issue Credit Ratings
Issue
credit ratings are based, in varying degrees, on S&P’s analysis of the following considerations: (i) likelihood of payment—capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance
with the terms of the obligation, (ii) nature of and provisions of the obligation, and (iii) protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws
of bankruptcy and other laws affecting creditors’ rights.
Issue ratings are an assessment of default risk, but may incorporate an
assessment of relative seniority or ultimate recovery in the event of default. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation may apply when an
entity has both senior and subordinated obligations, secured and unsecured obligations, or operating company and holding company obligations.)
AAA
An obligation rated ‘AAA’
has the highest rating assigned by S&P. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated ‘AA’
differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.
A-2
A
An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the
obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB
An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated ‘BB’, ‘B’, ‘CCC’, ‘CC’, and ‘C’ are regarded as having significant
speculative characteristics. ‘BB’ indicates the least degree of speculation and ‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties
or major exposures to adverse conditions.
BB
An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B
An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has
the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
CCC
An obligation rated ‘CCC’
is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.
C
A ‘C’ rating is assigned to obligations that are currently highly vulnerable
to nonpayment, obligations that have payment arrearages allowed by the terms of the documents, or obligations of an issuer that is subject of bankruptcy petition or similar action which have not experienced a payment default. Among others, the
‘C’ rating may be assigned to subordinated debt, preferred stock or other obligations on which cash payments have been suspended in accordance with the instrument’s terms or when preferred stock is the subject of a distressed exchange
offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
D
An obligation rated ‘D’ is in payment default. The ‘D’ rating
category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due, unless S&P believes that such payments will be made within the shorter of the stated grace period but not longer than five
business days. Both a longer stated grace period and the absence of a stated grace period are irrelevant. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action if payments on an
obligation are jeopardized. An obligation’s rating is lowered to ‘D’ upon completion of a distressed exchange offer, whereby some or all of the issue is either repurchased for an amount of cash or replaced by other instruments having
a total value that is less than par.
A-3
Plus (+) or minus (-)
The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
NR
This indicates that no rating has
been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated ‘A-1’ is rated in the highest category by S&P. The obligor’s capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
A-2
A short-term obligation rated
‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the
obligation is satisfactory.
A-3
A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B
A short-term obligation rated ‘B’ is regarded as having significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation;
however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet is financial commitment on the obligation.
C
A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D
A short-term obligation rated
‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation, including a regulatory capital instrument, are not made on the date due even if the applicable grace period has not expired, unless
S&P believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.
SPUR (S&P’s Underlying Rating)
This is a rating of a stand-alone capacity of an issue to pay debt service on a credit-enhanced debt issue, without giving effect to the enhancement that applies to it. These ratings are published only at
the request of the debt issuer/obligor with the designation SPUR to distinguish them from the credit-enhanced rating that applies to the debt issue. S&P maintains surveillance of an issue with a published SPUR.
A-4
APPENDIX B —
PYXIS CAPITAL, L.P.
PROXY VOTING POLICY
1. Application; General Principles
1.1 This proxy voting policy (the “Policy”) applies to securities held in Client accounts (including registered investment
companies and other pooled investment vehicles) as to which the above-captioned investment adviser (the “Company”) has voting authority, directly or indirectly. Indirect voting authority exists where the Company’s voting authority is
implied by a general delegation of investment authority without reservation of proxy voting authority.
1.2 The Company shall
vote proxies in respect of securities owned by or on behalf of a Client in the Client’s best economic interests and without regard to the interests of the Company or any other Client of the Company.
2. Voting; Procedures
2.1
Monitoring
. The Company has hired Broadridge as its proxy voting agent to vote proxies in respect of securities held in Client accounts for which the Company has proxy voting authority. The
Company utilizes Broadridge’s
ProxyEdge
®
internet tool to identify for Broadridge Client accounts
for which the Company has proxy voting authority and Broadridge monitors the holdings in these Client accounts via automated electronic interfaces with the Company’s custodian banks and brokers for purposes of determining whether there are
shareholder meetings or similar corporate actions affecting holdings in the Client accounts.
2.2
Voting
. The Company
has authorized Broadridge to vote proxies with respect to securities held in Client accounts for which the Company has proxy voting authority in accordance with recommendations provided by Glass, Lewis & Co. in its US 2010 Proxy Season
Proxy Paper Guidelines (and, absent further action, future annual or special Proxy Paper Guidelines issued by Glass, Lewis & Co.). Glass Lewis’s Proxy Paper Guidelines are available on the Company’s internet website and to all
Clients, prospective clients, and due diligence inquiries upon request. Broadridge is responsible for ensuring proxies are voted and submitted in a timely manner in accordance with such Guidelines, provided, however, that the Company may instruct
Broadridge to vote in a manner inconsistent with the Guidelines in accordance with the procedures set forth below.
The CCO or
his/her designee will be responsible for creating a weekly report of all upcoming shareholder meetings or similar corporate actions affecting securities held in Client accounts for which the Company has proxy voting authority, which will include
Glass Lewis’s recommendation, if available. The report will be distributed to the relevant portfolio managers and sub-advisers for review and approval. If warranted and determined to be in the best interest of a Client after taking into account
all the relevant facts and circumstances, the portfolio manager responsible for the Client account or security can override the recommendations of Glass, Lewis & Co. and direct Broadridge to vote one or more proxies according to his or her
own determination of the clients’ best interests. If the Company decides to direct Broadridge to vote a proxy in a manner that is inconsistent with the recommendations of Glass, Lewis & Co., the CCO or his/her designee shall document
the reasons for these votes and for the override of the Glass Lewis recommendation.
2.3
Guidelines
. In determining how
to vote a particular proxy, Glass Lewis follows the principles outlined in its Proxy Paper guidelines. It conducts careful analysis on each issuer looking specifically at Board composition of an issuer, the firm’s financial reporting and
integrity of those financial statement, compensation plans and governance structure. The Company has accepted the proxy voting guidelines published by Glass, Lewis & Co., and The Company’s CCO or his/her designee will annually review
the Glass Lewis Guidelines to ensure they remain appropriate and relevant to the Company’s proxy voting needs.
2.4
Conflicts of Interest
. If a portfolio manager determines that a potential material conflict of interest (as defined in Section 3 of this Policy) exists between the Company and a Client account with respect to voting a particular proxy,
the portfolio manager(s) shall contact the Company’s compliance department prior to the proxy being voted
B-1
by Broadridge. In the event of a potential material conflict of interest, the Company will (i) vote such proxy according to the Glass Lewis Guidelines; or (ii) seek instructions from
the Client or request that the Client vote such proxy. All such instances shall be reported to Pyxis’s Compliance Department at least quarterly
2.4.1. For a security held by an investment company, the Company shall disclose any potential material conflict of interest and its reasoning for voting as it did to the investment company’s Board of
Trustees at the next regularly scheduled quarterly meeting. In voting proxies for securities held by an investment company, the Company may consider only the interests of the Fund. It is the responsibility of the Compliance Department to document
the basis for the proxy voting decision when a potential material conflict of interest exists and to furnish the documentation to the Board of Trustees.
2.5
Non-Votes
. The Company may determine not to vote proxies in respect of the securities of any issuer if it determines it would be in its Client’s overall best interests not to vote. Such
determination may apply in respect of all Client holdings of the securities or only certain specified Clients, as the Company deems appropriate under the circumstances. As examples, the portfolio manager(s) may determine: (a) not to recall
securities on loan if, in his or her judgment, the matters being voted upon are not material events affecting the securities and the negative consequences to Clients of disrupting the securities lending program would outweigh the benefits of voting
in the particular instance or (b) not to vote certain foreign securities positions if, in its judgment, the expense and administrative inconvenience outweighs the benefits to Clients of voting the securities.
2.6
Recordkeeping
. Following the submission of any proxy vote by Broadridge, a record of how proxy ballots
were voted will be maintained electronically on the
ProxyEdge
®
system, and will be continuously available
for review. Broadridge will aggregate the proxy voting records of each investment company client of the Company for purposes of preparing and filing Form N-PX on such investment company’s behalf.
3. Conflicts of Interest
3.1
Voting the securities of an issuer where the following relationships or circumstances exist are deemed to give rise to a material conflict of interest for purposes of this Policy:
3.1.1 The issuer is a Client of the Company, or of an affiliate, accounting for more than 5% of the Company’s or affiliate’s
annual revenues.
3.1.2 The issuer is an entity that reasonably could be expected to pay the Company or its affiliates more
than $1 million through the end of the Company’s next two full fiscal years.
3.1.3 The issuer is an entity in which
a “Covered Person” (as defined in the Company’s Policies and Procedures Designed to Detect and Prevent Insider Trading and to Comply with Rule 17j-1 of the Investment Company Act of 1940, as amended (the “Code of Ethics”))
has a beneficial interest contrary to the position held by the Company on behalf of Clients.
3.1.4 The
issuer is an entity in which an officer or partner of the Company or a relative
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of any such person is or was an officer, director or employee, or such person or relative otherwise has received
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For the purposes of this Policy, “relative” includes the following family members: spouse, minor children or stepchildren or children or
stepchildren sharing the person’s home.
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more than $150,000 in fees, compensation and other payment from the issuer
during the Company’s last three fiscal years;
provided
,
however
, that the Compliance Department may deem such a relationship not to be a material conflict of interest if the Company representative serves as an officer or director
of the issuer at the direction of the Company for purposes of seeking control over the issuer.
3.1.5 The matter under
consideration could reasonably be expected to result in a material financial benefit to the Company or its affiliates through the end of the Company’s next two full fiscal years (for example, a vote to increase an investment advisory fee for a
Fund advised by the Company or an affiliate).
B-2
3.1.6 Another Client or prospective Client of the Company, directly or indirectly,
conditions future engagement of the Company on voting proxies in respect of any Client’s securities on a particular matter in a particular way.
3.1.7 The Company holds various classes and types of equity and debt securities of the same issuer contemporaneously in different Client portfolios.
3.1.8 Any other circumstance where the Company’s duty to serve its Clients’ interests, typically referred to as its “duty
of loyalty,” could be compromised.
3.2 Notwithstanding the foregoing, a conflict of interest described in
Section 3.1 shall not be considered material for the purposes of this Policy in respect of a specific vote or circumstance if:
3.2.1 The securities in respect of which the Company has the power to vote account for less than 1% of the issuer’s outstanding voting securities, but only if: (i) the securities for which the
Company has voting authority do not, in the aggregate, represent one of top 10 largest shareholders of such issuer and (ii) such securities do not represent more than 2% of the Client’s assets under management with the Company.
3.2.2 The matter to be voted on relates to a restructuring of the terms of existing securities or the issuance of new securities or a
similar matter arising out of the holding of securities, other than common equity, in the context of a bankruptcy or threatened bankruptcy of the issuer.
4. Recordkeeping, Retention and Compliance Oversight
4.1 The Company shall retain
records relating to the voting of proxies, including:
4.1.1 Copies of this Policy and any amendments thereto.
4.1.2 A copy of the Glass Lewis Proxy Voting Guidelines, amended annually.
4.1.3. A copy of each proxy statement that the Company receives regarding Client securities.
4.1.4 Records of each vote cast by the Company on behalf of Clients.
4.1.5 A copy of any documents created by the Company that were material to making a decision how to vote or that memorializes the basis
for that decision.
4.1.6 A copy of each written request for information on how the Company voted proxies on behalf of the
Client, and a copy of any written response by the Company to any (oral or written) request for information on how the Company voted.
4.2 These records shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the Company’s fiscal year during which the last entry was
made in the records, the first two years in an appropriate office of the Company.
4.3 The Company may rely on proxy statements
filed on the SEC’s EDGAR system or on proxy statements and records of votes cast by the Company maintained by Broadridge.
4.4 Records relating to the voting of proxies for securities held by investment company Clients will be reported periodically, as
requested, to the investment company’s Board of Trustees and, to the SEC on an annual basis pursuant to Form N-PX.
4.5 If
at any time any person is pressured or lobbied either by Company personnel or affiliates or third parties with respect to a particular shareholder vote, he or she should provide information regarding such activity to the CCO, who will keep a record
of this information.
4.6 Compliance oversees the implementation of this procedure, including oversight over voting and the
retention of proxy ballots voted. The CCO may review proxy voting pursuant to the firm’s compliance program.
B-3
PART C: Other Information
Item 28. Exhibits
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(a)
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(1)
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Amended and Restated Agreement and Declaration of Trust of the Registrant dated September 14, 2012, filed herewith
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(2)
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(i)
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Certificate of Designation for Pyxis Long/Short Equity Fund (formerly, Highland Long/Short Equity Fund, Highland Equity Opportunities Fund) (“Long/Short Equity Fund”)
(3)
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(ii)
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Certificate of Designation for Pyxis Long/Short Healthcare Fund (formerly, Highland Long/Short Healthcare Fund, Highland Healthcare Fund) (“Long/Short Healthcare Fund”)
(5)
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(iii)
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Certificate of Designation for Pyxis Floating Rate Opportunities Fund (formerly, Highland Floating Rate Opportunities Fund) (“Floating Rate Opportunities Fund”)
(13)
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(iv)
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Certificate of Designation for Pyxis/iBoxx Senior Loan ETF (“Senior Loan ETF”), filed herewith
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(b)
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By-laws of the Registrant (1)
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(c)
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Not Applicable
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(d)
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(1)
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Form of Investment Advisory Agreement between Pyxis Capital, L.P. (formerly, Highland Capital Management, L.P.) (“Pyxis”) and the Registrant with respect to Long/Short
Equity Fund (1)
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(2)
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Form of Fee Waiver Agreement between Pyxis and the Registrant on behalf of Long/Short Equity Fund (2)
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(3)
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Investment Advisory Agreement between Pyxis and the Registrant with respect to Long/Short Healthcare Fund (8)
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(4)
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Form of Investment Advisory Agreement between Pyxis and the Registrant with respect to Long/Short Healthcare Fund (16)
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(5)
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Investment Sub-Advisory Agreement between Pyxis and Cummings Bay Capital Management, L.P. (“CBCM”) with respect to Long/Short Healthcare Fund (11)
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(6)
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Investment Advisory Agreement between Pyxis and the Registrant with respect to Floating Rate Opportunities Fund (15)
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(7)
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Investment Advisory Agreement between Pyxis and the Registrant with respect to Senior Loan ETF, filed herewith
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(e)
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(1)
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Form of Underwriting Agreement between BNY Mellon Distributors Inc. (formerly, PFPC Distributors, Inc.) and the Registrant (1)
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(2)
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Exhibit A to Underwriting Agreement between BNY Mellon Distributors Inc. (formerly, PFPC Distributors, Inc.) and the Registrant (15)
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(3)
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Form of Underwriting Agreement related to Acquisition of the Indirect Parent of PFPC Distributors, Inc. between BNY Mellon Distributors Inc. and the Registrant
(11)
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(4)
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Form of Selling Group Agreement (8)
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(5)
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Distribution Agreement between SEI Investments Distribution Co. and the Registrant, filed herewith
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(6)
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Distribution Services Agreement between SEI Investments Distribution Co. and the Registrant, filed herewith
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(f)
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Not Applicable
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(g)
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(1)
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Form of Custodian Services Agreement between BNY Mellon Investment Servicing Trust Company (formerly, PFPC Trust Company) and the Registrant (1)
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(2)
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Exhibit A to Custodian Services Agreement between Registrant and PFPC Trust Company (15)
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(3)
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Master Custodian Agreement between State Street Bank and Trust Company and the Registrant, filed herewith
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(h)
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(1)
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Form of Accounting Services Agreement between the Registrant and BNY Mellon Investment Servicing (US) Inc. (formerly, PFPC Inc.) (1)
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(2)
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Exhibit A to Accounting Services Agreement between Registrant and BNY Mellon Investment Servicing (US) Inc.. (formerly, PFPC Inc.) (15)
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(3)
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Form of Administration Services Agreement between Pyxis and the Registrant (1)
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(4)
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Amendment No. 1 to Administration Services Agreement between Pyxis and the Registrant (6)
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(5)
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Revised Exhibit A to Administration Services Agreement between Pyxis and the Registrant, filed herewith
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(6)
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Form of Sub-Administration Services Agreement between Pyxis and BNY Mellon Investment Servicing (US) Inc. (formerly, PFPC Inc.) (1)
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(7)
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Exhibit A to Sub-Administration Services Agreement between Pyxis and BNY Mellon Investment Servicing (US) Inc. (formerly, PFPC Inc.) (15)
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(8)
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Form of Transfer Agency Services Agreement between BNY Mellon Investment Servicing (US) Inc., (formerly, PFPC Inc.) and the Registrant (1)
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(9)
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Amendment No. 1 to Transfer Agency Services Agreement between BNY Mellon Investment Servicing (US) Inc., (formerly, PFPC Inc.) and the Registrant (7)
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(10)
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Amendment No. 2 to Transfer Agency Services Agreement between BNY Mellon Investment Servicing (US) Inc., (formerly, PFPC Inc.) and the Registrant (7)
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(11)
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Exhibit A to Transfer Agency Services Agreement between Registrant and BNY Mellon Investment Services (US) Inc. (formerly, PFPC Inc.) (15)
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(12)
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Administration Agreement between SEI Global Funds Services and the Registrant, filed herewith
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(13)
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Form of Authorized Participant Agreement, filed herewith
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(14)
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Transfer Agency and Services Agreement between State Street Bank and Trust Company and the Registrant, filed herewith
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(i)
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(1)
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Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect to Long/Short Equity Fund (2)
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(2)
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Opinion of Skadden, Arps, Slate, Meagher & Flom LLP with respect to Long/Short Healthcare Fund (5)
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(3)
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Opinion of Ropes & Gray LLP with respect to Floating Rate Opportunities Fund (15)
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(4)
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Opinion of Ropes & Gray LLP with respect to Senior Loan ETF, filed herewith
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(j)
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(1)
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Power of Attorney (4)
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(2)
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Power of Attorney dated March 2, 2011 (15)
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(k)
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Not Applicable
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(l)
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(1)
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Initial Capital Agreement between Pyxis and the Registrant on behalf of Long/Short Equity Fund (2)
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(m)
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(1)
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Form of Rule 12b-1 Distribution Plan relating to Class A and Class C Shares of Long/Short Equity Fund (1)
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(2)
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Form of Rule 12b-1 Distribution Plan relating to Class A and Class C Shares of Long/Short Healthcare Fund (5)
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(3)
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Rule 12b-1 Distribution Plan relating to Class A, Class B and Class C Shares of Floating Rate Opportunities Fund (15)
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(4)
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Form of Rule 12b-1 Distribution Plan relating to Shares of Senior Loan ETF, filed herewith
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(n)
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(1)
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Form of Rule 18f-3 Multi-Class Plan relating to Long/Short Equity Fund (1)
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(2)
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Form of Rule 18f-3 Multi-Class Plan relating to Long/Short Healthcare Fund (5)
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(3)
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Rule 18f-3 Multi-Class Plan relating to Floating Rate Opportunities Fund (15)
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(o)
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Reserved
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(p)
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(1)
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Code of Ethics of the Registrant (14)
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(2)
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Code of Ethics of Pyxis, Adviser for the Registrant (12)
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(3)
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Code of Ethics of BNY Mellon Distributors Inc. (formerly, PFPC Distributors, Inc.), Principal Underwriter for the Registrant (1)
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(4)
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Code of Ethics of CBCM, Sub-Adviser for Long/Short Healthcare Fund (11)
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(5)
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Code of Ethics of SEI Investments Distribution Co., Distributor for Senior Loan ETF, filed herewith
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(1)
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Incorporated herein by reference to the Registrant’s initial Registration Statement on Form N-1A, File No. 333-132400, filed on March 14, 2006.
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(2)
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Incorporated herein by reference to Pre-Effective Amendment No. 3 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
November 22, 2006.
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(3)
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Incorporated herein by reference to Post-Effective Amendment No. 4 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
March 1, 2007.
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(4)
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Incorporated herein by reference to Post-Effective Amendment No. 5 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
December 21, 2007.
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(5)
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Incorporated herein by reference to Post-Effective Amendment No. 8 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
March 14, 2008.
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(6)
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Incorporated herein by reference to Post-Effective Amendment No. 9 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
October 16, 2008.
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(7)
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Incorporated herein by reference to Post-Effective Amendment No. 12 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
December 23, 2008.
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(8)
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Incorporated herein by reference to Post-Effective Amendment No. 18 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
October 30, 2009.
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(9)
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Incorporated herein by reference to Post-Effective Amendment No. 19 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
December 29, 2009.
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(10)
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Incorporated herein by reference to Post-Effective Amendment No. 21 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
March 31, 2010.
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(11)
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Incorporated herein by reference to Post-Effective Amendment No. 22 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
August 27, 2010.
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(12)
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Incorporated herein by reference to Post-Effective Amendment No. 24 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
October 29, 2010.
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(13)
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Incorporated herein by reference to Post-Effective Amendment No. 25 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
February 24, 2011.
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(14)
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Incorporated herein by reference to Post-Effective Amendment No. 1 to Registrant’s Registration Statement on Form N-14, File No. 333-172618, filed on
April 15, 2011.
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(15)
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Incorporated herein by reference to Post-Effective Amendment No. 27 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
June 10, 2011.
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(16)
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Incorporated herein by reference to Post-Effective Amendment No. 29 to Registrant’s Registration Statement on Form N-1A, File No. 333-132400, filed on
October 28, 2011.
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Item 29. Persons Controlled by or Under Common Control with the Fund
Not applicable
Item 30.
Indemnification
Section 4.2 of the Registrant’s Agreement and Declaration of Trust provides as follows:
(a) The Trust hereby agrees, solely out of the assets of the affected Series, to indemnify each Person who at any time serves as Trustee
or officer of the Trust (each such Person being an “indemnitee”) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and reasonable counsel fees reasonably
incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any
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court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting in any
capacity set forth above in this Article IV by reason of his having acted in any such capacity, except with respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of
the Trust or the respective Series of the Trust and furthermore, in the case of any criminal proceeding, as to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be
indemnified hereunder against any liability to any Person or any expense of such indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved
in the conduct of his position.
Notwithstanding the foregoing, with respect to any action, suit or other proceeding voluntarily prosecuted by
any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee was (1) authorized by a majority of the Trustees or (2) was instituted by the indemnitee to
enforce his or her rights to indemnification hereunder in a case in which the indemnitee is found to be entitled to such indemnification. The rights to indemnification set forth in this Declaration shall continue as to a Person who has ceased to be
a Trustee or officer of the Trust and shall inure to the benefit of his or her heirs, executors and personal and legal representatives. No amendment or restatement of this Declaration or repeal of any of its provisions shall limit or eliminate any
of the benefits provided to any Person who at any time is or was a Trustee or officer of the Trust or otherwise entitled to indemnification hereunder in respect of any act or omission that occurred prior to such amendment, restatement or repeal.
(b) Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination
(1) by a final decision on the merits by a court or other body of competent jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (2) in
the absence of such a decision, by (i) a majority vote of a quorum (being one-third of such Trustees) of those Trustees who are neither Interested Persons of the Trust nor parties to the proceeding (“Disinterested Non-Party
Trustees”), that the indemnitee is entitled to indemnification hereunder, or (ii) if such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion conclude that the
indemnitee should be entitled to indemnification hereunder. All determinations to make advance payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph
(c) below.
(c) The Trust shall make advance payments in connection with the expenses of defending any action with respect
to which indemnification might be sought hereunder if the Trust receives a written affirmation by the indemnitee of the indemnitee’s good faith belief that the standards of conduct necessary for indemnification have been met and a written
undertaking to reimburse the Trust unless it is subsequently determined that indemnitee is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to
have been met. In addition, at least one of the following conditions must be met: (1) the indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the Disinterested Non-Party Trustees, or if a majority vote of such quorum so directs, independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is substantial reason to believe that the indemnitee ultimately will be found entitled to indemnification.
(d) The rights accruing to any indemnitee under these provisions shall not exclude any other right to which he or she may be lawfully entitled.
(e) Subject to any limitations provided by the Investment Company Act of 1940, as amended (the “1940 Act”) and this Declaration,
the Trust shall have the power and authority, solely out of the assets of the affected Series, to indemnify and provide for the advance payment of expenses to employees, agents and other Persons providing services to the Trust or serving in any
capacity at the request of the Trust to the full extent as corporations organized under the Delaware General Corporation Law may indemnify or provide for the advance payment of expenses for such Persons provided that such indemnification has been
approved by a majority of the Trustees.
Section 6 of each Investment Advisory Agreement with Pyxis provides as follows:
(a) The Trust hereby agrees to indemnify the Adviser and each of the Adviser’s partners, officers, employees, and agents
(including any individual who serves at the Adviser’s request as director, officer, partner, trustee or the like of another corporation) and controlling persons (each such person being an “Indemnitee”) against any liabilities and
expenses, including amounts paid in
4
satisfaction of judgments, in compromise or as fines and penalties, and counsel fees (all as provided in accordance with applicable state law) reasonably incurred by such Indemnitee in connection
with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be
or may have been threatened, while acting in any capacity set forth above in this paragraph or thereafter by reason of his having acted in any such capacity, except with respect to any matter as to which he shall have been adjudicated not to have
acted in good faith in the reasonable belief that his action was in the best interest of the Trust and furthermore, in the case of any criminal proceeding, so long as he had no reasonable cause to believe that the conduct was unlawful, provided,
however, that (1) no Indemnitee shall be indemnified hereunder against any liability to the Trust or its shareholders or any expense of such Indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence (iv) reckless disregard of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as “Disabling Conduct”), (2) as to
any matter disposed of by settlement or a compromise payment by such Indemnitee, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interests of the Trust and that such Indemnitee appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and did not involve Disabling
Conduct by such Indemnitee and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding
by such Indemnitee was authorized by a majority of the full Board of the Trust. Notwithstanding the foregoing, the Trust shall not be obligated to provide any such indemnification to the extent such provision would waive any right that the Trust
cannot lawfully waive.
(b) The Trust shall make advance payments in connection with the expenses of defending any action with
respect to which indemnification might be sought hereunder if the Trust receives a written affirmation of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to
reimburse the Trust unless it is subsequently determined that he is entitled to such indemnification and if the Trustees of the Trust determine that the facts then known to them would not preclude indemnification. In addition, at least one of the
following conditions must be met: (1) the Indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses arising by reason of any lawful advances, (3) a majority of a quorum of Trustees
of the Trust who are neither “interested persons” of the Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (“Disinterested Non-Party Trustees”) or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Indemnitee ultimately will be found entitled to indemnification or (4) there is not a
Disinterested Non-Party Trustee, Indemnitee provides the written affirmation referred to above.
(c) All determinations with
respect to indemnification hereunder shall be made (1) by a final decision on the merits by a court or other body of competent jurisdiction before whom the proceeding was brought that such Indemnitee is not liable by reason of Disabling Conduct
or, (2) in the absence of such a decision, by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or even if obtainable, if a majority vote of such quorum so
directs, independent legal counsel in a written opinion.
(d) Each Indemnitee shall, in the performance of its duties, be fully
and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by any
of the Trust’s officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust,
regardless of whether such counsel or other person may also be a Trustee.
(e) The rights accruing to any Indemnitee under
these provisions shall not exclude any other right to which he may be lawfully entitled.
Section 9 of the Underwriting Agreement with
BNY Mellon Distributors, Inc. (formerly, PFPC Distributors, Inc.) provides as follows:
(a) The Fund agrees to indemnify and
hold harmless BNY Mellon Distributors and its affiliates from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, attorneys’ fees and disbursements and liabilities arising under the Securities Laws
and any state and foreign securities and blue sky laws) arising directly or indirectly from any action or omission to act which BNY Mellon Distributors takes in connection with the provision of services to the Fund. Neither BNY Mellon Distributors,
nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) caused by BNY Mellon Distributors’ or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard
of its duties and obligations under this Agreement.
5
(b) The Fund agrees to indemnify and hold harmless BNY Mellon Distributors, its officers,
directors, and employees, and any person who controls BNY Mellon Distributors within the meaning of Section 15 of the [Securities Act of 1933, as amended (the “1933 Act”)], free and harmless (a) from and against any and all
claims, costs, expenses (including reasonable attorneys’ fees) losses, damages, charges, payments and liabilities of any sort or kind which BNY Mellon Distributors, its officers, directors, employees or any such controlling person may incur
under the 1933 Act, under any other statute, at common law or otherwise, arising out of or based upon: (i) any untrue statement, or alleged untrue statement, of a material fact contained in the Fund’s Registration Statement, Prospectus,
Statement of Additional Information, or sales literature (including amendments and supplements thereto), or (ii) any omission, or alleged omission, to state a material fact required to be stated in the Fund’s Registration Statement,
Prospectus, Statement of Additional Information or sales literature (including amendments or supplements thereto), necessary to make the statements therein not misleading, provided, however, that insofar as losses, claims, damages, liabilities or
expenses arise out of or are based upon any such untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information furnished to the Fund by BNY Mellon Distributors or its affiliated persons
for use in the Fund’s Registration Statement, Prospectus, or Statement of Additional Information or sales literature (including amendments or supplements thereto), such indemnification is not applicable; and (b) from and against any and
all such claims, demands, liabilities and expenses (including such costs and counsel fees) which you, your officers and directors, or such controlling person, may incur in connection with this Agreement or BNY Mellon Distributors’ performance
hereunder (but excluding such claims, demands, liabilities and expenses (including such costs and counsel fees) arising out of or based upon any untrue statement, or alleged untrue statement, of a material fact contained in any Registration
Statement or any Prospectus or arising out of or based upon any omission, or alleged omission, to state a material fact required to be stated in either any Registration Statement or any Prospectus or necessary to make the statements in either
thereof not misleading), unless such claims, demands, liabilities and expenses (including such costs and counsel fees) arise by reason of BNY Mellon Distributors’ willful misfeasance, bad faith or negligence in the performance of BNY Mellon
Distributors’ duties hereunder. The Fund acknowledges and agrees that in the event that BNY Mellon Distributors, at the request of the Fund, is required to give indemnification comparable to that set forth in this paragraph to any broker-dealer
selling Shares of the Fund or servicing agent servicing the shareholders of the Fund and such broker-dealer or servicing agent shall make a claim for indemnification against BNY Mellon Distributors, BNY Mellon Distributors shall make a similar claim
for indemnification against the Fund.
(c) BNY Mellon Distributors agrees to indemnify and hold harmless the Fund, its several
officers and Board Members and each person, if any, who controls a Portfolio within the meaning of Section 15 of the 1933 Act against any and all claims, costs, expenses (including reasonable attorneys’ fees), losses, damages, charges,
payments and liabilities of any sort or kind which the Fund, its officers, Board Members or any such controlling person may incur under the 1933 Act, under any other statute, at common law or otherwise, but only to the extent that such liability or
expense incurred by the Fund, its officers or Board Members, or any controlling person resulting from such claims or demands arose out of the acquisition of any Shares by any person which may be based upon any untrue statement, or alleged untrue
statement, of a material fact contained in the Fund’s Registration Statement, Prospectus or Statement of Additional Information (including amendments and supplements thereto), or any omission, or alleged omission, to state a material fact
required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon information furnished or confirmed in writing to the Fund by BNY Mellon Distributors or its affiliated
persons (as defined in the 1940 Act). The foregoing rights of indemnification shall be in addition to any other rights to which the Fund or any such person shall be entitled to as a matter of law.
(d) In any case in which one party hereto (the “Indemnifying Party”) may be asked to indemnify or hold the other party hereto
(the “Indemnified Party”) harmless, the Indemnified Party will notify the Indemnifying Party promptly after identifying any situation which it believes presents or appears likely to present a claim for indemnification (an
“Indemnification Claim”) against the Indemnifying Party, although the failure to do so shall not prevent recovery by the Indemnified Party, and shall keep the Indemnifying Party advised with respect to all developments concerning such
situation. The Indemnifying Party shall have the option to defend the Indemnified Party against any Indemnification Claim which may be the subject of this indemnification, and, in the event that the Indemnifying Party so elects, such defense shall
be conducted by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying Party shall take over complete defense of the Indemnification Claim and the Indemnified Party shall sustain no further
legal or other expenses in respect of such Indemnification Claim. In the event that the Indemnifying Party does not elect to assume the defense of any such suit, or in case the Indemnified Party reasonably does not approve of counsel chosen by the
Indemnifying Party, or in case there is a conflict of interest between the Indemnifying Party or the Indemnified Party, the Indemnifying Party will reimburse the Indemnified Party for the fees and expenses of any counsel retained by the Indemnified
Party. Each party agrees promptly to notify the other party of the commencement of any litigation or proceedings against the notifying party or any of its officers or directors in connection with the issue and sale of any Shares. The Indemnified
Party will not confess any Indemnification Claim or make any compromise in any case in which the Indemnifying Party will be asked to provide indemnification, except with the Indemnifying Party’s prior written consent.
6
Section 8.02 of the Distribution Agreement with SEI Investments Distribution Co.
(“SIDCO”) provides as follows:
Distributor will indemnify and hold harmless the Company, each of its directors,
officers, employees and each person, if any, who controls, is controlled by or is under common control with, the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Company Indemnified Parties”) from and
against any and all losses, claims, damages or liabilities, joint or several, whatsoever (including any investigation, legal or other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any
claim asserted) to which the Company Indemnified Parties may become subject, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Covered Document, in reliance
upon and in conformity with written information furnished to the Company by the Distributor about the Distributor expressly for use therein.
Section 4.02 of the Distribution Services Agreement with SEI Investments Distribution Co. provides as follows:
SIDCO hereby agrees to indemnify, defend and hold harmless (on an as-incurred basis), the Advisor and each of its affiliates, officers, directors, employees and agents, and each person, if any, who
controls such persons within the meaning of Section 15 of the 1933 Act (each, an “Advisor Indemnified Party”) from and against any loss, liability, damages, cost or expense incurred by such Advisor Indemnified Party (including the
reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expense and reasonable counsel fees and disbursements incurred in connection therewith) as a result of (i) any material failure by SIDCO to comply
with any applicable laws, including but not limited to the NASD Conduct Rules, or (ii) an action or omission of SIDCO involving bad faith or fraud by SIDCO.
Section 12 of the Administration Agreement with Pyxis provides as follows:
(a) The Trust agrees to indemnify and hold harmless [Pyxis] and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including without limitation reasonable attorneys’ fees and disbursements and liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws) (collectively, “Losses”) arising directly
or indirectly from any action or omission to act which [Pyxis] takes (i) at the request or on the direction of or in reliance on the advice of the Trust or (ii) upon Oral Instructions or Written Instructions; provided, however, neither
[Pyxis] nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) arising out of [Pyxis’s] or its affiliates’ own willful misfeasance, bad faith, negligence or reckless disregard of
its duties and obligations under this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, the Trust
shall not be liable to [Pyxis] or its affiliates for any consequential, special or indirect losses or damages which [Pyxis] or its affiliates may incur or suffer as a consequence of this Agreement, whether or not the likelihood of such damages or
losses was known by the Trust.
In addition, the Trust will maintain a trustees and officers liability insurance policy under which the
Trust and its trustees and officers will be named insureds.
Item 31. Business and Other Connections of the Investment Adviser and
Investment Sub-Advisers
(a) The description of the business of Pyxis, the investment adviser, is set forth under the
caption “Management of the Funds” in the Prospectus and under the caption “Management” in the SAI, each forming part of this Registration Statement. The information as to other businesses, if any, and the directors and officers
of Pyxis is set forth in its Form ADV, as filed with the SEC on March 29, 2012 (File No. 801-69968) and as amended through the date hereof, and is incorporated herein by reference.
(b) The description of the business of CBCM, a registered investment adviser affiliated with Pyxis and the investment Sub-Adviser to
Long/Short Healthcare Fund, is set forth under the caption “Management of the Funds” in Long/Short Healthcare Fund’s Prospectus and under the caption “Management” in Long/Short Healthcare Fund’s SAI. Acis Capital
Management, L.P., Tunstall Capital Management, L.P., Granite Bay Advisors, L.P., NexPoint Advisors, L.P. and Highland Capital Management, L.P., each with its principal place of business at 200 Crescent Court, Suite 700, Dallas, Texas 75201, are
registered investment advisers affiliated with Pyxis. The following are officers of CBCM:
7
(1) James D. Dondero, President
(2) Thomas Surgent, Chief Compliance Officer
The following is an officer of Acis Capital Management, L.P., Tunstall Capital Management, L.P., and Granite Bay Advisors, L.P.:
(1) Thomas Surgent, Chief Compliance Officer
The following is an officer of NexPoint Advisors, L.P.:
(1)
Thomas Surgent, Secretary
(2) Alan Head, Chief Compliance Officer
(3) Ethan Powell, President
(4) Frank Waterhouse, Treasurer
The following is an officer of Highland Capital
Management, L.P.:
(1) Mark Okada, Chief Investment Officer
(2) Scott Ellington, Chief Legal Officer and General Counsel
(3) Thomas Surgent, Chief Compliance Officer
(4) Frank Waterhouse, Chief Financial Officer
Item 32. Principal Underwriter
(a) Foreside Funds Distributors
LLC (formerly, BNY Mellon Distributors, Inc.) (“Foreseide”), the principal underwriter for all series of the Registrant except for Senior Loan ETF, is registered with the Securities and Exchange Commission as a broker-dealer and is a
member of the FINRA. As of July 23, 2012, Foreside acted as principal underwriter for the following investment companies:
Aston Funds
E.I.I. Realty Securities Trust
FundVantage Trust
GuideStone Funds
Kalmar Pooled Investment Trust
Matthews International Funds, dba Matthews Asia Funds
Metropolitan West Funds
The Motley Fool Funds Trust
New Alternatives Fund, Inc.
Old Westbury Funds, Inc.
Pyxis Funds I
Pyxis Funds II
The RBB Fund, Inc.
Stratton Multi-Cap Fund, Inc.
Stratton Real Estate Fund, Inc.
The Stratton Funds, Inc.
The Torray Fund
Versus Global Multi-Manager Real Estate Income Fund LLC
SEI Investments
Distribution Co. (“SEI”) serves as the principal underwriter for Senior Loan ETF. As of April 1, 2012, SEI acted as principal underwriter for the following investment companies:
SEI Daily Income Trust
SEI Liquid Asset Trust
8
SEI Tax Exempt Trust
SEI Institutional Managed Trust
SEI Institutional International Trust
The Advisors’ Inner
Circle Fund
The Advisors’ Inner Circle Fund II
Bishop Street Funds
SEI Asset Allocation Trust
SEI Institutional Investments Trust
CNI Charter Funds
Causeway Capital Management Trust
ProShares Trust
Community Reinvestment Act Qualified Investment Fund
SEI Alpha Strategy Portfolios, LP
TD Asset Management USA Funds
SEI Structured Credit Fund, LP
Wilshire Mutual Funds, Inc.
Wilshire Variable Insurance Trust
Global X Funds
ProShares Trust II
Exchanged Traded Concepts Trust (f/k/a FaithShares Trust)
Schwab Strategic Trust
RiverPark Funds
Adviser Managed Trust Fund
Huntington Strategy Shares
New Covenant Funds
SEI provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services include portfolio evaluation, performance measurement and consulting services (“Funds Evaluation”) and automated execution, clearing and settlement of securities
transactions (“MarketLink”).
(b) Foreside’s main business address is 899 Cassatt Road, 400 Berwyn Park, Suite
110, Berwyn, PA 19312. The following is a list of the directors and executive officers of Foreside:
|
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(1) Name and Principal
Business Address
*
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(2) Positions and Offices with Underwriter
|
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(3) Positions and Offices with Registrant
|
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Mark A. Fairbanks
†
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President and Manager
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None
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Richard J. Berthy
†
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Vice President, Treasurer and Manager
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None
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|
Bruno S. DiStefano
|
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Vice President
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None
|
|
Ronald C. Berge
|
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Vice President
|
|
None
|
|
Susan K. Moscaritolo
|
|
Vice President and Chief Compliance Officer
|
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None
|
|
Lisa S. Clifford
†
|
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Vice President
|
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None
|
|
Jennifer E. Hoopes
†
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Secretary
|
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None
|
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Nishant Bhatnagar
†
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Assistant Secretary
|
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None
|
|
*
|
The principal business address for each individual unless otherwise noted is Foreside Funds Distributors LLC, 899 Cassatt Road, 400 Berwyn Park, Suite
110, Berwyn, PA 19312
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†
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The principal business address for this individual is Foreside Funds Distributors LLC, Three Canal Plaza, Suite 100, Portland ME 04101
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SEI is located at One Freedom Valley Drive, Oaks, PA 19456. The following is a list of the directors
and executive officers of SEI:
9
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(1) Name and Principal
Business Address
*
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(2) Positions and Offices with Underwriter
|
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(3) Positions and Offices with
Registrant
|
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William M. Doran
|
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Director
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None
|
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Edward D. Loughlin
|
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Director
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None
|
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Wayne M. Withrow
|
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Director
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None
|
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Kevin P. Barr
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President & Chief Executive Officer
|
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None
|
|
Maxine J. Chou
|
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Chief Financial Officer, Chief Operations Officer, & Treasurer
|
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None
|
|
Karen E. LaTourette
|
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Chief Compliance Officer, Anti-Money Laundering Officer & Assistant Secretary
|
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None
|
|
John C. Munch
|
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General Counsel & Secretary
|
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None
|
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Mark J. Held
|
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Senior Vice President
|
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None
|
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Lori L. White
|
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Vice President & Assistant Secretary
|
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None
|
|
John P. Coary
|
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Vice President & Assistant Secretary
|
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None
|
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John J. Cronin
|
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Vice President
|
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None
|
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Robert M. Silvestri
|
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Vice President
|
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None
|
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*
|
The principal business address for each individual is SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456
|
(c) Not applicable
Item 33. Location of Accounts and Records
(1) BNY Mellon Investment Servicing (US)
Inc., 4400 Computer Drive, Westborough, MA 01581 (records relating to its function as transfer agent and accounting services agent).
(2)
Foreside Funds Distributors LLC, 899 Cassatt Road, 400 Berwyn Park, Suite 110, Berwyn, PA 19312 (records relating to its function as distributor).
(3) BNY Mellon Investment Servicing Trust Company, 8800 Tinicum Boulevard, Philadelphia, PA 19153 (records relating to its function as custodian).
(4) Pyxis Capital, L.P., 200 Crescent Court, Suite 700, Dallas, Texas 75201 (records relating to its function as adviser and as administrator).
(5) BNY Mellon Investment Servicing (US) Inc., 760 Moore Road, King of Prussia, PA 19406 (records relating to its function as
sub-administrator).
(6) State Street Bank and Trust Company, 200 Clarendon Street, 16th Floor, Boston, MA 02116 (records relating to its
function as distributor and administrator with respect to Senior Loan ETF).
Item 34. Management Services
Not applicable
Item 35. Undertakings
Not applicable
10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the “Securities Act”) and the Investment Company Act of
1940, as amended (the “1940 Act”), the Registrant, Pyxis Funds I, certifies that it meets all of the requirements for effectiveness of this Registration Statement under rule 485(b) under the Securities Act and has duly caused this
Post-Effective Amendment No. 34 under the Securities Act and Amendment No. 37 under the 1940 Act to be signed on its behalf by the undersigned, duly authorized, in the City of Dallas and State of Texas on the 19th day of October, 2012.
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PYXIS FUNDS I
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By
|
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/s/ Ethan Powell
|
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Ethan Powell
|
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Executive Vice President and Secretary
|
Pursuant to the requirements of the Securities Act, this Post-Effective Amendment No. 34
to the Registration Statement has been signed on October 19, 2012 by the following persons in the capacities indicated:
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Signature
|
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Title
|
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|
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/s/ Ethan Powell
|
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Trustee,
|
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Ethan Powell
|
|
Executive Vice President and Secretary
|
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|
|
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/s/ Timothy K. Hui*
|
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Trustee
|
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Timothy K. Hui
|
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/s/ Scott F. Kavanaugh*
|
|
Chairman of the Board, Trustee
|
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Scott F. Kavanaugh
|
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|
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/s/ James F. Leary*
|
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Trustee
|
|
James F. Leary
|
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|
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|
|
/s/ Bryan A. Ward*
|
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Trustee
|
|
Bryan A. Ward
|
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Treasurer
|
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/s/ Brian Mitts*
|
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(Principal Financial Officer and Principal Accounting Officer)
|
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Brian Mitts
|
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* By:
|
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/s/ Ethan Powell
|
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Ethan Powell
|
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|
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Attorney-in-Fact
|
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October 19, 2012
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11
Exhibit Index
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Exhibit No.
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(a)(1)
|
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Amended and Restated Agreement and Declaration of Trust of the Registrant, dated September 14, 2012
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(a)(2)(iv)
|
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Certificate of Designation for Pyxis/iBoxx Senior Loan ETF
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(d)(7)
|
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Investment Advisory Agreement between Pyxis and the Registrant with respect to Senior Loan ETF
|
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(e)(5)
|
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Distribution Agreement between SEI Investments Distribution Co. and the Registrant
|
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(e)(6)
|
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Distribution Services Agreement between SEI Investments Distribution Co. and the Registrant
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(g)(3)
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Master Custodian Agreement between State Street Bank and Trust Company and the Registrant
|
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(h)(5)
|
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Revised Exhibit A to Administration Services Agreement between Pyxis and the Registrant
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(h)(12)
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Administration Agreement between SEI Global Funds Services and the Registrant
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(h)(13)
|
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Form of Authorized Participant Agreement
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(h)(14)
|
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Transfer Agency and Services Agreement between State Street Bank and Trust Company and the Registrant
|
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(i)(4)
|
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Opinion of Ropes & Gray LLP with respect to Senior Loan ETF
|
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(m)(4)
|
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Form of Rule 12b-1 Distribution Plan relating to Shares of Senior Loan ETF
|
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|
|
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(p)(5)
|
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Code of Ethics of SEI Investments Distribution Co., Distributor for Senior Loan ETF
|
Exhibit (a)(1)
PYXIS FUNDS I
AMENDED AND
RESTATED
AGREEMENT AND DECLARATION OF TRUST
September 14, 2012
TABLE OF CONTENTS
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ARTICLE I The Trust
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1
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Section 1.1. Name
|
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1
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Section 1.2. Definitions
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1
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Section 1.3. Purpose and Powers of Trust
|
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3
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ARTICLE II Trustees
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3
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Section 2.1. Number and Qualification
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3
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Section 2.2. Term and Election
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3
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Section 2.3. Resignation and Removal
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4
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Section 2.4. Vacancies
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4
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Section 2.5. Meetings
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4
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Section 2.6. Officers
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5
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ARTICLE III Powers and Duties of Trustees
|
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5
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Section 3.1. General
|
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5
|
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Section 3.2. Investments
|
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6
|
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Section 3.3. Legal Title
|
|
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6
|
|
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Section 3.4. Issuance and Repurchase of Shares
|
|
|
6
|
|
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Section 3.5. Borrow Money or Utilize Leverage
|
|
|
7
|
|
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Section 3.6. Delegation; Committees
|
|
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7
|
|
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Section 3.7. Collection and Payment
|
|
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7
|
|
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Section 3.8. Expenses
|
|
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7
|
|
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Section 3.9. By Laws
|
|
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8
|
|
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Section 3.10. Miscellaneous Powers
|
|
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8
|
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Section 3.11. Further Powers
|
|
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8
|
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ARTICLE IV Limitations of Liability and Indemnification
|
|
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9
|
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Section 4.1. No Personal Liability of Shareholders, Trustees, etc
|
|
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9
|
|
|
Section 4.2. Mandatory Indemnification
|
|
|
9
|
|
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Section 4.3. No Duty of Investigation; Notice in Trust Instruments, etc
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11
|
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Section 4.4. Reliance on Experts, etc
|
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11
|
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ARTICLE V Shares of Beneficial Interest
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11
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Section 5.1. Beneficial Interest
|
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11
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Section 5.2. Series Designation
|
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11
|
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Section 5.3. Class Designation
|
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12
|
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Section 5.4. Description of Shares
|
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12
|
|
-i-
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Section 5.5. Rights of Shareholders
|
|
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14
|
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Section 5.6. Trust Only
|
|
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14
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Section 5.7. Issuance of Shares
|
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14
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Section 5.8. Register of Shares
|
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14
|
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Section 5.9. Transfer of Shares
|
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15
|
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Section 5.10. Notices
|
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15
|
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Section 5.11. Net Asset Value
|
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15
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Section 5.12. Distributions to Shareholders
|
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15
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ARTICLE VI Shareholders
|
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16
|
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Section 6.1. Meetings of Shareholders
|
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16
|
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Section 6.2. Voting
|
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16
|
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Section 6.3. Notice of Meeting, Shareholder Proposals and Record Date
|
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16
|
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Section 6.4. Quorum and Required Vote
|
|
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17
|
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Section 6.5. Proxies, etc
|
|
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17
|
|
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Section 6.6. Reports
|
|
|
18
|
|
|
Section 6.7. Inspection of Records
|
|
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18
|
|
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Section 6.8. Shareholder Action by Written Consent
|
|
|
18
|
|
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ARTICLE VII Redemption
|
|
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18
|
|
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Section 7.1. Redemptions
|
|
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18
|
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Section 7.2. Disclosure of Holding
|
|
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19
|
|
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Section 7.3. Redemptions of Small Accounts
|
|
|
19
|
|
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ARTICLE VIII Duration: Termination of Trust; Amendment; Mergers, Etc
|
|
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19
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Section 8.1. Duration
|
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19
|
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Section 8.2. Termination
|
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19
|
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Section 8.3. Amendment Procedure
|
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20
|
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Section 8.4. Merger, Consolidation and Sale of Assets
|
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21
|
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ARTICLE IX Miscellaneous
|
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21
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Section 9.1. Filing
|
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21
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Section 9.2. Resident Agent
|
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21
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Section 9.3. Governing Law
|
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21
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Section 9.4. Counterparts
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22
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Section 9.5. Reliance by Third Parties
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22
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Section 9.6. Provisions in Conflict with Law or Regulation
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22
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-ii-
PYXIS FUNDS I
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
THIS AMENDED AND
RESTATED AGREEMENT AND DECLARATION OF TRUST made as of this 14th day of September 2012, by the Trustees hereunder, and amends and restates that certain Agreement and Declaration of Trust, dated February 27, 2006 (the “Original
Declaration”).
WHEREAS, this Trust has been formed to carry on business as set forth more particularly hereinafter;
WHEREAS, this Trust is authorized to issue an unlimited number of its shares of beneficial interest in separate series and
classes of each such series, each separate series to be a sub-trust hereunder, all in accordance with the provisions hereinafter set forth;
WHEREAS, the Trustees have agreed to manage all property coming into their hands as Trustees of a Delaware statutory trust in accordance with the provisions hereinafter set forth; and
WHEREAS, the parties hereto intend that the Trust created by this Declaration and the Certificate of Trust filed with the Secretary of
State of the State of Delaware on February 28, 2006 shall constitute a statutory trust under the Delaware Statutory Trust Statute and that this Declaration shall constitute the governing instrument of such statutory trust.
WHEREAS, the Trustees desire to continue the statutory trust formed pursuant to the Original Declaration and the filing of the
Certificate of Trust with the Secretary of State of the State of Delaware on February 28, 2006.
NOW, THEREFORE, the
Trustees hereby declare that they will hold all cash, securities, and other assets which they may from time to time acquire in any manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in this Trust or sub-trusts created hereunder as hereinafter set forth.
ARTICLE I
The Trust
Section 1.1.
Name
. This Trust shall be known as “Pyxis Funds I” or any other name or names as the Trustees may from time
to time determine.
Section 1.2.
Definitions
. As used in this Declaration, the following terms shall have the following
meanings:
“
By-Laws
” shall mean the By-Laws of the Trust as amended from time to time by the Trustees.
-1-
“
Class
” shall mean a portion of Shares of a Series of the Trust established
in accordance with Section 5.3 hereof.
“
Code
” shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
“
Commission
” shall mean the Securities and Exchange Commission.
“
Declaration
” shall mean this Amended and Restated Agreement and Declaration of Trust, as amended or amended
and restated from time to time, including by way of any classifying or reclassifying Shares of any Series or any Class of any such Series or determining any designations, powers, preferences, voting, conversion and other rights, limitations,
qualifications and terms and conditions thereof.
“
Delaware Statutory Trust Statute
” shall mean the
provisions of the Delaware Statutory Trust Act, 12
Del. C.
§3801,
et
.
seq.
, as such Act may be amended from time to time.
“
Fundamental Policies
” shall mean the investment policies and restrictions set forth from time to time in any Prospectus or contained in any current Registration Statement of the Trust or
any Series filed with the Commission or as otherwise adopted by the Trustees and the Shareholders in accordance with the requirements of the 1940 Act that are expressly designated as fundamental policies of such Series as they may be amended from
time to time in accordance with the 1940 Act.
“
Interested Person
” shall have the meaning ascribed thereto in
the 1940 Act.
“
Majority Shareholder Vote
” shall mean a vote of a “majority of the outstanding voting
securities” (as such term is defined in the 1940 Act) of the Trust, any Series of the Trust or any Class thereof, as applicable.
The “
1940 Act
” refers to the Investment Company Act of 1940 and the rules and regulations promulgated thereunder and applicable exemptions therefrom, as amended from time to time.
The “
1933 Act
” refers to the Securities Act of 1933, and the rules and regulations promulgated thereunder
and applicable exemptions therefrom, as amended from time to time.
“
Person
” shall mean and include natural
persons, corporations, partnerships, trusts, limited liability companies, associations, joint ventures and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof.
“
Prospectus
” shall mean the current prospectus or offering memorandum of securities of the Trust or of any Series
thereof or of any Class of any such Series, as applicable.
“
Series
” shall mean the separate sub-trusts that
may be established and designated as series pursuant to Section 5.2 hereof or any one of such sub-trusts, as applicable.
-2-
“
Series Liabilities
” shall mean as of any particular time any and all
debts, obligations or other liabilities, contingent or otherwise, of or relating to a particular Series of the Trust.
“
Series Property
” shall mean as of any particular time any and all property, real or personal, tangible or intangible,
which at such time is owned or held by or for the account of a particular Series.
“
Shareholders
” shall mean
as of any particular time the holders of record of outstanding Shares of the Trust, any Series of the Trust or any Class of any Series, as applicable, at such time.
“
Shares
” shall mean the transferable units of beneficial interest in the Trust or in a Series of the Trust and includes fractions of Shares as well as whole Shares, which Shares may be
classified as relating to particular Series and Classes within a Series. All references to Shares shall be deemed to be Shares of any or all Series or Classes as the context may require.
“
Trust
” shall mean the trust established by this Declaration, as amended from time to time, inclusive of each such
amendment and every sub-trust established as a Series hereunder.
“
Trustees
” shall mean the signatory to this
Declaration, so long as such signatory shall continue in office in accordance with the terms hereof, and all other Persons who at the time in question have been duly elected or appointed and have qualified as trustees in accordance with the
provisions hereof and are then in office.
Section 1.3.
Purpose and Powers of Trust
. The Trust is established for the
purpose of engaging in any activity not prohibited by Delaware law and shall have the power to engage in any such activity and in any activity incidental or related to any such activity.
ARTICLE II
Trustees
Section 2.1.
Number and Qualification
. Prior to any offering of Shares, there may be a sole Trustee and thereafter the number of
Trustees shall be such number, not less than three or more than fifteen, as shall be set forth in a written instrument or resolution signed or adopted by a majority of the Trustees then in office. No reduction in the number of Trustees shall have
the effect of removing any Trustee from office prior to the expiration of his or her term. An individual nominated as a Trustee shall be at least 21 years of age and not older than such age as may be set forth in a written instrument or resolution
signed or adopted by not less than a majority of the Trustees then in office and shall not be under legal disability. Trustees need not own Shares and may succeed themselves in office.
Section 2.2.
Term and Election
. Except for the Trustees appointed to fill vacancies pursuant to Section 2.4 hereof, each
Trustee shall be elected to serve until death, resignation, removal or reelection at the annual meeting, if one is held, or at any special meeting of shareholders. Subject to the foregoing sentence, each Trustee named herein or elected or appointed
pursuant to the terms hereof shall hold office until such Trustee’s successor has been elected at such a meeting and has qualified to serve as Trustee. Election of Trustees at a meeting
-3-
shall be by the affirmative vote of the holders of a plurality of the Shares present in person or by proxy. Each individual elected or appointed as a Trustee of the Trust shall, unless otherwise
provided by such election or appointment, also thereby be elected or appointed, as the case may be, as a Trustee of each Series of the Trust in existence at any time such individual is a Trustee. The Trustees may elect one of themselves to serve as
Chairman.
Section 2.3.
Resignation and Removal
. Any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered or mailed to the Trustees or the Chairman, if any, the President or the Secretary and such resignation shall be effective upon such delivery, or at a later date according to the
terms of the instrument. Any Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by Section 2.1 hereof) for cause at any time by written instrument, signed by
two-thirds of the remaining Trustees, specifying the date when such removal shall become effective. Any Trustee may be removed (provided the aggregate number of Trustees after such removal shall not be less than the minimum number required by
Section 2.1 hereof) without cause at any time by a written instrument, signed or adopted by two thirds of the remaining Trustees or by vote of Shares having not less than two-thirds of the aggregate number of Shares entitled to vote in the
election of such Trustee, specifying the date when such removal shall become effective. Upon the resignation or removal of a Trustee, or such Person otherwise ceasing to be a Trustee, such Person shall cease to hold any Series Property previously
held in the name of such former Trustee, without any requirement that such former Trustee execute and deliver any conveyance or acknowledgment thereof.
Section 2.4.
