SUB-ITEM 77(Q1)((E)
INVESTMENT ADVISORY AGREEMENTS
On December 11, 2003, the Investment Advisory Agreement between the
Registrant and Rydex Capital Partners I, LLC (the "Adviser") terminated due to a
change in control of the Adviser (the "Old Agreement"). A copy of the Old
Agreement, Exhibit 24(2)(g)) to the Registrant's Registration Statement on Form
N-2 is incorporated by reference as filed via XXXXX on May 12, 2003, accession
number 0000930413-03-001587.
On December 16, 2004, the Registrant's Board of Trustees approved a
new Investment Advisory Agreement between the Adviser and the Registrant (the
"New Agreement") under which, subject to its approval by the Registrant's
shareholders, the Adviser will continue to serve as investment adviser to the
Registrant. The New Agreement was approved by the Registrant's shareholders at
the April 30, 2004 shareholders' meeting and is identical in all respects
including fees to be paid to the Adviser to the Old Agreement, except for the
time periods covered by the agreements. A copy of the New Agreement was included
in the Registrant's Proxy Statement on Schedule 14A is incorporated herein as
filed with the SEC via XXXXX on March 22, 2004, accession number
0001206774-04-000233.
During the period between the termination of the Old Agreement and
the approval of the New Agreement by shareholders (the "Interim Period"), the
Adviser provided investment advisory services to the Registrant pursuant to an
interim agreement between the Adviser and the Registrant (the "Interim
Agreement") that was approved by the Board at its December 16, 2003 special
meeting. The Interim Agreement is identical in all respects -- including fees to
be paid to the Adviser to the Old and New Agreements, except for the time
periods covered by the agreement. The New Agreement replaced the Interim
Agreement upon approval of the New Agreement by shareholders on April 30, 2004.
A copy of the Interim Agreement is attached hereto as Exhibit A.
INTERIM INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT
BETWEEN
RYDEX CAPITAL PARTNERS SPHINX FUND
AND
RYDEX CAPITAL PARTNERS I, LLC
THIS INVESTMENT ADVISORY AGREEMENT (the "Agreement"), dated as of
November 11, 2003, is entered into by and between the RYDEX CAPITAL PARTNERS
SPHINX FUND (the "Fund"), a Delaware business trust established on December 4,
2002, and RYDEX CAPITAL PARTNERS I, LLC (the "Advisor"), a limited liability
company incorporated under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, the Fund is registered with the Securities and Exchange
Commission (the "Commission") as a non-diversified, closed-end management
investment company pursuant to the provisions of the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Advisor is an investment adviser registered as such with
the Commission pursuant to the provisions of the Investment Advisers Act of
1940, and is engaged in the business of rendering investment advice and
investment management services as an independent contractor;
WHEREAS, the Fund wishes to engage the Advisor, and the Advisor wishes
to be engaged, to manage the investment portfolio of the Fund with respect to
the investment and reinvestment of the assets of the Fund and to act in such
capacity in accordance with the terms, conditions, and other provisions of this
Agreement; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and for other good and valuable consideration, the
receipt, sufficiency, and adequacy of which are hereby acknowledged, the parties
herto, intending to be legally bound, agree and promise as follows:
1. SERVICES TO BE PROVIDED
a. INVESTMENT ADVISORY SERVICES. The Fund hereby employs the Advisor to
act as its investment adviser and, subject to the supervision and
control of the Board of Trustees the Fund (the "Board"), manage the
investment activities of the Fund as hereinafter set forth. Without
limiting the generality of foregoing, the Advisor shall: obtain and
evaluate such information and advice relating to the economy,
securities market, and securities as it deems necessary or useful to
discharge its duties hereunder; continuously manage the assets of the
Fund in a manger consistent with the investment objective, polices and
restrictions of the Fund, as set forth in the Fund's prospectus and
statement of additional information and as may be adopted from time to
time by the Board, and applicable laws and regulations; determine the
