<PAGE> PAGE 1
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000 C000000 0000276242
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000 F000000 Y
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000 J000000 A
001 A000000 AMERICAN CAPITAL HIGH YIELD INVESTMENTS
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008 B000001 A
008 C000001 801-8286
008 D010001 HOUSTON
008 D020001 TX
008 D030001 77056
011 A000001 VAN KAMPEN AMERICAN CAPITAL DISTRIBUTORS, INC
011 B000001 8-19903
011 C010001 HOUSTON
011 C020001 TX
011 C030001 77056
012 A000001 ACCESS INVESTOR SERVICES, INC.
012 B000001 84-01621
012 C010001 KANSAS CITY
012 C020001 MO
012 C030001 64141
012 C040001 9256
013 A000001 PRICE WATERHOUSE, LLP
013 B010001 HOUSTON
<PAGE> PAGE 2
013 B020001 TX
013 B030001 77002
015 A000001 STATE STREET BANK & TRUST CO.
015 B000001 C
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015 C020001 MA
015 C030001 02110
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022 A000001 SALOMON BROTHERS, INC.
022 B000001 13-3082694
022 C000001 1599810
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022 C000006 29802
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022 A000007 MORGAN STANLEY & CO., INC.
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<PAGE> PAGE 3
022 C000007 28107
022 D000007 3932
022 A000008 DONALDSON LUFKIN & JENRELLE SECURITIES CORP.
022 B000008 13-2741729
022 C000008 17809
022 D000008 5608
022 A000009 BEAR, STEARNS & CO., INC.
022 B000009 13-3299429
022 C000009 15288
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022 A000010 GENERAL ELECTRIC CAPITAL CORP.
022 B000010 06-1076552
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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SIGNATURE TANYA LODEN
TITLE CONTROLLER
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000276242
<NAME> AC HIGH YIELD INVESTMENTS CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-1-1994
<PERIOD-END> FEB-28-1995
<INVESTMENTS-AT-COST> 489,420,233
<INVESTMENTS-AT-VALUE> 474,711,521
<RECEIVABLES> 22,570,358
<ASSETS-OTHER> 42,646
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 497,324,525
<PAYABLE-FOR-SECURITIES> 10,370,660
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,395,693
<TOTAL-LIABILITIES> 14,766,353
<SENIOR-EQUITY> 809,826
<PAID-IN-CAPITAL-COMMON> 764,765,749
<SHARES-COMMON-STOCK> 66,081,843
<SHARES-COMMON-PRIOR> 59,466,967
<ACCUMULATED-NII-CURRENT> (75,453)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (268,233,238)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (14,708,712)
<NET-ASSETS> 482,558,172
<DIVIDEND-INCOME> 16,553
<INTEREST-INCOME> 23,257,592
<OTHER-INCOME> 0
<EXPENSES-NET> 2,990,273
<NET-INVESTMENT-INCOME> 20,283,872
<REALIZED-GAINS-CURRENT> (17,280,599)
<APPREC-INCREASE-CURRENT> 6,772,034
<NET-CHANGE-FROM-OPS> 9,775,307
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,716,372)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,119,448
<NUMBER-OF-SHARES-REDEEMED> (7,249,461)
<SHARES-REINVESTED> 1,744,889
<NET-CHANGE-IN-ASSETS> 34,200,457
<ACCUMULATED-NII-PRIOR> 757,130
<ACCUMULATED-GAINS-PRIOR> (250,952,639)
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 1,261,377
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<GROSS-EXPENSE> 2,990,273
<AVERAGE-NET-ASSETS> 368,263,479
<PER-SHARE-NAV-BEGIN> 6.12
<PER-SHARE-NII> .27
<PER-SHARE-GAIN-APPREC> (.145)
<PER-SHARE-DIVIDEND> (.285)
<PER-SHARE-DISTRIBUTIONS> 0
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<EXPENSE-RATIO> 1.18
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000276242
<NAME> AC HIGH YIELD INVESTMENTS CLASS B
<S> <C>
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<PERIOD-END> FEB-28-1995
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<PER-SHARE-NII> .25
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000276242
<NAME> AC HIGH YIELD INVESTMENTS CLASS C
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<FISCAL-YEAR-END> AUG-31-1995
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</TABLE>
[DESCRIPTION] N-SAR Item 77C
<PAGE> 1
N-SAR ITEM 77C
a) A Special Meeting of Shareholders was held on December 16, 1994.
b) Inapplicable
c) The following was voted on at the meeting:
1) Approval of a new investment advisory agreement between the Registrant
and American Capital Asset Management, Inc. to take effect upon the
closing of the proposed acquisition of American Capital Management &
Research, Inc. by The Van Kampen Merritt Companies, Inc.
For 47,369,854.313 Against 997,046.088
-------------- -----------
d) Inapplicable
[DESCRIPTION] NSAR item 77q
<PAGE> 1
AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC.
BY-LAWS
(As amended December 1, 1994)
ARTICLE 1.
STOCKHOLDERS
SECTION 1.01. Annual Meetings. The Corporation is not required to
hold an annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. If the Corporation is required by the Investment Company Act of 1940 to
hold a meeting of stockholders to elect directors, such meeting shall be held
at a date and time set by the Board of Directors in accordance with the
Investment Company Act of 1940 and no later than 120 days after the occurrence
of the event requiring the meeting. Any stockholders' meeting held in
accordance with the preceding sentence shall for all purposes constitute the
annual meeting of stockholders for the fiscal year of the Corporation in which
the meeting is held. Except as the charter or statute provides otherwise, any
business may be considered at an annual meeting without the purpose of the
meeting having been specified in the notice. Failure to hold an annual meeting
does not invalidate the Corporation's existence or affect any otherwise valid
corporate acts.
