INTERIM INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement, dated as of February 10, 2012 between THE CHINA FUND, INC.,
a Maryland corporation (the Fund), and RCM Asia Pacific Limited, a company
organized in Hong Kong and registered as an investment adviser with the U.S.
Securities and Exchange Commission and licensed by the Securities and Futures
Commission of Hong Kong (the Investment Manager).
WHEREAS, the Fund is a closed-end, non-diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the 1940 Act), shares of common stock of which are registered
under the Securities Act of 1933, as amended; and
WHEREAS, the Funds investment objective is long-term capital
appreciation which it seeks to achieve by investing primarily in equity
securities of China companies (as that term is defined in the Prospectus,
dated June 27, 2005 the Prospectus contained in the Fund's Registration
Statement on Form N-2 (File No.333-124392) (the Registration Statement) and
WHEREAS, the Fund desires to retain the Investment Manager to render
interim investment management services with respect to the Funds assets other
than those Fund assets invested in direct investments (as that term is defined
below), and the Investment Manager is willing to render such services on an
interim basis in accordance with Rule 15a-4 of the 1940 Act.
NOW, THEREFORE, in consideration of the mutual covenants hereafter
contained, it is hereby agreed by and between the parties hereto as follows:
1. Appointment of Investment Manager.
(a) The Fund hereby employs the Investment Manager for the period
and on the terms and conditions set forth herein, subject at all times to the
supervision of the Board of Directors of the Fund, to:
1. Other than with respect to the portion of the Funds assets
invested in direct investments (assets of the Fund that are invested in
securities that at the time of such investment are not listed (or approved for
listing) on a securities exchange), make all investment decisions for the
assets of the Fund (the Listed Assets) and to manage the investment and
reinvestment of the Listed Assets in accordance with the investment objective
and policies of the Fund set forth in the Funds Prospectus, and as such
investment objective and policies are amended from time to time by the Funds
Board of Directors, and subject always to the restrictions of the Funds
Articles of Incorporation and By-Laws, as amended or restated from time to
time, the provisions of the 1940 Act. Should the Board of Directors for the
Fund at any time make any definite determination as to investment policy and
notify the Investment Manager thereof, the Investment Manager shall be bound
by such determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Investment
Manager shall vote the Funds proxies in connection with its Listed Assets
in accordance with the Funds proxy voting policies which may be amended from
time to time by the Board, however, the Investment Manager will not be required
to comply with any such amendment until 30 days after it has been communicated
to the Investment Manager. The Investment Manager shall make such reports to
the Board concerning such proxy voting as the Board may deem necessary or
advisable. It is understood and acknowledged that no assurance has been or
can be provided that the investment objective of the Fund can or will be
achieved. The Investment Manager shall take, on behalf of the Fund, all actions
which it deems necessary to implement the investment policies of the Fund
applicable to the Funds Listed Assets and, with respect to the Funds Listed
Assets, to place all orders for the purchase or sale of portfolio securities
for the Fund with brokers or dealers selected by it, and in connection
therewith, the Investment Manager is authorized as agent of the Fund to give
instructions to the custodians from time to time of the Funds Listed Assets
as to deliveries of securities and payments of cash for the account of the Fund.
In connection with the selection of such brokers or dealers and the placing of
such orders, the Investment Manager is directed at all times to seek to use its
best efforts to obtain for the Fund the most favorable net results available
(best execution). In using its best efforts to obtain for the Fund best
execution, the Investment Manager shall consider all factors it deems relevant,
including, by way of illustration, price, the size of the transaction, the
nature of the market security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the reputation,
experience and financial stability of the broker or dealer involved and the
quality of service rendered by the broker or dealer in other transaction.
Subject to such policies as the Fund may communicate to the Investment Manager
in writing, the Investment Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement solely by reason of its
having caused the Fund to pay a broker or dealer that provides brokerage and
research services to the Investment Manager or its affiliates an amount of
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, if the Investment Manager determines in good faith that such
amount of commission was reasonable. Subject to these requirements and the
provision of the 1940 Act, the U.S. Securities Exchange Act of 1934 and any
other applicable provisions of law, nothing shall prohibit the Investment
Manager from selecting brokers or dealers with which it or the Fund is
affiliated;
2. Prepare and make available to the Fund as reasonably
requested by the Board of Directors pertinent research and statistical data;
and
3. Maintain or cause to be maintained for the Fund all
books and records required under the 1940 Act, to the extent that such books
and records are not maintained or furnished by administrators, custodians or
other agents of the Fund.
