MANAGEMENT AND INVESTMENT ADVISORY AGREEMENT
Between
XXXXXXXXXX STREET INCOME SECURITIES, INC.
and
XXXXXXX XXXXXX INVESTMENTS, INC.
AGREEMENT made this 7th day of September, 1998 by and between
Xxxxxxxxxx Street Income Securities, Inc., a Maryland corporation (hereinafter
called the "Fund"), and Xxxxxxx Xxxxxx Investments, Inc., a Delaware corporation
(hereinafter called the "Manager").
WHEREAS, the Fund engages in business as a closed-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended; and
WHEREAS, the Manager is registered as an investment adviser
under the Investment Advisers Act of 1940 and is engaged in the business of
providing investment advice; and
WHEREAS, the Fund desires to retain the Manager to render such
services in the manner and on the terms and conditions hereinafter set forth;
and
WHEREAS, the Manager desires to perform such services in the
manner and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, this Agreement
WITNESSETH:
that in consideration of the foregoing and of the premises and covenants
hereinafter contained, the Fund and the Manager agree as follows:
1. The Fund hereby employs the Manager to provide investment
advisory, statistical and research facilities and services, to supervise the
composition of the Fund's portfolio, to determine the nature and timing of
changes therein and the manner of effectuating such changes and to cause the
purchase and sale of portfolio securities, subject to overall supervision by the
Fund's Board of Directors, all for the period and on the terms set forth in this
Agreement. The Manager hereby accepts such employment and agrees to render the
services and to assume the obligations herein set forth, for the compensation
herein provided.
2. The Manager shall, at its expense:
(a) Furnish to the Fund research and statistical and other
factual information and reports with respect to securities held by the Fund or
which the Fund might purchase. It shall also furnish to the Fund such
information as may be appropriate concerning developments which may affect
issuers of securities held by the Fund or which the Fund might purchase or the
business in which such issuers may be engaged. Such statistical and other
factual information and reports shall include information and reports on
industries, businesses, corporations and all types of securities which the Fund
is empowered to purchase, whether or not the Fund has at any time any holdings
in such industries, businesses, corporations or securities.
(b) Furnish to the Fund, from time to time, advice,
information and recommendations with respect to the acquisition, holding or
disposal by the Fund of securities in which the Fund is permitted to invest in
accordance with its investment objectives, policies and limitations ("Eligible
Securities"), and subject to overall supervision of the Board of Directors of
the Fund, arrange purchases and sales of Eligible Securities on behalf of the
Fund.
(c) Furnish to the Fund necessary assistance in, as reasonably
requested by the Fund:
(i) The preparation and filing of all reports
(including Form N-SAR) now or hereafter required by Federal or other
laws or regulations.
(ii) The preparation and filing of prospectuses and
registration statements (including Form N-2) and amendments thereto
that may be required by Federal or other laws or by the rule or
regulation of any duly authorized commission or administrative body.
However, the Manager shall not be obligated to pay the costs of
preparation, printing or mailing of prospectuses being used in
connection with sales of the Fund's shares or otherwise, unless
otherwise provided herein.
(iii) The preparation and filing of all proxy
materials.
(iv) Making arrangements for all Board and
stockholders meetings and, to the extent requested by the Board of
Directors of the Fund, participating in those meetings.
(v) The preparation and filing of quarterly,
semiannual and annual reports and other communications to stockholders.
(vi) Responding to questions and requests from
stockholders, the financial press and the financial services community.
(vii) Providing data to the various publications and
services which track fund performance.
(viii) Providing information and reports to the New
York Stock Exchange and any other exchange on which the Fund's shares
are listed.
(ix) The valuation of the Fund's portfolio on a
weekly basis.
(x) The maintenance of the accounting records
(including book and tax) of the Fund required by Federal and other laws
and regulations.
(xi) Providing information to and answering questions
of the Fund's auditors.
(xii) Monitoring the services, and reviewing the
records, provided by the transfer agent and registrar, the dividend
disbursing agent and the custodian.
(d) Furnish the necessary personnel to provide the services
set forth herein.
(e) Furnish to the Fund office space at such place as may be
agreed upon from time to time, and all necessary office facilities, basic
business equipment, supplies, utilities, property casualty insurance and
telephone service for managing the affairs and investments and keeping the
general
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accounts and records of the Fund (exclusive of the necessary records of any
transfer agent, registrar, dividend disbursing or reinvesting agent, or
custodian), and arrange, if desired by the Board of Directors of the Fund, for
officers or employees of the Manager to serve, without or with compensation from
the Fund, as officers, directors or employees of the Fund.
(f) Advise the Board of Directors of the Fund promptly of any
change in any senior investment or administrative personnel providing services
to the Fund.
