AQUILA THREE PEAKS HIGH INCOME FUND SUB-ADVISORY AGREEMENT
THIS
AGREEMENT, made as of November 10, 2009 by and between AQUILA INVESTMENT
MANAGEMENT LLC, a Delaware limited liability company (the "Manager"), 000
Xxxxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 and THREE PEAKS CAPITAL
MANAGEMENT, LLC (the "Sub-Adviser"), a Colorado limited liability company, 0000
Xxxxxx Xxxx, Xxxxx 000, Xxxxxx Xxxx, XX 00000.
W I T N E
S S E T H :
WHEREAS, Aquila Three Peaks High Income
Fund (the "Fund") is a Massachusetts business trust which is registered under
the Investment Company Act of 1940 (the "Act") as an open-end, diversified
management investment company;
WHEREAS, the Manager has entered into
an Advisory and Administration Agreement as of the date hereof with the Fund
(the "Advisory and Administration Agreement"), pursuant to which the Manager
shall act as investment adviser with respect to the Fund; and
WHEREAS, pursuant to paragraph 2 of the
Advisory and Administration Agreement, the Manager wishes to retain the
Sub-Adviser for purposes of rendering investment advisory services to the
Manager in connection with the Fund upon the terms and conditions hereinafter
set forth;
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 hereby appoints the
Sub-Adviser to render, to the Manager and to the Fund, investment research and
advisory services as set forth below under the supervision of the Manager and
subject to the approval and direction of the Board of Trustees of the
Fund. The Sub-Adviser shall, all as more fully set forth herein, act
as investment adviser to the Fund with respect to the investment of the Fund's
assets, and supervise and arrange the purchase of securities for and the sale of
securities held in the portfolio of the Fund.
2. Duties and Obligations of
the Sub-Adviser With Respect To Investment of the Assets of the
Fund
(a) Subject to the succeeding
provisions of this section and subject to the direction and control of the
Manager and the Board of Trustees of the Fund, the Sub-Adviser
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;
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(iii)
arrange for the purchase and the sale of securities held in the portfolio
of the Fund; and
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(iv) consult
with the Manager in connection with its duties
hereunder.
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(b) Any investment program furnished by
the Sub-Adviser under this section shall at all times conform to, and be in
accordance with, any requirements imposed by: (1) the Investment Company Act of
1940 (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.
(c) The Sub-Adviser shall give to the
Manager and to the Fund the benefit of its best judgment and effort in rendering
services hereunder, but the Sub-Adviser 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 Sub-Adviser.
(d) Except as provided in section 7,
nothing in this Agreement shall prevent the Sub-Adviser or any affiliated person
(as defined in the Act) of the Sub-Adviser from acting as investment adviser or
manager for any other person, firm or corporation, and shall not in any way
limit or restrict the Sub-Adviser or any such affiliated person 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 Sub-Adviser expressly represents that, while acting as Sub-Adviser, it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Fund under this Agreement. The
Manager hereby acknowledges that the Sub-Adviser renders investment advisory and
managerial services to many different clients and, therefore, may give
investment advice and take action with respect to any of its other clients which
may differ from the advice given or action taken under this
Agreement.
(e) In connection with its duties to
arrange for the purchase and sale of the Fund's portfolio securities, the
Sub-Adviser shall select such broker-dealers ("dealers") as shall, in the
Sub-Adviser'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 Sub-Adviser shall cause the Fund to
deal directly with the selling or purchasing principal or market maker without
incurring brokerage commissions unless the Sub-Adviser 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 Sub-Adviser is authorized 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
Sub-Adviser 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
Sub-Adviser's overall responsibilities. If, on the foregoing basis,
the transaction in question could be allocated to two or more dealers, the
Sub-Adviser 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 Sub-Adviser or its other clients.
(f) The Sub-Adviser agrees
to maintain, and to preserve for the periods prescribed, such books and records
with respect to the portfolio transactions of the Fund as are required by
applicable law and regulation, and agrees that all records which it maintains
for the Fund on behalf of the Manager shall be the property of the Fund and
agrees upon reasonable request to provide to the Fund or the Manager copies of
any and all records it maintains in accordance with this Agreement.
