AQUILA THREE PEAKS HIGH INCOME FUND ADVISORY AND ADMINISTRATION AGREEMENT
THIS
AGREEMENT, made as of November 10, 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:
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(i) supervise
continuously the investment program of the Fund and the composition of its
portfolio;
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(ii) determine
what securities shall be purchased or sold by the Fund;
and
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(iii)
arrange for the purchase and the sale of securities held in the portfolio
of the Fund.
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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:
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(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;
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(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;
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(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;
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(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
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(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.
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(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.
/s/Xxxxxx
X. XxXxxxxx
___________________ By:___________________________________
Xxxxxx X. XxXxxxxx
ATTEST: AQUILA
INVESTMENT MANAGEMENT LLC
/s/Xxxxxx X.
Xxxxxxxxx
/s/Xxxxx X. Xxxxxxxx
____________________ By:___________________________________
____________________ By:___________________________________
Xxxxx X. Xxxxxxxx
