INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT dated May 16, 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 and the Advisor were previously parties to an
investment advisory agreement dated February 14, 2005 (the Initial
Agreement Date);
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 Funds 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 Funds holdings
in accordance with the Funds 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 Funds assets. In compliance with 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 Advisors 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 Advisors 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
Funds 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 Funds 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 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 Advisors 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 Funds 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 Funds 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 Funds net asset value attributable to the Funds outstanding
common shares, plus the liquidation preference of the Funds 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 Funds 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 Funds 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 above and continue until the second anniversary
of the Initial Agreement Date. 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.
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 Funds Trustees nor any
officers, employees or agents shall be liable thereunder and the Advisor
shall look solely to the Funds assets for the payment of any claim
hereunder or for the performance of the Funds 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 Funds 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 Funds 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 Funds 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 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.
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:
Xxxxxx X. XXxxxx, President
RMR ADVISORS, INC.
By:
Xxxx X. Xxxxxxxx, Treasurer