(g) The Sub-Adviser agrees
to furnish to the Manager and to the Board of Trustees of the Fund such periodic
and special reports as each may reasonably request.
(h) It is agreed that the
Sub-Adviser 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 Sub-Adviser for
inclusion therein. The Sub-Adviser shall promptly inform the Fund as
to any information concerning the Sub-Adviser appropriate for inclusion in such
Registration Statement, or as to any transaction or proposed transaction which
might result in an assignment (as defined in the Act) of this
Agreement.
(i) The Sub-Adviser shall not be liable
for any error in judgment or for any loss suffered by the Manager, 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.
(j) To the extent that the Manager is
indemnified under the Fund's Declaration of Trust with respect to the services
provided hereunder by the Sub-Adviser, the Manager agrees to provide the
Sub-Adviser the benefits of such indemnification.
3. Allocation of
Expenses
The Sub-Adviser shall bear all of the
expenses it incurs in fulfilling its obligations under this
Agreement. In particular, but without limiting the generality of the
foregoing, the Sub-Adviser shall furnish, at the Sub-Adviser's expense, all
office space, facilities, equipment and clerical personnel necessary for
carrying out its duties under this Agreement. The Sub-Adviser shall supply, or
cause to be supplied, to any investment adviser, administrator or principal
underwriter of the Fund all necessary financial information for which the
Sub-Adviser is responsible in connection with such adviser's, administrator's or
principal underwriter's duties under any agreement between such adviser,
administrator or principal underwriter and the Fund. The Sub-Adviser
will also pay all compensation of the Fund's officers, employees, and Trustees,
if any, who are affiliated persons of the Sub-Adviser.
4. Compensation of the
Sub-Adviser
The Manager agrees to pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation for all
services rendered by the Sub-Adviser as such, a management 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 0.45 of 1% of such net asset value on net
assets of the Fund up to $100,000,000; 0.40 of 1% of the Fund’s net assets above
$100,000,000 to $250,000,000 and 0.35 of 1% of the Fund's net assets above
$250,000,000.
5. Duration and
Termination
(a) 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) This Agreement may be terminated by
the Sub-Adviser at any time without penalty upon giving the Manager and the Fund
sixty days' written notice (which notice may be waived). This Agreement may be
terminated by the Manager or the Fund at any time without penalty upon giving
the Sub-Adviser sixty days' written notice (which notice may be waived by the
Sub-Adviser), 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. This Agreement shall
automatically terminate in the event of its assignment (as defined in the Act)
or the termination of the Advisory and Administration Agreement.
6. Notices of
Meetings
The Manager agrees that notice of each
meeting of the Board of Trustees of the Fund will be sent to the Sub-Adviser and
that Sub-Adviser will make appropriate arrangements for the attendance (as
persons present by invitation) of such person or persons as the Sub-Adviser may
designate.
7. Special
Provisions
For the duration of this Agreement, the
Sub-Adviser agrees that the Sub-Adviser shall not provide portfolio management
for investment companies registered under the Act which have an objective,
investment strategy and distribution channel similar to that of the Fund without
the prior written consent of the Manager, except that without the consent of the
Manager the Sub-Adviser may provide portfolio management to any registered
investment company which is an investment option offered by an insurance company
under a variable annuity contract, a variable life insurance policy or a
qualified retirement plan.
8. Separability
If at any time any provision of this
Agreement is or becomes illegal, invalid, or unenforceable in any respect, the
legality, validity, and enforceability of the remaining provisions will remain
in full force and effect.
IN
WITNESS WHEREOF, the parties hereto have caused the foregoing 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
INVESTMENT MANAGEMENT LLC
/s/Xxxxxxx X. Childs, III
________________________ By:
_______________________________
Xxxxxxx
X. Childs, III
ATTEST: THREE
PEAKS CAPITAL MANAGEMENT, LLC
/s/Xxxxxx Xxxxxxx /s/Xxxxx X. Xxxxxxxxx
________________________
By: _______________________________
Xxxxx
X. Xxxxxxxxx
