INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 28th day of June, 2004, by and between XXXXXXXXXXX
PRINCIPAL PROTECTED TRUST III (the "Trust"), and OPPENHEIMERFUNDS, INC. ("OFI").
WHEREAS, the Trust is an open-end series investment company registered as such
with the Securities and Exchange Commission (the "Commission") pursuant to the
Investment Company Act of 1940 (the "Investment Company Act"), and OFI is a
registered investment adviser;
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act") as an open-end management investment
company and may issue shares of common stock in separately designated series
representing separate funds with their own investment objectives, policies and
purposes; and
WHEREAS, the Trust desires that OFI shall act as its investment adviser with
respect to the Xxxxxxxxxxx Principal Protected Main Street Fund III(R) (the
"Fund") series pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISION.
The Trust hereby employs OFI and OFI hereby undertakes to act as the
investment adviser of the Fund and to perform for the Trust on behalf of the
Fund such other duties and functions as are hereinafter set forth. OFI shall, in
all matters, give to the Trust and its Board of Trustees the benefit of its best
judgment, effort, advice and recommendations and shall, at all times conform to,
and use its best efforts to enable the Fund to conform to (i) the provisions of
the Investment Company Act and any rules or regulations thereunder; (ii) any
other applicable provisions of state or federal law; (iii) the provisions of the
Declaration of Trust and By-Laws of the Trust as amended from time to time; (iv)
policies and determinations of the Board of Trustees of the Trust; (v) the
fundamental policies and investment restrictions of the Fund as reflected in the
Trust's registration statement under the Investment Company Act or as such
policies may, from time to time, be amended by the Fund's shareholders; and (vi)
the Prospectus and Statement of Additional Information of the Fund in effect
from time to time. The appropriate officers and employees of OFI shall be
available upon reasonable notice for consultation with any of the Trustees and
officers of the Trust with respect to any matters dealing with the business and
affairs of the Trust including the valuation of the portfolio securities of the
Fund which are either not registered for public sale or not being traded on any
securities market.
2. INVESTMENT MANAGEMENT.
(a) OFI shall, subject to the direction and control by the Trust's
Board of Trustees, (i) regularly provide investment advice and recommendations
to the Fund with respect to its investments, investment policies and the
purchase and sale of securities; (ii) supervise continuously the investment
program of the Fund and the composition of its portfolio and determine what
securities shall be purchased or sold by the Fund; and (iii) arrange, subject to
the provisions of paragraph "7" hereof, for the purchase of securities and other
investments for the Fund and the sale of securities and other investments held
in the portfolio of the Fund.
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(b) Provided that the Trust shall not be required to pay any
compensation other than as provided by the terms of this Agreement and subject
to the provisions of paragraph "7" hereof, OFI may obtain investment
information, research or assistance from any other person, firm or corporation
to supplement, update or otherwise improve its investment management services.
(c) Provided that nothing herein shall be deemed to protect OFI from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or reckless disregard of its obligations and duties under this
Agreement, OFI shall not be liable for any loss sustained by reason of good
faith errors or omissions in connection with any matters to which this Agreement
relates.
(d) Nothing in this Agreement shall prevent OFI or any officer thereof
from acting as investment adviser for any other person, firm or corporation or
in any way limit or restrict OFI or any of its directors, officers, stockholders
or employees from buying, selling or trading any securities for its own account
or for the account of others for whom it or they may be acting, provided that
such activities will not adversely affect or otherwise impair the performance by
OFI of its duties and obligations under this Agreement and under the Investment
Advisers Act of 1940.
3. OTHER DUTIES OF OFI.
OFI shall, at its own expense, provide and supervise the activities of
all administrative and clerical personnel as shall be required to provide
effective corporate administration for the Fund, including the compilation and
maintenance of such records with respect to its operations as may reasonably be
required; the preparation and filing of such reports with respect thereto as
shall be required by the Commission; composition of periodic reports with
respect to its operations for the shareholders of the Fund; composition of proxy
materials for meetings of the Fund's shareholders and the composition of such
registration statements as may be required by federal securities laws for
continuous public sale of shares of the Fund. OFI shall, at its own cost and
expense, also provide the Fund with adequate office space, facilities and
equipment. OFI shall, at its own expense, provide such officers for the Trust as
the Trust's Board may request.
