EXHIBIT 6
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the 20th day of August, 1998, by and between Pacholder
Fund, Inc., a Maryland corporation (hereinafter called the "Fund"), and
Pacholder & Company, LLC, an Ohio limited liability company (hereinafter called
the "Adviser").
WHEREAS, the Fund is engaged in business as a diversified, closed-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engages in
the business of acting as investment adviser; and
WHEREAS, the Fund desires to retain the Adviser to render management and
investment advisory services in the manner and on the terms and conditions
hereinafter set forth; and
WHEREAS, the Adviser desires to be retained to perform services on said
terms and conditions;
NOW, THEREFORE, in consideration of the promises and the mutual covenants
hereinafter contained, the Fund and the Adviser agree as follows:
1. Duties and Responsibilities of Adviser.
A. Investment Advisory Services. The Fund hereby retains the
Adviser to act as investment manager of the Fund and, subject to the
supervision of the Fund's Board of Directors, to supervise the investment
activities of the Fund as hereinafter set forth giving due consideration to
the policies of the Fund as expressed in the Fund's Registration Statement
on Form N-2 under the 1940 Act and under the Securities Act of 1933, as
amended, as well as to the factors affecting the status of the Fund as a
"regulated investment company" under the Internal Revenue Code of 1986, as
amended. Without limiting the generality of the foregoing, the Adviser:
(i) shall obtain and evaluate such information and advice
relating to the economy, securities market and securities as it deems
necessary or useful to discharge its duties hereunder;
(ii) shall continuously manage the assets of the fund in a
manner consistent with the investment objectives and policies of the
Fund;
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(iii) shall determine the securities to be purchased, sold or
otherwise disposed of by the Fund and the timing of such purchases,
sales and dispositions; and
(iv) shall take such further action, including the placing of
purchase and sale orders on behalf of the Fund, as the Adviser shall
deem necessary or appropriate. The Adviser shall also furnish to or
place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the
Adviser in the discharge of its duties as the Fund may, from time to
time, reasonably request.
B. Reports to Fund. The Adviser shall furnish to or place at the
disposal of the Fund such information, reports, evaluations, analyses and
opinions as the Fund may, at any time or from time to time, reasonably
request or as the Adviser may deem helpful to the Fund.
C. Fund Personnel. The Adviser agrees to permit individuals who
are officers or employees of the Adviser to serve (if duly elected or
appointed) as officers, directors, members of any committee of directors,
members of any advisory board, or members of any other committee of the
Fund, without remuneration from or other cost to the Fund.
D. Personnel, Office Space, and Facilities of Adviser. The Adviser
at its own expense shall furnish or provide and pay the cost of such office
space, office equipment, office personnel, and office services as the
Adviser requires in the performance of its investment advisory and other
obligations under this Agreement.
2. Allocation of Expenses.
A. Expenses Paid by Adviser. The Adviser shall bear the cost of
rendering the investment management and supervisory services to be
performed by it under this Agreement, and shall, at its own expense, pay
the compensation of the officers and employees of the Fund who are
employees of the Adviser or any corporate affiliate of the Adviser, if any,
and provide such office space, facilities and equipment and such clerical
help and bookkeeping services as the Fund shall reasonably require in the
conduct of its business. The Adviser shall also bear the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
B. Expenses Paid by Fund. The Fund assumes and shall pay or cause
to be paid all other expenses of the Fund, including without limitation:
the charges and expenses of any registrar, any custodian or depository
appointed by the Fund for the safekeeping of its cash, portfolio securities
and other property, and any stock transfer or dividend agent or agents
appointed by the Fund; brokers, commissions chargeable to the Fund in
connection with portfolio transactions to which the Fund is a party; all
taxes, including securities issuance and transfer taxes, and fees payable
by the Fund to federal, state or other governmental agencies; the cost and
expense of engraving or printing of certificates representing shares of the
Fund; all costs and expenses in connection with the registration and
maintenance of registration of the Fund and its shares with the Securities
and Exchange Commission and various states and
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other jurisdictions (including filing fees and legal fees and disbursements
of counsel and the costs and expenses of preparation, printing (including
typesetting) and distributing a prospectus for such purposes); all expenses
of stockholders' and directors' meetings and of preparing, printing and
mailing proxy statements and reports to stockholders; fees of directors or
members of any advisory board or committee who are not employees of the
Adviser or any corporate affiliate of the Adviser; travel expenses of
directors; all expenses incident to the payment of any dividend
reinvestment program; charges and expenses of any outside service used for
pricing of the Fund's portfolio securities; charges and expenses of legal
counsel, including counsel to the directors of the Fund who are not
"interested persons" (as defined in the 0000 Xxx) of the Fund or the
Adviser, and of independent accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest
payable on Fund borrowings; fees and expenses incident to the listing of
the Fund's shares on any stock exchange; postage; insurance premiums on
property or personnel (including officers and directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any
indemnification related thereto); fees and expenses of counsel, accountants
and investment bankers; and all other charges and costs of the Fund's
operation unless otherwise explicitly provided herein.
