INVESTMENT ADVISORY AGREEMENT
BETWEEN
RYDEX CAPITAL PARTNERS SPHINX FUND
AND
RYDEX CAPITAL PARTNERS I, LLC
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as of
April 30, 2004, is entered into by and between RYDEX CAPITAL PARTNERS SPHINX
FUND (the "Fund"), a Delaware business trust established on December 4, 2002,
and RYDEX CAPITAL PARTNERS I, LLC (the "Advisor"), a limited liability company
incorporated under the laws of the State of Delaware.
W I T N E S S E T H:
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "Commission") as a non-diversified, closed-end management
investment company pursuant to the provisions of the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Advisor is an investment adviser registered as such
with the Commission pursuant to the provisions of the Investment Advisers Act of
1940, as amended, and is engaged in the business of rendering investment advice
and investment management services as an independent contractor;
WHEREAS, the Fund wishes to engage the Advisor, and the Advisor
wishes to be engaged, to manage the investment portfolio of the Fund with
respect to the investment and reinvestment of the assets of the Fund and to act
in such capacity in accordance with the terms, conditions, and other provisions
of this Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration the
receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree and promise as follows:
1. SERVICES TO BE PROVIDED
a. Investment Advisory Services. The Fund hereby employs the Advisor to
act as its investment adviser and, subject to the supervision and
control of the Board of Trustees of the Fund (the "Board"), to
manage the investment activities of the Fund as hereinafter set
forth. Without limiting the generality of the foregoing, the Advisor
shall: obtain and evaluate such information and advice relating to
the economy, securities markets and securities as it deems necessary
or useful to discharge its duties hereunder; continuously manage the
assets of the Fund in a manner consistent with the investment
objective, policies and restrictions of the Fund, as set forth in
the Fund's registration statement filed with the Commission, as it
may be amended from time to time by the Board (the "Registration
Statement"), and applicable laws and regulations; determine the
securities to be purchased, sold or otherwise disposed of by the
Fund and the timing of such purchases, sales and dispositions;
invest discrete portions of the Fund's assets (which may constitute,
in the aggregate, all of the Fund's assets) in unregistered
investment funds or other investment vehicles and registered
investment companies ("Portfolio Funds"), which are managed by
investment managers ("Portfolio Managers"), including Portfolio
Managers for which separate investment vehicles have been created in
which the Portfolio Managers serve as
general partners or managing members and the Fund is the sole
investor ("Portfolio Accounts") and Portfolio Managers who are
retained to manage the Fund's assets directly through separate
managed accounts (Portfolio Managers of Portfolio Accounts and of
managed accounts are collectively referred to as "Portfolio Account
Managers") (subject to the approval of Portfolio Account Managers by
the Board and shareholders of the Fund to the extent required by the
1940 Act), and take such further action, including the placing of
purchase and sale orders and the voting of securities on behalf of
the Fund, as the Advisor shall deem necessary or appropriate. The
Advisor shall furnish to or place at the disposal of the Fund such
of the information, evaluations, analyses and opinions formulated or
obtained by the Advisor in the discharge of its duties as the Fund
may, from time to time, reasonably request.
b. Best Efforts. The Advisor agrees to use its best judgment and
efforts in rendering the advice and services to the Fund
contemplated by this Agreement. The Advisor further agrees to use
its best efforts in the furnishing of such advice, recommendations
and services to the Fund, in the preparation of reports and
information, and in the management of the assets of the Fund, all
pursuant to this Agreement, and for this purpose the Advisor shall,
at its own expense, maintain such staff and employ or retain such
personnel and consult with such other persons that the Advisor shall
from time to time determine to be necessary to the performance of
the Advisor's obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor
shall be deemed to include persons employed or retained by the
Advisor to furnish statistical, research, and other factual
information, advice regarding economic factors and trends,
information with respect to technical and scientific developments,
and such other information, advice, and assistance as the Advisor
may desire and request.
