FORM OF INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT dated ______, 2005, between RMR Preferred
Dividend Fund (the "Fund"), a Massachusetts business trust, and RMR Advisors,
Inc. (the "Advisor"), a Massachusetts corporation.
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as a closed-end, non-diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisors Act of
1940, as amended (the "Advisors Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Fund desires to employ the Advisor for, and the Advisor
desires to provide, investment advisory services to the Fund upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. INVESTMENT DESCRIPTION, APPOINTMENT. The Fund desires to employ its
capital by investing and reinvesting in investments of the kind and
in accordance with the investment objectives, policies and
limitations specified in its Agreement and Declaration of Trust, as
amended from time to time ("Charter"), its prospectus ("Prospectus")
and statement of additional information ("Statement") filed with the
Securities and Exchange Commission ("SEC") as part of the Fund's
Registration Statement on Form N-2, as amended from time to time
("Registration Statement"), and in the manner and to the extent as
may from time to time be approved by the Board of Trustees of the
Fund (the "Board"). Copies of the Prospectus, the Statement and the
Charter have been or will be submitted to the Advisor. The Fund
agrees to provide copies of all amendments to the Registration
Statement and the Charter to the Advisor on an on-going basis. The
Fund hereby appoints the Advisor to act as the investment advisor to
the Fund. The Advisor accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISOR. Subject to the supervision,
direction and approval of the Board, the Advisor will (a) manage the
Fund's holdings in accordance with the Fund's investment objectives
and policies as stated in the Charter and the Registration
Statement; (b) make investment decisions for the Fund; (c) place
purchase and sale orders for portfolio transactions for the Fund;
and (d) provide research services to the Fund. In providing those
services, the Advisor will conduct a continual program of
investment, evaluation and, if appropriate, sale and reinvestment of
the Fund's assets. In compliance with
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applicable law, the Advisor is hereby authorized to retain third
parties and to delegate some or all of its duties and obligations
under this paragraph 2 to such persons provided that such persons
shall remain under the general supervision of the Advisor.
3. STANDARD OF CARE. The Advisor shall give the Fund the benefit of its
best judgment and effort in rendering services. The Advisor shall
not be liable for any act or omission or for any loss sustained by
the Fund in connection with the matters to which this Agreement
relates, except those involving the Advisor's willful misfeasance,
bad faith or gross negligence in the performance of its duties, or
the reckless disregard of its obligations and duties under this
Agreement.
4. SERVICES TO OTHER COMPANIES AND ACCOUNTS. The Fund understands that
the Advisor and its affiliates now act, will continue to act and may
in the future act as investment advisor or fiduciary to other
managed accounts and as investment advisor or property manager to
other investment companies or trusts. Nothing in this Agreement
shall prevent the Advisor or any director, officer, employee or
other affiliate of the Advisor from acting as investment advisor,
property manager, fiduciary or administrator for any other person,
firm or corporation, or from engaging in any lawful activity, and
shall not in any way limit or restrict the Advisor or any of its
directors, officers, employees or agents from buying, selling or
trading any securities for its or their own accounts or for the
accounts of others for whom it or they may be acting; provided,
however, that the Advisor will undertake no activities which, in its
judgment, will adversely affect the performance of its obligations
under this Agreement and further provided that that whenever the
Fund and one or more other clients advised by the Advisor have
available funds for investment, investments suitable and appropriate
for each will be allocated in accordance with a formula believed to
be equitable to each client. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position
obtainable for the Fund. In addition, the Fund understands that the
persons employed by the Advisor to assist in the performance of the
Advisor's duties under this Agreement will not devote their full
time to such service and nothing contained in this Agreement shall
be deemed to limit or restrict the right of the Advisor or any
affiliate of the Advisor to engage in and devote time and attention
to other businesses or to render services of whatever kind or
nature.
5. PORTFOLIO TRANSACTIONS AND BROKERAGE. Subject to the supervision of
the Board, the Advisor is authorized, for the purchase and sale of
the Fund's portfolio securities, to employ such securities dealers
and brokers and to negotiate brokerage commissions on behalf of the
Fund as may, in the judgment of the Advisor, implement the policy of
the Fund to obtain the best net results taking into account such
factors as: the net price available; the reliability, integrity and
financial condition of the broker; the size of and difficulty in
executing the order; and the value of the expected contribution of
the broker to the Fund's investment performance on a continuing
basis. The Fund understands that the cost of the brokerage
commissions in any transaction may be greater than that available
from
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other brokers if the difference is reasonably justified by other
aspects of the services offered. Subject to such policies and
procedures as the Board may determine, the Advisor may cause the
Fund to pay a broker that provides research services to the Advisor
an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker
would have charged for effecting that transaction, if the Advisor
determines in good faith that such amount of commission was
reasonable in relation to the value of the research service provided
by such broker viewed in terms of either that particular transaction
or the Advisor's ongoing responsibilities under this Agreement. The
Fund understands that research and investment information provided
at no cost to the Advisor by brokers that are paid by the Fund will
be available to benefit other accounts advised by the Advisor and
its affiliates. In the allocation of the Fund's brokerage business
the Advisor is authorized to consider (i) its use of statistical,
research and other services furnished by brokers, and (ii) payments
made by brokers effecting transactions for the Fund to other persons
on the Fund's behalf for services (such as custodial or professional
fees).