Vacancies
. Whenever a vacancy in the Board of Trustees shall occur, the remaining Trustees may fill such vacancy by appointing an individual having the qualifications described in this
Article by a written instrument signed by a majority of the Trustees then in office or by election by the Shareholders, or may leave such vacancy unfilled or may reduce the number of Trustees (provided the aggregate number of Trustees after such
reduction shall not be less than the minimum number required by Section 2.1 hereof). Any vacancy created by an increase in Trustees may be filled by the appointment of an individual having the qualifications described in this Article made by a
written instrument signed, or a resolution approved, by a majority of the Trustees then in office or by election by the Shareholders. No vacancy shall operate to annul this Declaration or to revoke any existing authority or power existing pursuant
to the terms of this Declaration. Whenever a vacancy in the number of Trustees shall occur, until such vacancy is filled as provided herein, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and
shall discharge all the duties imposed upon the Trustees by this Declaration.
Section 2.5.
Meetings
. Meetings of the
Trustees shall be held from time to time upon the call of the Chairman, if any, the President, the Secretary or any two Trustees. Regular meetings of the Trustees may be held without call or notice at a time and place fixed by the By Laws or by
resolution of the Trustees. Notice of any other meeting shall be given by the Secretary and shall be delivered to the Trustees orally not less than 24 hours before the meeting or in writing not less than 72 hours, but may be waived in writing by any
Trustee either before or after such meeting. The attendance of a Trustee at a meeting shall constitute a waiver of notice of such meeting , except where a Trustee attends a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting has not been properly called or
-4-
convened. A quorum for all meetings of the Trustees shall be one-third, but not less than two, of the Trustees then in office. Unless provided otherwise in this Declaration of Trust and except as
required by the 1940 Act, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present (a quorum being present) or without a meeting by written consent of a majority of the Trustees then in office.
Any committee of the Trustees, including an executive committee, if any, may act with or without a meeting. A quorum for all meetings of
any such committee shall be one-third, but not less than two, of the members thereof. Unless provided otherwise in this Declaration or any instrument or resolution of the Trustees establishing or affecting such Committee, any action of any such
committee may be taken at a meeting by vote of a majority of the members present (a quorum being present) or without a meeting by written consent of a majority of the members.
With respect to actions of the Trustees and any committee of the Trustees, Trustees who are Interested Persons in any action to be taken may be counted for quorum purposes under this Section and shall be
entitled to vote to the extent not prohibited by the 1940 Act.
All or any one or more Trustees may participate in a meeting
of the Trustees or any committee thereof by means of a conference telephone, internet connection or similar communications equipment by means of which all Persons participating in the meeting can hear or otherwise communicate with each other;
participation in a meeting pursuant to any such communications system shall constitute presence in person at such meeting, except as otherwise provided by the 1940 Act.
Section 2.6.
Officers
. The Trustees shall elect a President, a Secretary, a Treasurer and an Assistant Treasurer, who shall serve at the pleasure of the Trustees or until their successors are
elected and qualified. The Trustees may elect or appoint or may authorize the Chairman, if any, or President to appoint such other officers or agents with such other titles and powers as the Trustees may deem to be advisable. The President,
Secretary, Treasurer and Assistant Treasurer may, but need not, be a Trustee.
ARTICLE III
Powers and Duties of Trustees
Section 3.1.
General
. The Trustees shall owe to the Trust and its Shareholders the same fiduciary duties as owed by directors of corporations to such corporations and their stockholders under the
general corporation law of the State of Delaware. The Trustees shall have exclusive and absolute control over the Series Property of each Series and over the business of the Trust and any Series thereof to the same extent as if the Trustees were the
sole owners of all such Series Property and business in their own right, but with such powers of delegation as may be permitted by this Declaration. The enumeration of any specific power herein shall not be construed as limiting the aforesaid power.
The Trustees may perform such acts as in their sole discretion are proper for conducting the business of the Trust. The powers of the Trustees may be exercised without order of or resort to any court. No Trustee shall be obligated to give any bond
or other security for the performance of any of his duties or powers hereunder.
-5-
Section 3.2.
Investments
. The Trustees shall have power, subject to the Fundamental
Policies in effect from time to time, to:
(a) manage, conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise acquire, hold, pledge, sell, assign, transfer, exchange,
distribute or otherwise deal in or dispose of any and all sorts of property, tangible or intangible, including but not limited to securities of any type whatsoever, whether equity or non equity, of any issuer, evidences of indebtedness of any Person
and any other rights, interests, instruments or property of any sort and to exercise any and all rights, powers and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons to exercise any of said rights, powers and privileges in respect of any of said investments. The Trustees shall not be limited by
any law limiting the investments that may be made by fiduciaries.
Section 3.3.
Legal Title
. Legal title to all the
Series Property shall be vested in the Trustees as joint tenants, except that the Trustees shall have power to cause legal title to any Series Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or any
Series thereof, or in the name of any other Person as nominee, custodian or pledgee, on such terms as the Trustees may determine, provided that the interest of the Trust or any Series thereof therein is appropriately protected.
The right, title and interest of the Trustees in the Series Property shall vest automatically in each Person who may hereafter become a
Trustee upon his due election and qualification. Upon the ceasing of any Person to be a Trustee for any reason, such Person shall automatically cease to have any right, title or interest in any of the Series Property, and the right, title and
interest of such Trustee in the Series Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.
Section 3.4.
Issuance and Repurchase of Shares
. The Trustees shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares, including Shares in fractional denominations, shall have the power to establish from time to time in accordance with the provisions of Section 5.2 and
5.3 hereof Series and Classes representing interests in the Trust or a Series thereof and, subject to the more detailed provisions set forth in Article VII, shall have the power to apply to any such repurchase, redemption, retirement, cancellation
or acquisition of Shares any funds or property of the applicable Series of the Trust whether capital or surplus or otherwise, to the full extent now or hereafter permitted by the laws of the State of Delaware governing business corporations.
Notwithstanding anything contained herein to the contrary, the Trustees may in their sole discretion determine that Shares of any Series or Class will be issued in lots of such aggregate number of Shares determined by the Trustees, to be called
creation units or such other term as the Trustees shall determine (as so defined, “Creation Units”), and in connection with the issuance or redemption of such Creation Units, to charge such transaction fees or other fees as the Trustees
shall determine, provided however that the Trustees may from time to time, in their
-6-
sole discretion determine to alter the number of Shares constituting a Creation Unit. For avoidance of doubt, the Trustees shall determine the number of shares in each Creation Unit but shall not
be required to specifically authorize each issuance or redemption of a Creation Unit.
Section 3.5.
Borrow Money or Utilize
Leverage
. Subject to the Fundamental Policies in effect from time to time, the Trustees shall have the power to borrow money or otherwise obtain credit or utilize leverage in connection with the activities of any Series to the maximum extent
permitted by law, regulation or order and the Fundamental Policies of any Series and to secure the same by mortgaging, pledging or otherwise subjecting as security the assets of such Series, including the lending of portfolio securities, and to
endorse, guarantee, or undertake the performance of any obligation, contract or engagement of any other Person; provided, however, that the assets of any particular Series shall not be used as security for any credit extended solely or partially to
one or more other Series.
Section 3.6.
Delegation; Committees
. The Trustees shall have the power, consistent with
their continuing exclusive authority over the management of the Trust and the Series Property, to delegate from time to time to such of their number or to officers, employees or agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the applicable Series or the names of the Trustees or otherwise as the Trustees may deem expedient, to at least the same extent as such delegation is permitted to directors of a Delaware business
corporation and is permitted by the 1940 Act, as well as any further delegations the Trustees may determine to be desirable, expedient or necessary in order to effect the purpose hereof. The Trustees may designate one or more committees which shall
have all or such lesser portion of the authority of the entire Board of Trustees as the Trustees shall determine from time to time, except to the extent action by the entire Board of Trustees or particular Trustees is required by the 1940 Act.
Section 3.7.
Collection and Payment
. The Trustees shall have power to collect all property due to any Series of the
Trust; to pay all claims, including taxes, against any Series Property, the Trust or any Series of the Trust, the Trustees or any officer, employee or agent of the Trust; to prosecute, defend, compromise or abandon any claims relating to any Series
Property, the Trust or any Series of the Trust, the Trustees or any officer, employee or agent of the Trust; to foreclose any security interest securing any obligations, by virtue of which any property is owed to any Series of the Trust; and to
enter into releases, agreements and other instruments. Except to the extent required for a Delaware business corporation, the Shareholders shall have no power to vote as to whether or not a court action, legal proceeding or claim should or should
not be brought or maintained derivatively or as a class action on behalf of the Trust, any Series or the Shareholders thereof.
Section 3.8.
Expenses
. The Trustees shall have power to incur and pay out of the assets or income of any Series of the Trust, any
expenses which in the opinion of the Trustees are necessary or appropriate to carry out any of the purposes of this Declaration, and the business of any Series of the Trust, and to pay reasonable compensation from the funds of each Series to
themselves as Trustees. The Trustees shall fix the compensation of all officers, employees and Trustees. Subject to the 1940 Act, the Trustees may pay themselves such compensation for special services, including legal, underwriting, syndicating and
brokerage services, as they in good faith may deem reasonable and reimbursement for expenses reasonably incurred by
-7-
themselves on behalf of any Series. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder, or each Shareholder of any particular Series, to pay
directly, in advance or arrears, for charges of distribution, of the custodian or transfer, shareholder servicing or similar agent of such Series or Class, a pro rata amount as defined from time to time by the Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends or distributions owed such Shareholder and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares that represent, at the net
asset value thereof, the outstanding amount of such charges due from such Shareholder.
Section 3.9.
By Laws
. The
Trustees shall have the exclusive authority to adopt and from time to time amend or repeal By Laws for the conduct of the business of the Trust.
Section 3.10.
Miscellaneous Powers
. The Trustees shall have the power to: (a) employ or contract with such Persons as the Trustees may deem desirable for the transaction of the business of any
Series, including investment advisers, administrators, custodians, transfer agents, shareholder services providers, accountants, counsel, brokers, dealers and others; (b) enter into joint ventures, partnerships and any other combinations or
associations; (c) purchase, and pay for out of Series Property, insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers, distributors, selected dealers or independent contractors of any Series
against all claims arising by reason of holding any such position or by reason of any action taken or omitted by any such Person in such capacity, whether or not constituting negligence, or whether or not the Trust would have the power to indemnify
such Person against such liability; (d) establish pension, profit sharing, share purchase, and other retirement, incentive and benefit plans for any Trustees, officers, employees and agents of the Trust; (e) make donations, irrespective of
benefit to the Trust, for charitable, religious, educational, scientific, civic or similar purposes; (f) to the extent permitted by applicable law, indemnify any Person with whom any Series has dealings, including without limitation any
investment adviser, administrator, manager, transfer agent, custodian, distributor or selected dealer, or any other Person as the Trustees may see fit to such extent as the Trustees shall determine; (g) guarantee indebtedness or contractual
obligations of others; (h) determine and change the fiscal year of the Trust and the method in which its accounts shall be kept; (i) adopt a seal for the Trust but the absence of such seal shall not impair the validity of any instrument
executed on behalf of the Trust; and (j) list any Series or Class of Shares for trading on a securities exchange or in an over-the-counter market.
Section 3.11.
Further Powers
. The Trustees shall have the power to conduct the business of the Trust or any Series of the Trust or any Class thereof and carry on its operations in any and all of
its branches and maintain offices both within and without the State of Delaware, in any and all states of the United States of America, in the District of Columbia, and in any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign governments, and to do all such other things and execute all such instruments as they deem necessary, proper or desirable in order to promote the interests of the Trust or
any Series of the Trust or any Class thereof although such things are not herein specifically mentioned. Any determination as to what is in the interests of the Trust or any Series of the Trust or any Class thereof made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the presumption shall be in favor of a grant of power to the Trustees.
-8-
ARTICLE IV
Limitations of Liability and Indemnification
Section 4.1.
No Personal
Liability of Shareholders, Trustees, etc
. No Shareholder of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person in connection with Series Property or the acts, obligations or affairs of the Trust.
Shareholders shall have the same limitation of personal liability as is extended to stockholders of a private corporation for profit incorporated under the general corporation law of the State of Delaware. No Trustee, officer, employee or agent of
the Trust or any Series of the Trust shall be subject in such capacity to any personal liability whatsoever to any Person, other than the Trust or the respective Series or the Shareholders, in connection with Series Property or the affairs of the
Trust or the respective Series, save only liability to the Trust or its Shareholders arising from bad faith, willful misfeasance, gross negligence or reckless disregard for his duty to such Person; and, subject to the foregoing exception, all such
Persons shall look solely to the Series Property of the affected Series for satisfaction of claims of any nature arising in connection with the affairs of the Trust. If any Shareholder, Trustee or officer, as such, of the Trust, is made a party to
any suit or proceeding to enforce any such liability, subject to the foregoing exception regarding Trustees and officers, he shall not, on account thereof, be held to any personal liability. Any repeal or modification of this Section 4.1 shall
not adversely affect any right or protection of a Trustee or officer of the Trust existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
Section 4.2.
Mandatory Indemnification
. The Trust hereby agrees, solely out of the assets of the affected Series, to indemnify
each Person who at any time serves as Trustee or officer of the Trust (each such Person being an “indemnitee”) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and reasonable counsel fees reasonably incurred by such indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or investigative body
in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while acting in any capacity set forth above in this Article IV by reason of his having acted in any such capacity, except with
respect to any matter as to which he shall not have acted in good faith in the reasonable belief that his action was in the best interest of the Trust or the respective Series of the Trust and furthermore, in the case of any criminal proceeding, as
to which he shall have had reasonable cause to believe that the conduct was unlawful, provided, however, that no indemnitee shall be indemnified hereunder against any liability to any Person or any expense of such indemnitee arising by reason of
(i) willful misfeasance, (ii) bad faith, (iii) gross negligence, or (iv) reckless disregard of the duties involved in the conduct of his position. Notwithstanding the foregoing, with respect to any action, suit or other
proceeding voluntarily prosecuted by any indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such indemnitee was (1) authorized by a majority of the Trustees or
(2) was instituted by the indemnitee to enforce his or her rights to indemnification hereunder in a case in which the indemnitee is found to be entitled to such indemnification. The
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rights to indemnification set forth in this Declaration shall continue as to a Person who has ceased to be a Trustee or officer of the Trust and shall inure to the benefit of his or her heirs,
executors and personal and legal representatives. No amendment or restatement of this Declaration or repeal of any of its provisions shall limit or eliminate any of the benefits provided to any Person who at any time is or was a Trustee or officer
of the Trust or otherwise entitled to indemnification hereunder in respect of any act or omission that occurred prior to such amendment, restatement or repeal.
(a) Notwithstanding the foregoing, no indemnification shall be made hereunder unless there has been a determination (1) by a final decision on the merits by a court or other body of competent
jurisdiction before whom the issue of entitlement to indemnification hereunder was brought that such indemnitee is entitled to indemnification hereunder or, (2) in the absence of such a decision, by (i) a majority vote of a quorum (being
one-third of such Trustees) of those Trustees who are neither Interested Persons of the Trust nor parties to the proceeding (“Disinterested Non-Party Trustees”), that the indemnitee is entitled to indemnification hereunder, or (ii) if
such quorum is not obtainable or even if obtainable, if such majority so directs, independent legal counsel in a written opinion conclude that the indemnitee should be entitled to indemnification hereunder. All determinations to make advance
payments in connection with the expense of defending any proceeding shall be authorized and made in accordance with the immediately succeeding paragraph (c) below.
(b) The Trust shall make advance payments in connection with the expenses of defending any action with respect to which indemnification might be sought hereunder if the Trust receives a written
affirmation by the indemnitee of the indemnitee’s good faith belief that the standards of conduct necessary for indemnification have been met and a written undertaking to reimburse the Trust unless it is subsequently determined that indemnitee
is entitled to such indemnification and if a majority of the Trustees determine that the applicable standards of conduct necessary for indemnification appear to have been met. In addition, at least one of the following conditions must be met:
(1) the indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses arising by reason of any lawful advances, or (3) a majority of a quorum of the Disinterested Non-Party Trustees, or
if a majority vote of such quorum so directs, independent legal counsel in a written opinion, shall conclude, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is substantial reason to believe that
the indemnitee ultimately will be found entitled to indemnification.
(c) The rights accruing to any indemnitee under these
provisions shall not exclude any other right to which he or she may be lawfully entitled.
(d) Subject to any limitations
provided by the 1940 Act and this Declaration, the Trust shall have the power and authority, solely out of the assets of the affected Series, to indemnify and provide for the advance payment of expenses to employees, agents and other Persons
providing services to the Trust or serving in any capacity at the request of the Trust to the full extent as corporations organized under the Delaware General Corporation Law may indemnify or provide for the advance payment of expenses for such
Persons provided that such indemnification has been approved by a majority of the Trustees.
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Section 4.3.
No Duty of Investigation; Notice in Trust Instruments, etc
. No
purchaser, lender, transfer agent or other Person dealing with the Trustees or with any officer, employee or agent of the Trust or any Series of the Trust or Class thereof shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or be liable for the application of money or property paid, loaned, or delivered to or on the order of the Trustees or of said officer, employee or agent. Every obligation,
contract, undertaking, instrument, certificate, Share, other security of the Trust or any Series of the Trust, and every other act or thing whatsoever executed in connection with the Trust or any Series of the Trust shall be conclusively taken to
have been executed or done by the executors thereof only in their capacity as Trustees under this Declaration or in their capacity as officers, employees or agents of the Trust. The Trustees may maintain insurance for the protection of the Series
Property, the Shareholders of each Series, Trustees, officers, employees and agents in such amount as the Trustees shall deem adequate to cover possible liability, and such other insurance as the Trustees in their sole judgment shall deem advisable
or is required by the 1940 Act.
Section 4.4.
Reliance on Experts, etc
. Each Trustee and officer or employee of the
Trust or any Series of the Trust shall, in the performance of his duties, be fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records
of the Trust or any Series of the Trust or Class thereof, upon an opinion of counsel, or upon reports made to the Trust or any Series thereof by any of the Trust’s officers or employees or by any advisor, administrator, manager, distributor,
selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the Trust, regardless of whether such counsel or other expert may also be a Trustee.
ARTICLE V
Shares of Beneficial Interest
Section 5.1.
Beneficial Interest
. The interest of the beneficiaries hereunder shall be represented by an unlimited number of transferable shares of beneficial interest, par value $.001 per share.
All Shares issued in accordance with the terms hereof, including, without limitation, Shares issued in connection with a dividend in Shares or a split of Shares, shall be fully paid when the consideration determined by the Trustees (if any) therefor
shall have been received by the Trust. The power to make certain changes against Shareholders and their Shares shall not be considered assessments for the foregoing purpose.
Section 5.2.
Series Designation
. The Trustees, in their discretion from time to time, may authorize the reclassification of Shares into one or more Series, each Series relating to a separate
portfolio of investments and each of which Series shall be a separate and distinct subtrust of the Trust. Each Series so established hereunder shall be deemed to be a separate trust under the provisions of Delaware law. The Trustees shall have
exclusive power without the requirement of Shareholder approval to establish and designate such separate and distinct Series and to fix and determine the relative rights and preferences as between the different Series. The establishment and
designation of any Series shall be effective upon the execution or approval by a majority of the Trustees of an instrument or resolution setting forth the establishment and
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designation of such Series (or when authorized to do so, by any officer of the Trust pursuant to the vote of a majority of the Trustees of the Trust). Such instrument shall also set forth any
rights and preferences of such Series which are in addition to the rights and preferences of Shares set forth in this Declaration. At any time that there are no Shares outstanding of any particular Series previously established and designated, the
Trustees may by an instrument or resolution executed or approved by a majority of their number abolish or alter that Series and the establishment and designation thereof. Each instrument referred to in this paragraph shall have the status of an
amendment to this Declaration.
Section 5.3.
Class Designation
. The Trustees, in their discretion from time to time,
may authorize the reclassification of Shares of any Series into one or more Classes of Shares, all the assets of which Series shall remain commingled and not allocated among the different Classes thereof. The Trustees shall have exclusive power
without the requirement of Shareholder approval to establish and designate such separate and distinct Classes and to fix and determine the relative rights, terms, conditions and expenses applicable to each Class of Shares to the maximum extent
permitted by the 1940 Act. The establishment and designation of any Class of Shares shall be effective upon the execution or approval by a majority of the Trustees of an instrument or resolution setting forth the establishment and designation of
such Class (or when authorized to do so, by an officer of the Trust pursuant to the vote of a majority of the Trustees of the Trust). At any time that there are no Shares outstanding of any particular Class previously established and designated, the
Trustees may, by an instrument or resolution executed or approved by a majority of the Trustees, abolish or alter that Class and the establishment and designation thereof.
Section 5.4.
Description of Shares
. If the Trustees shall create sub trusts and reclassify the Shares into one or more Series or create Classes of Shares, the following provisions shall be
applicable:
(a)
Number of Shares
. The number of Shares of each Series or Class that may be issued shall be unlimited.
The Trustees may, but shall not be required to, classify or reclassify any unissued Shares or any Shares previously issued and reacquired of any Series or Class into one or more Series or Classes that may be established and designated from time to
time. The Trustees may, but shall not be required to, hold redeemed Shares as treasury Shares (of the same or some other Series or Class), reissue such Shares for such consideration and on such terms as they may determine, or cancel any Shares of
any Series or Class reacquired by the Trust at their discretion from time to time.
(b)
Investment of Property
. The
power of the Trustees to invest and reinvest the Trust Property of each Series that may be established shall be governed by Section 3.2 of this Declaration.
(c)
Allocation of Assets
. All consideration received by the Trust for the issue or sale of Shares of a particular Series or Class of such Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof, including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payment derived from any reinvestment of such
proceeds in whatever form the same may be, together with such Series’ or Class’s share of any other assets of the Trust, shall be held
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by the Trustees and Trust for the benefit of the Shareholders of such Series and, subject to the rights of creditors of such Series only, shall irrevocably belong to that Series for all purposes,
and shall be so recorded upon the books of account of the Trust. In the event that there are any assets, income, earnings, profits, and proceeds thereof, funds or payments that are not readily identifiable as belonging to any particular Series, such
assets shall be allocated among the Series in proportion to their net assets as a proportion of the total net assets of the Trust unless the Trustees shall have affirmatively allocated them among any one or more of the Series established and
designated from time to time in any other manner or basis as they, in their sole discretion, deem fair and equitable, and anything so allocated to a Series shall belong to such Series. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series and for all purposes.
(d)
Allocation of Liabilities
. The assets belonging to each particular
Series or attributable to each particular Class of such Series shall be charged with the liabilities of the Trust in respect of that Series or Class and with all expenses, costs, charges and reserves attributable to that Series or Class, and any
general liabilities, expenses, costs, charges or reserves of the Trust that are not readily identifiable as being attributable to any particular Series or Class shall be allocated and charged against assets of the Series and Classes of each Series
in proportion to their net assets as a proportion of the total net assets of the Trust unless the Trustees shall have affirmatively allocated them among any one or more of the Series or Classes established and designated from time to time in any
other manner or basis as the Trustees in their sole discretion deem fair and equitable; provided that any incremental expenses allocated to one or more Classes of Shares on a basis other than the relative net asset values of the respective Classes
shall be allocated in a manner consistent with the 1940 Act. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the Shareholders of all Series and Classes for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital, and each such determination and allocation shall be conclusive and binding upon
the Shareholders. Under no circumstances shall the assets allocated or belonging to a particular Series or attributable to a particular Class be charged with any liabilities attributable to another Series or Class. Any creditor may look only to the
assets of the particular Series with respect to which such Person is a creditor for satisfaction of such creditor’s debt.
(e)
Dividends
. The power of the Trust to pay dividends and make distributions with respect to any one or more Series shall be
governed by Section 5.12 of this Trust. Dividends and distributions on Shares of a particular Series may be paid with such frequency as the Trust may determine, which may be daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trust may determine, to the holders of Shares of that Series, from such of the income and capital gains, accrued or realized, from the assets belonging to that Series, as the Trust may determine, after
providing for actual and accrued liabilities belonging to that Series. All dividends and distributions on each Class of a Series shall be distributed pro rata to the holders of Shares of that Class in proportion to the number of Shares of that Class
held by such holders at the date and time of record established for the payment of such dividends or distributions, and such dividends and distributions need not be pro rata with respect to dividends and distributions paid to Shares of any other
Class of such Series. Dividends and distributions shall be paid with respect to Shares of a given Class only out of lawfully available assets attributable to such Class.
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Section 5.5.
Rights of Shareholders
. The Shares shall be personal property giving
only the rights in this Declaration specifically set forth. The ownership of the Trust Property of every description and the right to conduct any business herein before described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their Shares with respect to a particular Series or Class, and they shall have no right to call for any partition or division of any property, profits, rights or interests of
the Trust nor can they be called upon to share or assume any losses of the Trust or, subject to the right of the Trustees to charge certain expenses directly to Shareholders, as provided in the last sentence of Section 3.8, suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall not entitle the holder to preference, preemptive, appraisal, conversion or exchange rights (except as specified in Section 8.4 or as specified by the Trustees in the
designation or redesignation of any Series or Class thereof).
Section 5.6.
Trust Only
. It is the intention of the
Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust. Nothing in this Declaration shall be construed to make the Shareholders, either by themselves or with the Trustees, partners, members or shareholders of any such entity.
Section 5.7.
Issuance of Shares
. The Trustees, in their discretion, may from time to time without the vote of the
Shareholders issue Shares with respect to any Series that may have been established pursuant to Section 5.2, in addition to the then issued and outstanding Shares and Shares held in the treasury, to such party or parties and for such amount and
type of consideration, including cash or property, at such time or times, and on such terms as the Trustees may determine, and may in such manner acquire other assets (including the acquisition of assets subject to, and in connection with the
assumption of, liabilities) and businesses. The Trustees may from time to time divide or combine the Shares of any Series into a greater or lesser number without thereby changing the proportionate beneficial interest in such Series of the Trust.
Issuances and redemptions of Shares may be made in whole Shares, l/l,000ths of a Share, and/or multiples of either of the foregoing (including only in Creation Units approved pursuant to Section 3.4 hereto), or as the Trustees may otherwise
determine.
Section 5.8.
Register of Shares
. One or more registers shall be kept at the offices of the Trust or any
transfer agent duly appointed by the Trustees under the direction of the Trustees which registers shall contain the names and addresses of the Shareholders and the number of Shares of each Series and Class thereof held by them respectively and a
record of all transfers thereof. Such registers shall be conclusive as to who are the holders of the Shares of the applicable Series and Classes thereof and who shall be entitled to receive dividends or distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive payment of any dividend or distribution, nor to have notice given to him as herein provided, until he or she has given his or her address to a transfer agent or such other
officer or agent of the Trustees as shall keep the register for entry thereon. It is not contemplated that certificates will be issued for the Shares; however, the Trustees, in their discretion, may authorize the issuance of share certificates and
promulgate appropriate fees therefor and rules and regulations as to their use.
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Section 5.9.
Transfer of Shares
. Shares shall be transferable on the records of the
Trust only by the record holder thereof or by its agent thereto duly authorized in writing, upon delivery to the Trustees or a transfer agent of the Trust of a duly executed instrument of transfer, together with such evidence of the genuineness of
each such execution and authorization and of other matters as may reasonably be required. Upon such delivery, the transfer shall be recorded on the applicable register of the Trust. Until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereof, and none of the Trustees, transfer agent, registrar, officers, employees or agents of the Trust shall be affected by any notice of the proposed transfer.
Any Person becoming entitled to any Shares in consequence of the death, bankruptcy, or incompetence of any Shareholder, or otherwise by
operation of law, shall be recorded on the applicable register of Shares as the holder of such Shares upon production of the proper evidence thereof to the Trustees or a transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such for all purposes hereof, and none of the Trustees, transfer agent, registrar, officers, employees or agents of the Trust shall be affected by any notice of such death, bankruptcy or incompetence, or
other operation of law.
Section 5.10.
Notices
. Any and all notices to which any Shareholder hereunder may be entitled
and any and all communications to any Shareholder shall be deemed duly served or given if mailed, postage prepaid, addressed to any Shareholder of record at his or her last known address as recorded on the applicable register of the Trust and may be
sent together with any such notice or other communication to another Shareholder at the same address.
Section 5.11.
Net
Asset Value
. The value of the assets of the Trust or any Series of the Trust or any Class of such Series, the amount of liabilities of the Trust or any Series of the Trust or any Class of such Series and the net asset value of each outstanding
Share of any Series or Class shall be determined at such time or times and on such days as the Trustees may determine in accordance with the 1940 Act. The method of determination of net asset value shall be determined by the Trustees. The power and
duty to value the assets and liabilities of the Trust and make net asset value determinations and calculations may be delegated by the Trustees.
Section 5.12.
Distributions to Shareholders
.
(a) The Trust shall from time
to time distribute among the Shares such proportion of the net profits, surplus (including paid-in surplus), capital, or assets held by the Trustees as they or any Persons to whom they delegate such determination may deem proper or as may otherwise
be determined in the instrument setting forth the terms of such Series or Class of Shares, which need not be ratable with respect to distributions in respect of Shares of any other Class. Such distributions may be made in cash or property (including
without limitation any type of obligations of the Trust or any assets thereof) or any combination thereof.
15
(b) Distributions may be made to the Shareholders of record entitled to such distribution at
the time such distribution is declared or at such later date as shall be determined by the Trust prior to the date of payment.
(c) The Trust may always retain from any source such amount as the Trustees or their delegate may deem necessary to pay the debts or
expenses of the Trust or to meet obligations of the Trust, or as the Trustees or their delegate otherwise may deem desirable to use in the conduct of its affairs or to retain for future requirements or extensions of the business of the Trust.
ARTICLE VI
Shareholders
Section 6.1.
Meetings of Shareholders
. The Trust may,
but shall not be required to, hold annual meetings of the Shareholders of any or all of the Classes or Series. An annual or special meeting of Shareholders may be called at any time only by the Trustees. Any meeting of Shareholders shall be held
within or without the State of Delaware on such day and at such time as the Trustees shall designate.
Section 6.2.
Voting
. Shareholders shall have no power to vote on any matter, except matters on which a vote of Shares is expressly required by applicable law, this Declaration or resolution of the Trustees. In particular, no amendment of this Declaration,
and no merger, consolidation, share exchange or sale of assets of the Trust or any Series thereof, and no conversion of the Trust to any other form of organization or any other action of the Trust or Series thereof shall require any vote or other
approval of any of the Shareholders, except as provided by the foregoing sentence. Any matter required to be submitted for approval of any of the Shares and affecting more than one Series or Class shall require approval by the required vote of
Shares of the affected Series or Classes voting together as a single Series or Class and, if such matter affects one or more Series or Classes thereof differently from one or more other Series or Classes, approval, to the extent provided by
applicable law, this Declaration or resolution of the Trustees, by the required vote of Shares of each such Series or Class voting as a separate Series or Class shall be required in order to be approved with respect to such Series or Class;
provided, however, that except to the extent required by the 1940 Act, there shall be no separate class votes on the election or removal of Trustees or the selection of auditors for the Trust and its Series. Shareholders of a particular Series shall
not be entitled to vote on any matter that affects the rights or interests of only one or more other Series. There shall be no cumulative voting in the election or removal of Trustees.
Section 6.3.
Notice of Meeting, Shareholder Proposals and Record Date
. Notice of all meetings of Shareholders, stating the time,
place and purposes of the meeting, shall be given by the Trustees by mail to each Shareholder of record entitled to vote thereat at its registered address, mailed at least 10 days before the meeting or otherwise in compliance with applicable law.
Except with respect to an annual meeting, at which any business required by the 1940 Act may be conducted, only the business stated in the notice of the meeting shall be considered at such meeting. Subject to the provisions of applicable law, any
Shareholder wishing to include a proposal to be considered at an annual meeting must submit such proposal to the Secretary of the
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Trust at least 30 days in advance of such meeting. Any adjourned meeting may be held as adjourned one or more times without further notice not later than 130 days after the record date. For the
purposes of determining the Shareholders who are entitled to notice of and to vote at any meeting the Trustees may, without closing the transfer books, fix a date not more than 100 days prior to the date of such meeting of Shareholders as a record
date for the determination of the Persons to be treated as Shareholders of record for such purposes.
Section 6.4.
Quorum
and Required Vote
.
(a) The holders of one-third of the outstanding Shares of the Trust on the record date present in
person or by proxy shall constitute a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of all Shareholders of the Trust is being taken. The holders of one-third of the outstanding Shares of the affected
Series or Classes on the record date present in person or by proxy shall constitute a quorum at any meeting of the Shareholders for purposes of conducting business on which a vote of Shareholders of such Series or Classes, respectively, is being
taken. Shares underlying a proxy as to which a broker or other intermediary states its absence of authority or lack of instruction to vote with respect to one or more matters or fails to abstain or vote on or against one or more matters shall be
treated as present for purposes of establishing a quorum or proportion of shares voted for taking action on any such matter only to the extent so determined by the Trustees at or prior to the meeting of Shareholders at which such matter is to be
considered.
(b) Subject to any provision of applicable law, this Declaration or a resolution of the Trustees specifying or
requiring a greater or lesser vote requirement for the transaction of any matter of business at any meeting of Shareholders, (i) the affirmative vote of a plurality of the Shares entitled to vote for the election of any Trustee or Trustees
shall be the act of such Shareholders with respect to the election of such Trustee or Trustees, (ii) the affirmative vote of a majority of the Shares present in person or represented by proxy on any other matter and entitled to vote on such
matter shall be the act of the Shareholders with respect to such matter, and (iii) where a separate vote of any Series or Class is required on any matter, the affirmative vote of a majority of the Shares of such Series or Class present in
person or represented by proxy on such matter and entitled to vote on such matter shall be the act of the Shareholders of such Series or Class with respect to such matter.
Section 6.5.
Proxies, etc
. At any meeting of Shareholders, any holder of Shares entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have
been placed on file with the Secretary, or with such other officer or agent of the Trust as the Secretary may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of a majority of the Trustees,
proxies may be solicited in the name of one or more Trustees or one or more of the officers or employees of the Trust. Only Shareholders of record shall be entitled to vote. Each full Share shall be entitled to one vote and each fractional Share
shall be entitled to a vote equal to its fraction of a full Share. When any Share is held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Share, but if more than one of them shall be
present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Share. A proxy purporting to be given by or on behalf of a
Shareholder of record on the record date for a meeting shall be deemed valid
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unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. If the holder of any such Share is a minor or a Person of unsound mind, and
subject to guardianship or to the legal control of any other Person as regards the charge or management of such Share, he or she may vote by his or her guardian or such other Person appointed or having such control, and such vote may be given in
person or by proxy. The Trustees shall have the authority to make and modify from time to time regulations regarding the validity of proxies. In addition to signed proxies, such regulations may authorize facsimile, telephonic, internet and other
methods of appointing a proxy that are subject to such supervision by or under the direction of the Trustees as the Trustees shall determine.
Section 6.6.
Reports
. The Trustees shall cause to be prepared and sent to Shareholders at least annually and more frequently to the extent and in the form required by law, regulation or any
exchange on which Shares are listed a report of operations containing financial statements of the Trust prepared in conformity with generally accepted accounting principles and applicable law. Separate reports may be prepared for the various Series.
Copies of such reports shall be mailed to all Shareholders of record of the applicable Series within the time required by the 1940 Act, and in any event within a reasonable period preceding the meeting of Shareholders. The Trustees may prepare and
send to Shareholders of any Series or Class any other reports.
Section 6.7.
Inspection of Records
. The records of the
Trust shall be open to inspection by Persons who have been holders of record of at least $25,000 in net asset value or liquidation preference of Shares for a continuous period of not less than six months to the same extent and for the same purposes
as is permitted under the Delaware General Business Corporation Law to shareholders of a Delaware business corporation.
Section 6.8.
Shareholder Action by Written Consent
. Any action which may be taken by Shareholders by vote may be taken without a
meeting if the holders of all of the Shares entitled to vote thereon consent to the action in writing and the written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken
at a meeting of Shareholders.
ARTICLE VII
Redemption
Section 7.1.
Redemptions
. Outstanding Shares of any
Series of the Trust or any Class thereof may be redeemed at the option of the holders thereof, upon and subject to the terms and conditions provided in this Article VII. The Trust shall, upon application by any Shareholder or pursuant to
authorization from any Shareholder of a particular Series or Class, redeem or repurchase from such Shareholder outstanding Shares of such Series or Class for an amount per share determined by the application of a formula adopted for such purpose by
the Trustees with respect to such Series or Class (which formula shall be consistent with the 1940 Act); provided that (a) such amount per share shall not exceed any limitations imposed under applicable law; (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time, charge fees for effecting such redemption, at such rates as the Trustees may establish, as and to the extent permitted under the 1940 Act, and may, at any time and from time to time,
pursuant to such Act, suspend such right of redemption; and (c) the redemption or repurchase of such Shares is in
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accordance with such procedures or methodologies that the Trustees from time to time may adopt for such Series or Class, including, in the case of Shares of any Series or Class issued only in
Creation Units pursuant to Section 5.7, procedures restricting the right of redemption to Creation Units by not allowing redemption of partial or fractional Creation Units if so determined by the Trustees. The procedures for effecting
redemption shall be as set forth in the Prospectus with respect to the applicable Series or Class from time to time. The proceeds of the redemption of Shares shall be paid in cash or property (tangible or intangible) or any combination thereof in
the sole discretion of the Trustees or, if not determined by them, the Trust’s investment adviser.
Section 7.2.
Disclosure of Holding
. The holders of Shares shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of Shares as the Trustees deem necessary to comply with the provisions of the
Code or any other applicable laws.
Section 7.3.
Redemptions of Small Accounts
. The Trustees shall have the power to
redeem shares of any Series or Class at a redemption price determined in accordance with Section 7.1 above, (a) if at any time the total investment in such account does not have a value of at least such minimum amount as may be specified
in the Prospectus for such Series or Class from time to time, (b) as provided by Section 3.8, or (c) to the extent a Shareholder or other Person beneficially owns Shares equal to or in excess of a percentage of Shares of the Trust or
any Series or Class determined from time to time by the Trustees and specified in the applicable Prospectus. In the event the Trustees determine to exercise their power to redeem Shares provided in subsection (a) of this Section 7.3, the
Shareholder shall be notified that the value of his account is less than the applicable minimum amount and shall be allowed 30 days to make an appropriate investment before redemption is processed.
ARTICLE VIII
Duration: Termination of Trust; Amendment; Mergers, Etc
Section 8.1.
Duration
. Subject to termination in accordance with the provisions of Section 8.2 hereof, the Trust created hereby shall have perpetual existence.
Section 8.2.
Termination
.
(a) The Trust or any Series may be dissolved by the affirmative vote of a majority of the Trustees, and without any vote of the Shareholders thereof, except as may be required by the 1940 Act. Upon the
dissolution of the Trust or any Series:
(1) The Trust or such Series shall carry on no business, except for
the purpose of winding up its affairs.
(2) The Trustees shall proceed to wind up the affairs of the Trust or
such Series and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust or such Series shall have been wound up, including the power to fulfill or discharge the contracts of the Trust or such Series,
collect its assets, sell, convey, assign, exchange, merge where the Trust is not the survivor, transfer or
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otherwise dispose of all or any part of the remaining Trust Property to one or more Persons at a public or private sale for consideration which may consist in whole or in part in cash, securities
or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business; provided that any sale, conveyance, assignment, exchange, merger in which the Trust is not the survivor, transfer or other
disposition of all or substantially all the Trust Property of the Trust or any Series shall require approval of the principal terms of the transaction and the nature and amount of the consideration with the same vote as required for dissolution
pursuant to paragraph (a) above.
(3) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property of the Trust or any Series, in cash or in kind or partly in
each, among the Shareholders of such Series according to their respective rights.
(b) After the winding up and termination of
the Trust or any Series and distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination and shall execute
and file a certificate of cancellation with the Secretary of State of the State of Delaware. Upon termination of the Trust, the Trustees shall thereupon be discharged from all further liabilities and duties hereunder, and the rights and interests of
all Shareholders shall thereupon cease.
Upon termination of any Series, the Trustees shall thereunder be discharged from all
further liabilities and duties with respect to such Series, and the rights and interests of all Shareholders of such Series shall thereupon cease.
Section 8.3.
Amendment Procedure
.
(a) Subject to Section 8.3(b),
this Declaration may be amended in any respect by the affirmative vote or approval in writing of two-thirds of the Trustees and without any vote of the Shareholders of the Trust or any Series or Class, except as may be required by the 1940 Act.
(b) Nothing contained in this Declaration shall permit the amendment of this Declaration to impair the exemption from
personal liability of the Shareholders, Trustees, officers, employees and agents of the Trust or to permit assessments upon Shareholders. Expenses of the Trust charged directly to Shareholders pursuant to Section 3.8 hereof or fees or sales
charges payable upon or in connection with redemptions of Shares pursuant to Section 7.1 hereof shall not constitute “assessments” for purposes of this Section 8.3(b).
(c) An amendment duly adopted by the requisite approval of the Board of Trustees and, if required, Shareholders as aforesaid, shall
become effective at the time of such adoption or at such other time as may be designated by the Board of Trustees or Shareholders, as the case may be. A certification signed by a majority of the Trustees setting forth an amendment and reciting that
it was duly adopted by the Trustees and, if required, Shareholders as aforesaid,
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or a copy of the Declaration, as amended, and executed by a majority of the Trustees, shall be conclusive evidence of such amendment when lodged among the records of the Trust or at such other
time designated by the Board.
Notwithstanding any other provision hereof, until such time as Shares are issued and
outstanding, this Declaration may be terminated or amended in any respect by the affirmative vote of a majority of the Trustees or by an instrument signed by a majority of the Trustees.
Section 8.4.
Merger, Consolidation and Sale of Assets
. The Trust or any Series may merge or consolidate with any other
corporation, association, trust or other organization or any Series, sub-trust or other designated portion thereof or may sell, lease or exchange all or substantially all of the Trust Property or the property of any Series including its good will or
may acquire all or substantially all of the property of any other corporation, association, trust or other organization or any series, sub-trust or other designated portion thereof, upon such terms and conditions and for such consideration when and
as authorized by two-thirds of the Trustees and without any vote by the Shareholders of the Trust or any Series or Class, except as may be required by the 1940 Act, and any such merger, consolidation, sale, lease, exchange or purchase shall be
determined for all purposes to have been accomplished under and pursuant to the statutes of the State of Delaware.
ARTICLE IX
Miscellaneous
Section 9.1.
Filing
. This Declaration and any amendment or supplement hereto shall be filed in such places as may be required or as the Trustees deem appropriate. Each amendment or supplement shall
be accompanied by a certificate signed and acknowledged by a Trustee stating that such action was duly taken in a manner provided herein, and shall, upon insertion in the Trust’s minute book, be conclusive evidence of all amendments contained
therein. A restated Declaration, containing the original Declaration and all amendments and supplements theretofore made, may be executed from time to time by a majority of the Trustees and shall, upon insertion in the Trust’s minute book, be
conclusive evidence of all amendments and supplements contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto.
Section 9.2.
Resident Agent
. The Trust shall maintain a resident agent in the State of Delaware, which agent shall initially be
The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The Trustees may designate a successor resident agent, provided, however, that such appointment shall not become effective until written notice
thereof is delivered to the office of the Secretary of the State.
Section 9.3.
Governing Law
. This Declaration is
executed by a majority of the Trustees for the purpose of creating a “statutory trust” under the Delaware Statutory Trust Statute and establishing this Declaration as the “governing instrument” of the Trust within the meaning of
the Delaware Statutory Trust Statute. The rights of all Persons hereunder and the validity and construction of every provision hereof shall be subject to and construed according to the laws of said State of Delaware and reference shall be
specifically made to the business corporation law
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of the State of Delaware as to the construction of matters not specifically covered herein or as to which an ambiguity exists, although such law shall not be viewed as limiting the powers
otherwise granted to the Trustees hereunder and any ambiguity shall be viewed in favor of such powers.
Section 9.4.
Counterparts
. This Declaration may be simultaneously executed in several counterparts, each of which shall be deemed to be an original, and such counterparts, together, shall constitute one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
Section 9.5.
Reliance by Third Parties
. Any certificate executed by an
individual who, according to the records of the Trust, or of any recording office in which this Declaration may be recorded, appears to be a Trustee hereunder, certifying to the existence of any fact or facts which in any manner relate to the
affairs of the Trust shall be conclusive evidence as to the matters so certified in favor of any Person dealing with the Trust.
Section 9.6.
Provisions in Conflict with Law or Regulation
.
(a) The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company provisions of the Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of this Declaration to the
extent of such conflict; provided, however, that such determination shall not affect any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability
shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of this Declaration in any jurisdiction.
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IN WITNESS WHEREOF, the undersigned has caused these presents to be executed as of the 14th
day of September 2012.
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/s/ Ethan Powell
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Ethan Powell
as Trustee and not individually
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/s/ Timothy K. Hui
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Timothy K. Hui
as Trustee and not individually
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/s/ Scott F. Kavanaugh
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Scott F. Kavanaugh
as Trustee and not individually
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/s/ James F. Leary
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James F. Leary
as Trustee and not individually
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/s/ Bryan A. Ward
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Bryan A. Ward
as Trustee and not individually
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Exhibit (a)(2)(iv)
PYXIS FUNDS I
Certificate of Designation
of
Pyxis/iBoxx Senior Loan ETF
The undersigned, being the Secretary of Pyxis Funds I, a Delaware statutory trust (the “Trust”), pursuant to the authority conferred upon the Trustees of the Trust by Section 5.2 of the
Trust’s Agreement and Declaration of Trust (“Declaration”), hereby confirms the establishment and designation, by the affirmative vote of a majority of the Trustees of the Trust, of the Pyxis/iBoxx Senior Loan ETF (the
“Fund”) with the following rights, preferences and characteristics:
1.
Shares
. The beneficial interest in the Fund
shall be divided into Shares having a nominal or par value of $20 per Share, of which an unlimited number may be issued, which Shares shall represent interests only in the Fund. The Trustees shall have the authority from time to time to authorize
separate Series of Shares for the Trust as they deem necessary or desirable.
2.
Creation Units
. The Shares of the Fund shall be
issuable and redeemable only in aggregations of 100,000 Shares (each such lot, a “Creation Unit”). The Trustees shall have the authority from time to time to modify the number of Shares in a Creation Unit as they deem necessary or
desirable.
3.
Transaction Fees
. Shares shall be subject to such transaction fees for issuance and redemption, as may be
established from time to time by the Trustees, as set forth in the Fund’s prospectus.
4.
Meetings
. A meeting of
Shareholders of the Fund may be called with respect to the Rule 12b-1 distribution plan applicable to such Fund or with respect to any other proper purpose affecting only holders of shares of such Fund at any time by a majority of the Trustees.
5.
Other Rights Governed by Declaration
. All other rights, preferences, qualifications, limitations and restrictions with
respect to Shares of any Series of the Trust or with respect to any Class of Shares set forth in the Declaration shall apply to Shares of the Fund unless otherwise specified in this Certificate of Designation, in which case this Certificate of
Designation shall govern.
6.
Amendments, etc
. Subject to the provisions and limitations of the Declaration and applicable law,
this Certificate of Designation may be amended by an instrument signed in writing by a majority of the Trustees (or by any officer of the Trust pursuant to the vote of a majority of the Trustees) or when authorized to do so by the vote in accordance
with the Declaration of the holders of a majority of all the Shares of the Fund outstanding and entitled to vote.
7.
Incorporation
of Defined Terms
. All capitalized terms which are not defined herein shall have the same meaning as ascribed to those terms in the Declaration.
[Signature Page Follows]
SIGNATURE
PYXIS FUNDS I
Date: September 14, 2012
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By:
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/s/ Ethan Powell
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Ethan Powell
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Secretary
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-2-
Exhibit (d)(7)
INVESTMENT ADVISORY AGREEMENT BETWEEN
Pyxis Funds I AND Pyxis Capital,
L.P.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of September 21, 2012, by and between Pyxis Capital, L.P., a Delaware limited partnership (the “
Adviser”
), and Pyxis Funds I, a Delaware statutory trust (fka
Highland Funds I the “
Trust”
), on behalf of its series listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A may be amended from time to time (each, a “
Fund
”).
WHEREAS, the Trust is engaged in business as 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 Adviser is engaged principally in the
business of rendering investment management services and is registered as an investment adviser under the Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties hereto as follows:
SECTION 1.
Appointment of Adviser
.
The Trust hereby appoints the Adviser
to act as manager and investment adviser to the Fund for the period and on the terms herein set forth. The Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
SECTION 2.
Duties of Adviser
.
The Adviser, at its own expense, shall furnish the following services and facilities to the Fund:
(a)
Investment Program
. The Adviser shall (i) furnish continuously an investment program for the Fund, (ii) determine (subject to the overall supervision and review of the Trust’s
Board of Trustees) the investments to be purchased, held, sold or exchanged by the Fund and the portion, if any, of the assets of the Fund to be held uninvested, (iii) make changes in the investments of the Fund and (iv) vote, exercise
consents and exercise all other rights pertaining to such investments. The Adviser also shall manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto pursuant to a separate administration agreement
with the Trust, subject always to the control of the Trust’s Board of Trustees, and to the provisions of the organizational documents of the Trust, the Registration Statement of the Trust with respect to the Fund and its shares of beneficial
interest (“Shares”), including the Fund’s Prospectus and Statement of Additional Information, and the 1940 Act, in each case as from time to time amended and in effect. Subject to the foregoing, the Adviser shall have the authority to
engage, terminate and replace one or more sub-advisers in connection with the portfolio management of the Fund, which sub-advisers may be affiliates of the Adviser; provided, however, that the Adviser shall remain responsible to the Trust with
respect to its duties and obligations on behalf of the Fund set forth in this Agreement. The Adviser agrees to furnish advice and recommendations to the Fund and the Board with respect to the selection and continued employment of any sub-adviser(s)
to provide investment advisory services for the portion(s) of the Fund’s portfolio specified by the Adviser and on terms and conditions, including but not limited to the compensation payable to any such sub-adviser(s), approved in the manner
provided by applicable law.
(b)
Portfolio Transactions
. The Adviser shall place all orders for the purchase and sale
of portfolio securities for the account of the Fund with brokers or dealers selected by the Adviser, although the Fund will pay the actual brokerage commissions on portfolio transactions in accordance with
Section 3(d)
.
In placing portfolio transactions for the Fund, it is recognized that the Adviser will give primary consideration to securing the most
favorable price and efficient execution. Consistent with this policy, the Adviser may consider the financial responsibility, research and investment information and other services provided by brokers or dealers who may effect or be a party to any
such transaction or other transactions to which other clients of the Adviser may be a party. It is understood that neither the Fund nor the Adviser has adopted a formula for allocation of the Fund’s investment transaction business. It is also
understood that it is desirable for the Fund that the Adviser have access to supplemental investment and market research and security and economic analysis provided by brokers who may execute brokerage transactions at a higher cost to the Fund than
would otherwise result when
allocating brokerage transactions to other brokers on the basis of seeking the most favorable price and efficient execution. Therefore, subject to Section 28(e) of the Securities Exchange
Act of 1934, the Adviser is authorized to place orders for the purchase and sale of securities for the Fund with such brokers, subject to review by the Trust’s Board of Trustees from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by such brokers may be useful or beneficial to the Adviser in connection with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a security to be in the best interest of the Fund as well as other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities to be so sold or purchased in order to obtain the most favorable price or lower brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Adviser in the manner it considers to be the most equitable and consistent with its fiduciary obligations to the Fund and to such other
clients.
The Adviser shall initially determine the identity and number of shares of the securities to be accepted in exchange
for creation units for the Fund and the identity and number of shares of the securities that will be applicable that day to redemption requests received for such Fund (and may give directions to the Fund’s custodian with respect to such
designation).
SECTION 3.
Allocation of Expenses
.
Except for the services and facilities to be provided by the Adviser pursuant to a separate administration agreement with the Trust, the
Fund assumes and shall pay all expenses for all other Fund operations and activities and shall reimburse the Adviser for any such expenses incurred by the Adviser. Unless the Prospectus or Statement of Additional Information of the Fund provides
otherwise, the expenses to be borne by the Fund shall include, without limitation:
(a) all expenses of organizing the Fund;
(b) the charges and expenses of any registrar, stock transfer or dividend disbursing agent, shareholder servicing agent,
custodian or depository appointed by the Fund for the safekeeping of its cash, portfolio securities and other property, including the costs of servicing shareholder investment accounts, and bookkeeping, accounting and pricing services provided to
the Fund (other than those utilized by the Adviser in providing the services described in
Section 2
);
(c) the
charges and expenses of bookkeeping, accounting and auditors;
(d) brokerage commissions and other costs incurred in connection
with transactions in the portfolio securities of the Fund, including any portion of such commissions attributable to brokerage and research services as defined in Section 28(e) of the Securities Exchange Act of 1934;
(e) taxes, including issuance and transfer taxes, and trust registration, filing or other fees payable by the Fund to federal, state or
other governmental agencies;
(f) expenses, including the cost of printing certificates, relating to the issuance of Shares of
the Fund;
(g) expenses involved in registering and maintaining registrations of the Fund and of its Shares with the Securities
and Exchange Commission (“
SEC
”) and various states and other jurisdictions, including reimbursement of actual expenses incurred by the Adviser or others in performing such functions for the Fund, and including compensation of
persons who are employees of the Adviser, in proportion to the relative time spent on such matters;
(h) expenses of
shareholders’ and trustees’ meetings, including meetings of committees, and of preparing, printing and mailing proxy statements, quarterly reports, if any, semi-annual reports, annual reports and other communications to existing
shareholders;
(i) expenses of preparing and printing prospectuses and marketing materials;
(j) compensation and expenses of trustees who are not affiliated with the Adviser;
(k) charges and expenses of legal counsel in connection with matters relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund’s trust and financial structure and relations with its shareholders, issuance of Shares of the Fund and registration and qualification of Shares under federal, state and other laws;
- 2 -
(l) the cost and expense of maintaining the books and records of the Fund, including general
ledger accounting;
(m) insurance premiums on fidelity, errors and omissions and other coverages, including the expense of
obtaining and maintaining a fidelity bond as required by
Section 17(g)
of the 1940 Act which may also cover the Adviser;
(n) expenses incurred in obtaining and maintaining any surety bond or similar coverage with respect to securities of the Fund;
(o) interest payable on Fund borrowings;
(p) such other non-recurring expenses of
the Fund as may arise, including expenses of actions, suits or proceedings to which the Trust on behalf of the Fund is a party and expenses resulting from the legal obligation that the Trust on behalf of the Fund may have to provide indemnity with
respect thereto;
(q) expenses and fees reasonably incidental to any of the foregoing specifically identified expenses; and
(r) all other expenses permitted by the Prospectus and Statement of Additional Information of the Fund as being paid by the
Fund.
SECTION 4.
Advisory Fee
.
(a) In return for its advisory services, the Fund will pay the Adviser a monthly fee, computed and accrued daily, based on an annual rate set forth in Exhibit A of the Fund’s “Average Daily
Managed Assets.” “Average Daily Managed Assets” of the Fund shall mean the average daily value of the total assets of the Fund, less all accrued liabilities of the Fund (other than the aggregate amount of any outstanding borrowings
constituting financial leverage). The Adviser may waive a portion of its fees. If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for such month shall be
computed in a manner consistent with the calculation of the fees payable on a monthly basis. Subject to the provisions of
Section 5
below, the accrued fees will be payable monthly as promptly as possible after the end of each month
during which this Agreement is in effect.
(b) The Adviser may direct the Fund’s administrator to pay to any sub-adviser
a portion of the compensation payable to the Adviser pursuant to Section 4(a) out of the assets of the Fund;
provided, however
, that in such case the compensation payable to the Adviser hereunder will be reduced by the amount of any
compensation paid directly by the Fund to such sub-adviser.
SECTION 5.
Reimbursements
.
The parties agree that they may negotiate from time to time for the Adviser to reimburse certain costs and expenses of the Fund. If such
an agreement is in effect, the determination of whether reimbursement for such costs and expenses is due the Fund from the Adviser will be made on an accrual basis once monthly, and if it is so determined that such reimbursement is due, the accrued
amount of such reimbursement that is due shall serve as an offset to the investment advisory fee payable monthly by the Fund to the Adviser pursuant to
Section 4
hereof, and the amount to be paid by the Adviser to the Fund as soon as is
practicable at the end of a fiscal year of the Fund shall be equal to the difference between the aggregate reimbursement due the Fund from the Adviser for that fiscal year and the aggregate offsets made by the Fund against the aggregate investment
advisory fees payable to the Adviser pursuant to
Section 4
hereof for that fiscal year by virtue of such aggregate reimbursement. The foregoing limitation on reimbursement of costs and expenses shall exclude distribution and service
fees, brokerage commissions, short sale dividend and interest expense, taxes, deferred organization expenses and extraordinary expenses (as determined by the Board of the Trustees of the Fund in the exercise of its business judgment).
SECTION 6.
Indemnification
.
(a) The Trust hereby agrees to indemnify the Adviser and each of the Adviser’s partners, officers, employees, and agents (including any individual who serves at the Adviser’s request as
director, officer, partner, trustee or the like of another corporation) and controlling persons (each such person being an “
Indemnitee”
) against any liabilities and expenses, including amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees (all as provided in accordance with applicable state law) reasonably incurred by such Indemnitee in connection with the defense or disposition of any action, suit or other proceeding, whether
civil or
- 3 -
criminal, before any court or administrative or investigative body in which he may be or may have been involved as a party or otherwise or with which he may be or may have been threatened, while
acting in any capacity set forth above in this paragraph or thereafter by reason of his having acted in any such capacity, except with respect to any matter as to which he shall have been adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust and furthermore, in the case of any criminal proceeding, so long as he had no reasonable cause to believe that the conduct was unlawful, provided, however, that (1) no Indemnitee
shall be indemnified hereunder against any liability to the Trust or its shareholders or any expense of such Indemnitee arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross negligence (iv) reckless disregard
of the duties involved in the conduct of his position (the conduct referred to in such clauses (i) through (iv) being sometimes referred to herein as “
Disabling Conduct”
), (2) as to any matter disposed of by
settlement or a compromise payment by such Indemnitee, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless there has been a determination that such settlement or
compromise is in the best interests of the Trust and that such Indemnitee appears to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust and did not involve Disabling Conduct by such Indemnitee
and (3) with respect to any action, suit or other proceeding voluntarily prosecuted by any Indemnitee as plaintiff, indemnification shall be mandatory only if the prosecution of such action, suit or other proceeding by such Indemnitee was
authorized by a majority of the full Board of the Trust. Notwithstanding the foregoing, the Trust shall not be obligated to provide any such indemnification to the extent such provision would waive any right that the Trust cannot lawfully waive.