SECTION 1.02. Special Meetings. At any time in the interval between
annual meetings, a special meeting of stockholders may be called by the
Chairman of the Board or the President or by a majority of the Board of
Directors by vote at a meeting or in writing (addressed to the Secretary of the
Corporation) with or without a meeting. The Secretary of the Corporation shall
call a special meeting of stockholders on the written request of stockholders
entitled to cast at least ten percent of all the votes entitled to be cast at
the meeting. A request for a special meeting shall state the purpose of the
meeting and the matters proposed to be acted on at it. The Secretary shall
inform the stockholders who make the request of the reasonably estimated costs
of preparing and mailing a notice of the meeting and, on payment of these costs
to the Corporation, notify each stockholder entitled to notice of the meeting.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
special meeting of stockholders held in the preceding 12 months.
SECTION 1.03. Place of Meetings. Meetings of stockholders shall be
held at such place in the United States as is set from time to time by the
Board of Directors.
SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than
ten nor more than 90 days before each stockholders' meeting, the Secretary
shall give written notice of the meeting to each stockholder entitled to vote
at the meeting and each other stockholder entitled
1
<PAGE> 2
to notice of the meeting. The notice shall state the time and place of the
meeting and, if the meeting is a special meeting or notice of the purpose is
required by statute, the purpose of the meeting. Notice is given to a
stockholder when it is personally delivered to him, left at his residence or
usual place of business, or mailed to him at his address as it appears on the
records of the Corporation. Notwithstanding the foregoing provisions, each
person who is entitled to notice waives notice if he before or after the
meeting signs a waiver of the notice which is filed with the records of
stockholders' meetings, or is present at the meeting in person or by proxy.
SECTION 1.05. Quorum; Voting. Unless statute or the charter provides
otherwise, at a meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast
at the meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all the votes
cast at a meeting at which a quorum is present is sufficient to elect a
director.
SECTION 1.06. Adjournments. Whether or not a quorum is present, a
meeting of stockholders convened on the date for which it was called may be
adjourned from time to time without further notice by a majority vote of the
stockholders present in person or by proxy to a date not more than 120 days
after the original record date. Any business which might have been transacted
at the meeting as originally notified may be deferred and transacted at any
such adjourned meeting at which a quorum shall be present.
SECTION 1.07. General Right to Vote; Proxies. Unless the Charter
provides for a greater or lesser number of votes per share or limits or denies
voting rights, each outstanding share of stock, regardless of class, is
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders. In all elections for directors, each share of stock may be voted
for as many individuals as there are directors to be elected and for whose
election the share is entitled to be voted. A stockholder may vote the stock
the stockholder owns of record either in person or by proxy. A stockholder may
sign a writing authorizing another person to act as proxy. Signing may be
accomplished by the stockholder or the stockholder's authorized agent signing
the writing or causing the stockholder's signature to be affixed to the writing
by any reasonable means, including facsimile signature. A stockholder may
authorize another person to act as proxy by transmitting, or authorizing the
transmission of, a telegram, cablegram, datagram, or other means of electronic
transmission to the person authorized to act as proxy or to a proxy
solicitation firm, proxy support service organization, or other person
authorized by the person who will act as proxy to receive the transmission.
Unless a proxy provides otherwise, it is not valid more than 11 months after
its date. A proxy is revocable by a stockholder at any time without condition
or qualification unless the proxy states that it is irrevocable and the proxy
is coupled with an interest. A proxy may be made irrevocable for so long as it
is coupled with an interest. The interest with which a proxy may be coupled
includes an interest in the stock to be voted under the proxy or another
general interest in the Corporation or its assets or liabilities.
2
<PAGE> 3
SECTION 1.08. List of Stockholders. At each meeting of stockholders,
a full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number and class or series of shares held by each and
certified by the transfer agent for such class or series or by the Secretary,
shall be furnished by the Secretary.
SECTION 1.09. Conduct of Business and Voting. At all meetings of
stockholders, unless the voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching the qualification of
voters and the validity of proxies, the acceptance or rejection of votes and
procedures for the conduct of business not otherwise specified by these
By-Laws, the charter or law, shall be decided or determined by the chairman of
the meeting. If demanded by stockholders, present in person or by proxy,
entitled to cast ten percent in number of votes entitled to be cast, or if
ordered by the chairman, the vote upon any election or question shall be taken
by ballot and, upon like demand or order, the voting shall be conducted by one
or more inspectors, in which event the proxies and ballots shall be received,
and all questions touching the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided, by such
inspectors. Unless so demanded or ordered, no vote need be by ballot and voting
need not be conducted by inspectors. The stockholders at any meeting may choose
an inspector or inspectors to act at such meeting, and in default of such
election the chairman of the meeting may appoint an inspector or inspectors.
No candidate for election as a director at a meeting shall serve as an
inspector thereat.
SECTION 1.10. Informal Action by Stockholders. Any action required
or permitted to be taken at a meeting of stockholders may be taken without a
meeting if there is filed with the records of stockholders' meetings an
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board
of Directors, except as conferred on or reserved to the stockholders by statute
or by the charter or By-Laws. It shall be the duty of the Board of Directors to
ensure that the purchase, sale, retention and disposal of portfolio securities
and the other investment practices of the Corporation are at all times
consistent with the investment policies and restrictions of the Corporation and
the Investment Company Act of 1940. The Board, however, may delegate the duty
of management of the assets and the administration of the day-to-day operations
of the Corporation to one or more entities or individuals pursuant to a written
contract or contracts which have obtained the approvals, including the approval
of renewals thereof, required by the Investment Company Act of 1940.