securities to be purchased, sold or otherwise disposed of by the Fund
and the timing of such purchases, sales and dispositions; invest
discrete portions of the Fund's assets (which may constitute, in the
aggregate, all of the Fund's assets) in unregistered investment funds
or other investment vehicles and registered investment companies
("Portfolio Funds"), which are managed by investment managers
("Portfolio Managers"), including Portfolio Managers for which
separate investment vehicles have been created in which the Portfolio
Managers serve as general partners or managing members and the Fund is
the sole investor ("Portfolio Accounts") and the Portfolio Managers
who are retained to manage the Fund's assets directly through separate
managed accounts (Portfolio Managers of Portfolio Accounts and of
managed accounts are collectively referred to as "Portfolio Account
Managers"), and take such further action, including the placing of
purchase and sale orders and the voting securities on behalf of the
Fund, as the Advisor shall deem necessary or appropriate. The Advisor
shall furnish to or place at the disposal of the Fund such of the
information, evaluations, analyses and opinions formulated or obtained
by the Advisor in the discharge of its duties as the Fund may, from
time to time, reasonably request
b. BEST EFFORTS. The Advisor agrees to use its best judgment and efforts
in rendering the advice and services to the Fund contemplated by this
Agreement. The Advisor further agrees to use its best efforts in the
furnishing of such advice, recommendations and services to the Fund,
in the preparation of reports and information, and in the management
of the assets of the Fund, all pursuant to this Agreement, and for
this purpose the Advisor shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other
persons that the Advisor shall from time to time determine to be
necessary to the performance of the Advisor's obligations under this
Agreement. Without limiting the generality of the foregoing, the staff
and personnel of the Advisor shall be deemed to include persons
employed or retained by the Advisor to furnish statistical, research,
and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific
developments, and such other information, advice, and assistance as
the Advisor may desire and request.
2. PAYMENT OF FEES AND EXPENSES
a. The Advisor is responsible for all costs and expenses associated with
the provision of its services hereunder including, but not limited to:
expenses relating to the selection and monitoring of Portfolio
Managers; fees of consultants or a Sub-Adviser retained by the
Advisor; and expenses relating to qualifying potential investors and
reviewing subscription documents.
b. The Fund shall bear all of its own expenses, including: all investment
related expenses (including, but not limited to, fees paid directly or
indirectly to Portfolio Managers, all costs and expenses directly
related to portfolio transactions and positions for the Fund's account
such as direct and indirect expenses associated with the Fund's
investments, including its investments in Portfolio Funds, transfer
taxes and premiums, taxes withheld on foreign dividends and, if
applicable in the event that the Fund utilizes a Portfolio Account
Manager, brokerage commissions, interest and commitment fees on loans
and debit balances, borrowing charges on securities sold short,
dividends on securities sold but not yet purchased and margin fees);
all costs and expenses associated with the establishment of Portfolio
Accounts; any non-investment related interest expense; attorney's fees
and disbursements associated with updating the Fund's registration
statement, prospectus and statement of additional information; fees
and disbursements of any attorneys and accountants engaged by the
Fund; expenses related to the annual audit of the Fund; fees paid to
the Fund's administrator; custody and escrow expenses; the costs of an
errors and omissions/directors and officers liability insurance policy
and a fidelity bond; the fee payable to the Advisor; fees and travel
expenses of the members of the Board; all costs and charges for
equipment or services used in communicating information regarding the
Fund's transactions among the Advisor and any custodian or other agent
engaged by the Fund; and any extraordinary expenses.
