FORM OF INVESTMENT MANAGEMENT SERVICES AGREEMENT
This Agreement dated as of ________2003, is by and between Advisory
Hedged Opportunity Fund, a Delaware statutory trust, (the "Trust"), and American
Express Financial Corporation, a Delaware corporation ("AEFC").
Part One: INVESTMENT MANAGEMENT AND OTHER SERVICES
(1) The Trust hereby retains AEFC, and AEFC hereby agrees, for the
period of this Agreement and under the terms and conditions hereinafter set
forth, to furnish the Trust continuously with investment advice; to determine,
consistent with the Trust's investment objectives and policies, which securities
in AEFC's discretion shall be purchased, held or sold, and to execute or cause
the execution of purchase or sell orders; to prepare and make available to the
Trust all necessary research and statistical data in connection therewith; to
furnish all other services of whatever nature required in connection with the
management of the Trust as provided under this Agreement; and to pay such
expenses as may be provided for in Part Three; subject always to the direction
and control of the Board of Trustees (the "Board") and the authorized officers
of the Trust. AEFC agrees to maintain an adequate organization of competent
persons to provide the services and to perform the functions herein mentioned.
AEFC agrees to meet with any persons at such times as the Board deems
appropriate for the purpose of reviewing AEFC's performance under this
Agreement.
(2) AEFC agrees that the investment advice and investment decisions
will be in accordance with the investment objectives and policies and
limitations of the Trust as disclosed to AEFC from time to time by the Trust and
as set forth in its prospectus and registration statement filed with the United
States Securities and Exchange Commission (the "SEC").
(3) AEFC agrees that it will maintain all required records, memoranda,
instructions or authorizations relating to the acquisition or disposition of
securities for the Trust.
(4) The Trust agrees that it will furnish to AEFC any information that
the latter may reasonably request with respect to the services performed or to
be performed by AEFC under this Agreement.
(5) AEFC is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Trust and is
directed to use its best efforts to obtain the best available price and most
favorable execution, except as prescribed herein. Subject to prior authorization
by the Board of appropriate policies and procedures, and subject to termination
at any time by the Board, AEFC may also be authorized to effect individual
securities transactions at commission rates in excess of the minimum commission
rates available, to the extent authorized by law, if AEFC determines in good
faith that such amount of commission was reasonable in relation to
the value of the brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or AEFC's overall
responsibilities with respect to the Trust and other funds for which it acts as
investment adviser.
(6) It is understood and agreed that in furnishing the Trust with the
services as herein provided, neither AEFC, nor any officer, director or agent
thereof shall be held liable to the Trust or its creditors or shareholders for
errors of judgment or for anything except willful misfeasance, bad faith, or
gross negligence in the performance of its duties, or reckless disregard of its
obligations and duties under the terms of this Agreement. It is further
understood and agreed that AEFC may rely upon information furnished to it
reasonably believed to be accurate and reliable.
Part Two: COMPENSATION TO INVESTMENT MANAGER
(1) The Trust agrees to pay to AEFC, and AEFC covenants and agrees to
accept from the Trust in full payment for the services furnished, a fee composed
of an asset charge of 1.25% of the net assets of the Trust at each month end,
including assets attributable to AEFC and before giving effect to any
repurchases of shares by the Trust.
(a) The fee for each month shall be computed based on the net assets
as of the close of business on the last business day of each
month. In the case of the suspension of the computation of net
asset value, the fee for each month during such suspension shall
be computed on the basis of the value of the net assets of the
Trust as last determined. If the Trust determines the value of
its portfolio more than once in any month, then the last such
determination there of in that month shall be deemed to be the
sole determination thereof in that month for purposes of this
paragraph. The value of the net assets of the Trust shall be
determined pursuant to the applicable provisions of the Trust's
Declaration of Trust, valuation procedures and registration
statement, each as amended from time to time. As used herein "net
assets" as of the close of a business day shall include all
transactions in shares of the Trust recorded on the books of the
Trust for that day.
(2) The fee shall be paid on a monthly basis and, in the event of the
termination of this Agreement, the fee accrued shall be prorated on the basis of
the number of days that this Agreement is in effect during the month with
respect to which such payment is made.
(3) The fee provided for hereunder shall be paid in cash by the Trust
to AEFC within five business days after the last day of each month.
Part Three: ALLOCATION OF EXPENSES
(1) The Trust agrees to pay:
(a) Fees payable to AEFC for its services under the terms
of this Agreement.
(b) Taxes.
(c) Brokerage commissions and charges in connection with
the purchase and sale of assets.
(d) Custodian fees and charges.
(e) Fees and charges of its independent certified public
accountants for service the Trust requests.
(f) Premium on the bond required by Rule 17g-1 under the
Investment Company Act of 1940, as amended (the "1940
Act").
(g) Fees and expenses of attorneys (i) it employs in
matters not involving the assertion of a claim by a
third party against the Trust, its trustees and
officers, (ii) it employs in conjunction with a claim
asserted by the Board against AEFC, except that AEFC
shall reimburse the Trust for such fees and expenses
if it is ultimately determined by a court of
competent jurisdiction, or AEFC agrees, that it is
liable in whole or in part to the Trust, and (iii) it
employs to assert a claim against a third party.
(h) Fees paid for the qualification and registration for
public sale of the securities of the Trust under the
laws of the United States and of the several states
in which such securities shall be offered for sale.
(i) Fees of consultants employed by the Trust.