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SECTION 2.02. Number of Directors. The Corporation shall have at
least three directors; provided that, if there is no stock outstanding, the
number of directors may be less than three but not less than one, and, if there
is stock outstanding and so long as there are fewer than three stockholders,
the number of directors may be less than three but not less than the number of
stockholders. The Corporation shall have the number of directors provided in
its charter until changed as herein provided. A majority of the entire Board of
Directors may alter the number of directors set by the charter to not exceed 25
nor less than the minimum number then permitted herein, but the action may not
affect the tenure of office of any director.
SECTION 2.03. Election and Tenure of Directors. At each annual
meeting, the stockholders shall elect directors to hold office until the next
annual meeting and until their successors are elected and qualify; provided,
however, that through June 30, 1995 the term of office of each director shall
end at the time such director reaches the age of 76 1/2 or 73 1/2 for persons
first elected on or after January 1, 1986 as a director of any open end
investment company managed by American Capital Asset Management, Inc. and that
on and after July 1, 1995 the term of office of each director shall end at the
time such director reaches the age of 76 1/2 or 72 1/2 for persons first
elected on or after January 1, 1986 as a director of any open end investment
company managed by American Capital Asset Management, Inc.
SECTION 2.04. Removal of Directors. Unless statute or the charter
provides otherwise, the stockholders may remove any director, with or without
cause, by the affirmative vote of a majority of all the votes entitled to be
cast for the election of directors.
SECTION 2.05. Vacancy on Board. The stockholders may elect a
successor to fill a vacancy on the Board of Directors which results from the
removal of a director by the stockholders. A director elected by the
stockholders to fill a vacancy which results from the removal of a director
serves for the balance of the term of the removed director. Unless otherwise
provided by statute or the charter, a majority of the remaining directors,
whether or not sufficient to constitute a quorum, may fill a vacancy on the
Board of Directors which results from any cause except an increase in the
number of directors and a majority of the entire Board of Directors may fill a
vacancy which results from an increase in the number of directors. A director
elected by the Board of Directors to fill a vacancy serves until the next
annual meeting of stockholders and until his successor is elected and
qualifies.
SECTION 2.06. Regular Meetings. After each meeting of stockholders
at which directors shall have been elected, the Board of Directors shall meet
as soon as practicable for the purpose of organization and the transaction of
other business. In the event that no other time and place are specified by
resolution of the Board, the President or Chairman with notice in accordance
with Section 2.08, the Board of Directors shall meet immediately following the
close of, and at the place of, such stockholders' meeting. Any other regular
meeting of the Board of Directors shall be held on such date and at any place
as may be designated from time to time by the Board of Directors.
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SECTION 2.07. Special Meetings. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board or the
President or by a majority of the Board of Directors by vote at a meeting, or
in writing with our without a meeting. A special meeting of the Board of
Directors shall be held on such date and at any place as may be designated from
time to time by the Board of Directors. In the absence of designation such
meeting shall be held at such place as may be designated in the call.
SECTION 2.08. Notice of Meetings, Waiver of Notice. Except as
provided in Section 2.06, the Secretary shall give notice to each director of
each regular and special meeting of the Board of Directors. The notice shall
state the time and place of the meeting. Notice is given to a director when it
is delivered personally to him, left at his residence or usual place of
business, or sent by telegraph, facsimile transmission or telephone, at least
24 hours before the time of the meeting or, in the alternative, by mail to his
address as it shall appear on the records of the Corporation at least 72 hours
before the time of the meeting. Unless statute, the By-Laws or a resolution of
the Board of Directors provides otherwise, the notice need not state the
business to be transacted at or the purposes of any regular or special meeting
of the Board of Directors. No notice of any meeting of the Board of Directors
need be given to any director who attends, or to any director who, in a writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of the Board of Directors,
regular or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement.
SECTION 2.09. Action by Directors. Unless statute or the charter or
the By-Laws requires a greater proportion, the action of a majority of the
directors present at a meeting at which a quorum is present is action of the
Board of Directors. A majority of the entire Board of Directors shall
constitute a quorun for the transaction of business. In the absence of a
quorum, the directors present by majority vote and without notice other than by
announcement may adjourn the meeting from time to time until a quorum shall
attend. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally notified. Unless otherwise provided by statute or regulation, any
action required or permitted to be taken at a meeting of the Board of Directors
may be taken without a meeting, if an unanimous written consent which sets
forth the action is signed by each member of the Board and filed with the
minutes of proceedings of the Board.
SECTION 2.10. Telephone Meetings. Members of the Board of Directors
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Unless provided otherwise by statute or
regulation, participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 2.11. Compensation. By resolution of the Board of Directors
a fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. A director who serves the
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Corporation in any other capacity also may receive compensation for such other
services, pursuant to a resolution of the Board of Directors.
ARTICLE III.
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from
among its members an Executive Cormmittee and other committees composed of two
or more directors and delegate to these committees any of the powers of the
Board of Directors, except the power to declare dividends or other
distributions on stock, elect directors, issue stock other than as provided in
the next sentence, recommend to the stockholders any action which requires
stockholder approval, amend the By-Laws, or approve any merger or share
exchange which does not require stockholder approval. If the Board of Directors
has given general authorization for the issuance of stock, a committee of the
Board, in accordance with a general formula or method specified by the Board by
resolution or by adoption of a stock option or other plan, may fix the terms of
stock subject to classification or reclassification and the terms on which any
stock may be issued, including all terms and conditions required or permitted
to be established or authorized by the Board of Directors.
