Exhibit h(5)
FORM OF
EXPENSE LIMITATION AGREEMENT
▇▇▇▇▇ ▇▇▇▇▇▇ Trust II
▇▇▇▇▇ ▇▇▇▇▇▇ Capital Preservation Fund II
EXPENSE LIMITATION AGREEMENT, effective as of ________ ___, 2002 by and
between ▇▇▇▇▇ ▇▇▇▇▇▇ Fund Management LLC (the "Manager") and ▇▇▇▇▇ ▇▇▇▇▇▇ Trust
II (the "Trust"), on behalf of the Trust's series, ▇▇▇▇▇ ▇▇▇▇▇▇ Capital
Preservation Fund II (the "Fund").
WHEREAS, the Trust is a Massachusetts business trust, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management company; and
WHEREAS, the Trust and the Manager have entered into a Management
Agreement dated ________ ___, 2002 ("Management Agreement"), pursuant to which
the Manager provides investment management services to the Fund for
compensation based on the value of the average daily net assets of the Fund;
and
WHEREAS, the Trust and the Manager have determined that it is appropriate
and in the best interests of the Fund and its shareholders to maintain the
expenses of the Fund at a level below the level to which the Fund may otherwise
be subject.
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the ordinary operating
expenses incurred by a class of the Fund in any fiscal year, including but not
limited to investment management fees payable to the Manager, but excluding
interest, taxes, brokerage commissions, other investment-related costs,
extraordinary expenses such as litigation and other expenses not incurred in
the ordinary course of the Fund's business ("Fund Operating Expenses"), exceed
the Operating Expense Limit, as defined in Section 1.2 below, such excess
amount (the "Excess Amount") shall be the liability of the Manager.
1.2. Operating Expense Limit. The Operating Expense Limit in any fiscal
year with respect to each class of the Fund shall be the amount specified in
Schedule A hereto based on a percentage of the average daily net assets of such
class of the Fund.
1.3. Method of Computation. To determine the Manager's obligation with
respect to the Excess Amount, the Fund Operating Expenses for each class of the
Fund shall be calculated each day. If the annualized value of that calculation
exceeds the Operating Expense Limit for any class of the Fund, the expenses
shall be capped as specified in Schedule A, and a receivable from the Manager
for that day's Excess Amount shall be recorded. The Fund may offset amounts
owed to the Fund pursuant to this Agreement against the investment management
fee payable to the Manager from the Fund.
1.4. Adjustments. From time to time, as better or more complete
information becomes available, adjustments to expenses may be made in order to
more accurately reflect the actual expense environment in which the Fund
operates. Such adjustments may temporarily cause the Fund's annualized expense
ratio on a given day to exceed the Operating Expense Limit. In such cases,
subsequent adjustments will be made to ensure that the Fund's expense ratio for
the fiscal year will not exceed the Operating Expense Limit. If necessary, on
or before the last day of the first month of each fiscal year, an adjustment
payment shall be made by the appropriate party in order that the amount of the
investment management fees waived or reduced and other payments remitted by the
Manager to each class of the Fund with respect to the previous fiscal year
shall equal the Excess Amount.
2. Recoupment of Fee Waivers and Expense Reimbursements.
2.1. Recoupment. If on any day during which the Management Agreement is in
effect, the estimated annualized Fund Operating Expenses of a class of the Fund
for that day are less than the Operating Expense Limit, the Manager shall be
entitled to recoup from the Fund the investment management fees waived or
reduced and other payments remitted by the Manager to such class of the Fund
pursuant to Section 1 hereof (the "Recoupment Amount") during any of the
previous thirty-six (36) months, to the extent that such class' annualized Fund
Operating Expenses plus the amount so recouped equals, for such day, the
Operating Expense Limit provided in Schedule A, provided that such amount paid
to the Manager will in no event exceed the total Recoupment Amount and the
Recoupment Amount will not include any amounts previously recouped.
2.2. Adjustments. If necessary, appropriate adjustments shall be made in
order to ensure that the actual Fund Operating Expenses of each class of the
Fund for the fiscal year (including any recoupment payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall have an initial term through five years from the
second business day after the end of the Fund's offering period, or if that day
is not a business day, the first business day thereafter (as determined
pursuant to the prospectus for the Fund) (the "Guarantee Maturity Date").
Thereafter, this Agreement shall automatically renew for one-year terms unless
the Manager provides written notice to the Fund of the termination of this
Agreement at least 30 days prior to the end of the then-current term. In
addition, this Agreement shall terminate upon termination of the Management
Agreement with respect to the Fund, or it may be terminated by the Fund,
without payment of any penalty, upon ninety (90) days' prior written notice to
the Manager at its principal place of business. The Operating Expense Limit
specified in Schedule A is effective through to the Guarantee Maturity Date;
thereafter the maximum Operating Expense Limit may be changed upon the
extension of this Agreement as contemplated by this paragraph and paragraph
4.4.
4. Miscellaneous.
4.1. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
4.2. Interpretation. Nothing herein contained shall be deemed to require
the Fund or the Trust to take any action contrary to the Trust's Declaration of
Trust, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Trust's Board of
Trustees of its responsibility for and control of the conduct of the affairs of
the Fund.
4.3. Definitions. Any question of interpretation of any term or provision
of this Agreement, including but not limited to the investment management fee
and the computations of net asset values, having a counterpart in or otherwise
derived from the terms and provisions of the Management Agreement or the 1940
Act, shall have the same meaning as and be resolved by reference to such
Management Agreement or the 1940 Act.
4.4. Amendments. This Agreement may be amended only by a written agreement
signed by each of the parties hereto.
The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Declaration of Trust of the Trust and
the obligations of this Agreement are not binding upon any of the Trustees,
officers or shareholders of the Trust individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the day and year
first above written.
▇▇▇▇▇ ▇▇▇▇▇▇ TRUST II
On behalf of ▇▇▇▇▇ ▇▇▇▇▇▇ Capital
Preservation Fund II
By:
---------------------------
Name:
Title:
▇▇▇▇▇ ▇▇▇▇▇▇ FUND
MANAGEMENT LLC
By:
---------------------------
Name:
Title:
Schedule A
OPERATING EXPENSE LIMITS
Maximum Operating Expense Limit
(as a percentage of average net assets)*
Class A Class B Class L
▇▇▇▇▇ ▇▇▇▇▇▇ Capital Preservation Fund II ___%** ___%** ___%**
* Effective through to the Guarantee Maturity Date; thereafter this limit is
subject to change if the Agreement is extended as contemplated in
paragraph 4.4.
** During any period in which the Fund's assets are required to be invested
in a defeasance portfolio, the maximum Operating Expense Limit (as a
percentage of average net assets) with respect to those assets comprising
the defeasance portfolio shall be: ___% Class A, ___% Class B and ___
Class L. The maximum Operating Expense Limit (as a percentage of average
net assets) with respect to assets other than the defeasance portfolio
(the "Other Assets") shall remain as set forth in the table above, and the
fund operating expenses subject to such maximum Operating Expense Limit
for the Other Assets shall be payable solely from the Other Assets and not
from the defeasance portfolio.