2. PAYMENT OF FEES AND EXPENSES
a. The Advisor is responsible for all costs and expenses associated
with the provision of its services hereunder including, but not
limited to: expenses relating to the selection and monitoring of
Portfolio Managers; and fees of consultants retained by the Advisor.
b. Except to the extent expressly assumed by the Advisor herein or
under a separate agreement, the Advisor shall not be obligated to
pay any costs or expenses incidental to the organization, operations
or business of the Fund. Without limitation, costs and expenses for
which the Advisor shall have no obligation shall include but not be
limited to: all costs and expenses directly related to investment
transactions and positions for the Fund's account, including, but
not limited to, brokerage commissions, research fees, interest and
commitment fees on loans and debit balances, borrowing charges on
securities sold short, dividends on securities sold but not yet
purchased, custodial fees, margin fees, transfer taxes and premiums,
taxes withheld on foreign dividends and indirect expenses from
investments in Portfolio Funds; any non-investment
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related interest expense; all costs and expenses associated with the
operation and registration of the Fund, offering costs and the costs
of compliance with, any applicable Federal and state laws; all costs
and expenses associated with the organization and operation of
Portfolio Accounts; the costs and expenses of holding meetings of
the Board and any meetings of Shareholders, including costs
associated with the preparation and dissemination of proxy
materials; the fees and disbursements of Fund legal counsel, legal
counsel to the Independent Trustees, if any, independent accountants
for the Fund and other consultants and professionals engaged on
behalf of the Fund; the fee payable to the Advisor hereunder and for
providing certain administrative services to the Fund; the fees
payable to custodians and other persons providing other
administrative services to the Fund; all costs and charges for
equipment or services used in communicating information regarding
the Fund's transactions among the Advisor and any custodian or other
agent engaged by the Fund; the costs of a fidelity bond and any
liability insurance obtained on behalf of the Fund or the Board; all
costs and expenses of preparing, setting in type, printing and
distributing reports and other communications to shareholders; the
fees and expenses charged by Portfolio Funds to their investors; and
extraordinary expense and such other types of expenses as may be
approved by the Board.
3. AUTHORITY OF THE ADVISOR
a. The Advisor is authorized: (i) to obtain investment information,
research or assistance from any other person, firm or corporation to
supplement, update or otherwise improve its investment management
services; and (ii) to enter into investment sub-advisory agreements
with any registered investment adviser (a "Sub-Adviser"), subject to
such approvals of the Board and shareholders of the Fund as may be
required to comply with applicable provisions of the 1940 Act,
delegating any or all of the investment advisory services required
to be provided by the Advisor under this Agreement, subject to the
supervision of the Advisor.
b. In connection with the investment and reinvestment of the assets of
the Fund, the Advisor is authorized on behalf of the Fund, to open,
maintain and close accounts in the name and on behalf of the Fund
with brokers and dealers as it determines are appropriate and to
place orders for the execution of the Fund's portfolio transactions
in accordance with the applicable policies of the Fund as set forth
in the Registration Statement. The Advisor shall place orders for
the purchase or sale of securities either directly with the issuer
or with a broker or dealer selected by the Advisor. In placing the
Fund's securities trades, it is recognized that the Advisor will
give primary consideration to securing the most favorable price and
efficient execution, so that the Fund's total cost or proceeds in
each transaction will be the most favorable under all circumstances.
Within the framework of this policy, the Advisor 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 Advisor may be a party.
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c. It is understood that it is desirable for the Fund that the Advisor
have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also
understood that brokers providing such services may execute
brokerage transactions at a higher cost to the Fund than might
result from the allocation of brokerage to other brokers purely
based on seeking the most favorable price. Therefore, the purchase
and sale of securities for the Fund may be made with brokers who
provide such research and analysis, subject to review by the Board
from time to time with respect to the extent and continuation of
this practice to determine whether the Fund benefits, directly or
indirectly, from such practice. It is understood by both parties
that the Advisor may select broker-dealers for their execution of
the Fund's portfolio transactions who provide research and analysis
as the Advisor may lawfully and appropriately use in its investment
management and advisory capacities, whether or not such research and
analysis also may be useful to the Advisor in connection with its
services to other clients.
d. On occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of the Fund, as well as in the
interests of other clients, the Advisor to the extent permitted by
applicable laws and regulations, may aggregate the securities to be
so purchased or sold in order to obtain the most favorable price,
lower brokerage commissions and the most 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 Advisor in the manner it considers to be equitable and
consistent with its fiduciary obligations to the Fund and to such
other clients.
4. COMPENSATION
a. Advisory Fee. In exchange for the rendering of advice and advisory
services pursuant hereto, the Trust shall pay the Advisor, and the
Advisor shall accept as full compensation for the advisory services
to be rendered and as full reimbursement for all the charges and
expenses to be assumed and paid by the Advisor as provided in
Section 2, an advisory fee computed and paid monthly in advance at
the annual rate of 1.75% of the value of the Fund's net assets
determined as of the beginning of each month.
b. Payment. The fee will be calculated and paid to the Advisor monthly,
in advance, not later than the fifth (5th) business day of the month
for which services will be provided. In the event of termination of
this Agreement at any time other than the end of a month, a pro rata
refund of a portion of the fee will be made to the Fund based on the
number of days that this Agreement is in effect in the last month
that this Agreement is in effect as a percentage of the total number
of days in such month. For purposes of calculating the Advisor's
fee, the value of the net assets of the Fund shall be determined in
the same manner as the Fund uses to compute the value of the Fund's
net assets in connection with the determination of the Net Asset
Value of the Fund, all as set forth more fully in the Registration
Statement.
