EXHIBIT (G)
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this 1st day of March 1994, by and between
Prospect Street Investment Management Co., Inc., a corporation organized under
the laws of the State of Massachusetts having its principal place of business in
Boston, Massachusetts (the "Manager"), and Prospect Street High Income Portfolio
Inc., a Maryland corporation having its principal place of business in Boston,
Massachusetts (the "Fund").
WHEREAS, the Fund is engaged in business as a closed-end diversified
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of rendering
investment management services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended;
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the parties
hereto as follows:
1. APPOINTMENT OF MANAGER.
The Fund hereby appoints the Manager to act as manager and investment
adviser to the Fund for the period and on the terms herein set forth. The
Manager accepts such appointment and agrees to render the services herein set
forth, for the compensation herein provided.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services and
facilities to the Fund:
(a) Investment Program. The Manager shall (i) furnish continuously an
investment program for the Fund, (ii) determine (subject to the overall
supervision and review of the Board of Directors of the Fund) what
investments shall be purchased, held, sold or exchanged by the Fund and
what portion, if any, of the assets of the Fund shall be held uninvested,
and (iii) make changes in the investments of the Fund. The Manager shall
also manage, supervise and conduct the other affairs and business of the
Fund and matters incidental thereto, subject always to the control of the
Board of Directors of the Fund, and to the provisions of the Articles of
Amendment and Restatement (the "Articles of Incorporation") and By-laws of
the Fund, the Prospectuses of the Fund, and the 1940 Act, in each case as
from time to time amended and in effect. Subject to the foregoing, the
Manager shall have the authority to engage one or more sub-advisers in
connection with the management of the Fund, which sub-advisers may be
affiliates of the Manager.
(b) Office Space and Facilities. The Manager shall furnish the Fund
office space in the offices of the Manager, or in such other place or
places as may be agreed upon from time to time, and all necessary office
facilities, simple business equipment, supplies, utilities and telephone
service for managing the affairs and investments of the Fund.
(c) Regulatory Reports. The Manager shall furnish to the Fund
necessary assistance in:
(i) the preparation of all reports now or hereafter required by
federal or other laws; and
(ii) the preparation of prospectuses, registration statements and
amendments thereto that may be required by federal or other laws or by
the rules or regulations of any duly authorized commission or
administrative body.
(d) Services of Personnel. The Manager shall provide all necessary
executive and administrative personnel for managing the affairs of the
Fund, including personnel to perform clerical, bookkeeping, accounting and
other office functions. These services are exclusive of the bookkeeping and
accounting services of any dividend disbursing agent, transfer agent,
registrar or custodian. The Manager shall compensate all personnel,
officers and directors of the Fund if such persons are also employees of
the Manager or its affiliates.
In providing services of the type contemplated by the foregoing
paragraphs (c) and (d), the Manager shall be entitled to retain the
services of one or more accounting, consulting or similar firms, provided
that the Manager shall pay all fees and expenses of any firms so retained
and shall remain responsible for the provision of the services described
herein.
(e) Fidelity Bond. The Manager shall arrange for providing and
maintaining a bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued against larceny and
embezzlement covering each officer and employee of the Fund who may singly
or jointly with others have access to funds or securities of the Fund, with
direct or indirect authority to draw upon such funds or to direct generally
the disposition of such funds. The bond shall be in such reasonable amount
as a majority of the directors who are not "interested persons" of the
Fund, as defined in the 1940 Act, shall determine, with due consideration
given to the aggregate assets of the Fund to which any such officer or
employee may have access. The premium for the bond shall be payable by the
Fund in accordance with paragraph 3(m).
(f) Portfolio Transactions. The Manager shall place all orders for the
purchase and sale of portfolio securities for the account of the Fund with
brokers or dealers selected by the Manager, although the Fund will pay the
actual brokerage commissions on portfolio transactions in accordance with
paragraph 3(d).
In placing portfolio transactions for the Fund, it is recognized that
the Manager will give primary consideration to securing the most favorable
price and efficient execution. Consistent with this policy, the Manager 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 Manager may be a party. It is understood that neither the Fund nor
the Manager has adopted a formula for allocation of the Fund's investment
transaction business. It is also understood that it is desirable for the
Fund that the Manager have access to supplemental investment and market
research and security and economic analysis provided by brokers who may
execute brokerage transactions at a higher cost to the Fund than would
otherwise result when allocating brokerage transactions to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Manager is authorized to place orders for the purchase and
sale of securities for the Fund with such brokers, subject to review by the
Fund's Board of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided
by such brokers may be useful or beneficial to the Manager in connection
with its services to other clients.
On occasions when the Manager deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients, the
Manager, to the extent permitted by applicable laws and regulations, may,
but shall be under no obligation to, aggregate the securities to be so sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and 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 Manager in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Fund and to such other clients.
