AQUILA THREE PEAKS HIGH INCOME FUND
ADVISORY AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of _______________, 2009 by and between AQUILA
THREE PEAKS HIGH INCOME FUND (the "Fund"), a Massachusetts business trust, 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and AQUILA INVESTMENT
MANAGEMENT LLC (the "Manager"), a Delaware limited liability company, 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000.
W I T N E S S E T H:
WHEREAS, the Fund and the Manager wish to enter into an Advisory and
Administration Agreement, referred to hereafter as "this Agreement," with
respect to the Fund;
NOW THEREFORE, in consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. In General
The Manager shall perform (at its own expense) the functions set forth more
fully herein for the Fund.
2. Duties and Obligations of the Manager
(a) Investment Advisory Services. Subject to the succeeding provisions of
this Section and subject to the direction and control of the Board of Trustees
of the Fund, the Manager shall:
(i) supervise continuously the investment program of the Fund and the
composition of its portfolio;
(ii) determine what securities shall be purchased or sold by the Fund; and
(iii) arrange for the purchase and the sale of securities held in the portfolio
of the Fund.
Subject to the provisions of Section 5 hereof, the Manager may at its own
expense delegate to a qualified organization ("Sub-Adviser"), affiliated or not
affiliated with the Manager, any or all of the above duties. Any such delegation
of the duties set forth in (i), (ii) or (iii) above shall be by a written
agreement (the "Sub-Advisory Agreement") approved as provided in Section 15 of
the Investment Company Act of 1940 (the "Act").
(b) Administration. Subject to the succeeding provisions of this Section and
subject to the direction and control of the Board of Trustees of the Fund, the
Manager shall provide all administrative services to the Fund other than those
relating to its investment portfolio delegated to a Sub-Adviser of the Fund
under a Sub-Advisory Agreement; as part of such administrative duties, the
Manager shall:
(i) provide office space, personnel, facilities and equipment for the
performance of the following functions and for the maintenance of the
headquarters of the Fund;
(ii) oversee all relationships between the Fund and any sub-adviser, transfer
agent, custodian, legal counsel, auditors, fund accounting agent and
principal underwriter, including the negotiation of agreements in relation
thereto, the supervision and coordination of the performance of such
agreements, and the overseeing of all administrative matters which are
necessary or desirable for the effective operation of the Fund and for the
sale, servicing or redemption of the Fund's shares;
(iii) maintain the Fund's books and records, and prepare (or assist counsel and
auditors in the preparation of) all required proxy statements, reports to
the Fund's shareholders and Trustees, reports to and other filings with
the Securities and Exchange Commission and any other governmental
agencies, and tax returns, and oversee the insurance relationships of the
Fund;
(iv) prepare, on behalf of the Fund and at the Fund's expense, such
applications and reports as may be necessary to register or maintain the
registration of the Fund and/or its shares under the securities or
"Blue-Sky" laws of all such jurisdictions as may be required from time to
time; and
(v) respond to any inquiries or other communications of shareholders of the
Fund and broker-dealers, or if any such inquiry or communication is more
properly to be responded to by the Fund's shareholder servicing and
transfer agent or distributor, oversee such shareholder servicing and
transfer agent's or distributor's response thereto.
(c) Compliance with Requirements. Any investment program furnished, and any
activities performed, by the Manager or by a Sub-Adviser under this section
shall at all times conform to, and be in accordance with, any requirements
imposed by: (1) the Act and any rules or regulations in force thereunder; (2)
any other applicable laws, rules and regulations; (3) the Declaration of Trust
and By-Laws of the Fund as amended from time to time; (4) any policies and
determinations of the Board of Trustees of the Fund; and (5) the fundamental
policies of the Fund, as reflected in its Registration Statement under the Act
or as amended by the shareholders of the Fund.
(d) Best Efforts; Responsibility. The Manager shall give the Fund the
benefit of its best judgment and effort in rendering services hereunder, but the
Manager shall not be liable for any loss sustained by reason of the adoption of
any investment policy or the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon (i)
its own investigation and research or (ii) investigation and research made by
any other individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation shall have
been selected in good faith by the Manager or a Sub-Adviser.
