FORM OF EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT, effective as of __________________, by
and between American Express Financial Corporation ("AEFC") and Advisory Hedged
Opportunity Fund (the "Trust").
WHEREAS, the Trust is a Delaware statutory trust organized under a
Declaration of Trust ("Declaration of Trust"), and is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as a closed-end
management investment company;
WHEREAS, the Trust and AEFC have entered into an Investment Management
Services Agreement ("Management Agreement"), pursuant to which AEFC will render
investment advisory services to the Trust for compensation based on the value of
the month-end net assets of the Trust;
WHEREAS, the Trust and AEFC have entered into an Administrative
Services Agreement ("Administrative Agreement"), pursuant to which AEFC will
render administrative services to the Trust for compensation based on the value
of month-end assets of the Trust;
WHEREAS, the Trust and AEFC have determined that it is appropriate and
in the best interests of the Trust and its shareholders to maintain the expenses
of the Trust at the Maximum Annual Operating Expense Limit (as hereinafter
defined);
NOW THEREFORE, the parties hereto agree as follows:
I. Expense Limitation.
1.1 Applicable Expense Limit. To the extent that the aggregate expenses
of every character incurred by the Trust in an fiscal year, including but not
limited to administrative services fees and investment management fees of AEFC
and fees and expenses of American Express Financial Advisors, Inc. under any
Plan and Agreement of Distribution (but excluding extraordinary and
non-recurring expenses) ("Trust Operating Expenses"), exceed the Maximum Annual
Operating Expense Limit, as defined in Section 1.2 below, such excess amount
("Excess Amount") shall be the liability of AEFC.
1.2. Maximum Annual Operating Expense Limit. The Maximum Annual
Operating Expense Limit of the Trust shall be 1.50 percent annually. This amount
shall be accrued monthly, based on a percentage of the monthly net assets of the
Trust, determined at month-end by adding subscriptions then subtracting
repurchases from the prior month-end balance.
1.3. Method of Computation. To determine AEFC's liability with respect
to the Excess Amount, each month the Trust Operating Expenses shall be
annualized as of the last day of the month. If the annualized Trust Operating
Expenses for any month exceed the Maximum Annual Operating Expense Limit, AEFC
shall first waive or reduce its advisory fees and administrative services fees
for such month by an amount sufficient to reduce the annualized Trust Operating
Expenses to an amount no higher than the Maximum Annual Operating Expense Limit.
If the amount of the waived or reduced advisory fees and administrative services
fees for
any such month is insufficient to pay the Excess Amount, AEFC may also
remit to the Trust for the benefit of the Trust an amount that, together with
the waived or reduced advisory fees and administrative services fees, is
sufficient to pay such Excess Amount.
1.4. Year-End Adjustment. If necessary, on or before the last business
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 advisory fees and
administrative services fees waived or reduced and other payments remitted by
AEFC to the Trust with respect to the previous fiscal year shall equal the
Excess Amount.
II. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1 Reimbursement. If the Management Agreement and Administrative
Agreement are still in effect and the estimated aggregate Trust Operating
Expenses of the Trust for the fiscal year are less than the Maximum Annual
Operating Expense Limit for that year, subject to quarterly approval by the
Trust's Board of Trustees as provided in Section 2.2 below, AEFC shall be
entitled to reimbursement by the Trust, in whole or in part as provided below,
of the advisory fees and administrative services fees waived or reduced and
other payments remitted by AEFC to the Trust pursuant to Section 1 hereof. The
total amount of reimbursement to which AEFC may be entitled ("Reimbursement
Amount") shall equal, at any time, the sum of all other payments remitted by
AEFC to the Trust, pursuant to Section 1 hereof, during any of the previous
three (3) fiscal years, less any reimbursement previously paid by the Trust to
AEFC, pursuant to Section 2.2 or 2.3 hereof, with respect to such waivers,
reductions, and payments. The Reimbursement Amount shall not include any
additional charges or fees whatsoever, including, e.g. interest accruable on the
Reimbursement Amount.
2.2. Board Approval. No reimbursement shall be paid to AEFC pursuant to
this provision in any fiscal quarter, unless the Trust's Board of Trustees has
determined that the payment of such reimbursement is in the best interests of
the Trust and its shareholders. The Trust's Board of Trustees shall determine
quarterly in advance whether any reimbursement may be paid to AEFC by the Trust
in such quarter.
2.3. Method of Computation. To determine the Reimbursement Amount, each
month the Operating Expenses of the Trust shall be annualized as of the last day
of the month. If the annualized Operating Expenses of the Trust for any month
are less than the Maximum Annual Operating Expense Limit of the Trust, only with
the prior approval of the Trust's Board of Trustees, shall pay to AEFC an amount
sufficient to increase the annualized Operating Expenses to an amount no greater
than the Maximum annual Operating Expense Limit, provided that such amount paid
to AEFC will in no event exceed the total Reimbursement Amount.
2.4. Year-End Adjustment. 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 actual Operating Expenses of the Trust for
the prior fiscal year (including any reimbursement payments hereunder with
respect to such fiscal year) do not exceed the Maximum Annual Operating Expense
Limit.
III. Term and Termination Agreement.
This agreement shall continue in effect one year from the date the
Trust commences operations and shall thereafter automatically renew for one-year
terms. After one year from the
date that the Trust has commenced operations, this Agreement may be terminated
by either party hereto, without payment of any penalty, upon thirty (30) days'
prior written notice to the other party at its principal place of business;
provided that, in the case of termination by the Trust, such action shall be
authorized by resolution of a majority of the Trustees who are not interested
persons, within the meaning of the 1940 Act, of the Trust or by a vote of a
majority of the outstanding voting securities of the Trust.
IV. 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 Trust to take any action contrary to the Trust's Declaration of Trust or
Bylaws, 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 Trust.
4.3 Definitions. Any question of interpretation of any term or
provision of this Agreement, including but not limited to the advisory services
fee or administrative services fee, the computations of net asset values, and
the allocation of expenses, having a counterpart in or otherwise derived from
the terms and provisions of the Management Agreement and Administrative
Agreement or the 1940 Act, shall have the same meaning as and be resolved by
reference to such Management Agreement and Administrative Agreement or the 1940
Act.
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.
ADVISORY HEDGED OPPORTUNITY FUND
By:
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NAME:
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TITLE:
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AMERICAN EXPRESS FINANCIAL CORPORATION
By:
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NAME:
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TITLE:
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