SECTION 3.02. Committee Procedure. Each committee may fix rules of
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the action of a
majority of those present at a meeting at which a quorum is present shall be
action of the committee. The members of a committee present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of an absent member. Any action required or permitted to be taken at a
meeting of a committee may be taken without a meeting, if an unanimous written
consent which sets forth the action is signed by each member of the committee
and filed with the minutes of the committee. The members of a committee may
conduct any meeting thereof by telephone in accordance with the provisions of
Section 2.10.
SECTION 3.03. Emergency. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by
the charter and these By-Laws, any two or more available members of the then
incumbent Executive Committee shall constitute a quorum of that Committee for
the full conduct and management of the affairs and business of the Corporation
in accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
composed of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed
from time to time for that purpose,
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and any provisions of the By-Laws (other than this Section) and any resolutions
which are contrary to the provisions of this Section or to the provisions of
any such implementing resolutions shall be suspended until it shall be
determined by any interim Executive Committee acting under this Section that it
shall be to the advantage of the Corporation to resume the conduct and
management of its affairs and business under all the other provisions of these
By-Laws.
ARTICLE IV.
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall
have a President, a Secretary and a Treasurer. It may also have a Chairman of
the Board. The Board of Directors shall designate who shall serve as chief
executive officer, who shall have general supervision of the business and
affairs of the Corporation, and may designate a chief operating officer, who
shall have supervision of the operations of the Corporation. In the absence of
any designation the President, shall serve as chief executive officer. The
Corporation may also have one or more Vice-Presidents, assistant officers and
subordinate officers as may be established by the Board of Directors. A person
may hold more than one office in the Corporation except that no person may
serve concurrently as both President and Vice-President of the Corporation. The
other officers may be directors.
SECTION 4.02. Chairman of the Board. The Chairman of the Board, if
one be elected, shall preside at all meetings of the Board of Directors and of
the stockholders at which he shall be present; and, in general, he shall
perform all such duties as are from time to time assigned to him by the Board
of Directors. The Chairman of the Board shall be a director. The Chairman of
the Board, if one be elected, shall not be an officer of the corporation unless
expressly designated as an officer by the Board of Directors; the Chairman
shall be an executive officer if also expressly designated as the chief
executive officer of the Corporation.
SECTION 4.03. President. Unless otherwise provided by resolution of
the Board of Directors, the President, in the absence of the Chairman of the
Board, shall preside at all meetings of the Board of Directors and of the
stockholders at which he shall be present. Unless otherwise specified by the
Board of Directors, the President shall be the chief operating officer of the
Corporation and perform the duties customarily performed by chief operating
officers. He may sign and execute, in the name of the Corporation, all
authorized deeds, mortgages, bonds, contracts or other instruments, except in
cases in which the signing and execution thereof shall have been expressly
delegated to some other officer or agent of the Corporation. In general, he
shall perform all duties usually performed by a president of a corporation and
such other duties as are from time to time assigned to him by the Board of
Directors or the chief executive officer of the Corporation.
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SECTION 4.04. Vice-President. The Vice-President or Vice-Presidents,
at the request of the chief executive officer or the President, or in the
President's absence or during his inability to act, shall perform the duties
and exercise the functions of the President, and when so acting shall have the
powers of the President. If there be more than one Vice-President, the Board of
Directors may determine which one or more of the Vice-Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Directors, the chief executive officer or the
President may make such determination; otherwise any of the Vice-Presidents may
perform any of such duties or exercise any of such functions. The
Vice-President or Vice-Presidents shall have such other powers and perform such
other duties, and have such additional descriptive designations in their titles
(if any), as are from time to time assigned to them by the Board of Directors,
the chief executive officer, or the President.
SECTION 4.05. Secretary. The Secretary shall keep the minutes of the
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for that purpose; he shall see that all notices are duly
given in accordance with the provisions of the By-Laws or as required by law;
he shall be custodian of the records of the Corporation; he may witness any
document on behalf of the Corporation, the execution of which is duly
authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same; and, in general, he shall perform all duties incident to the office of a
secretary of a corporation, and such other duties as are from time to time
assigned to him by the Board of Directors, the chief executive officer, or the
President.
SECTION 4.06. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust
companies or other depositories as shall, from time to time, be selected by the
Board of Directors; he shall render to the President and to the Board of
Directors, whenever requested, an account of the financial condition of the
Corporation; and, in general, he shall perform all the duties incident to the
office of a treasurer of a corporation, and such other duties as are from time
to time assigned to him by the Board of Directors, the chief executive officer,
or the President.
SECTION 4.07. Assistant and Subordinate Officers. The assistant and
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board
of Directors, the chief executive officer, or the President.
SECTION 4.08. Election, Tenure and Removal of Officers. The Board of
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, during the pleasure of the
Board. The Board of Directors (or, as to any assistant or subordinate officer,
any committee or officer authorized by the Board) may remove an officer at any
time. The removal of an officer does not
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prejudice any of his contract rights. The Board of Directors (or, as to any
assistant or subordinate officer, any committee or officer authorized by the
Board) may fill a vacancy which occurs in any office for the unexpired portion
of the term.
SECTION 4.09. Compensation. The Board of Directors shall have power
to fix the salaries and other compensation and remuneration, of whatever kind,
of all officers of the Corporation. It may authorize any committee or officer,
upon whom the power of appointing assistant and subordinate officers may have
been conferred, to fix the salaries, compensation and remuneration of such
assistant and subordinate officers.
ARTICLE V.