3. AUTHORITY OF THE ADVISOR
a. The Advisor is authorized: (i) to obtain investment information,
research or assistance from any other person, firm or corporation to
supplement, update or otherwise improve its investment management
services; and (ii) to enter into investment sub-advisory agreements
with any other registered investment adviser (a "Sub-Adviser"),
subject to such approvals of the Board and shareholders of the Fund as
may be required to comply with applicable provisions of the 1940 Act,
delegating any or all of the investment advisory services required to
be provided by the Advisor under this Agreement, subject to the
supervision of the Advisor.
b. In connection with the investment and reinvestment of the assets of
the Fund, the Advisor is authorized on behalf of the Fund, to open,
maintain and close accounts in the name and on behalf of the Fund with
brokers and dealers as it determines are appropriate and to place
orders for the execution of the Fund's portfolio transactions in
accordance with the applicable policies of the Fund as set forth in
the Registration Statement, as such Registration Statement may be
amended from time to time. The Advisor shall place orders for the
purchase or sale of securities either directly with the issuer of with
a broker or dealer selected by the Advisor. In placing the Fund's
securities trades, it is recognized that the Advisor will give primary
consideration to securing the most favorable price and efficient
execution, so that the Fund's total cost or proceeds in each
transaction will be the most favorable under all circumstances. Within
the framework of this policy, the Advisor may consider the financial
responsibility, research and investment information, and other
services provided by brokers or dealers who may effect or be a party
to any such transaction or other transactions to which other clients
of the Advisor may be a party.
c. It is understood that it is desirable for the Fund that the Advisor
have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also
understood that brokers providing such services may execute brokerage
transactions at a higher cost to the Fund than might result from the
allocation of brokerage to other brokers purely based on seeking the
most favorable price. Therefore, the purchase and sale of securities
for the Fund may be made with brokers who provide such research and
analysis, subject to review by the Trustees from time to time with
respect to the extent and continuation of this practice to determine
whether the Fund benefits, directly or indirectly, from such practice.
It is understood by both parties that the Advisor may select
broker-dealers for their execution of the Fund's portfolio
transactions who provide research and analysis as the Advisor may
lawfully and appropriately use in its investment management and
advisory capacities, whether or not such research and analysis also
may be useful to the Advisor in connection with its services to other
clients.
d. On occasions when the Advisor deems the purchase or sale of a security
to be in the best interests of the Fund, as well as in the interests
of other clients, the Advisor to the extent permitted by applicable
laws and regulations, may aggregate the securities to be so purchased
or sold in order to obtain the most favorable price, lower brokerage
commissions, and the most efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in
the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients.
4. COMPENSATION
a. ADVISORY FEE. In exchange for the rendering of advice and advisory
services pursuant hereto, the Trust shall pay the Advisor, and the
Advisor shall accept as full compensation for the advisory services to
be rendered and as full reimbursement for all the charges and expenses
to be assumed and paid by the Advisor as provided in Section 2, an
advisory fee at an annual rate of 1.75% of the monthly net assets of
the Fund.
b. PAYMENT. The fee will be calculated an paid to the Advisor monthly, in
advance, not later than the fifth (5th) business day of the month for
which services will be provided. In the event of termination of this
Agreement, the fee shall be computed on the basis of the period ending
on the last business day on which this Agreement is in effect subject
to a pro rata adjustment based on the number of days that this
Agreement is in effect in the last month that this Agreement is in
effect as a percentage of the total number of days in such month. For
purposes of calculating the Advisor's fee, the value of the net assets
of the Fund shall be determined in the same manner as the Fund uses to
compute the value of the Fund's net assets in connection with the
determination of the Net Asset Value of the Fund, all set forth more
fully in the current prospectus and statement of additional
information for the Fund included in the Registration Statement, as of
the same may be amended.
5. AFFILIATIONS OF PARTIES: CHANGE IN OWNERSHIP OR CONTROL OF THE ADVISOR
Subject to and in accordance with the Declaration of Trust of the Fund
(the "Trust Declaration"), the By-Laws and Articles of Incorporation
of the Advisor, and the 1940 Act, the Trustees, officers, agents, and
shareholders of the Fund are or may be interested persons of the
Advisor or its affiliates (or any successor thereof) as shareholders
or officers, directors, agents, or otherwise, and directors, officers,
agents, or shareholders of the Advisor or its affiliates are or may be
interested persons of the Fund as Trustees, officers, agents,
shareholders, or otherwise, and the Advisor or its affiliates may be
interested persons of the Fund, and such relationships shall be
governed by said governing instruments and the applicable provisions
of the 1940 Act. The Advisor shall notify the Fund of any changes in
ownership or control of Rydex Capital Partners I, LLC that could cause
an "assignment" of this Agreement (as the term "assignment" is defined
in the 1940 Act and the rules and regulations promulgated thereunder)
as soon as practicable. In the case of a voluntary assignment, notice
will be provided at least 90 days prior to the voluntary assignment if
the circumstances are such that the Fund could not rely on Rule 15a-4
under the 1940 Act (or such shorter period approved by a majority of
the Trustees who are not interested persons of the Fund).