(e) Other Customers. Nothing in this Agreement shall prevent the Manager or
any officer thereof from acting as investment adviser, sub-adviser,
administrator or manager for any other person, firm, or corporation, and shall
not in any way limit or restrict the Manager or any of its officers, members or
employees from buying, selling or trading any securities for its own or their
own accounts or for the accounts of others for whom it or they may be acting,
provided, however, that the Manager expressly represents that it will undertake
no activities which, in its judgment, will adversely affect the performance of
its obligations under this Agreement.
(f) Order Allocation. In connection with any duties for which it may become
responsible to arrange for the purchase and sale of the Fund's portfolio
securities, the Manager shall select, and shall cause any Sub-Adviser to select,
such broker-dealers ("dealers") as shall, in the Manager's judgment, implement
the policy of the Fund to achieve "best execution," i.e., prompt, efficient, and
reliable execution of orders at the most favorable net price. The Manager shall
cause the Fund to deal directly with the selling or purchasing principal or
market maker without incurring brokerage commissions unless the Manager
determines that better price or execution may be obtained by paying such
commissions; the Fund expects that most transactions will be principal
transactions at net prices and that the Fund will incur little or no brokerage
costs. The Fund understands that purchases from underwriters include a
commission or concession paid by the issuer to the underwriter and that
principal transactions placed through dealers include a spread between the bid
and asked prices. In allocating transactions to dealers, the Manager is
authorized and shall authorize any Sub-Adviser, to consider, in determining
whether a particular dealer will provide best execution, the dealer's
reliability, integrity, financial condition and risk in positioning the
securities involved, as well as the difficulty of the transaction in question,
and thus need not pay the lowest spread or commission available if the Manager
determines in good faith that the amount of commission is reasonable in relation
to the value of the brokerage and research services provided by the dealer,
viewed either in terms of the particular transaction or the Manager's overall
responsibilities. If, on the foregoing basis, the transaction in question could
be allocated to two or more dealers, the Manager is authorized, in making such
allocation, to consider whether a dealer has provided research services, as
further discussed below. Such research may be in written form or through direct
contact with individuals and may include quotations on portfolio securities and
information on particular issuers and industries, as well as on market,
economic, or institutional activities. The Fund recognizes that no dollar value
can be placed on such research services or on execution services and that such
research services may or may not be useful to the Fund and may be used for the
benefit of the Manager or its other clients. The Manager shall cause the
foregoing provisions, in substantially the same form, to be included in any
Sub-Advisory Agreement.
(g) Registration Statement; Information. It is agreed that the Manager shall
have no responsibility or liability for the accuracy or completeness of the
Fund's Registration Statement under the Act and the Securities Act of 1933,
except for information supplied by the Manager for inclusion therein. The
Manager shall promptly inform the Fund as to any information concerning the
Manager appropriate for inclusion in such Registration Statement, or as to any
transaction or proposed transaction which might result in an assignment of the
Agreement.
(h) Liability for Error. The Manager shall not be liable for any error in
judgment or for any loss suffered by the Fund or its security holders in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. Nothing in this Agreement shall, or
shall be construed to, waive or limit any rights which the Fund may have under
federal and state securities laws which may impose liability under certain
circumstances on persons who act in good faith.
(i) Indemnification. The Fund shall indemnify the Manager to the full extent
permitted by the Fund's Declaration of Trust.
3. Allocation of Expenses
The Manager shall, at its own expense, provide office space, facilities,
equipment, and personnel for the performance of its functions hereunder and
shall pay all compensation of Trustees, officers, and employees of the Fund who
are affiliated persons of the Manager.