(b) The Trust shall make advance payments in connection with the expenses of defending any action with respect to which
indemnification might be sought hereunder if the Trust receives a written affirmation of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification has been met and a written undertaking to reimburse the Trust
unless it is subsequently determined that he is entitled to such indemnification and if the Trustees of the Trust determine that the facts then known to them would not preclude indemnification. In addition, at least one of the following conditions
must be met: (1) the Indemnitee shall provide adequate security for his undertaking, (2) the Trust shall be insured against losses arising by reason of any lawful advances, (3) a majority of a quorum of Trustees of the Trust who are
neither “interested persons” of the Trust (as defined in Section 2(a)(19) of the 1940 Act) nor parties to the proceeding (“
Disinterested Non-Party Trustees
”) or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the Indemnitee ultimately will be found entitled to indemnification or (4) if there is not a
Disinterested Non-Party Trustee, Indemnitee provides the written affirmation referred to above.
(c) All determinations with
respect to indemnification hereunder shall be made (1) by a final decision on the merits by a court or other body of competent jurisdiction before whom the proceeding was brought that such Indemnitee is not liable by reason of Disabling Conduct
or, (2) in the absence of such a decision, by (i) a majority vote of a quorum of the Disinterested Non-Party Trustees of the Trust, or (ii) if such a quorum is not obtainable or even if obtainable, if a majority vote of such quorum so
directs, independent legal counsel in a written opinion.
(d) Each Indemnitee shall, in the performance of its duties, be
fully and completely justified and protected with regard to any act or any failure to act resulting from reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of the Trust’s officers or employees or by any advisor, administrator, manager, distributor, selected dealer, accountant, appraiser or other expert or consultant selected with reasonable care by the Trustees, officers or employees of the
Trust, regardless of whether such counsel or other person may also be a Trustee.
(e) The rights accruing to any Indemnitee
under these provisions shall not exclude any other right to which he may be lawfully entitled.
SECTION 7.
Relations with
Fund
.
Subject to and in accordance with the organizational documents of the Adviser and the Trust, as well as their
policies and procedures and codes of ethics, it is understood that Trustees, officers, agents and shareholders of the Fund are or may be interested in the Adviser (or any successor thereof) as directors, officers or otherwise, that partners,
officers and agents of the Adviser (or any successor thereof) are or may be interested in the Fund as Trustees, officers, agents, shareholders or otherwise, and that the Adviser (or any such successor thereof) is or may be interested in the Fund as
a shareholder or otherwise.
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SECTION 8.
Liability of Adviser
.
The Adviser shall not be liable to the Fund for any error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates; provided, however, that no provision of this Agreement shall be deemed to protect the Adviser against any liability to the Fund or its shareholders to which it might otherwise be subject
by reason of any Disabling Conduct nor shall any provision hereof be deemed to protect any trustee or officer of the Fund against any such liability to which he might otherwise be subject by reason of any Disabling Conduct.
SECTION 9.
Duration and Termination of this Agreement
.
(a)
Duration
. This Agreement shall become effective on the date first set forth above with respect to the initial Funds on Exhibit A, such date being the date on which this Agreement has been
executed following: (1) the approval of the Trust’s Board of Trustees, including approval by a vote of a majority of the Trustees who are not “interested persons” (as defined in the 1940 Act) of the Adviser or the Fund, cast in
person at a meeting called for the purpose of voting on such approval; and (2) the approval by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the Fund. Unless terminated as herein provided,
this Agreement shall remain in full force and effect until the date that is two years after the effective date of this Agreement. Subsequent to such initial period of effectiveness, this Agreement shall continue in full force and effect, subject to
paragraph 9(c)
, so long as such continuance is approved at least annually (a) by either the Trust’s Board of Trustees or by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the
Fund and (b) in either event, by the vote of a majority of the Trustees of the Fund who are not parties to this Agreement or “interested persons” (as defined in the 1940 Act) of any such party, cast in person at a meeting called for
the purpose of voting on such approval. With respect to each new Fund added to the Agreement on or after the initial effective date, each such Fund shall have an initial term of up to two years beginning on the date indicated on Exhibit A and
thereafter, if not terminated, shall continue in effect if approved at least annually as set forth above.
(b)
Amendment
. No provision of this Agreement may be amended, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the amendment, waiver, discharge or termination is
sought. Any amendment of this Agreement shall be subject to the 1940 Act including the interpretation thereof that amendments that do not increase the compensation of the Adviser or otherwise fundamentally alter the relationship of the Trust with
the Adviser do not require shareholder approval if approved by the requisite majority of the Trust’s Trustees who are not “interested persons” (as defined in the 1940 Act) of the Trust.
(c)
Termination
. This Agreement may be terminated at any time, without payment of any penalty, by vote of the Trust’s Board
of Trustees, or by a “vote of a majority of the outstanding voting securities” (as defined in the 1940 Act) of the Fund, or by the Adviser, in each case on not more than 60 days’ nor less than 30 days’ prior written notice to the
other party.
(d)
Automatic Termination
. This Agreement shall automatically and immediately terminate in the event of
its “assignment” (as defined in the 1940 Act).
SECTION 10.
Services Not Exclusive
.
The services of the Adviser to the Fund hereunder are not to be deemed exclusive, and the Adviser (and its affiliates) shall be free to
render similar services to others so long as its services hereunder are not impaired thereby; provided, however, that the Adviser will undertake no activities that, in its reasonable good faith judgment, will adversely affect the performance of its
obligations under this Agreement. In addition, the parties may enter into other agreements pursuant to which the Adviser provides administrative or other, non-investment advisory services to the Fund, and the Adviser may be compensated for such
other services.
SECTION 11.
Notices
.
Notices under this Agreement shall be in writing and shall be addressed, and delivered or mailed postage prepaid, to the other party at such address as such other party may designate from time to time for
the receipt of such notices. Until further notice to the other party, the address of each party to this Agreement for this purpose shall be NexBank Tower, 13455 Noel Road, Suite 800, Dallas, Texas 75240.
- 5 -
SECTION 12.
Governing Law; Severability; Counterparts
.
This Agreement shall be construed in accordance with the laws of the State of Delaware, and the applicable provisions of the 1940 Act. To
the extent that applicable law of the State of Delaware, or any of the provisions herein, conflict with applicable provisions of the 1940 Act, the latter shall control. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
SECTION 13.
Miscellaneous
.
The Adviser agrees to advise the Fund of any change of its membership (which shall mean its general partner) within a reasonable time
after such change. If the Adviser enters into a definitive agreement that would result in a change of control (within the meaning of the 1940 Act) of the Adviser, it agrees to give the Fund the lesser of 60 days’ written notice and such notice
as is reasonably practicable before consummating the transaction.
Where the effect of a requirement of the 1940 Act reflected
in or contemplated by any provisions 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first set forth above.
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Pyxis Capital, L.P.
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By:
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/s/ Ethan Powell
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Name:
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Ethan Powell
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Title:
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Executive Vice President and Secretary
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Pyxis Funds I
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By:
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/s/ Alan Head
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Name:
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Alan Head
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Title:
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Chief Compliance Officer
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- 6 -
Exhibit A
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Initial Fund
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Advisory Fee
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Pyxis/iBoxx Senior Loan ETF
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0.45%
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- 7 -
Exhibit (e)(5)
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT
(this
“
Agreement’
) is made as of this 25th day of September, 2012, by and between Pyxis Funds I (the “
Company
”), a Delaware statutory trust, and SEI Investments Distribution Co. (the “
Distributor
”), a
Pennsylvania corporation.
WHEREAS,
the Company is registered as an investment company with the U.S. Securities and Exchange Commission
(the “
SEC
”) under the Investment Company Act of 1940, as amended (the “
1940 Act
”), and its shares of beneficial interest (“
Shares
”) are registered with the SEC under the Securities Act of 1933, as
amended (the “
1933 Act
”); and
WHEREAS,
the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the “
1934 Act
”) and is a member of the Financial Industry Regulatory Authority, Inc. (“
FINRA
”); and
WHEREAS,
the Company intends to create and redeem groups of Shares of each class or series of the Company (each a “
Fund
” and collectively, the “
Funds
”) identified
on
Schedule A
hereto, on a continuous basis at their net asset value only in aggregations constituting Creation Units (as defined in the Funds’ Registration Statement); and
WHEREAS
, the Shares of each Fund will be listed on one or more national securities exchanges (together, the “
Listing Exchanges
”);
WHEREAS,
the Company desires to retain the Distributor to act as the distributor with respect to the issuance and distribution of Creation Units
of each Fund, hold itself available to receive and process orders for such Creation Units in the manner set forth herein, and to enter into arrangements with broker-dealers who may solicit purchases of Creation Units.
NOW, THEREFORE
, in consideration of the mutual covenants hereinafter contained and intending to be legally bound, the parties hereby agree as
follows:
SECTION 1 APPOINTMENT
The Company hereby appoints Distributor as its distributor of Creation Units of the Funds and to provide such other services in accordance with the terms set forth in this Agreement. Distributor accepts
such appointment and agrees to furnish certain related services as set forth in this Agreement.
SECTION 2
SOLICITATION OF SALES AND OTHER SERVICES
2.01
Solicitation of Sales
. The Company grants to
Distributor the right to sell its Creation Units authorized for issue at the applicable net asset value, in accordance with the Prospectus, as agent and on behalf of the Company, during the term of this Agreement and subject to the registration
requirements of the 1933 Act, the rules and regulations of the SEC and the laws governing the sale of securities in the various states (“
Blue Sky Laws
”). As used in this Agreement, the term, “
Prospectus
” means any
registration statement, proxy solicitation and tender offer materials, annual or other periodic report of the Company or any Fund of the Company or any advertising, marketing, shareholder communication, or promotional material generated by the
Company or its investment adviser from time to time, as appropriate, including all amendments or supplements thereto and applicable law.
2.02
Other Services
. Without limiting the foregoing, the Distributor will perform or supervise the performance by others of the additional services set forth herein, including those set forth in
Schedule B
, attached hereto.
- 1 -
SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS
3.01 Representations, Warranties and Covenants of the Company. The Company represents, warrants and covenants that:
(a) it is duly organized, validly existing and in good standing under the laws of the state of its formation, and has all requisite power
under the laws of such state and applicable federal law to conduct its business as now being conducted and to perform its obligations as contemplated by this Agreement;
(b) this Agreement has been duly authorized by the board of directors of the Company, including by unanimous affirmative vote of all of the independent directors of the Company and, when executed and
delivered by the Company, will constitute a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms;
(c) it shall timely perform all obligations identified in this Agreement as obligations of the Company, including, without limitation, providing the Distributor with all due diligence and marketing
materials reasonably requested by the Distributor and giving all necessary consents or approvals in good faith and within a timely manner;
(d) it is not a party to any, and there are no, pending or threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations or inquiries
(collectively, “
Actions
”) of any nature against it, its advisor or its properties or assets which could, individually or in the aggregate, have a material effect upon its business or financial condition, and there is no injunction,
order, judgment, decree, or regulatory restriction imposed upon it or any of its properties or assets;
(e) it is an
investment company that is duly registered under all applicable laws and regulations, including, without limitation the 1940 Act, and each Fund is a separate series of the Company;
(f) it is and will continue to be in compliance with all applicable laws and regulations aimed at the prevention and detection of money
laundering and/or the financing of terrorism activities including Bank Secrecy Act, as amended by USA PATRIOT Act, U.S. Treasury Department, including the Office of Foreign Asset Control (“
OFAC
”), Financial Crimes and Enforcement
Network (“
FinCEN
”) and the SEC
(g) it has an anti-money laundering program (“
AML Program
”),
that at minimum includes, (i) an AML compliance officer designated to administer and oversee the AML Program, (ii) ongoing training for appropriate personnel, (iii) internal controls and procedures reasonably designed to prevent and
detect suspicious activity monitoring and terrorist financing activities; (iv) procedures to comply with know your customer requirements and to verify the identity of all customers; and (v) appropriate record keeping procedures;
(h) each Prospectus has been prepared in accordance with all applicable laws and regulations and, at the time such Prospectus
was filed with the SEC and became effective, no Prospectus will include an untrue statement of a material fact or omit to state a material fact that is required to be stated therein so as to make the statements contained in such Prospectus not
misleading;
(i) it will notify the Distributor as soon as reasonably practical in advance of any matter which could
materially affect the Distributor’s performance of its duties and obligations under this Agreement, including any amendment to the Prospectus;
(j) it will provide Distributor with the opportunity to review and comment on each registration statement and supplement thereto at least one week prior to filing the same with an applicable regulatory
body;
- 2 -
(k) it will provide Distributor with the opportunity to review and comment on each exemptive
application or amendment thereto at least two weeks prior to filing the same with an applicable regulatory body;
(l) it shall
fully cooperate with requests from government regulators and the Distributor for information relating to customers and/or transactions involving the Creation Units, as permitted by law, in order for the Distributor to comply with its regulatory
obligations; and
(m) in the event it determines that it is in the interest of the Company to suspend or terminate the sale of
any Creation Units, the Company shall promptly notify the Distributor of such fact in advance and in writing prior to the date on which the Company desires to cease offering the Creation Units.
3.02
Representations, Warranties and Covenants of Distributor
. Distributor hereby represents, warrants and covenants as follows:
(a) it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions
contemplated hereby; the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite actions on its part, and no other proceedings on its part are
necessary to approve this Agreement or to consummate the transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in
accordance with its terms;
(b) information about litigation to which SEI or its affiliates is a party will be set forth in
SEI Investments Company’s periodic SEC filings in accordance with the rules of the SEC and will be publicly available in filings on Forms 10-Q, 10-K and 8-K from time to time;
(c) it is registered as a broker-dealer with the SEC under the 1934 Act and a member of FINRA;
(d) it shall not give any information or to make any representations other than those contained in the current Prospectus of the Company
filed with the SEC or contained in shareholder reports or other material that may be prepared by or on behalf of the Company for the Distributor’s use; and
(e) it may prepare and distribute sales literature and other material as it may deem appropriate, provided that such literature and materials have been prepared in accordance with applicable rules and
regulations.
- 3 -
SECTION 4 REGISTRATION OF SHARES
The Company agrees that it will take all action necessary to register Shares under the federal and state securities laws so that there will be available
for sale the number of Shares necessary in connection with the number of Creation Units the Distributor may reasonably be expected to sell and to pay all fees associated with said registration. The Company will make available to the Distributor such
number of copies of its Prospectus as the Distributor may reasonably request. The Company will furnish to the Distributor copies of all information, financial statements and other papers which the Distributor may reasonably request for use in
connection with the distribution of Creation Units of the Company.
SECTION 5 AGREEMENTS WITH AUTHORIZED
PARTICIPANTS
The Distributor will enter into agreements (each, an “
Authorized Participant Agreement
”) with authorized
participants of its choice for the creation and redemption of Creation Units of a Fund. Each authorized participant shall be a registered broker/dealer, a clearing agency registered with the Securities and Exchange Commission or a participant in the
system for book-entry of the Depository Trust Company. Each Authorized Participant Agreement will include such terms and conditions as the Distributor will deem necessary or appropriate from time to time.
SECTION 6 EXPENSES
6.01
Company Expenses
. The Company will pay all fees and expenses (i) in connection with the preparation, setting in type and filing of any Prospectus under the 1933 Act and amendments for the
issue of its Shares or Creation Units; (ii) in connection with the registration and qualification of Shares for sale in the various states in which the board of directors of the Company will determine advisable to qualify such Shares for sale;
(iii) of preparing, setting in type, printing and mailing any report or other communication to shareholders or authorized participants of the Company in their capacity as such; and (iv) of preparing, setting in type, printing and mailing
any Prospectus sent to existing shareholders or authorized participants.
6.02
Distributor Expenses
. Distributor will
pay all of its costs and expenses (other than expenses and costs deemed payable by the Funds and other than expenses which one or more authorized participants may bear pursuant to any agreement with Distributor) incurred by it in connection with the
performance of its distribution duties hereunder.
SECTION 7 COMPENSATION
As compensation for providing the services under this Agreement, the Company will pay Distributor the fees set forth in
Schedule C
hereto.
Notwithstanding anything in this Agreement to the contrary, the Distributor and its affiliates may receive compensation or reimbursement from the Company or the Company’s investment advisor with respect to any services not included under this
Agreement, as may be agreed upon by the parties from time to time. The parties acknowledge, that to the extent the Company lacks sufficient resources to pay the fees (or other expenses) payable to Distributor, the Company’s investment adviser
may make such payment to Distributor from the past profits or other resources of the investment adviser, including management fees paid by the Company. The parties further acknowledge that to the extent that fees payable to the Distributor are paid
by the investment adviser, the investment adviser shall be responsible for making all disclosures of such payments to the board of directors.
SECTION 8 INDEMNIFICATION; CONTRIBUTION
8.01
Indemnification of Distributor
. The Company agrees to indemnify, defend and hold harmless, the Distributor, each of its directors, officers, principals, representatives, employees and each
person, if any, who controls, is controlled by or is under common control with, the Distributor within the meaning of Section 15 of the 1933 Act (collectively, the “
Distributor Indemnified Parties
”) from and against
- 4 -
any and all losses, claims, damages or liabilities, joint or several, whatsoever (including any reasonable costs of investigation, legal or other reasonable expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) to which the Distributor Indemnified Parties may become subject, arising out of or based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus or any document incorporated by reference therein or filed as an exhibit thereto, or any marketing literature or materials distributed on behalf of the Company with respect to the securities covered by the
Prospectus (the “
Covered Documents
”) or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Distributor for
any legal or other expenses reasonably incurred by the Distributor in connection with investigating or defending any such action or claim as such expenses are incurred and (ii) any breach of any representation, warranty or covenant made by the
Company in this Agreement; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of the bad faith or willful misfeasance of Distributor hereunder, or is based
upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Covered Documents about the Distributor in reliance upon and in conformity with written information furnished to the Company by the Distributor
expressly for use therein; and further provided that any person under common control with the Distributor within the meaning of Section 15 of the 1933 Act will not be considered a Distributor Indemnified Party unless such person assists the
Distributor with providing services under this Agreement.
8.02
Indemnification of the Company
. Distributor will
indemnify and hold harmless the Company, each of its directors, officers, employees and each person, if any, who controls, is controlled by or is under common control with, the Company within the meaning of Section 15 of the 1933 Act
(collectively, the “
Company Indemnified Parties
”) from and against any and all losses, claims, damages or liabilities, joint or several, whatsoever (including any investigation, legal or other expenses incurred in connection with,
and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) to which the Company Indemnified Parties may become subject, to the extent, but only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Covered Document, in reliance upon and in conformity with written information furnished to the Company by the Distributor about the Distributor expressly for use therein.
8.03
Indemnification Procedures
.
(a) If any action or claim shall be brought against any Distributor Indemnified Party or Company Indemnified Party (any such party, an “
Indemnified Party
” and collectively, the
“
Indemnified Parties
”), in respect of which indemnity may be sought against the other party hereto, such Indemnified Party shall promptly notify the indemnifying party in writing, and the indemnifying party shall assume the defense
thereof, including the employment of counsel and payment of all fees and expenses; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party except to the extent such
indemnifying party has been materially prejudiced by such failure.
(b) Any Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the indemnifying party has agreed in writing to pay such fees and
expenses, (ii) the indemnifying party has failed to assume the defense and employ counsel, or (iii) the named parties to any such action (including any impleaded party) included such Indemnified Party and the indemnifying party and such
Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party or which may also result in a conflict of interest
(in which case if such Indemnified Party notifies the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such Indemnified Party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action or separate but substantially
- 5 -
similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Indemnified Parties.
(c) No indemnifying party shall, without the written consent of the Indemnified
Party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the
Indemnified Party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the Indemnified Party from all liability arising out of such action or claim and
(ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Indemnified Party.
(d) The indemnifying party shall not be liable for any settlement of any such action effected without its written consent, but if such action is settled with the written consent of the indemnifying party,
or if there shall be a final judgment for the plaintiff in any such action and the time for filing all appeals has expired, the indemnifying party agrees to indemnify and hold harmless any Indemnified Party from and against any loss or liability by
reason of such settlement or judgment.
(e) The obligations of the indemnifying party under this
Section 8
shall
be in addition to any liability that the indemnifying party may otherwise have.
8.04
Contribution
. If the
indemnification provided for in this
Section 8
is insufficient or unavailable to any Indemnified Party under this
Section 8
in respect of any losses, claims, damages, liabilities or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Distributor on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the Indemnified Party failed to give the
notice required under
Section 8.3(a)
, above, then each indemnifying party shall contribute to such amount paid or payable by such Indemnified Party in such proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Distributor on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits received by the Company on the one hand and the Distributor on the other shall be deemed to be in the same proportion as the amount of gross proceeds received by the Company from the offering
of the Shares under this Agreement (expressed in dollars) bears to the net profits received by the Distributor under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Distributor on the other and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission. The Company and the Distributor agree that it would not be just and equitable if contributions pursuant to this
Section 8.4
were determined by pro rata
allocation or by any other method of allocation which does not take account of the equitable considerations referred to herein. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions
in respect thereof) referred to above shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
8.05
Consequential Damages
. In no event and under no circumstances will either party to this Agreement be liable to anyone,
including, without limitation, the other party, for consequential damages for any act or failure to act under any provision of this Agreement.
- 6 -
SECTION 9 TERM AND TERMINATION
This Agreement will be effective upon its execution, and, unless terminated as provided, will continue in force for two years and thereafter from year to
year, provided that such annual continuance is approved by either (i) the vote of a majority of the Company of the Company, or the vote of a majority of the outstanding voting securities of the directors and (ii) the vote of a majority of
those directors of the Company who are not parties to this Agreement or the Company’s distribution plan(s) or interested persons of any such party (“
Qualified Director
”), cast in person at a meeting called for the purpose of
voting on the approval. This Agreement may be terminated at any time without penalty by a vote of the directors; by vote of a majority of the outstanding voting securities of the Company; or by the Distributor upon not less than thirty days prior
written notice to the other party; and shall automatically terminate upon its assignment. As used in this paragraph the terms, “vote of a majority of the outstanding voting securities,” “assignment” and “interested
person” will have the respective meanings specified in the 1940 Act. In the event the Company gives notice of termination, all expenses associated with the movement (or duplication) of records and materials and conversion thereof to a successor
service provider, and all trailing expenses incurred by Distributor, will be borne by the Company.
SECTION 10
MISCELLANEOUS
10.01
Records
.
The books and records pertaining to the Company, which
are in the possession or under the control of Distributor, will be the property of the Company. Such books and records will be prepared and maintained as required under the 1940 Act and other applicable securities laws, rules and regulations. The
Company and its authorized persons will have access to such books and records at all times during the Distributor’s normal business hours. Upon the reasonable request of the Company, the Distributor will make available copies of such books and
records to the Company or its authorized persons, at the Company’s expense.
10.02
Independent Contractor.
The
Distributor will undertake and discharge its obligations hereunder as an independent contractor. Neither Distributor nor any of its officers, directors, employees or representatives is or will be an employee of a Fund in connection with the
performance of Distributor’s duties hereunder. Distributor will be responsible for its own conduct and the employment, control, compensation and conduct of its agents and employees, and for any injury to such agents or employees or to others
through its agents and employees. Any obligations of Distributor hereunder may be performed by one or more third parties or affiliates of Distributor.
10.03
Notices
. All notices provided for or permitted under this Agreement will be deemed effective upon receipt, and will be in writing and (a) delivered personally, (b) sent by
commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below.
Notices to the Distributor will be sent to the attention of: General Counsel, SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. Notices to the Company will be sent to Pyxis Funds, 200 Crescent Court, Suite 700,
Dallas, TX 75201.
10.04
Dispute Resolution
. Whenever either party desires to institute legal proceedings against the
other party concerning this Agreement, it will provide written notice to that effect to such other party. The party providing such notice will refrain from instituting said legal proceedings for a period of thirty (30) days following the date
of provision of such notice. During such period, the parties will attempt in good faith to amicably resolve their dispute by negotiation among their executive officers.
10.05
Entire Agreement; Amendments
. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement, draft or agreement or proposal with respect to the
subject matter hereof. This Agreement or any part hereof may be amended or waived only by an instrument in writing signed by the party against which enforcement of such amendment or waiver is sought.
- 7 -
10.06
Non-Solicitation
. During the term of this Agreement and for a period of one
(1) year afterward, the Company will not recruit, solicit, employ or engage, for the Company or any other person, any of the Distributor’s employees.
10.07
Governing Law
. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to any conflict of laws or choice of laws
rules or principles thereof. To the extent that the applicable laws of the Commonwealth of Pennsylvania, or any of the provisions of this Agreement, conflict with the applicable provisions of the 1940 Act, the latter will control.
10.08
Counterparts
. This Agreement may be executed in two or more counterparts, all of which will constitute one and the same
instrument. Each such counterpart will be deemed an original, and it will not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement will be deemed executed by both parties when any
one or more counterparts hereof or thereof, individually or taken together, bears the original, scanned or facsimile signatures of each of the parties.
10.09
Force Majeure
. No breach of any obligation of a party to this Agreement (other than obligations to pay amounts owed) will constitute an event of default or breach to the extent it arises out
of a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or default, including without limitation: work action or strike; lockout or other labor dispute; flood; war; riot; theft;
act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default or breach will, when the cause arises, give to the other party prompt notice of the facts which constitute such cause;
and, when the cause ceases to exist, give prompt notice thereof to the other party.
10.10
Severability.
Any provision
of this Agreement that is determined to be invalid or unenforceable in any jurisdiction will be ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining
provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree
that the court making such determination will have the power to reduce the scope, duration, or area of the provision, to delete specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes
closest to expressing the original intention of the parties, and this Agreement will be enforceable as so modified.
10.11
Confidential Information
.
(a) The Distributor and the Company (in such capacity, the “
Receiving
Party
”) acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter defined) provided by the Distributor and the Company (in such capacity, the “
Disclosing Party
”) in connection with
this Agreement. The Receiving Party will not disclose or disseminate the Disclosing Party’s Confidential Information to any Person other than (a) those employees, agents, contractors, subcontractors and licensees of the Receiving Party, or
(b) with respect to the Distributor as a Receiving Party, to those employees, agents, contractors, subcontractors and licensees of any agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing its
obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In addition, the Receiving Party (a) will take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential
Information, and (b) will not use the Disclosing Party’s Confidential Information, or authorize other Persons to use the Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its
obligations or exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps will in no event be
less than a reasonable standard of care.
- 8 -
(b) The term “
Confidential Information
,” as used herein, will mean all
business strategies, plans and procedures, proprietary information, methodologies, data and trade secrets, and other confidential information and materials (including, without limitation, any non-public personal information as defined in Regulation
S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business, that may be obtained by the Receiving Party from any source or that may be developed as a result of this Agreement.
(c) The provisions of this
Section 10.12
respecting Confidential Information will not apply to the extent, but
only to the extent, that such Confidential Information is: (a) already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (b) subsequently learned from an independent third party free
of any restriction and without breach of this Agreement; (c) or becomes publicly available through no wrongful act of the Receiving Party or any third party; (d) independently developed by or for the Receiving Party without reference to or
use of any Confidential Information of the Disclosing Party; or (e) required to be disclosed pursuant to an applicable law, rule, regulation, government requirement or court order, or the rules of any stock exchange (provided, however, that the
Receiving Party will advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such
disclosure).
(d) The Receiving Party will advise its employees, agents, contractors, subcontractors and licensees, and will
require its agents and affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s obligations of confidentiality and non-use under this
Section 10.12
, and will be responsible
for ensuring compliance by its and its affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party will require all persons that are provided access to the Disclosing
Party’s Confidential Information, other than the Receiving Party’s accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions substantially similar to those set forth in this
Section 10.12
. The Receiving Party will promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such persons.
(e) Upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party promptly will
return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing sentence,
(a) the Receiving Party may retain one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit purposes and/or
to the extent required by applicable law, and (b) the Distributor will have no obligation to return or destroy Confidential Information of the Company that resides in save tapes of Distributor; provided, however, that in either case all such
Confidential Information retained by the Receiving Party will remain subject to the provisions of
Section 10.12
for so long as it is so retained. If requested by the Disclosing Party, the Receiving Party will certify in writing its
compliance with the provisions of this paragraph.
10.12
Use of Name
.
(a) The Company will not use the name of the Distributor, or any of its affiliates, in any Prospectus, sales literature, and other
material relating to the Company in any manner without the prior written consent of the Distributor (which will not be unreasonably withheld);
provided
,
however
, that the Distributor hereby approves all lawful uses of the names of the
Distributor and its affiliates in the Prospectus of the Company and in all other materials which merely refer in accurate terms to their appointment hereunder or which are required by applicable law, regulations or otherwise by the SEC, FINRA, or
any state securities authority.
(b) Neither the Distributor nor any of its affiliates will use the name of the Company in any
publicly disseminated materials, including sales literature, in any manner other than with respect to
- 9 -
representative client lists, without the prior written consent of the Company (which will not be unreasonably withheld);
provided
,
however
, that the Company and each Fund hereby
approves all lawful uses of its name in any required regulatory filings of the Distributor which merely refer in accurate terms to the appointment of the Distributor hereunder, or which are required by applicable law, regulations or otherwise by the
SEC, FINRA, or any state securities authority.
10.13
Insurance
. The Trust hereby represents that it maintains adequate
insurance coverage with respect to its responsibilities pursuant to this Agreement, including commercially reasonable fidelity bond(s), errors and omissions, directors and officers, professional liability insurance. The Distributor shall be included
as an additional insured on the Trust’s commercial liability policies and shall be named as a loss payee on the Trust’s fidelity bond(s). All of the foregoing policies shall be issued by insurance companies having an “A minus”
rating or better by A.M. Best Company or an equivalent Standard & Poor’s rating. The Trust shall furnish Certificates of Insurance evidencing all of the foregoing insurance coverages upon execution of this Agreement, and annually upon
the written request of the Distributor. Annually upon the written request of the Distributor, the Trust shall provide insurance policy documentation evidencing the Trust’s “additional insured” status with respect to the Trust’s
Commercial General Liability and “loss payee” status with respect to the Trust’s Fidelity Bond. The Trust shall promptly inform the Distributor of any material changes to its policies, endorsements or coverages.
*****
- 10 -
IN WITNESS WHEREOF,
the Company and Distributor have each duly executed this Agreement, as of the day
and year above written.
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Pyxis Funds I
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SEI INVESTMENTS DISTRIBUTION CO.
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By:
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/s/ Ethan Powell
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By:
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/s/ Maxine J. Chou
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Name: Ethan Powell
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Name: Maxine J. Chou
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Title: Executive Vice President and Secretary
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Title: CFO & COO
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SCHEDULE A
List of Funds
Pyxis/iBoxx Senior Loan ETF
- 12 -
SCHEDULE B
List of Services
Contract Management
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•
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Coordinate and execute Authorized Participant Agreements pursuant to
Section 5
of this Agreement
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•
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Coordinate and execute operational agreements related to the services contemplated by this Agreement (networking agreements, NSCC redemption
agreements, etc.)
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Coordinate and execute on behalf of the Company shareholder service and similar agreements to the extent permitted by applicable law, and as
contemplated by the Company’s distribution and/or shareholder servicing plan, if applicable
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FINRA Review
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Conduct FINRA filing of materials
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Respond to FINRA comments on marketing materials
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Other Services
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Forward any complaints concerning the Company received by the Distributor to the Company, assist in resolving such complaints, and maintain a log of
such complaints as required by applicable law;
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Keep and maintain all books and records relating to the services provided by the Distributor in accordance with applicable law.
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- 13 -
SCHEDULE C
Fees
The Distributor will receive from the Company, to the extent available pursuant to
Section 7
hereof, fees in the amount of $0.00 annually.
- 14 -
Exhibit (e)(6)
DISTRIBUTION SERVICES AGREEMENT
THIS DISTRIBUTION SERVICES AGREEMENT
(this
“
Agreement
”) is made as of this 25th day of September, 2012 (“
Effective Date
”) by and between Pyxis Capital, L.P. (“
Advisor
”), a a Delaware limited partnership organized under the laws of the state
of Delaware, and SEI Investments Distribution Co., a corporation organized under the laws of the Commonwealth of Pennsylvania (“
SIDCO
”).
WHEREAS, the Advisor serves as investment advisor to Pyxis/iBoxx Senior Loan ETF (the “
ETF
”), a series of Pyxis Funds I, a statutory trust organized under the laws of the state of
Delaware (the “Trust”);
WHEREAS, the Trust has entered into a Distribution Agreement with SIDCO for the distribution by SIDCO of
shares of beneficial interest (“Shares”) of the ETF;
WHEREAS, the Advisor and SIDCO desire to enter into this Agreement pursuant to
which SIDCO will perform certain services for the Advisor with respect to baskets of shares of the ETF (“
Creation Units
”) as described and defined in the ETF’s prospectus (“Prospectus”). As used in this Agreement, the
term “Prospectus” means any prospectus, registration statement, statement of additional information, proxy solicitation and tender offer materials, annual or other periodic report of the ETF or any advertising, marketing, shareholder
communication, or promotional material generated by the ETF or the Adviser from time to time, as appropriate, including all amendments or supplements thereto; and
NOW THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, and intending to be legally bound, the parties hereto agree as follows:
SECTION 1 SERVICES PROVIDED BY SIDCO
1.01.
Services
. The Advisor hereby appoints SIDCO to perform, and SIDCO agrees to perform (and may delegate or sub-contract, as provided below) the services set forth in this Agreement, including
the services set forth in
Schedule A
of this Agreement (collectively, the “
Services
”).
1.02.
Modifications to the Services
. In the event that the ETF or the Advisor desire to implement any changes related to the Services set forth herein (including, without limitation, changes to fees, CUSIPs, fund names, order cut-off times and
affirmation/confirmation disclosure), the Advisor shall provide written notice of such requested changes to SIDCO at least two weeks prior to the proposed effectiveness of such change to enable SIDCO to evaluate the impact that such change will have
on SIDCO’s operating procedures, if any. SIDCO shall have no obligation to implement any requested changes to the Services unless such changes are specifically agreed in writing. In the event that SIDCO agrees to implement the proposed changes,
SIDCO shall promptly notify the Advisor of any corresponding changes to the Services or fees set forth in this Agreement, and if the proposed changes require modification of SIDCO’s operating procedures SIDCO shall notify Advisor of such
changes to its operating procedures.
SECTION 2 REPRESENTATIONS, WARRANTIES AND COVENANTS
2.01.
Representations and Warranties by Advisor
. The Advisor represents and warrants on behalf of itself and, if applicable, the
ETF that:
2.01.01. it has full power, right and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby;
2.01.02. the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by all requisite actions on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the transactions contemplated hereby;
- 1 -
2.01.03. this Agreement has been duly executed and delivered by it and constitutes a legal,
valid and binding obligation, enforceable against it in accordance with its terms;
2.01.04. it is not a party to any, and
there are no, pending or threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory investigations or inquiries (collectively, “
Actions
”) of any nature against it or its properties
or assets which could, individually or in the aggregate, have a material effect upon its business or financial condition;
2.01.05. there is no injunction, order, judgment, decree, or regulatory restriction imposed specifically upon it or any of its properties
or assets;
2.01.06. it is not in default under any contractual or statutory obligations whatsoever (including the payment of
any tax) which, individually or in the aggregate, could materially and adversely affect, or is likely to materially and adversely affect, its business or financial condition; and
2.01.07. it has obtained all consents and given all notices (regulatory or otherwise), made all required regulatory filings and is in
compliance with all applicable laws and regulations.
2.02.
Covenants by Advisor
. During the term of this Agreement,
the Advisor hereby covenants and agrees that it shall or it shall cause the ETF to:
2.02.01. provide SIDCO with any requested
due diligence materials and copies of, or access to, any documents that SIDCO may reasonably request and notify SIDCO as soon as possible of any matter materially affecting SIDCO’s performance of the Services under this Agreement;.
2.02.02. provide reasonable assistance, if requested by SIDCO, to facilitate SIDCO’s receipt of a current and complete Authorized
Trader Form and an AP Authorization Form from each authorized participant, each substantially in the form attached hereto as
Schedule B
;
2.02.03. cause the index receipt agent, transfer agent and/or DTC to provide SIDCO with all necessary information so that SIDCO may perform its obligations under the Agreement;
2.02.04. support or cause the ETF’s index receipt agent and/or transfer agent to support the servicing of the shareholders, in
connection therewith the index receipt agent, transfer agent or the Advisor will provide an adequate number of persons during normal business hours to respond to telephone inquiries concerning the ETF and/or the Shares;
2.02.05. select and identify persons (referred to herein as, an “
Authorized Participant
”) with whom the Advisor desires
SIDCO to enter into Authorized Participant Agreements to create and redeem Shares and reasonably cooperate, if requested by SIDCO, in connection with the execution of such agreements, including, without limitation, by providing SIDCO’s standard
Authorized Participant Agreement to such persons;
2.02.06. report to SIDCO any and all actions or inactions by any Authorized
Participant that (i) fail to comply with the terms of any Authorized Participant agreement, (ii) violate any applicable laws of any governmental authorities, including the NASD’s Conduct Rules, or (iii) violate any other
agreements or procedures with which such Authorized Participant is required to comply;
2.02.07. review and confirm all trade
activity and report any errors with respect to the same within 24 hours of such trading activity. Failure by the Advisor to so notify SIDCO within 24 hours of the trading activity will constitute a waiver of any claims in connection with any such
errors;
- 2 -
2.02.08. administer on behalf of the ETF the ETF’s creditworthiness standards for
Authorized Participants, which SIDCO can assume have been satisfied before the placement of an order by an Authorized Participant and upon which SIDCO can rely without inquiry;
2.02.09. be responsible for the costs of printing and mailing prospectuses to the Nasdaq Stock Market, Inc. (and any other national stock
exchange on which the Shares may be listed), an Authorized Participant or any agent of an Authorized Participant for the purposes of providing prospectuses to prospective Authorized Participants or purchasers of exchange traded Shares in the
secondary market;
2.02.10. notify SIDCO promptly in writing in the event that the applicable prospectus is or, to the extent
known by the Advisor, will be, modified in a manner that materially impacts the Services provided by SIDCO pursuant to this Agreement;
2.02.11. it will promptly notify SIDCO in the event of any changes to the representations and warranties made hereunder; and
2.02.13 fully disclose to the Board of Directors/Trustees of the ETF the services being provided under this Agreement and the fees being paid by the Advisor.
2.03.
Representations and Warranties by SIDCO
. SIDCO represents and warrants that:
2.03.01. it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated
hereby;
2.03.02. the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly approved by all requisite action on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the transactions contemplated hereby;
2.03.03. this Agreement has been duly executed and delivered by it and constitutes a legal, valid and binding obligation, enforceable
against it in accordance with its terms;
2.03.04. information about litigation to which SEI or its affiliates is a party will
be set forth in SEI Investments Company’s periodic SEC filings in accordance with the rules of the SEC and will be publicly available on filings on Forms 10-Q, 10-K and 8-K from time to time;
2.03.05. there is no injunction, order, judgment, decree, or regulatory restriction imposed specifically upon it or any of its properties
or assets;
2.03.06. it is not in default under any statutory obligations whatsoever (including the payment of any tax) which
materially and adversely affects, or is likely to materially and adversely affect, its business or financial condition; and
2.03.07. it is a member of Financial Industry Regulatory Authority (“
FINRA
”) and agrees to abide by all of the rules and
regulations of FINRA, including, without limitation, the NASD Conduct Rules. SIDCO agrees to comply with all applicable federal and state laws, rules and regulations as applicable to it. SIDCO agrees to notify the Advisor immediately in the event of
its expulsion or suspension by FINRA.
- 3 -
SECTION 3 COMPENSATION; REIMBURSEMENT OF EXPENSES
3.01.
Compensation
. Advisor shall pay to SIDCO for its Services described in this Agreement the fees set forth in
Schedule C
attached hereto, such fees to be paid monthly in advance on the first day of each calendar month.
3.02.
Reimbursement of
Expenses
. The fees paid to SIDCO for the Services are exclusive of reimbursable expenses. Advisor agrees to reimburse SIDCO for SIDCO’s reasonable expenses incurred in providing the Services hereunder as set forth in
Exhibit C
,
attached hereto.
SECTION 4 INDEMNIFICATION
4.01.
Indemnification of SIDCO
. The Advisor hereby agrees to indemnify, defend and hold harmless (on an as-incurred basis), SIDCO
and each of its affiliates, officers, principals, representatives, directors, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each, a “
SIDCO Indemnified
Party
”) from and against any loss, liability, damages, cost or expense incurred by such SIDCO Indemnified Party (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expense and
reasonable counsel fees and disbursements incurred in connection therewith) as a result of SIDCO’s performance of the Services hereunder, including (i) any breach of any representation, warranty, covenant or undertaking made by the Advisor
in this Agreement, (ii) a failure of the Advisor to perform any obligations set forth in this Agreement (including any written procedures prepared in connection with the performance of this Agreement), (iii) any failure by the Advisor to
comply with applicable laws, including any failure to comply with the terms of any exemptive relief with respect to the ETF, (iv) any act or omission by or on behalf of the Advisor involving bad faith, negligence or fraud, (v) any untrue
statement or alleged untrue statement of a material fact contained in any Prospectus or any document incorporated by reference therein or filed as an exhibit thereto, or any marketing literature or materials prepared by the Advisor with respect to
the securities covered by the Prospectus or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, (vi) the operation of a customer contact center
or similar call center by the Advisor or one of its affiliates or agents, (vii) an Authorized Participant’s failure to initially or subsequently fulfill the ETF’s creditworthiness standards, (viii) the failure to apply or the
inaccurate application of the ETF’s creditworthiness standards; (ix) SIDCO’s reliance on information contained in an Authorized Trader Form; or (x) any claim by an Authorized Participant related to SIDCO’s services.
4.02.
Indemnification of the Advisor
. SIDCO hereby agrees to indemnify, defend and hold harmless (on an as-incurred
basis), the Advisor and each of its affiliates, officers, directors, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each, an “
Advisor Indemnified
Party
”) from and against any loss, liability, damages, cost or expense incurred by such Advisor Indemnified Party (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages, or expense and
reasonable counsel fees and disbursements incurred in connection therewith) as a result of (i) any material failure by SIDCO to comply with any applicable laws, including but not limited to the NASD Conduct Rules, or (ii) an action or
omission of SIDCO involving bad faith or fraud by SIDCO.
4.03.
Indemnification Procedures
. In case any such action,
suit, proceeding or claim for which indemnity may be payable hereunder shall be brought against a SIDCO Indemnified Party or an Advisor Indemnified Party, as applicable (an “
Indemnified Party
”), and such Indemnified Party shall
notify the applicable indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate in, and to the extent that such indemnifying party shall wish to assume the defense thereof, retain its own counsel
reasonably satisfactory to such Indemnified Party, subject to the further provisions of this paragraph. After written notice from such indemnifying party to such Indemnified Party of its election to so assume the defense thereof, such indemnifying
party shall not be liable to the applicable
- 4 -
Indemnified Parties for any additional attorneys’ fees or other expenses of litigation, other than reasonable costs of investigation subsequently incurred by such Indemnified Parties in
connection with the defense thereof, unless (i) the employment of counsel by such Indemnified Parties has been authorized in writing by such indemnifying party, such authorization not to be unreasonably withheld or delayed; (ii) such
Indemnified Parties shall have obtained a written opinion of counsel reasonably acceptable to such indemnifying party that there exists a conflict of interest between such Indemnified Parties and the relevant party in the conduct of the defense of
such action or that there are one or more defenses available to such Indemnified Parties that are unavailable to such indemnifying party (in which case such indemnifying party shall not have the right to direct the defense of such action on behalf
of such Indemnified Parties); or (iii) such indemnifying party shall not in fact have employed counsel reasonably satisfactory to such Indemnified Parties to assume the defense of such action, in each of which cases the reasonable fees and
expenses of counsel utilized by such Indemnified Parties shall be at the expense of such indemnifying party, it being understood, however, that such indemnifying party shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for an Indemnified Party, which firm shall
be designated in writing by the Indemnified Party. Notwithstanding the foregoing, under the circumstances described in clause (ii) above, the applicable Indemnified Parties shall be entitled to retain an additional law firm, in any one such
action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, provided such Indemnified Parties have obtained a written opinion of counsel reasonably acceptable
to the indemnifying party that a conflict of interest exists that would preclude the use of a single law firm, in which case the indemnifying party shall be liable for the reasonable fees and expenses of counsel designated by the Indemnified Parties
in writing. All such fees and expenses which are at the expense of an indemnifying party hereunder shall be promptly paid by such indemnifying party.
4.04.
Additional Provision Regarding Indemnification
. Nothing in this Agreement shall be construed as limiting an Indemnified Party’s rights to employ counsel at its own expense or to obtain
indemnification for amounts reasonably paid to adverse claimants in satisfaction of any judgments or in settlement of any actions, suit, proceeding or claims, except that no party hereto shall be liable for any settlement of any action, suit,
proceeding or claim effected without its written consent. None of the parties hereto shall settle or compromise any action, suit, proceeding or claim if such settlement or compromise provides for an admission of liability on the part of an
Indemnified Party without such Indemnified Party’s written consent.
SECTION 5 LIMITATION OF LIABILITY
5.01.
Limitation of Liability
. THE DUTIES OF SIDCO SHALL BE CONFINED TO THOSE EXPRESSLY SET FORTH IN THIS
AGREEMENT, AND NO IMPLIED DUTIES ARE ASSUMED BY OR MAY BE ASSERTED AGAINST SIDCO. EXCEPT TO THE EXTENT ARISING OUT OF SIDCO’S FRAUD OR CRIMINAL MISCONDUCT WHEN PROVIDING THE SERVICES, SIDCO’S LIABILITY ARISING OUT OF THIS AGREEMENT WILL BE
LIMITED TO DIRECT AND ACTUAL MONETARY DAMAGES NOT TO EXCEED THE AMOUNT OF FEES PAID HEREUNDER DURING THE THREE MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO THE FIRST SUCH CLAIM TO OCCUR. For the avoidance of doubt, SIDCO shall have no
liability related to any breach in the performance of its obligations under this Agreement due to (i) the failure or delay of the Advisor, the ETF or either of their respective agents to perform its obligations under this Agreement or
(ii) activities or statements of sales or wholesaler personnel who are employed and supervised by the Advisor or its affiliates, (iii) any act or omission of the ETF’s transfer agent or index receipt agent, (iv) any misstatement
or omission in the ETF’s registration statement, prospectus, shareholder report or other information filed or made public by the ETF or the Advisor (as amended from time to time), provided that such misstatement or omission was not made in
reliance upon, and in conformity with, information furnished to by SIDCO, (v) the operation of a customer contact center or similar call center by the Advisor or one of its affiliates or
- 5 -
agents, (vi) mistakes or errors in data provided to SIDCO by, or interruptions or delays or communications with, any other service providers to the ETF, or (vii) actions taken pursuant
to any instruction (whether written or verbal) which it reasonably believes to be genuine and to have been signed or given by the proper person or persons. Each party shall have the duty to mitigate its damages for which another party may become
responsible. As used in this
Section 5
, the term “
SIDCO
” shall include the officers, directors, employees, affiliates and agents of SIDCO as well as that entity itself.
5.02.
Consequential Damages
. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL SIDCO BE
LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL, OR OTHER NON-DIRECT DAMAGES OF ANY KIND WHETHER SUCH LIABILITY IS PREDICATED ON CONTRACT, STRICT LIABILITY, OR ANY OTHER THEORY AND REGARDLESS OF WHETHER THE ADVISOR IS ADVISED
OF THE POSSIBILITY OF ANY SUCH DAMAGES.
SECTION 6 TERM AND TERMINATION
6.01.
Initial Term
. The term of this Agreement shall commence as of the Effective Date and continue in full force and effect,
unless earlier terminated by either party in accordance with the terms set forth in this
Section 6
, for 2 years (the “
Initial Term
”).
6.02.
Renewal Term
. Upon the expiration of the Initial Term, this Agreement shall automatically renew for successive periods of 2 years (each, a “
Renewal Term
”).
6.03.
Termination for Cause
. This Agreement may be terminated by either party hereto on such date as is specified in written
notice given by the terminating party, in the event of a material breach of this Agreement by the other party, provided the terminating party has notified the other party of such material breach at least sixty days prior to the specified date of
termination and the breaching party has not remedied such breach by the specified date.
6.04.
Other Termination
.
Either party may terminate this Agreement at any time, with or without cause, and upon written notice to the other party hereto if that certain distribution agreement between SIDCO and Pyxis Funds I is terminated.
6.05.
Survival
. The provisions of
Sections 4, 5, 7, 8
and
11
shall survive termination of this Agreement.
SECTION 7 CONFIDENTIAL INFORMATION
7.01.
General
. SIDCO and the Advisor (in such capacity, the “
Receiving Party
”) acknowledge and agree to maintain the confidentiality of Confidential Information (as hereinafter
defined) provided by SIDCO and the Advisor (in such capacity, the “
Disclosing Party
”) in connection with this Agreement. The Receiving Party will not disclose or disseminate the Disclosing Party’s Confidential Information to
any Person other than (a) those employees, agents, contractors, subcontractors and licensees of the Receiving Party, or (b) with respect to SIDCO as a Receiving Party, to those employees, agents, contractors, subcontractors and licensees
of any agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing its obligations, or to permit the Receiving Party to exercise its rights under this Agreement. In addition, the Receiving Party (a) will
take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (b) will not use the Disclosing Party’s Confidential Information, or authorize other Persons to use the Disclosing
Party’s Confidential Information, for any purposes other than in connection with performing its obligations or exercising its rights hereunder. As used herein, “reasonable steps” means steps that a party takes to protect its own,
similarly confidential or proprietary information of a similar nature, which steps will in no event be less than a reasonable standard of care.
- 6 -
7.02.
Confidential Information
. The term “
Confidential Information
,”
as used herein, will mean all business strategies, plans and procedures, proprietary information, methodologies, data and trade secrets, and other confidential information and materials (including, without limitation, any non-public personal
information as defined in Regulation S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business, that may be obtained by the Receiving Party from any source or that may be
developed as a result of this Agreement.
7.03.
Exclusions
. The provisions of this
Section 7
respecting
Confidential Information will not apply to the extent, but only to the extent, that such Confidential Information is: (a) already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party,
(b) subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (c) or becomes publicly available through no wrongful act of the Receiving Party or any third party;
(d) independently developed by or for the Receiving Party without reference to or use of any Confidential Information of the Disclosing Party; or (e) required to be disclosed pursuant to an applicable law, rule, regulation, government
requirement or court order, or the rules of any stock exchange (provided, however, that the Receiving Party will advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a
reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such disclosure).
7.04.
Duties
.
The Receiving Party will advise its employees, agents, contractors, subcontractors and licensees, and will require its agents and affiliates to advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s
obligations of confidentiality and non-use under this
Section 7
, and will be responsible for ensuring compliance by its and its affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In
addition, the Receiving Party will require all persons that are provided access to the Disclosing Party’s Confidential Information, other than the Receiving Party’s accountants and legal counsel, to execute confidentiality or
non-disclosure agreements containing provisions substantially similar to those set forth in this
Section 7
. The Receiving Party will promptly notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of
the Disclosing Party’s Confidential Information by such persons.
7.05.
Treatment of Confidential Information upon
Termination
. Except as specifically set forth in
Section 8.03
, upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party promptly will return to the Disclosing Party, or
destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing sentence, (a) the Receiving Party may retain
one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit purposes and/or to the extent required by applicable
law, and (b) SIDCO will have no obligation to return or destroy Confidential Information of the Advisor that resides in save tapes of SIDCO; provided, however, that in either case all such Confidential Information retained by the Receiving
Party will remain subject to the provisions of this
Section 7
for so long as it is so retained. If requested by the Disclosing Party, the Receiving Party will certify in writing its compliance with the provisions of this paragraph.
SECTION 8 RECORDS
8.01.
Books and Records
. SIDCO shall keep and maintain on behalf of the Advisor all books and records which SIDCO is required to keep and maintain in connection with the Services to be provided
hereunder pursuant to any applicable statutes, rules and regulations, including without limitation Rules 31a-1 and 31a-2 under the 1940 Act.
8.02.
Ownership of Books and Records
. All books and records prepared pursuant to
Section 8.01
shall be the property of the ETF and SIDCO shall make such books and records available for
inspection by the Advisor or by the Securities and Exchange Commission (the “
SEC
”) at reasonable times upon reasonable prior notice during normal business hours.
- 7 -
8.03.
Delivery of Books and Records
. Upon request, SIDCO shall make available to the
Advisor copies of the books and records prepared pursuant to
Section 8.01
. SIDCO shall maintain a copy of all such documents for a period of six years from and after the date of such document’s creations, unless control of such
document is given to Advisor prior to the expiration of such six year period. At the end of such six-year period, such records and documents will be turned over to the Advisor unless the Advisor authorizes in writing the destruction of such records
and documents.
SECTION 9 RIGHT OF OWNERSHIP
All computer programs, resources and procedures developed by SIDCO (or at SIDCO’s expense) to perform the Services to be provided by SIDCO under this Agreement are the property of SIDCO unless
otherwise mutually agreed by the parties in writing.
SECTION 10 MISCELLANEOUS
10.01.
Independent Contractor.
SIDCO will undertake and discharge its obligations hereunder as an independent contractor. Neither
SIDCO nor any of its officers, directors, principals, employees or representatives is or will be an employee of a Fund in connection with the performance of SIDCO’s duties hereunder. Each of the Advisor and SIDCO will be responsible for its own
conduct and the employment, control, compensation and conduct of its agents and employees, and for any injury to such agents or employees or to others through its agents and employees. Any obligations of SIDCO hereunder may be performed by one or
more third parties or affiliates of SIDCO.
10.02.
Notices
. All notices provided for or permitted under this Agreement
will be deemed effective upon receipt, and will be in writing and (a) delivered personally, (b) sent by commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage
prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below. Notices to SIDCO will be sent to the attention of: General Counsel, SEI Investments Distribution Co., 1 Freedom Valley Drive, Oaks,
Pennsylvania 19456. Notices to the Advisor will be sent to Pyxis Capital, L.P., 200 Crescent Court, Suite 700, Dallas, TX 75201.
10.03.
Dispute Resolution
. Whenever either party desires to institute legal proceedings against the other party concerning this Agreement, it will provide written notice to that effect to such
other party. The party providing such notice will refrain from instituting said legal proceedings for a period of thirty (30) days following the date of provision of such notice. During such period, the parties will attempt in good faith to
amicably resolve their dispute by negotiation among their executive officers.
10.04.
Non-Solicitation
. During the term
of this Agreement and for a period of one (1) year afterward, the Advisor will not recruit, solicit, employ or engage, for the Advisor or any other person, any of SIDCO’s employees.
10.05.
Governing Law
. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania without giving effect to any conflict of laws or choice of laws rules or principles thereof. To the extent that the applicable laws of the Commonwealth of Pennsylvania, or any of the provisions of this Agreement, conflict with the
applicable provisions of the 1940 Act, the latter will control.
10.06.
Counterparts
. This Agreement may be executed in
two or more counterparts, all of which will constitute one and the same instrument. Each such counterpart will be deemed an original, and it will not be necessary in making proof of this Agreement to produce or account for more than one such
- 8 -
counterpart. This Agreement will be deemed executed by both parties when any one or more counterparts hereof or thereof, individually or taken together, bears the original, scanned or facsimile
signatures of each of the parties.
10.07.
Force Majeure
. No breach of any obligation of a party to this Agreement
(other than obligations to pay amounts owed) will constitute an event of default or breach to the extent it arises out of a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or
default, including without limitation: work action or strike; lockout or other labor dispute; flood; war; riot; theft; act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default
or breach will, when the cause arises, give to the other party prompt notice of the facts which constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other party.
10.08.
Severability.
Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction will be
ineffective to the extent of such invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other
jurisdiction. If a court of competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree that the court making such determination will have the power to reduce the scope, duration, or area of the
provision, to delete specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes closest to expressing the original intention of the parties, and this Agreement will be enforceable as so
modified.
10.09.
Sole Benefit
. This Agreement is for the sole benefit of the Advisor and SIDCO and will not be deemed
to be for the direct or indirect benefit of the clients or customers of Advisor or SIDCO. The clients or customers of Advisor and SIDCO will not be deemed to be third party beneficiaries of this Agreement nor to have any other contractual
relationship with SIDCO by reason of this Agreement and each party hereto agrees to indemnify and hold harmless the other party from any claims of such party’s clients or customers against the other party in accordance with and to the extent
provided in Section 5 of this Agreement.
10.10.
Assignment
. The Advisor may not assign, delegate or transfer, by
operation of law or otherwise, this Agreement (in whole or in part), or any of its obligations hereunder, without the prior written consent of SIDCO, which consent shall not be unreasonably withheld or delayed. SIDCO may assign, delegate or
transfer, by operation of law or otherwise, all of its rights under this Agreement to an affiliate of SIDCO or to any person or entity who purchases all or substantially all of the business or assets of SIDCO to which this Agreement relates,
provided that such affiliate, person or entity agrees in advance and in writing to be bound by the terms, conditions and provisions of this Agreement. Subject to the foregoing, all of the terms, conditions and provisions of this Agreement shall be
binding upon and shall inure to the benefit of each party’s successors and permitted assigns. Any assignment, delegation, or transfer in violation of this provision shall be void and without legal effect.