3. Except as otherwise expressly provided herein, the Fund
assumes and shall pay or cause to be paid all costs and expenses of the Fund,
including, without limitation: (a) all costs and expenses incident to: (i) the
registration of the Fund under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), or (ii) any public offering of shares of the
Fund, for cash or otherwise, including those costs and expenses relating to the
registration of shares under the Securities Act of 1933, as amended (the
"Securities Act"), the qualification of shares of the Fund under state
securities laws, the printing or other reproduction and distribution of any
registration statement (and all amendments thereto) under the Securities Act,
the preliminary and final prospectuses included therein, and any other necessary
documents incident to any public offering, the advertising of shares of the Fund
and the review by the National Association of Securities Dealers, Inc. of any
underwriting arrangements; (b) the charges and expenses of any registrar or any
custodian appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property; (c) the charges and expenses of auditors
(including preparation of tax returns); (d) the charges and expenses of any
stock transfer, dividend agent or registrar appointed by the Fund; (e) broker's
commissions chargeable to the Fund in connection with portfolio securities
transactions to which the Fund is a party; (f) all taxes, including securities
issuance and transfer taxes, and corporate fees payable by the Fund to Federal,
state or other governmental agencies; (g) the cost and expense of engraving or
printing of stock certificates representing shares of the Fund; (h) fees
involved in registering and maintaining registrations of the Fund and of its
shares with the Securities and Exchange Commission and various states and other
jurisdictions; (i) all expenses of stockholders' and directors' meetings and of
preparing, printing and mailing proxy statements and quarterly, semiannual and
annual reports to stockholders; (j) fees and travel expenses of directors of the
Fund who are not directors, officers or employees of the Manager or its
"affiliates" (as defined in the Investment Company Act); (k) all fees and
expenses incident to any dividend or distribution reinvestment program; (l)
charges and expenses of outside 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 stockholders, issuance of Fund shares, and registrations and qualifications
of securities under Federal, state and other laws; (m) association dues; (n)
interest payable on Fund borrowings; (o) fees and expenses incident to the
listing of Fund shares on any stock exchange; (p) costs of information obtained
from sources other than the Manager or its "affiliates" (as defined in the
Investment Company Act) relating to the valuation of portfolio securities; and
(q) postage.
4. The Fund agrees to pay to the Manager, as full compensation
for the services to be rendered and expenses to be borne by the Manager
hereunder, an annual fee, payable monthly, equal to .50 of 1% of the value of
the net assets of the Fund up to and including $150 million; .45 of 1% of the
value of the net assets of the Fund over $150 million and up to and including
$200 million; and .40 of 1% of the value of the net assets of the Fund over $200
million. For purposes of computing the monthly fee, the value of the net assets
of the Fund shall be determined as of the close of business on the last business
day of each month; provided, however, that the fee for the period from the end
of the last month ending prior to termination of this Agreement, for whatever
reason, to the date of termination shall be based on
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the value of the net assets of the Fund determined as of the close of business
on the date of termination, and the fee for such period and for the period from
the effective date of this Agreement through the end of the month in which the
effective date falls will be prorated according to the proportion which such
period bears to a full monthly period. Each payment of a monthly fee to the
Manager shall be made within the ten days next following the day as of which
such payment is so computed.
5. (a) In the event the expenses of the Fund, including
amounts payable to the Manager pursuant to paragraph 4 hereof (but excluding
interest, taxes, brokerage commissions and extraordinary expenses), exceed one
and one-half percent (1-1/2%) of the first thirty million dollars ($30,000,000)
of the average net assets of the Fund, plus one percent (1%) of the average net
assets of the Fund in excess of $30,000,000, in each case computed by dividing
(i) the sum of the net asset values of the Fund as of the last business day of
each week of such fiscal year or of each week during such fiscal year during
which this Agreement was in effect, as the case may be, by (ii) the number of
weeks of such fiscal year or the number of weeks (including a partial week)
during which the Agreement is in effect during such fiscal year, as the case may
be, the Manager shall pay to the Fund the amount of such excess as soon as
practicable after the end of such fiscal year, and in all events prior to the
publication of the annual report of the Fund for such fiscal year; provided,
however, that the Manager shall not be obligated to pay any amount to the Fund
during any fiscal year in excess of the amount of the advisory fee for such
fiscal year.
(b) At the end of each month of each fiscal year of the Fund,
the Manager shall review the expenses of the Fund as outlined in subparagraph
(a) of this paragraph 5 which have accrued to and including the period ending
with such month and shall estimate such contemplated expenses to the end of such
fiscal year. If, as a result of such review and estimate, it appears likely that
the expense limitation provided for in subparagraph (a) of this paragraph 5 will
be exceeded for such fiscal year, the Manager's fee for such month, as provided
in paragraph 4 hereof, shall be reduced, subject to later adjustment, by an
amount equal to a pro rata portion (prorated on the basis of the remaining
months of the year including the month just ending) of the amount by which the
sum of such expenses of the Fund for such fiscal year are expected to exceed the
expense limitation.