3. Compensation.
A. Fulcrum Fee. As full compensation for the services provided,
facilities furnished and expenses paid by the Adviser under this Agreement,
the Fund agrees to pay the Adviser an annual investment advisory fee, which
increases and decreases proportionately based on the investment performance
of the Fund in relation to the investment record of the CS First Boston
High Yield Index/TM/ (the "Index"). The advisory fee shall be accrued at
least weekly and paid quarterly as soon as practicable after the end of
each calendar quarter, as follows:
(i) If the Fund's investment performance for the twelve months
immediately preceding the end of the quarter is equivalent to the
investment record of the Index for the same 12-month period, then the
advisory fee shall be computed at the annual rate of 0.90% of the
Fund's average net assets. The rate at which the advisory fee is
computed shall be increased or decreased from the 0.90% fulcrum fee by
10% of the amount by which the investment performance of the Fund
exceeds or is less than the investment record of the Index, up to a
maximum of 1.40% and down to a minimum of 0.40%. For purposes of
calculating the amount of the advisory fee, the Fund's average net
assets shall be determined by taking the average of all determinations
of such net assets during the applicable 12-month period. The
investment performance of the Fund and the investment record of the
Index shall be determined in accordance with the Advisers Act and the
rules and regulations promulgated thereunder.
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(ii) The compensation payable to the Adviser after the end of
each quarter shall be equal to the amount of the annual advisory fee
calculated as provided in sub-paragraph (i) above reduced by the
compensation previously paid by the Fund to the Adviser and/or to
Pacholder & Company in respect of the applicable 12-month period. In
the event that such prior payments should exceed the amount of the
annual advisory fee payable hereunder, the Adviser shall remit to the
Fund such excess as soon as practicable after the end of the quarter.
B. Proration. If the Adviser shall serve for less than the whole
of any quarter, the investment advisory fee shall be prorated on the basis
of twelve-month period immediately preceding the date of termination of
this Agreement.
4. Brokerage. Subject to the approval of the Board of Directors of
the Fund, the Adviser, in carrying out its duties under Section 1.A., may cause
the Fund to pay a broker-dealer which furnishes brokerage and research services
within the meaning of Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a higher commission than that which might be
charged by another broker-dealer, if such commission is deemed reasonable in
relation to the brokerage and research services provided by the broker-dealer,
viewed in terms of either that particular transaction or the overall
responsibilities of the Adviser with respect to the accounts as to which it
exercises investment discretion (as such term is defined under Section 3(a)(35)
of the Exchange Act).
5. Adviser's Use of the Services of Others. The Adviser may (at its
cost except as contemplated by Sections 2 and 4 of this Agreement) employ,
retain or otherwise avail itself of the services or facilities of other persons
or organizations for the purpose of providing the Adviser or the Fund with such
statistical and other factual information, such advice regarding economic
factors and trends, such advice as to occasional transactions in specific
securities or such other information, advice or assistance as the Adviser may
deem necessary, appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to the Fund, or in the discharge of Adviser's
overall responsibilities with respect to the other accounts which it serves as
investment adviser.
6. Ownership of Records. All records required to be maintained and
preserved by the Fund pursuant to the provisions of rules or regulations of the
Securities and Exchange Commission under Section 31(a) of the 1940 Act and
maintained and preserved by the Adviser on behalf of the Fund are the property
of the Fund and will be surrendered by the Adviser promptly on request by the
Fund.