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5. AFFILIATIONS OF PARTIES; CHANGE IN OWNERSHIP OR CONTROL OF THE ADVISOR
Subject to and in accordance with the Declaration of Trust of the
Fund (the "Trust Declaration"), the Limited Liability Company Agreement of the
Advisor and the 1940 Act, the Trustees, officers, agents, and shareholders of
the Fund are or may be interested persons of the Advisor or its affiliates (or
any successor thereof) as shareholders or officers, directors, agents, or
otherwise, and directors, officers, agents, or shareholders of the Advisor or
its affiliates are or may be interested persons of the Fund as Trustees,
officers, agents, shareholders, or otherwise, and the Advisor or its affiliates
may be interested persons of the Fund, and such relationships shall be governed
by said governing instruments and the applicable provisions of the 1940 Act. The
Advisor shall notify the Fund of any change in ownership or control of Rydex
Capital Partners I, LLC., that could cause an "assignment" of this Agreement (as
the term "assignment" is defined in the 1940 Act and the rules and regulations
promulgated thereunder) as soon as practicable. In the case of a voluntary
assignment, notice will be provided at least 90 days prior to the voluntary
assignment if the circumstances are such that the Fund could not rely on Rule
15a-4 under the 1940 Act (or such shorter period approved by a majority of the
Trustees who are not interested persons of the Fund).
6. FURNISHING OF INFORMATION
During the term of this Agreement, the Fund agrees to provide the
Advisor with:
a. copies of all prospectuses, statements of additional information,
proxy statements, Registration Statements, reports to shareholders,
sales literature, and other material prepared for distribution to
shareholders of the Fund or the public that refer in any way to the
Advisor, no later than ten (10) business days before the date such
material is first distributed to the public, or sooner if
practicable, and the Fund shall not use such material, if the
Advisor reasonably objects in writing within five (5) business days
(or within such other time as may be mutually agreed to by the
parties) after the Advisor's receipt thereof;
b. true and correct copies of each amendment or supplement to the
Registration Statement (including any prospectus and statement of
additional information included therein) or the Trust Declaration
not later than the date such material is first distributed to the
public, or sooner if practicable;
c. (i) written notice of any resolutions, policies, restrictions, or
procedures adopted by the Trustees which affect the Advisor's
investment management or other responsibilities hereunder, and (ii)
a list of every natural person or entity deemed by the Fund to be an
"affiliated person" of, or "promoter" of, or "principal underwriter"
for the Fund, or "an affiliated person of such person," as these
terms are defined or used in Sections 2(a)(3), 2(a)(30), and
2(a)(29), respectively, of the 1940 Act, and the Fund shall promptly
notify the Advisor of any additions or deletions to such list; and
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d. any such additional materials or information which the Advisor may
reasonably request to enable the Advisor to perform its functions
under this Agreement.
7. TERM OF AGREEMENT; TERMINATION
a. This Agreement shall become effective on the date first above
written for an initial term of two (2) years, and shall continue in
effect from year to year thereafter provided that such continuance
is approved at least annually by (i) a vote of a majority of the
Trustees, and (ii) a vote of a majority of the Trustees who are not
parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting such
approval.
b. This Agreement may be terminated on sixty (60) days prior written
notice to the Advisor without penalty either by vote of the Trustees
or by vote of a majority of the outstanding voting securities of the
Fund. This Agreement shall automatically terminate in the event of
its assignment (within the meaning of the 1940 Act and the rules
thereunder). This Agreement may be terminated by the Advisor on
sixty (60) days prior written notice to the Fund. Any notice under
this Agreement shall be given as provided in Section 13 below.
8. NON-TRANSFERABILITY
This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged without the affirmative vote or prior written
consent of the holders of a majority of the outstanding voting securities of the
Fund.
9. OTHER ACTIVITIES OF THE ADVISOR
The services of the Advisor to the Fund hereunder are not to be
deemed exclusive, and the Advisor and each of its affiliates shall be free to
render similar services to others so long as the Advisor's services hereunder
are not impaired thereby. The Advisor, for purposes herein, shall be deemed to
be an independent contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the Fund, in any way
or otherwise be deemed an agent of the Fund.