INDEMNIFICATION
SECTION 5.01. Indemnification of Directors and Officers. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than a proceeding by or in the right of the Corporation in which such person
shall have been adjudged to be liable to the Corporation), by reason of being
or having been a director or officer of the Corporation, or serving or having
served at the request of the Corporation as a director, officer, partner,
trustee, employee or agent of another entity in which the Corporation has a
interest as a shareholder, creditor or otherwise (a "Covered Person"), against
all liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and reasonable expenses
(including attorney's fees) actually incurred by the Covered Person in
connection with such action, suit or proceeding, except (i) liability in
connection with any proceeding in which it is determined that (A) the act or
omission of the Covered Person was material to the matter giving rise to the
proceeding, and was committed in bad faith or was the result of active and
deliberate dishonesty, or (B) the Covered Person actually received an improper
personal benefit in money, property or services, or (C) in the case of any
criminal proceeding, the Covered Person had reasonable cause to believe that
the act or omission was unlawful and (ii) liability to the Corporation or its
security holders to which the Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office (any or all of
the conduct referred to in clauses (i) and (ii) being hereinafter referred to
as "Disabling Conduct").
SECTION 5.02. Procedure For Indemnification. Any indemnification
under this By-law shall (unless ordered by a court) be made by the Corporation
only as authorized for a specific proceeding by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Covered Person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of the proceeding against the Covered Person for insufficiency
of evidence of any Disabling Conduct, or (iii) a reasonable determination,
based upon a review of the facts, by a majority of a quorum of the directors
who are neither "interested
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persons" of the Corporation as defined in the 40 Act nor parties to the
proceeding ("disinterested, non-party directors"), or an independent legal
counsel in a written opinion, that the Covered Person was not liable by reason
of Disabling Conduct. The termination of any proceeding by judgment, order or
settlement shall not create a presumption that the Covered Person did not meet
the required standard of conduct; the termination of any proceeding by
conviction, or a plea of nolo contenders or its equivalent, or an entry of an
order of probation prior to judgment, shall create a rebuttable presumption
that the Covered Person did not meet the required standard of conduct. Any
determination pursuant to this Section 5.02 shall not prevent recovery from any
Covered Person of any amount paid to him in accordance with this By-Law as
indemnification if such Covered Person is subsequently adjudicated by a court
of competent jurisdiction to be liable by reason of Disabling Conduct.
SECTION 5.03. Advance Payment of Expenses. Reasonable expenses
(including attorney's fees) incurred by a Covered Person may be paid or
reimbursed by the Corporation in advance of the final disposition of an action,
suit or proceeding upon receipt by the Corporation of (i) a written affirmation
by the Covered Person of his good faith belief that the standard of conduct
necessary for indemnification under this By-Law has been met and (ii) a written
undertaking by or on behalf of the Covered Person to repay the amount if it is
ultimately determined that such standard of conduct has not been met, so long
as either (A) the Covered Person has provided a security for his undertaking,
(B) the Corporation is insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of the disinterested, non-party
directors, or an independent legal counsel in a written opinion, has
determined, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the Covered Person
ultimately will be found entitled to indemnification.
SECTION 5.04. Exclusivity, Etc. The indemnification and advance of
expenses provided by this By-Law shall not be deemed exclusive of any other
rights to which a Covered Person seeking indemnification or advance of expenses
may be entitled under any law (common or statutory), or any agreement, vote of
stockholders or disinterested directors, or other provision that is consistent
with law, both as to action in an official capacity and as to action in another
capacity while holding office or while employed by or acting as agent for the
Corporation, shall continue in respect of all events occurring while the
Covered Person was a director or officer after such Covered Person has ceased
to be a director or officer, and shall inure to the benefit of the estate,
heirs, executors and administrators of such Covered person. All rights to
indemnification and advance of expenses under the Charter and hereunder shall
be deemed to be a contract between the Corporation and each director or officer
of the Corporation who serves or served in such capacity at any time while this
By-Law is in effect. Nothing herein shall prevent the amendment of this By-Law,
provided that no such amendment shall diminish the rights of any Covered Person
hereunder with respect to events occurring or claims made before its adoption
or as to claims made after its adoption in respect of events occurring before
its adoption. Any repeal or modification of this By-Law shall not in any way
diminish any rights to indemnification or advance of expenses of a Covered
Person or the obligations of the Corporation arising hereunder with respect to
events occurring, or claims made, while this By-Law or any provision hereof is
in force.
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SECTION 5.05. Insurance. The Corporation may purchase and maintain
insurance on behalf of any Covered Person against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such; provided, however, that the Corporation shall not purchase
insurance to indemnify any Covered Person against liability for Disabling
Conduct.
SECTION 5.06. Severability: Definitions. The invalidity or
unenforceability of any provision of this Article V shall not affect the
validity or enforceability of any other provision hereof. The phrase "this
By-Law" in this Article V means this Article V in its entirety.
ARTICLE VI.
STOCK
SECTION 6.01. Certificates for Stock. If the Board of Directors
authorizes the issue of a class or series of stock with certificates, each
holder of shares of that class or series, upon written request therefor in
accordance with such procedures as may be established by the Board from time to
time, is entitled to certificates which represent and certify the shares of
that class or series he holds in the Corporation. Each stock certificate shall
include on its face the name of the Corporation, the name of the stockholder or
other person to whom it is issued, and the class or series of stock and number
of shares it represents. It shall be in such form, not inconsistent with law or
with the charter, as shall be approved by the Board of Directors or any officer
of officers designated for such purpose by resolution of the Board of
Directors. Each stock certificate shall be signed by the Chairman of the Board,
the President, or a Vice-President, and countersigned by the Secretary, an
Assistant Secretary, the Treasurer, or an Assistant Treasurer. Each certificate
may be sealed with the actual corporate seal or a facsimile of it or in any
other form and the signatures may be either manual or facsimile signatures. A
certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. The Board of Directors may authorize the
issue of some or all of the shares of any or all classes or series without
certificates. Such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. At the time of
issue or transfer of shares without certificates the Corporation shall send
each stockholder a written statement of the information required by the
Maryland General Corporation Law.