10.11.
Services Not Exclusive
. The Advisor hereby acknowledges that the services provided hereunder by SIDCO are not exclusive.
Nothing herein shall be deemed to limit or restrict SIDCO’s right, or the right of any of SIDCO’s officers, directors or employees to engage in any other business or to devote time and attention to the management or other aspects of any
other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, fund, firm, individual or association, as well as provide services to any other investment company, including any investment
company which may directly compete with or be similar to the ETF.
10.12.
Headings
. Paragraph headings in this
Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.
- 9 -
10.13.
Use of Name
.
10.13.01. The Advisor will not use the name of SIDCO, or any of its affiliates, in any Prospectus, sales literature, and other material
relating to the Advisor in any manner without the prior written consent of SIDCO (which will not be unreasonably withheld);
provided
,
however
, that SIDCO hereby approves all lawful uses of the names of SIDCO and its affiliates in the
Prospectus of the Advisor and in all other materials which merely refer in accurate terms to their appointment hereunder or which are required by applicable law, regulations or otherwise by the SEC, FINRA, or any state securities authority.
10.13.02. Neither SIDCO nor any of its affiliates will use the name of the Advisor in any publicly disseminated materials,
including sales literature, in any manner other than with respect to representative client lists, without the prior written consent of the Advisor (which will not be unreasonably withheld);
provided
,
however
, that the Advisor and each
Fund hereby approves all lawful uses of its name in any required regulatory filings of SIDCO which merely refer in accurate terms to the appointment of SIDCO hereunder, or which are required by applicable law, regulations or otherwise by the SEC,
FINRA, or any state securities authority.
10.14.
Entire Agreement; Amendments
. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior agreement, draft or agreement or proposal with respect to the subject matter hereof. This Agreement or any part hereof may be amended or waived only by an instrument in writing signed by
the party against which enforcement of such amendment or waiver is sought.
- 10 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and
year first above written.
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Pyxis Capital, L.P.
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SEI INVESTMENTS DISTRIBUTION CO.
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By:
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/s/ Ethan Powell
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By:
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/s/ Maxine J. Chou
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Name: Ethan Powell
Title: Executive Vice President and Secretary
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Name: Maxine J. Chou
Title: CFO & COO
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- 11 -
schedule a
Services
Order Processing
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•
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SIDCO shall provide an online and telephone order processing system pursuant to which Authorized Participants who have entered into appropriate
agreements with SIDCO may contact SIDCO and place orders to create and redeem creation units of the ETF in accordance with SIDCO’s then current trade order processing policies and procedures, a current copy of which will be provided to the
Adviser upon request
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•
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SIDCO shall transmit such orders daily to the Advisor, transfer agent, and index receipt agent
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•
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In the event that the online system is not available, SIDCO shall establish alternative means by which Authorized Participants may place orders
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Marketing Review
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•
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SIDCO shall review advertising and other sales literature relating to the ETF submitted by the Advisor in the manner prescribed for compliance with the
applicable rules of the FINRA and the SEC and the requirements of the exemptive application; file such materials with FINRA and use commercially reasonable efforts to obtain such approvals for their use as may be required by the SEC or FINRA;
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•
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provide consultation to the Adviser with respect to regulatory matters regarding the marketing materials, including monitoring regulatory and
legislative developments that may affect the marketing materials;
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•
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Provide client with copy of SEI’s SEC & FINRA Marketing Materials Guidebook
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SCHEDULE B
AUTHORIZED TRADER FORM
The following are the names, titles and signatures of all persons (each an “
Authorized Person
”) authorized to give instructions relating
to any trade order processing activity contemplated by this Agreement or any other notice, request or instruction on behalf of an Authorized Participant.
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Name:
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Title:
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Signature:
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Name:
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Title:
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Signature:
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Name:
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Title:
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Signature:
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Name:
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Title:
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Signature:
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Name:
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Title:
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Signature:
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Name:
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Title:
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Signature:
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The undersigned,
, being the
of .,
does hereby certify that the persons listed above have been duly elected or appointed to the offices set forth beneath their names, that they presently hold such offices, that they have been duly authorized to act as Authorized Persons and that
their signatures set forth above are their own true and genuine signatures.
In Witness Whereof, the undersigned has hereby set his/her hand.
- 13 -
SCHEDULE C
FEES
$100.00 per
Authorized Participant transaction
- 14 -
Exhibit (g)(3)
M
ASTER
C
USTODIAN
A
GREEMENT
This Agreement is made as of October 1, 2012 by and among each management investment company identified on Appendix A and Appendix B hereto (each such investment company and each management
investment company made subject to this Agreement in accordance with Section 19.5 below, shall hereinafter be referred to as a “
Fund
”), and S
TATE
S
TREET
B
ANK
AND
T
RUST
C
OMPANY
, a Massachusetts trust company (the “
Custodian
”).
W
ITNESSETH
:
W
HEREAS
,
each
Fund may or may not be authorized to issue shares of common stock or shares of beneficial interest in separate series (“
Shares
”), with each such series representing interests in a separate portfolio of securities and other
assets;
W
HEREAS
,
each Fund so authorized intends that this Agreement be applicable to each of its
series set forth on Appendix A and Appendix B hereto (such series together with all other series subsequently established by the Fund and made subject to this Agreement in accordance with Section 19.6 below, shall hereinafter be referred to as
the “
Portfolio(s)
”);
W
HEREAS
,
each Fund not so authorized intends that this
Agreement be applicable to it and all references hereinafter to one or more “Portfolio(s)” shall be deemed to refer to such Fund(s);
W
HEREAS
,
each Fund listed on Appendix B hereto (each a “Pyxis ETF” and collectively the “Pyxis ETFs”), which is an exchange traded fund, will issue and redeem
shares of each Portfolio only in aggregations of Shares known as “
Creation Units
,” generally in exchange for a basket of certain equity or fixed income securities and a specified cash payment, as more fully described in the
currently effective prospectus and statement of additional information of each Fund related to the Portfolio (collectively, the “
Prospectus
”);
W
HEREAS
,
the nature of the Pyxis ETFs requires that Sections 2.14, 2.15 and 7A of the Agreement apply to the Pyxis ETFs only; and
N
OW
, T
HEREFORE
,
in consideration of the mutual covenants and agreements hereinafter contained, the
parties hereto agree as follows:
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S
ECTION
1.
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E
MPLOYMENT
OF
C
USTODIAN
AND
P
ROPERTY
TO
BE
H
ELD
BY
I
T
.
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Each Fund hereby employs the Custodian as a
custodian of assets of the Portfolios, including securities which the Fund, on behalf of the applicable Portfolio, desires to be held in places within the United States (“
domestic securities
”) and securities it desires to be
held outside the United States (“
foreign securities
”). Each Fund, on behalf of its Portfolio(s), agrees to deliver to the Custodian all securities and cash of the Portfolios, and all payments of income, payments of principal
or capital distributions received by it with respect to all securities owned by the Portfolio(s) from time to time, and the cash consideration received by it for such Shares as may be issued or sold from time to time. The Custodian shall not be
responsible for any property of a Portfolio which is not received by it or
which is delivered out in accordance with Proper Instructions (as such term is defined in Section 8 hereof) including, without limitation, Portfolio property (i) held by brokers,
private bankers or other entities on behalf of the Portfolio (each a “
Local Agent
”), (ii) held by Special Sub-Custodians (as such term is defined in Section 6 hereof), (iii) held by entities which have advanced
monies to or on behalf of the Portfolio and which have received Portfolio property as security for such advance(s) (each a “
Pledgee
”), or (iv) delivered or otherwise removed from the custody of the Custodian (a) in
connection with any Free Trade (as such term is defined in Sections 2.2(14) and 2.6(7) hereof) or (b) pursuant to Special Instructions (as such term is defined in Section 8 hereof). With respect to uncertificated shares (the
“
Underlying Shares
”) of registered “investment companies” (as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended from time to time (the “
1940 Act
”)), whether in
the same “group of investment companies” (as defined in Section 12(d)(1)(G)(ii) of the 1940 Act) or otherwise, including pursuant to Section 12(d)(1)(F) of the 1940 Act (hereinafter sometimes referred to as the
“
Underlying Portfolios
”) the holding of confirmation statements that identify the shares as being recorded in the Custodian’s name on behalf of the Portfolios will be deemed custody for purposes hereof.
Upon receipt of Proper Instructions, the Custodian shall on behalf of the applicable Portfolio(s) from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by the Board of Trustees or the Board of Directors of the Fund (as appropriate, and in each case, the “
Board
”) on behalf of the applicable
Portfolio(s), and provided that the Custodian shall have no more or less responsibility or liability to any Fund on account of any actions or omissions of any sub-custodian so employed than any such sub-custodian has to the Custodian. The Custodian
may place and maintain each Fund’s foreign securities with foreign banking institution sub-custodians employed by the Custodian and/or foreign securities depositories, all as designated in Schedules A and B hereto, but only in accordance with
the applicable provisions of Sections 3 and 4 hereof.
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S
ECTION
2.
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D
UTIES
OF
THE
C
USTODIAN
WITH
R
ESPECT
TO
P
ROPERTY
OF
THE
P
ORTFOLIOS
TO
BE
H
ELD
IN
THE
U
NITED
S
TATES
.
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S
ECTION
2.1
H
OLDING
S
ECURITIES
. The
Custodian shall hold and physically segregate for the account of each Portfolio all non-cash property, to be held by it in the United States, including all domestic securities owned by such Portfolio other than (a) securities which are
maintained pursuant to Section 2.8 in a clearing agency which acts as a securities depository or in a book-entry system authorized by the U.S. Department of the Treasury (each, a “
U.S. Securities System
”) and
(b) Underlying Shares owned by each Fund which are maintained pursuant to Section 2.10 hereof in an account with State Street Bank and Trust Company or such other entity which may from time to time act as a transfer agent for the
Underlying Portfolios and with respect to which the Custodian is provided with Proper Instructions (the “
Underlying Transfer Agent
”).
-2-
S
ECTION
2.2
D
ELIVERY
OF
S
ECURITIES
. The Custodian shall release and deliver domestic securities owned by a Portfolio held by the Custodian, in a U.S. Securities System account of the Custodian or in an account at the Underlying Transfer
Agent, only upon receipt of Proper Instructions on behalf of the applicable Portfolio, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
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1)
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Upon sale of such securities for the account of the Portfolio in accordance with customary or established market practices and procedures, including, without
limitation, delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment;
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2)
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Upon the receipt of payment in connection with any repurchase agreement related to such securities entered into by the Portfolio;
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3)
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In the case of a sale effected through a U.S. Securities System, in accordance with the provisions of Section 2.8 hereof;
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4)
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To the depository agent in connection with tender or other similar offers for securities of the Portfolio;
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5)
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To the issuer thereof or its agent when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
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6)
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To the issuer thereof, or its agent, for transfer into the name of the Portfolio or into the name of any nominee or nominees of the Custodian or into the name or
nominee name of any agent appointed pursuant to Section 2.7 or into the name or nominee name of any sub-custodian appointed pursuant to Section 1; or for exchange for a different number of bonds, certificates or other evidence representing
the same aggregate face amount or number of units; provided that, in any such case, the new securities are to be delivered to the Custodian;
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7)
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Upon the sale of such securities for the account of the Portfolio, to the broker or its clearing agent, against a receipt, for examination in accordance with
“street delivery” custom; provided that in any such case, the Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise
from the Custodian’s own negligence or willful misconduct;
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8)
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For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
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9)
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In the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim
receipts or temporary securities for definitive securities; provided that, in any such case, the new securities and cash, if any, are to be delivered to the Custodian;
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10)
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For delivery in connection with any loans of securities made by the Portfolio (a) against receipt of collateral as agreed from time to time by the Fund on behalf
of the Portfolio, except that in connection with any loans for which collateral is to be credited to the Custodian’s account in the book-entry system authorized by the U.S. Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Portfolio prior to the receipt of such collateral or (b) to the lending agent, or the lending agent’s custodian, in accordance with written Proper Instructions (which may not provide
for the receipt by the Custodian of collateral therefor) agreed upon from time to time by the Custodian and the Fund;
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11)
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For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
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12)
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For delivery in accordance with the provisions of any agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-dealer registered under the
Securities Exchange Act of 1934 (the “
Exchange Act
”) and a member of the Financial Industry Regulatory Authority, Inc. (“
FINRA
,” formerly known as The National Association of Securities Dealers, Inc.),
relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by
the Fund on behalf of a Portfolio;
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13)
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For delivery in accordance with the provisions of any agreement among a Fund on behalf of the Portfolio, the Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission (the “
CFTC
”) and/or any contract market, or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund on behalf of a Portfolio;
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14)
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Upon the sale or other delivery of such investments (including, without limitation, to one or more (a) Special Sub-Custodians or (b) additional custodians
appointed by the Fund, and communicated to the Custodian from time to time via a writing duly executed by an authorized officer of the Fund, for the purpose of engaging in repurchase agreement transactions(s), each a “
Repo
Custodian
”), and prior to receipt of payment therefor, as set forth in written Proper Instructions (such delivery in advance of payment, along with payment in advance of delivery made in accordance with Section 2.6(7), as
applicable, shall each be referred to herein as a “
Free Trade
”), provided that such Proper Instructions shall set forth (a) the securities of the Portfolio to be delivered and (b) the person(s) to whom delivery of
such securities shall be made;
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15)
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Upon receipt of instructions from the Fund’s transfer agent (the “
Transfer Agent
”) for delivery to such Transfer Agent or to the holders of
Shares in connection with distributions in kind, as may be described from time to time in the currently effective prospectus and statement of additional information of the Fund related to the Portfolio (the “
Prospectus
”), in
satisfaction of requests by holders of Shares for repurchase or redemption;
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16)
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In the case of a sale processed through the Underlying Transfer Agent of Underlying Shares, in accordance with Section 2.10 hereof;
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17)
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For delivery as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
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18)
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For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the applicable Portfolio specifying (a) the securities of the
Portfolio to be delivered and (b) the person or persons to whom delivery of such securities shall be made.
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S
ECTION
2.3
R
EGISTRATION
OF
S
ECURITIES
. Domestic
securities held by the Custodian (other than bearer securities) shall be registered in the name of the Portfolio or in the name of any nominee of a Fund on behalf of the Portfolio or of any nominee of the Custodian which nominee shall be assigned
exclusively to the Portfolio, unless the Fund has authorized in writing the appointment of a nominee to be used in common with other registered management investment companies having the same investment adviser as the Portfolio, or in the name or
nominee name of any agent appointed pursuant to Section 2.7 or in the name or nominee name of any sub-custodian appointed pursuant to Section 1. All securities accepted by the Custodian on behalf of the Portfolio under the terms of this
Agreement shall be in “street name” or other good delivery form. If, however, a Fund directs the Custodian to maintain securities in “street name”, the Custodian shall utilize its best efforts only to timely collect income due
the Fund on such securities and to notify the Fund on a best efforts basis only of relevant corporate actions including, without limitation, pendency of calls, maturities, tender or exchange offers.
S
ECTION
2.4
B
ANK
A
CCOUNTS
. The Custodian shall open and maintain
a separate bank account or accounts in the United States in the name of each Portfolio of each Fund, subject only to draft or order by the Custodian acting pursuant to the terms of this Agreement, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the account of the Portfolio, other than cash maintained by the Portfolio in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by the
Custodian for a Portfolio may be deposited by it to its credit as Custodian in the banking department of the Custodian or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every
such bank or trust company shall be qualified to act as a custodian under the 1940 Act and that each such bank or trust company and the funds to be deposited with each such bank or trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board. Such funds shall be deposited by the Custodian in its capacity as Custodian and shall be withdrawable by the Custodian only in that capacity.
-5-
S
ECTION
2.5
C
OLLECTION
OF
I
NCOME
. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14) or purchased pursuant to Section 2.6(7), and subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with respect to registered domestic securities held hereunder to which each Portfolio shall be entitled either by law or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such securities are held by the Custodian or its agent. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. The Custodian shall credit income to the
Portfolio as such income is received or in accordance with the Custodian’s then current payable date income schedule. Any credit to the Portfolio in advance of receipt may be reversed when the Custodian determines that payment will not occur in
due course and the Portfolio may be charged at the Custodian’s applicable rate for time credited. Income due each Portfolio on securities loaned pursuant to the provisions of Section 2.2 (10) shall be the responsibility of the
applicable Fund. The Custodian will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of
the income to which the Portfolio is properly entitled.
S
ECTION
2.6
P
AYMENT
OF
F
UND
M
ONIES
. The Custodian shall pay out monies of a Portfolio as provided in Section 5 and otherwise upon receipt of Proper Instructions on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out monies of a Portfolio in the following cases only:
|
|
1)
|
Upon the purchase of domestic securities, options, futures contracts or options on futures contracts for the account of the Portfolio but only
(a) in accordance with customary or established market practices and procedures, including, without limitation, delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against expectation of
receiving later delivery of such securities or evidence of title to such options, futures contracts or options on futures contracts to the Custodian (or any bank, banking firm or trust company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been designated by the Custodian as its agent for this purpose) registered in the name of the Portfolio or in the name of a nominee of the Custodian referred to in Section 2.3 hereof or
in proper form for transfer; (b) in the case of a purchase effected through a U.S. Securities System, in accordance with the conditions set forth in Section 2.8 hereof; (c) in the case of a purchase of Underlying Shares, in accordance
with the conditions set forth in Section 2.10 hereof; (d) in the case of repurchase agreements entered into between the applicable Fund on behalf of a Portfolio and the Custodian, or another bank, or a broker-dealer which is a member of
FINRA, (i) against delivery of the securities either in certificate form or through
|
-6-
|
|
an entry crediting the Custodian’s account at the Federal Reserve Bank with such securities or (ii) against delivery of the receipt evidencing purchase by the Portfolio of securities
owned by the Custodian along with written evidence of the agreement by the Custodian to repurchase such securities from the Portfolio; or (e) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such
transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund as defined herein;
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|
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2)
|
In connection with conversion, exchange or surrender of securities owned by the Portfolio as set forth in Section 2.2 hereof;
|
|
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3)
|
For the redemption or repurchase of Shares issued as set forth in Section 7 hereof;
|
|
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4)
|
For the payment of any expense or liability incurred by the Portfolio, including but not limited to the following payments for the account of the Portfolio: interest,
taxes, management, accounting, transfer agent and legal fees, and operating expenses of the Fund whether or not such expenses are to be in whole or part capitalized or treated as deferred expenses;
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5)
|
For the payment of any dividends on Shares declared pursuant to the Fund’s articles of incorporation or organization and by-laws or agreement or declaration of
trust, as applicable, and Prospectus (collectively, “
Governing Documents
”);
|
|
|
6)
|
For payment of the amount of dividends received in respect of securities sold short;
|
|
|
7)
|
Upon the purchase of domestic investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s),
and prior to receipt of such investments, as set forth in written Proper Instructions (such payment in advance of delivery, along with delivery in advance of payment made in accordance with Section 2.2(14), as applicable, shall each be referred
to herein as a “
Free Trade
”), provided that such Proper Instructions shall also set forth (a) the amount of such payment and (b) the person(s) to whom such payment is made;
|
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8)
|
For payment as initial or variation margin in connection with futures or options on futures contracts entered into by the Fund on behalf of the Portfolio; and
|
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9)
|
For any other purpose, but only upon receipt of Proper Instructions from the Fund on behalf of the Portfolio specifying (a) the amount of such payment and
(b) the person or persons to whom such payment is to be made.
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S
ECTION
2.7
A
PPOINTMENT
OF
A
GENTS
. The Custodian may at any time or times in its discretion appoint (and may at any time remove) any other bank or trust company which is itself qualified under
the 1940 Act to act as a custodian, as its agent to carry out such of the provisions of
-7-
this Section 2 as the Custodian may from time to time direct; provided, however, that the appointment of any agent shall not relieve the Custodian of its responsibilities or liabilities
hereunder. The Underlying Transfer Agent shall not be deemed an agent or sub-custodian of the Custodian for purposes of this Section 2.7 or any other provision of this Agreement.
S
ECTION
2.8
D
EPOSIT
OF
F
UND
A
SSETS
IN
U.S. S
ECURITIES
S
YSTEMS
. The Custodian may deposit and/or maintain securities owned by a Portfolio in a U.S. Securities System in compliance with the conditions of Rule 17f-4 under the 1940 Act, as
amended from time to time.
S
ECTION
2.9
S
EGREGATED
A
CCOUNT
. The Custodian shall upon receipt of Proper Instructions on behalf of each applicable Portfolio, establish and maintain a segregated account or accounts for and on behalf of each such Portfolio, into which
account or accounts may be transferred cash and/or securities, including securities maintained in an account by the Custodian pursuant to Section 2.8 hereof, (a) in accordance with the provisions of any agreement among the Fund on behalf
of the Portfolio, the Custodian and a broker-dealer registered under the Exchange Act and a member of FINRA (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange (or the CFTC or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the
Portfolio, (b) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Portfolio or commodity futures contracts or options thereon purchased or sold by the Portfolio, (c) for
the purposes of compliance by the Portfolio with the procedures required by Investment Company Act Release No. 10666, or any subsequent release of the U.S. Securities and Exchange Commission (the “
SEC
”), or
interpretative opinion of the staff of the SEC, relating to the maintenance of segregated accounts by registered management investment companies, and (d) for any other purpose in accordance with Proper Instructions.
S
ECTION
2.10
D
EPOSIT
OF
F
UND
A
SSETS
WITH
THE
U
NDERLYING
T
RANSFER
A
GENT
. Underlying Shares beneficially owned by the Fund, on behalf of a Portfolio, shall be deposited and/or maintained in an
account or accounts maintained with an Underlying Transfer Agent and the Custodian’s only responsibilities with respect thereto shall be limited to the following:
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1)
|
Upon receipt of a confirmation or statement from an Underlying Transfer Agent that such Underlying Transfer Agent is holding or maintaining Underlying Shares in the
name of the Custodian (or a nominee of the Custodian) for the benefit of a Portfolio, the Custodian shall identify by book-entry that such Underlying Shares are being held by it as custodian for the benefit of such Portfolio.
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2)
|
In respect of the purchase of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall pay out monies of such
Portfolio as so directed, and record such payment from the account of such Portfolio on the Custodian’s books and records.
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-8-
|
|
3)
|
In respect of the sale or redemption of Underlying Shares for the account of a Portfolio, upon receipt of Proper Instructions, the Custodian shall transfer such
Underlying Shares as so directed, record such transfer from the account of such Portfolio on the Custodian’s books and records and, upon the Custodian’s receipt of the proceeds therefor, record such payment for the account of such
Portfolio on the Custodian’s books and records.
|
The Custodian shall not be liable to the Fund for any loss
or damage to the Fund or any Portfolio resulting from the maintenance of Underlying Shares with an Underlying Transfer Agent except for losses resulting directly from the fraud, negligence or willful misconduct of the Custodian or any of its agents
or of any of its or their employees.
S
ECTION
2.11
O
WNERSHIP
C
ERTIFICATES
FOR
T
AX
P
URPOSES
. The Custodian shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by it and in connection with transfers of securities.
S
ECTION
2.12
P
ROXIES
.
Except with respect to Portfolio property released and delivered pursuant
to Section 2.2(14), or purchased pursuant to Section 2.6(7), the Custodian shall, with respect to the domestic securities held hereunder, cause to be promptly executed by the registered holder of such securities, if the securities are
registered otherwise than in the name of the Portfolio or a nominee of the Portfolio, all proxies, without indication of the manner in which such proxies are to be voted, and shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
S
ECTION
2.13
C
OMMUNICATIONS
R
ELATING
TO
P
ORTFOLIO
S
ECURITIES
. Except with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to
Section 2.6(7), and subject to the provisions of Section 2.3, the Custodian shall transmit promptly to the applicable Fund for each Portfolio all written information (including, without limitation, pendency of calls and maturities of
domestic securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund on behalf of the Portfolio and the maturity of futures contracts purchased or sold by the Fund on behalf of the
Portfolio) received by the Custodian from issuers of the securities being held for the Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is sought and from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or
power in connection with domestic securities or other property of the Portfolios at any time held by it unless (i) the Custodian is in actual possession of such domestic securities or property and (ii) the Custodian receives Proper
Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall
also transmit promptly to the applicable Fund for each Portfolio all written information received by the Custodian regarding any class action or other litigation in connection with Portfolio securities or other assets issued in the United States
-9-
and then held, or previously held, during the term of this Agreement by the Custodian for the account of the Fund for such Portfolio, including, but not limited to, opt-out notices and
proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the Custodian shall have no responsibility to so transmit any
information under this Section 2.13.
S
ECTION
2.14
D
ETERMINATION
OF
F
UND
D
EPOSIT
,
ETC
. Subject to and in accordance with the directions of the investment adviser for the Portfolios, the Custodian shall determine for each Portfolio after the end of each
trading day on the New York Stock Exchange (the “
NYSE
”), in accordance with the respective Portfolio’s policies as adopted from time to time by the Board and in accordance with the procedures set forth in the Prospectus,
(i) the identity and weighting of the securities in the Deposit Securities and the Fund Securities, (ii) the Cash Component, and (iii) the amount of cash redemption proceeds (all as defined in the Prospectus) required for the issuance
or redemption, as the case may be, of Shares in Creation Unit aggregations of such Portfolio on such date. The Custodian shall provide or cause to be provided this information to the Portfolios’ distributor and other persons according to the
policy established by the Board and shall disseminate such information on each day that the NYSE is open, including through the facilities of the National Securities Clearing Corporation, prior to the opening of trading on the NYSE. The parties
acknowledge and agree that this Section 2.14 applies to the Pyxis ETFs only.
S
ECTION
2.15
A
LLOCATION
OF
D
EPOSIT
S
ECURITY
S
HORTFALLS
. Each Fund acknowledges that the Custodian maintains only one account on the books of the National Securities
Clearing Corporation (the “
NSCC
”) for the benefit of all exchange traded funds for which the Custodian serves as custodian, including each Fund (collectively, the “
ETF Custody Clients
”). In the event
that (a) two or more ETF Custody Clients require delivery of the same Deposit Security in order to purchase a Creation Unit, and (b) the NSCC, pursuant to its Continuous Net Settlement system, delivers to the Custodian’s NSCC account
less than the full amount of such Deposit Security necessary to satisfy in full each affected ETF Custody Client’s required amount (a “
Common Deposit Security Shortfall
”), then, until all Common Deposit Security
Shortfalls for a given Deposit Secuirty are satisfied in full, the Custodian will allocate to each affected ETF Custody Client, on a
pro rata
basis, securities and/or cash received in the Custodian’s NSCC account relating to such
shortfall, first to satisfy any prior unsatisfied Common Deposit Security Shortfall, and then to satisfy the current Common Deposit Security Shortfall. The parties acknowledge and agree that this Section 2.15 applies to the Pyxis ETFs only.
-10-
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S
ECTION
3.
|
P
ROVISIONS
R
ELATING
TO
R
ULES
17
F
-5
AND
17
F
-7
.
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S
ECTION
3.1.
D
EFINITIONS
. As used throughout this
Agreement, the capitalized terms set forth below shall have the indicated meanings:
“
Country Risk
” means all factors
reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country’s political environment, economic and financial infrastructure (including any Eligible Securities Depository
operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country.
“
Eligible Foreign Custodian
” has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect
subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC), or a foreign branch of a Bank (as defined
in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository.
“
Eligible Securities Depository
” has the meaning set forth in section (b)(1) of Rule 17f-7.
“
Foreign Assets
” means any of the Portfolios’ investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash
equivalents as are reasonably necessary to effect the Portfolios’ transactions in such investments.
“
Foreign Custody
Manager
” has the meaning set forth in section (a)(3) of Rule 17f-5.
“
Rule 17f-5
” means Rule 17f-5
promulgated under the 1940 Act.
“
Rule 17f-7
” means Rule 17f-7 promulgated under the 1940 Act.
S
ECTION
3.2.
T
HE
C
USTODIAN
AS
F
OREIGN
C
USTODY
M
ANAGER
.
3.2.1
D
ELEGATION
TO
THE
C
USTODIAN
AS
F
OREIGN
C
USTODY
M
ANAGER
. Each Fund, by resolution adopted by its Board, hereby delegates to the Custodian, subject to
Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with
respect to the Portfolios.
3.2.2
C
OUNTRIES
C
OVERED
.
The Foreign
Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be
amended from time to time by any Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign
-11-
Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of
the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by each Fund, on
behalf of the applicable Portfolio(s), of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by such Fund’s Board on behalf of such Portfolio(s) responsibility as
Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Agreement by each Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each
country listed on Schedule A. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country,
the delegation by the Board on behalf of such Portfolio to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager with respect to
such Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with
respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its
capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian’s acceptance of delegation is withdrawn.
3.2.3
S
COPE
OF
D
ELEGATED
R
ESPONSIBILITIES
:
(a)
S
ELECTION
OF
E
LIGIBLE
F
OREIGN
C
USTODIANS
.
Subject to the provisions of this Section 3.2,
the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its
delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the
standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors
specified in Rule 17f-5(c)(1).
(b)
C
ONTRACTS
W
ITH
E
LIGIBLE
F
OREIGN
C
USTODIANS
.
The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody
Manager will satisfy the requirements of Rule 17f-5(c)(2).
(c)
M
ONITORING
. In each case
in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign
-12-
Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the
custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer
appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder.
3.2.4
G
UIDELINES
FOR
THE
E
XERCISE
OF
D
ELEGATED
A
UTHORITY
.
For purposes of this Section 3.2, the Board shall be
deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios.
3.2.5
R
EPORTING
R
EQUIREMENTS
.
The Foreign Custody Manager shall report the
withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an
amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the
occurrence of the material change.
3.2.6
S
TANDARD
OF
C
ARE
AS
F
OREIGN
C
USTODY
M
ANAGER
OF
A
P
ORTFOLIO
. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise
reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.2.7
R
EPRESENTATIONS
WITH
R
ESPECT
TO
R
ULE
17
F
-5
.
The Foreign Custody Manager represents to each Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. Each Fund represents to the Custodian that its Board has determined that it is reasonable for
such Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios.
3.2.8
E
FFECTIVE
D
ATE
AND
T
ERMINATION
OF
THE
C
USTODIAN
AS
F
OREIGN
C
USTODY
M
ANAGER
.
Each Board’s delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated
at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of
Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries.
S
ECTION
3.3
E
LIGIBLE
S
ECURITIES
D
EPOSITORIES
.
3.3.1
A
NALYSIS
AND
M
ONITORING
. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser)
with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B
-13-
hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or
investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7.
3.3.2
S
TANDARD
OF
C
ARE
.
The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.3.1.
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S
ECTION
4.
|
D
UTIES
OF
THE
C
USTODIAN
WITH
R
ESPECT
TO
P
ROPERTY
OF
THE
P
ORTFOLIOS
TO
BE
H
ELD
O
UTSIDE
THE
U
NITED
S
TATES
.
|
S
ECTION
4.1
D
EFINITIONS
. As used throughout this
Agreement, the capitalized terms set forth below shall have the indicated meanings:
“
Foreign Securities System
” means
an Eligible Securities Depository listed on Schedule B hereto.
“
Foreign Sub-Custodian
” means an Eligible Foreign
Custodian.
S
ECTION
4.2.
H
OLDING
S
ECURITIES
. The
Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the
Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the
Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that
securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
S
ECTION
4.3.
F
OREIGN
S
ECURITIES
S
YSTEMS
. Foreign securities shall be maintained in a Foreign Securities System in a
designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country.
S
ECTION
4.4.
T
RANSACTIONS
IN
F
OREIGN
C
USTODY
A
CCOUNT
.
4.4.1.
D
ELIVERY
OF
F
OREIGN
A
SSETS
. The Custodian or a
Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the following cases:
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|
(i)
|
Upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign
securities are held or traded, including, without limitation: (A) delivery against expectation of
|
-14-
|
|
receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
|
|
|
(ii)
|
In connection with any repurchase agreement related to foreign securities;
|
|
|
(iii)
|
To the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios;
|
|
|
(iv)
|
To the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
|
|
|
(v)
|
To the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian
or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
|
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|
(vi)
|
To brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case, the Foreign
Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such foreign securities prior to receiving payment for such foreign securities except as may arise from the Foreign Sub-Custodian’s own negligence
or willful misconduct;
|
|
|
(vii)
|
For exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
|
|
|
(viii)
|
In the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of
interim receipts or temporary securities for definitive securities;
|
|
|
(ix)
|
For delivery as security in connection with any borrowing by a Fund on behalf of a Portfolio requiring a pledge of assets by the Fund on behalf of such Portfolio;
|
|
|
(x)
|
In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
|
|
|
(xi)
|
Upon the sale or other delivery of such foreign securities (including, without limitation, to one or more Special Sub-Custodians or Repo Custodians) as a Free Trade,
provided that applicable Proper Instructions shall set forth (A) the foreign securities to be delivered and (B) the person or persons to whom delivery shall be made;
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-15-
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(xii)
|
In connection with the lending of foreign securities; and
|
|
|
(xiii)
|
For any other purpose, but only upon receipt of Proper Instructions specifying (A) the foreign securities to be delivered and (B) the person or persons to
whom delivery of such securities shall be made.
|
4.4.2.
P
AYMENT
OF
P
ORTFOLIO
M
ONIES
. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign
Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only:
|
|
(i)
|
Upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a
dealer therefor (or an agent for such seller or dealer) against expectation of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules
governing the operation of such Foreign Securities System;
|
|
|
(ii)
|
In connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
|
|
|
(iii)
|
For the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer
agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses;
|
|
|
(iv)
|
For the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its
Foreign Sub-Custodians;
|
|
|
(v)
|
In connection with trading in options and futures contracts, including delivery as original margin and variation margin;
|
|
|
(vi)
|
Upon the purchase of foreign investments including, without limitation, repurchase agreement transactions involving delivery of Portfolio monies to Repo Custodian(s),
as a Free Trade, provided that applicable Proper Instructions shall set forth (A) the amount of such payment and (B) the person or persons to whom payment shall be made;
|
|
|
(vii)
|
For payment of part or all of the dividends received in respect of securities sold short;
|
-16-
|
|
(viii)
|
In connection with the borrowing or lending of foreign securities; and
|
|
|
(ix)
|
For any other purpose, but only upon receipt of Proper Instructions specifying (A) the amount of such payment and (B) the person or persons to whom such
payment is to be made.
|
4.4.3.
M
ARKET
C
ONDITIONS
.
Notwithstanding any provision of this Agreement to the contrary, settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in
accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a
dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer.
The Custodian shall provide to each Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C
hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in a Board being provided with substantively less information than had been previously
provided hereunder.
S
ECTION
4.5.
R
EGISTRATION
OF
F
OREIGN
S
ECURITIES
. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or
in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the applicable Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign
securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in
accordance with reasonable market practice.
S
ECTION
4.6
B
ANK
A
CCOUNTS
. The Custodian shall identify on its books as belonging to the applicable Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to
maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian.
All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of
the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth
of Massachusetts.
-17-
S
ECTION
4.7.
C
OLLECTION
OF
I
NCOME
. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled. In the event that
extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. The Custodian shall credit income to the
applicable Portfolio as such income is received or in accordance with Custodian’s then current payable date income schedule. Any credit to the Portfolio in advance of receipt may be reversed when the Custodian determines that payment will not
occur in due course and the Portfolio may be charged at the Custodian’s applicable rate for time credited. Income on securities loaned other than from the Custodian’s securities lending program shall be credited as received.
S
ECTION
4.8
S
HAREHOLDER
R
IGHTS
.
With respect to the
foreign securities held pursuant to this Section 4, the Custodian shall use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that
may exist in the country where such securities are issued. Each Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the
ability of such Fund to exercise shareholder rights.
S
ECTION
4.9.
C
OMMUNICATIONS
R
ELATING
TO
F
OREIGN
S
ECURITIES
.
The Custodian shall transmit promptly to the applicable Fund written information with respect to materials received by the
Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in
connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the applicable Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose
tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or
other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions
with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. The Custodian shall also transmit
promptly to the applicable Fund all written information received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios regarding any class action or other litigation in
connection with Portfolio foreign securities or other assets issued outside the United States and then held, or previously held, during the term of this Agreement by the Custodian via a Foreign Sub-Custodian for the account of the Fund for such
Portfolio, including, but not limited to, opt-out notices and proof-of-claim forms. For avoidance of doubt, upon and after the effective date of any termination of this Agreement, with respect to a Fund or its Portfolio(s), as may be applicable, the
Custodian shall have no responsibility to so transmit any information under this Section 4.9.
-18-
S
ECTION
4.10.
L
IABILITY
OF
F
OREIGN
S
UB
-C
USTODIANS
. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise
reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian’s
performance of such obligations. At a Fund’s election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim.
S
ECTION
4.11
T
AX
L
AW
. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on any
Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of each Fund to notify the Custodian of the obligations imposed
on such Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the
tax law of countries for which such Fund has provided such information.
S
ECTION
4.12.
L
IABILITY
OF
C
USTODIAN
. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in
this Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care.
|
S
ECTION
5.
|
C
ONTRACTUAL
S
ETTLEMENT
S
ERVICES
(P
URCHASE
/ S
ALES
)
.
|
S
ECTION
5.1 The Custodian shall, in accordance with the terms set out in this section, debit or credit the appropriate
cash account of each Portfolio in connection with (i) the purchase of securities for such Portfolio, and (ii) proceeds of the sale of securities held on behalf of such Portfolio, on a contractual settlement basis.
S
ECTION
5.2 The services described above (the “
Contractual Settlement Services
”) shall be
provided for such instruments and in such markets as the Custodian may advise from time to time. The Custodian may terminate or suspend any part of the provision of the Contractual Settlement Services under this Agreement at its sole discretion
immediately upon notice to the applicable Fund on behalf of each Portfolio, including, without limitation, in the event of force majeure events affecting settlement, any disorder in markets, or other changed external business circumstances affecting
the markets or the Fund.
-19-
S
ECTION
5.3 The consideration payable in connection with a purchase
transaction shall be debited from the appropriate cash account of the Portfolio as of the time and date that monies would ordinarily be required to settle such transaction in the applicable market. The Custodian shall promptly recredit such amount
at the time that the Portfolio or the Fund notifies the Custodian by Proper Instruction that such transaction has been canceled.
S
ECTION
5.4 With respect to the settlement of a sale of securities, a provisional credit of an amount equal to the net sale price for the transaction (the “
Settlement
Amount
”) shall be made to the account of the Portfolio as if the Settlement Amount had been received as of the close of business on the date that monies would ordinarily be available in good funds in the applicable market. Such
provisional credit will be made conditional upon the Custodian having received Proper Instructions with respect to, or reasonable notice of, the transaction, as applicable; and the Custodian or its agents having possession of the asset(s) (which
shall exclude assets subject to any third party lending arrangement entered into by a Portfolio) associated with the transaction in good deliverable form and not being aware of any facts which would lead them to believe that the transaction will not
settle in the time period ordinarily applicable to such transactions in the applicable market.
S
ECTION
5.5. Simultaneously with the making of such provisional credit, the Portfolio agrees that the Custodian shall
have, and hereby grants to the Custodian, a security interest in any property at any time held for the account of the Portfolio to the full extent of the credited amount, and each Portfolio hereby pledges, assigns and grants to the Custodian a
continuing security interest and a lien on any and all such property under the Custodian’s possession, in accordance with the terms of this Agreement. In the event that the applicable Portfolio fails to promptly repay any provisional credit,
the Custodian shall have all of the rights and remedies of a secured party under the Uniform Commercial Code of of the State of New York.
S
ECTION
5.6 The Custodian shall have the right to reverse any provisional credit or debit given in connection with the Contractual Settlement Services at any time when the Custodian
believes, in its reasonable judgment, that such transaction will not settle in accordance with its terms or amounts due pursuant thereto, will not be collectable or where the Custodian has not been provided Proper Instructions with respect thereto,
as applicable, and the Portfolio shall be responsible for any costs or liabilities resulting from such reversal. Upon such reversal, a sum equal to the credited or debited amount shall become immediately payable by the Portfolio to the Custodian and
may be debited from any cash account held for benefit of the Portfolio.
S
ECTION
5.7 In the event that the
Custodian is unable to debit an account of the Portfolio, and the Portfolio fails to pay any amount due to the Custodian at the time such amount becomes payable in accordance with this Agreement, (i) the Custodian may charge the Portfolio for
costs and expenses associated with providing the provisional credit, including without limitation the cost of funds associated therewith, (ii) the amount of any accrued dividends, interest and other distributions with respect to assets
associated with such transaction may be set off against the credited amount, (iii) the provisional credit and any such costs and expenses shall be considered an advance of cash for purposes of the Agreement and (iv) the Custodian shall
have the right to setoff against any property and to sell, exchange, convey, transfer or otherwise dispose of any property at any time held for the account of the Portfolio to the full extent necessary for the Custodian to make itself whole.
-20-
|
S
ECTION
6.
|
S
PECIAL
S
UB
-C
USTODIANS
.
|
Upon receipt of Special Instructions (as such term is defined in Section 8 hereof), the Custodian shall, on behalf of one or more Portfolios, appoint one or more banks, trust companies or other
entities designated in such Special Instructions to act as a sub-custodian for the purposes of effecting such transaction(s) as may be designated by a Fund in Special Instructions. Each such designated sub-custodian is referred to herein as a
“
Special Sub-Custodian
.” Each such duly appointed Special Sub-Custodian shall be listed on Schedule D hereto, as it may be amended from time to time by a Fund, with the acknowledgment of the Custodian. In connection with the
appointment of any Special Sub-Custodian, and in accordance with Special Instructions, the Custodian shall enter into a sub-custodian agreement with the Fund and the Special Sub-Custodian in form and substance approved by such Fund, provided that
such agreement shall in all events comply with the provisions of the 1940 Act and the rules and regulations thereunder and the terms and provisions of this Agreement.
|
S
ECTION
7.
|
P
AYMENTS
FOR
S
ALES
OR
R
EPURCHASES
OR
R
EDEMPTIONS
OF
S
HARES
.
|
The Custodian shall receive from the distributor of the Shares or
from the Transfer Agent and deposit into the account of the appropriate Portfolio such payments as are received for Shares thereof issued or sold from time to time by the applicable Fund. The Custodian will provide timely notification to such Fund
on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may
be available for the purpose, the Custodian shall, upon receipt of instructions from the Transfer Agent, make funds available for payment to holders of Shares who have delivered to the Transfer Agent a request for redemption or repurchase of their
Shares. In connection with the redemption or repurchase of Shares, the Custodian is authorized upon receipt of instructions from the Transfer Agent to wire funds to or through a commercial bank designated by the redeeming shareholders. In connection
with the redemption or repurchase of Shares, the Custodian shall honor checks drawn on the Custodian by a holder of Shares, which checks have been furnished by a Fund to the holder of Shares, when presented to the Custodian in accordance with such
procedures and controls as are mutually agreed upon from time to time between such Fund and the Custodian.
|
S
ECTION
7A.
|
P
AYMENTS
FOR
S
ALES
OR
R
EPURCHASES
OR
R
EDEMPTIONS
OF
S
HARES
.
|
The Custodian shall receive from the distributor of the Shares or
from the Transfer Agent, as the case may be, and deposit into the account of the appropriate Portfolio such payments as are received for Shares, in Creation Unit aggregations, thereof issued or sold from time to time by the Fund. The Custodian will
provide timely notification to the Fund on behalf of each such Portfolio and the Transfer Agent of any receipt by it of payments for Shares of such Portfolio.
-21-
From such funds and securities as may be available for the purpose, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds and securities available for payment to, or in accordance with the instructions of, Authorized Participants (as defined in the Prospectus) who have delivered to the Transfer Agent proper instructions
for the redemption or repurchase of their Shares, in Creation Unit aggregations, which shall have been accepted by the Transfer Agent, the applicable Fund Securities (as defined in the Prospectus) (or such securities in lieu thereof as may be
designated by the investment adviser of the Fund in accordance with the Prospectus) for such Portfolio and the Cash Redemption Amount (as defined in the Prospectus), if applicable, less any applicable Redemption Transaction Fee (as defined in the
Prospectus). The Custodian will transfer the applicable Fund Securities to or on the order of the Authorized Participant. Any cash redemption payment (less any applicable Redemption Transaction Fee) due to the Authorized Participant on redemption
shall be effected through the DTC (as defined in the Prospectus) system or through wire transfer in the case of redemptions effected outside of the DTC system. The parties acknowledge and agree that this Section 7A applies to the Pyxis ETFs
only.
|
S
ECTION
8.
|
P
ROPER
I
NSTRUCTIONS
AND
S
PECIAL
I
NSTRUCTIONS
.
|
“
Proper Instructions
,” which may also be standing instructions, as such term is used throughout this Agreement shall mean
instructions received by the Custodian from a Fund, a Fund’s duly authorized investment manager or investment adviser, or a person or entity duly authorized by either of them. Such instructions may be in writing signed by the authorized person
or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be
agreed from time to time by the Custodian and the person(s) or entity giving such instruction, provided that the Fund has followed any security procedures agreed to from time to time by the applicable Fund and the Custodian including, but not
limited to, the security procedures selected by the Fund via the form of Funds Transfer Addendum hereto, the terms of which are hereby agreed to. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to
have been given by a person authorized to provide such instructions with respect to the transaction involved; the Fund shall cause all oral instructions to be confirmed in writing. For purposes of this Section, Proper Instructions shall include
instructions received by the Custodian pursuant to any multi-party agreement which requires a segregated asset account in accordance with Section 2.9 hereof.
“
Special Instructions
,” as such term is used throughout this Agreement, means Proper Instructions countersigned or confirmed in writing by the Treasurer or any Assistant Treasurer
of the applicable Fund or any other person designated in writing by the Treasurer of such Fund, which countersignature or confirmation shall be (a) included on the same instrument containing the Proper Instructions or on a separate instrument
clearly relating thereto and (b) delivered by hand, by facsimile transmission, or in such other manner as the Fund and the Custodian agree in writing.
Concurrently with the execution of this Agreement, and from time to time thereafter, as appropriate, each Fund shall deliver to the Custodian, duly certified by such Fund’s Treasurer or Assistant
-22-
Treasurer, a certificate setting forth: (i) the names, titles, signatures and scope of authority of all persons authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of the Fund and (ii) the names, titles and signatures of those persons authorized to give Special Instructions. Such certificate may be accepted and relied upon by the Custodian as
conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Custodian of a similar certificate to the contrary.
|
S
ECTION
9.
|
E
VIDENCE
OF
A
UTHORITY
.
|
The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate or other instrument or paper reasonably believed by it to be genuine and to have been properly
executed by or on behalf of the applicable Fund. The Custodian may receive and accept a copy of a resolution certified by the Secretary or an Assistant Secretary of any Fund as conclusive evidence (a) of the authority of any person to act in
accordance with such resolution or (b) of any determination or of any action by the applicable Board as described in such resolution, and such resolution may be considered as in full force and effect until receipt by the Custodian of written
notice to the contrary.
|
S
ECTION
10.
|
A
CTIONS
P
ERMITTED
WITHOUT
E
XPRESS
A
UTHORITY
.
|
The Custodian may in its discretion, without express authority from the applicable Fund on behalf of each applicable Portfolio:
|
|
1)
|
Make payments to itself or others for minor expenses of handling securities or other similar items relating to its duties under this Agreement; provided that all such
payments shall be accounted for to the Fund on behalf of the Portfolio;
|
|
|
2)
|
Surrender securities in temporary form for securities in definitive form;
|
|
|
3)
|
Endorse for collection, in the name of the Portfolio, checks, drafts and other negotiable instruments; and
|
|
|
4)
|
In general, attend to all non-discretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and
property of the Portfolio except as otherwise directed by the applicable Board.
|
|
S
ECTION
11.
|
D
UTIES
OF
C
USTODIAN
WITH
R
ESPECT
TO
THE
B
OOKS
OF
A
CCOUNT
AND
C
ALCULATION
OF
N
ET
A
SSET
V
ALUE
AND
N
ET
I
NCOME
.
|
The Custodian shall cooperate with and supply necessary information to the entity or entities appointed by the applicable Board
to keep the books of account of each Portfolio and/or compute the net asset value per Share of the outstanding Shares or, if directed in writing to do so by a Fund on behalf of a Portfolio, shall itself keep such books of account and/or compute such
net asset value per Share. With respect to the Pyxis ETFs only, the Custodian shall transmit the net asset value per share of each Portfolio to the Transfer Agent, the Distributor, the NYSE and such other entities as
-23-
directed in writing by the Fund. If so directed, the Custodian shall also calculate daily the net income of the Portfolio as described in the Prospectus and shall advise the Fund and the Transfer
Agent daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, shall advise the Transfer Agent periodically of the division of such net income among its various components. With respect to the
Pyxis ETFs only, the Custodian shall on each day a Portfolio is open for the purchase or redemption of Shares of such Portfolio compute the number of Shares of each Deposit Security (as defined in the Prospectus) to be included in the current Fund
Deposit (as defined in the Prospectus) and the Fund Securities (as defined in the Prospectus) and shall transmit such information to the NSCC.
Each Fund acknowledges and agrees that, with respect to investments maintained with the Underlying Transfer Agent, the Underlying Transfer Agent is the
sole source of information on the number of shares of a fund held by it on behalf of a Portfolio and that the Custodian has the right to rely on holdings information furnished by the Underlying Transfer Agent to the Custodian in performing its
duties under this Agreement, including without limitation, the duties set forth in this Section 11 and in Section 12 hereof; provided, however, that the Custodian shall be obligated to reconcile information as to purchases and sales of
Underlying Shares contained in trade instructions and confirmations received by the Custodian and to report promptly any discrepancies to the Underlying Transfer Agent. The calculations of the net asset value per Share and the daily income of each
Portfolio shall be made at the time or times described from time to time in the Prospectus. Each Fund acknowledges that, in keeping the books of account of the Portfolio and/or making the calculations described herein with respect to Portfolio
property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies),
or the agents of either of them.
S
ECTION
12.
R
ECORDS
.
The Custodian shall with respect to each Portfolio create and maintain all records relating to its activities and obligations under this Agreement in such
manner as will meet the obligations of each Fund under the 1940 Act, with particular attention to section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of such Fund and employees and agents of the SEC. The Custodian shall, at a Fund’s request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to do so by the Fund and for such compensation as shall be agreed upon between the Fund and the Custodian, include certificate numbers in such tabulations. Each Fund
acknowledges that, in creating and maintaining the records as set forth herein with respect to Portfolio property released and delivered pursuant to Section 2.2(14), or purchased pursuant to Section 2.6(7) hereof, the Custodian is
authorized and instructed to rely upon information provided to it by the Fund, the Fund’s counterparty(ies), or the agents of either of them.
-24-
|
S
ECTION
13.
|
O
PINION
OF
F
UND
’
S
I
NDEPENDENT
A
CCOUNTANT
.
|
The Custodian shall take all reasonable action, as a Fund with respect to a Portfolio may from time to time request, to obtain
from year to year favorable opinions from the Fund’s independent accountants with respect to its activities hereunder in connection with the preparation of the Fund’s Form N-1A or Form N-2, as applicable, and Form N-SAR or other annual
reports to the SEC and with respect to any other requirements thereof.
|
S
ECTION
14.
|
R
EPORTS
TO
F
UND
BY
I
NDEPENDENT
P
UBLIC
A
CCOUNTANTS
.
|
The Custodian shall provide the applicable Fund, on behalf of each of the
Portfolios at such times as such Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a U.S. Securities System or a Foreign Securities System (either, a “
Securities System
”), relating to the services provided by the Custodian under this Agreement;
such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
|
S
ECTION
15.
|
C
OMPENSATION
OF
C
USTODIAN
.
|
The Custodian shall be entitled to reasonable compensation for its services and expenses as Custodian, as agreed upon from time to time between each Fund on behalf of each applicable Portfolio and the
Custodian.
|
S
ECTION
16.
|
R
ESPONSIBILITY
OF
C
USTODIAN
.
|
So long as and to the extent that it is in the exercise of reasonable care, the Custodian shall not be responsible for the title, validity or genuineness of any property or evidence of title thereto
received by it or delivered by it pursuant to this Agreement and shall be held harmless in acting upon any notice, request, consent, certificate or other instrument reasonably believed by it to be genuine and to be signed by the proper party or
parties, including any futures commission merchant acting pursuant to the terms of a three-party futures or options agreement. The Custodian shall be held to the exercise of reasonable care in carrying out the provisions of this Agreement, but shall
be kept indemnified by and shall be without liability to any Fund for any action taken or omitted by it in good faith without negligence, including, without limitation, acting in accordance with any Proper Instruction. It shall be entitled to rely
on and may act upon advice of counsel (who shall be counsel for or selected by a Fund) or such other counsel selected by the Custodian (at the expense of the Custodian) on all matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice. The Custodian shall be without liability to any Fund or Portfolio for any loss, liability, claim or expense resulting from or caused by anything that is part of Country Risk (as defined in Section 3 hereof),
including without limitation nationalization, expropriation, currency restrictions, insolvency of a Foreign Sub-custodian, acts of war, revolution, riots or terrorism.
-25-
Except as may arise from the Custodian’s own negligence or willful misconduct or the negligence or
willful misconduct of a sub-custodian or agent, the Custodian shall be without liability to any Fund for any loss, liability, claim or expense resulting from or caused by; (i) events or circumstances beyond the reasonable control of the
Custodian or any sub-custodian or Securities System or any agent or nominee of any of the foregoing, including, without limitation, the interruption, suspension or restriction of trading on or the closure of any securities market, power or other
mechanical or technological failures or interruptions, computer viruses or communications disruptions, work stoppages, natural disasters, or other similar events or acts; (ii) errors by any Fund or its duly authorized investment manager or
investment adviser in their instructions to the Custodian provided such instructions have been in accordance with this Agreement; (iii) the insolvency of or acts or omissions by a Securities System; (iv) any act or omission of a Special
Sub-Custodian including, without limitation, reliance on reports prepared by a Special Sub-Custodian; (v) any delay or failure of any broker, agent or intermediary, central bank or other commercially prevalent payment or clearing system to
deliver to the Custodian’s sub-custodian or agent securities purchased or in the remittance or payment made in connection with securities sold; (vi) any delay or failure of any company, corporation, or other body in charge of registering
or transferring securities in the name of the Custodian, any Fund, the Custodian’s sub-custodians, nominees or agents or any consequential losses arising out of such delay or failure to transfer such securities including non-receipt of bonus,
dividends and rights and other accretions or benefits; (vii) delays or inability to perform its duties due to any disorder in market infrastructure with respect to any particular security or Securities System; and (viii) any provision of
any present or future law or regulation or order of the United States of America, or any state thereof, or any other country, or political subdivision thereof or of any court of competent jurisdiction. The Custodian shall be liable for the acts or
omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in this Agreement.
If a Fund on
behalf of a Portfolio requires the Custodian to take any action with respect to securities, which action involves the payment of money or which action may, in the opinion of the Custodian, result in the Custodian or its nominee assigned to the Fund
or the Portfolio being liable for the payment of money or incurring liability of some other form, such Fund on behalf of the Portfolio, as a prerequisite to requiring the Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
If a Fund requires the Custodian, its affiliates, subsidiaries or agents, to advance cash or securities
for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement), or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims
or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee’s own negligent action, negligent failure to act or willful misconduct, or if a Fund fails to compensate the Custodian
pursuant to Section 15 hereof, any property at any time held for the account of the applicable Portfolio shall be security therefor and should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available
cash and to dispose of such Portfolio’s assets to the extent necessary to obtain reimbursement.
-26-
Except as may arise from the Custodian’s own negligence or willful misconduct, each Fund shall
indemnify and hold the Custodian harmless from and against any and all costs, expenses, losses, damages, charges, reasonable counsel fees, payments and liabilities which may be asserted against the Custodian (a) acting in accordance with any
Proper Instruction or Special Instruction including, without limitation, any Proper Instruction with respect to Free Trades including, but not limited to, cost, expense, loss, damage, liability, tax, charge, assessment or claim resulting from
(i) the failure of the applicable Fund to receive income with respect to purchased investments, (ii) the failure of the applicable Fund to recover amounts invested on maturity of purchased investments, (iii) the failure of the
Custodian to respond to or be aware of notices or other corporate communications with respect to purchased investments, or (iv) the Custodian’s reliance upon information provided by the applicable Fund, such Fund’s counterparty(ies)
or the agents of either of them with respect to Fund property released, delivered or purchased pursuant to either of Section 2.2(14) or Section 2.6(7) hereof; (b) for the acts or omissions of any Special Sub-Custodian; or (c) for
the acts or omissions of any Local Agent or Pledgee.
In no event shall the Custodian be liable for indirect, special or consequential
damages.
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S
ECTION
17.
|
E
FFECTIVE
P
ERIOD
, T
ERMINATION
AND
A
MENDMENT
.
|
This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing. Upon termination of this Agreement pursuant to this paragraph with respect to any Fund or Portfolio, the applicable Fund shall, for all services rendered prior to termination, pay Custodian
its compensation due and shall reimburse Custodian for its costs, expenses and disbursements.
Termination of this Agreement with respect to
any one particular Fund or Portfolio shall in no way affect the rights and duties under this Agreement with respect to any other Fund or Portfolio. The provisions of Sections 4.11, 15 and 16 of this Agreement shall survive termination of this
Agreement.
This Agreement may be amended at any time in writing by mutual agreement of the parties hereto.
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S
ECTION
18.
|
S
UCCESSOR
C
USTODIAN
.
|
If a successor custodian for one or more Portfolios shall be appointed by the applicable Board, the Custodian shall, upon termination and receipt of Proper Instructions, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for transfer, all securities of each applicable Portfolio then held by it hereunder and shall transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System or at the Underlying Transfer Agent. The Custodian shall also provide to the successor custodian a Fund’s records (as described in Section 12 of this Agreement) as reasonably requested by the
Fund.