3. ALLOCATION OF EXPENSE.
Except for the services and facilities to be provided by the Manager as set
forth in paragraph 2 above, the Fund assumes and shall pay all expenses for all
other Fund operations and activities and shall reimburse the Manager for any
such expenses incurred by the Manager. The expenses to be borne by the Fund
shall include, without limitation:
(a) all expenses of organizing the Fund;
(b) the charges and expenses of (i) any registrar, stock transfer or
dividend disbursing agent, shareholder servicing agent, custodian or
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, including the costs of servicing shareholder
investment accounts and bookkeeping, accounting and pricing services,
provided to the Fund (other than those utilized by the Manager in providing
the services described in Section 2), (ii) any agent engaged for the
purposes of conducting auctions with respect to the Fund's Taxable Auction
Rate Preferred Stock, (iii) any institution serving as trustee with respect
to the Fund's Senior Extendible Notes and (iv) fees of any stock exchange
or any rating agency responsible for rating outstanding securities of the
Fund;
(c) the charges and expenses of bookkeeping, accounting and auditors;
(d) brokerage commissions and other costs incurred in connection with
transactions in the portfolio securities of the Fund, including any portion
of such commissions attributable to brokerage and research services as
defined in Section 28(e) of the Securities Exchange Act of 1934;
(e) taxes, including issuance and transfer taxes, and corporate
registration, filing or other fees payable by the Fund to federal, state or
other governmental agencies:
(f) expenses, including the cost of printing certificates, relating to
the issuance of securities of the Fund;
(g) expenses involved in registering and maintaining registrations of
the Fund and of its securities with the Securities and Exchange Commission
and various states and other jurisdictions, including reimbursement of
actual expenses incurred by the Manager or others in performing such
functions for the Fund, and including compensation of persons who are
employees of the Manager, in proportion to the relative time spent on such
matters;
(h) expenses of shareholders' and directors' meetings, including
meetings of committees, and of preparing, printing and mailing proxy
statements, quarterly reports, semi-annual reports, annual reports and
other communications to existing security holders;
(i) expenses of preparing and printing prospectuses and marketing
materials;
(j) compensation and expenses of directors who are not affiliated with
the Manager;
(k) charges and expenses of legal counsel in connection with matters
relating to the Fund, including, without limitation, legal services
rendered in connection with the Fund's corporate and financial structure
and relations with its security holders, issuance of shares of the Fund and
registration and qualification of securities under federal, state and other
laws;
(1) the cost and expense of maintaining the books and records of the
Fund, including general ledger accounting;
(m) insurance premiums on fidelity, errors and omissions and other
coverages including the expense of obtaining and maintaining a fidelity
bond as required by Section 17(g) of the 1940 Act which may also cover the
Manager;
(n) expenses incurred in obtaining and maintaining any surety bond or
similar coverage with respect to securities of the Fund;
(o) interest payable on Fund borrowings;
(p) such other non-recurring expenses of the Fund as may arise,
including expenses of actions, suits or proceedings to which the Fund is a
party and expenses resulting from the legal obligation which the Fund may
have to provide indemnity with respect thereto; and
(g) expenses and fees reasonably incidental to any of the foregoing
specifically identified expenses.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager as set forth
in paragraph 2 hereof, the Fund will pay to the Manager as full compensation
therefor a fee at an annual rate of 0.65% of the Fund's net assets up to and
including $175 million, (b) 0.55% on the next $50 million, and (c) 0.50% of the
excess over $225 million. For purposes hereof, net assets shall mean (a) the
average weekly value of the total assets of the Fund minus (b)(i) accrued
liabilities of the Fund (other than the principal amount of the Fund's "senior
securities representing indebtedness" (as defined in the 1940 Act), not to
exceed $50 million, and not including the aggregate liquidation preference of
the Fund's Taxable Auction Rate Preferred Stock or any other preferred stock or
other senior securities issued in lieu thereof (the "Preferred Stock")) and (ii)
accumulated and unpaid dividends on the Preferred Stock. The fee to the Manager
will be computed weekly and will be paid to the Manager monthly as soon as
practicable following the end of each month.
In the case of commencement or termination of this Agreement during any
month, the fee with respect to such month shall be adjusted proportionately.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of the Fund (exclusive of
interest, taxes, brokerage expenses and extraordinary items such as litigation
expenses) for any fiscal year of the Fund exceed the lowest expense limitation
imposed by any jurisdiction to which the Fund is then subject, if any, the
Manager will pay or reimburse the Fund for that excess up to the amount of its
advisory fees payable with respect to the Fund during that fiscal year. The
amount of the monthly advisory fee payable by the Fund under paragraph 4 hereof
shall be reduced to the extent that the monthly expenses of the Fund, on an
annualized basis, would exceed the foregoing limitation. At the end of each
fiscal year of the Fund, if the aggregate annual expenses chargeable to the Fund
for that year exceed the foregoing limitation based upon the average of the
monthly average net asset values of the Fund for the year, the Manager will
promptly reimburse the Fund for the amount of such excess to the extent not
already reimbursed by reduction of the monthly advisory fee, but if such
expenses are within the foregoing limitation, any excess amount previously
withheld from the monthly advisory fee during that fiscal year will be promptly
paid over to the Manager.