SECTION 6.02. Transfers. The Board of Directors shall have power and
authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of shares of stock; and may
appoint transfer agents. and registrars thereof. The duties of transfer agent
and registrar may be combined.
SECTION 6.03. Record Date and Closing, of Transfer Books. The Board
of Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled. to
notice of a meeting, vote at a meeting, receive a dividend, or
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be allotted other rights. The record date may not be prior to the close of
business on the day the record date is fixed nor, subject to Section 1.06, more
than 90 days before the date on which the action requiring the determination
will be taken; the transfer books may not be closed for a period longer than
20 days; and, in the case of a meeting of stockholders, the record date or the
closing of the transfer books shall be at least ten days before the date of the
meeting.
SECTION 6.04. Stock Ledger. The Corporation shall maintain a stock
ledger which contains the name and address of each stockholder and the number
of shares of stock of each class or series which the stockholder holds. The
stock ledger may be in written form or in any other form which can be converted
within a reasonable time into written form for visual inspection. The original
or a duplicate of the stock-ledger shall be kept at the offices of a transfer
agent for the particular class or series of stock, or, if none, at the
principal office in the State of Maryland or the principal executive offices of
the Corporation.
SECTION 6.05. Certification of Beneficial Owners. The Board of
Directors may adopt by resolution a procedure by which a stockholder of the
Corporation may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may certify, the purpose for which the certification
may be made, the form of certification and the information to be contained in
it, if the certification is with respect to a record date or closing of the
stock transfer books, the time after the record date or closing of the stock
transfer books within which the certification must be received by the
Corporation, and any other provisions with respect to the procedure which the
Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set
forth in the certification, the holder of record of the specified stock in
place of the stockholder who makes the certification.
SECTION 6.06. Lost Stock Certificates. The Board of Directors of the
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen or destroyed, including
the requirement that the owner furnish a bond as indemnity against any claim
that may be made against the Corporation in respect of the lost, stolen or
destroyed certificate, or the Board of Directors may delegate such power to any
officer or officers of the Corporation. In their discretion, the Board of
Directors or such officer or officers may refuse to issue such new certificate
save upon the order of some court having jurisdiction in the premises.
ARTICLE VII.
FINANCE
SECTION 7.01. Checks, Drafts, Etc. All checks, drafts and orders for
the payment of money, notes and other evidences of indebtedness, issued in the
name of the
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Corporation, shall, unless otherwise provided by resolution of the Board of
Directors, be signed by the President, a Vice-President or an Assistant
Vice-President and countersigned by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary.
SECTION 7.02. Annual Statement of Affairs. The President or chief
accounting officer shall prepare annually a full and correct statement of the
affairs of the Corporation, to include a statement of net assets and a
financial statement of operations for the preceding fiscal year. The statement
of affairs shall be placed on file at the Corporation's principal office within
120 days after the end of the fiscal year.
SECTION 7.03. Fiscal Year. The fiscal year of the Corporation shall
be the twelve-calendar-month period ending August 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 7.04. Dividends. If declared by the Board of Directors at
any meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the charter of the
Corporation.
SECTION 7.05. Net Asset Value. Except in the event of emergency
conditions or as otherwise permitted by the Investment Company Act of 1940, the
net asset value per share of each class or series of stock shall be determined
no less frequently than once daily, Monday through Friday, at such time or
times as the Board of Directors sets at least annually. In valuing portfolio
investments for the determination of the net asset value per share of any class
or series, securities for which market quotations are readily available shall
be valued at prices which, in the opinion of the Board of Directors or the
person designated by the Board of Directors to make the determination, most
nearly represent the current market value of such securities, and other
securities and assets shall be valued on the basis of their fair value as
determined by or pursuant to the direction of the Board of Directors, which in
the case of debt obligations, commercial paper and repurchase agreements may,
but need not, be on the basis of yields for securities of comparable maturity,
quality and type, or on the basis of amortized cost.
SECTION 7.06. Employment of Custodian. The Corporation shall place
and maintain its securities and similar investments in the custody of one or
more custodians meeting the requirements of the Investment Company Act of 1940
or may serve as its own custodian but only in accordance with such rules and
regulations or orders as the Securities and Exchange Commission may from time
to time prescribe for the protection of investors. Securities held by a
custodian may be registered in the name of the Corporation, including the
designation of the particular class or series to which such assets belong, or
any such custodian, or the nominee of either of them. Subject to such rules,
regulations, and orders as the Commission may adopt as necessary or appropriate
for the protection of investors, the Corporation or any custodian, with the
consent of the Corporation, may deposit all or any part of the securities owned
by the
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Corporation in a system for the central handling of securities, pursuant to
which system all securities of a particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities.
ARTICLE VIII.
SUNDRY PROVISIONS
SECTION 8.01. Books and Records. The Corporation shall keep correct
and complete books and records of its accounts and transactions and minutes of
the proceedings of its stockholders and Board of Directors and of any executive
or other committee when exercising any of the powers of the Board of Directors.
The books and records of a Corporation may be in written form or in any other
form which can be converted within a reasonable time into written form for
visual inspection. Minutes shall be recorded in written form but may be
maintained in the form of a reproduction. The original or a certified copy of
these By-Laws shall be kept at the principal office of the Corporation.
SECTION 8.02. Corporate Seal. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the
charge of the Secretary. The Board of Directors may authorize one or more
duplicate seals and provide for the custody thereof If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet
the requirement of any law, rule or regulation relating to a corporate seal to
place the word "Seal" adjacent to the signature of the person authorized to
sign the document on behalf of the Corporation.
SECTION 8.03. Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more
sureties and in such amount as may be satisfactory to the Board of Directors.
