1
EXHIBIT (c)(1)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of February 17, 1993, by and
between VAN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PRIME RATE INCOME TRUST (the "Fund"), a
Massachusetts business trust (the "Trust"), and VAN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INVESTMENT
ADVISORY CORP. (the "Advisor"), a Delaware corporation.
1. (a) Retention of Advisor by Fund. The Fund hereby employs the
Advisor to act as the investment adviser for and to manage the investment and
reinvestment of the assets of the Fund in accordance with the Fund's investment
objective and policies and limitations, an to administer its affairs to the
extent requested by, and subject to the review and supervision of, the Board of
Trustees of the Fund for the period and upon the terms herein set forth. The
investment of funds shall be subject to all applicable restrictions of
applicable law and of the Declaration of Trust and By-Laws of the Trust, and
resolutions of the Board of Trustees of the Fund as may from time to time be
in force and delivered or made available to the Advisor.
(b) Advisor's Acceptance of Employment. The Advisor accepts such
employment and agrees during such period to render such services, to supply
investment research and portfolio management (including without limitation
the selection of securities for the Fund to purchase, hold or sell and the
selection of brokers through whom the Fund's portfolio transactions are
executed, in accordance with the policies adopted by the Fund and its Board
of Trustees), to administer the business affairs of the Fund, to
furnish offices and necessary facilities and equipment to the Fund, to
provide administrative services for the Fund, to render periodic reports
to the Board of Trustees of the Fund, and to permit any of its officers
or employees to serve without compensation as trustees or officers of the
Fund if elected to such positions.
(c) Independent Contractor. The Advisor shall be deemed to be an
independent contractor under this Agreement and, unless otherwise expressly
provided or authorized, shall have no authority to act for or represent
the Fund in any way or otherwise be deemed as agent of the Fund.
(d) Non-Exclusive Aqreement. The services of the Advisor to the Fund
under this Agreement are not to be deemed exclusive, and the Advisor shall be
free to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
2. (a) Fee. For the services and facilities described in Section 1, the
Fund will accrue daily and pay to the Advisor at the end of each calendar
month an investment management fee equal to ninety-five one-hundredths of
one percent (.95 of 1%) of the average weekly net assets of the Fund.
(b) Determination of Net Asset Value. The net asset value of the
Fund shall be calculated as of the close of the New York Stock Exchange
on the last day the Exchange is open for trading in each calendar week or
as of such other time or times as the trustees may determine in accordance
with the provisions of applicable law and of the Declaration of Trust and
By-Laws of the Trust, and resolutions of the Board of Trustees of the Fund
as from time to time in force. For the purpose of the foregoing computations,
on each such day when net asset value is not calculated, the net asset value
of a share of beneficial interest of the Fund shall be deemed to be the net
asset value of such share as of the close of business of the last day on which
such calculation was made.
(c) Proration. For the month and year in which this Agreement
becomes effective or terminates, there shall be an appropriate proration
of the Advisor's fee on the basis of the number of days
that the Agreement is in effect during such month and year, respectively.
3. Expenses. In addition to the fee of the Advisor, the Fund shall
assume and pay any expenses for services rendered by a custodian for
the safekeeping of the Fund's securities or other property, for keeping
its books of account, for any other charges of the custodian and for
calculating the net asset value
2
of the Fund as provided above. The Advisor shall not be required to
pay, and the Fund shall assume and pay, the charges and expenses of its
operations, including compensation of the trustees (other than those who are
interested persons of the Advisor), charges and expenses of independent
accountants, of legal counsel and of any transfer or dividend disbursing
agent, costs of acquiring and disposing of portfolio securities, cost of
listing shares of the New York Stock Exchange or other exchange interest (if
any) on obligations incurred by the Fund, costs of share certificates,
membership dues in the Investment Company Institute or any similar
organization, costs of reports and notices to shareholders, costs of
registering shares of the Fund under the federal securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental
agencies on account of the registration of securities issued by the Fund,
filing of corporation documents or otherwise. The Fund shall not pay or incur
any obligation for any management or administrative expenses for which the Fund
intends to seek reimbursement from the Advisor without first obtaining the
written approval of the Advisor. The Advisor shall arrange, if desired by the
Fund, for officers or employees of the Advisor to serve, without compensation
from the Fund, as trustees, officers or agents of the Fund if duly elected or
appointed to such positions and subject to their individual consent and to any
limitations imposed by law.
4. Interested Persons. Subject to applicable statutes and
regulations, it is understood that trustees, officers, shareholders
and agents of the Fund are or may be interested in the Advisor as
directors, officers,shareholders, agents or otherwise and that the
directors, officers, shareholders and agents of the Advisor
may be interest in the Fund as trustees, officers, shareholders,
agents or otherwise.
5. Liability. The Advisor shall not be liable for any error of judgment
or of law, or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the Advisor
in the performance of its obligations and duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
6. (a) Term. This Agreement shall become effective on the date
hereof and shall remain in full force until December 31, 1994, unless
sooner terminated as hereinafter provided. This Agreement shall continue
in force from year to year thereafter, but only as long as such
continuance is specifically approved as least annually in the manner
required by the Investment Company Act of 1940, as amended.
(b) Termination. This Agreement shall be submitted to the
shareholders of the Fund for approval at the first shareholders meeting and
shall automatically terminate if not approved by a majority of the shares
of the Fund present and voting at such meeting. This Agreement shall
automatically terminate in the event of its assignment. This Agreement
may be terminated at any time without the payment of any penalty by the
Fund or by the Advisor on sixty (60) days written notice to the other party.
The Fund may effect termination by action of the Board of Trustees or
by vote of a majority of the outstanding shares of stock of the Fund,
accompanied by appropriate notice. This Agreement may be terminated at any
time without the payment of any penalty and without advance notice by the
Board of Trustees or by vote of a majority of the outstanding shares of the
Fund in the event that it shall have been established by a court of
competent jurisdiction that the Advisor or any officer or director of the
Advisor has taken any action which results in a breach of the covenants
of the advisor set forth herein.
(c) Payment upon Termination. Termination of this Agreement
shall not affect the right of the Advisor to receive payment on any
unpaid balance of the compensation described in Section 2 earned
prior to such termination.
7. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise,
the remainder shall not be thereby affected.
8. Notices. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed,
- 2 -
3
postage prepaid, to the other party at such address as such other party may
designate for the receipt of such notice.
9. Disclaimer. The Advisor acknowledges and agrees that, as provided
by Section 5.5 of the Declaration of Trust of the Trust, the shareholders,
trustees, officers, employees and other agents of the Trust and the Fund shall
not personally be bound by or liable hereunder, nor shall resort be had
to their private property for the satisfaction of any obligation or claim
hereunder.
IN WITNESS WHEREOF, the Fund and the Advisor have caused this Agreement
to be executed on the day and year first above written.
VAN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ INVESTMENT ADVISORY CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇ III
First Vice President
VAN ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PRIME RATE INCOME TRUST
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇ III
Vice President and Treasurer