6. FURNISHING OF INFORMATION
During the term of this Agreement, the Fund agrees to provide the
Advisor with:
a. copies of all prospectuses, statements of additional information,
proxy statements, registration statements, reports to shareholders,
sales literature, and other material prepared for distribution to
shareholders of the Fund or the public that refer in any way to the
Advisor, no later than ten (10) business days before the date such
material is first distributed to the public, or sooner if practicable,
and the Fund shall not use such material, if the Advisor reasonably
objects in writing within five (5) business days (or within such other
time as may be mutually agreed to by both parties) after the Advisor's
receipt thereof;
b. true and correct copies of each amendment or supplement to the
Registration Statement (including any prospectus and statement of
additional information included therein) or the Trust Declaration not
later than the date such material is first distributed to the public,
or sooner if practicable;
c. (i) written notice of any resolutions, policies, restrictions, or
procedures adopted by the Trustees which affect the Advisor's
investment management or administration responsibilities hereunder,
and (ii) a list of every natural person or entity deemed by the Fund
to be an "affiliated person" of, or "promoter" of, or "principal
underwriter" for the Fund, or "an affiliated person of such person,"
as these terms are defined or used n Sections 2(a)(3), 2(a)(30), and
2(a)(29), respectively, of the 1940 Act, and the Fund shall promptly
notify the Advisor of any additions or deletions to such list; and
d. any such additional materials or information which the Advisor may
reasonably request to enable the Advisor to perform its functions
under this Agreement.
7. TERM OF AGREEMENT: TERMINATION
a. This Agreement shall become effective on the date first above written
for an initial term of two (2) years from the date hereof, and shall
continue in effect from year to year thereafter provided that such
continuance is approved at least annually by (i) a vote of a majority
of the Trustees, and (ii) a vote of a majority of the Trustees who are
not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting such
approval.
b. This Agreement may be terminated on sixty (60) days prior written
notice to the Advisor without penalty either by a vote of the Trustees
or by a vote of a majority of the outstanding voting securities of the
Fund. This Agreement shall automatically terminate in the event of its
assignment (within the meaning of the 1940 Act and the rules
thereunder). This Agreement may be terminated by the Advisor on sixty
(60) days prior written notice to the Fund. Any notice under this
Agreement shall be given as provided in Section 13 below.
8. NON-TRANSFERABILITY
This Agreement may not be transferred, assigned, sold or in any manner
hypothecated or pledged without the affirmative vote or prior written
consent of the holders of a majority of the outstanding voting
securities of the Fund.
9. OTHER ACTIVITIES OF THE ADVISOR
The services of the Advisor to the Fund hereunder are not to be deemed
exclusive, and the Advisor and each of its affiliates shall be free to
render similar services to others so long as the Advisor's services
hereunder are not impaired thereby. The Advisor, for purposes herein,
shall be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for
or represent the Fund, in any way or otherwise be deemed an agent of
the Fund.