-27-
If no such successor custodian shall be appointed, the Custodian shall, in like manner, upon receipt of
Proper Instructions, deliver at the office of the Custodian and transfer such securities, funds and other properties in accordance with such resolution.
In the event that no Proper Instructions designating a successor custodian or alternative arrangements shall have been delivered to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust company, which is a “bank” as defined in the 1940 Act, doing business in Boston, Massachusetts or New York, New York, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by the Custodian on behalf of each applicable Portfolio and all instruments held
by the Custodian relative thereto and all other property held by it under this Agreement on behalf of each applicable Portfolio, and to transfer to an account of such successor custodian all of the securities of each such Portfolio held in any
Securities System or at the Underlying Transfer Agent. Thereafter, such bank or trust company shall be the successor of the Custodian under this Agreement.
In the event that securities, funds and other properties remain in the possession of the Custodian after the date of termination hereof owing to failure of any Fund to provide Proper Instructions as
aforesaid, the Custodian shall be entitled to fair compensation for its services during such period as the Custodian retains possession of such securities, funds and other properties and the provisions of this Agreement relating to the duties and
obligations of the Custodian shall remain in full force and effect.
S
ECTION
19.1
N
EW
Y
ORK
L
AW
TO
A
PPLY
. This Agreement shall be construed and the
provisions thereof interpreted under and in accordance with laws of the State of New York.
S
ECTION
19.2
P
RIOR
A
GREEMENTS
. This Agreement supersedes and terminates, as of the date hereof, all prior agreements between each Fund on behalf of each of the Portfolios and the Custodian relating to the
custody of such Fund’s assets.
S
ECTION
19.3
A
SSIGNMENT
. This
Agreement may not be assigned by (a) any Fund without the written consent of the Custodian or (b) by the Custodian without the written consent of each applicable Fund.
S
ECTION
19.4
I
NTERPRETIVE
AND
A
DDITIONAL
P
ROVISIONS
. In connection with the operation of this Agreement, the Custodian and each Fund on behalf of each of the Portfolios, may from time to time agree on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent with the general tenor of this Agreement. Any such interpretive or additional provisions shall be in a writing signed by all parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any applicable federal or state regulations or any provision of a Fund’s Governing Documents. No interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Agreement.
-28-
S
ECTION
19.5
A
DDITIONAL
F
UNDS
. In the event that any management investment company in addition to those listed on Appendix A hereto desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such services, such management investment company shall become a Fund hereunder, be entitled to all rights hereunder, and be bound by all terms and conditions and provisions
hereof including, without limitation, the representations and warranties set forth in Section 19.7 below.
S
ECTION
19.6
A
DDITIONAL
P
ORTFOLIOS
. In the event that any Fund
establishes one or more series of Shares in addition to those set forth on Appendix A and Appendix B hereto with respect to which it desires to have the Custodian render services as custodian under the terms hereof, it shall so notify the Custodian
in writing, and if the Custodian agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
S
ECTION
19.7
T
HE
P
ARTIES
. All references herein to the “Fund” are to each of the management investment companies listed on
Appendix A and Appendix B hereto, and each management investment company made subject to this Agreement in accordance with Section 19.5 above, individually, as if this Agreement were between such individual Fund and the Custodian. In the case
of a series corporation, trust or other entity, all references herein to the “Portfolio” are to the individual series or portfolio of such corporation, trust or other entity, or to such corporation, trust or other entity on behalf of the
individual series or portfolio, as appropriate. Any reference in this Agreement to “the parties” shall mean the Custodian and such other individual Fund as to which the matter pertains. Each Fund hereby represents and warrants that
(a) it is duly incorporated or organized and is validly existing in good standing in its jurisdiction of incorporation or organization; (b) it has the requisite power and authority under applicable law and its Governing Documents to enter
into and perform this Agreement; (c) all requisite proceedings have been taken to authorize it to enter into and perform this Agreement; (d) this Agreement constitutes its legal, valid, binding and enforceable agreement; and (e) its
entrance into this Agreement shall not cause a material breach or be in material conflict with any other agreement or obligation of the Fund or any law or regulation applicable to it.
S
ECTION
19.8
R
EMOTE
A
CCESS
S
ERVICES
A
DDENDUM
. The Custodian and each Fund agree to be bound by the terms of the Remote Access Services Addendum hereto.
S
ECTION
19.9
N
OTICES
. Any notice, instruction or other instrument required to be given hereunder may be delivered in person to the offices of the
parties as set forth herein during normal business hours or delivered prepaid registered mail or by telex, cable or telecopy to the parties at the following addresses or such other addresses as may be notified by any party from time to time.
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To any Fund:
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P
YXIS
C
APITAL
, LP
|
|
|
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200 Crescent Court, Suite 700
|
|
|
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Dallas, TX 75201
|
|
|
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Attention: Ethan Powell
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|
|
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Telephone: (972) 419-2575
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|
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Telecopy: (972) 628-4147
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-29-
|
|
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To the Custodian:
|
|
S
TATE
S
TREET
B
ANK
AND
T
RUST
C
OMPANY
|
|
|
|
200 Clarendon Street,
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|
|
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Boston, Massachusetts, 02110
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|
|
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Attention: Carol M. Lowd, Senior Vice President
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|
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Telephone: (617)- 662-9071
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Telecopy: (617)- 662-1970
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Such notice, instruction or other instrument shall be deemed to have been served in the case of a registered letter at
the expiration of five business days after posting, in the case of cable twenty-four hours after dispatch and, in the case of telex, immediately on dispatch and if delivered outside normal business hours it shall be deemed to have been received at
the next time after delivery when normal business hours commence and in the case of cable, telex or telecopy on the business day after the receipt thereof. Evidence that the notice was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
S
ECTION
19.10
C
OUNTERPARTS
. This
Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.
S
ECTION
19.11
S
EVERABILITY
. If any provision or provisions of this Agreement
shall be held to be invalid, unlawful or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.
S
ECTION
19.12
C
ONFIDENTIALITY
. The parties hereto agree that each shall treat confidentially all information provided by each party to the other
party regarding its business and operations. All confidential information provided by a party hereto shall be used by any other party hereto solely for the purpose of rendering or receiving services pursuant to this Agreement and, except as may be
required in carrying out this Agreement, shall not be disclosed to any third party. The foregoing shall not be applicable to any information (i) that is publicly available when provided or thereafter becomes publicly available, other than
through a breach of this Agreement, or that is independently derived by any party hereto without the use of any information provided by the other party hereto in connection with this Agreement, (ii) that is required in any legal or regulatory
proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or regulation, or (iii) where the party seeking to disclose has received the prior written consent of the party
providing the information, which consent shall not be unreasonably withheld. Notwithstanding anything herein to the contrary, the Custodian and its affiliates may report and use nonpublic portfolio holdings information of its clients, including a
Fund or Portfolio, on an aggregated basis with all or substantially all other client information and without specific reference to any Fund or Portfolio.
-30-
S
ECTION
19.13
R
EPRODUCTION
OF
D
OCUMENTS
. This Agreement and all schedules, addenda, exhibits, appendices, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not
such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
S
ECTION
19.14
R
EGULATION
GG
. Each Fund hereby represents and warrants that it does not engage
in an “Internet gambling business,” as such term is defined in Section 233.2(r) of Federal Reserve Regulation GG (12 CFR 233) (“
Regulation GG
”). Each Fund hereby covenants and agrees that it shall not engage in
an Internet gambling business. In accordance with Regulation GG, each Fund is hereby notified that “restricted transactions,” as such term is defined in Section 233.2(y) of Regulation GG, are prohibited in any dealings with the
Custodian pursuant to this Agreement or otherwise between or among any party hereto.
S
ECTION
19.15
D
ATA
P
RIVACY
.
The Custodian will implement and maintain a written information security program that contains appropriate security measures to safeguard the personal information of the Funds’ shareholders,
employees, directors and/or officers that the Custodian receives, stores, maintains, processes or otherwise accesses in connection with the provision of services hereunder. For these purposes, “personal information” shall mean
(i) an individual’s name (first initial and last name or first name and last name), address or telephone number
plus
(a) social security number, (b) drivers license number, (c) state identification card number,
(d) debit or credit card number, (e) financial account number or (f) personal identification number or password that would permit access to a person’s account or (ii) any combination of the foregoing that would allow a
person to log onto or access an individual’s account. Notwithstanding the foregoing “personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or
local government records lawfully made available to the general public.
S
ECTION
19.16
L
OAN
S
ERVICES
A
DDENDUM
. In the event the Fund directs Custodian in writing to perform loan services, Custodian and the Fund hereby agree to be bound by the terms of the Loan Services
Addendum attached hereto and the Fund shall reimburse Custodian for its fees and expenses related thereto as agreed upon from time to time in writing by the Fund and Custodian.
S
ECTION
19.17
S
HAREHOLDER
C
OMMUNICATIONS
E
LECTION
.
SEC Rule 14b-2 requires banks which hold securities for the account of customers to respond to requests by issuers of securities for the names, addresses and holdings of beneficial owners of securities of that issuer held by the bank unless the
beneficial owner has expressly objected to disclosure of this information. In order to comply with the rule, the Custodian needs each Fund to indicate whether it authorizes the Custodian to provide such Fund’s name, address, and share position
to requesting companies whose securities the Fund owns. If a Fund tells the Custodian “no,” the Custodian will not provide this information to
-31-
requesting companies. If a Fund tells the Custodian “yes” or does not check either “yes” or “no” below, the Custodian is required by the rule to treat the Fund as
consenting to disclosure of this information for all securities owned by the Fund or any funds or accounts established by the Fund. For a Fund’s protection, the Rule prohibits the requesting company from using the Fund’s name and address
for any purpose other than corporate communications. Please indicate below whether the Fund consents or objects by checking one of the alternatives below.
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YES
¨
|
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The Custodian is authorized to release the Fund’s name, address, and share positions.
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NO
x
|
|
The Custodian is not authorized to release the Fund’s name, address, and share positions.
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-32-
Exhibit (g)(3)
S
IGNATURE
P
AGE
I
N
W
ITNESS
W
HEREOF
, each of the parties has caused this instrument to be executed in its name and behalf by its duly authorized representative under seal as of the date first above-written.
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EACH OF THE ENTITIES
|
|
SET FORTH ON APPENDIX A HERETO
|
|
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By:
|
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/s/ Ethan Powell
|
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Name:
|
|
Ethan Powell
|
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Title:
|
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Executive Vice President and Secretary
|
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STATE STREET BANK AND TRUST COMPANY
|
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By:
|
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/s/ Michael F. Rogers
|
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Name:
|
|
Michael F. Rogers
|
|
Title:
|
|
Executive Vice President
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Master Custodian Agreement
APPENDIX A
TO
M
ASTER
C
USTODIAN
A
GREEMENT
M
ANAGEMENT
I
NVESTMENT
C
OMPANIES
R
EGISTERED
WITH
THE
SEC
AND
P
ORTFOLIOS
THEREOF
, I
F
A
NY
Pyxis Funds I
(effective on or around January 1, 2013)
Pyxis Long/Short Equity Fund
Pyxis Long/Short Healthcare Fund
Pyxis Floating Rate Opportunities Fund
Pyxis Funds II
(effective on or around January 1, 2013)
Pyxis Alpha Trend Following Fund
Pyxis Core America Equity Fund
Pyxis Dividend Equity Fund
Pyxis Energy and Materials Fund
Pyxis Fixed Income Fund
Pyxis Global Equity Fund
Pyxis Money Market Fund II
Pyxis Premier Growth Equity Fund
Pyxis Small-Cap Equity Fund
Pyxis Tax-Exempt Fund
Pyxis Total Return Fund
Pyxis Trend Following Fund
NexPoint Credit Strategies Fund
(effective on or around January 1, 2013)
Pyxis Special Situations Fund
(effective on or around January 1, 2013)
APPENDIX B
TO
M
ASTER
C
USTODIAN
A
GREEMENT
Pyxis Funds I
Pyxis/iBoxx Senior Loan ETF
SCHEDULE D
TO
M
ASTER
C
USTODIAN
A
GREEMENT
S
PECIAL
S
UB
-C
USTODIANS
:
None
REMOTE ACCESS SERVICES ADDENDUM TO CUSTODIAN CONTRACT
ADDENDUM to that certain Custodian Contract dated as of October 1, 2012 (the “Custodian Agreement”) between the Fund (the
“Customer”) and State Street Bank and Trust Company, including its subsidiaries and affiliates (“State Street”).
State Street has developed and/or utilizes proprietary or third-party accounting and other systems in conjunction with the services that State Street provides to the Customer. In this regard, State Street
maintains certain information in databases under its ownership and/or control that it makes available to its customers (the “Remote Access Services”).
T
HE
S
ERVICES
State Street agrees to provide the
Customer, and its designated investment advisors, consultants or other third parties who agree to abide by the terms of this Addendum (“Authorized Designees”) with access to State Street proprietary and third-party systems as may be
offered by State Street from time to time (each, a “System”) on a remote basis.
S
ECURITY
P
ROCEDURES
The Customer agrees to comply, and to cause its Authorized Designees to comply, with remote access
operating standards and procedures and with user identification or other password control requirements and other security devices and procedures as may be issued or required from time to time by State Street or its third-party vendors for use of the
System and access to the Remote Access Services. The Customer is responsible for any use and/or misuse of the System and Remote Access Services by its Authorized Designees. The Customer agrees to advise State Street immediately in the event that it
learns or has reason to believe that any person to whom it has given access to the System or the Remote Access Services has violated or intends to violate the terms of this Addendum and the Customer will cooperate with State Street in seeking
injunctive or other equitable relief. The Customer agrees to discontinue use of the System and Remote Access Services, if requested, for any security reasons cited by State Street and State Street may restrict access of the System and Remote Access
Services by the Customer or any Authorized Designee for security reasons or noncompliance with the terms of this Addendum at any time.
F
EES
Fees and charges for the use of the System and the Remote
Access Services and related payment terms shall be as set forth in the fee schedule in effect from time to time between the parties. The Customer shall be responsible for any tariffs, duties or taxes imposed or levied by any government or
governmental agency by reason of the transactions contemplated by this Addendum, including, without limitation, federal, state and local taxes, use, value added and personal property taxes (other than income, franchise or similar taxes which may be
imposed or assessed against State Street). Any claimed exemption from such tariffs, duties or taxes shall be supported by proper documentary evidence delivered to State Street.
Proprietary Information/Injunctive Relief
The System and Remote Access Services
described herein and the databases, computer programs, screen formats, report formats, interactive design techniques, formulae, processes, systems, software, knowhow, algorithms, programs, training aids, printed materials, methods, books, records,
files, documentation and other information made available to the Customer by State Street as part of the Remote Access Services and
through the use of the System and all copyrights, patents, trade secrets and other proprietary and intellectual property rights of State Street and third-party vendors related thereto are the
exclusive, valuable and confidential proprietary property of State Street and its relevant licensors and third-party vendors (the “Proprietary Information”). The Customer agrees on behalf of itself and its Authorized Designees to keep the
Proprietary Information confidential and to limit access to its employees and Authorized Designees (under a similar duty of confidentiality) who require access to the System for the purposes intended. The foregoing shall not apply to Proprietary
Information in the public domain or required by law to be made public.
The Customer agrees to use the Remote Access Services only in
connection with the proper purposes of this Addendum. The Customer will not, and will cause its employees and Authorized Designees not to, (i) permit any third party to use the System or the Remote Access Services, (ii) sell, rent, license
or otherwise use the System or the Remote Access Services in the operation of a service bureau or for any purpose other than as expressly authorized under this Addendum, (iii) use the System or the Remote Access Services for any fund, trust or
other investment vehicle without the prior written consent of State Street, or (iv) allow or cause any information transmitted from State Street’s databases, including data from third-party sources, available through use of the System or
the Remote Access Services, to be published, redistributed or retransmitted for other than use for or on behalf of the Customer, as State Street’s customer.
The Customer agrees that neither it nor its Authorized Designees will modify the System in any way; enhance, copy or otherwise create derivative works based upon the System; nor will the Customer or
Customer’s Authorized Designees reverse engineer, decompile or otherwise attempt to secure the source code for all or any part of the System.
The Customer acknowledges that the disclosure of any Proprietary Information, or of any information which at law or equity ought to remain confidential, will immediately give rise to continuing
irreparable injury to State Street or its third-party licensors and vendors inadequately compensable in damages at law and that State Street shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of
the foregoing undertakings, in addition to any other legal remedies which may be available.
Limited Warranties
State Street represents and warrants that it is the owner of and/or has the right to grant access to the System and to provide the Remote Access Services
contemplated herein. Because of the nature of computer information technology, including but not limited to the use of the Internet, and the necessity of relying upon third-party sources, and data and pricing information obtained from third parties,
the System and Remote Access Services are provided “AS IS” without warranty express or implied including as to availability of the System, and the Customer and its Authorized Designees shall be solely responsible for the use of the System
and Remote Access Services and investment decisions, results obtained, regulatory reports and statements produced using the Remote Access Services. State Street and its relevant licensors and third-party vendors will not be liable to the Customer or
its Authorized Designees for any direct or indirect, special, incidental, punitive or consequential damages arising out of or in any way connected with the System or the Remote Access Services, nor shall any party be responsible for delays or
nonperformance under this Addendum arising out of any cause or event beyond such party’s control.
EXCEPT AS EXPRESSLY SET
FORTH IN THIS ADDENDUM, STATE STREET, FOR ITSELF AND ITS RELEVANT LICENSORS AND THIRD-PARTY VENDORS
EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES CONCERNING THE SYSTEM AND THE SERVICES TO BE RENDERED HEREUNDER, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF
MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Infringement
State Street will defend or, at its option, settle any claim or action brought against the Customer to the extent that it is based upon an assertion that access to or use of State Street proprietary
systems by the Customer under this Addendum constitutes direct infringement of any United States patent or copyright or misappropriation of a trade secret, provided that the Customer notifies State Street promptly in writing of any such claim or
proceeding, cooperates with State Street in the defense of such claim or proceeding and allows State Street sole control over such claim or proceeding. Should the State Street proprietary system or any part thereof become, or in State Street’s
opinion be likely to become, the subject of a claim of infringement or the like under any applicable patent, copyright or trade secret laws, State Street shall have the right, at State Street’s sole option, to (i) procure for the Customer
the right to continue using the State Street proprietary system (ii) replace or modify the State Street proprietary system so that the State Street proprietary system becomes noninfringing, or (iii) terminate this Addendum without further
obligation. This section constitutes the sole remedy available to the Customer for the matters described in this section.
Termination
Either party to the Custodian Agreement may terminate this Addendum (i) for any reason by giving the other party at least one-hundred
and eighty (180) days’ prior written notice in the case of notice of termination by State Street to the Customer or thirty (30) days’ notice in the case of notice from the Customer to State Street of termination, or
(ii) immediately for failure of the other party to comply with any material term and condition of the Addendum by giving the other party written notice of termination. This Addendum shall in any event terminate within ninety (90) days
after the termination of any service agreement applicable to the Customer. The Customer’s use of any third-party System is contingent upon its compliance with any terms and conditions of use of such System imposed by such third party and State
Street’s continued access to, and use of, such third-party System. In the event of termination, the Customer will return to State Street all copies of documentation and other confidential information in its possession or in the possession of
its Authorized Designees and immediately cease access to the System and Remote Access Services. The foregoing provisions with respect to confidentiality and infringement will survive termination for a period of three (3) years.
Miscellaneous
This Addendum constitutes
the entire understanding of the parties to the Custodian Agreement with respect to access to the System and the Remote Access Services. This Addendum cannot be modified or altered except in a writing duly executed by each of State Street and the
Customer and shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.
By its execution of the
Custodian Agreement, the Customer: (a) confirms to State Street that it informs all Authorized Designees of the terms of this Addendum; (b) accepts responsibility for its and its Authorized Designees’ compliance with the terms of this
Addendum; and (c) indemnifies and holds State Street harmless from and against any and all costs, expenses, losses, damages, charges, counsel fees, payments and liabilities arising from any failure of the Customer or any of its Authorized
Designees to abide by the terms of this Addendum.
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OPERATING GUIDELINES
1.
OBLIGATION OF THE SENDER
: State Street is authorized to promptly debit Client’s account(s) upon the receipt of a payment order in compliance with the selected Security Procedure chosen for
funds transfer and in the amount of money that State Street has been instructed to transfer. State Street shall execute payment orders in compliance with the Security Procedure and with the Client’s instructions on the execution date provided
that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after this time will be deemed to have been received on the
next business day.
2.
SECURITY PROCEDURE
: The Client acknowledges that the Security Procedure it has designated on the Selection Form
was selected by the Client from Security Procedures offered by State Street. The Client agrees that the Security Procedures are reasonable and adequate for its wire transfer transactions and agrees to be bound by any payment orders, amendments and
cancellations, whether or not authorized, issued in its name and accepted by State Street after being confirmed by any of the selected Security Procedures. The Client also agrees to be bound by any other valid and authorized payment order accepted
by State Street. The Client shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated in writing to State Street. The Client must notify State Street immediately if it has reason to
believe unauthorized persons may have obtained access to such information or of any change in the Client’s authorized personnel. State Street shall verify the authenticity of all instructions according to the Security Procedure.
3.
ACCOUNT NUMBERS
: State Street shall process all payment orders on the basis of the account number contained in the payment order. In the event
of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern. Financial institutions that receive payment orders initiated by State Street at the instruction of the
Client may also process payment orders on the basis of account numbers, regardless of any name included in the payment order. State Street will also rely on any financial institution identification numbers included in any payment order, regardless
of any financial institution name included in the payment order.
4.
REJECTION
: State Street reserves the right to decline to process
or delay the processing of a payment order which (a) is in excess of the collected balance in the account to be charged at the time of State Street’s receipt of such payment order; (b) if initiating such payment order would cause
State Street, in State Street’s sole judgment, to exceed any volume, aggregate dollar, network, time, credit or similar limits upon wire transfers which are applicable to State Street; or (c) if State Street, in good faith, is unable to
satisfy itself that the transaction has been properly authorized.
5.
CANCELLATION
OR AMENDMENT
: State Street shall use
reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording State Street reasonable opportunity to
act. However, State Street assumes no liability if the request for amendment or cancellation cannot be satisfied.
6.
ERRORS:
State
Street shall assume no responsibility for failure to detect any erroneous payment order provided that State Street complies with the payment order instructions as received and State Street complies with the Security Procedure. The Security Procedure
is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7.
INTEREST
AND LIABILITY LIMITS
: State Street shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless State Street is notified of the unauthorized payment order within thirty
(30) days of notification by State Street of the acceptance of such payment order. In no event shall State Street be liable for special, indirect or consequential damages, even if advised of the possibility of such damages and even for failure
to execute a payment order.
8.
AUTOMATED CLEARING HOUSE (“ACH”) CREDIT ENTRIES/PROVISIONAL PAYMENTS
: When a Client initiates
or receives ACH credit and debit entries pursuant to these Guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, State Street will act as an Originating Depository Financial
Institution and/or Receiving Depository Institution, as the case may be, with respect to such entries. Credits given by State Street with respect to an ACH credit entry are provisional until State Street receives final settlement for such entry from
the Federal Reserve Bank. If State Street does not receive such final settlement, the Client agrees that State Street shall receive a refund of the amount credited to the Client in connection with such entry, and the party making payment to the
Client via such entry shall not be deemed to have paid the amount of the entry.
9.
CONFIRMATION STATEMENTS
:
Confirmation of State Street’s execution of payment orders shall ordinarily be provided within 24 hours. Notice may be delivered through State Street’s proprietary information systems, such as, but not limited to Horizon and GlobalQuest
®
, account statements, advices, or by facsimile or callback. The Client must report any objections to the execution of
a payment order within 30 days.
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10.
LIABILITY ON
FOREIGN ACCOUNTS
: State Street shall not be required to repay any deposit made at a non-U.S. branch of State Street, or any deposit made with State Street and denominated in a non-U.S. dollar currency, if repayment of such deposit or the use of
assets denominated in the non-U.S. dollar currency is prevented, prohibited or otherwise blocked due to: (a) an act of war, insurrection or civil strife; (b) any action by a non-U.S. government or instrumentality or authority asserting
governmental, military or police power of any kind, whether such authority be recognized as a defacto or a dejure government, or by any entity, political or revolutionary movement or otherwise that usurps, supervenes or otherwise materially impairs
the normal operation of civil authority; or(c) the closure of a non-U.S. branch of State Street in order to prevent, in the reasonable judgment of State Street, harm to the employees or property of State Street. The obligation to repay any such
deposit shall not be transferred to and may not be enforced against any other branch of State Street.
The foregoing provisions constitute the
disclosure required by Massachusetts General Laws, Chapter 167D, Section 36.
While State Street is not obligated to repay any deposit
made at a non-U.S. branch or any deposit denominated in a non-U.S. currency during the period in which its repayment has been prevented, prohibited or otherwise blocked, State Street will repay such deposit when and if all circumstances preventing,
prohibiting or otherwise blocking repayment cease to exist.
11.
MISCELLANEOUS:
State Street and the Client agree to cooperate to
attempt to recover any funds erroneously paid to the wrong party or parties, regardless of any fault of State Street or the Client, but the party responsible for the erroneous payment shall bear all costs and expenses incurred in trying to effect
such recovery. These Guidelines may not be amended except by a written agreement signed by the parties.
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Security
Procedure(s) Selection Form
Please select one or more of the funds transfer security procedures indicated below.
¨
SWIFT
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a cooperative society owned and operated by member financial institutions that provides telecommunication services for its
membership. Participation is limited to securities brokers and dealers, clearing and depository institutions, recognized exchanges for securities, and investment management institutions. SWIFT provides a number of security features through
encryption and authentication to protect against unauthorized access, loss or wrong delivery of messages, transmission errors, loss of confidentiality and fraudulent changes to messages. SWIFT is considered to be one of the most secure and efficient
networks for the delivery of funds transfer instructions.
Selection of this security procedure would be most appropriate for existing
SWIFT members.
¨
Standing Instructions
Standing Instructions may be used where funds are transferred to a broker on the Client’s established list of brokers with which it engages in
foreign exchange transactions. Only the date, the currency and the currency amount are variable. In order to establish this procedure, State Street will send to the Client a list of the brokers that State Street has determined are used by the
Client. The Client will confirm the list in writing, and State Street will verify the written confirmation by telephone. Standing Instructions will be subject to a mutually agreed upon limit. If the payment order exceeds the established limit, the
Standing Instruction will be confirmed by telephone prior to execution.
¨
Remote Batch Transmission
Wire transfer instructions are delivered via Computer-to-Computer (CPU-CPU) data communications between the Client and State Street. Security procedures
include encryption and or the use of a test key by those individuals authorized as Automated Batch Verifiers.
Clients selecting this
option should have an existing facility for completing CPU-CPU transmissions. This delivery mechanism is typically used for high-volume business.
¨
Global Horizon Interchangesm Funds Transfer Service
Global Horizon Interchange Funds Transfer Service (FTS) is a State Street proprietary microcomputer-based wire initiation system. FTS enables Clients to electronically transmit authenticated Fedwire,
CHIPS or internal book transfer instructions to State Street.
This delivery mechanism is most appropriate for Clients with a low-to-medium
number of transactions (5-75 per day), allowing Clients to enter, batch, and review wire transfer instructions on their PC prior to release to State Street.
¨
Telephone Confirmation (Callback)
Telephone confirmation will be used to verify all non-repetitive funds transfer instructions received via untested facsimile or phone. This procedure requires Clients to designate individuals as
authorized initiators and authorized verifiers. State Street will verify that the instruction contains the signature of an authorized person and prior to execution, will contact someone other than the originator at the Client’s location to
authenticate the instruction.
Selection of this alternative is appropriate for Clients who do not have the capability to use other
security procedures.
¨
Repetitive Wires
For situations where funds are transferred periodically (minimum of one instruction per calendar quarter) from an existing authorized account to the same
payee (destination bank and account number) and only the date and currency amount are variable, a repetitive wire may be implemented. Repetitive wires will be subject to a mutually agreed upon limit. If the payment order exceeds the established
limit, the instruction will be confirmed by telephone prior to execution. Telephone confirmation is used to establish this process. Repetitive wire instructions must be reconfirmed annually.
This alternative is recommended whenever funds are frequently transferred between the same two accounts.
¨
Transfers Initiated by Facsimile
The Client faxes wire transfer instructions directly to State Street Mutual Fund Services. Standard security procedure requires the use of a random number test key for all transfers. Every six months the
Client receives test key logs from State Street. The test key contains alpha-numeric characters, which the Client puts on each document faxed to State Street. This procedure ensures all wire instructions received via fax are authorized by the
Client.
We provide this option for Clients who wish to batch wire instructions and transmit these as a group to State Street Mutual Fund
Services once or several times a day.
¨
Instruct
Instruct is a State Street web-based application designed to provide internet-enabled remote access that allows for the capturing,
verification and processing of various instruction types, including securities, cash and foreign exchange transactions. Instruct is designed using industry standard formats to facilitate straight-through processing. Instruct provides a number of
security features through user entitlements, industry standard encryption protocols, digital security certificates and multiple tiers of user authentication requirements.
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Secure Transport
Secure Transport is a file transfer application based
upon the Secure File Transfer Protocol standard that is designed to enable State Street clients/ investment managers to send file based transfer and transaction instructions over the internet. Secure Transport features multi-factor authenticators
such as SecurID and digital certificates, and incorporates industry-standard encryption protocols.
¨
Automated Clearing House (ACH)
State Street receives an automated transmission or a magnetic tape from a Client for the initiation of payment (credit) or collection (debit) transactions
through the ACH network. The transactions contained on each transmission or tape must be authenticated by the Client. Clients using ACH must select one or more of the following delivery options:
¨
Global Horizon Interchange Automated Clearing House Service
Transactions are created on a microcomputer, assembled into batches and delivered to State Street via fully authenticated electronic transmissions in
standard NACHA formats.
¨
Transmission from Client PC to State Street Mainframe with Telephone
Callback
¨
Transmission from Client Mainframe to State Street Mainframe with Telephone
Callback
¨
Transmission from DST Systems to State Street Mainframe with Encryption
¨
Magnetic Tape Delivered to State Street with Telephone Callback
¨
Email with Enforced Transport Layer Security Combined with Telephone
Callback
Transport Layer Security is a communication method that allows clients to electronically deliver financial transaction
instructions to State Street using an enforced (encrypted) connection. The communication method features use of enforced network connections which include industry-standard transport layer cryptography to effect point-to-point encryption. Please
note that such point-to-point encryption is performed at the domain level and not at the individual user level or email gateway within the client’s organization. Telephone confirmation will be used to verify transaction instructions received
via email with enforced TLS. This procedure requires clients to designate individuals as authorized initiators and authorized verifiers. State Street will contact the client’s designees to authenticate instructions received by this method.
¨
Email “Send Secure” Feature Available in Outlook
with Telephone Callback
“Send Secure” is a communication method that allows clients to electronically deliver financial
transaction instructions to State Street using an enforced (encrypted) connection by responding to a secure email received from State Street The communication method features use of enforced network connections which include industry-standard
transport layer cryptography to effect point-to-point encryption at the desktop. Telephone confirmation will be used to verify transaction instructions received via email using the “send secure” feature. This procedure requires
clients to designate individuals as authorized initiators and authorized verifiers. State Street will contact the client’s designees to authenticate instructions received by this method.
¨
State Street Cash Manager
®
Global Funds Transfer (GFT)
State Street’s proprietary web-based system that enables clients to originate and electronically transmit authenticated repetitive and non-repetitive Fed wires, CHIPS, internal book transfers,
drawdowns, and international payments to State Street. Instructions received by State Street via Cash Manager
®
constitute funds transfer instructions originated by the Client and can either be in U.S. dollar or other currencies supported by the system. The State Street Cash Manager
®
GFT is a web-based system utilizing the Internet and employs the use of ID and password security, two factor token authentication and encryption to protect the
integrity of transmissions to State Street.
State Street is hereby instructed to accept funds transfer instructions only via the delivery
methods and security procedures indicated. The selected delivery methods and security procedure(s) will be effective
for payment orders initiated by our organization.
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Key Contact
Information
Whom shall we contact to implement your selection(s)?
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CLIENT OPERATIONS CONTACT
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ALTERNATE CONTACT
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Name
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Name
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Address
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Address
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City/State/Zip Code
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City/State/Zip Code
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Telephone Number
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Telephone Number
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Facsimile Number
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Facsimile Number
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SWIFT Number
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Telex Number
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INSTRUCTION(S)
TELEPHONE CONFIRMATION
Fund
Investment Adviser
Authorized Initiators
Please Type or Print
Please provide a listing of Fund officers or other individuals who are currently authorized to
INITIATE
wire transfer instructions
to State Street:
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NAME
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TITLE
(Specify whether position is with
Fund or Investment Adviser)
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SPECIMEN SIGNATURE
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Authorized Verifiers
Please Type or Print
Please provide a listing of Fund officers or
other individuals who will be
CALLED BACK
to verify the initiation of repetitive wires of $10 million or more and all non-repetitive wire instructions:
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NAME
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CALLBACK PHONE NUMBER
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DOLLAR LIMITATION (IF ANY)
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SUBCUSTODIANS – SCHEDULE A
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MARKET
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SUBCUSTODIAN
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Argentina
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Citibank, N.A.
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Australia
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Citigroup Pty. Limited
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The Hongkong and Shanghai Banking Corporation Limited
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Austria
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UniCredit Bank Austria AG
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Bahrain
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HSBC Bank Middle East Limited
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(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Bangladesh
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Standard Chartered Bank
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Belgium
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Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Brussels branch)
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Benin
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via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
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Bermuda
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HSBC Bank Bermuda Limited
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Federation of Bosnia and Herzegovina
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UniCredit Bank d.d.
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Botswana
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Standard Chartered Bank Botswana Limited
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Brazil
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Citibank, N.A.
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Bulgaria
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ING Bank N.V.
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UniCredit Bulbank AD
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Burkina Faso
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via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
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Canada
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State Street Trust Company Canada
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Chile
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Banco Itaú Chile
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People’s Republic of China
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HSBC Bank (China) Company Limited
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
China Construction Bank
Corporation (for A-share market only)
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Colombia
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Cititrust Colombia S.A. Sociedad Fiduciaria
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Costa Rica
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Banco BCT S.A.
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Croatia
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Privredna Banka Zagreb d.d.
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Zagrebacka Banka d.d.
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Cyprus
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BNP Paribas Securities Services, S.C.A., Greece (operating through its Athens branch)
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Czech Republic
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Československá obchodní banka, a.s.
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UniCredit Bank Czech Republic a.s.
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Denmark
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Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Copenhagen branch)
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LIMITED
ACCESS
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Ecuador
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Banco de la Producción S.A. PRODUBANCO
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Egypt
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HSBC Bank Egypt S.A.E.
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(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Estonia
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AS SEB Pank
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Finland
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Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Helsinki branch)
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France
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Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Paris branch)
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Republic of Georgia
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JSC Bank of Georgia
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Germany
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Deutsche Bank AG
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Ghana
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Standard Chartered Bank Ghana Limited
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Greece
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BNP Paribas Securities Services, S.C.A.
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Guinea-Bissau
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via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
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Hong Kong
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Standard Chartered Bank (Hong Kong) Limited
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Hungary
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UniCredit Bank Hungary Zrt.
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Iceland
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Landsbankinn hf.
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India
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Deutsche Bank AG
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The Hongkong and Shanghai Banking Corporation Limited
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Indonesia
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Deutsche Bank AG
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Ireland
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State Street Bank and Trust Company, United Kingdom branch
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Israel
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Bank Hapoalim B.M.
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Italy
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Deutsche Bank S.p.A.
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Ivory Coast
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Société Générale de Banques en Côte d’Ivoire
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Japan
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Mizuho Corporate Bank Limited
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The Hongkong and Shanghai Banking Corporation Limited
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Jordan
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HSBC Bank Middle East Limited
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(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Kazakhstan
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SB HSBC Bank Kazakhstan JSC
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(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Kenya
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Standard Chartered Bank Kenya Limited
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Republic of Korea
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Deutsche Bank AG
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The Hongkong and Shanghai Banking Corporation Limited
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Kuwait
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HSBC Bank Middle East Limited
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Latvia
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AS SEB banka
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14
LIMITED ACCESS
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Lebanon
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HSBC Bank Middle East Limited
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(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
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Lithuania
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AB SEB bankas
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Malaysia
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Standard Chartered Bank Malaysia Berhad
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Mali
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via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
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Malta
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The Hongkong and Shanghai Banking Corporation Limited
|
|
|
|
(operating through its subsidiary HSBC Bank Malta Plc., Valletta)
|
|
|
|
|
Mauritius
|
|
The Hongkong and Shanghai Banking Corporation Limited
|
|
|
|
|
Mexico
|
|
Banco Nacional de México, S.A.
|
|
|
|
|
Morocco
|
|
Citibank Maghreb
|
|
|
|
|
Namibia
|
|
Standard Bank Namibia Limited
|
|
|
|
|
Netherlands
|
|
Deutsche Bank AG
|
|
|
|
|
New Zealand
|
|
The Hongkong and Shanghai Banking Corporation Limited
|
|
|
|
|
Niger
|
|
via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
|
|
|
|
|
Nigeria
|
|
Stanbic IBTC Bank Plc.
|
|
|
|
|
Norway
|
|
Skandinaviska Enskilda Banken AB (publ), Sweden (operating through its Oslo branch)
|
|
|
|
|
Oman
|
|
HSBC Bank Oman S.A.O.G.
|
|
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
Pakistan
|
|
Deutsche Bank AG
|
|
|
|
|
Palestine
|
|
HSBC Bank Middle East Limited
|
|
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
Peru
|
|
Citibank del Perú, S.A.
|
|
|
|
|
Philippines
|
|
Deutsche Bank AG
|
|
|
|
|
Poland
|
|
Bank Handlowy w Warszawie S.A.
|
|
|
|
|
Portugal
|
|
BNP Paribas Securities Services, S.C.A., Paris (operating through its Lisbon branch with support from its Paris branch)
|
|
|
|
Deutsche Bank AG, Netherlands (operating through its Amsterdam branch with support from its Lisbon branch)
|
|
|
|
|
Puerto Rico
|
|
Citibank N.A.
|
|
|
|
|
Qatar
|
|
HSBC Bank Middle East Limited
|
|
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
Romania
|
|
ING Bank N.V.
|
|
|
|
|
Russia
|
|
ING Bank (Eurasia) ZAO
|
|
|
|
|
Saudia Arabia
|
|
HSBC Saudi Arabia Limited
|
|
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
15
LIMITED ACCESS
|
|
|
|
|
Senegal
|
|
via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
|
|
|
|
|
Serbia
|
|
UniCredit Bank Serbia JSC
|
|
|
|
|
Singapore
|
|
Citibank N.A.
|
|
|
|
United Overseas Bank Limited
|
|
|
|
|
Slovak Republic
|
|
Československá obchodná banka, a.s.
|
|
|
|
UniCredit Bank Slovakia a.s.
|
|
|
|
|
Slovenia
|
|
UniCredit Banka Slovenija d.d.
|
|
|
|
|
South Africa
|
|
FirstRand Bank Limited
|
|
|
|
Standard Bank of South Africa Limited
|
|
|
|
|
Spain
|
|
Deutsche Bank S.A.E.
|
|
|
|
|
Sri Lanka
|
|
The Hongkong and Shanghai Banking Corporation Limited
|
|
|
|
|
Republic of Srpska
|
|
UniCredit Bank d.d.
|
|
|
|
|
Swaziland
|
|
Standard Bank Swaziland Limited
|
|
|
|
|
Sweden
|
|
Skandinaviska Enskilda Banken AB (publ)
|
|
|
|
|
Switzerland
|
|
Credit Suisse AG
|
|
|
|
UBS AG
|
|
|
|
|
Taiwan - R.O.C.
|
|
Deutsche Bank AG
|
|
|
|
Standard Chartered Bank (Taiwan) Limited
|
|
|
|
|
Thailand
|
|
Standard Chartered Bank (Thai) Public Company Limited
|
|
|
|
|
Togo
|
|
via Société Générale de Banques en Côte d’Ivoire, Abidjan, Ivory Coast
|
|
|
|
|
Trinidad & Tobago
|
|
Republic Bank Limited
|
|
|
|
|
Tunisia
|
|
Banque Internationale Arabe de Tunisie
|
|
|
|
|
Turkey
|
|
Citibank, A.S.
|
|
|
|
|
Uganda
|
|
Standard Chartered Bank Uganda Limited
|
|
|
|
|
Ukraine
|
|
ING Bank Ukraine
|
|
|
|
|
United Arab Emirates –
|
|
HSBC Bank Middle East Limited
|
|
Dubai Financial Market
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
United Arab Emirates –
|
|
HSBC Bank Middle East Limited
|
|
Dubai International
Financial
Center
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
United Arab Emirates –
|
|
HSBC Bank Middle East Limited
|
|
Abu Dhabi
|
|
(as delegate of The Hongkong and Shanghai Banking Corporation Limited)
|
|
|
|
|
United Kingdom
|
|
State Street Bank and Trust Company, United Kingdom branch
|
|
|
|
|
Uruguay
|
|
Banco Itaú Uruguay S.A.
|
16
LIMITED ACCESS
|
|
|
|
|
Venezuela
|
|
Citibank, N.A.
|
|
|
|
|
Vietnam
|
|
HSBC Bank (Vietnam) Limited
|
|
|
|
|
Zambia
|
|
Standard Chartered Bank Zambia Plc.
|
|
|
|
|
Zimbabwe
|
|
Barclays Bank of Zimbabwe Limited
|
17
LIMITED ACCESS
DEPOSITORIES OPERATING IN NETWORK MARKETS – SCHEDULE B
|
|
|
|
|
MARKET
|
|
DEPOSITORY
|
|
|
|
|
Argentina
|
|
Caja de Valores S.A.
|
|
|
|
|
Australia
|
|
Austraclear Limited
|
|
|
|
|
Austria
|
|
Oesterreichische Kontrollbank AG (Wertpapiersammelbank Division)
|
|
|
|
|
Bahrain
|
|
Clearing, Settlement, Depository and Registry System of the Bahrain Bourse
|
|
|
|
|
Bangladesh
|
|
Central Depository Bangladesh Limited
|
|
|
|
|
Belgium
|
|
Euroclear Belgium
|
|
|
|
National Bank of Belgium
|
|
|
|
|
Benin
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Bermuda
|
|
Bermuda Securities Depository
|
|
|
|
|
Federation of Bosnia and Herzegovina
|
|
Registar vrijednosnih papira u Federaciji Bosne i Hercegovine, d.d.
|
|
|
|
|
Botswana
|
|
Bank of Botswana
|
|
|
|
Central Securities Depository Company of Botswana Ltd.
|
|
|
|
|
Brazil
|
|
Central de Custódia e de Liquidação Financeira de Títulos Privados (CETIP)
|
|
|
|
Companhia Brasileira de Liquidação e Custódia
|
|
|
|
Sistema Especial de Liquidação e de Custódia (SELIC)
|
|
|
|
|
Bulgaria
|
|
Bulgarian National Bank
|
|
|
|
Central Depository AD
|
|
|
|
|
Burkina Faso
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Canada
|
|
The Canadian Depository for Securities Limited
|
|
|
|
|
Chile
|
|
Depósito Central de Valores S.A.
|
|
|
|
|
People’s Republic of China
|
|
China Securities Depository and Clearing Corporation Limited, Shanghai Branch
China Securities Depository and Clearing Corporation Limited, Shenzhen Branch
|
|
|
|
|
Colombia
|
|
Depósito Central de Valores
|
|
|
|
Depósito Centralizado de Valores de Colombia S.A. (DECEVAL)
|
|
|
|
|
Costa Rica
|
|
Central de Valores S.A.
|
|
|
|
|
Croatia
|
|
Središnje klirinško depozitarno društvo d.d.
|
|
|
|
|
Cyprus
|
|
Central Depository and Central Registry
|
|
|
|
|
Czech Republic
|
|
Centrální depozitář cenných papírů, a.s.
|
|
|
|
Czech National Bank
|
|
|
|
|
Denmark
|
|
VP Securities A/S
|
LIMITED
ACCESS
|
|
|
|
|
Egypt
|
|
Central Bank of Egypt
|
|
|
|
Misr for Central Clearing, Depository and Registry S.A.E.
|
|
|
|
|
Estonia
|
|
AS Eesti Väärtpaberikeskus
|
|
|
|
|
Finland
|
|
Euroclear Finland
|
|
|
|
|
France
|
|
Euroclear France
|
|
|
|
|
Republic of Georgia
|
|
Georgian Central Securities Depository
|
|
|
|
National Bank of Georgia
|
|
|
|
|
Germany
|
|
Clearstream Banking AG, Frankfurt
|
|
|
|
|
Ghana
|
|
Central Securities Depository (Ghana) Limited
|
|
|
|
GSE Securities Depository Company Limited
|
|
|
|
|
Greece
|
|
Bank of Greece, System for Monitoring Transactions in Securities in Book-Entry Form
|
|
|
|
Kentriko Apothetirio Aksion, a department of Hellenic Exchanges S.A. Holding
|
|
|
|
|
Guinea-Bissau
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Hong Kong
|
|
Central Moneymarkets Unit
|
|
|
|
Hong Kong Securities Clearing Company Limited
|
|
|
|
|
Hungary
|
|
Központi Elszámolóház és Értéktár (Budapesti) Zrt. (KELER)
|
|
|
|
|
Iceland
|
|
Icelandic Securities Depository Limited
|
|
|
|
|
India
|
|
Central Depository Services (India) Limited
|
|
|
|
National Securities Depository Limited
|
|
|
|
Reserve Bank of India
|
|
|
|
|
Indonesia
|
|
Bank Indonesia
|
|
|
|
PT Kustodian Sentral Efek Indonesia
|
|
|
|
|
Ireland
|
|
Euroclear UK & Ireland Limited *
|
|
|
|
Euroclear Bank S.A./N.V.
|
|
|
|
|
Israel
|
|
Tel Aviv Stock Exchange Clearing House Ltd. (TASE Clearing House)
|
|
|
|
|
Italy
|
|
Monte Titoli S.p.A.
|
|
|
|
|
Ivory Coast
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Japan
|
|
Bank of Japan – Financial Network System
|
|
|
|
Japan Securities Depository Center (JASDEC) Incorporated
|
|
|
|
|
Jordan
|
|
Securities Depository Center
|
|
|
|
|
Kazakhstan
|
|
Central Securities Depository
|
|
|
|
|
Kenya
|
|
Central Bank of Kenya
|
|
|
|
Central Depository and Settlement Corporation Limited
|
|
|
|
|
Republic of Korea
|
|
Korea Securities Depository
|
|
|
|
|
Kuwait
|
|
Kuwait Clearing Company
|
|
|
|
|
Latvia
|
|
Latvian Central Depository
|
19
LIMITED ACCESS
|
|
|
|
|
Lebanon
|
|
Banque du Liban
|
|
|
|
Custodian and Clearing Center of Financial Instruments
|
|
|
|
for Lebanon and the Middle East (Midclear) S.A.L.
|
|
|
|
|
Lithuania
|
|
Central Securities Depository of Lithuania
|
|
|
|
|
Malaysia
|
|
Bank Negara Malaysia
|
|
|
|
Bursa Malaysia Depository Sdn. Bhd.
|
|
|
|
|
Mali
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Malta
|
|
Central Securities Depository of the Malta Stock Exchange
|
|
|
|
|
Mauritius
|
|
Bank of Mauritius
|
|
|
|
Central Depository and Settlement Co. Limited
|
|
|
|
|
Mexico
|
|
S.D. Indeval, S.A. de C.V.
|
|
|
|
|
Morocco
|
|
Maroclear
|
|
|
|
|
Namibia
|
|
Bank of Namibia
|
|
|
|
|
Netherlands
|
|
Euroclear Nederland
|
|
|
|
|
New Zealand
|
|
New Zealand Central Securities Depository Limited
|
|
|
|
|
Niger
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Nigeria
|
|
Central Bank of Nigeria
|
|
|
|
Central Securities Clearing System Limited
|
|
|
|
|
Norway
|
|
Verdipapirsentralen
|
|
|
|
|
Oman
|
|
Muscat Clearing & Depository Company S.A.O.C.
|
|
|
|
|
Pakistan
|
|
Central Depository Company of Pakistan Limited
|
|
|
|
State Bank of Pakistan
|
|
|
|
|
Palestine
|
|
Clearing, Depository and Settlement system, a department of the Palestine Securities Exchange
|
|
|
|
|
Peru
|
|
CAVALI S.A. Institución de Compensación y Liquidación de Valores
|
|
|
|
|
Philippines
|
|
Philippine Depository & Trust Corporation
|
|
|
|
Registry of Scripless Securities (ROSS) of the Bureau of the Treasury
|
|
|
|
|
Poland
|
|
Rejestr Papierów Wartościowych
|
|
|
|
Krajowy Depozyt Papierów Wartościowych, S.A.
|
|
|
|
|
Portugal
|
|
INTERBOLSA - Sociedad Gestora de Sistemas
|
|
|
|
de Liquidação e de Sistemas Centralizados de Valores Mobiliários, S.A.
|
|
|
|
|
Qatar
|
|
Central Clearing and Registration (CCR), a department of the Qatar Exchange
|
|
|
|
|
Romania
|
|
National Bank of Romania
|
|
|
|
S.C. Depozitarul Central S.A.
|
|
|
|
|
Russia
|
|
National Settlement Depository
|
|
|
|
|
Senegal
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Serbia
|
|
Central Registrar, Depository and Clearinghouse
|
20
LIMITED ACCESS
|
|
|
|
|
Singapore
|
|
Monetary Authority of Singapore
|
|
|
|
The Central Depository (Pte.) Limited
|
|
|
|
|
Slovak Republic
|
|
Centrálny depozitár cenných papierov SR, a.s.
|
|
|
|
|
Slovenia
|
|
KDD - Centralna klirinško depotna družba d.d.
|
|
|
|
|
South Africa
|
|
Strate Limited
|
|
|
|
|
Spain
|
|
IBERCLEAR
|
|
|
|
|
Sri Lanka
|
|
Central Bank of Sri Lanka
|
|
|
|
Central Depository System (Pvt) Limited
|
|
|
|
|
Republic of Srpska
|
|
Central Registry of Securities in the Republic of Srpska JSC
|
|
|
|
|
Sweden
|
|
Euroclear Sweden
|
|
|
|
|
Switzerland
|
|
SIX SIS AG
|
|
|
|
|
Taiwan - R.O.C.
|
|
Central Bank of the Republic of China (Taiwan)
|
|
|
|
Taiwan Depository and Clearing Corporation
|
|
|
|
|
Thailand
|
|
Thailand Securities Depository Company Limited
|
|
|
|
|
Togo
|
|
Dépositaire Central – Banque de Règlement
|
|
|
|
|
Trinidad and Tobago
|
|
Central Bank of Trinidad and Tobago
|
|
|
|
Trinidad and Tobago Central Depository Limited
|
|
|
|
|
Tunisia
|
|
Société Tunisienne Interprofessionelle pour la
|
|
|
|
Compensation et le Dépôt des Valeurs Mobilières (STICODEVAM)
|
|
|
|
|
Turkey
|
|
Central Bank of Turkey
|
|
|
|
Central Registry Agency
|
|
|
|
|
Uganda
|
|
Bank of Uganda
|
|
|
|
Securities Central Depository
|
|
|
|
|
Ukraine
|
|
All-Ukrainian Securities Depository
|
|
|
|
|
United Arab Emirates -
Abu Dhabi
|
|
Clearing, Settlement, Depository and Registry department of the Abu Dhabi Securities Exchange
|
|
|
|
|
United Arab Emirates -
Dubai Financial Market
|
|
Clearing and Depository System, a department of the Dubai Financial Market
|
|
|
|
|
United Arab Emirates - Dubai International
Financial Center
|
|
Central Securities Depository, owned and operated by NASDAQ Dubai Limited
|
|
|
|
|
United Kingdom
|
|
Euroclear UK & Ireland Limited *
|
|
|
|
|
Uruguay
|
|
Banco Central del Uruguay
|
|
|
|
|
Venezuela
|
|
Banco Central de Venezuela
|
|
|
|
Caja Venezolana de Valores
|
|
|
|
|
Vietnam
|
|
Vietnam Securities Depository
|
|
|
|
|
Zambia
|
|
Bank of Zambia
|
|
|
|
LuSE Central Shares Depository Limited
|
21
LIMITED ACCESS
TRANSNATIONAL
Euroclear Bank S.A./N.V.
Clearstream Banking,
S.A.
|
**
|
Euroclear UK & Ireland Limited (EUI) serves as depository for GBP- and EUR-denominated money market instruments. Also, EUI utilizes its CREST system to
facilitate settlement for eligible securities in the UK and Ireland, with securities ownership recorded at the relevant issuer’s registrar.
|
22
LIMITED ACCESS
SCHEDULE C
|
|
|
|
|
Publication/Type of Information
|
|
Brief Description
|
|
(scheduled frequency)
|
|
|
|
|
|
|
The Guide to Custody in World Markets
(hardcopy annually and regular website updates)
|
|
An overview of settlement and safekeeping procedures, custody practices and foreign investor considerations for the markets in which State Street offers custodial
services.
|
|
|
|
|
Global Custody Network Review
(annually)
|
|
Information relating to Foreign Sub-Custodians in State Street’s Global Custody Network. The Review stands as an integral part of the materials that State Street provides to
its U.S. mutual fund clients to assist them in complying with SEC Rule 17f-5. The Review also gives insight into State Street’s market expansion and Foreign Sub-Custodian selection processes, as well as the procedures and controls used to
monitor the financial condition and performance of our Foreign Sub-Custodian banks.
|
|
|
|
|
Securities Depository Review
(annually)
|
|
Custody risk analyses of the Foreign Securities Depositories presently operating in Network markets. This publication is an integral part of the materials that State Street
provides to its U.S. mutual fund clients to meet informational obligations created by SEC Rule 17f-7.
|
|
|
|
|
Global Legal Survey
(annually)
|
|
With respect to each market in which State Street offers custodial services, opinions relating to whether local law restricts (i) access of a fund’s independent public
accountants to books and records of a Foreign Sub- Custodian or Foreign Securities System, (ii) a fund’s ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (iii) a fund’s
ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (iv) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars.
|
|
|
|
|
Subcustodian Agreements
(annually)
|
|
Copies of the contracts that State Street has entered into with each Foreign Sub-Custodian that maintains U.S. mutual fund assets in the markets in which State Street offers
custodial services.
|
|
|
|
|
Global Market Bulletin
(daily or as necessary)
|
|
Information on changing settlement and custody conditions in markets where State Street offers custodial services.
|
|
|
|
|
|
|
Includes changes in market and tax regulations, depository developments, dematerialization information, as well as other market changes that may impact State Street’s
clients.
|
|
|
|
|
Foreign Custody Advisories
(as necessary)
|
|
For those markets where State Street offers custodial services that exhibit special risks or infrastructures impacting custody, State Street issues market advisories to highlight
those unique market factors which might impact our ability to offer recognized custody service levels.
|
|
|
|
|
Material Change Notices
(presently on a quarterly basis or as otherwise necessary)
|
|
Informational letters and accompanying materials confirming State Street’s foreign custody arrangements, including a summary of material changes with Foreign Sub-Custodians
that have occurred during the previous quarter. The notices also identify any material changes in the custodial risks associated with maintaining assets with Foreign Securities Depositories.
|
LIMITED
ACCESS
LOAN SERVICES ADDENDUM
TO MASTER CUSTODIAN AGREEMENT
ADDENDUM to that certain Master Custodian Agreement (the “
Custodian Agreement
”) by and among each fund (a “
Fund
”) identified on Appendix A thereto or made
subject thereto pursuant to Section 19.16 thereof and State Street Bank and Trust Company, including its subsidiaries and other affiliates. As used in this Addendum, the term “
Fund
”, in relation to a Loan (as defined
below), includes a Portfolio on whose behalf the Fund acts with respect to the Loan.
The following provisions will apply with
respect to interests in commercial loans, including loan participations, whether the loans are bilateral or syndicated and whether any obligor is located in or outside of the United States (collectively, “
Loans
”), made or
acquired by a Fund on behalf of one or more of its Portfolios.
S
ECTION
1.
P
AYMENT
C
USTODY
. If a Fund wishes the Custodian to receive payments directly with respect to a Loan for credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement,
(a) the Fund will cause the Custodian to be named as the Fund’s nominee for payment purposes under the relevant financing documents,
e.g., in the case of a syndicated loan, the administrative contact for the agent bank, and otherwise provide for the payment to the Custodian of the payments with respect to the Loan; and
(b) the Custodian will credit to the bank account maintained by the Custodian for the Fund under the Custodian Agreement any payment on
or in respect of the Loan actually received by the Custodian and identified as relating to the Loan, but with any amount credited being conditional upon clearance and actual receipt by the Custodian of final payment.
S
ECTION
2.
M
ONITORING
. If a Fund wishes the Custodian to monitor payments on and
forward notices relating to a Loan,
(a) the Fund will deliver, or cause to be delivered, to the Custodian a schedule
identifying the amount and due dates of the scheduled principal payments, the scheduled interest payment dates and related payment amount information, and such other information with respect to the Loan as the Custodian may reasonably require in
order to perform its services hereunder (collectively, “
Loan Information
”) and in such form and format as the Custodian may reasonably request; and
(b) the Custodian will (i) if the amount of a principal, interest, fee or other payment with respect to the Loan is not received by the Custodian on the date on which the amount is scheduled to be
paid as reflected in the Loan Information, provide a report to the Fund that the payment has not been received and (ii) if the Custodian receives any consent solicitation, notice of default or similar notice from any syndication agent, lead or
obligor on the Loan, undertake reasonable efforts to forward the notice to the Fund.
S
ECTION
3.