In the event that this Agreement (i) is terminated as of a date other than
the last day of the fiscal year of the Fund or (ii) commences as of a date other
than the first day of the fiscal year of the Fund, then the expenses of the Fund
shall be annualized and the Manager shall pay to, or receive from, the Fund a
pro rata portion of the amount that the Manager would have been required to pay
or would have been entitled to receive, if any, had this Agreement been in
effect with respect to the Fund for the full fiscal year.
6. RELATIONS WITH FUND.
Subject to and in accordance with the Articles of Incorporation and By-laws
of the Fund and the Articles of Organization and By-laws of the Manager, it is
understood that Directors, officers, agents and shareholders of the Fund are or
may be interested in the Manager (or any successor thereof) as directors,
officers or otherwise, that directors, officers, agents and shareholders of the
Manager (or any successor thereof) are or may be interested in the Fund as
Directors, officers, agents, shareholders or otherwise, that the Manager (or any
such successor thereof) is or may be interested in the Fund as a shareholder or
otherwise.
7. LIABILITY OF MANAGER.
The Manager shall not be liable to the Fund for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates; provided, however, that no provision of
this Agreement shall be deemed to protect the Manager against any liability to
the Fund or its shareholders to which it might otherwise be subject by reason of
any 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, nor shall any provision hereof be deemed to protect any director or
officer of the Fund against any such liability to which he might otherwise be
subject by reason of any willful misfeasance, bad faith or gross negligence in
the performance of his duties or the reckless disregard of his obligations and
duties. The Fund hereby agrees to indemnify and hold harmless the Manager and
each of its agents, employees, officers, directors and stockholders from and
against any and all liabilities arising in connection with the performance of
this Agreement other than liabilities arising as a result of any willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations
and duties on the part of the Manager or any such agent, employee, officer,
director or stockholder.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective on the date first set
forth above, such date being the date on which this Agreement has been executed.
Unless terminated as herein provided, this Agreement shall remain in full force
and effect until the date which is two years after the effective date of this
Agreement. Subsequent to such initial period of effectiveness this Agreement
shall continue in full force and effect, subject to Section 8(c), for successive
one-year periods so long as such continuance is approved at least annually (a)
by either the directors of the Fund or by vote of a majority of the outstanding
voting securities (as defined in the 0000 Xxx) of the Fund, voting as a single
class, and (b) in either event, by the vote of a majority of the directors of
the Fund who are not parties to this Agreement or "interested persons" (as
defined in the 0000 Xxx) of any such party, cast in person at a meeting called
for the purpose of voting on such approval. Notwithstanding the foregoing
provisions of this Section 8(a), the continuance of this Agreement is subject to
the approval of this Agreement by a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Fund, voting as a single class,
at the initial meeting of shareholders after the date of this Agreement.
(b) Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the outstanding voting
securities (as defined in the 0000 Xxx) of the Fund, voting as a single class.
(c) Termination. This Agreement may be terminated at any time, without
payment of any penalty, by vote of the Directors or by vote of a majority of the
outstanding voting securities (as defined in the 0000 Xxx) of the Fund, voting
as a single class, or by the Manager, in each case on not more than sixty (60)
days' nor less than thirty (30) days' prior written notice to the other party.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
9. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Fund hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired hereby.
10. PRIOR AGREEMENTS SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties hereto.
11. NOTICES.
Notices under this Agreement shall be in writing and shall be addressed,
and delivered or mailed postage prepaid, to the other party at such address as
such other party may designate from time to time for the receipt of such
notices. Until further notice to the other party, the address of each party to
this Agreement for this purpose shall be Exchange Place, Boston, Massachusetts.
12. GOVERNING LAW; COUNTERPARTS.
This Agreement shall be construed in accordance with the laws of the State
of New York. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first set forth above.
ATTEST: PROSPECT STREET INVESTMENT
MANAGEMENT CO. INC.
/s/ XXXXX X. XXXXXX By: /s/ XXXXXXX X. XXXXXXXXX, XX.
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XXXXXXX X. XXXXXXXXX, XX.
President
ATTEST:
PROSPECT STREET HIGH INCOME
PORTFOLIO INC.
/s/ XXXXX X. XXXXXX By: /s/ XXXX X. XXXXXXXX
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XXXX X. XXXXXXXX
Vice President