10. STANDARD OF CARE: INDEMNIFICATION
a. No provisions of this Agreement shall be deemed to protect the Advisor
against any liability to the Fund or the shareholders of the Fund to
which the Advisor otherwise would be subject by reason of any willful
misfeasance, bad faith, or gross negligence in the performance of the
Advisor's duties or other reckless disregard of the Advisor's
obligations under this Agreement. Nor shall any provisions hereof be
deemed to protect any Trustee or officer of the Fund against any such
liability to which said Trustee or officer might otherwise be subject
by reason of any willful misfeasance, bad faith, or gross negligence
in the performance of the Trustee's or officer's respective duties or
the reckless disregard of the Trustee's or the officer's respective
obligations.
b. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the Advisor's obligations or duties hereunder,
the Advisor shall not be subject to liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that
may be sustained in the purchase, holding, or sale of any security or
other property by the Fund. The Advisor shall not be required to do or
refrain from doing or concur in anything which (by act or omission to
act) may impose any liability on the Advisor.
c. Any person, even though an officer, director, partner, employee, or
agent of the Trustee, who may be or become an officer, director,
trustee, partner, employee, or agent of the Fund, shall be deemed when
rendering such services to the Fund or acting on any business of the
Fund to be rendering such services to or acting solely for the Fund
and not as Trustee's officer, director, trustee, partner, employee, or
agent or as one under the Trustee's control or direction even though
paid by the Trustee.
11. USE OF RYDEX NAME, SPHINX NAME, AND SUBLICENSE.
The Fund may use the name "Rydex Capital Partners SPhinX Fund" or any
other name derived from either the name "Rydex" or "SPhinX" only for
so long as this Agreement or any extension, renewal, or amendment
hereof remains in effect, including any similar agreement with any
organization which shall have succeeded to the business of Advisor as
investment adviser. At such time as this Agreement or any extension,
renewal or amendment hereof, or such other similar agreement shall no
longer be in effect, the Fund will cease to use any name derived from
either the name "Rydex" or "SPhinX" or otherwise connected with the
Advisor; or with any organization which shall have succeeded to
Advisor's business as investment adviser. Further, The Fund
acknowledges the Advisor's rights with respect to the Standard &
Poor's Hedge Fund Index (the "Index") and the Fund's ability to invest
in vehicles that are constituents of the Index are possible because of
a licensing agreement between the Advisor and PlusFunds Group, Inc. At
such time as this Agreement or any extension, renewal or amendment
hereof, or such other similar agreement shall no longer be in effect,
the Fund may lose such rights absent other arrangements.
12. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants that the Fund is duly registered with
the Securities and Exchange Commission under the 1940 Act, as an
open-end investment company, and that all required action has been
taken by the Fund under the 1933 Act and the 1940 Act, to permit the
public offering of, and to consummate the sale of, the shares of the
Fund pursuant to the current prospectus of the Fund.
13. NOTICES
All notices or other communications required or permitted to be given
hereunder shall be in writing and shall be delivered or sent by
prepaid, first-class letter posted to the following addresses, or to
such other address as shall be designated in a notice given in
accordance with this section, and such notice shall be deemed to have
been given at the time of delivery of, if sent by post, five (5) week
days after posting by airmail.
If to the Fund:
Rydex Capital Partners Sphinx Fund
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: President
If to the Advisor:
RYDEX Capital Partners I, LLC
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
ATTENTION: President
14. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland (without reference to such state's
conflict of law rules).
15. COUNTERPARTS
This Agreement may be executed in tow or more counterparts, each of
which shall be deemed an original, but which together shall constitute
one and the same instrument.
16. DEFINITIONS
As used in this Agreement, the terms "interested persons" and "vote of
a majority of the outstanding securities" shall have the respective
meanings set forth in Section 2(a)(19) and Section 2(a)(42) of the
1940 Act.
17. LIMITATION OF LIABILITY
A copy of the Certificate of Trust of the Fund is on file with the
Secretary of State of the State of Delaware, and notice is hereby
given that this Agreement is executed on behalf of the Trustees of the
Fund as Trustees and not individually and that the obligations of the
this instrument are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding only upon the
assets and property of the Fund.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this
Agreement to be executed on the date first above written.
RYDEX CAPITAL PARTNERS SPHINX FUND
By: /S/ XXXX XXXXX
RYDEX CAPITAL PARTNERS I, LLC
By: /S/ XXXX XXXXX
