Exhibit g
INVESTMENT ADVISORY AGREEMENT
BETWEEN
RYDEX CAPITAL PARTNERS SPHINX FUND
AND
RYDEX CAPITAL PARTNERS I, LLC
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as
of June 1, 2003, 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:
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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:
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RYDEX CAPITAL PARTNERS I, LLC
By:
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