INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 3rd day of January, 2011, by and
between FIRST TRUST SPECIALTY FINANCE AND FINANCIAL OPPORTUNITIES FUND, a
Massachusetts business trust (the "Fund"), and FIRST TRUST ADVISORS L.P., an
Illinois limited partnership (the "Adviser").
WITNESSETH:
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby engages the Adviser 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 the Fund's affairs to the extent requested by and subject to
the supervision of the Board of Trustees of the Fund for the period and upon the
terms herein set forth. The investment of the Fund's assets shall be subject to
the Fund's policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's most recent effective registration
statement under the Investment Company Act of l940 (the "1940 Act") and as such
policies, restrictions and limitations may be amended by the Board of Trustees
of the Fund from time to time, and all applicable laws and the regulations of
the Securities and Exchange Commission relating to the management of registered
closed-end management investment companies.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services (other than such services, if any,
provided by the Fund's transfer agent, administrator or other service providers)
for the Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such positions,
and to assume the obligations herein set forth for the compensation herein
provided. The Adviser shall at its own expense furnish all executive and other
personnel, office space, and office facilities required to render the investment
management and administrative services set forth in this Agreement. In the event
that the Adviser pays or assumes any expenses of the Fund not required to be
paid or assumed by the Adviser under this Agreement, the Adviser shall not be
obligated hereby to pay or assume the same or similar expense in the future;
provided that nothing contained herein shall be deemed to relieve the Adviser of
any obligation to the Fund under any separate agreement or arrangement between
the parties.
2. The Adviser shall, for all purposes herein provided, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for nor represent the Fund in any way, nor
otherwise be deemed an agent of the Fund.
3. For the services and facilities described in Section 1, the Fund will
pay to the Adviser, at the end of each calendar month, and the Adviser agrees to
accept as full compensation therefore, an investment management fee equal to the
annual rate of 1.00% of the Fund's Managed Assets, as such term is defined
herein. "Managed Assets" means the average daily gross asset value of the Fund
(including assets attributable to the Fund's preferred shares, if any, and the
principal amount of borrowings), minus the sum of the Fund's accrued and unpaid
dividends on any outstanding preferred shares and accrued liabilities (other
than the principal amount of any borrowings incurred, commercial paper or notes
issued by the Fund and the liquidation preference of any outstanding preferred
shares).
For the month and year in which this Agreement becomes effective, or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement shall have been in effect during the month and year,
respectively. The services of the Adviser to the Fund under this Agreement are
not to be deemed exclusive, and the Adviser shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby.
4. The Adviser shall arrange for suitably qualified officers or employees
of the Adviser 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.
5. For purposes of this Agreement, brokerage commissions paid by the Fund
upon the purchase or sale of the Fund's portfolio securities shall be considered
a cost of securities of the Fund and shall be paid by the Fund.
6. Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of the Fund's securities on behalf of the Fund,
and is directed to use its commercially reasonable efforts to obtain best
execution, which includes most favorable net results and execution of the Fund's
orders, taking into account all appropriate factors, including price, dealer
spread or commission, size and difficulty of the transaction and research or
other services provided. Subject to approval by the Fund's Board of Trustees and
to the extent permitted by and in conformance with applicable law (including
Rule 17e-1 of the 1940 Act), Adviser may select brokers or dealers affiliated
with Adviser. It is understood that Adviser will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the Fund, or be in breach of
any obligation owing to the Fund under this Agreement, or otherwise, solely by
reason of its having caused the Fund to pay a member of a securities exchange, a
broker or a dealer a commission for effecting a securities transaction for the
Fund in excess of the amount of commission another member of an exchange, broker
or dealer would have charged if Adviser determined in good faith that the
commission paid was reasonable in relation to the brokerage or research services
provided by such member, broker or dealer, viewed in terms of that particular
transaction or Adviser's overall responsibilities with respect to its accounts,
including the Fund, as to which it exercises investment discretion.
In addition, Adviser may, to the extent permitted by applicable law,
aggregate purchase and sale orders of securities with similar orders being made
simultaneously for other accounts managed by Adviser or its affiliates, if in
Adviser's reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund, taking into consideration the selling or purchase
price, brokerage commissions and other expenses. In the event that a purchase or
-2-
sale of an asset of the Fund occurs as part of any aggregate sale or purchase
orders, the objective of Adviser and any of its affiliates involved in such
transaction shall be to allocate the securities so purchased or sold, as well as
expenses incurred in the transaction, among the Fund and other accounts in an
equitable manner. Nevertheless, the Fund acknowledges that under some
circumstances, such allocation may adversely affect the Fund with respect to the
price or size of the securities positions obtainable or salable. Whenever the
Fund and one or more other investment advisory clients of Adviser have available
funds for investment, investments suitable and appropriate for each will be
allocated in a manner believed by Adviser to be equitable to each, although such
allocation may result in a delay in one or more client accounts being fully
invested that would not occur if such an allocation were not made. Moreover, it
is possible that due to differing investment objectives or for other reasons,
Adviser and its affiliates may purchase securities of an issuer for one client
and at approximately the same time recommend selling or sell the same or similar
types of securities for another client.
Adviser will not arrange purchases or sales of securities between the Fund
and other accounts advised by Adviser or its affiliates unless (a) such
purchases or sales are in accordance with applicable law (including Rule 17a-7
of the 0000 Xxx) and the Fund's policies and procedures, (b) Adviser determines
the purchase or sale is in the best interests of the Fund, and (c) the Fund's
Board of Trustees have approved these types of transactions.