6. COMPENSATION OF THE ADVISOR. In consideration of the advisory
services pursuant to this Agreement, the Fund agrees to pay to the
Advisor, on the first business day of each month a fee ("Advisory
Fee") for the previous month, and the Advisor agrees to accept as
full compensation for all services rendered by the Advisor, computed
at the annual rate of .85% of the sum of the Fund's net asset value
attributable to the Fund's outstanding common shares, plus the
liquidation preference of the Fund's outstanding preferred shares
plus the principal amount of any borrowings evidenced by notes,
commercial paper or other similar instruments issued by the Fund
("Average Daily Managed Assets") . The value of the Fund's Average
Daily Managed Assets shall be computed at the times and in the
manner specified by the Registration Statement. For any period less
than a month during which this Agreement is in effect, the fee shall
be prorated according to the proportion which such period bears to a
full month of 28, 29, 30 or 31 days, as the case may be.
7. FEE WAIVER. Notwithstanding the provisions of the above Section 6,
during the five year period following the closing of the Fund's
first public offering of common shares, the Advisor agrees to waive
a portion of its Advisory Fee equal to an annual rate of .25% of
Average Daily Total Assets.
8. DURATION AND TERMINATION. This Agreement shall become effective on
the date first set forth and above and continue for two (2) years.
Thereafter, this Agreement will continue from year to year, or for
such longer terms as may be approved by Board (including a majority
of the Trustees who are not "interested persons" of the Advisor, as
defined by the 0000 Xxx) and as may be permitted by the 1940 Act,
but only so long as such continuation is specifically approved at
least as often as required by the 1940 Act, as it may be amended
from time to time.
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So long as the 1940 Act requires these provisions respectively: (i)
this Agreement may be terminated by the Fund at any time without
penalty upon giving the Advisor sixty days' notice and payment of
any unpaid compensation to the Advisor described in Section 6,
above, earned prior to such termination, provided that such
termination by the Fund shall be directed or approved by the vote of
a majority of the Trustees of the Fund in office at the time or by
the vote of the holders of a "majority" (as defined in the 0000 Xxx)
of the voting securities of the Fund at the time outstanding and
entitled to vote; (ii) this Agreement shall terminate automatically
in the event of its assignment (as "assignment" is defined in the
1940 Act).
9. AMENDMENT. No amendment of this Agreement shall be effective unless
it is in writing and signed by the party against which enforcement
of the amendment is sought.
10. NON-LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. The Charter is on file
with the Secretary of State of The Commonwealth of Massachusetts.
This Agreement is executed on behalf of the Fund, by the Trustees or
by an officer or officers of the Fund in their capacity as such and
not individually, and neither the shareholders nor the Fund's
Trustees nor any officers, employees or agents shall be liable
thereunder and the Advisor shall look solely to the Fund's assets
for the payment of any claim hereunder or for the performance of the
Fund's duties created by this Agreement.
11. EXPENSES. The Advisor will bear all the expenses in connection with
the performance of its advisory services under this Agreement. The
Fund will bear all other expenses incurred in the operations of the
Fund including, but not limited to the fees payable under this
Agreement, brokerage commissions, taxes, interest, distributions,
legal, auditing, SEC, blue sky qualification or other governmental
fees, rating agency fees, the cost of preparing share certificates,
custodian, transfer and shareholder service agent costs, accounting
costs, administration services costs (including those fees charged
by any party under any administration or sub-administration
agreements approved by the Board) expenses of issue, sale,
redemption and repurchase of shares, dividend disbursing expenses,
expenses of registering and qualifying shares for sale, the Fund's
and its Board members' proportionate share of insurance premiums,
fees of the Board members of the Fund who are not "affiliated
persons" (as defined in the 0000 Xxx) of the Advisor or any
affiliate of the Advisor, expenses relating to Board and shareholder
meetings, the cost of preparing and distributing reports, notices
and proxy statements to shareholders, the fees and other expenses
incurred related to the Fund's membership in investment company
organizations and the cost of printing copies of prospectuses and
statements of additional information for regulatory purposes and for
distribution to the Fund's shareholders and any extraordinary
expenses.
12. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of The Commonwealth of Massachusetts for contracts to be
performed entirely
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therein without reference to choice of law principles and in
accordance with the applicable provisions of the 1940 Act.
13. NOTICES. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from
time to time for the receipt of notices and shall be deemed to be
received on the earlier of the date actually received or on the
fourth day after the postmark if such notice is mailed first class
postage prepaid.
14. LICENSE AGREEMENT. The Fund shall have the non-exclusive right to
use the name "RMR Preferred Dividend Fund" to designate any current
or future series of shares and may use the term "RMR", including
marks and symbols containing such term or variations thereof as
considered appropriate, only so long as RMR Advisors, Inc. serves as
investment manager or advisor to the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their respective
seals to be hereunto affixed, all as of the day and the year first above
written.
RMR PREFERRED DIVIDEND FUND
By:
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Xxxxxx X. X'Xxxxx, President
RMR ADVISORS, INC.
By:
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Xxxx X. Xxxxxxxx, Treasurer
[SIGNATURE PAGE TO ADVISORY AGREEMENT]