7. Limitation of Liability of Adviser. The Adviser will use its
best efforts in the supervision and management of the investment activities of
the Fund, but in the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of its obligations hereunder the Adviser shall not be
liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission by the Adviser or for any losses
sustained by the Fund or its shareholders.
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8. Services to Other Clients. Subject to Section 12 of this
Agreement, nothing contained in this Agreement shall prevent the Adviser or any
affiliated person of the Adviser from acting as investment adviser or manager
for any other person, firm or corporation and shall not in any way bind or
restrict the Adviser or any such affiliated person from buying, selling or
trading any securities or commodities for their own accounts or for the account
of others for whom they may be acting. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser to engage
in any other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a similar or
dissimilar nature.
9. Use of Adviser's Name. The Fund may include the name "Pacholder"
or any other name derived from the name "Pacholder" only for so long as this
Agreement or any extension, renewal or amendment hereof remains in effect,
connected with the Adviser, or with any organization which shall have succeeded
to the Adviser's business as investment adviser. At such time as this Agreement
or any extension, renewal or amendment hereof, or such other similar agreement
shall no longer be in effect, the Fund will (by corporate action, if necessary)
cease to use any name derived from the name "Pacholder", any name similar
thereto or any other name indicating that it is advised or otherwise connected
with the Adviser, or with any organization which shall have succeeded to the
Adviser's business as investment adviser.
10. Term of Agreement. This Agreement shall become effective as of
the date first written above and, unless sooner terminated as provided herein
shall continue in effect until June 30, 1999. Thereafter, if not terminated,
this Agreement shall continue in effect for successive periods of 12 months each
ending on June 30 of each year, provided such continuance is specifically
approved at least annually by the vote of holders of "a majority of the
outstanding voting securities" (as defined in the 0000 Xxx) of the Fund or by
the Board of Directors of the Fund, and, 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, (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon 30 days' written notice to
the Adviser, either by majority vote of the directors of the Fund or by the vote
of the holders of a majority of the outstanding voting securities of the Fund;
(b) this Agreement shall immediately terminate in the event of its assignment
(to the extent required by the 1940 Act and the rules thereunder) unless such
automatic termination shall be prevented by an exemptive order of the Securities
and Exchange Commission; and (c) the Adviser may terminate this Agreement
without payment of penalty on 180 days' written notice to the Fund. In the
event the Adviser elects to terminate this Agreement, the advisory fee payable
during the 180-day period will be the lesser of the fee payable under this
Agreement or the fee which will be payable to the Adviser under any new advisory
agreement with the Fund. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed post-paid, to the other party at the
principal office of such party.
11. Amendment. This Agreement may be amended by the parties without
the vote or consent of the stockholders of the Fund to supply any omission, to
cure, correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this
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Agreement to the requirements of applicable federal laws or regulations, but
neither the Fund nor the Adviser shall be liable for failing to do so.
12. Allocation of Services. The Adviser reserves the right to
manage other investment accounts, including those with investment objectives
similar to the Fund. Securities considered as investments for the Fund may also
be appropriate for other investment accounts managed by the Adviser. Subject to
applicable laws and regulations, the Adviser will attempt to allocate equitably
portfolio transactions among the portfolios of its other investment accounts
whenever decisions are made to purchase or sell securities by the Fund and one
or more of such other accounts simultaneously. In making such allocations, the
main factors to be considered by the Adviser will be the respective investment
objectives of the Fund and such other accounts, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other accounts, the size of investment
commitments generally held by the Fund and such accounts, and the opinions of
the persons responsible for recommending investments to the Fund and such other
accounts.
13. Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940 Act
and the Advisers Act. To the extent the applicable law of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act or the Advisers 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 Cincinnati, Ohio.
WITNESS PACHOLDER FUND, INC.
By:
-------------------------- -----------------------------------
Xxxxx X. Xxxxxx
Senior Vice
President
WITNESS PACHOLDER & COMPANY, LLC
By:
-------------------------- -----------------------------------
Xxxxxxx X. Xxxxxx
President
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