To the extent the Fund seeks to adopt, amend or eliminate any objectives,
policies, restrictions or procedures in a manner that modifies or restricts
Adviser's authority regarding the execution of the Fund's portfolio
transactions, the Fund agrees to use reasonable commercial efforts to consult
with the Adviser regarding the modifications or restrictions prior to such
adoption, amendment or elimination.
Adviser will communicate to the officers and trustees of the Fund such
information relating to transactions for the Fund as they may reasonably
request. In no instance will portfolio securities be purchased or sold to
Adviser or any affiliated person of either the Fund or Adviser, except as may be
permitted under the 1940 Act.
Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform to all applicable Rules and Regulations of the
Securities and Exchange Commission in all material respects and comply
with all policies and procedures adopted by the Board of Trustees for the
Fund and communicated to Adviser and, in addition, will conduct its
activities under this Agreement in accordance with any applicable
regulations of any governmental authority pertaining to its investment
advisory activities;
(c) will report regularly to the Board of Trustees of the Fund
(generally on a quarterly basis) and will make appropriate persons
-3-
available for the purpose of reviewing with representatives of the Board
of Trustees on a regular basis at reasonable times the management of the
Fund, including, without limitation, review of the general investment
strategies of the Fund, the performance of the Fund's investment portfolio
in relation to relevant standard industry indices and general conditions
affecting the marketplace and will provide various other reports from time
to time as reasonably requested by the Board of Trustees of the Fund; and
(d) will prepare and maintain such books and records with respect to
the Fund's securities and other transactions as required under applicable
law and will prepare and furnish the Fund's Board of Trustees such
periodic and special reports as the Board may reasonably request. Adviser
further agrees that all records which it maintains for the Fund are the
property of the Fund and Adviser will surrender promptly to the Fund any
such records upon the request of the Fund (provided, however, that Adviser
shall be permitted to retain copies thereof); and shall be permitted to
retain originals (with copies to the Fund) to the extent required under
Rule 204-2 of the Investment Advisers Act of 1940 or other applicable law.
7. Subject to applicable statutes and regulations, it is understood that
officers, trustees, or agents of the Fund are, or may be, interested persons (as
such term is defined in the 1940 Act and rules and regulations thereunder) of
the Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Adviser may be
interested persons of the Fund otherwise than as trustees, officers or agents.
8. The Adviser shall not be liable for any loss sustained by reason of the
purchase, sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research made by
any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
9. Subject to obtaining the initial and periodic approvals required under
Section 15 of the 1940 Act, the Adviser may retain one or more sub-advisers at
the Adviser's own cost and expense for the purpose of furnishing one or more of
the services described in Section 1 hereof with respect to the Fund. Retention
of a sub-adviser shall in no way reduce the responsibilities or obligations of
the Adviser under this Agreement and the Adviser shall be responsible to the
Fund for all acts or omissions of any sub-adviser in connection with the
performance of the Adviser's duties hereunder.
10. The Fund acknowledges that Adviser now acts, and intends in the future
to act, as an investment adviser to other managed accounts and as investment
adviser or investment sub-adviser to one or more other investment companies. In
addition, the Fund acknowledges that the persons employed by Adviser to assist
in Adviser's duties under this Agreement will not devote their full time to such
efforts. It is also agreed that Adviser may use any supplemental research
obtained for the benefit of the Fund in providing investment advice to its other
investment advisory accounts and for managing its own accounts.
-4-
11. This Agreement shall be effective on the date provided above, provided
it has been approved by a vote of a majority of the outstanding voting
securities of the Fund in accordance with the requirements of the 1940 Act. This
Agreement shall continue in effect until the two-year anniversary of the date of
its effectiveness, unless and until terminated by either party as hereinafter
provided, and 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 1940 Act.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser upon 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 voting securities of the Fund, accompanied
by appropriate notice. This Agreement may be terminated, at any time, without
the payment of any penalty, by the Board of Trustees of the Fund, or by vote of
a majority of the outstanding voting securities of the Fund, in the event that
it shall have been established by a court of competent jurisdiction that the
Adviser, or any officer or director of the Adviser, has taken any action which
results in a breach of the covenants of the Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in Section
3, earned prior to such termination. The terms "assignment" and "vote of the
majority of outstanding voting securities" shall have the same meanings set
forth in the 1940 Act and the rules and regulations thereunder.
12. 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.
13. 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 receipt of such notice.
14. All parties hereto are expressly put on notice of the Fund's
Declaration of Trust and all amendments thereto, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts and the limitation of
shareholder and trustee liability contained therein. This Agreement is executed
on behalf of the Fund by the Fund's officers as officers and not individually
and the obligations imposed upon the Fund by this Agreement are not binding upon
any of the Fund's Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Fund, and persons dealing with
the Fund must look solely to the assets of the Fund for the enforcement of any
claims.
15. This Agreement shall be construed in accordance with applicable
federal law and (except as to Section 14 hereof which shall be construed in
accordance with the laws of Massachusetts) the laws of the State of Illinois.
-5-
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
FIRST TRUST SPECIALTY FINANCE AND
FINANCIAL OPPORTUNITIES FUND
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
FIRST TRUST ADVISORS L.P.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
ATTEST: /s/ Xxxx X. Xxxxxxx
---------------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Operating Officer
-6-