SECTION 8.04. Voting Shares in Other Corporations. Shares of other
corporations or associations, registered in the name of the Corporation, may be
voted by the President, a Vice-President, or a proxy appointed by either of
them. The Board of Directors, however, may by resolution appoint some other
person to vote such shares, in which case such person shall be entitled to vote
such shares upon the production of a certified copy of such resolution.
SECTION 8.05. Mail. Any notice or other document which is required
by these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
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SECTION 8.06. Execution of Documents. A person who holds more than
one office in the Corporation may not act in more than one capacity to execute,
acknowledge or verify an instrument required by law to be executed,
acknowledged or verified by more than one officer.
SECTION 8.07. Amendments. Subject to the special provisions of
Section 2.02, (i) any and all provisions of these By-Laws may be altered or
repealed and new by-laws may be adopted at any annual meeting of the
stockholders, or at any special meeting called for that purpose, and (ii) the
Board of Directors shall have the power, at any regular or special meeting
thereof, to make and adopt new by-laws, or to amend, alter or repeal any of the
By-Laws of the Corporation.
* * *
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[DESCRIPTION] NSAR item 77q
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INVESTMENT ADVISORY AGREEMENT
AGREEMENT (herein so called) made this 20th day of December, 1994, by and
between AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC., a Maryland corporation
(hereinafter referred to as the "FUND"), and AMERICAN CAPITAL ASSET MANAGEMENT,
INC., a Delaware corporation (hereinafter referred to as the "ADVISER").
The FUND and the ADVISER agree as follows:
(1) Services Rendered and Expenses Paid by ADVISER
The ADVISER, subject to the control, direction and supervision of the FUND's
Directors and in conformity with applicable laws, the FUND's Articles of
Incorporation ("Articles of Incorporation"), By-laws, registration statements,
prospectus and stated investment objectives, policies and restrictions, shall:
a. manage the investment and reinvestment of the FUND's assets including, by
way of illustration, the evaluation of pertinent economic, statistical,
financial and other data, determination of the industries and companies to be
represented in the FUND's portfolio, and formulation and implementation of
investment programs;
b. maintain a trading desk and place all orders for the purchase and sale of
portfolio investments for the FUND's account with brokers or dealers selected
by the ADVISER;
c. conduct and manage the day-to-day operations of the FUND including, by way
of illustration, the preparation of registration statements, prospectuses,
reports, proxy solicitation materials and amendments thereto, the furnishing
of routine legal services except for services provided by outside counsel to
the FUND selected by the Directors, and the supervision of the FUND's Treasurer
and the personnel working under his direction; and
d. furnish to the FUND office space, facilities, equipment and personnel
adequate to provide the services described in paragraphs a., b., and c. above
and pay the compensation of each FUND director and FUND officer who is an
affiliated person of the ADVISER, except the compensation of the FUND's
Treasurer and related expenses as provided below.
In performing the services described in paragraph b. above, the ADVISER shall
use its best efforts to obtain for the FUND the most favorable price and
execution available and shall maintain records adequate to demonstrate
compliance with this requirement. Subject to prior authorization by the FUND's
Directors of appropriate policies and procedures, the ADVISER may, to the
extent authorized by law, cause the FUND to pay a broker or dealer that
provides brokerage and research services to the ADVISER an amount of
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commission for effecting a portfolio investment transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction. In the event of such authorization and to the extent
authorized by law, the ADVISER shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of such action.
Except as otherwise agreed, or as otherwise provided herein, the FUND shall
pay, or arrange for others to pay, all its expenses other than those expressly
stated to be payable by the ADVISER hereunder, which expenses payable by the
FUND shall include (i) interest and taxes; (ii) brokerage commissions and other
costs in connection with the purchase and sale of portfolio investments; (iii)
compensation of its directors and officers other than those who are affiliated
persons of the ADVISER; (iv) compensation of its Treasurer, compensation of
personnel working under the Treasurer's direction, and expenses of office
space, facilities, and equipment used by the Treasurer and such personnel in
the performance of their normal duties for the FUND which consist of
maintenance of the accounts, books and other documents which constitute the
record forming the basis for the FUND's financial statements, preparation of
such financial statements and other FUND documents and reports of a financial
nature required by federal and state laws, and participation in the production
of the FUND's registration statement, prospectuses, proxy solicitation
materials and reports to shareholders; (v) fees of outside counsel to and of
independent accountants of the FUND selected by the Directors; (vi) custodian,
registrar and shareholder service agent fees and expenses; (vii) expenses
related to the repurchase or redemption of its shares including expenses
related to a program of periodic repurchases or redemptions; (viii) expenses
related to the issuance of its shares against payment therefor by or on behalf
of the subscribers thereto; (ix) fees and related expenses of registering and
qualifying the FUND and its shares for distribution under state and federal
securities laws; (x) expenses of printing and mailing of registration
statements, prospectuses, reports, notices and proxy solicitation materials of
the FUND; (xi) all other expenses incidental to holding meetings of the FUND's
shareholders including proxy solicitations therefor; (xii) expenses for
servicing shareholder accounts; (xiii) insurance premiums for fidelity coverage
and errors and omissions insurance; (xiv) dues for the FUND's membership in
trade associations approved by the Directors; and (xv) such nonrecurring
expenses as may arise, including those associated with actions, suits or
proceedings to which the FUND is a party and the legal obligation which the
FUND may have to indemnify its officers and directors with respect thereto. To
the extent that any of the foregoing expenses are allocated between the FUND
and any other party, such allocations shall be pursuant to methods approved by
the Directors.
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(2) Role of ADVISER
The ADVISER, and any person controlled by or under common control with the
ADVISER, shall be free to render similar services to others and engage in other
activities, so long as the services rendered to the FUND are not impaired.