(b) The Investment Manager accepts such appointment and agrees
during the term of this Agreement to render such services, to permit one of
its or its affiliates directors, officers or employees to serve without
compensation as a director and/or officer of the Fund if elected to such
positions and to assume the obligations herein for the compensation herein
provided. The Investment Manager 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 or represent
the Fund in any way or otherwise be deemed an agent of the Fund.
(c) The Fund hereby acknowledges (and the Investment Manager
hereby acknowledges the Fund has informed it) that the Fund has allocated
25% of the net proceeds of the Offering (as defined in the Prospectus)
less 25% of the aggregate repurchase price of any shares of the Funds
Common Stock repurchased by the Fund to direct investments; provided,
however, that such allocation shall be subject to review and modification
by the Board of Directors of the Fund (the Direct Investment Amount).
The portion of the Direct Investment Amount as is actually invested in
direct investments shall be managed by such entity as may be appointed
by the Fund to manage the assets of the Fund other than the Listed Assets
(the Direct Investment Manager) in accordance with the terms of a separate
investment management and advisory services agreement entered into by and
between the Fund and the Direct Investment Manager (the Direct Investment
Management Agreement). The portion of the Direct Investment Amount as is
not actually invested in direct investments shall be treated as Listed
Assets to be managed by the Investment Manager pursuant to the terms of
this Agreement. Whenever the Direct Investment Manager shall recommend the
investment of Fund assets in a direct investment, the Fund shall instruct
the Investment Manager in writing as to the amount of Fund assets sought to
be invested in such direct investment, and the Investment Manager shall,
within ten business days thereafter (or such other period of time as the Fund
may direct in writing, but such period may not be less than 10 business days),
liquidate sufficient portfolio securities to realize such amount and make the
net proceeds thereof available for investment in such direct investment Upon
the sale of a direct investment, the Direct Investment Manager shall make the
net proceeds thereof available as soon as reasonably practicable for
investment pursuant to this Agreement by the Investment Manager. For the
avoidance of doubt, the Investment Manager shall not be under any obligation
to comply with or to ensure that the amount of direct investments are within
the Direct Investment Amount.
(d) The Fund hereby agrees that the Investment Manager shall be
entitled to delegate all or any of its functions, powers, discretions, duties
and obligations, to any person or persons, and any such delegation may be on
such terms and conditions as the Investment Manager thinks fit provided that
any such delegation shall not relieve the Investment Manager of its obligations
under this Agreement; provided, however, that no delegation of investment
management powers and functions may occur unless approved in advance by the
Board of Directors of the Fund and, if required by the 1940 Act, by the Funds
stockholders; and provided further that no delegation of any other powers or
functions may occur unless the Investment Manager has given the Board of
Directors of the Fund at least 30 days prior notice of such delegation.
2. Compensation. For the services and facilities described in Section 1,
the Fund agrees to pay in United States dollars to the Investment Manager, a
fee in accordance with the schedule set forth as Exhibit A hereto. 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 this
Agreement is in effect during such month and year, respectively.
3. Investment in Fund Stock. The Investment Manager agrees that it will
not make a short sale of any capital stock of the Fund, or purchase any share
of the capital stock of the Fund.
4. Non-Exclusivity of Services. Nothing herein shall be construed as
prohibiting the Investment Manager or any of its affiliates from providing
investment advisory services to, or entering into investment advisory
agreements with, any other clients (including other registered investment
companies), including clients which may invest in Chinese equity securities,
so long as the Investment Managers services to the Fund pursuant to this
Agreement are not materially impaired thereby. The Investment Manager is not
obligated to purchase or sell for the Fund any security which the Investment
Manager or its affiliates may purchase or sell for their own accounts or other
clients.