4. ALLOCATION OF EXPENSES.
All other costs and expenses of the Fund not expressly assumed by OFI
under this Agreement, or to be paid by the Distributor of the shares of the
Fund, shall be paid by the Trust, including, but not limited to (i) interest and
taxes; (ii) brokerage commissions; (iii) premiums for fidelity and other
insurance coverage requisite to its operations; (iv) the fees and expenses of
its Trustees; (v) legal and audit expenses; (vi) custodian and transfer agent
fees and expenses; (vii) expenses incident to the redemption of its shares;
(viii) expenses incident to the issuance of its shares against payment therefor
by or on behalf of the subscribers thereto; (ix) fees and expenses, other than
as hereinabove provided, incident to the registration under federal securities
laws of shares of the Fund for public sale; (x) expenses of printing and mailing
reports, notices and proxy materials to shareholders of the Fund; (xi) except as
noted above, all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary non-recurring expenses as may arise,
including litigation affecting the Fund and any legal obligation which the Trust
may have on behalf of the Fund to indemnify its officers and Trustees with
respect thereto. Any officers or employees of OFI or any entity controlling,
controlled by or under common control with OFI, who may also serve as officers,
Trustees or employees of the Trust shall not receive any compensation from the
Trust for their services.
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5. COMPENSATION OF OFI AND EXPENSE REIMBURSEMENT BY OFI.
The Trust agrees to pay OFI and OFI agrees to accept as full
compensation for the performance of all functions and duties on its part to be
performed pursuant to the provisions hereof, a fee computed on the total net
asset value of each Fund of the Trust as of the close of each business day and
payable monthly at the annual rate for each Fund set forth on Schedule A hereto.
The Trust's obligation under this paragraph will become effective following the
close of the "Offering Period," as defined in the Fund's prospectus.
OFI shall reimburse the Fund for the amount of normal operating
expenses (other than extraordinary expenses) paid by Xxxxxxxxxxx Xxxx Xxxxxx
Fund relating to the Fund's assets invested in Xxxxxxxxxxx Xxxx Xxxxxx Fund
during the payment period.
6. USE OF NAME "XXXXXXXXXXX" AND OF THE NAME "MAIN STREET."
OFI hereby grants to the Trust a royalty-free, non-exclusive license to
use the name "Xxxxxxxxxxx" or the name "Main Street" in the name of the Trust
and the Fund for the duration of this Agreement and any extensions or renewals
thereof. To the extent necessary to protect OFI's rights to the name
"Xxxxxxxxxxx" or the name "Main Street" under applicable law, such license shall
allow OFI to inspect, and subject to control by the Trust's Board, control the
name and quality of services offered by the Fund under either such name. Such
license may, upon termination of this Agreement, be terminated by OFI, in which
event the Trust shall promptly take whatever action may be necessary to change
its name and the name of the Fund and discontinue any further use of the name
"Xxxxxxxxxxx" or the name "Main Street" in the name of the Trust or the Fund or
otherwise. The name "Xxxxxxxxxxx" or the name "Main Street" may be used by OFI
in connection with any of its activities or licensed by OFI to any other party.
7. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) OFI is authorized, in arranging the Fund's portfolio transactions,
to employ or deal with such members of securities or commodities exchanges,
brokers or dealers, including "affiliated" broker dealers (as that term is
defined in the Investment Company Act) (hereinafter "broker-dealers"), as may,
in its best judgment, implement the policy of the Fund to obtain, at reasonable
expense, the "best execution" (prompt and reliable execution at the most
favorable security price obtainable) of the Fund's portfolio transactions as
well as to obtain, consistent with the provisions of subparagraph "(c)" of this
paragraph "7," the benefit of such investment information or research as may be
of significant assistance to the performance by OFI of its investment management
functions.
(b) OFI shall select broker-dealers to effect the Fund's portfolio
transactions on the basis of its estimate of their ability to obtain best
execution of particular and related portfolio transactions. The abilities of a
broker-dealer to obtain best execution of particular portfolio transaction(s)
will be judged by OFI on the basis of all relevant factors and considerations
including, insofar as feasible, the execution capabilities required by the
transaction or transactions; the ability and willingness of the broker-dealer to
facilitate the Fund's portfolio transactions by participating therein for its
own account; the importance to the Fund of speed, efficiency or confidentiality;
the broker-dealer's apparent familiarity with sources from or to whom particular
securities might be purchased or sold; as well as any other matters relevant to
the selection of a broker-dealer for particular and related transactions of the
Fund.
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(c) OFI shall have discretion, in the interests of the Fund, to
allocate brokerage on the Fund's portfolio transactions to broker-dealers other
than affiliated broker-dealers, qualified to obtain best execution of such
transactions who provide brokerage and/or research services (as such services
are defined in Section 28(e)(3) of the Securities Exchange Act of 1934) for the
Fund and/or other accounts for which OFI and its affiliates exercise "investment
discretion" (as that term is defined in Section 3(a)(35) of the Securities
Exchange Act of 1934) and to cause the Fund to pay such broker-dealers a
commission for effecting a portfolio transaction for the Fund that is in excess
of the amount of commission another broker-dealer adequately qualified to effect
such transaction would have charged for effecting that transaction, if OFI
determines, in good faith, that such commission is reasonable in relation to the
value of the brokerage and/or research services provided by such broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of OFI and its investment advisory affiliates with respect to
the accounts as to which they exercise investment discretion. In reaching such
determination, OFI will not be required to place or attempt to place a specific
dollar value on the brokerage and/or research services provided or being
provided by such broker-dealer. In demonstrating that such determinations were
made in good faith, OFI shall be prepared to show that all commissions were
allocated for the purposes contemplated by this Agreement and that the total
commissions paid by the Fund over a representative period selected by the Fund's
trustees were reasonable in relation to the benefits to the Fund.