Except as otherwise required by the Investment Company Act of 1940 (the "1940
Act"), any of the shareholders, directors, officers and employees of the FUND
may be a shareholder, trustee, director, officer or employee of, or be
otherwise interested in, the ADVISER, and in any person controlled by or under
common control with the ADVISER, and the ADVISER, and any person controlled by
or under common control with the ADVISER, may have an interest in the FUND.
Except as otherwise agreed, in the absence of willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties hereunder on the part
of the ADVISER, the ADVISER shall not be subject to liability to the FUND, or
to any shareholder of the FUND, for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
(3) Compensation Payable to ADVISER
The FUND shall pay to the ADVISER, as compensation for the services rendered,
facilities furnished and expenses paid by the ADVISER, a monthly fee computed
at the following annual rates:
.625% on the first $150 million of the FUND's average daily net assets; .55% on
the next $150 million of the FUND's average daily net assets; and .50% of any
excess over $300 million.
Average daily net assets shall be determined by taking the average of the net
assets for each business day during a given calendar month calculated in the
manner provided in the FUND's Articles of Incorporation. Such fee shall be
payable for each calendar month as soon as practicable after the end of that
month.
The fees payable to the ADVISER by the FUND pursuant to this Section 3 shall be
reduced by any commissions, tender solicitation and other fees, brokerage or
similar payments received by the ADVISER, or any other direct or indirect
majority owned subsidiary of American Capital Management & Research, Inc., or
its successor, in connection with the purchase and sale of portfolio
investments of the FUND, less any direct expenses incurred by such person, in
connection with obtaining such commissions, fees, brokerage or similar
payments. The ADVISER shall use its best efforts to recapture all available
tender offer solicitation fees and exchange offer fees in connection with the
FUND's portfolio transactions and shall advise the Directors of any other
commissions, fees, brokerage or similar payments which may be possible for the
ADVISER
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or any other direct or indirect majority owned subsidiary of American Capital
Management & Research, Inc., or its successor, to receive in connection with
the FUND's portfolio transactions or other arrangements which may benefit the
FUND.
In the event that the ordinary business expenses of the FUND for any fiscal
year should exceed the most restrictive expense limitation applicable in the
states where the FUND's shares are qualified for sale, the compensation due the
ADVISER for such fiscal year shall be reduced by the amount of such excess. The
ADVISER's compensation shall be so reduced by a reduction or a refund thereof,
at the time such compensation is payable after the end of each calendar month
during such fiscal year of the FUND, and if such amount should exceed such
monthly compensation, the ADVISER shall pay the FUND an amount sufficient to
make up the deficiency, subject to readjustment during the FUND's fiscal year.
For purposes of this paragraph, all ordinary business expenses of the FUND
shall include the investment advisory fee and other operating expenses paid by
the FUND except (i) for interest and taxes; (ii) brokerage commissions; (iii)
as a result of litigation in connection with a suit involving a claim for
recovery by the FUND; (iv) as a result of litigation involving a defense
against a liability asserted against the FUND, provided that, if the ADVISER
made the decision or took the actions which resulted in such claim, it acted in
good faith without negligence or misconduct; (v) any indemnification paid by
the FUND to its officers and directors and the ADVISER in accordance with
applicable state and federal laws as a result of such litigation; and (vi)
amounts paid to American Capital Marketing, Inc., the distributor of the FUND's
shares, in connection with a distribution plan adopted by the FUND's Directors
pursuant to Rule 12b-1 under the Investment Company Act of 1940.
If the ADVISER shall serve for less than the whole of any month, the foregoing
compensation shall be prorated.
(4) Books and Records
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
ADVISER hereby agrees that all records which it maintains for the FUND are the
property of the FUND and further agrees to surrender promptly to the FUND any
of such records upon the FUND's request. The ADVISER further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the Act.
(5) Duration of Agreement
This Agreement shall have an initial term of 2 years from the date hereof, and
shall continue in force from year to year thereafter, but only so long as such
continuance is approved at least annually by the vote of a majority of the
FUND's Directors who are not parties to this Agreement or interested persons of
any such
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parties, cast in person at a meeting called for the purpose of voting on such
approval, and by a vote of a majority of the FUND's Directors or a majority of
the FUND's outstanding voting securities.
This Agreement shall terminate automatically in the event of its assignment.
The Agreement may be terminated at any time by the FUND's Directors, by vote of
a majority of the FUND's outstanding voting securities, or by the ADVISER, on
60 days' written notice, or upon such shorter notice as may be mutually agreed
upon. Such termination shall be without payment of any penalty.
(6) Miscellaneous Provisions
For the purposes of this Agreement, the terms "affiliated person,"
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have their respective meanings defined in the 1940 Act and
the Rules and Regulations thereunder, subject, however, to such exemptions as
may be granted to either the ADVISER or the FUND by the Securities and Exchange
Commission (the "Commission"), or such interpretive positions as may be taken
by the Commission or its staff, under the 1940 Act, and the term "brokerage and
research services" shall have the meaning given in the Securities Exchange Act
of 1934 and the Rules and Regulations thereunder.
The parties hereto each have caused this Agreement to be signed in duplicate on
its behalf by its duly authorized officer on the above date.
AMERICAN CAPITAL HIGH YIELD INVESTMENTS, INC.
By: /s/ CURTIS W. MORELL
---------------------------------------
Name: Curtis W. Morell
---------------------------------------
Its: Vice President
AMERICAN CAPITAL ASSET MANAGEMENT, INC.
By: /s/ NORI L. GABERT
---------------------------------------
Name: Nori L. Gabert
---------------------------------------
Its: Vice President
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