AQUILA THREE PEAKS HIGH INCOME FUND
AMENDED AND RESTATED ADVISORY
AND ADMINISTRATION AGREEMENT
THIS AGREEMENT, made as of May 24, 2006 by and between AQUILA
THREE PEAKS HIGH INCOME FUND (the "Fund"), 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 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 Fund and the Manager have entered into an Advisory
and Administration Agreement as of March 21, 2006, amended as of the
date hereof, referred to hereafter as "this Agreement," with respect
to the Fund; and
WHEREAS, the shareholder of the Fund initially approved this
Agreement without the amendments thereto at a meeting of shareholders
held on March 21, 2006 and and has approved amendments to that initial
agreement on the date hereof; and
WHEREAS, the parties wish to restate this Agreement, to include
the amendments;
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.
(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 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.
(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,
stockholders 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 (i) whether a dealer has provided
research services, as further discussed below; and (ii) whether a dealer has
sold shares of the Fund. 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
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 second 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:___________________________________
ATTEST: AQUILA INVESTMENT MANAGEMENT LLC
___________________ By:___________________________________
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