E
XCULPATION
OF
THE
C
USTODIAN
.
(a)
Payment Custody and Monitoring.
The Custodian will have no liability for any delay or failure by the Fund or any third party in providing Loan Information to the Custodian or for any inaccuracy or incompleteness of any Loan Information. The
Custodian will have no obligation to verify, investigate,
recalculate, update or otherwise confirm the accuracy or completeness any Loan Information or other information or notices received by the Custodian in respect of the Loan. The Custodian will be
entitled to (i) rely upon the Loan Information provided to it by or on behalf of the Fund or any other information or notices that the Custodian may receive from time to time from any syndication agent, lead or obligor or any similar party with
respect to the Loan and (ii) update its records on the basis of such information or notices as may from time to time be received by the Custodian.
(b)
Any Service
. The Custodian will have no obligation to (i) determine whether any necessary steps have been taken or requirements have been met for the Fund to have acquired good or record
title to a Loan, (ii) ensure that the Fund’s acquisition of the Loan has been authorized by the Fund, (iii) collect past due payments on the Loan, preserve any rights against prior parties, exercise any right or perform any obligation
in connection with the Loan (including taking any action in connection with any consent solicitation, notice of default or similar notice received from any syndication agent, lead or obligor on the Loan) or otherwise take any other action to enforce
the payment obligations of any obligor on the Loan, (iv) become itself the record title holder of the Loan or (v) make any advance of its own funds with respect to the Loan.
(c)
Miscellaneous.
The Custodian will not be considered to have been or be charged with knowledge of the sale of a Loan by the
Fund, unless and except to the extent that the Custodian shall have received written notice of the sale from the Fund and the proceeds of the sale have been received by the Custodian for credit to the bank account maintained by the Custodian for the
Fund under the Custodian Agreement. If any question arises as to the Custodian’s duties under this Addendum, the Custodian may request instructions from the Fund and will be entitled at all times to refrain from taking any action unless it has
received Proper Instructions from the Fund. The Custodian will in all events have no liability, risk or cost for any action taken or omitted with respect to the Loan pursuant to Proper Instructions. The Custodian will have no responsibilities or
duties whatsoever with respect to the Loan except as are expressly set forth in this Addendum.
Exhibit (h)(5)
EXHIBIT A
(revised May 2, 2008)
|
|
|
|
|
|
|
Portfolio
|
|
Administration Fee
|
|
|
Highland Equity Opportunities Fund
|
|
|
0.20%
|
|
|
Highland High Income Fund
|
|
|
0.20%
|
|
|
Highland Income Fund
|
|
|
0.20%
|
|
|
Highland Healthcare Fund
|
|
|
0.20%
|
|
Exhibit (h)(12)
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT (this “
Agreement
”) is made as of the 25th day of September, 2012 (the “
Effective
Date
”), by and between Pyxis Funds I (the “
Trust
”), and SEI Investments Global Funds Services, a statutory trust formed under the laws of the State of Delaware (the “
Administrator
”).
WHEREAS, the Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the
“
1940 Act
”), consisting, in part of the series (each a “
Fund
” and collectively, the “
Funds
”) set forth in
Schedule I (Funds)
, as such Schedule I may be amended from time to time, attached
hereto; and
WHEREAS, the Trust desires the Administrator to provide, and the Administrator is willing to provide,
administrative and accounting services to the Trust on the terms and conditions set forth herein;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained herein, the Trust and the Administrator hereby agree as follows:
SECTION
1 DEFINITIONS
|
|
1.01
|
“
1940 Act
” shall have the meaning given to such term in the preamble of this Agreement.
|
|
|
1.02
|
“
Adviser
” means Pyxis Capital, L.P., or any other Person acting as an “adviser” to the Trust within the meaning of the Investment Advisers
Act of 1940.
|
|
|
1.03
|
“
Authorized Participant
” means an individual or institution that has entered into an Authorized Participant Agreement with the Trust and the
Trust’s Distributor that is authorized to purchase and redeem Creation Units of Funds within the Trust.
|
|
|
1.04
|
“
Board
” means any board of directors, board of trustees, board of managers, managing members, general partners or other Persons having similar
responsibilities to any of the foregoing.
|
|
|
1.05
|
“
Confidential Information
” shall have the meaning given to such term in
Section 11.01
of this Agreement.
|
|
|
1.06
|
“
Conversion
” means the processes and activities required to transfer the books and records of the Trust from the Trust or its prior administrator,
import the Trust’s data and files into the Administrator’s system and such other processes and activities identified as the responsibility of the Administrator in accordance with the Conversion Plan.
|
|
|
1.07
|
“
Conversion Plan
” shall have the meaning given to such term in
Section 2.05
of this Agreement.
|
|
|
1.08
|
“
Creation Unit
” means an aggregation of a specified number of Fund shares that is purchased and/or redeemed by an Authorized Participant as described
in the Fund’s Prospectus and Statement of Additional Information and in accordance with any terms and procedures set forth in the Distributor’s AP Handbook and/or related procedures.
|
|
|
1.09
|
“
Disclosing Party
” shall have the meaning given to such term in
Section 11.01
of this Agreement.
|
|
|
1.10
|
“
Fund
” shall have the meaning given to such term in the preamble of this Agreement.
|
- 1 -
|
|
1.11
|
“
Initial Term
” shall have the meaning given to such term in Section 9.01 of this Agreement.
|
|
|
1.12
|
“
Interested Party
” or “
Interested Parties
” means the Administrator, its subsidiaries and its affiliates and each of their respective
officers, directors, employees, agents, delegates and associates.
|
|
|
1.13
|
“
Investments
” shall mean such cash, securities and all other assets and property of whatsoever nature now owned or subsequently acquired by or for the
account of the Trust.
|
|
|
1.14
|
“
Live Date
” means the date on which the Trust is converted onto the Administrator’s system and the Administrator begins calculating the
Trust’s official net asset values (“NAV”).
|
|
|
1.15
|
“
Organizational Documents
” means, as applicable, the articles of incorporation, declaration of trust, certificate of formation, memorandum of
association, partnership agreement, bylaws or other similar documentation setting forth the respective rights and obligations of directors, managers and Authorized Participants in the Trust.
|
|
|
1.16
|
“
Person
” shall mean any natural person, partnership, estate, association, custodian, nominee, limited liability company, corporation, trust or other
legal entity.
|
|
|
1.17
|
“
Receiving Party
” shall have the meaning given to such term in Section 11.01 of this Agreement.
|
|
|
1.18
|
“
Renewal Term
” shall have the meaning given to such term in Section 9.01 of this Agreement.
|
|
|
1.19
|
“
Services
” shall have the meaning given to such term in Section 2.01 of this Agreement.
|
|
|
1.20
|
Unless the context otherwise requires and except as otherwise specified in this Agreement, the term the “
Trust
” shall include, as applicable, a
sponsor, general partner, trustee or other Person having similar status or performing similar functions, as the case may be, acting on behalf of the Trust.
|
|
|
1.21
|
“
Trust Data
” shall have the meaning given to such term in Section 2.04 of this Agreement.
|
|
|
1.22
|
“
Trust Materials
” means any prospectus, registration statement, statement of additional information, proxy solicitation and tender offer materials,
annual or other periodic report of the Trust or any advertising, marketing, shareholder communication, or promotional material generated by the Trust or its investment adviser from time to time, as appropriate, including all amendments or
supplements thereto.
|
SECTION 2 APPOINTMENT AND CONTROL
|
|
2.01
|
Services
. The Trust hereby appoints the Administrator to be, and the Administrator agrees to act as, the administrative agent of the Trust for the term and
subject to the provisions hereof. The Administrator shall perform (and may delegate or sub-contract, as provided below) the services set forth in this Agreement, including the services set forth in
Schedule II (Services)
, which may be amended
from time to time in writing by the parties (“
Services
”). In performing its duties under this Agreement, the Administrator will act in all material respects in accordance with the Organizational Documents and Trust Materials as they
may be amended (to the extent that copies of such documents are delivered to the Administrator).
|
- 2 -
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|
2.02
|
Authority
. Each of the activities engaged in under the provisions of this Agreement by the Administrator on behalf of the Trust shall be subject to the overall
direction and control of the Trust or any Person authorized to act on the Trust’s behalf (including, without limitation, the Trust’s Board); provided, however, that the Administrator shall have the general authority to do all acts deemed
in the Administrator’s good faith belief to be necessary and proper to perform its obligations under this Agreement. In performing its duties hereunder, the Administrator shall observe and generally comply with the Trust Materials, all
applicable resolutions and/or directives of the Board of which it has notice, and applicable laws which may from time to time apply to the Services rendered by the Administrator. In the event that a Fund desires to amend its Organizational Documents
in any manner that can reasonably be expected to have a material impact on the Administrator’s performance of the Services hereunder, such Fund shall notify the Administrator in advance of such amendment and the parties will work together in
good faith to minimize the impact of such change on the Administrator’s operations and compensate the Administrator in connection therewith. The Administrator (i) shall not have or be required to have any authority to supervise the
investment or reinvestment of the Creation Units, underlying securities or other properties which comprise the assets of the Trust and (ii) shall not provide any investment advisory services to the Trust, and shall have no liability related to
the foregoing.
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2.03
|
Third Parties; Affiliates
. The Administrator may delegate to, or sub-contract with, third parties or affiliates administrative or other functions it deems
necessary to perform its obligations under this Agreement; provided, however, all fees and expenses incurred in any delegation or sub-contract shall be paid by the Administrator and the Administrator shall remain responsible to the Trust for the
acts and omissions of such other entities as if such acts or omissions were the acts or omissions of the Administrator. The Trust acknowledges that during the term of this Agreement, the services to be performed by the Administrator may be completed
by one or more of the Administrator’s affiliates or third parties located in or outside of the United States of America.
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|
2.04
|
Trust Data
. The Trust shall be solely responsible for the accuracy, completeness, and timeliness of all data and other information provided to the Administrator
by or on behalf of the Trust pursuant to this Agreement (including, without limitation, (i) prices, (ii) sufficient transaction supporting documentation, (iii) detailed accounting methodologies with respect to the Trust’s
Investments as approved by the Trust’s auditors, (iv) the terms of any agreement between the Trust and an investor or Authorized Participant regarding any special fee or specific fee arrangement or access to portfolio information that may
impact or affect the Services, and (v) trade and settlement information from prime brokers and custodians) (collectively, “
Trust Data
”). All Trust Data shall be provided to the Administrator on a timely basis and in a format
and medium reasonably requested by the Administrator from time to time. The Trust shall have an ongoing obligation to promptly update all Trust Data so that such information remains complete and accurate. All Trust Data shall be prepared and
maintained, by or on behalf of the Trust, in accordance with applicable law, Trust Materials and generally acceptable accounting principles. The Administrator shall be entitled to rely on all the Trust Data and shall have no liability for any loss,
damage or expense incurred by the Trust or any other Person to the extent that such loss, damage or expense arises out of or is related to the Trust Data that is not timely, current, complete and accurate.
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|
2.05
|
Conversion Plan
. Promptly following the Effective Date, the Administrator shall prepare a project plan (“
Conversion Plan
”) that sets forth the
respective roles and responsibilities of each of the parties in connection with the Conversion or other implementation of the Trust onto the Administrator’s system.
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- 3 -
SECTION 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE TRUST
|
|
3.01
|
The Trust represents and warrants that:
|
|
|
3.01.01.
|
it issues and offers shares of an exchange traded fund that is registered under the 1940 Act as [an open-end fund/a unit investment trust] and that issues and redeems
its shares at their net asset value;
|
|
|
3.01.02.
|
shares of an Fund in the Trust are available for purchase and redeemable only by Authorized Participants and only in Creation Units;
|
|
|
3.01.03.
|
it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite actions on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the
transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms;
|
|
|
3.01.04.
|
it is not a party to any, and there are no, pending or threatened legal, administrative, arbitral or other proceedings, claims, actions or governmental or regulatory
investigations or inquiries (collectively, “
Actions
”) of any nature against it or its properties or assets which could, individually or in the aggregate, have a material effect upon its business or financial condition. There is no
injunction, order, judgment, decree, or regulatory restriction imposed specifically upon it or any of its properties or assets;
|
|
|
3.01.05.
|
it is not in default under any contractual or statutory obligations whatsoever (including the payment of any tax) which, individually or in the aggregate, could
materially and adversely affect, or is likely to materially and adversely affect, its business or financial condition;
|
|
|
3.01.06.
|
as of the close of business on the Effective Date, each Fund that is in existence as of the Effective Date has authorized the issuance of an indefinite number of shares
and has elected to register an indefinite number of shares in accordance with Rule 24f-2 under the 1940 Act;
|
|
|
3.01.07.
|
it has obtained all consents and given all notices (regulatory or otherwise), made all required regulatory filings and is in compliance with all applicable laws and
regulations;
|
|
|
3.01.08.
|
it has a valid engagement with an independent auditor, custodian and broker and will provide additional information regarding such service providers, including
information regarding the terms of its agreement with such service providers, upon request;
|
|
|
3.01.09.
|
it has notified the Administrator of any and all separate agreements between the Trust and any third party that could impact the Administrator’s performance of its
obligations pursuant to this Agreement; and
|
- 4 -
|
|
3.01.10.
|
it has disclosed the terms of any agreement between the Trust and an investor or Authorized Participant regarding any special fee or specific fee arrangement or access
to portfolio information that may impact or affect the Services.
|
|
|
3.02
|
The Trust covenants and agrees that:
|
|
|
3.02.01.
|
it will furnish the Administrator from time to time with complete copies, authenticated or certified, of each of the following:
|
|
|
(a)
|
Copies of the following documents:
|
|
|
(1)
|
Copies of the Trust’s current Organizational Documents and of any amendments thereto, certified by the proper official of the state in which such document has been
filed; and
|
|
|
(2)
|
Copies of resolutions of the Board covering the approval of this Agreement, authorization of a specified officer of the Trust to execute and deliver this Agreement and
authorization for specified officers of the Trust to instruct the Administrator.
|
|
|
(b)
|
A list of all the officers of the Trust, together with specimen signatures of those officers who are authorized to instruct the Administrator in all matters.
|
|
|
(c)
|
Copies of all Trust Materials, including the current prospectus and statement of additional information for the Trust.
|
|
|
(d)
|
A list of all issuers the Trust is restricted from purchasing.
|
|
|
(e)
|
A list of all issuers and or indices that any Fund in the Trust will invest in and/or track.
|
|
|
(f)
|
A list of all affiliated persons (as such term is defined in the 1940 Act) of the Trust that are broker-dealers.
|
|
|
(g)
|
The identity of the Trust’s auditors along with contact information.
|
|
|
(h)
|
The expense budget for each Fund for the current fiscal year.
|
|
|
(i)
|
A list of contact persons (primary, backup and secondary backup) of the Trust’s investment adviser and, if applicable, sub-adviser, who can be reached until 6:30
p.m. ET with respect to valuation matters.
|
|
|
(j)
|
Copies of all the Trust Data reasonably requested by the Administrator or necessary for the Administrator to perform its obligations pursuant to this Agreement.
|
The Trust shall promptly provide the Administrator with written notice of any updates of or changes to any of
the foregoing documents or information, including an updated written copy of such document or information. Until the Administrator receives such updated information or document, the Administrator shall have no obligation to implement or rely upon
such updated information or document.
- 5 -
|
|
3.02.02.
|
it shall timely perform or oversee the performance of all obligations identified in this Agreement as obligations of the Trust, including, without limitation, providing
the Administrator with all the Trust Data and Organizational Documents reasonably requested by the Administrator;
|
|
|
3.02.03.
|
it will notify the Administrator as soon as reasonably practical in advance of any matter which is reasonably likely to materially affect the Administrator’s
performance of its duties and obligations under this Agreement, including any amendment to the documents referenced in
Section 3.02.01
above;
|
|
|
3.02.04.
|
it will comply in all material respects with all applicable requirements of the Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act, and any laws,
rules and regulations of governmental authorities having jurisdiction;
|
|
|
3.02.05.
|
any reference to the Administrator or this Agreement in the Trust Materials shall be limited solely to the description provided by the Administrator in writing from
time to time or such other description as the parties shall mutually agree in advance and in writing;
|
|
|
3.02.06.
|
it shall be solely responsible for its compliance with applicable investment policies, Trust Materials, and any laws and regulations governing the manner in which its
assets may be invested, and shall be solely responsible for any losses attributable to non-compliance with Trust Materials, and applicable policies, laws and regulations governing such the Trust, its activities or the duties, actions or omissions of
the investment manager;
|
|
|
3.02.07.
|
it will promptly notify the Administrator of updates to its representations and warranties hereunder; and
|
|
|
3.02.08.
|
it has an agreement in place with the Adviser pursuant to which the Adviser shall review the PLF file and confirm that it is complete and accurate.
|
SECTION 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADMINISTRATOR
|
|
4.01
|
The Administrator represents and warrants that:
|
|
|
4.01.01.
|
it has full power, right and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby; the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by all requisite action on its part, and no other proceedings on its part are necessary to approve this Agreement or to consummate the
transactions contemplated hereby; this Agreement has been duly executed and delivered by it; this Agreement constitutes a legal, valid and binding obligation, enforceable against it in accordance with its terms.
|
|
|
4.01.02.
|
it is not a party to any, and there are no, pending or threatened Actions of any nature against it or its properties or assets which could, individually or in the
aggregate, have a material effect upon its business or financial condition. There is no injunction, order, judgment, decree, or regulatory restriction imposed specifically upon it or any of its properties or assets.
|
- 6 -
|
|
4.01.03.
|
it is not in default under any statutory obligations whatsoever (including the payment of any tax) which materially and adversely affects, or is likely to materially
and adversely affect, its business or financial condition.
|
SECTION 5 LIMITATION OF LIABILITY AND
INDEMNIFICATION
|
|
5.01
|
THE DUTIES OF THE ADMINISTRATOR SHALL BE CONFINED TO THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT, AND NO IMPLIED DUTIES ARE ASSUMED BY OR MAY BE ASSERTED AGAINST THE
ADMINISTRATOR. EXCEPT TO THE EXTENT ARISING OUT OF THE ADMINISTRATOR’S FRAUD OR CRIMINAL MISCONDUCT WHEN PROVIDING THE SERVICES, THE ADMINISTRATOR’S AGGREGATE LIABILITY TO THE FUND WILL BE LIMITED TO MONETARY DAMAGES NOT TO EXCEED THE
AMOUNT OF FEES PAID HEREUNDER DURING THE THREE MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING RISE TO THE FIRST SUCH CLAIM TO OCCUR. For the avoidance of doubt, the Administrator shall not be responsible for any breach in the performance of its
obligations under this Agreement due to (i) the failure or delay of the Trust or its agents to perform its obligations under this Agreement or (ii) the Administrator’s reliance on the Trust Data. Each party shall have the duty to
mitigate its damages for which another party may become responsible. As used in this
Section 5
, the term “
Administrator
” shall include the officers, directors, employees, affiliates and agents of the Administrator as
well as that entity itself. NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE ADMINISTRATOR BE LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL, OR OTHER NON-DIRECT DAMAGES OF ANY KIND
WHETHER SUCH LIABILITY IS PREDICATED ON CONTRACT, STRICT LIABILITY, OR ANY OTHER THEORY AND REGARDLESS OF WHETHER THE FUND IS ADVISED OF THE POSSIBILITY OF ANY SUCH DAMAGES.
|
|
|
5.02
|
The Administrator may, from time to time, provide to the Trust services and products (“
Special Third Party Services
”) from external third party sources
that are Pricing Sources or other similar service providers (“
Special Third Party Vendors
”). The Trust acknowledges and agrees that the Special Third Party Services are confidential and proprietary trade secrets of the Special Third
Party Vendors. Accordingly, the Trust shall honor requests by the Administrator and the Special Third Party Vendors to protect their proprietary rights in their data, information and property including requests that the Trust place copyright notices
or other proprietary legends on printed matter, print outs, tapes, disks, film or any other medium of dissemination. The Trust further acknowledges and agrees that all Special Third Party Services are provided on an “AS IS WITH ALL FAULTS”
basis solely for such the Trust’s internal use, and as an aid in connection with the receipt of the Services. The Trust may use Special Third Party Services as normally required on view-only screens and hard copy statements, reports and other
documents necessary to support such the Trust’s investors, however the Trust shall not distribute any Special Third Party Services to other third parties. THE SPECIAL THIRD PARTY VENDORS AND THE ADMINISTRATOR MAKE NO WARRANTIES, EXPRESS OR
IMPLIED, AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR USE, OR ANY OTHER MATTER WITH RESPECT TO ANY OF THE SPECIAL THIRD PARTY SERVICES. NEITHER THE ADMINISTRATOR NOR THE SPECIAL THIRD PARTY VENDORS SHALL BE LIABLE FOR ANY DAMAGES SUFFERED BY THE
FUND IN THE USE OF ANY OF THE SPECIAL THIRD PARTY SERVICES, INCLUDING, WITHOUT LIMITATION, LIABILITY FOR ANY INCIDENTAL, CONSEQUENTIAL OR SIMILAR DAMAGES.
|
|
|
5.03
|
The Trust shall indemnify, defend and hold harmless the Administrator from and against and the Administrator shall have no liability in connection with
any and all actions, suits
|
- 7 -
|
|
and claims, whether groundless or otherwise, and from and against any and all losses, damages, costs, charges, reasonable counsel fees and disbursements, payments, expenses and liabilities
(including reasonable investigation expenses) arising directly or indirectly out of: (i) any act or omission of the Administrator in carrying out its duties hereunder or as a result of the Administrator’s reliance upon any instructions,
notice or instrument that the Administrator believes is genuine and signed or presented by an authorized Person of the Trust; provided that this indemnification shall not apply if any such loss, damage or expense is caused by or arises from the
Administrator’s bad faith or fraud in the performance of the Services; (ii) any violation by the Trust or any agent of the Trust of any applicable investment policy, law or regulation, (iii) any misstatement or omission in Trust
Materials or any the Trust Data; (iv) any breach by the Trust of any representation, warranty or agreement contained in this Agreement; (v) any act or omission of the Trust, the Trust’s former administrator prior to the Effective
Date, a Special Third Party Vendor, the Trust’s other service providers (such as custodians, prime brokers, transfer agents, investment advisers and sub-adviser(s); (vi) any pricing error caused by the failure of the Trust’s
investment adviser or sub-adviser to provide a trade ticket or for incorrect information included in any trade ticket; or (vii) any act or omission of the Administrator as a result of the Administrator’s compliance with the Regulations,
including, but not limited to, returning an investor or Authorized Participant’s investment or restricting the payment of redemption proceeds.
|
|
|
5.04
|
To the extent that the Trust receives Special Third Party Services from Interactive Data Corporation (“IDC”), the Trust shall indemnify and hold harmless IDC
and its suppliers from any and all losses, damages, liability, costs, including reasonable attorney’s fees, resulting directly or indirectly from any claim or demand against IDC by a third party arising out of, derived from, or related to the
accuracy or completeness of any such Special Third Party Services received by the Trust. IDC shall not be liable for any claim or demand against the Trust by any third party.
|
|
|
5.05
|
The Administrator may apply to the Trust, the Trust’s sponsor or any Person acting on the Trust’s behalf at any time for instructions and may consult counsel
for the Trust or the Trust’s sponsor or with accountants, counsel and other experts with respect to any matter arising in connection with the Administrator’s duties hereunder, and the Administrator shall not be liable or accountable for
any action taken or omitted by it in good faith in accordance with such instruction or with the advice of counsel, accountants or other experts. Also, the Administrator shall not be liable for actions taken pursuant to any document which it
reasonably believes to be genuine and to have been signed by the proper Person or Persons. The Administrator shall not be held to have notice of any change of authority of any officer, employee or agent of the Trust until receipt of written notice
thereof. To the extent that the Administrator consults with the Trust counsel pursuant to this provision, any such expense shall be borne by the Trust.
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5.06
|
The Administrator shall have no liability for its reliance on the Trust Data or the performance or omissions of unaffiliated third parties such as, by way of example
and not limitation, transfer agents, sub-transfer agents, custodians, prime brokers, placement agents, third party marketers, asset data service providers, investment advisers (including, without limitation, the sponsor) or sub-advisers, current or
former third party service providers, Pricing Sources, software providers, printers, postal or delivery services, prior administrators, telecommunications providers and processing and settlement services. The Administrator may rely on and shall have
no duty to investigate or confirm the accuracy or adequacy of any information provided by any of the foregoing third parties.
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5.07
|
The Administrator shall have no obligations with respect to any laws relating to the distribution, purchase or sale of Creation Units or underlying securities. Further,
the Trust assumes full responsibility for the preparation, contents and distribution of its Trust Materials and its compliance with all applicable laws, rules, and regulations.
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5.08
|
The indemnification rights hereunder shall include the right to reasonable advances of defense expenses on an as-incurred basis in the event of any pending or
threatened litigation or Action with respect to which indemnification hereunder may ultimately be merited. If in any case the Trust is asked to indemnify or hold the Administrator harmless, the Administrator shall promptly advise the Trust of the
pertinent facts concerning the situation in question, and the Administrator will use all reasonable care to identify and notify the Trust promptly concerning any situation which presents or appears likely to present the probability of such a claim
for indemnification, but failure to do so shall not affect the rights hereunder.
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5.09
|
The Trust shall be entitled to participate at its own expense or, if it so elects, to assume the defense of any suit brought to enforce any claims subject to this
indemnity provision. If the Trust elects to assume the defense of any such claim, the defense shall be conducted by counsel chosen by the Trust and satisfactory to the Administrator, whose approval shall not be unreasonably withheld. In the event
that the Trust elects to assume the defense of any suit and retain counsel, the Administrator shall bear the fees and expenses of any additional counsel retained by it. If the Trust does not elect to assume the defense of a suit, it will advance to
the Administrator the fees and expenses of any counsel retained by the Administrator. None of the parties hereto shall settle or compromise any action, suit, proceeding or claim if such settlement or compromise provides for an admission of liability
on the part of the indemnified party without such indemnified party’s written consent.
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5.10
|
The provisions of this
Section 5
shall survive the termination of this Agreement.
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SECTION 6 VALUATION
The Administrator is entitled
to rely on the price and value information (hereinafter “
Valuation Information
”) provided by prior administrators, brokers and custodians, investment advisers (including, without limitation, the sponsor) an underlying fund in which
the Trust invests, if applicable, or any third-party pricing services selected by the Administrator, the Trust’s investment adviser or the Trust (collectively hereinafter referred to as the “
Pricing Sources
”) in order to
calculate the Trust’s aggregate NAV (and the value of Authorized Participants’ capital accounts based upon such valuation). The Administrator shall have no obligation to obtain Valuation Information from any sources other than the Pricing
Sources and may rely on estimates provided by the Trust’s investment adviser or the applicable underlying fund. In the event that the Trust’s Adviser does not provide a timely value for an underlying fund, the Administrator shall have the
right to use the prior month’s valuation in its calculation of the current month’s NAV, and the Administrator shall have no liability and shall be indemnified by the applicable the Trust in connection with such action. The Administrator
shall have no liability or responsibility for the accuracy of the Valuation Information provided by a Pricing Source or the delegate of a Pricing Source and the Trust shall indemnify and defend the Administrator against any loss, damages, costs,
charges or reasonable counsel fees and expenses in connection with any inaccuracy of such Valuation Information. The Trust shall not use Valuation Information for any purpose other than in connection with the Services and in accordance with the
provisions of this Agreement.
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SECTION 7 ALLOCATION OF CHARGES AND EXPENSES
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7.01
|
The Administrator
. The Administrator shall furnish at its own expense the personnel necessary to perform its obligations under this Agreement.
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7.02
|
Fund Expenses
. The Trust assumes and shall pay or cause to be paid all expenses of the Trust (including any Fund of the Trust) not otherwise allocated in this
Agreement, including, without limitation, organizational costs; taxes; expenses for legal and auditing services; the expenses of preparing (including typesetting), printing and mailing reports, Trust Materials, proxy solicitation and tender offer
materials and notices to existing shareholders; all expenses incurred in connection with issuing and redeeming Creation Units; the costs of Pricing Sources; the costs of loan credit activity data; the costs of escrow and custodial services; the cost
of document retention and archival services, the costs of responding to document production requests; the cost of initial and ongoing registration of the shares under Federal and state securities laws; costs associated with attempting to locate lost
shareholders; all expenses incurred in connection with any custom programming or systems modifications required to provide any reports or services requested by the Trust; any expense, if applicable, incurred to reprint the Trust documents
identifying the Administrator (along with its address and telephone number) as the Trust’s new administrator; costs associated with DST FanMail or similar reporting service; bank service charges; NSCC trading charges; fees and out-of-pocket
expenses of Board members; the costs of Board meetings; insurance; interest; brokerage costs; litigation and other extraordinary or nonrecurring expenses; and all fees and charges of service providers to the Trust. The Trust shall reimburse the
Administrator for its reasonable costs and out-of-pocket expenses incurred in the performance of the Services expenses, including all reasonable charges for independent third party audit charges, printing, financial reporting software/typesetting
fees, copying, postage, telephone, and fax charges incurred by the Administrator in the performance of its duties.
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SECTION 8
COMPENSATION
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8.01
|
Fees
. Trust shall pay to the Administrator compensation for the services performed and the facilities and personnel provided by the
Administrator pursuant to this Agreement, its pro-rata portion of the fees set forth in the written fee schedule annexed hereto as
Schedule III
and incorporated herein. Trust shall have no right of set-off. The fees set forth herein are
determined based on the characteristics of the each Fund as of the Effective Date. Any material change to the characteristics to a Fund may give rise to an adjustment to the fees set forth in this Agreement. In the event of such a change, the
parties shall negotiate any adjustment to the fees payable hereunder in good faith; provided, however, that if the parties cannot in good faith agree on such adjustment to the fees within a reasonable period of time, the Administrator may terminate
this Agreement upon thirty days prior written notice to the Trust. Trust shall pay the Administrator’s fees monthly in U.S. Dollars, unless otherwise agreed to by the parties. The Administrator is hereby authorized to, and may, at its option,
automatically debit its fees due from the Trust’s portfolio account(s). Trust shall pay the foregoing fees despite the existence of any dispute among the parties. If this Agreement becomes effective subsequent to the first day of any calendar
month or terminates before the last day of any calendar month, the Administrator’s compensation for that part of the month in which this Agreement is in effect shall be prorated in a manner consistent with the calculation of the fees as set
forth in
Schedule III
. Trust agrees to pay interest on all amounts past due in an amount equal to the lesser of the maximum amount permitted by applicable law or the month fee of one and one-half percent (1
1
/
2
%) times the amount past due multiplied by the number of whole or partial months from the date on which such amount was first due up to and including the day on which payment is received by the
Administrator.
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8.02
|
Adjustment of Fees
. Trust acknowledges that from time to time after the first anniversary of the Effective Date, Administrator may increase all non-asset based
Fees upon thirty days written notice to the Trust, in an amount equal to the greater of: (a) five percent; or (b) the percentage increase in the CPI since the Effective Date of the first such increase and since the date of the immediately
preceding increase with respect to all subsequent increases; provided, however, that Administrator may not increase the Fees more than one time during any twelve-month period. Notwithstanding the above, in the event of an increase to
Administrator’s costs for Special Third Party Services, Administrator may at any time upon thirty days written notice increase the Fees applicable to such Special Third Party Services, provided, that such fee increase will not exceed the
applicable percentage increase in costs incurred by Administrator with respect to such Special Third Party Services.
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SECTION
9 DURATION AND TERMINATION
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9.01
|
Term and Renewal
. This Agreement shall become effective as of the Effective Date and shall remain in effect for a period of two years from and after the Live
Date (the “
Initial Term
”), and thereafter shall automatically renew for successive two year terms (each such period, a “
Renewal Term
”) unless terminated by any party giving written notice of non-renewal at least
ninety days prior to the last day of the then current term to each other party hereto.
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9.02
|
Termination for Cause
.
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9.02.01.
|
This Agreement may be terminated by any party giving prior notice in writing to the other parties if at anytime the other party or parties have been first
(i) notified in writing that such party shall have materially failed to perform its duties and obligations under this Agreement (such notice shall be of the specific asserted material breach) (“
Breach Notice
”) and (ii) the
party receiving the Breach Notice shall not have remedied the noticed failure within sixty days after receipt of the Breach Notice requiring it to be remedied.
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9.02.02.
|
This Agreement may be terminated by any party giving one hundred eighty days prior notice in writing to the other parties prior to the “liquidation” of the
Trust. For purposes of this paragraph, the term “liquidation” shall mean a transaction in which all the assets of the Trust are sold or otherwise disposed of and proceeds there from are distributed in cash or in kind to the Authorized
Participants in complete liquidation of the interests of such Authorized Participants in the Trust. A termination pursuant to this
Section 9.02.02
shall be effective as of the date of such liquidation. Notwithstanding the foregoing, the
right to terminate set forth in this
Section 9.02.02
shall not relieve the Trust of its obligation to pay the fees set forth on
Schedule III (Fees)
for the remainder of the one hundred eighty days day period set forth in this
Section 9.02.02
, which amount shall be payable prior to the effective date of such liquidation.
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9.02.03.
|
If the Administrator is unable to successfully convert the Trust or any Fund to its operational environment within a reasonable period of time following the Effective
Date (or such later date on which an additional Fund is added to this Agreement) due to untimely, inaccurate or incomplete the Trust Data, the Administrator shall have the right to terminate this Agreement, in its entirety or solely with respect to
such Fund, upon written notice and such termination shall be effective upon the date set forth in such notice.
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9.02.04.
|
Notwithstanding anything contained in this Agreement to the contrary, in the event of a merger, acquisition, change in control, re-structuring, re-organization or any
other decision involving the Trust or any affiliate (as defined in the 1940 Act) of the Trust that causes it to cease to use the Administrator as a provider of the Services in favor of another service provider prior to the last to occur of
(a) the date that is the fifth anniversary of the Live Date and (b) the expiration of the then current term of this Agreement, the Administrator shall use reasonable efforts to facilitate the deconversion of the Trust to such successor
service provider; provided, however that the Administrator makes no guaranty that such deconversion shall happen as of any particular date. In connection with the foregoing and prior to the effective date of such deconversion, the deconverting Trust
shall pay to the Administrator (1) all fees and other costs as set forth in
Schedule III
as if the Administrator had continued providing Services until the expiration of the then current term and calculated based upon the assets of the
deconverting Trust on the date notice of termination in accordance with this Section was given and (2) all fees and expenses previously waived by the Administrator at any time during the term of the Agreement. This Agreement shall terminate
effective as of the conclusion of the deconversion as set forth in this Section.
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9.03
|
Effect of Termination
.
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9.03.01.
|
The termination of this Agreement shall be without prejudice to any rights that may have accrued hereunder to any party hereto prior to such termination.
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9.03.02.
|
After termination of this Agreement and upon payment of all accrued fees, reimbursable expenses and other moneys owed to the Administrator, the Administrator shall send
to the Trust, or as it shall direct, all books of account, records, registers, correspondence, documents and assets relating to the affairs of or belonging to the Trust in the possession of or under the control of the Administrator or any of its
agents or delegates.
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9.03.03.
|
In the event any and all accrued fees, reimbursable expenses and other moneys owed to the Administrator hereunder remain unpaid in whole or in part for more than thirty
days past due, the Administrator, without further notice, may take any and all actions it deems necessary to collect such amounts due, and any and all of its collection expenses, costs and fees shall be paid by the Trust, including, without
limitation, administrative costs, attorneys fees, court costs, collection agencies or agents and interest.
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9.03.04.
|
Notwithstanding the foregoing, in the event this Agreement is terminated and for any reason the Administrator, with the written consent of the Trust, in fact continues
to perform any one or more of the services contemplated by this Agreement, the pertinent provisions of this Agreement, including without limitation, the provisions dealing with payment of fees and indemnification shall continue in full force and
effect. The Administrator shall be entitled to collect from the Trust, in addition to the compensation described in
Schedule III (Fees)
, the amount of all of the Administrator’s expenses in connection with the Administrator’s
activities following such termination, including without limitation, the delivery to the Trust and/or its designees of the Trust’s property, records, instruments and documents.
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SECTION 10 CONFLICTS OF INTEREST
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10.01
|
Non-Exclusive
. The services of the Administrator rendered to the Trust are not deemed to be exclusive. The Administrator is free to render such services to
others. The Administrator shall not be deemed to be affected by notice of, or to be under any duty to disclose to the Trust or Person acting on the Trust’s behalf, information which has come into its possession or the possession of an
Interested Party in the course of or in connection with providing administrative or other services to any other person or in any manner whatsoever other than in the course of carrying out its duties pursuant to this Agreement.
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10.02
|
Rights of Interested Parties
. Subject to applicable law, nothing herein contained shall prevent:
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10.02.01.
|
an Interested Party from buying, holding, disposing of or otherwise dealing in any shares or Creation Units for its own account or the account of any of its customers
or from receiving remuneration in connection therewith, with the same rights which it would have had if the Administrator were not a party to this Agreement; provided, however, that the prices quoted by the Administrator are no more favorable to the
Interested Party than to a similarly situated investor in or redeeming holder of shares or Creation Units;
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10.02.02.
|
an Interested Party from buying, holding, disposing of or otherwise dealing in any securities or other investments for its own account or for the account of any of its
customers and receiving remuneration in connection therewith, notwithstanding that the same or similar securities or other investments may be held by or for the account of the Trust;
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10.02.03.
|
an Interested Party from receiving any commission or other remuneration which it may negotiate in connection with any sale or purchase of shares or Creation Units or
Investments effected by it for the account of the Trust; provided, however, that the amount of such commission or other remuneration is negotiated at arm’s length; and
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10.02.04.
|
an Interested Party from contracting or entering into any financial, banking or other transaction with the Trust or from being interested in any such contract or
transaction; provided, however, that the terms of such transaction are negotiated at arm’s length.
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SECTION 11
CONFIDENTIALITY
|
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11.01
|
Confidential Information
. The Administrator and the Trust (in such capacity, the “
Receiving Party
”) acknowledge and agree to
maintain the confidentiality of Confidential Information (as hereinafter defined) provided by the Administrator and the Trust (in such capacity, the “
Disclosing Party
”) in connection with this Agreement. The Receiving Party shall
not disclose or disseminate the Disclosing Party’s Confidential Information to any Person other than those employees, agents, contractors, subcontractors and licensees of the Receiving Party, or with respect to the Administrator as a Receiving
Party, to those employees, agents, contractors, subcontractors and licensees of any agent or affiliate, who have a need to know it in order to assist the Receiving Party in performing its obligations, or to permit the Receiving Party to exercise its
rights under this Agreement. In addition, the Receiving Party (a) shall take all reasonable steps to prevent unauthorized access to the Disclosing Party’s Confidential Information, and (b) shall not use the Disclosing Party’s
Confidential Information, or authorize other Persons to use the
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- 13 -
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Disclosing Party’s Confidential Information, for any purposes other than in connection with performing its obligations or exercising its rights hereunder. As used herein, “reasonable
steps” means steps that a party takes to protect its own, similarly confidential or proprietary information of a similar nature, which steps shall in no event be less than a reasonable standard of care.
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The term “
Confidential Information
,” as used herein, means any of the Disclosing Party’s proprietary or
confidential information including, without limitation, any non-public personal information (as defined in Regulation S-P) of the Disclosing Party, its affiliates, their respective clients or suppliers, or other Persons with whom they do business,
that may be obtained by the Receiving Party from any source or that may be developed as a result of this Agreement, the terms of (or any exercise of rights granted by) this Agreement, technical data; trade secrets; know-how; business processes;
product plans; product designs; service plans; services; customer lists and customers; markets; software; developments; inventions; processes; formulas; technology; designs; drawings; and marketing, distribution or sales methods and systems; sales
and profit figures or other financial information that is disclosed, directly or indirectly, to the Receiving Party by or on behalf of the Disclosing Party, whether in writing, orally or by other means and whether or not such information is marked
as confidential.
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11.02
|
Exclusions
. The provisions of this
Section 11
respecting Confidential Information shall not apply to the extent, but only to the extent, that such
Confidential Information: (a) is already known to the Receiving Party free of any restriction at the time it is obtained from the Disclosing Party, (b) is subsequently learned from an independent third party free of any restriction and
without breach of this Agreement; (c) is or becomes publicly available through no wrongful act of the Receiving Party or any third party; (d) is independently developed by or for the Receiving Party without reference to or use of any
Confidential Information of the Disclosing Party; or (e) is required to be disclosed pursuant to an applicable law, rule, regulation, government requirement or court order, or the rules of any stock exchange (provided, however, that the
Receiving Party shall advise the Disclosing Party of such required disclosure promptly upon learning thereof in order to afford the Disclosing Party a reasonable opportunity to contest, limit and/or assist the Receiving Party in crafting such
disclosure).
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11.03
|
Permitted Disclosure
. The Receiving Party shall advise its employees, agents, contractors, subcontractors and licensees, and shall require its affiliates to
advise their employees, agents, contractors, subcontractors and licensees, of the Receiving Party’s obligations of confidentiality and non-use under this
Section 11
, and shall be responsible for ensuring compliance by its and its
affiliates’ employees, agents, contractors, subcontractors and licensees with such obligations. In addition, the Receiving Party shall require all Persons that are provided access to the Disclosing Party’s Confidential Information, other
than the Receiving Party’s accountants and legal counsel, to execute confidentiality or non-disclosure agreements containing provisions substantially similar to those set forth in this
Section 11
. The Receiving Party shall promptly
notify the Disclosing Party in writing upon learning of any unauthorized disclosure or use of the Disclosing Party’s Confidential Information by such Persons.
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11.04
|
Effect of Termination
. Upon the Disclosing Party’s written request following the termination of this Agreement, the Receiving Party
promptly shall return to the Disclosing Party, or destroy, all Confidential Information of the Disclosing Party provided under or in connection with this Agreement, including all copies, portions and summaries thereof. Notwithstanding the foregoing
sentence, (a) the Receiving Party may retain one copy of each item of the Disclosing Party’s Confidential Information for purposes of identifying and establishing its rights and obligations under this Agreement, for archival or audit
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- 14 -
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purposes and/or to the extent required by applicable law, and (b) the Administrator shall have no obligation to return or destroy Confidential Information of the Trust that resides in save
tapes of Administrator; provided, however, that in either case all such Confidential Information retained by the Receiving Party shall remain subject to the provisions of
Article 11
for so long as it is so retained. If requested by the
Disclosing Party, the Receiving Party shall certify in writing its compliance with the provisions of this paragraph.
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SECTION
12 MISCELLANEOUS PROVISIONS
|
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12.01
|
Internet Access
. Data and information may be made electronically accessible to the Trust, its adviser and/or sub-adviser(s) and its investors or Authorized
Participants through Internet access to one or more web sites provided by the Administrator (“
Web Access
”). As between the Trust and Administrator, the Administrator shall own all right, title and interest to such Web Access,
including, without limitation, all content, software, interfaces, documentation, data, trade secrets, design concepts, “look and feel” attributes, enhancements, improvements, ideas and inventions and all intellectual property rights
inherent in any of the foregoing or appurtenant thereto including all patent rights, copyrights, trademarks, know-how and trade secrets (collectively, the “Proprietary Information”). The Trust recognizes that the Proprietary Information is
of substantial value to the Administrator and shall not use or disclose the Proprietary Information except as specifically authorized in writing by the Administrator. Use of the Web Access by the Trust or its agents or investors will be subject to
any additional terms of use set forth on the web site. All Web Access and the information (including text, graphics and functionality) on the web sites related to such Web Access is presented “As Is” and “As Available” without
express or implied warranties including, but not limited to, implied warranties of non-infringement, merchantability and fitness for a particular purpose. The Administrator neither warrants that the Web Access will be uninterrupted or error free,
nor guarantees the accessibility, reliability, performance, timeliness, sequence, or completeness of information provided on the Web Access.
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12.02
|
Independent Contractor
. In making, and performing under, this Agreement, the Administrator shall be deemed to be acting as an independent contractor of the Trust
and neither the Administrator nor its employees shall be deemed an agent, affiliate, legal representative, joint venturer or partner of the Trust. No party is authorized to bind any other party to any obligation, affirmation or commitment with
respect to any other Person.
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12.03
|
Assignment; Binding Effect
. The Trust may not assign, delegate or transfer, by operation of law or otherwise, this Agreement (in whole or in part), or any of the
Trust’s obligations hereunder, without the prior written consent of the Administrator, which consent shall not be unreasonably withheld or delayed. The Administrator may assign or transfer, by operation of law or otherwise, all or any portion
of its rights under this Agreement to an affiliate of the Administrator or to any person or entity who purchases all or substantially all of the business or assets of the Administrator to which this Agreement relates, provided that such affiliate,
person or entity agrees in advance and in writing to be bound by the terms, conditions and provisions of this Agreement. Subject to the foregoing, all of the terms, conditions and provisions of this Agreement shall be binding upon and shall inure to
the benefit of each party’s successors and permitted assigns. Any assignment, delegation, or transfer in violation of this provision shall be void and without legal effect.
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12.04
|
Agreement for Sole Benefit of the Administrator and the Trusts
. This Agreement is for the sole and exclusive benefit of the Administrator and
the Trusts and will not be deemed to be for the direct or indirect benefit of either (i) the clients or customers of the Administrator or the Trust or (ii) the sponsor. The clients or customers of the
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- 15 -
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Administrator or the Trust will not be deemed to be third party beneficiaries of this Agreement nor to have any other contractual relationship with the Administrator by reason of this Agreement
and each party hereto agrees to indemnify and hold harmless the other party from any claims of its clients or customers against the other party including any attendant expenses and attorneys’ fees, based on this Agreement or the services
provided hereunder.
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12.05
|
Governing Law; Jurisdiction
. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving
effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. To the extent that the applicable laws of the Commonwealth of Pennsylvania, or any of the provisions of this Agreement,
conflict with the applicable provisions of the 1940 Act, the Securities Act of 1933 or the Securities Exchange Act of 1934, the latter shall control. Each party to this Agreement, by its execution hereof, (i) hereby irrevocably submits to the
nonexclusive jurisdiction of the state courts of the Commonwealth of Pennsylvania or the United States District Courts for the Eastern District of Pennsylvania for the purpose of any action between the parties arising in whole or in part under or in
connection with this Agreement, and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred
or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof
may not be enforced in or by such court.
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12.06
|
Equitable Relief
. Each party agrees that any other party’s violation of the provisions of
Section 11 (Confidentiality)
may cause immediate and
irreparable harm to the other party for which money damages may not constitute an adequate remedy at law. Therefore, the parties agree that, in the event either party breaches or threatens to breach said provision or covenant, the other party shall
have the right to seek, in any court of competent jurisdiction, an injunction to restrain said breach or threatened breach, without posting any bond or other security.
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12.07
|
Dispute Resolution
. Whenever either party desires to institute legal proceedings against the other concerning this Agreement, it shall provide written notice to
that effect to such other party. The party providing such notice shall refrain from instituting said legal proceedings for a period of thirty days following the date of provision of such notice. During such period, the parties shall attempt in good
faith to amicably resolve their dispute by negotiation among their executive officers. This
Section 12.07
shall not prohibit either party from seeking, at any time, equitable relief as permitted under
Section 12.06
.
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12.08
|
Notice
. All notices provided for or permitted under this Agreement (except for correspondence between the parties related to operations in the ordinary course)
shall be deemed effective upon receipt, and shall be in writing and (a) delivered personally, (b) sent by commercial overnight courier with written verification of receipt, or (c) sent by certified or registered U.S. mail, postage
prepaid and return receipt requested, to the party to be notified, at the address for such party set forth below, or at such other address of such party specified in the opening paragraph of this Agreement. Notices to the Administrator shall be sent
to the attention of: General Counsel, SEI Investments Global Trusts Services, One Freedom Valley Drive, Oaks, Pennsylvania 19456, with a copy, given in the manner prescribed above, to the Trust’s current relationship manager. Notices to the
Trust shall be sent to the persons specified in
Schedule IV (Notice Instruction Form)
.
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12.09
|
Entire Agreement; Amendments
. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof. This Agreement
supersedes all prior or contemporaneous representations, discussions, negotiations, letters, proposals, agreements and understandings between the parties hereto with respect to the subject matter hereof, whether written or oral. This Agreement may
be amended, modified or supplemented only by a written instrument duly executed by an authorized representative of each of the parties.
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12.10
|
Severability
. Any provision of this Agreement that is determined to be invalid or unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability in such jurisdiction, without rendering invalid or unenforceable the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. If a court of
competent jurisdiction declares any provision of this Agreement to be invalid or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, or area of the provision, to delete
specific words or phrases, or to replace the provision with a provision that is valid and enforceable and that comes closest to expressing the original intention of the parties, and this Agreement shall be enforceable as so modified.
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12.11
|
Waiver
. Any term or provision of this Agreement may be waived at any time by the party entitled to the benefit thereof by written instrument executed by such
party. No failure of either party hereto to exercise any power or right granted hereunder, or to insist upon strict compliance with any obligation hereunder, and no custom or practice of the parties with regard to the terms of performance hereof,
will constitute a waiver of the rights of such party to demand full and exact compliance with the terms of this Agreement.
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12.12
|
Anti-Money Laundering Laws
. In connection with performing the Services set forth herein, the Administrator may provide information that the Trust may rely upon
in connection with the Trust’s compliance with applicable laws, policies and regulations aimed at the prevention and detection of money laundering and/or terrorism activities (hereinafter, the “
Regulations
”). The Trust and the
Administrator agree that the Trust shall be responsible for its compliance with all such Regulations. It shall be a condition precedent to providing Services to the Trust under this Agreement and the Administrator shall have no liability for
non-performance of its obligations under this Agreement unless it is satisfied, in its absolute discretion, that it has sufficient and appropriate information and material to discharge its obligations under the Regulations, and that the performance
of such obligations will not violate any Regulations applicable to it. Without in any way limiting the foregoing, the Trust acknowledges that the Administrator is authorized to return an Authorized Participant’s Investment in any Fund and take
any action necessary to restrict repayment of redemption proceeds to the extent necessary to comply with its obligations pursuant to the Regulations.
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12.13
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Force Majeure
. No breach of any obligation of a party to this Agreement (other than obligations to pay amounts owed) will constitute an event of default or
breach to the extent it arises out of a cause, existing or future, that is beyond the control and without negligence of the party otherwise chargeable with breach or default, including without limitation: work action or strike; lockout or other
labor dispute; flood; war; riot; theft; act of terrorism, earthquake or natural disaster. Either party desiring to rely upon any of the foregoing as an excuse for default or breach will, when the cause arises, give to the other party prompt notice
of the facts which constitute such cause; and, when the cause ceases to exist, give prompt notice thereof to the other party.
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12.14
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Equipment Failures
. In the event of equipment failures beyond the Administrator’s control, the Administrator shall take reasonable and prompt steps to
minimize service interruptions but shall have no liability with respect thereto. The Administrator shall develop and maintain a plan for recovery from equipment failures which may include contractual arrangements with appropriate parties making
reasonable provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available.
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12.15
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Non-Solicitation.
During the term of this Agreement and for a period of one year thereafter, the Trust shall not solicit, make an offer of employment to, or
enter into a consulting relationship with, any person who was an employee of the Administrator during the term of this Agreement. If the Trust breaches this provision, the Trust shall pay to the Administrator liquidated damages equal to 100% of the
most recent twelve month salary of the Administrator’s former employee together with all legal fees reasonably incurred by the Administrator in enforcing this provision. The foregoing restriction on solicitation does not apply to unsolicited
applications for jobs, responses to public advertisements or candidates submitted by recruiting firms, provided that such firms have not been contacted to circumvent the spirit and intention of this
Section 12.15
.
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12.16
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Headings
. All Article headings contained in this Agreement are for convenience of reference only, do not form a part of this Agreement and will not affect in any
way the meaning or interpretation of this Agreement.
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12.17
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Counterparts
. This Agreement may be executed in two or more counterparts, all of which shall constitute one and the same instrument. Each such counterpart shall
be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement shall be deemed executed by both parties when any one or more counterparts hereof or
thereof, individually or taken together, bears the original facsimile or scanned signatures of each of the parties.
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12.18
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Publicity
. Except to the extent required by applicable Law, neither the Administrator nor the Trust shall issue or initiate any press release arising out of or
in connection with this Agreement or the Services rendered hereunder;
provided
,
however
, that if no special prominence is given or particular reference made to the Trust over other clients, nothing herein shall prevent the
Administrator from (i) placing the Trust on the Administrator’s client list(s) (and sharing such list(s) with current or potential clients of the Administrator); (ii) using the Trust as reference; or (iii) otherwise orally
disclosing that the Trust is a client of the Administrator at presentations, conferences or other similar meetings. If the Administrator desires to engage in any type of publicity other than as set forth in subsections (i) through
(iii) above or if the Trust desires to engage in any type of publicity, the party desiring to engage in such publicity shall obtain the prior written consent of the other party hereto, such consent not to be unreasonably withheld, delayed or
conditioned.
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12.19
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Insurance
. The Trust hereby represents that it maintains adequate insurance coverage with respect to its responsibilities pursuant to this
Agreement, including commercially reasonable fidelity bond(s), errors and omissions, directors and officers, professional liability insurance; provided, however, that the amount of insurance coverage shall in no way affect a party’s obligations
or liability as otherwise set forth in this Agreement. Without limiting the foregoing, in the event that the Administrator makes an employee of the Administrator available to the Trust to serve as an officer of the Trust, the Trust shall maintain
professional liability (directors’ & officers’ and errors and omissions) insurance with limits of not less than $5 Million per occurrence (“
Officer Insurance Minimum
”). All of the foregoing policies shall be
issued by insurance companies having an “A minus” rating
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- 18 -
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or better by A.M. Best Company or an equivalent Standard & Poor’s rating. Annually upon the written request of the Administrator, the Trust shall provide insurance policy
documentation evidencing the Trust’s insurance coverage consistent with this
Section 12.19
. The Trust shall promptly inform the Administrator of any material changes to its policies, endorsements or coverages, including the fact
that the professional liability coverage required above has fallen below the Officer Insurance Minimum, if applicable.
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- 19 -
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of
the Effective Date.
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SEI INVESTMENTS GLOBAL FUNDS SERVICES
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Pyxis Funds I
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By:
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/s/ John Alshefski
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By:
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/s/ Ethan Powell
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Name: John Alshefski
Title: Senior Vice President
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Name: Ethan Powell
Title: Executive Vice President and Secretary
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- 20 -
SCHEDULE I
Funds
Pyxis/iBoxx Senior Loan ETF
- 1 -
SCHEDULE II
Services
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1)
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Maintain the Trust’s accounting books and records;
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2)
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Obtain underlying security valuations from appropriate sources consistent with the Trust’s pricing and valuation policies, and calculate net asset value of each
Fund;
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3)
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Receive PLF files from Adviser and, subject to final approval of such file by Adviser, send PLF files to custodian in appropriate format;
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4)
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Compute yields, total return, expense ratios, portfolio turnover rate and average dollar-weighted portfolio maturity, as appropriate;
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5)
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Track and validate income and expense accruals, analyze and modify expense accrual changes periodically, and process expense disbursements to vendors and service
providers;
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6)
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Perform cash processing such as recording paid-in capital activity, perform necessary reconciliations with the transfer agent and the custodian, and provide cash
availability data to the adviser, if requested;
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7)
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Calculate required ordinary income and capital gains distributions, coordinate estimated cash payments, and perform necessary reconciliations with the transfer
agent;
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8)
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Provide standardized performance reporting data to the Trust and its Adviser;
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9)
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Provide performance, financial and expense information for registration statements and proxies;
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10)
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Communicate net asset value, yield, total return or other financial data to appropriate third party reporting agencies, and assist in resolution of errors reported
by such third party agencies;
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11)
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Update accounting system to reflect rate changes, as received from a Fund’s investment adviser, sub-adviser or respective designee, on variable interest rate
instruments;
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12)
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Accrue expenses of each Fund according to instructions received from the Trust’s treasurer or other authorized representative (including officers of the
Trust’s investment adviser);
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13)
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Determine the outstanding receivables and payables for all (1) security trades, (2) portfolio share transactions and (3) income and expense accounts
in accordance with the budgets provided by the Trust or its investment adviser;
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14)
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Prepare the Trust’s financial statements for review by fund management and independent auditors, manage annual and semi-annual report preparation process,
prepare Forms N-SAR, N-Q, N-CSR and 24f-2, provide fund performance data for annual report, coordinate printing and delivery of annual and semi-annual reports to shareholders, and file Forms N-SAR, N-Q, N-CSR and 24f-2 and annual/semi-annual reports
via EDGAR;
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15)
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Monitor each Fund’s compliance with the requirements of Subchapter M of the Internal Revenue Code with respect to status as a regulated investment company;
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16)
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Prepare and file federal and state tax returns for the Trust other than those required to be prepared and filed by the Trust’s transfer agent or custodian.