(c) If, for any fiscal year of the Fund ending on a date on
which this Agreement is in effect, the expenses of the Fund which are includable
within the expense limitation described in subparagraph (a) of this paragraph 5
(but reduced by an amount, if any, payable by the Manager pursuant to
subparagraph (a) of this paragraph 5), exceed twenty-five percent (25%) of the
gross income of the Fund for such fiscal year, the Manager will pay the amount
of such excess to the Fund promptly and in all events prior to the publication
of the Fund's annual report for such fiscal year; provided, however, that the
Manager shall not be obligated to pay any amount to the Fund during any fiscal
year in excess of the amount of the advisory fee for such fiscal year. For
purposes of this subparagraph (c), "gross income of the Fund" shall include, but
not be limited to, gains from the sale of securities, without offset or
deduction for losses from the sale of securities, unpaid interest on debt
securities in the Fund's portfolio, accrued to and including the last day of
such fiscal year, and dividends declared but not paid on equity securities in
the Fund's portfolio, the record dates for which fall on or prior to the last
day of such fiscal year.
6. The services of the Manager to the Fund are not to be
deemed exclusive, and the Manager shall be free to engage in any other business
or to render investment advisory or management services of any kind to any other
corporation, firm, trust, individual or association, including any other
investment company, so long as its services hereunder are not impaired thereby.
Nothing in this
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Agreement shall limit or restrict the right of any director, officer or employee
of the Manager to engage in any other business or to devote his time and
attention in part to the management or other aspects of any other business,
whether of a similar or dissimilar nature.
7. Subject to paragraph 8 hereof, the Manager shall not be
responsible for any action of the Board of Directors of the Fund or any
committee thereof in following or declining to follow any advice or
recommendation of the Manager. The Manager shall be entitled to rely on express
written instructions of the President or any Vice President of the Fund or of a
majority of the Board of Directors of the Fund.
8. Neither the Manager, nor any director, officer, agent or
employee of the Manager shall be liable or responsible to the Fund or its
stockholders except for willful misfeasance, bad faith, gross negligence or
reckless disregard of their respective duties. The Fund will hold the Manager
harmless against judgments, but not expenses of defense or settlements, rendered
against the Manager which (a) result from specific actions or omissions by the
Manager in respect of the performance of its obligations hereunder, which
specific acts or omissions occur as a result of express written instructions of
the President or any Vice President of the Fund or of a majority of the Board of
Directors of the Fund, and (b) arise in actions in which there is an express
finding that such specific acts or omissions did not constitute willful
misfeasance, bad faith, gross negligence or reckless disregard of its duty.
9. The Manager shall not be liable or responsible for any acts
or omissions of any predecessor manager or of any other persons having
responsibility for matters to which this Agreement relates, nor shall the
Manager be responsible for reviewing any such acts or omissions. The Manager
shall, however, be liable for its own acts and omissions subsequent to assuming
responsibility under this Agreement as herein provided.
10. This Agreement shall remain in effect until July 31, 1999,
unless sooner terminated as hereinafter provided. This Agreement shall continue
in effect from year to year thereafter provided its continuance is specifically
approved at least annually by vote of a majority of the outstanding voting
securities of the Fund or by vote of the Board of Directors of the Fund, and by
a majority of the Board of Directors of the Fund who are not parties to this
Agreement or "interested persons" (as defined in the Investment Company Act) of
any party to this Agreement, which vote must be cast in person at a meeting
called for the purpose of voting on approval of the terms of this Agreement and
its continuance; provided, however, that (a) the Fund may, at any time and
without the payment of any penalty, terminate this Agreement upon sixty days'
written notice to the Manager either by majority vote of the Board of Directors
of the Fund or by the vote of a majority of the outstanding voting securities of
the Fund; (b) this Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Investment Company Act) unless such
automatic termination shall be prevented by an exemptive order of the Securities
and Exchange Commission; and (c) the Manager may terminate this Agreement
without payment of penalty on sixty days' written notice to the Fund. All
notices or communications hereunder shall be in writing and if sent to the
Manager shall be mailed by first class mail, or delivered, or telegraphed or
telexed and confirmed in writing to the Manager at 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attn: Juris Padegs, or at such other address as the Manager
shall have communicated in writing to the Fund, and if sent to the Fund shall be
mailed by first class mail, or delivered, or telegraphed or telexed and
confirmed in writing to the Fund at 000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000, Attn: Xxxx Xxxxxxx, or at such other address as the
Fund shall have communicated in writing to the Manager.
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11. For purposes of this Agreement, a "majority of the
outstanding voting securities of the Fund" shall be determined in accordance
with the applicable provisions of the Investment Company Act.
12. This Agreement shall be construed in accordance with the
laws of the State of California and the applicable provisions of the Investment
Company Act. To the extent applicable law of the State of California, or any of
the provisions herein, conflict with applicable provisions of the Investment
Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the day and year first above written in San
Francisco, California.
XXXXXXXXXX STREET INCOME SECURITIES, INC.
By: ________________________________
Vice President
XXXXXXX XXXXXX INVESTMENTS, INC.
By: ________________________________
Managing Director
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