(d) OFI shall have no duty or obligation to seek advance competitive
bidding for the most favorable commission rate applicable to any particular
portfolio transactions or to select any broker-dealer on the basis of its
purported or "posted" commission rate but will, to the best of its ability,
endeavor to be aware of the current level of the charges of eligible
broker-dealers and to minimize the expense incurred by the Fund for effecting
its portfolio transactions to the extent consistent with the interests and
policies of the Fund as established by the determinations of its Board of
Trustees and the provisions of this paragraph "7."
(e) The Trust recognizes that an affiliated broker-dealer (i) may act
as one of the Fund's regular brokers so long as it is lawful for it so to act;
(ii) may be a major recipient of brokerage commissions paid by the Trust; and
(iii) may effect portfolio transactions for the Fund only if the commissions,
fees or other remuneration received or to be received by it are determined in
accordance with procedures contemplated by any rule, regulation or order adopted
under the Investment Company Act for determining the permissible level of such
commissions.
8. DURATION.
This Agreement will take effect on the date first set forth above.
Unless earlier terminated pursuant to paragraph 9 hereof, this Agreement shall
remain in effect for two years from the date of execution hereof, and thereafter
will continue in effect from year to year, so long as such continuance shall be
approved at least annually by the Trust's Board of Trustees, including the vote
of the majority of the trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, or by the holders of a "majority" (as defined in the Investment
Company Act) of the outstanding voting securities of the Fund and by such a vote
of the Trust's Board of Trustees.
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9. TERMINATION.
This Agreement may be terminated (i) by OFI at any time without penalty
upon giving the Fund sixty days' written notice (which notice may be waived by
the Fund); or (ii) by the Fund at any time without penalty upon sixty days'
written notice to OFI (which notice may be waived by OFI) provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of all of the Trustees of the Fund then in office or by the vote of the holders
of a "majority" (as defined in the Investment Company Act) of the outstanding
voting securities of the Fund.
10. ASSIGNMENT OR AMENDMENT.
This Agreement may not be amended without the affirmative vote or
written consent of the holders of a "majority" of the outstanding voting
securities of the Fund, and shall automatically and immediately terminate in the
event of its "assignment," as defined in the Investment Company Act.
11. DISCLAIMER OF SHAREHOLDER LIABILITY.
OFI understands that the obligations of the Trust under this Agreement
are not binding upon any Trustee or shareholder of the Trust or Fund personally,
but bind only the Trust, but only with respect to the Fund's property. OFI
represents that it has notice of the provisions of the Declaration of Trust of
the Trust disclaiming trustee or shareholder liability for acts or obligations
of the Trust.
12. DEFINITIONS.
The terms and provisions of this Agreement shall be interpreted and
defined in a manner consistent with the provisions and definitions of the
Investment Company Act.
XXXXXXXXXXX PRINCIPAL PROTECTED TRUST III
By: /s/Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Vice President and Secretary
OPPENHEIMERFUNDS, INC.
By: /s/Xxxxxx X. Xxxx
-----------------
Xxxxxx X. Xxxx,
Executive Vice President & General Counsel
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SCHEDULE A
TO
INVESTMENT ADVISORY AGREEMENT
BETWEEN
XXXXXXXXXXX PRINCIPAL PROTECTED TRUST III
AND
OPPENHEIMERFUNDS, INC.
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NAME OF SERIES ANNUAL FEE AS A PERCENTAGE OF DAILY
TOTAL NET ASSETS
=========================================== ====================================
=========================================== ====================================
Xxxxxxxxxxx Principal Protected Main 0.50% per annum of average annual
Street Fund III(R) net assets of the Fund. The
investment advisory fee shall be
reduced to 0.40% per annum of
average annual net assets of the
Fund in any month during the
Warranty Period (as defined in the
Fund's prospectus) following a month
where the Fund's average daily
investment in equity securities
(including shares of Xxxxxxxxxxx
Main Street Fund) is less than 10%
of net assets.
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The investment advisory fee shall be
reduced to 0.25% of average annual
net assets of the Fund if 100% of
the Fund's assets are irreversibly
invested in debt securities; and in
that case OFI will reduce its
management fee to the extent
necessary so that total annual
operating expenses of the Fund
(other than Extraordinary Expenses
and other expenses such as
litigation costs) are limited to
1.30% for Class A shares, 2.05% for
Class B shares, 2.05% for Class C
shares and 1.55% for Class N shares
(except that the advisory fee shall
not be reduced below zero and shall
not require OFI to subsidize
expenses in excess of the amount
that its fee would have otherwise
been).
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