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- 1 -
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17)
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Provide data for year-end 1099’s and supplemental tax letters;
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18)
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Provide such fund accounting and financial reports in connection with quarterly meetings of the Board as the Board may reasonably request;
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19)
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Manage the Trust’s proxy solicitation process, including evaluating proxy distribution channels, coordinating with outside service provider to distribute
proxies, track shareholder responses and tabulate voting results, and managing the proxy solicitation vendor if necessary;
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20)
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Provide individuals to serve as ministerial officers of the Trust, as requested;
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21)
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Provide principal accounting officer for purposes of Sarbanes-Oxley (if requested);
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22)
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Coordinate with the Trust’s counsel on filing of the Trust’s registration statements and proxy statements, and coordinate printing and delivery of the
Trust’s prospectuses and proxy statements;
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23)
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Provide consultation to the Trust on regulatory matters relating to the operation of the Trust as requested and coordinate with the Trust’s legal counsel
regarding such matters;
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24)
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Assist legal counsel to the Trust in the development of policies and procedures relating to the operation of the Trust;
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25)
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Act as liaison to legal counsel to the Trust and, where applicable, to legal counsel to the Trust’s independent trustees;
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26)
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Coordinate with the Trust counsel in the preparation, review and execution of contracts between the Trust and third parties, such as the Trust’s investment
adviser, transfer agent, and custodian, and record-keepers or shareholder service providers;
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27)
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Assist the Trust in handling and responding to routine regulatory examinations with respect to records retained or services provided by the Administrator, and
coordinate with the Trust’s legal counsel in responding to any non-routine regulatory matters with respect to such matters;
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28)
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Provide consulting with respect to the ongoing design, development and operation of the Trust, including new Funds and/or load structures and financing, as well as
changes to investment objectives and polices for existing Funds;
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29)
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Coordinate as necessary the registration or qualification of Creation Units with appropriate state securities authorities;
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30)
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Manage the preparation for and conducting of Board meetings by (i) coordinating Board book production and distribution process, (ii) subject to review and
approval by the Trust and its counsel, preparing meeting agendas, (iii) preparing the relevant sections of the Board materials required to be prepared by the Administrator, (iv) assisting to gather and coordinate special materials related
to annual contract renewals and approval of rule 12b-1 for and as directed by the trustees or the Trust counsel, (v) attending Board meetings, and (vi) performing such other Board meeting functions as shall be agreed by the parties in
writing (in this regard, the Trust shall provide the Administrator with notice of regular meetings at least six (6) weeks before such meeting and as soon as practicable before any special meeting of the Board);
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31)
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Cooperate with, and take all reasonable actions in the performance of its duties under this Agreement to ensure that all necessary information is
made available to the Trust’s independent public accountants in connection with the preparation of any audit or report requested by the
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- 2 -
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Trust, including the provision of a conference room at the Administrator’s location if necessary (in this regard, the Trust’s independent auditors shall provide the Administrator
with reasonable notice of any such audit so that (i) the audit will be completed in a timely fashion and (ii) the Administrator will be able to promptly respond to such information requests without undue disruption of its business);
and
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32)
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On a T+2 post-trade basis and based on the information available to the Administrator, periodically monitor the Funds for compliance with applicable limitations as
set forth in the Trust’s or any Fund’s then current Prospectus or Statement of Additional Information (this provision shall not relieve the Trust’s investment adviser and sub-advisers, if any, of their primary day-to-day
responsibility for assuring such compliance, including on a pre-trade basis).
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33)
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Additional Reports and Services.
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•
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Upon reasonable notice and as mutually agreed upon, the Administrator may provide additional reports upon the request of the Trust or its investment
adviser, which may result in additional charges, the amount of which shall be agreed upon between the parties prior to the provision of such report.
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•
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Upon reasonable notice and as mutually agreed upon, the Administrator may provide such additional services with respect to a Fund, which may result in
an additional charge, the amount of which shall be agreed upon between the parties prior to the provision of such service.
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***
- 3 -
SCHEDULE III
Fees
Administration and Accounting Fee
:
The following fees are due and payable monthly to Administrator pursuant to
Section 8
of the Agreement. The Trust will be
charged the greater of the Asset Based Fee or the Annual Minimum Fee, in each case calculated in the manner set forth below.
Asset Based
Fees:
(calculated and assessed monthly in arrears based on the aggregate net assets of the Trust):
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Trust Assets
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Basis Points
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First $250 million in aggregate net assets
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10 BPS
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Next $750 million in aggregate net assets
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9 BPS
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Aggregate net assets in excess of $1 billion
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8 BPS
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Annual Minimum Fee
(calculated and paid on a monthly basis):
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Fund
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Annual Minimum Fee
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Each Fund of the Trust
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$
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85,000
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Manager Dashboard:
The Adviser shall receive 5 seats to Administrator’s Manager Dashboard at no additional charge. Additional seats shall be made available to Adviser subject to good faith negotiations with
Administrator.
Expense Reimbursement
:
All reasonable expenses incurred by the Administrator on behalf of a Fund will be billed to the applicable Fund quarterly in arrears as set forth in Section 7.02 of this Agreement.
Change of Terms
:
This
schedule is based upon regulatory requirements and the Trust’s requirements as set forth in its Trust Materials as of the Effective Date. Any material change to any of the foregoing, including but not limited to, a material change in the
Trust’s assets or the investment objective of a Fund will constitute a material change to this Agreement. If such a change occurs, the Administrator agrees to review the change with representatives of the Trust and provide information
concerning the feasibility of implementing any additional or enhanced services and associated costs resulting from such change. The parties shall then in good faith agree to mutually agreeable terms applicable to such additional or enhanced service.
The Trust acknowledges and agrees that Administrator reserves the right to impose a five percent (5%) per annum surcharge per Fund in
the event such Fund has not implemented by the first anniversary of this Agreement an automated trade ticket process with Administrator to facilitate the orderly and timely processing of transactions, valuations and reconciliations.
- 1 -
SCHEDULE IV
Notice Instruction Form
TO WHOM NOTICES SHOULD BE SENT PURSUANT TO SECTION 12.08 OF THE AGREEMENT:
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Name of Party or Parties:
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Pyxis Funds
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Name of Contact:
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Address:
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200 Crescent Court, Suite 700, Dallas, TX 75201
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Telephone No.:
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Facsimile No.:
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Email Address:
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- 2 -
Exhibit (h)(13)
AUTHORIZED PARTICIPANT AGREEMENT
This Authorized Participant Agreement (this “
Agreement
”) is entered into as of this day of
20 (the “
Effective Date
”), by and between
(the “
Participant
”) and SEI Investments Distribution Co. (together with its affiliates, the “
Distributor
”), principal underwriter of Pyxis
Funds I (the “
Trust
”), and is subject to acceptance by the Trust and [ ] as index receipt agent (the “Index Receipt Agent”) to each investment
portfolio of the Trust that is listed for trading on one or more U.S. national securities exchanges or associations and operates as an “Exchange Traded Fund” or “ETF” (each, a “Series”). Capitalized terms used herein
and not otherwise defined have the meaning assigned to them in
SECTION 14
of this Agreement.
WHEREAS, the Trust is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “
1940 Act
”), as an open-end management company;
WHEREAS, the Distributor serves as the principal underwriter of the Trust acting on an agency basis in connection with the sale and distribution of shares of beneficial interest of each Series of the
Trust (“
Shares
”);
WHEREAS, Index Receipt Agent serves as the transfer agent for the Trust, and is an Index Receipt Agent as
that term is defined in the rules of the National Securities Clearing Corporation (“NSCC”);
WHEREAS, the Shares of any Series
offered by the Trust (now or in the future) may be directly purchased from or redeemed to the Trust at a price based on the net asset value per Share (subject to applicable Law and the terms hereof) only by or through a registered broker-dealer and
member of The Depository Trust Company that has entered into an authorized participant agreement with the Distributor; and
WHEREAS the
Distributor and the Participant intend that the Trust shall be a third-party beneficiary of this Agreement and shall receive the benefits contemplated by this Agreement.
NOW THEREFORE, the parties hereto in consideration of the premises and of the mutual agreements contained herein, and for other good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, agree as follows:
SECTION 1 ORDERS FOR CREATION AND REDEMPTION
1.01 Creation Units.
The Shares of any Series offered by the Trust may only be directly purchased from or redeemed to the Distributor in Creation Units. The number of Shares of a Series
constituting a Creation Unit will be stated in the Prospectus of the applicable Series. The Participant is authorized to create and redeem Creation Units of such Series as determined in the discretion of the Trust and/or the Distributor, subject to
applicable Law and the terms hereof.
1.02 Procedures for Orders.
The procedures for placing and execution of Creation Orders and
Redemption Requests are described in the Prospectus for each Series and in the AP Handbook (and any updates) which shall be provided to the Trust. All Orders shall be placed and executed in accordance with the terms and procedures set forth in the
Prospectus and the AP Handbook. Orders received in proper form in accordance with such terms and procedures shall be processed at the net asset value per Share of the relevant Series next determined after such Order is received in proper form. The
Participant agrees to comply with any and all requirements stated in the Prospectus and in the AP Handbook to the extent applicable to it. The Trust reserves the right to revise or augment the procedures relating to the manner of creating or
redeeming Creation Units. The Distributor will make commercially reasonable efforts to provide prior notice to the Participant of any changes to the AP Handbook with respect to the placement of Orders. Revised procedures shall not apply
retroactively to Orders submitted prior to such change in procedure, unless required by applicable Law. The Participant agrees to comply with such procedures as they may be revised or augmented from time to time. Such revised or additional
procedures may be implemented by the Trust, with respect to any or all Series, due to changing applicable Law, market conditions, administrative or operational processes or requirements for new or existing Series, or any other purposes.
Any Series may, subject to applicable Law, change the manner in which a Creation Order and/or Redemption
Request may be placed and/or executed by the Participant, including, without limitation, requiring that a Creation Order or Redemption Request be cleared outside the CNS Clearing Process or any non-CNS Clearing Process subject to approval by the
Index Receipt Agent.
1.03 NSCC Authorization.
Solely with respect to Orders processed through the CNS Clearing Process, the
Participant, as a Participating Party, hereby authorizes the Index Receipt Agent to transmit to the NSCC on behalf of the Participant instructions, including without limitation instructions regarding the transfer of Deposit Securities, Cash Amounts
and Cash Components, consistent with the Order instructions issued by the Participant to the Distributor. The Participant agrees to be bound by the terms of such instructions issued by the Index Receipt Agent and reported to NSCC as though such
instructions were issued by the Participant directly to NSCC.
1.04 Consent to Recording.
It is contemplated that the phone lines used
by the Distributor, the Trust or their Affiliated Persons with respect to any Orders will be recorded, and the Parties hereby consent to the recording of all calls with any of those Parties. The Participant also acknowledges and agrees that its
access to, and actions taken on, the Website may be recorded.
1.05 Irrevocability.
All Orders are irrevocable and considered final
when placed by a Participant. Accordingly, the Participant acknowledges and agrees that it may not be possible to cancel or modify an Order once the Participant has placed it, and the Participant agrees to exercise caution before placing all Orders.
Any attempt the Participant makes to revise or cancel an Order may be deemed a request to place a new Order that may modify or cancel the previous Order, at the sole discretion of the Trust. The Participant shall be responsible for any and all
reasonable expenses and costs incurred by the Trust or the Distributor in connection with any modified or cancelled Order. It is acknowledged and agreed that the Trust has the absolute right to reject any Creation Order or Redemption Request (to the
extent permitted by Law and the Prospectus) transmitted to it by the Distributor. The Distributor shall notify the Participant as soon as reasonably practicable of any such rejection of an Order. It is acknowledged and agreed that notice may not be
reasonably practicable until after the time the Distributor stops accepting Orders for that day.
1.06 Prospectus and Trade Confirmation
Delivery.
The Participant consents to the delivery of a link to the Prospectus and trade confirmations electronically, and understands that unless the Participant notifies the Distributor in writing that this consent is revoked, the Participant
can only obtain access to Prospectuses from the Distributor electronically. The Trust makes the current Prospectuses and annual and semi-annual shareholder reports for each applicable Series available on the Trust’s website:
http://www.pyxisais.com. The Participant agrees to maintain a valid electronic mail address for purposes of receiving links to Prospectuses and trade confirmations and further agrees to promptly notify the Distributor if its electronic mail address
for this purpose changes. The Participant understands that it must have regular and continuous Internet access to access all documents relating to a Prospectus.
SECTION 2 EXECUTION OF CREATION ORDERS
2.01 Fund Deposit.
To affect the purchase of
a Creation Unit of a Series, the Participant agrees to deliver to the Series a Fund Deposit plus any applicable Cash Amount.
2.02 Cash in
Lieu.
The Trust may, in its sole discretion, permit or require the substitution of an amount of cash to be added to any Cash Component to replace any Deposit Security (“
cash in lieu
”). The Trust may suspend the ability of the
Participant to engage in cash in lieu transactions with respect to any Series at any time, without prior notice.
2.03 Delivery of Collateral or Fund Deposit.
As described in the Prospectus and the AP Handbook from
time to time, the Trust may, in its sole discretion, permit collateral to be posted to the Custodian (or such other agent as may be agreed in writing by the Participant and the Trust from time to time) for the benefit of a Series in anticipation of
delivery of all or a portion of the requisite Deposit Securities, and may require additional collateral of 115% of the market value of such Deposit Securities to be posted, in the sole discretion of the Trust. The Series may at any time use such
cash or collateral to purchase Deposit Securities without further consultation with the Participant. To the extent permitted by the Prospectus, the Participant shall be responsible for any and all expenses and costs incurred by the Trust, including
all Cash Amounts, in connection with any Creation Orders. The Participant understands and agrees that in the event collateral or the Fund Deposit are not fully transferred to the Trust by the time specified, a Creation Order may be cancelled by the
Trust and the Participant will be solely responsible for any and all expenses and costs incurred by the applicable Series, Distributor, or the Index Receipt Agent related to the cancelled Creation Order. Orders processed through the NSCC via CNS are
not eligible for cash collateralization.
2.04 Title to Securities; Restricted Shares.
The Participant represents that upon delivery of
a portfolio of Deposit Securities to the Custodian and/or the relevant subcustodian in accordance with the terms of the Prospectus, the Trust will acquire good, marketable and unencumbered title to such securities, free and clear of any and all
liens, restrictions, hypothecations, charges, duties imposed on the transfer of assets and encumbrances and not subject to any adverse claims, including, without limitation, any restriction upon the sale or transfer of such securities imposed by
(A) any agreement or arrangement entered into by the Participant or any Participant Client, or (B) any applicable provision of the 1933 Act, and any regulations thereunder (except that (I) securities of issuers other than U.S. issuers
shall not be required to have been registered under the 1933 Act if exempt from such registration and (II) securities of U.S. issuers shall not be required to have been registered under the 1933 Act if (1) exempt from such registration or
(2) eligible for sale without registration pursuant to Rule 144A under the 1933 Act and such security is included by a Series as a Deposit Security (a “
Rule 144A Security
”), or of the applicable Law of any other applicable
jurisdiction and (C) any such securities being “restricted securities” as such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act.
2.05 Corporate Actions.
With respect to any Creation Order, the Trust, on behalf of each applicable Series, shall return to the Participant or the Participant Client any dividend, distribution or
other corporate action paid to the Trust in respect of any Deposit Security that is transferred to the Trust that, based on the valuation of such Deposit Security on the Business Day on which the Trust receives and accepts the Creation Order in
proper form, should have been paid to the Participant or the Participant Client. Likewise, the Participant acknowledges and agrees to return to the Trust any dividend, distribution or other corporate action paid to the Participant or any Participant
Client in respect of any Deposit Security that is transferred to the Trust that, based on the valuation of such Deposit Security on the Business Day on which the Trust receives and accepts the Creation Order in proper form, should have been paid to
the Trust.
2.06 Cash Amount and Cash Component.
In situations where a Cash Amount and/or a Cash Component will be applied to a
Creation Order, the Participant hereby agrees it will transfer funds for each creation of Shares in an amount equal to the Cash Amount and/or Cash Component, as applicable. Computation of this amount shall exclude any stamp duty and other similar
fees and expenses payable upon the transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Participant and not of the Trust or the Distributor. The Participant hereby agrees to deliver the Cash
Amount and/or Cash Component to the Trust on or before the Contractual Settlement Date or such earlier time as may be designated by the Trust.
2.07 Ownership of Deposit Securities.
Notwithstanding anything to the contrary contained herein, and subject to the provisions of
Section 2.02
, the Participant agrees that this Agreement is a contract for the sale of the Deposit Securities
in praesenti
, and that ownership of, and all attendant rights to and benefits of, the Deposit Securities shall be vested
in the Trust as of the Business Day on which the Trust receives and accepts the related Purchase Order in proper form and in accordance with the foregoing terms and procedures.
SECTION 3 EXECUTION OF REDEMPTION REQUESTS
3.01 Creation Units.
To effect the redemption of a Creation Unit of a Series, the Participant agrees to deliver to the Trust, the requisite number of Shares comprising the number of Creation Units
being redeemed plus any applicable Cash Amount and/or Cash Component. Proceeds of redemption of a Creation Unit shall consist of Fund Securities and/or any applicable Cash Component, less any applicable Cash Amount. To the extent permitted by the
Prospectus, the Participant shall be responsible for any and all expenses and costs incurred by the Trust, including all Cash Amounts, in connection with any Redemption Request.
3.02 Delivery of Shares.
The Participant understands and agrees that in the event Shares are not transferred to the Trust (or the Custodian for the benefit of the Trust) by the time specified, a
Redemption Request may be cancelled by the Trust and the Participant will be solely responsible for all expenses and costs incurred by the Trust and/or the Distributor related to the cancelled Order. The Distributor will provide notice to the
Participant, as soon as reasonably practicable, of any such cancellation of a Redemption Request.
3.03 Legal and Beneficial Ownership.
The Participant represents and warrants that it will not attempt to place a Redemption Request for the purpose of redeeming any Creation Unit of Shares of any Series unless it or the Participant Client, as the case may be, owns outright or has full
legal authority and legal right to tender for redemption the requisite number of Shares of the relevant Series to be redeemed as a Creation Unit and to the entire proceeds of the redemption and that such Shares have not been loaned or pledged to
another party and are not the subject of a repurchase agreement, securities lending agreement or any other arrangement affecting legal or beneficial ownership or precluding the tender of such Shares for redemption. In the event that the Distributor
and/or the Trust have reason to believe that the Participant does not have the requisite number of Shares of the relevant Series to be redeemed as a Creation Unit, the Distributor and/or the Trust may require the Participant to deliver or execute
supporting documentation in order for the Redemption Request to be in proper form. Failure to deliver or execute the requested supporting documentation may result in a Participant’s Redemption Request being rejected as not in proper form.
3.04 Same Business Day Creation and Redemption.
Notwithstanding anything to the contrary contained herein, except as otherwise
specifically advised by the Participant in writing to the Distributor and the Trust, the Participant represents and warrants on behalf of itself and any Participant Client that in the case of any Redemption Request that is placed on the same
Business Day as any Creation Order is placed by the Participant for the same Series: (i) the Redeeming Shareholder is not the same Participant or Participant Client as the Creation Shareholder; (ii) the Redeeming Shareholder is not
affiliated in any manner to or with the Creating Shareholder; (iii) the Redeeming Shareholder and the Creating Shareholder are acting for their own respective beneficial interests; (iv) the placing of such Redemption Request and such
Creation Order is not for the beneficial interest of the same person; and (v) the placing of such Redemption Request and such Creation Order is not pursuant to any common plan, mutual agreement, or understanding.
3.05 Corporate Actions.
With respect to any Redemption Request, the Participant acknowledges and agrees to return to the Trust any dividend,
distribution or other corporate action paid to it or a Participant Client in respect of any Fund Security that is transferred to the Participant or any Participant Client that, based on the valuation of such Fund Security at the time of transfer,
should have been paid to the Series. It is acknowledged and agreed that the Trust is entitled to reduce the amount of money or other proceeds due to the Participant or any Participant Client by an amount equal to any dividend, distribution or other
corporate action to be paid to the Participant or to the Participant Client in respect of any Fund Security that is transferred to the Participant or any Participant Client that, based on the valuation of such Fund Security at the time of transfer,
should be paid to the Series. Likewise, the Trust, on behalf of the applicable Series, shall return to the Participant or any Participant Client any dividend, distribution or other corporate action paid to it in respect of any Fund Security that is
transferred to the Trust, on behalf of the applicable Series, that, based on the valuation of such Fund Security at the time of transfer, should have been paid to the Participant or the Participant Client.
3.06 Cash Amount and Cash Component.
In situations where a Cash Amount and/or a Cash Component will
be applied to a Redemption Request, the Participant hereby agrees that it will make available or transfer funds in an amount equal to the Cash Amount and/or Cash Component, as applicable. Computation of this amount shall exclude any stamp duty and
other similar fees and expenses payable upon the transfer of beneficial ownership of the Fund Securities, which shall be the sole responsibility of the Participant and not of the Trust or the Distributor. The Participant hereby agrees to ensure that
the Cash Amount and/or Cash Component will be received by the Trust on or before the Contractual Settlement Date or such earlier time as may be designated by the Trust.
SECTION 4 BENEFICIAL OWNERSHIP LIMITATION
4.01 Beneficial Ownership.
The
Participant represents and warrants to the Distributor and the Trust that immediately after each acquisition of Shares by the Participant pursuant to this Agreement (based upon the number of outstanding Shares of such Series made publicly available
by the Trust) it does not hold for its account or the account of any single Beneficial Owner of Shares of the relevant Series eighty percent (80%) or more of the outstanding Shares of such relevant Series. The Participant agrees that its
Authorized Persons will be asked to represent and warrant that, immediately after giving effect to the creation of Shares to which the Order relates, the Participant will not own or hold eighty percent (80%) or more of the outstanding Shares of
the relevant Series of the Trust. If the Participant acts as agent for another party or parties in acquiring Shares, then Participant agrees that no party or parties on behalf of whom Participant acquired Shares in the transaction to which the
confirmation relates holds or owns through the Participant account, immediately after such acquisition, eighty percent (80%) or more of the outstanding Shares of the relevant Series. The Trust, the Index Receipt Agent and Distributor shall have
the right to require information from the Participant regarding Share ownership of each Series, and to rely thereon to the extent necessary to make a determination regarding ownership of eighty percent (80%) or more of the currently outstanding
Shares of any Series by a Beneficial Owner as a condition to the acceptance of a deposit of Deposit Securities.
4.02 Rule 144A
Securities.
The Participant represents and warrants to the Distributor and the Trust that immediately after each acquisition of a Rule 144A Security by the Participant pursuant to this Agreement, it or any Beneficial Owner of the Rule 144A
Security will be a “qualified institutional buyer” as defined in Rule 144A under the 1933 Act.
SECTION 5 AUTHORIZED PERSONS
5.01 Phone Orders and Website Orders
. When placing Orders by phone, an Authorized Person, on behalf of the Participant, will be
required to provide his or her name, the name of the Participant he or she represents and a valid PIN Number (with such PIN Number to be issued by the Distributor). When placing Orders through the Website, an Authorized Person on behalf of the
Participant, will be required to enter a valid firm PIN Number, a valid personal ID and password (with such password provided by the Distributor) for Website access and trade order processing. The Participant will only have access to certain
section(s) of the Website, as determined by the Trust or the Distributor, in their sole discretion. The Participant will adhere to the security procedures mandated by the Distributor from time to time in all material respects. The PIN Number,
personal ID and password shall be kept confidential and shall not be shared with any third party unless otherwise required by applicable Law. It is acknowledged and agreed that these procedures may be revised and updated from time to time and made
available in the AP Handbook.
5.02 PIN Numbers and Password.
Upon the execution of this Agreement by the Participant and the
acceptance thereof by the Distributor, the Participant shall be issued a PIN Number by the Distributor and each Authorized Person will be issued a personal ID and password for use on the Website. To place Orders through the Distributor, the
Authorized Person must provide the Participant’s valid PIN Number and must also enter a valid personal ID and password to access the Website. The PIN Number is used to identify the Participant and validate instructions issued by the Participant
pursuant to this Agreement. The Distributor shall be entitled to assume that all instructions issued to it using the Participant’s PIN Number have been properly placed by Authorized Persons, unless the Participant has revoked its PIN
Number and such revocation has been acknowledged by the Distributor. The Distributor shall be under no obligation to verify that an Order is being placed by an Authorized Person. The Participant
agrees that neither the Distributor nor the Trust shall be responsible for any losses incurred by the Participant as a result of an Authorized Person identifying himself or herself as a different Authorized Person or an unauthorized person
identifying himself or herself as an Authorized Person. The PIN Number and password shall be kept confidential and only provided to Authorized Persons unless otherwise required by applicable Law. The Participant may revoke the PIN Number and
password at any time upon written notice to the Distributor and the Trust, and the Participant shall be responsible for doing so in the event that it becomes aware that an unauthorized person has received access to its PIN Number and/or password or
has used the PIN Number and/or password in an unauthorized manner. Upon receipt of such written request, the Distributor shall promptly de-activate the PIN Number and/or password. If a Participant’s PIN Number and/or password is changed, the
new PIN Number and/or password will become effective on a date mutually agreed upon by the Participant and the Distributor.
5.03
Certification.
Concurrently with the execution of this Agreement and as requested from time to time by the Trust and/or Distributor but no less frequently than annually, the Participant shall deliver to the Distributor and the Trust, with copies
to the Index Receipt Agent, a certificate (the form of which is set forth in
Annex I
) signed by the Participant’s Secretary or other duly authorized official setting forth the names, electronic mail addresses and telephone and facsimile
numbers of all Authorized Persons. Such certificate may be accepted and relied upon by the Distributor and the Trust as conclusive evidence of the facts set forth therein and shall be considered to be in full force and effect until delivery to the
Distributor and the Trust of a superseding certificate in a form approved by the Trust bearing a subsequent date. It shall be the responsibility of the Participant to ensure that the Distributor has a current list of all Authorized Persons. Upon the
termination or revocation of authority of an Authorized Person by the Participant, the Participant shall give prompt written notice of such fact to the Distributor and such notice shall be effective upon receipt by the Distributor.
SECTION 6 STATUS OF PARTICIPANT AND DISTRIBUTOR
6.01 Ability to Enter Into Agreement.
Each of the Participant and Distributor hereby represents and warrants that it (i) is duly organized, validly existing and in good standing under the laws
of its state of organization, (ii) has the power and authority, and the legal right, to own its assets and to transact the business in which it is engaged, and (iii) has the power and authority, and the legal right, to execute, deliver and
perform its obligations under this Agreement and has taken all necessary action required by its governing documents or other applicable requirements of law and regulation to authorize the execution, delivery and performance of this Agreement. Each
of the Participant and Distributor hereby represents and warrants that this Agreement, when executed and delivered by the Participant or the Distributor, as applicable, will constitute a legal, valid and binding obligation of it and be enforceable
against it in accordance with the terms of the Agreement, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws or regulations affecting the enforcement of creditors’ rights generally and
by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
6.02 Clearing Status.
The
Participant hereby represents and warrants that with respect to (i) all Orders of Creation Units of any Series, it is a DTC Participant, (ii) any Order of Creation Units of any Series initiated through the CNS Clearing Process, it is a
Participating Party and (iii) any Order of Creation Units of any Series initiated through the applicable Non-CNS Clearing Process, it has the ability to transact through such processes designated by such Series. Any change in the status of the
Participant with respect to subsection (i) of this
Section 6.02
shall terminate this Agreement and the Participant shall give prompt written notice to the Distributor and the Trust of such change. If, at any time, the
Participant’s representation and warranty made in subsections (ii) or (iii) of this
Section 6.02
becomes inaccurate, Participant shall give prompt written notice to the Distributor and the Trust in writing, and the
Distributor or the Trust may elect to terminate this Agreement in their sole discretion.
6.03 Broker Dealer Status.
The Participant hereby represents and warrants that it is
(i) registered as a broker-dealer under the 1934 Act, (ii) qualified to act as a broker or dealer in the states or other jurisdictions where it is so required to be qualified, and (iii) a member of FINRA. The Participant agrees that
it will maintain such registrations, qualifications, and membership in good standing and in full force and effect throughout the term of this Agreement. The Participant further agrees to materially comply with all applicable Federal laws, the laws
of the states or other jurisdictions concerned, and the rules and regulations promulgated thereunder and with the Constitution, By-Laws and NASD/FINRA Conduct Rules, to the extent such laws, rules and regulations relate to Participant’s Orders
and related transactions in, and activities with respect to, the Shares, and that it will not offer or sell Shares of any Series of the Trust in any state or jurisdiction where they may not lawfully be offered and/or sold.
6.04 Foreign Status.
If the Participant is offering and selling Shares of any Series of the Trust in jurisdictions outside the several states,
territories and possessions of the United States and is not otherwise required to be registered, qualified, or a member in good standing of FINRA as set forth in the preceding paragraph, the Participant nevertheless agrees to observe the applicable
laws and regulations of the jurisdiction in which such offer and/or sale is made, to comply with the full disclosure requirements of the 1933 Act and the regulations promulgated thereunder and to conduct its business in accordance with the
NASD/FINRA Conduct Rules.
6.05 Distributor Status.
The Participant understands and acknowledges that the method by which Shares will
be created and traded may raise certain issues under applicable securities laws and regulations. For example, because new Creation Units may be issued and sold by the Trust on an ongoing basis, at any point a “distribution”, as such term
is used in the 1933 Act, may occur. The Distributor and the Trust hereby caution Participant that some activities on its part, depending on the circumstances, may result in its being deemed a participant in a distribution in a manner which could
render it a statutory underwriter and subject it to the prospectus delivery and liability provisions of the 1933 Act. The Participant also understands and acknowledges that dealers who are not “underwriters” but are effecting transactions
in Shares, whether or not participating in the distribution of Shares, are generally required to deliver a Prospectus.
SECTION 7 ROLE OF
PARTICIPANT
7.01 Independent Contractor.
The Participant acknowledges and agrees that for all purposes of this Agreement, the
Participant will be deemed to be an independent contractor, and will have no authority to act as agent for the Trust or the Distributor in any matter or in any respect. The Participant and Distributor each agree to make itself and its employees
available, upon reasonable request, during normal business hours to consult with the other party, and if requested, the Trust or their designees concerning the performance of the Participant’s responsibilities under this Agreement.
7.02 Maintenance of Records.
The Participant agrees to maintain records of all Orders relating to Shares made by or through it and, to the extent
it can do so in a manner consistent with any contractual obligations of Participant to any clients and applicable Laws, to furnish copies of such records to the Trust or the Distributor upon the reasonable request of the Trust or the Distributor.
SECTION 8 MARKETING MATERIALS AND REPRESENTATIONS
The Participant represents, warrants and agrees that it will not make any representations concerning Shares other than those contained in or consistent with the Trust’s then current Prospectus or in
any promotional materials or sales literature furnished to the Participant by the Trust or the Distributor. The Participant agrees not to furnish or cause to be furnished to any person or display or publish any information or materials relating to
Shares (including, without limitation, promotional materials and sales literature, advertisements, press releases, announcements, statements, posters, signs or other similar materials), except such information and materials as may be furnished to
the Participant by the Trust or the Distributor and such other information and materials as may be approved in writing by the Trust and the Distributor. The Participant understands that the Trust or any of its Series will not be advertised or
marketed as open-end investment companies (i.e., as mutual funds) which offer redeemable securities, and that any advertising materials will prominently disclose that the individual Shares are not redeemable units of beneficial interest in the
Trust. In addition, the Participant understands that any advertising
material that addresses redemptions of Shares, including the Prospectus, will disclose that the owners of Shares may acquire Shares and tender Shares for redemption to the Trust in Creation Unit
aggregations only. Notwithstanding the foregoing, the Participant may without the written approval of the Trust or the Distributor prepare and circulate in the regular course of its business or for internal use, research reports institutional sales
literature (as such term in defined in NASD Rule 2211 or any successor rule), correspondence (as such term is defined in NASD Rule 2211 or any successor rule) and other similar materials that include information, opinions or recommendations relating
to Shares,
provided
that such materials comply with applicable NASD rules (or comparable FINRA rules, if such NASD rules are subsequently repealed, rescinded, or are otherwise replaced by FINRA rules). The Participant agrees that any
representation or statement in such reports, sales literature, correspondence, communications or other similar materials will not contain any untrue statement of a material fact related to a Series or omit to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading and, to the extent such materials include statements of fact regarding the Shares, such statements of fact will be consistent wit the Prospectus. As between the Trust
and Distributor on one hand and the Participant on the other, Participant agrees that Participant shall be fully responsible and liable for such reports, sales literature, correspondence, communications or other similar materials.
Participant agrees that, so long as this Agreement remains in effect, it may be identified or named as an “Authorized Participant,” or any
similar designation, in any materials relating to any Series, the Trust or as may be necessary to meet applicable legal requirements.
SECTION 9 IRREVOCABLE PROXY
9.01
Appointment of Irrevocable Proxy
. The Participant, from time to time, may be a beneficial owner and/or an owner of record of Shares. To the extent that it is a beneficial owner of Shares, the Participant does hereby irrevocably appoint the
Distributor as its attorney and proxy with full authorization and power to vote (or abstain from voting) the Participant’s beneficially owned Shares of a Series, which the Participant is or may be entitled to vote at any meeting of a Series
held after the date this Agreement is executed, whether annual or special and whether or not an adjourned meeting, or, if applicable, to give written consent with respect thereto.
9.02 Powers of Attorney and Proxy.
The Distributor, as attorney and proxy for the Participant under this
SECTION 9
: (i) is hereby given full power of substitution and revocation,
(ii) may act through such agents, nominees or substitute attorneys as it may from time to time appoint, and (iii) may provide voting instructions to such agents, nominees or substitute attorneys in any lawful manner deemed appropriate by
it, including in writing, by telephone, telex, facsimile, electronically (including through the Internet) or otherwise. The powers of the Distributor as attorney and proxy under this paragraph shall include (without limiting its general powers
hereunder) the power to receive and waive any notice of any meeting on behalf of the Participant.
9.03 Term of Power of Attorney and
Proxy.
The appointment of the Distributor as attorney and proxy shall be deemed renewed each time Participant acquires Shares as a beneficial owner. The Distributor shall serve as an irrevocable attorney and proxy for the Participant under this
Section for so long (and only so long) as this Agreement remains in effect. In the event applicable law prevents the assignment of the irrevocable power of attorney and proxy, or deems such power of attorney and proxy to expire due to the passage of
time, the Participant hereby agrees to execute and deliver such additional documentation as may be necessary to cause the Distributor to serve as its attorney and proxy for the purposes discussed in this Agreement. This irrevocable proxy
automatically shall terminate with respect to any Series or the Trust as a whole, if the Distributor ceases to act as Distributor to any Series or the Trust, as applicable. The Distributor may terminate this irrevocable proxy with sixty
(60) days written notice to the Participant.
SECTION 10 INDEMNIFICATION; LIMITATION OF LIABILITY
10.01 Indemnification of Distributor Indemnified Party.
The Participant hereby agrees to indemnify and hold harmless the Distributor, the Trust,
the Index Receipt Agent, their respective subsidiaries, Affiliated Persons, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each a
“
Distributor Indemnified Party
”) from and against any loss, liability, cost and expense (including reasonable attorneys’ fees, collectively “
Losses
”) incurred by such Distributor Indemnified Party as a result
of (i) any breach by the Participant of any provision of this Agreement; (ii) any failure by the Participant to comply with applicable laws, including rules and regulations of self-regulatory organizations such as the NASD/FINRA Conduct
Rules; and (iii) actions of such Distributor Indemnified Party in reliance upon any instructions issued over the phone or the Website reasonably believed by the Trust, the Distributor and/or the Index Receipt Agent to be genuine and to have
been given by the Participant or an Authorized Person. The foregoing shall not apply to any Losses incurred by such Distributor Indemnified Party arising out of the Distributor Indemnified Party’s own fraud, willful misconduct or reckless
disregard of its duties hereunder.
10.02 Limitation of Liability.
The Participant agrees that the Distributor, the Index Receipt Agent
and the Trust shall not be liable, absent fraud or willful misconduct, for losses incurred by the Participant in connection with the placement of Orders or otherwise, including as a result of unauthorized use of the Participant’s PIN Number.
10.03 Survival.
This
SECTION 10
shall survive the termination of this Agreement.
SECTION 11 THIRD PARTY BENEFICIARIES
The Distributor and the Participant acknowledge and agree that this Agreement is entered into for, among other things, the benefit of the Trust and intend
that the Trust shall be a third-party beneficiary of this Agreement and be entitled to enforce all of the terms hereof, including, without limitation, the rights granted in its favor and in favor of the Distributor, the Index Receipt Agent or the
Custodian under this Agreement.
SECTION 12 NOTICES
All notices, communications, requests and demands to or upon the respective parties hereto to be effective shall be in writing (and if sent by mail, sent via certified or registered mail, return receipt
requested) or be by confirmed facsimile transmission or electronic mail with confirmed delivery status notification. All notices shall be deemed to have been duly given or made when delivered by hand, or three Business Days after being deposited in
the mail, postage prepaid, or, in the case of electronic mail transmission, when sent, addressed as follows or at such other address as such party may designate in writing. Notwithstanding the above, delivery of any amendment or supplement to the
Prospectus or AP Handbook shall be made via email to the Participant.
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DISTRIBUTOR:
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PARTICIPANT:
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Attn: General Counsel
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456-1100
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DTC/ NSCC Clearing Participant Code:
Attn:
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Telephone: (610) 676-3482
Facsimile: (610) 676-3482
Email:
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Telephone:
Facsimile:
Email:
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INDEX RECEIPT AGENT:
Attn:
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Telephone:
Facsimile:
Email:
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SECTION 13 COMMENCEMENT OF TRADING
The Participant may not submit an Order pursuant to this Agreement until five Business Days after effectiveness of this Agreement or a date agreed upon by the Distributor and the Participant; provided,
however, that this Agreement shall be immediately effective if the execution of this Agreement supersedes any other authorized participant agreement among the Parties that is currently in effect.
SECTION 14 DEFINITIONS
The capitalized
terms used in this Agreement are defined below. Any capitalized terms used herein that are not defined shall have the meaning set forth in the Prospectus or in the AP Handbook.
14.01 “1933 Act”
means the Securities Act of 1933, as amended.
14.02
“1934 Act”
means the Securities Exchange Act of 1934, as amended.
14.03 “1940 Act”
has the meaning set forth
in the preamble of this Agreement.
14.04 “Affiliated Person”
shall have the meaning given to it by Section 2(a)(3) of
the 1940 Act, subject to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation or order applicable to the Trust or their investment adviser.
14.05 “Agreement”
has the meaning set forth in the preamble of this Agreement.
14.06 “AP Handbook”
means the handbook and other supplemental materials that accompany, or are made available in connection with, this
Agreement that clarify and provide revised or additional procedures with respect to a Participant’s transactions with the Distributor and the Trust, as they may be amended from time to time by the Distributor or the Trust and made available to
the Participant. The AP Handbook is incorporated by reference into this Agreement and hereby made a part hereof. It is acknowledged and agreed that the AP Handbook may be made available solely in an electronic format accessible via the internet. Any
changes to the AP Handbook made available to the Participant subsequent to the date of this Agreement shall also be deemed incorporated by reference herein.
14.07 “Authorized Person”
means a person that is authorized to give instructions relating to any activity contemplated by this Agreement or any other notice, request or instruction on
behalf of the Participant.
14.08 “Beneficial Owner”
shall have the meaning given to it by Rule 16a-1(a)(2) of the 1934 Act.
14.09 “Business Day”
shall mean each day the exchange on which a Series is listed is open for regular trading.
14.10 “Cash Amount”
means an amount of cash sufficient to pay any applicable transaction fee, redemption fee and any additional fixed
and/or variable charges applicable to purchase or redemption transactions effected fully or partially in cash (when, in the sole discretion of the Trust, cash transactions are available or specified), in each case, as disclosed in the applicable
Prospectus. Without limiting the generality of the foregoing, the term “Cash Amount” shall also include any fees, costs and expenses (including, without limitation, reasonable attorneys fees) incurred by the Trust in taking possession of,
liquidation of or other use of any collateral posted in lieu of delivery of Deposit Securities or Shares.
14.11 “Cash
Component”
means, (1) in the case of a purchase of a Creation Unit, an amount of cash equal to the difference between the total aggregate value of the Deposit Securities and the net asset value of the Creation Unit; and (2) in the
case of a redemption of a Creation Unit, an amount of cash equal to the difference between the net asset value of the Creation Unit being redeemed and the total aggregate value of the Fund Securities delivered by the Series in consideration for the
Creation Unit, in such case including any cash in lieu amounts.
14.12 “Cash in Lieu”
shall have the meaning given such term in
Section 2.02
of
this Agreement.
14.13 “CNS Clearing Process”
means the Continuous Net Settlement clearing processes of NSCC, as such
processes have been enhanced to effect purchases and redemptions of Creation Units.
14.14 “CNS System”
means the Continuous
Net Settlement clearing processes of NSCC.
14.15 “Contractual Settlement Date”
means the date as specified in the Prospectus
or in the AP Handbook upon which delivery of Deposit Securities, Shares and/or any Cash Component, as applicable, must be made by the Participant to the Trust.
14.16 “Creation Unit”
means an aggregation of a specified number of Shares of a Series, as specified in the applicable Prospectus.
14.17 “Custodian”
means [name of Custodian] or such other custodian as the Trust may specify from time to time.
14.18 “Deposit Securities”
means an in-kind deposit of a designated portfolio of equity or fixed-income securities or other financial
instruments as determined from time to time in the sole discretion of the Trust in accordance with the terms of the Prospectus.
14.19
“Distributor Indemnified Party”
shall have the meaning set forth in
Section 10.01
.
14.20
“Distributor”
has the meaning set forth in the preamble hereto.
14.21 “DTC Participant”
means a person that is
eligible and authorized to participate in the DTC direct registration system.
14.22 “DTC”
means The Depository Trust
Company.
14.23 “Effective Date”
has the meaning set forth in the preamble hereto.
14.24 “Exchange Traded Fund”
or “
ETF
” has the meaning set forth in the preamble hereto.
14.25 “Federal Reserve System”
means the central banking system of the United States.
14.26 “FINRA”
means the Financial Industry Regulatory Authority, Inc.
14.27 “Fund Deposit”
means the requisite Deposit Securities and, if applicable, a Cash Component.
14.28 “Fund Securities”
means in-kind redemption proceeds of a designated portfolio of securities or other financial instruments as determined from time to time in the sole discretion of
the Trust
14.29 “Index Receipt Agent”
means acting in the capacity as “index receipt agent,” as such term is
defined in the rules of NSCC, for the Trust.
14.30 “Law”
means any rule, regulation, statute, order, ordinance, guideline,
pronouncement, code or other legally enforceable requirement, including common law, state and federal laws or securities laws and laws of foreign jurisdictions and, with respect to a Party, the rules and regulations of any self regulatory
organization of which such Party or, to the extent relevant to the performance of a Party’s obligations under this Agreement, such Party’s Affiliate, is a member or securities market on which Shares are listed.
14.31 “Losses”
has the meaning set forth in
Section 10.01
hereto.
14.32 “non-CNS Clearing Process”
means the applicable clearing process specified for any Series, including but not limited to those
affected through the facilities of DTC, the Federal Reserve System, Euroclear, the custodian, local subcustodians and/or any subset or combination thereof.
14.33 “NSCC”
means the National Securities Clearing Corporation.
14.34
“Orders”
means Purchase Orders and Redemption Requests.
14.35 “Participant Client”
means any party on whose
behalf the Participant acts in connection with an Order (whether a customer or otherwise).
14.36 “Participant”
has the
meaning set forth in the preamble hereto.
14.37 “Participating Party”
means a Participant who is a member of the NSCC and a
participant in the CNS System of NSCC.
14.38 “PIN Number”
means a unique personal identification number issued to the
Participant pursuant to this Agreement.
14.39 “Prospectus”
means each Series’ current prospectus and statement of
additional information included in the Trust’s effective registration statement, as supplemented and/or amended from time to time, the contents of which are hereby incorporated into this Agreement by reference.
14.40 “Purchase Order”
means an irrevocable order to purchase one or more Creation Units by a Participant.
14.41 “Purchasing Shareholder”
means, in the case of a same Business Day Purchase Order and Redemption Request as described in
Section 3.04
, the Participant (in the case of a Purchase Order that is placed for the Participant’s own beneficial interest) or Participant Client (in the case of a Purchase Order that is placed for the Participant Client’s
beneficial interest).
14.42 “Redeeming Shareholder”
means, in the case of a same Business Day Purchase Order and Redemption
Request as described in
Section 3.04
, the Participant (in the case of a Redemption Request that is placed for the Participant’s own beneficial interest) or Participant Client (in the case of a Redemption Request that is placed for
the Participant Client’s beneficial interest).
14.43 “Redemption Request”
means a request to redeem one or more
Creation Units by a Participant.
14.44 “Rule 144A Security”
has the meaning set forth in
Section 2.04
hereof.
14.45 “Series”
has the meaning set forth in the recitals and includes Series that are formed and offered after the date of
this Agreement.
14.46 “Shares”
has the meaning set forth in the recitals.
14.47 “Trust”
has the meaning set forth in the preamble of this Agreement.
14.48 “Website”
means the website: https://etfwebservices.seic.com/ETF (or such other web address as may be communicated by the Distributor or the Trust to the Participant from time to
time) established and maintained by the Trust or their affiliates for purposes of allowing Participants to place Orders, as it may be updated from time to time.
SECTION 15 INCORPORATION BY REFERENCE AND PROSPECTUS CONTROLLING
The Participant acknowledges receipt of the AP Handbook, represents that it has reviewed such document and understands the terms thereof, and further
acknowledges that the information and procedures contained therein are incorporated herein by reference. The Participant also acknowledges and agrees that the Prospectus for each Series may contain, among other things, procedures relating to the
creation and redemption of Shares. The Participant hereby acknowledges and agrees that it has the responsibility of reviewing and obtaining familiarity with the Prospectus for the Shares of each Series in which it transacts. In the event that any
information contained in this Agreement, the AP Handbook or posted on the Website is in conflict with the information disclosed in the Prospectus for a Series, the information contained in the Prospectus shall be controlling. In the event that any
information posted on the Website (for the avoidance of doubt, it is acknowledged and agreed that the Website is deemed not to include the Prospectus or the AP Handbook) is in conflict with the terms and conditions of this Agreement, the terms and
conditions of this Agreement shall be controlling. The Trust will make reasonable efforts to keep the information contained in the AP Handbook or posted on the Website and contained in the Prospectus consistent.
SECTION 16 EFFECTIVENESS, TERMINATION, AMENDMENT AND ASSIGNMENT
16.01
This Agreement shall become effective in this form upon delivery to and execution by the Distributor. This Agreement may be terminated at any time by any Party upon sixty days prior written
notice to the other Parties and may be terminated earlier by a Party at any time in the event of a breach by the other Party of any provision of this Agreement or the procedures described or incorporated herein. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof. This Agreement supersedes all prior or contemporaneous representations, discussions, negotiations, letters, proposals, agreements and understandings between the parties hereto
with respect to the subject matter hereof, whether written or oral.
This Agreement may be amended, modified or supplemented by the Trust or
the Distributor from time to time without the consent of the Participant or any Beneficial Owner by the following procedure. Amendments to this Agreement can be made upon reasonable notice by the Trust and Distributor, respectively. The Trust or the
Distributor will electronically transmit the amendment to the Participant. If neither the Participant nor the other party objects in writing to the amendment within thirty (30) business days after its receipt, the amendment will become a part
of this Agreement in accordance with its terms. For the avoidance of doubt, it is acknowledged and agreed that changes in procedures stated in the Prospectus or AP Handbook shall not be considered an amendment to this Agreement and shall be
effective immediately. This Agreement may not be assigned by the Participant, except in connection with the sale of all or substantially all of the Participant’s business to another party.
SECTION 17 GOVERNING LAW
This Agreement
shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to any choice or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. To
the extent that the applicable laws of the Commonwealth of Pennsylvania, or any of the provisions of this Agreement, conflict with the applicable provisions of the 1940 Act, the 1933 Act or the 1934 Act, the latter shall control. Each party to this
Agreement, by its execution hereof, (i) hereby irrevocably submits to the nonexclusive jurisdiction of the state courts of the Commonwealth of Pennsylvania or the United States District Courts for the Eastern District of Pennsylvania for the
purpose of any action between the parties arising in whole or in part under or in connection with this Agreement, and (ii) hereby waives to the extent not prohibited by applicable Law, and agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such action brought in one of the above-named
courts
should be dismissed on grounds of forum non conveniens, should be transferred or removed to any court other than one of the above-named courts, or should be stayed by reason of the pendency of
some other proceeding in any other court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by such court.
SECTION 18 COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of
which shall constitute one and the same instrument. Each such counterpart shall be deemed an original, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. This Agreement shall be
deemed executed by both parties when any one or more counterparts hereof or thereof, individually or taken together, bears the original facsimile or scanned signatures of each of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and
year written above.
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SEI INVESTMENTS DISTRIBUTION CO.
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[NAME OF PARTICIPANT]
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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ACKNOWLEDGED AND ACCEPTED BY:
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, as
Index
Receipt Agent
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PYXIS FUNDS I
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Date:
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Date:
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ANNEX I
CERTIFICATE DESIGNATING AUTHORIZED PERSONS
The following employees of
[NAME OF PARTICIPANT] (each, an “Authorized Person”) are authorized, in accordance with the Authorized Participant Agreement between [NAME OF PARTICIPANT] and SEI
Investments Distribution Co., as such Agreement may be amended from time to time, to act as agent of [NAME OF PARTICIPANT] to submit purchase orders and redemption requests (“Orders”) on behalf of [NAME OF PARTICIPANT] and to give
instructions or any other notice or request on behalf of [NAME OF PARTICIPANT] with respect to such Orders or any other activity contemplated by the Authorized Participant Agreement.
SECTION A
– List of Current Authorized Persons
Name:
e-mail Address:
Telephone:
Fax:
Name:
e-mail Address:
Telephone:
Fax:
Name:
e-mail Address:
Telephone:
Fax:
Name:
e-mail Address:
Telephone:
Fax:
SECTION B
– List of Changes to Authorized Persons
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The following persons who were not designated as Authorized Persons on Participant’s previous Certificate have been verified and added as
Authorized Persons:
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The following persons who were included on the Participant’s previous Certificate are no longer Authorized Persons:
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The undersigned, [name of secretary or authorized officer], [title] of [NAME OF PARTICIPANT], does hereby
certify that the persons listed in Section A above have been duly authorized to act as Authorized Persons pursuant to the Authorized Participant Agreement.
Date:
Exhibit (h)(14)
TRANSFER AGENCY AND SERVICE AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 2012, by and between STATE STREET BANK AND TRUST COMPANY, a trust company chartered under the laws of the Commonwealth of Massachusetts having
its principal office and place of business at One Lincoln Center, Boston, Massachusetts 02111 (“State Street” or the “Transfer Agent”), and PYXIS FUNDS I, a Delaware statutory trust (the “Trust”) having its principal
office and place of business at 200 Crescent Court, Suite 700
,
Dallas, TX 75201.
WHEREAS, the Trust is
authorized to issue shares of beneficial interest (“Shares”) in separate series, with each such series representing interests in a separate portfolio of securities and other assets;
WHEREAS, the Trust intends to initially offer Shares in one or more series, each as named in the attached
Schedule A
, which may be
amended by the parties from time to time (such series, together with all other series subsequently established by the Trust and made subject to this Agreement in accordance with Section 12 of this Agreement, being herein referred to as a
“Portfolio,” and collectively as the “Portfolios”);
WHEREAS, each Portfolio will issue and redeem Shares
only in aggregations of Shares known as “Creation Units” as described in the currently effective prospectus and statement of additional information of the Trust (collectively, the “Prospectus”);
WHEREAS, only those entities (“Authorized Participants”) that have entered into an Authorized Participant Agreement with the
distributor of the Trust, currently SEI Investments Distribution Co. (the “Distributor”), are eligible to place orders for Creation Units with the Distributor;
WHEREAS, the Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York (“DTC”) or its nominee will be the record or registered owner of all
outstanding Shares;
WHEREAS, Trust desires to appoint State Street as transfer agent, dividend disbursing agent and agent in
connection with certain other activities; and
WHEREAS, State Street is willing to accept such appointment.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, mutually
covenant and agree as follows:
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1.1
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Subject to the terms and conditions set forth in this Agreement, the Trust and each Portfolio hereby employs and appoints the Transfer Agent to act as, and the Transfer
Agent agrees to act as, transfer agent for the Creation Units and dividend disbursing agent of the Trust and each Portfolios.
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1.2
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Transfer Agency Services
. In accordance with procedures established from time to time by agreement between the Trust and each Portfolio, as applicable, and the
Transfer Agent, the Transfer Agent shall:
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(i)
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establish one or more omnibus accounts representing DTC’s position in each Portfolio on the Transfer Agent’s recordkeeping system and maintain such account;
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(ii)
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receive and process orders for the benefit of the appropriate Authorized Participant for the purchase of Creation Units from the Distributor or the Trust, and promptly
deliver payment and appropriate documentation thereof to the custodian of the applicable Portfolio as identified by the Trust (the “Custodian”);
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(iii)
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receive and process redemption requests and redemption directions from the Distributor or the Trust and deliver the appropriate documentation thereof to the Custodian;
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(iv)
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prepare and transmit by means of DTC’s book-entry system payments for any dividends and distributions declared by the Trust on behalf of the applicable Portfolio;
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(v)
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record the issuance of Shares of the applicable Portfolio and maintain a record of the total number of Shares of each Portfolio which are issued and outstanding; and
provide the Trust on a regular basis with the total number of Shares of each Portfolio which are issued and outstanding but Transfer Agent shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares to
determine if there are authorized Shares available for issuance or to take cognizance of any laws relating to, or corporate actions required for, the issue or sale of such Shares, which functions shall be the sole responsibility of the Trust and
each Portfolio; and, excluding DTC or its nominee as the record or registered owner, the Transfer Agent shall have no obligations or responsibilities to account for, keep records of, or otherwise related to, the beneficial owners of the Shares;
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(vi)
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maintain and manage, as agent for the Trust and each Portfolio, such bank accounts as the Transfer Agent shall deem necessary for the performance of its duties under
this Agreement, including but not limited to, the processing of Creation Unit purchases and redemptions and the payment of a Portfolio’s dividends and distributions. The Transfer Agent may maintain such accounts at the bank or banks deemed
appropriate by the Transfer Agent in accordance with applicable law;
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(vii)
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process any request from an Authorized Participant to change its account registration; and
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(viii)
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except as otherwise instructed by the Trust, the Transfer Agent shall process all transactions in each Portfolio in accordance with the procedures mutually agreed upon
by the Trust and the Transfer Agent with respect to the proper net asset value to be applied to purchase orders received in good order by the Transfer Agent or by the Trust or any other person or firm on behalf of such Portfolio or from an
Authorized Participant before cut-offs established by the Trust. The Transfer Agent shall report to the Trust any known exceptions to the foregoing.
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1.3
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Additional Services
. In addition to, and neither
in lieu
of nor in contravention of the services set forth in Section 1.2 above, the Transfer Agent
shall perform the following services:
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(i)
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Other Services
. The Transfer Agent shall perform such other services for the Trust that are mutually agreed to by the parties from time to time, for which the
Trust will pay such fees as may be mutually agreed upon, including the Transfer Agent’s reasonable out-of-pocket expenses. The provision of such services shall be subject to the terms and conditions of this Agreement.
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(ii)
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Distributor, DTC and NSCC
. The Transfer Agent shall: (a) accept and effectuate the registration and maintenance of accounts, and the purchase and redemption
of Creation Units in such accounts, in accordance with instructions transmitted to and received by the Transfer Agent by transmission from Distributor, DTC or NSCC relative to the Authorized Participants; and (b) issue instructions to a
Portfolio’s banks for the settlement of transactions between the Portfolio with Distributor, DTC and NSCC (acting on behalf of the applicable Authorized Participant).
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1.4
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Authorized Persons
. The Trust and each Portfolio, hereby agrees and acknowledges that the Transfer Agent may rely on the current list of authorized persons,
including the Distributor, as provided or agreed to by the Trust and as may be amended from time to time, in receiving instructions to issue or redeem Creation Units. The Trust and each Portfolio, agrees and covenants for itself and each such
authorized person that any order or sale of or transaction in Creation Units received by it after the order cut-off time as set forth in the Prospectus or such earlier time as designated by such Portfolio (the “Order Cut-Off Time”), shall
be effectuated at the net asset value determined on the next business day or as otherwise required pursuant to the applicable Portfolio’s then-effective Prospectus, and the Trust or such authorized person shall so instruct the Transfer Agent of
the proper effective date of the transaction.
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1.5
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Anti-Money Laundering and Client Screening
. With respect to the Trust’s or any Portfolio’s offering and sale of Creation Units at any
time, and for all subsequent transfers of such interests, the Trust or its delegate shall, directly or indirectly and to the extent required by law: (i) conduct know your customer/client identity due diligence with respect to potential
investors and transferees in the Shares and
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Creation Units and shall obtain and retain due diligence records for each investor and transferee; (ii) use its best efforts to ensure that each investor’s and any transferee’s
funds used to purchase Creation Units or Shares shall not be derived from, nor the product of, any criminal activity; (iii) if requested, provide periodic written verifications that such investors/transferees have been checked against the
United States Department of the Treasury Office of Foreign Assets Control database for any non-compliance or exceptions; and (iv) perform its obligations under this Section in accordance with all applicable anti-money laundering laws and
regulations. In the event that the Transfer Agent has received advice from counsel that access to underlying due diligence records pertaining to the investors/transferees is necessary to ensure compliance by the Transfer Agent with relevant
anti-money laundering (or other applicable) laws or regulations, the Trust shall, upon receipt of written request from the Transfer Agent, provide the Transfer Agent copies of such due diligence records.
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1.6
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State Transaction (“Blue Sky”) Reporting
. The Trust shall be solely responsible for its “blue sky” compliance and state registration
requirements.
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1.7
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Tax Law
. The Transfer Agent shall have no responsibility or liability for any obligations now or hereafter imposed on the Trust, a Portfolio, any Creation Units,
any Shares, a beneficial owner thereof, an Authorized Participant or the Transfer Agent in connection with the services provided by the Transfer Agent hereunder by the tax laws of any country or of any state or political subdivision thereof. It
shall be the responsibility of the Trust to notify the Transfer Agent of the obligations imposed on the Trust, a Portfolio, the Creation Units, the Shares, or the Transfer Agent in connection with the services provided by the Transfer Agent
hereunder by the tax law of countries, states and political subdivisions thereof, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting.
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1.8
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The Transfer Agent shall provide the office facilities and the personnel determined by it to perform the services contemplated herein.