The Fund agrees to bear the costs of preparing and setting in type its
prospectuses, statements of additional information and reports to its
shareholders, and the costs of printing or otherwise producing and distributing
those copies of such prospectuses, statements of additional information and
reports as are sent to its shareholders. All costs and expenses not expressly
assumed by the Manager under this sub-section or otherwise by the Manager,
administrator or principal underwriter or by any Sub-Adviser shall be paid by
the Fund, including, but not limited to (i) interest and taxes; (ii) brokerage
commissions; (iii) insurance premiums; (iv) expenses of portfolio pricing and
keeping the Fund's accounting records including the computation of net asset
value per share and the dividends; (v) compensation of its Trustees other than
those affiliated with the Manager or such adviser, administrator or principal
underwriter and expenses of all its Trustees; (vi) legal and audit expenses;
(vii) custodian and transfer agent, or shareholder servicing agent, fees and
expenses; (viii) expenses incident to the issuance of its shares (including
issuance on the payment of, or reinvestment of, dividends); (ix) fees and
expenses incident to the registration under Federal or State securities laws of
the Fund or its shares; (x) expenses of preparing, printing and mailing reports
and notices and proxy material to shareholders of the Fund; (xi) all other
expenses incidental to holding meetings of the Fund's shareholders; and (xii)
such non-recurring expenses as may arise, including litigation affecting the
Fund and the legal obligations for which the Fund may have to indemnify its
officers and Trustees.
4. Compensation of the Manager
The Fund agrees to pay the Manager, and the Manager agrees to accept as
full compensation for all services rendered by the Manager as such, an annual
fee payable monthly and computed on the net asset value of the Fund as of the
close of business each business day at the annual rate of 0.65 of 1% of such net
asset value.
5. Termination of Sub-Advisory Agreement
The Sub-Advisory Agreement may provide for its termination by the Manager
upon reasonable notice, provided, however, that the Manager agrees not to
terminate the Sub-Advisory Agreement except in accordance with such
authorization and direction of the Board of Trustees, if any, as may be in
effect from time to time.
6. Duration and Termination of this Agreement
(a) Duration. This Agreement shall become effective as of the date first
written above following approval by the shareholders of the Fund and shall,
unless terminated as hereinafter provided, continue in effect until the
September 30 next preceding the first anniversary of the effective date of this
Agreement, and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually (1) by a vote of the
Fund's Board of Trustees, including a vote of a majority of the Trustees who are
not parties to this Agreement or "interested persons" (as defined in the Act) of
any such party, with votes cast in person at a meeting called for the purpose of
voting on such approval, or (2) by a vote of the holders of a "majority" (as so
defined) of the outstanding voting securities of the Fund and by such a vote of
the Trustees.
(b) Termination. This Agreement may be terminated by the Manager at any time
without penalty upon giving the Fund sixty days' written notice (which notice
may be waived by the Fund) and may be terminated by the Fund at any time without
penalty upon giving the Manager sixty days' written notice (which notice may be
waived by the Manager), provided that such termination by the Fund shall be
directed or approved by a vote of a majority of its Trustees in office at the
time or by a vote of the holders of a majority (as defined in the Act) of the
voting securities of the Fund outstanding and entitled to vote. The portions of
this Agreement which relate to providing investment advisory services (Sections
2(a), (c), (d) and (e)) shall automatically terminate in the event of the
assignment (as defined in the Act) of this Agreement, but all other provisions
relating to providing services other than investment advisory services shall not
terminate, provided however, that upon such an assignment the annual fee payable
monthly and computed on the net asset value of the Fund as of the close of
business each business day shall be reduced to the annual rate of .25 of 1% of
such net asset value on net assets of the Fund up to $100,000,000; 0.30% above
$100,000,000 to $250,000,000 and 0.35 of 1% of the Fund's net assets above
$250,000,000 of such net asset value.
7. Disclaimer of Shareholder Liability
The Manager understands that the obligations of this Agreement are not
binding upon any shareholder of the Fund personally, but bind only the Fund's
property; the Manager represents that it has notice of the provisions of the
Fund's Declaration of Trust disclaiming shareholder liability for acts or
obligations of the Fund.
8. Notices of Meetings
The Fund agrees that notice of each meeting of the Board of
Trustees of the Fund will be sent to the Manager and that the Fund will make
appropriate arrangements for the attendance (as persons present by invitation)
of such person or persons as the Manager may designate.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers and their seals to be hereunto
affixed, all as of the day and year first above written.
ATTEST: AQUILA THREE PEAKS HIGH INCOME FUND
By:___________________________________
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ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
By:___________________________________
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