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EXHIBIT (g)
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT dated as of November 10, 1995, by and
between ▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL PRIME RATE INCOME TRUST (the "Fund"), a
Massachusetts business trust (the "Trust"), and ▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL
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, and 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 Agreement. 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 a percentage of the average daily net
assets of the fund as follows:
Fee Percent of
Average Daily Average Daily
Net Assets Net Assets
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First $4.0 billion .950 of 1%
Next $3.5 billion .900 of 1%
Next $2.5 billion .875 of 1%
Over $10 billion .850 of 1%
(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
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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
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 the second anniversary of the date hereof
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 at least annually in the manner required
by the Investment Company Act of 1940, as amended.
(b) Termination. 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.
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(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, 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.
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL INVESTMENT ADVISORY CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, III
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Senior Vice President
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL PRIME RATE INCOME
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, III
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Vice President and Treasurer
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