(j) Trustees, officers and employees expenses which shall
include fees, salaries, memberships, dues, travel,
seminars, pension, profit sharing, and all other
benefits paid to or provided for trustees, officers
and employees, trustees and officers liability
insurance, errors and omissions liability insurance,
worker's compensation insurance and other expenses
applicable to the trustees, officers and employees,
except the Trust will not pay any fees or expenses of
any person who is an officer or employee of AEFC or
its affiliates.
(k) Filing fees and charges incurred by the Trust in
connection with filing any amendment to its
Certificate of Trust, or incurred in filing any other
document with the State of Delaware.
(l) Organizational expenses of the Trust.
(m) Expenses incurred in connection with lending
portfolio securities of the Trust.
(n) Expenses properly payable by the Trust, approved by
the Board.
(2) AEFC agrees to pay all expenses associated with the services it
provides under the terms of this Agreement.
Part Four: MISCELLANEOUS
(1) AEFC shall be deemed to be an independent contractor and, except as
expressly provided or authorized in this Agreement, shall have no authority to
act for or represent the Trust.
(2) A "business day" shall be as defined in the By-laws of the Trust.
(3) The Trust recognizes that AEFC now renders and may continue to
render investment advice and other services to other investment companies and
persons which may or may not have investment policies and investments similar to
those of the Trust and that AEFC manages its own investments and/or those of its
subsidiaries. AEFC shall be free to render such investment advice and other
services and the Trust hereby consents thereto.
(4) Neither this Agreement nor any transaction had pursuant hereto
shall be invalidated or in any way affected by the fact that Trustees, officers,
agents and/or shareholders of the Trust are or may be interested in AEFC or any
successor or assignee thereof, as Trustees, officers, stockholders or otherwise;
that directors, officers, stockholders or agents of AEFC are or may be
interested in the Trust as trustees, officers, shareholders, or otherwise; or
that AEFC or any successor or assignee, is or may be interested in the Trust as
shareholder or otherwise, provided, however, that neither AEFC, nor any officer,
director or employee thereof or of the Trust, shall sell to or buy from the
Trust any property or security other than shares issued by the Trust, except in
accordance with applicable regulations or orders of the SEC.
(5) Any notice under this Agreement shall be given in writing,
addressed, and delivered, or mailed postpaid, to the party to this Agreement
entitled to receive such, at such party's principal place of business in
Minneapolis, Minnesota, or to such other address as either party may designate
in writing mailed to the other.
(6) AEFC agrees that no officer, director or employee of AEFC will deal
for or on behalf of the Trust with himself as principal or agent, or with any
corporation or partnership in which he may have a financial interest, except
that this shall not prohibit:
(a) Officers, directors or employees of AEFC from having a financial
interest in the Trust or in AEFC.
(b) The purchase of securities for the Trust, or the sale of
securities owned by the Trust, through a security broker or
dealer, one or more of whose partners, officers, directors or
employees is an officer, director or employee of AEFC, provided
such transactions are handled in the capacity of broker only and
provided commissions charged do not exceed customary brokerage
charges for such services.
(c) Transactions with the Trust by a broker-dealer affiliate of AEFC
as may be allowed by rule or order of the SEC and if made
pursuant to procedures adopted by the Board.
(7) AEFC agrees that, except as herein otherwise expressly provided or
as may be permitted consistent with the use of a broker-dealer affiliate of AEFC
under applicable provisions of the federal securities laws, neither it nor any
of its officers, directors or employees shall at any time during the period of
this Agreement, make, accept or receive, directly or indirectly, any fees,
profits or emoluments of any character in connection with the purchase or sale
of securities (except shares issued by the Trust) or other assets by or for the
Trust.
(8) The Agreement shall be governed by the laws of the State of
Minnesota, without giving effect to the conflicts of laws principles thereof,
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
Part Five: RENEWAL AND TERMINATION
(1) This Agreement shall continue in effect until _________, 2005 or
until a new agreement is approved by a vote of the majority of the outstanding
shares of the Trust and by vote of the Trust's Board, including the vote
required by (b) of this paragraph, and if no new agreement is so approved, this
Agreement shall continue from year to year thereafter unless and until
terminated by either party as hereinafter provided, except that such continuance
shall be specifically approved at least annually (a) by the Board or by a vote
of the majority of the outstanding shares of the Trust and (b) by the 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 on such approval. As used in this paragraph, the term "interested person"
shall have the same meaning as set forth in the 1940 Act.
(2) This Agreement may be terminated by either the Trust or AEFC at any
time by giving the other party 60 days' written notice of such intention to
terminate, provided that any termination shall be made without the payment of
any penalty, and provided further that termination may be effected either by the
Board or by a vote of the majority of the outstanding voting shares of the
Trust. The vote of the majority of the outstanding voting shares of the Trust
for the purpose of this Part Five shall be the vote at a shareholders' regular
meeting, or a special meeting duly called for the purpose, of 67% or more of the
Trust's shares present at such meeting if the holders of more than 50% of the
outstanding voting shares are present or represented by proxy, or more than 50%
of the outstanding voting shares of the Trust, whichever is less.
(3) This Agreement shall terminate in the event of its assignment, the
term "assignment" for this purpose having the same meaning as set forth in the
1940 Act.
IN WITNESS THEREOF, the parties hereto have executed the foregoing Agreement as
of the day and year first above written.
ADVISORY HEDGED OPPORTUNITY FUND
By ______________________
AMERICAN EXPRESS FINANCIAL CORPORATION
By ______________________