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2.1
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Fee Schedule
. For the performance by the Transfer Agent pursuant to this Agreement, the Trust and each of the Portfolios to pay the Transfer Agent the fees and
expenses set forth in a fee schedule. Such fees and any out of pocket expenses and advances identified under Section 2.2 below may be changed from time to time, subject to mutual written agreement between the Trust and the Portfolios and the
Transfer Agent. The parties agree that the fees set forth in the fee schedule shall apply with respect to each Portfolio listed on
Schedule A
hereto as of the date hereof and to any newly created Portfolios added to this Agreement that have
requirements consistent with services then being provided by the Transfer Agent under this Agreement. In the event that a Portfolio is to become a party to this Agreement as a result of an acquisition or merger, then the parties shall confer
diligently and negotiate in good faith, and agree upon fees applicable to such Portfolio.
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2.2
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Out of Pocket Expenses
. In addition to the fees paid under Section 2.1 above, the Trust and the Portfolios to reimburse the Transfer Agent for out of pocket
expenses, including but not limited to, confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Transfer Agent for the items set out in the fee schedule. In
addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Trust, will be reimbursed by the Trust on behalf of the applicable Portfolio.
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2.3
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Invoices
. The Trust and each of the Portfolios agree to pay all fees and out of pocket expenses within thirty (30) days following the receipt of the
respective invoice, except for any fee or expense that is subject to good faith dispute. In the event of such a dispute, the Trust may withhold that portion of the fee or expense subject to the good faith dispute. The Trust shall notify the Transfer
Agent in writing within twenty-one (21) calendar days following the receipt of each invoice if the Trust is disputing any amounts in good faith. The Trust shall settle such disputed amounts within five (5) days of the day on which the
parties agree on the amount to be paid.
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2.4
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The Transfer Agent is authorized to and may employ, associate or contract with such person or persons as the Transfer Agent may deem desirable to assist it in
performing its duties under this Agreement; provided, however, that the compensation of such person or persons shall be paid by the Transfer Agent and that the Transfer Agent shall be as fully responsible to each Trust for the acts and omissions of
any such person or persons as it is for its own acts and omissions.
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3.
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REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
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The Transfer Agent represents and warrants to the Trust that:
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3.1
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It is a trust company duly organized and existing under the laws of the Commonwealth of Massachusetts.
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3.2
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It is duly registered as a transfer agent under Section 17A(c)(2) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), it will remain so
registered for the duration of this Agreement, and it will promptly notify the Trust in the event of any material change in its status as a registered transfer agent.
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3.3
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It is duly qualified to carry on its business in the Commonwealth of Massachusetts.
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3.4
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It is empowered under applicable laws and by its organizational documents to enter into and perform the services contemplated in this Agreement.
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3.5
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All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
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4.
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REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE PORTFOLIOS
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The Trust and each Portfolio represents and warrants to the Transfer Agent that:
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4.1
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The Trust is a statutory trust duly organized, existing and in good standing under the laws of the state of its formation.
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4.2
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The Trust is empowered under applicable laws and by its organizational documents to enter into and perform this Agreement.
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4.3
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All requisite proceedings have been taken to authorize the Trust to enter into, perform and receive services pursuant to this Agreement.
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4.4
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The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.
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4.5
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A registration statement under the Securities Act of 1933, as amended (the “Securities Act”), is currently effective and will remain effective, and all
appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Trust being offered for sale.
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5.
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DATA ACCESS AND PROPRIETARY INFORMATION
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5.1
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The Trust acknowledges that the databases, computer programs, screen formats, report formats, interactive design techniques, and documentation manuals furnished to the
Trust by the Transfer Agent as part of the Trust’s ability to access certain Trust-related data maintained by the Transfer Agent or another third party on databases under the control and ownership of the Transfer Agent (“Data Access
Services”) constitute copyrighted, trade secret, or other proprietary information (collectively, “Proprietary Information”) of substantial value to the Transfer Agent or another third party. In no event shall Proprietary Information
be deemed Customer Information (as defined below) or the confidential information of the Trust. The Trust and each Portfolio agrees to treat all Proprietary Information as proprietary to the Transfer Agent and further agrees that it shall not
divulge any Proprietary Information to any person or organization except as may be provided hereunder. Without limiting the foregoing, the Trust agrees for itself and its officers and employees and applicable agents, to:
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(i)
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use such programs and databases solely on the Trust’s, or such agents’ computers, or solely from equipment at the location(s) agreed to between the Trust and
the Transfer Agent, and solely in accordance with the Transfer Agent’s applicable user documentation;
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(ii)
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refrain from copying or duplicating in any way the Proprietary Information;
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(iii)
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refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform the Transfer Agent in
a timely manner of such fact and dispose of such information in accordance with the Transfer Agent’s instructions;
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(iv)
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refrain from causing or allowing Proprietary Information transmitted from the Transfer Agent’s computers to the Trust’s, or such agents’ computer to be
retransmitted to any other computer facility or other location;
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(v)
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allow the Trust to have access only to those authorized transactions agreed upon by the Trust and the Transfer Agent;
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(vi)
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honor all reasonable written requests made by the Transfer Agent to protect at the Transfer Agent’s expense the rights of the Transfer Agent in Proprietary
Information at common law, under federal copyright law and under other federal or state law.
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5.2
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Proprietary Information shall not include all or any portion of any of the foregoing items that are or become publicly available without breach of this Agreement; that
are released for general disclosure by a written release by the Transfer Agent; or that are already in the possession of the receiving party at the time of receipt without obligation of confidentiality or breach of this Agreement.
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5.3
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Notwithstanding any other provision to the contrary, the Trust may disclose Proprietary Information in the event that it is required to be disclosed by law or in a
judicial or administrative proceeding, or by an appropriate regulatory authority having jurisdiction over the Trust; provided that all reasonable legal remedies for maintaining such information in confidence have been exhausted including, but not
limited to, giving the Transfer Agent as much advance notice of the possibility of such disclosure as practical so the Transfer Agent may attempt to stop such disclosure or obtain a protective order concerning such disclosure.
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5.4
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If the Trust notifies the Transfer Agent that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for
such services, the Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Transfer Agent may obtain certain data included in the Data Access Services are solely responsible for the contents of such
data, and the Trust agrees to make no claim against the Transfer Agent arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE
SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN “AS IS, AS AVAILABLE” BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
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5.5
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If the transactions available to the Trust include the ability to originate electronic instructions to the Transfer Agent in order to effect the transfer or movement of
cash or Creation Units or transmit Authorized Participant information or other information, then in such event the Transfer Agent shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry
as long as such instruction is undertaken in conformity with security procedures established by the Transfer Agent from time to time.
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5.6
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Each party shall take reasonable efforts to advise its employees of their obligations pursuant to this Section. The obligations of this Section shall survive any
earlier termination of this Agreement.
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6.
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WIRE TRANSFER OPERATING GUIDELINES
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6.1
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Obligation of Sender
. The Transfer Agent is authorized to promptly debit the appropriate Portfolio account(s) upon the receipt of a payment order in compliance
with the selected security procedure (the “Security Procedure”) chosen for funds transfer in the Funds Transfer Addendum to the Custody Contract between the Trust and State Street dated as of October 1, 2012, as amended from time to
time (the “Custody Contract”), and in the amount of money that the Transfer Agent has been instructed to transfer. The Transfer Agent shall execute payment orders in compliance with the Security Procedure and with the Trust’s
instructions on the execution date, provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after the
customary deadline will be deemed to have been received the next business day.
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6.2
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Security Procedure
. The Trust and each Portfolio acknowledges that the Security Procedure it has designated on the Funds Transfer Addendum was selected by the
Trust from security procedures offered by the Transfer Agent. The Trust shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated to the Transfer Agent in writing. The Trust must
notify the Transfer Agent immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Trust’s authorized personnel. The Transfer Agent shall verify the authenticity of all
instructions received from the Trust according to the Security Procedure.
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6.3
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Account Numbers
. The Transfer Agent shall process all payment orders on the basis of the account number contained in the payment order. In the event of a
discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.
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6.4
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Rejection
. The Transfer Agent reserves the right to decline to process or delay the processing of a payment order which (i) is in excess of the collected
balance in the account to be charged at the time of the Transfer Agent’s receipt of such payment order; (ii) if initiating such payment order would cause the Transfer Agent, in the Transfer Agent’s sole judgment, to exceed any volume,
aggregate dollar, network, time, credit or similar limits which are applicable to the Transfer Agent; or (iii) if the Transfer Agent, in good faith is unable to satisfy itself that the transaction has been properly authorized.
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6.5
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Cancellation Amendment
. The Transfer Agent shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in
compliance with the Security Procedure, provided that such requests are received in a timely manner affording the Transfer Agent reasonable opportunity to act. However, the Transfer Agent assumes no liability if the request for amendment or
cancellation cannot be satisfied.
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6.6
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Errors
. The Transfer Agent shall assume no responsibility for failure to detect any erroneous payment order provided that the Transfer Agent complies with the
payment order instructions as received and the Transfer Agent complies with the Security Procedure. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
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6.7
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Interest
. The Transfer Agent shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless the
Transfer Agent is notified of the unauthorized payment order within thirty (30) days of notification by the Transfer Agent of the acceptance of such payment order.
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6.8
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ACH Credit Entries/Provisional Payments
. When a Portfolio initiates or receives Automated Clearing House credit and debit entries pursuant to these guidelines
and the rules of the National Automated Clearing House Association and the New England Clearing House Association, the Transfer Agent will act as an Originating Depository Financial Institution and/or Receiving Depository Financial Institution, as
the case may be, with respect to such entries. Credits given by the Transfer Agent with respect to an ACH credit entry are provisional until the Transfer Agent receives final settlement for such entry from the Federal Reserve Bank. If the Transfer
Agent does not receive such final settlement, the Trust agrees that the Transfer Agent shall receive a refund of the amount credited to the applicable Portfolio in connection with such entry, and the party making payment to the Portfolio via such
entry shall not be deemed to have paid the amount of the entry.
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6.9
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Confirmation
. Confirmation of the Transfer Agent’s execution of payment orders shall ordinarily be provided within twenty four (24) hours notice of
which may be delivered through the Transfer Agent’s proprietary information systems, or by facsimile or call-back. The Trust must report any objections to the execution of an order within thirty (30) calendar days of receipt of such
confirmation.
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7.
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STANDARD OF CARE / LIMITATION OF LIABILITY
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7.1
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The Transfer Agent shall at all times act in good faith in its performance of all services performed under this Agreement, but assumes no responsibility and shall not
be liable for loss or damage due to errors, including encoding and payment processing errors, unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees or agents. The parties agree that any encoding
or payment processing errors shall be governed by this standard of care, and that Section 4-209 of the Uniform Commercial Code is superseded by this Section.
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7.2
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In no event shall the Transfer Agent be liable for any special, indirect, incidental, punitive or consequential damages. In any event, the Transfer Agent’s
cumulative liability for each calendar year (a “Liability Period”) with respect to the services provided pursuant to this Agreement regardless of the form of action or legal theory shall be limited to its total annual compensation earned
and fees payable hereunder during the preceding Compensation Period, as defined herein, for any liability or loss suffered by the Trust or the Portfolios including, but not limited to, any liability relating to qualification of the Trust or a
Portfolio as a regulated investment company or any liability relating to the Trust’s or a Portfolio’s compliance with any federal or state tax or securities statute, regulation or ruling during such Liability Period. “Compensation
Period” shall mean the calendar year ending immediately prior to each Liability Period in which the event(s) giving rise to the Transfer Agent’s liability for that period have occurred. Notwithstanding the foregoing, the Compensation
Period for purposes of calculating the annual cumulative liability of the Transfer Agent for the Liability Period commencing on the date of this Agreement and terminating on December 31, 2012 shall be the date of this Agreement through
December 31, 2012, calculated on an annualized basis, and the Compensation Period for the Liability Period commencing January 1, 2013 and terminating on December 31, 2013 shall be the date of this Agreement through December 31,
2012, calculated on an annualized basis.
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8.1
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The Transfer Agent shall not be responsible for, and the Trust and each Portfolio shall indemnify and hold the Transfer Agent harmless from and against, any and all
losses, damages, costs, charges, reasonable counsel fees (including the defense of any lawsuit in which the Transfer Agent or affiliate is a named party), payments, reasonable expenses and liability arising out of or attributable to:
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(i)
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all actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct;
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10
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(ii)
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the Trust’s breach of any representation, warranty or covenant of the Trust hereunder;
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(iii)
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the Trust’s lack of good faith, negligence or willful misconduct;
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(iv)
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the reliance upon, and any subsequent use of or action taken or omitted, by the Transfer Agent, or its agents or subcontractors on: (a) any information, records,
documents, data, stock certificates or services, which are received by the Transfer Agent or its agents or subcontractors by machine readable input, facsimile, electronic data entry, electronic instructions or other similar means authorized by the
Trust, and which have been prepared, maintained or performed by the Trust or any other person or firm on behalf of the Trust, including but not limited to any broker-dealer, third party administrator or previous transfer agent; (b) any
instructions or requests of the Trust or any of its officers, employees, agents or subcontractors; (c) any instructions or opinions of legal counsel to the Trust or any Portfolio with respect to any matter arising in connection with the
services to be performed by the Transfer Agent under this Agreement which are provided to the Transfer Agent after consultation with such legal counsel; or (d) any paper or document, reasonably believed to be genuine, authentic, or signed by
the proper person or persons;
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(v)
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the offer or sale of Creation Units in violation of federal or state securities laws or regulations requiring that such Creation Units be registered, or in violation of
any stop order or other determination or ruling by any federal or state agency with respect to the offer or sale of such Creation Units;
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(vi)
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the negotiation and processing of any checks, wires and ACH transmissions, including without limitation, for deposit into, or credit to, the Trust’s demand deposit
accounts maintained by the Transfer Agent;
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(vii)
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all actions relating to the transmission of Creation Unit or Authorized Participant data through the NSCC clearing systems, if applicable; and
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(viii)
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any tax obligations under the tax laws of any country or of any state or political subdivision thereof, including taxes, withholding and reporting requirements, claims
for exemption and refund, additions for late payment, interest, penalties and other expenses (including legal expenses) that may be assessed, imposed or charged against the Transfer Agent as transfer agent hereunder.
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8.2
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At any time the Transfer Agent may apply to any officer of the Trust for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Transfer Agent under this Agreement, and the Transfer Agent and its agents or subcontractors shall not be liable and shall be indemnified by the Trust and the applicable Portfolio for
any action taken or omitted by it in reliance upon such instructions or upon the
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11
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opinion of such counsel. The Transfer Agent, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Trust or the
applicable Portfolio, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided the Transfer Agent or its agents or subcontractors by machine
readable input, electronic data entry or other similar means authorized by the Trust and the Portfolios, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Trust.
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8.3
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In order that the indemnification provisions contained in this Section shall apply, upon the assertion of a claim for which the Trust may be required to indemnify the
Transfer Agent, the Transfer Agent shall promptly notify the Trust of such assertion, and shall keep the Trust advised with respect to all material developments concerning such claim. The Trust shall have the option to participate with the Transfer
Agent in the defense of such claim or to defend against said claim in its own name. The Transfer Agent shall in no case confess any claim or make any compromise in any case in which the Trust may be required to indemnify the Transfer Agent except
with the Trust’s prior written consent which shall not be unreasonably withheld.
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9.
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COVENANTS OF THE TRUST AND THE TRANSFER AGENT
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9.1
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The Trust shall promptly furnish to the Transfer Agent the following:
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(i)
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A copy of the resolution of the Board of Trustees of the Trust certified by the Trust’s Secretary authorizing the appointment of the Transfer Agent and the
execution and delivery of this Agreement.
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(ii)
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A copy of the Declaration of Trust and By-Laws of the Trust and all amendments thereto.
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9.2
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The Transfer Agent hereby agrees to establish and maintain facilities and procedures for safekeeping of check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates, forms and devices.
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9.3
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Records
. The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act and the Rules thereunder, the Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent relating to the services to be performed by the Transfer Agent hereunder are the
property of the Trust and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Trust on and in accordance with its request.
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12
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10.
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CONFIDENTIALITY AND PRIVACY
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10.1
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The Transfer Agent, the Trust and the Portfolios agree that each shall treat confidentially all information provided by each party to the other party regarding its
business and operations. All confidential information provided by a party hereto shall be used by the other party hereto solely for the purpose of rendering or receiving services pursuant to this Agreement and, except as may be required in carrying
out this Agreement, shall not be disclosed to any third party. Neither party will use or disclose confidential information for purposes other than the activities contemplated by this Agreement or except as required by law, court process or pursuant
to the lawful requirement of a governmental agency, or if the party is advised by counsel that it may incur liability for failure to make a disclosure, or except at the request or with the written consent of the other party. Notwithstanding the
foregoing, each party acknowledges that the other party may provide access to and use of confidential information relating to the other party to the disclosing party’s employees, contractors, sub-contractors, agents, professional advisors,
auditors or persons performing similar functions.
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The foregoing shall not be applicable to any information
(i) that is publicly available when provided or thereafter becomes publicly available, other than through a breach of this Agreement, (ii) that is independently derived by a party hereto without the use of any information provided by the
other party hereto in connection with this Agreement, (iii) that is required in any legal or regulatory proceeding, investigation, audit, examination, subpoena, civil investigative demand or other similar process, or by operation of law or
regulation, or (iv) where the party seeking to disclose has received the prior written consent of the party providing the information, which consent shall not be unreasonably withheld.
The undertakings and obligations contained in this Section 10.1 shall survive the termination or expiration of this Agreement for a
period of three (3) years.
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10.2
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The Transfer Agent affirms that it has, and will continue to have throughout the term of this Agreement, procedures in place that are reasonably designed to protect the
privacy of non-public personal consumer/customer financial information to the extent required by applicable laws, rules and regulations.
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11.
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EFFECTIVE PERIOD AND TERMINATION
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This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than sixty (60) days after the date of such delivery or mailing. Upon
termination of this Agreement pursuant to this paragraph with respect to the Trust or any Portfolio, the Trust or applicable Portfolio shall pay Transfer Agent its compensation due and shall reimburse Transfer Agent for its costs, expenses and
disbursements.
13
Termination of this Agreement with respect to any one particular Portfolio shall in no way
affect the rights and duties under this Agreement with respect to the Trust or any other Portfolio.
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12.
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ADDITIONAL PORTFOLIOS
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In
the event that the Trust establishes one or more series of Shares in addition to the Portfolios listed on the attached
Schedule A
, with respect to which the Trust desires to have the Transfer Agent render services as transfer agent under the
terms hereof, it shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees in writing to provide such services, such series of Shares shall become a Portfolio hereunder.
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13.1
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Except as provided in Section 14.1 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written
consent of the other party. Any attempt to do so in violation of this Section shall be void. Unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or
responsibility under this Agreement.
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13.2
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Except as explicitly stated elsewhere in this Agreement, nothing under this Agreement shall be construed to give any rights or benefits in this Agreement to anyone
other than the Transfer Agent and the Trust and the Portfolios, and the duties and responsibilities undertaken pursuant to this Agreement shall be for the sole and exclusive benefit of the Transfer Agent and the Trust and the Portfolios. This
Agreement shall inure to the benefit of, and be binding upon, the parties and their respective permitted successors and assigns.
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13.3
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This Agreement does not constitute an agreement for a partnership or joint venture between the Transfer Agent and the Trust. Other than as provided in
Section 14.1, neither party shall make any commitments with third parties that are binding on the other party without the other party’s prior written consent.
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The
Transfer Agent may, without further consent on the part of the Trust, subcontract for the performance hereof with a transfer agent which is duly registered pursuant to Section 17A(c)(2) of the 1934 Act (“Section 17A(c)(2)”),
including, but not limited to: (i) Boston Financial Data Services, Inc., a Massachusetts corporation (“BFDS”); (ii) a BFDS subsidiary; (iii) a BFDS affiliate; or (iv) other affiliated or unaffiliated third party;
provided, however, that the Transfer Agent shall remain liable to the Trust for the acts and omissions of any subcontractor under this Section as it is for its own acts and omissions under this Agreement.
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15.1
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Amendment
. This Agreement may be amended by a written agreement executed by both parties.
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14
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15.2
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Governing Law
. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts without regard to the conflicts of law provisions thereof.
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15.3
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Force Majeure
. The Transfer Agent shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out
of or caused, directly or indirectly, by circumstances beyond its control, including without limitation, work stoppage, power or other mechanical failure, computer virus, natural disaster, governmental action or communication disruption.
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15.4
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Survival
. All provisions regarding indemnification, warranty, liability, and limits thereon, and confidentiality and/or protections of proprietary rights and
trade secrets shall survive the termination of this Agreement.
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15.5
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Severability
. If any provision or provisions of this Agreement shall be held invalid, unlawful, or unenforceable, the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired.
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15.6
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Priorities Clause
. In the event of any conflict, discrepancy or ambiguity between the terms and conditions contained in this Agreement and any schedules or
attachments hereto, the terms and conditions contained in this Agreement shall take precedence.
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15.7
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Waiver.
No waiver by either party or any breach or default of any of the covenants or conditions herein contained and performed by the other party shall be
construed as a waiver of any succeeding breach of the same or of any other covenant or condition.
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15.8
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Merger of Agreement
. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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15.9
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Counterparts
. This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
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15.10
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Reproduction of Documents
. This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process. The parties hereto all/each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not
the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
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15.11
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Data Protection
. The Transfer Agent will implement and maintain a comprehensive written information security program that contains appropriate
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15
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security measures to safeguard the personal information of the Trust’s shareholders, employees, directors and/or officers that the Transfer Agent receives, stores, maintains, processes or
otherwise accesses in connection with the provision of services hereunder. For these purposes, “personal information” shall mean (i) an individual’s name (first initial and last name or first name and last name), address or
telephone number
plus
(a) social security number, (b) driver’s license number, (c) state identification card number, (d) debit or credit card number, (e) financial account number or (f) personal
identification number or password that would permit access to a person’s account or (ii) any combination of the foregoing that would allow a person to log onto or access an individual’s account. Notwithstanding the foregoing
“personal information” shall not include information that is lawfully obtained from publicly available information, or from federal, state or local government records lawfully made available to the general public.
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15.12
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Notices
. All notices and other communications as required or permitted hereunder shall be in writing and sent by first class mail, postage prepaid, addressed as
follows or to such other address or addresses of which the respective party shall have notified the other.
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(a)
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If to Transfer Agent, to:
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State Street Bank and Trust Company
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
Attention: Sheila McClorey, Transfer Agent Vice President
Telephone: (617) 937-6912
Facsimile: (617) 937-8139
With a copy to:
State Street Bank and Trust Company
2 Avenue de Lafayette, 2nd Floor (LCC/2)
Boston, MA 02206-5049
Attn: Mary Moran Zeven, Esq.
Telephone: (617) 662-1783
Facsimile: (617) 662-2702
Pyxis
Capital, LP
200 Crescent Court, Suite 700
Dallas, TX 75201
Attention: Ethan Powell
Telephone: (972) 419-2575
Facsimile: (972) 628-4147
[Remainder of Page Intentionally Left Blank]
16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their
names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
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STATE STREET BANK AND TRUST COMPANY
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By:
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/s/ Michael F. Rogers
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Name:
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Michael F. Rogers
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Title:
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Executive Vice President
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PYXIS FUNDS I
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By:
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/s/ Ethan Powell
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Name:
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Ethan Powell
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Title:
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Executive Vice President and Secretary
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17
Schedule A
LIST OF PORTFOLIOS
Pyxis Funds I
Pyxis/iBoxx Senior Loan ETF
18
Exhibit (i)(4)
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ROPES & GRAY LLP
PRUDENTIAL TOWER
800 BOYLSTON STREET
BOSTON, MA 02199-3600
WWW.ROPESGRAY.COM
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October 19, 2012
Ladies and Gentlemen:
We are furnishing this opinion in connection with Post-Effective Amendment
No. 34 under the Securities Act of 1933, as amended, and Amendment No. 37 under the Investment Company Act of 1940, as amended, to the Registration Statement on Form N-1A of Pyxis Funds I (the “Trust”) for the registration of an
indefinite number of shares of beneficial interest of its Pyxis/iBoxx Senior Loan ETF series (the “Fund”). The aforementioned shares are referred to herein as the “Shares.”
In connection with this opinion, we have examined:
(a) A copy of the Certificate of Trust of the Trust, dated February 27, 2006, certified by the Secretary of State of the State of Delaware.
(b) A copy of the Amended and Restated Agreement and Declaration of Trust of the Trust, dated September 14, 2012, as amended.
(c) A copy of the By-Laws of the Trust.
(d) Such other certificates, documents, and records as
we have deemed necessary for the purpose of this opinion.
We are familiar with the action taken by the Board of Trustees of the Trust to
authorize the issuance of the Shares. We assume that appropriate action has been taken to register or qualify the sale of the Shares under any applicable state and federal laws regulating offerings and sales of securities. We have also assumed that
each of the Shares will be sold for the consideration described in the Registration Statement of the Trust on Form N-1A, as amended to the date of such sale, and that such consideration will in each event be at least equal to the net asset value per
Share of such Shares.
Based upon the foregoing, We are of the opinion that the Trust is authorized to issue an unlimited number of Shares,
and that, when the Shares are issued and sold, they will be validly issued, fully paid and nonassessable by the Trust.
We consent to the
filing of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ Ropes & Gray LLP
Ropes & Gray LLP
Exhibit (m)(4)
PYXIS FUNDS I
FORM OF RULE 12b-1 DISTRIBUTION PLAN
Pyxis Funds I, a Delaware statutory trust (the “Trust”) that engages in business as an open-end management investment company
and is registered as such under the Investment Company Act of 1940, as amended (the “Act”), on behalf of its series listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A may be amended from time to time
(each a “Fund”), adopts the following distribution plan with respect to each Fund (the “Plan”) pursuant to Rule 12b-1 (the “Rule”) under the Act for the purpose of providing personal service and/or the maintenance of
shareholder accounts and to facilitate the distribution of shares of each Fund.
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I.
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Service and Distribution Fees
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Each Fund may pay a fee for reimbursement and/or compensation for distribution and other services at an annual rate that shall not exceed 0.25% of the average daily net assets of the Fund. Such fees shall
be accrued daily and paid monthly in arrears (or shall be accrued and paid at such other intervals as the Board may determine). Such services include, but are not limited to, (i) marketing and promotional services, including advertising;
(ii) provision of, printing and distributing to persons other than current shareholders the reports, prospectuses, notices and similar materials that are prepared by the Trust for current shareholders; (iii) preparing, printing and
distributing any literature used in connection with the offering of Fund shares and which is not covered by (ii) above; (iv) the promotion and sale of shares, including travel, communications and the provision of sales personnel;
(v) distribution assistance through financial institutions and intermediaries such as banks, savings and loan associations, insurance companies and investment counselors, broker-dealers, and the affiliates and subsidiaries of the Trust’s
service providers; and (vi) services to shareholders, including assistance in answering inquiries related to shareholder accounts.
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II.
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Payments of Fees under the Plan
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Each Fund shall make all payments of service and distribution fees under this Plan to the principal underwriter of the shares of the Fund (the “Distributor”) on the 20th day of each month or, if
such day is not a business day, on the next business day thereafter. A Fund shall not pay, nor shall the Distributor be entitled to receive, any amount under this Plan if such payment would result in the Distributor’s receiving amounts in
excess of those permitted by applicable law or by rules of the Financial Industry Regulatory Authority, Inc.
As of the end of
a Fund’s fiscal year, the expenses incurred in connection with the sale and promotion of fund shares and the furnishing of services to shareholders, as described above, may exceed 0.25% of the Fund’s average daily net assets. Although the
Fund is not permitted to pay any such excess expenses during that same fiscal year, such excess expenses may be reimbursed during any of the Fund’s subsequent three fiscal years,
provided and to the extent that
the current expenses plus
the excess expenses do not exceed the 0.25% limitation for that subsequent year. All or any portion of such excess expenses may be reimbursed by the Fund during any one or more of the three subsequent fiscal years.
The
Distributor may pay part or all of the service and distribution fees it receives from a Fund as commissions, asset-based sales charges or other compensation to financial service firms (including, but not limited to, any affiliate of the Distributor)
that sell Fund shares or as reimbursements to financial service firms or other entities (including, but not limited to, any affiliate of the Distributor) that provide shareholder services to and/or maintenance of accounts of record or of beneficial
owners of Fund shares (including third-party administrators of qualified plans). This provision does not obligate the Distributor to make any such payments nor limit the use that the Distributor may make of the fees it receives.
While this
Plan is in effect, the Distributor shall provide to the Funds’ Trustees, and the Trustees shall review, at least quarterly, written reports setting forth all Plan expenditures and the purposes for those expenditures. Amounts payable under this
paragraph are subject to any limitations on such amounts prescribed by applicable laws or rules.
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V.
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Other Payments Authorized
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Payments by a Fund or the Distributor and its affiliates other than as set forth in Section I that may be indirect financing of
distribution costs are authorized by this Plan.
This Plan
shall not take effect with respect to a Fund until it has been approved for that Fund by a vote of both a majority of the Board of Trustees and a majority of the Independent Trustees, cast in person at a meeting called for the purpose of voting on
the Plan.
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VII.
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Continuation; Amendment; Termination
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This Plan shall continue in effect with respect to a Fund for a period of more than one year only so long as such continuance is specifically approved for that Fund at least annually as provided in the
Rule. The Plan may not be amended to increase materially the service fee or distribution fee with respect to a Fund without such shareholder approval as is required by the Rule and any applicable orders of the Securities and Exchange Commission, and
all material amendments of the Plan must be approved in the manner described in the Rule. The Plan may be terminated with respect to any Fund at any time as provided in the Rule without payment of any penalty.
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VIII.
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Agreements Related to the Plan
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All agreements with any person relating to implementation of this Plan shall be in writing, and any agreement related to this Plan shall provide that such agreement (a) shall be approved, as provided
in the Rule, at a meeting called for the purpose of voting on such agreement and shall continue in effect for a period of more than one year only so long as such continuance is specifically approved at least annually as provided in the Rule,
(b) may be terminated at any time, as provided in the Rule without payment of any penalty, and (c) shall terminate automatically in the event of its “assignment” as such term is defined in the Act.
Adopted: September 14, 2012
EXHIBIT A
Fund
Pyxis/iBoxx Senior Loan ETF
Exhibit (p)(5)
SEI INVESTMENTS DISTRIBUTION CO.
RULE 17j-1 CODE OF ETHICS
October 3, 2012
TABLE OF CONTENTS
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I.
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General Policy
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II.
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Code of Ethics
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A.
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Purpose of Code
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B.
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Employee Categories
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C.
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Prohibitions and Restrictions
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D.
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Pre-clearance of Personal Securities Transactions
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E.
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Reporting Requirements
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F.
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Detection and Reporting of Code Violations
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G.
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Violations of the Code of Ethics
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H.
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Confidential Treatment
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I.
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Recordkeeping
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J.
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Definitions Applicable to the Code of Ethics
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III.
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Exhibits – Code of Ethics Reporting Forms
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2
I.
GENERAL POLICY
SEI Investments Distribution Co. (“SIDCO”) serves as principal underwriter for investment companies that are registered under the Investment Company Act of 1940 (“Investment
Vehicles”). In addition, certain employees of SIDCO may serve as directors and/or officers of certain Investment Vehicles. This Code of Ethics (“Code”) sets forth the procedures and restrictions governing personal securities
transactions for certain SIDCO personnel.
SIDCO has a highly ethical business culture and expects that its personnel will conduct any
personal securities transactions consistent with this Code and in such a manner as to avoid any actual or potential conflict of interest or abuse of a position of trust and responsibility. Thus, SIDCO personnel must conduct themselves and their
personal securities transactions in a manner that does not create conflicts of interest with the firm’s clients.
Pursuant to this Code,
SIDCO personnel, their family members, and other persons associated with SIMC may be subject to various pre-clearance and reporting standards for their personal securities transactions based on their status as defined by this Code. Therefore, it is
important that every person pay special attention to the categories set forth to determine which provisions of this Code applies to him or her, as well as to the sections on restrictions, pre-clearance, and reporting of personal securities
transactions.
Each person subject to this Code must read and retain a copy of this Code and agree to abide by its terms. Failure to comply
with the provisions of this Code may result in the imposition of serious sanctions, including, but not limited to, disgorgement of profits, penalties, dismissal, substantial personal liability and/or referral to regulatory or law enforcement
agencies.
Please note that employees and registered representatives of SIDCO are subject to the supervisory procedures and other
policies and procedures of SIDCO, and are also subject to the Code of Conduct of SEI Investments Company, which is the parent company of SIDCO. The requirements and limitations of this Code of Ethics are in addition to any requirements or
limitations contained in these other policies and procedures. All employees are required to comply with federal securities laws and any regulations set forth by self-regulatory organizations (NASD, MSRB, etc.) of which SIDCO is a member.
Any questions regarding this Code of Ethics should be directed to a member of the SIDCO Compliance Department.
3
II.
CODE OF ETHICS
A.
Purpose of Code
This Code is intended to conform to the provisions of
Section 17(j) of the Investment Company Act of 1940 (“the 1940 Act”), as amended, and Rule 17j-1 thereunder, as amended, to the extent applicable to SIDCO’s role as principal underwriter to Investment Vehicles. Those provisions
of the U.S. securities laws are designed to prevent persons who are actively engaged in the management, portfolio selection or underwriting of registered investment companies from participating in fraudulent, deceptive or manipulative acts,
practices or courses of conduct in connection with the purchase or sale of securities held or to be acquired by such companies. Certain SIDCO personnel will be subject to various requirements based on their responsibilities within SIDCO and
accessibility to certain information. Those functions are set forth in the categories below.
B.
Access Persons
(1) any director, officer or employee of SIDCO who serves as a director or officer of an Investment Vehicle for which SIDCO serves as
principal underwriter;
(2) any director or officer of SIDCO who, in the ordinary course of business, makes, participates in or
obtains information regarding, the purchase or sale of Covered Securities by an Investment Vehicle for which SIDCO serves as principal underwriter, or whose functions or duties in the ordinary course of business relate to the making of any
recommendation to the Investment Vehicle regarding the purchase or sale of a Covered Security.
C.
Prohibitions and Restrictions
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1.
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Prohibition Against Fraud, Deceit and Manipulation
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Access Persons may not, directly or indirectly, in connection with the purchase or sale of a security held or to be acquired by an Investment Vehicle for which SIDCO serves as principal underwriter:
(a) employ any device, scheme or artifice to defraud the Investment Vehicle;
(b) make to the Investment Vehicle any untrue statement of a material fact or omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not misleading;
(c) engage in any act, practice or
course of business that operates or would operate as a fraud or deceit upon the Investment Vehicle; or
(d) engage in any
manipulative practice with respect to the Investment Vehicle.
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2.
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Excessive Trading of Mutual Fund Shares
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Access Persons may not, directly or indirectly, engage in excessive short-term trading of shares of Investment Vehicles for which SIDCO serves as principal underwriter. Exhibit 6 hereto provides a list of
the Investment Vehicles for which SIDCO provided such services. For purposes of this section, a person’s trades shall be considered “excessive” if made in violation of any stated policy in the mutual fund’s prospectus or if the
trading involves multiple short-term round trip trades in a Fund for the purpose of taking advantage of short-term market movements.
Note that the SEI Funds are Covered Securities.
1
Trades in the SEI Funds do not have to be pre-cleared but do have to be reported in accordance with this Code. Trades in SEI Funds done through the SEI Capital Accumulation (401(k)) Plan and trades
done through an employee account established at SEI Private Trust Company will be deemed to satisfy the reporting requirements of the Code. Any trades in SEI Funds done in a different channel must be reported to the SIDCO Compliance Officer or the
designated representative of the SIDCO Compliance Department.
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3.
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Personal Securities Restrictions
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Access Persons:
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•
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may not purchase or sell, directly or indirectly, any Covered Security
within 24 hours before or after
the time that the same Covered Security
(including any equity related security of the same issuer such as preferred stock, options, warrants and convertible bonds) is being purchased or sold by any Investment Vehicle for which SIDCO serves as principal underwriter.
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may not acquire securities as part of an Initial Public Offering (“IPO”) without obtaining the written approval of the SIDCO Compliance
Officer or the designated representative of the SIDCO Compliance Department before directly or indirectly acquiring a beneficial ownership in such securities.
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may not acquire a Beneficial Ownership interest in securities issued in a private placement transaction without obtaining prior written approval from
the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department.
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•
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may not profit
from the purchase and sale or sale and purchase of a Covered Security
within 60 days
of acquiring or disposing of
Beneficial Ownership of that Covered Security. This prohibition does not apply to transactions resulting in a loss, or to futures or options on futures on broad-based securities indexes or U.S. Government securities. This prohibition also does not
apply to transactions in the SEI Funds, which are separately covered under the “Excessive Trading of Mutual Fund Shares” discussed in Section II.C.2 above.
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1
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The SEI Family of Funds includes the following Trusts: SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
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may not serve on the board of directors of any publicly traded company.
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D.
Pre-Clearance of Personal Securities Transactions
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1.
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Transactions Required to be Pre-Cleared:
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Access Persons must pre-clear with the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department a proposed
transaction in a Covered Security if he or she has actual knowledge at the time of the transaction that, during the 24 hour period immediately preceding or following the transaction, the Covered Security was purchased or sold or was being considered
for purchase or sale by any Investment Vehicle
.
The pre-clearance obligation applies to all Accounts held in the person’s name or in the name of others in which they hold a Beneficial Ownership interest.
Note that, among other things,
this means that these persons must pre-clear such proposed securities transactions by their spouse or domestic partner, minor children, and relatives who reside in the person’s household.
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The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department may authorize a Pre-clearing Person to conduct the
requested trade upon determining that the transaction for which pre-clearance is requested would not result in a conflict of interest or violate any other policy embodied in this Code. Factors to be considered may include: the discussion with the
requesting person as to the background for the exemption request, the requesting person’s work role, the size and holding period of the requesting person’s position in the security, the market capitalization of the issuer, the liquidity of
the security, the reason for the requesting person’s requested transaction, the amount and timing of client trading in the same or a related security, and other relevant factors. The person granting the authorization must document the basis for
the authorization.
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2.
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Transactions that do no have to be pre-cleared:
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purchases or sales over which the person pre-clearing the transactions (the “Pre-clearing Person”) has no direct or indirect influence or
control;
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purchases, sales or other acquisitions of Covered Securities which are non-volitional on the part of the Pre-clearing Person or any Investment Vehicle,
such as purchases or sales upon exercise or puts or calls written by Pre-clearing Person, sales from a margin account pursuant to a
bona fide
margin call, stock dividends, stock splits, mergers consolidations, spin-offs, or other similar
corporate reorganizations or distributions;
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purchases or withdrawals made pursuant to an Automatic Investment Program; however, any transaction that overrides the preset schedule or allocations
of the automatic investment plan must be reported in a quarterly transaction report;
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purchases effected upon the exercise of rights issued by an issuer
pro rata
to all holders of a class of its securities, to the extent such
rights were acquired for such issuer; and
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acquisitions of Covered Securities through gifts or bequests.
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3.
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Pre-clearance Procedures:
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All requests for pre-clearance of securities transactions must be submitted to the SIDCO Compliance Officer or designated representative of the SIDCO
Compliance Department by using the SEI Automated Pre-Clearance Trading system
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The following information must be provided for each request:
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a. Name, date, phone extension and job title
b. Transaction detail, i.e. whether the transaction is a buy or sell; the security name and security type; number of shares; price; date acquired if a sale; and whether the security is traded in a
portfolio or Investment Vehicle, part of an initial public offering, or part of a private placement transaction; and
c.
Signature and date; if electronically submitted, initial and date.
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The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department will notify the requesting person whether the trading
request is approved or denied through the SEI Automated Pre-Clearance Trading system.
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A Pre-clearance Request should not be submitted for a transaction that the requesting person does not intend to execute.
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Pre-clearance trading authorization is valid from the time when approval is granted through the next business day. If the transaction is not executed
within this period, an explanation of why the previous pre-cleared transaction was not completed must be submitted to the SIDCO Compliance department or entered into the SEI Automated Pre-clearance Trading system. Also, Open and Limit Orders must be
resubmitted for pre-clearance approval if not executed within the permitted time period.
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With respect to any transaction requiring pre-clearance, the person subject to pre-clearance must submit to the SIDCO Compliance Officer or designated
representative of the SIDCO Compliance Department transaction reports showing the transactions for all the Investment
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Vehicles with respect to which such person has knowledge regarding purchases and sales that triggered the requirement to pre-clear under Section D.1. The transaction information must be provided
for the 24 hour period before and after the date on which their securities transactions were effected. These reports may be submitted in hard copy or viewed through the SEI Pre-clearance Trading system. Transaction reports need only cover the
Investment Vehicles that hold or are eligible to purchase and sell the types of securities proposed to be bought or sold by person subject to pre-clearance requirements. For example, if a person seeks approval for a proposed equity trade, only the
transactions reports for the Investment Vehicles effecting or eligible to effect transactions in equity securities are required.
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The SIDCO Compliance Department will maintain pre-clearance records and records of exemptions granted for 5 years.
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E.
Reporting Requirements
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1.
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Duplicate Brokerage Statements
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Access Persons are required to instruct their broker/dealer to file duplicate statements with the SIDCO Compliance Department at SEI Oaks. Statements
must be filed for all Accounts (including those in which the person has a Beneficial Ownership interest), except those that trade exclusively in open-end funds other than Reportable Funds, government securities or Automatic Investment Plans. Failure
of a broker/dealer to send duplicate statements will not excuse a violation of this Section.
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Sample letters instructing the broker/dealer firms to send the statements to SIDCO are attached in
Exhibit 1
of this Code. If the broker/dealer
requires a letter authorizing a SIDCO employee to open an account, the permission letter may also be found in Exhibit 1. Please complete the necessary brokerage information and forward a signature ready copy to the SIDCO Compliance Officer.
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If no such duplicate statement can be supplied, the employee should contact the SIDCO Compliance Department.
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2.
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Initial Holdings Report
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Access Persons must submit an Initial Holdings Report to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department
disclosing
every
Covered Security, including mutual fund accounts, beneficially owned directly or indirectly by such person
within 10 days
of becoming an Access Person. Any person who returns the report late may be subject to the
penalties in Section G regarding Code of Ethics violations.
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The following information must be provided on the report:
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a. the title of the security;
b. the number of shares held;
c. the principal amount of the security;
d. the name of the broker, dealer, transfer agent; bank or other location where the security is held; and
e. the date the report is submitted.
The information disclosed in the report
should be current as of a date no more than 45 days prior to the date the person becomes an Access Person. If the above information is contained on the Access Person’s brokerage statement, he or she may attach the statement and sign the Initial
Holdings Report.
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The Initial Holdings Report is attached as
Exhibit 2
to this Code.
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3.
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Quarterly Report of Securities Transactions
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Access Persons must submit quarterly transaction reports of the purchases and/or sales of Covered Securities in which such persons have a direct or
indirect Beneficial Ownership interest. The report will be provided to all of the above defined persons before the end of each quarter by the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department and must be
completed and returned
no later than 30 days
after the end of each calendar quarter. Quarterly Transaction Reports that are not returned by the date they are due
will
be considered late and will be noted as violations of
the Code of Ethics. Any person who repeatedly returns the reports late may be subject to the penalties in Section G regarding Code of Ethics violations.
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The following information must be provided on the report:
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a. the date of the transaction, the description and number of shares, and the principal amount of each security involved;
b. whether the transaction is a purchase, sale or other acquisition or disposition;
c. the transaction price;
d. the name of the broker, dealer or bank through whom
the transaction was effected;
e. a list of securities accounts opened during the quarterly including the name of the broker,
dealer or bank and account number; and
f. the date the report is submitted.
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The Quarterly Report of Securities Transaction is attached as
Exhibit 3
to this Code.
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4.
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Annual Report of Securities Holdings
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On an annual basis, Access Persons must submit to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department an
Annual Report of Securities Holdings that contains a list of all Covered Securities, including mutual fund accounts, in which they have any direct or indirect Beneficial Ownership interest.
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The following information must be provided on the report:
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a. the title of the security;
b. the number of shares held;
c. the principal amount of the security;
d. the name of the broker, dealer, transfer agent, bank or other location where the security is held; and
e. the date the report is submitted.
The information disclosed in the report
should be current as of a date no more than 45 days before the report is submitted. If the above information is contained on the Access Person’s brokerage statement, he or she may attach the statement and sign the annual holdings report.
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Annual Reports must be completed and returned to the SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department
within
30 days
after the end of the calendar year-end. Annual Reports that are not returned by the date they are due
will
be considered late and will be noted as violations of the Code of Ethics. Any person who repeatedly returns the
reports late may be subject to the penalties in Section G regarding Code of Ethics violations.
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The Annual Report of Securities Holdings is attached as
Exhibit 4
to this Code.
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5.
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Annual Certification of Compliance
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Access Persons will be required to certify annually that they:
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-have read the Code of Ethics;
-understand the Code of Ethics; and
-have complied with the provisions of the
Code of Ethics.
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The SIDCO Compliance Officer or designated representative from the SIDCO Compliance Department will send out annual forms to all Access Persons that
must be completed and returned
no later than 30 days
after the end of the calendar year. Any person who repeatedly returns the forms late may be subject to the penalties in Section G regarding Code of Ethics violations.
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The Annual Certification of Compliance is attached as
Exhibit 5
to this Code.
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6.
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Exception to Reporting Requirements
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An Access Person who is subject to the Code of Ethics of an affiliate of SIDCO (“Affiliate Code”), and who pursuant to the Affiliate Code
submits reports consistent with the reporting requirements of paragraphs 1 through 4 above, will not be required to submit such reports under this Code.
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F.
Detection and Reporting of Code Violations
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1.
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The SIDCO Compliance Officer or designated representative of the SIDCO Compliance Department will:
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review the personal securities transaction reports or duplicate statements filed by Access Persons and compare the reports or statements of the
Investment Vehicles’ completed portfolio transactions. The review will be performed on a quarterly basis. If the SIDCO Compliance Officer or the designated representative of the SIDCO Compliance Department determines that a compliance violation
may have occurred, the Officer will give the person an opportunity to supply explanatory material;
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prepare an Annual Issues and Certification Report to the Board of Trustees or Directors of any Investment Vehicle that (1) describes the issues
that arose during the year under this Code, including, but not limited to, material violations of and sanctions under the Code, and (2) certifies that SIDCO has adopted procedures reasonably necessary to prevent its Access Persons from
violating this Code;
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prepare a written report to SIDCO management outlining any violations of the Code together with recommendations for the appropriate penalties; and
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prepare a written report detailing any approval(s) granted for the purchase of securities offered in connection with an IPO or a private placement. The
report must include the rationale supporting any decision to approve such a purchase.
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2.
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An employee who in good faith reports illegal or unethical behavior will not be subject to reprisal or retaliation for making the report. Retaliation is a serious
violation of this policy and any concern about retaliation should be reported immediately. Any person found to have retaliated against an employee for reporting violations will be subject to appropriate disciplinary action.
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11
G.
Violations of the Code of Ethics
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Persons who violate the Code of Ethics may be subject to serious penalties, which may include:
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reversal of securities transactions;
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restriction of trading privileges;
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disgorgement of trading profits;
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suspension or termination of employment; and/or
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referral to regulatory or law enforcement agencies.
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Factors which may be considered in determining an appropriate penalty include, but are not limited to:
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the frequency of occurrence;
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the degree of personal benefit to the employee;
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the degree of conflict of interest;
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the extent of unjust enrichment;
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evidence of fraud, violation of law, or reckless disregard of a regulatory requirement; and/or
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the level of accurate, honest and timely cooperation from the employee.
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H.
Confidential Treatment
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The SIDCO Compliance Officer or designated representative from the SIDCO Compliance Department will use their best efforts to assure that all requests
for pre-clearance, all personal securities reports and all reports for securities holding are treated as personal and confidential. However, such documents will be available for inspection by appropriate regulatory agencies and other parties, such
as counsel, within and outside SIDCO as necessary to evaluate compliance with or sanctions under this Code.
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I.
Recordkeeping
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SIDCO will maintain records relating to this Code of Ethics in accordance with Rule 31a-2 under the 1940 Act. They will be available for examination by
representatives of the Securities and Exchange Commission and other regulatory agencies.
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A copy of this Code that is, or at any time within the past five years has been, in effect will be preserved in an easily accessible place for a period
of five years.
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A record of any Code violation and of any sanctions taken will be preserved in an easily accessible place for a period of at least five years following
the end of the fiscal year in which the violation occurred.
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A copy of each Quarterly Transaction Report, Initial Holdings Report, and Annual Holdings Report submitted under this Code, including any information
provided in lieu of any such reports made under the Code, will be preserved for a period of at least five years from the end of the fiscal year in which it is made, for the first two years in an easily accessible place.
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A record of all persons, currently or within the past five years, who are or were required to submit reports under this Code, or who are or were
responsible for reviewing these reports, will be maintained in an easily accessible place for a period of at least five years from the end of the calendar year in which it is made.
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J.
Definitions Applicable to the Code of Ethics
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Account
- a securities trading account held by a person and by any such person’s spouse, minor children and adults residing in his
or her household (each such person, an “immediate family member”); any trust for which the person is a trustee or from which the person benefits directly or indirectly; any partnership (general, limited or otherwise) of which the person is
a general partner or a principal of the general partner; and any other account over which the person exercises investment discretion.
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Automatic Investment Plan
– a program in which regular periodic purchases (or withdrawals) are made automatically in (or from)
investment accounts in accordance with a predetermined schedule and allocation. An Automatic Investment Plan includes a dividend reinvestment plan.
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Beneficial Ownership
– Covered Security ownership in which a person has a direct or indirect financial interest. Generally, a person
will be regarded as a beneficial owner of Covered Securities that are held in the name of:
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a.
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a spouse or domestic partner;
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c.
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a relative who resides in the person’s household; or
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d.
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any other person
IF
: (a) the person obtains from the securities benefits substantially similar to those of ownership (for example, income from
securities that are held by a spouse); or (b) the person can obtain title to the securities now or in the future.
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Covered Security
– except as noted below, includes any interest or instrument commonly known as a “security”, including
notes, bonds, stocks (including closed-end funds), debentures, convertibles, preferred stock, security future, warrants, rights, and any put, call, straddle, option,
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or privilege on any security (including a certificate of deposit) or on any group or index of securities. The term “Covered Securities” specifically includes the SEI Funds. See the
definition of Reportable Funds below.
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A “Covered Security”
does not include
(i) direct obligations of the U.S. Government, (ii) bankers’ acceptances, (iii) bank certificates of deposit, (iv) commercial paper and other high quality short-term debt instruments, including repurchase agreements,
(v) shares issued by money market funds and (vi) shares issued by open-end investment companies other than a Reportable Fund.
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Initial Public Offering
– an offering of securities for which a registration statement has not been previously filed with the U.S.
SEC and for which there is no active public market in the shares.
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Purchase or sale of a Covered Security
– includes the writing of an option to purchase or sell a security.
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Reportable Fund
– Any non-money market fund for which SIDCO serves as principal underwriter.
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14
SEI INVESTMENTS DISTRIBUTION CO.
CODE OF ETHICS EXHIBITS
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Exhibit 1
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Account Opening Letters to Brokers/Dealers
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Exhibit 2
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Initial Holdings Report
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Exhibit 3
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Quarterly Transaction Report
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Exhibit 4
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Annual Securities Holdings Report
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Exhibit 5
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Annual Compliance Certification
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Exhibit 6
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SIDCO Client List
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EXHIBIT 1
Date:
Your Broker
street address
city, state zip code
your S.S. number or
account number
Dear Sir or Madam:
Please be advised that I am an employee of SEI Investments Distribution Co. Please send
duplicate statements only
of this brokerage account to the
attention of:
SEI Investments Distribution Co.
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is
made pursuant to SEI’s Code of Ethics.
Thank you for your cooperation.
Sincerely,
Your name
Date:
[Address]
Account #
SS#
Dear Sir or
Madam:
Please be advised that the above referenced person is an employee of SEI Investments Distribution Co. We grant permission for him/her
to open a brokerage account with your firm, provided that you agree to send
duplicate statements only
of this employee’s brokerage account to:
SEI Investments Distribution Co.
Attn: The Compliance Department
One Freedom Valley Drive
Oaks, PA 19456
This request is made pursuant to SEI’s Code of Ethics.
Thank you for your cooperation.
Sincerely,
SEI Compliance Officer
EXHIBIT 2
SEI INVESTMENTS DISTRIBUTION CO.
INITIAL HOLDINGS REPORT
Name of Reporting
Person:
Date Person Became Subject to the Code’s Reporting
Requirements:
Information in Report Dated as of:
Date Report Due:
Date Report Submitted:
Securities Holdings
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Name of Issuer and
Title
of Security
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No. of Shares (if
applicable)
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Principal Amount, Maturity
Date and Interest Rate (if
applicable)
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Name of Broker, Dealer or Bank
Where Security Held
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If you have no securities holdings to report, please check here.
¨
Securities Accounts
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Name of Broker,
Dealer or
Bank
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Account Number
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Names on Account
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Type of Account
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If you have no securities accounts to report, please check here.
¨
I certify that I have included on this report all securities holdings
and accounts in which I have a direct or indirect beneficial interest and required to be reported pursuant to the Code of Ethics and that I will comply with the Code of Ethics.
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Signature:
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Date:
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Received by:
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EXHIBIT 3
SEI INVESTMENTS DISTRIBUTION CO.
QUARTERLY TRANSACTION REPORT
Transaction Record of Securities Directly or Indirectly Beneficially Owned
For the Quarter Ended
Name:
Submission Date:
Securities Transactions
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Date of
Transaction
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Name of Issuer
and Title of
Security
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No. of Shares (if
applicable)
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Principal Amount,
Maturity Date and
Interest Rate (if
applicable)
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Type of
Transaction
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Price
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Name of
Broker, Dealer
or Bank
Effecting
Transaction
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If you had no reportable transactions during the quarter, please check here.
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NOTE: Trades in SEI Funds done through the SEI Capital Accumulation (401(k)) Plan and
trades done through an employee account established at SEI Private Trust Company will be deemed to satisfy the reporting requirements of the Code and do not have to be reported here. Any trades in SEI Funds done in a different channel must be
reported.
This report is required of all officers, directors and certain other persons under Rule 17j-1 of the Investment Company Act of 1940
and is subject to examination. Transactions in direct obligations of the U.S. Government need not be reported. In addition, persons need not report transactions in bankers’ acceptances, certificates of deposit, commercial paper or open-end
investment companies other than Reportable Funds.
The report must be returned within 30 days of the applicable calendar quarter end.
The reporting of transactions on this record shall not be construed as an admission that the reporting person
has any direct or indirect beneficial ownership in the security listed.
Securities Accounts
If you established an account within the quarter, please provide the following information:
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Name of Broker,
Dealer
or Bank
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Account Number
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Names on Account
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Date Account was
Established
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Type of Account
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If you did not establish a securities account during the quarter, please check here.
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By signing this document, I represent that all reported transactions were pre-cleared
through the Compliance Department or the designated Compliance Officer in compliance with the SIDCO Code of Ethics. In addition, I certify that I have included on this report all securities transactions and accounts required to be reported pursuant
to the Policy.
EXHIBIT 4
SEI INVESTMENTS DISTRIBUTION CO.
ANNUAL SECURITIES HOLDINGS REPORT
As of December 31,
Name of Reporting Person:
Securities Holdings
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Name of Issuer and Title of Security
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No. of Shares (if
applicable)
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Principal Amount,
Maturity Date and
Interest
Rate
(if applicable)
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Name of Broker, Dealer or Bank
Where Security Held
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If you had no securities holding to report this year, please check here.
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Securities Accounts
If you established an account during the year, please provide the following information:
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Name of Broker, Dealer or Bank
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Date Account was
Established
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Account
Number
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Names on Account
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Type of Account
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If you have no securities accounts to report this year, please check here.
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I certify that the above list is an accurate and complete listing of all securities in which I have a direct
or indirect beneficial interest.
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Signature
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Received by
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Date
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Note:
Do not
report holdings of U.S. Government securities, bankers’ acceptances, certificates of
deposit, commercial paper and mutual funds other than Reportable Funds.
EXHIBIT 5
SEI INVESTMENTS DISTRIBUTION CO.
RULE 17J-1 CODE OF ETHICS
ANNUAL COMPLIANCE CERTIFICATION
Please return the signed form via email or
interoffice the form to SEI
Compliance Department – Meadowlands Two
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I hereby acknowledge receipt of a copy of the Code of Ethics.
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2.
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I have read and understand the Code of Ethics and recognize that I am subject thereto. In addition, I have raised any questions I may have on the Code of Ethics with
the SIDCO Compliance Officer and have received a satisfactory response[s].
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3.
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For all securities/accounts beneficially owned by me, I hereby declare that I have complied with the terms of the Code of Ethics during the prior year.
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Date:
EXHIBIT 6
As of October 3, 2012, SIDCO acts as distributor for the following:
SEI Daily Income Trust
SEI Liquid Asset Trust
SEI Tax
Exempt Trust
SEI Institutional Managed Trust
SEI Institutional International Trust
The Advisors’ Inner Circle Fund
The Advisors’ Inner Circle Fund II
Bishop
Street Funds
SEI Asset Allocation Trust
SEI Institutional Investments Trust
CNI Charter Funds
Causeway Capital Management Trust
ProShares
Trust
ProShares Trust II
Community
Reinvestment Act Qualified Investment Fund
SEI Alpha Strategy Portfolios, LP
TD Asset Management USA Funds
SEI Structured Credit Fund LP
Wilshire Mutual Funds, Inc.
Wilshire Variable
Insurance Trust
Global X Funds
Exchange Traded Concepts Trust (f/k/a FaithShares Trust)
Schwab Strategic Trust
RiverPark Funds
Adviser Managed Trust Fund
Huntington Strategy Shares
New Covenant Funds
KKR Series Trust
KKR Alternative Corporate Opportunities Fund
KKR Alternative Corporate Opportunities Fund P