10. STANDARD OF CARE; INDEMNIFICATION
a. No provisions of this Agreement shall be deemed to protect the
Advisor against any liability to the Fund or the shareholders of the
Fund to which the Advisor otherwise would be subject by reason of
any willful misfeasance, bad faith, or gross negligence in the
performance of the Advisor's duties or the reckless disregard of the
Advisor's obligations under this Agreement. Nor shall any provisions
hereof be deemed to protect any Trustee or officer of the Fund
against any such liability to which said Trustee or officer might
otherwise be subject by reason of any willful misfeasance, bad
faith, or gross negligence in the performance of the Trustee's or
officer's respective duties or the reckless disregard of the
Trustee's or officer's respective obligations.
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b. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the Advisor's obligations or duties
hereunder, the Advisor shall not be subject to liability to the Fund
or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for
any losses that may be sustained in the purchase, holding, or sale
of any security or other property by the Fund. The Advisor shall not
be required to do or refrain from doing or concur in anything which
(by act or omission to act) may impose any liability on the Advisor.
c. Any person, even though an officer, director, partner, employee, or
agent of the Trustee, who may be or become an officer, director,
trustee, partner, employee, or agent of the Fund, shall be deemed
when rendering such services to the Fund or acting on any business
of the Fund to be rendering such services to or acting solely for
the Fund and not as the Trustee's officer, director, trustee,
partner, employee, or agent or as one under the Trustee's control or
direction even though paid by the Trustee.
11. USE OF RYDEX NAME, SPHINX NAME, AND SUBLICENSE.
The Fund may use the name "Rydex Capital Partners SPhinX Fund" or
any other name derived from either the name "Rydex" or "SPhinX" only for so long
as this Agreement or any extension, renewal, or amendment hereof remains in
effect, including any similar agreement with any organization which shall have
succeeded to the business of Advisor as investment adviser. At such time as this
Agreement or any extension, renewal or amendment hereof, or such other similar
agreement shall no longer be in effect, the Fund will cease to use any name
derived from either the name "Rydex" or "SPhinX" or otherwise connected with the
Advisor, or with any organization which shall have succeeded to Advisor's
business as investment adviser. Further, The Fund acknowledges that the
Advisor's rights with respect to the Standard & Poor's Hedge Fund Index (the
"Index") (including its ability to obtain all information that may be necessary
to enable the investment of the Fund's assets in a manner designed to track the
Index) and the Fund's ability to invest in vehicles that are constituents of the
Index, are possible because of a licensing agreement between the Advisor and
PlusFunds Group Inc. At such time as this Agreement or any extension, renewal or
amendment hereof, or such other similar agreement shall no longer be in effect,
or in the event the licensing agreement with PlusFunds Group Inc. terminates,
the Fund may lose such rights absent the implementation of other arrangements.
12. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants that the Fund is duly registered
with the Securities and Exchange Commission under the 1940 Act, as an open-end
management investment company, and that all required action has been taken by
the Fund under the 1933 Act and the 1940 Act, to permit the public offering of,
and to consummate the sale of, the shares of the Fund pursuant to the current
prospectus of the Fund.
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13. NOTICES
All notices or other communications required or permitted to be
given hereunder shall be in writing and shall be delivered or sent by prepaid,
first-class letter posted to the following addresses, or to such other address
as shall be designated in a notice given in accordance with this section, and
such notice shall be deemed to have been given at the time of delivery of, if
sent by post, five (5) week days after posting by airmail.
If to the Fund: Rydex Capital Partners Sphinx
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
ATTENTION: President
If to the Advisor: RYDEX Capital Partners I, LLC.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
ATTENTION: President
14. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland (without reference to such state's conflict of
law rules).
15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same instrument.
16. DEFINITIONS
As used in this Agreement, the terms "interested persons" and "vote
of a majority of the outstanding securities" shall have the respective meanings
set forth in Section 2(a)(l9) and Section 2(a)(42) of the 1940 Act.
17. LIMITATION OF LIABILITY
A copy of the Certificate of Trust of the Fund is on file with the
Secretary of State of the State of Delaware, and notice is hereby given that
this Agreement is executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders of the Fund individually but
are binding only upon the assets and property of the Fund.
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IN WITNESS WHEREOF, the Fund and the Advisor have caused this
Agreement to be executed on the date first above written.
RYDEX CAPITAL PARTNERS SPHINX FUND
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx
President, Rydex Capital Partners SPhinX Fund
RYDEX CAPITAL PARTNERS I, LLC
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx
President, Rydex Capital Partners I, LLC
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