5. Standard of Care; indemnification. The Investment Manager may rely on
information reasonably believed by it to be accurate and reliable. Neither the
Investment Manager nor its officers, directors, employees, agents or controlling
persons (as defined in the 0000 Xxx) shall be subject to any liability for any
act or omission, error of judgment or mistake of law, or for any loss suffered
by the Fund, in the course of, connected with or arising out of any services to
be rendered hereunder, except by reason of willful misfeasance, bad faith or
gross negligence on the part of the Investment Manager in the performance of
its duties or by reason of reckless disregard on the part of the Investment
Manager of its obligations and duties under this Agreement. Any person, even
though also employed by the Investment Manager, who may be or become an
employee of the Fund shall be deemed, when acting within the scope of his
employment by the Fund, to be acting in such employment solely for the Fund
and not as an employee or agent of the Investment Manager. In no event will
the Investment Manager have any responsibility for any portion of the Fund
other than the Listed Assets or for the acts or omissions of the Direct
Investment Manager or any other adviser of the Fund. In particular, the
Investment Manager shall have no responsibility for the Funds being in
violation of any applicable law or regulation or investment policy or
restriction or instruction applicable to the Fund as a whole or for the
Funds failing to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended (the Code), if the Funds holding
of the Listed Assets is such that the Listed Assets would not be in such
violation or if the Fund would not fail to qualify if the Listed Assets
were deemed a separate series of the Fund or a separate regulated investment
company under the Code.
The Fund agrees to indemnify and hold harmless the Investment Manager,
its officers, directors, employees, agents, shareholders, controlling persons
or other affiliates (each an Indemnified Party), for any losses, costs and
expenses incurred or suffered by any Indemnified Party arising from any
action, proceeding or claims which may be brought against such Indemnified
Party in connection with the performance or non-performance in good faith
of its functions under this Agreement, except losses, costs and expenses
resulting from willful misfeasance, bad faith or gross negligence in the
performance of such Indemnified Partys duties or from reckless disregard on
the part of such Indemnified Party of such Indemnified Partys obligations
and duties under this Agreement.
6. Allocation of Charges and Expenses.
(a) The Investment Manager shall assume and pay for maintaining
its staff and personnel, and shall at its own expense provide the equipment,
office space and facilities, necessary to perform its obligations hereunder.
The Investment Manager shall pay the salaries and expenses of such officer
of the Fund and any fees and expenses of such Directors of the Fund who,
as contemplated by Section 1(b) hereof, is a director, officer or
employee of the Investment Manager or any of its affiliates, provided,
however, that the Fund, and not the Investment Manager, shall bear travel
expenses or an appropriate fraction thereof of any Director and/or officer
of the Fund who is a director, officer or employee of the Investment Manager
to the extent that such expenses relate to attendance at meetings of the
Board of Directors of the Fund or any committee thereof and provided,
further, that such expenses are incurred in accordance with the Funds
travel policy.
(b) In addition to the fee of the Investment Manager, the
Fund shall assume and pay the following expenses: fees of the Direct
Investment Manager; legal fees and expenses of counsel to the Fund;
auditing and accounting expenses; taxes and governmental fees; New York
Stock Exchange listing fees; dues and expenses incurred in connection
with membership in investment company organizations; fees and expenses
of the Funds custodian, sub-custodian, transfer agents and registrars;
fees and expenses with respect to administration, except as may be herein
expressly provided otherwise; expenses for portfolio pricing services
by a pricing agent, if any; expenses of preparing share certificates
and other expenses in connection with the issuance, offering and
underwriting of shares issued by the Fund; expenses relating
to investor and public relations; expenses of registering or qualifying
securities of the Fund for public sale; freight, insurance and other
charges in connection with the shipment of the Funds portfolio
securities; brokerage commissions or other costs of acquiring or
disposing of any portfolio holding of the Fund; expenses of preparation
and distribution of reports, notices and dividends to shareholders;
expenses of the Funds dividend reinvestment and cash purchase plan;
costs of stationery; any litigation expenses; and costs of stockholders
and other meetings.
7. Potential Conflicts of Interest.
(a) Subject to applicable statutes and regulations, it is
understood that directors, officers or agents of the Fund are or may be
interested in the Investment Manager as directors, officers, employees,
agents, shareholders or otherwise, and that the directors, officers,
employees, agents or shareholders of the Investment Manager may be
interested in the Fund as a director, officer, agent or otherwise.
(b) If the Investment Manager considers the purchase or sale of
securities for the Fund and other advisory clients of the Investment Manager
at or about the same time, transactions in such securities will be made for
the Fund and such other clients in accordance with the Investment Manager's
trade allocation procedures, as may be amended from time to time, provided
that the Board of Directors of the Fund receives at least ten days advance
notice of any such amendment.
8. Duration and Termination.
(a) This Agreement shall become effective at noon on February 12,
2012 (New York time) and continue in effect until April 6, 2012 (New York
time), unless earlier terminated as provided herein.
(b) This Agreement may be terminated at any time without payment
of any penalty, by the Fund acting pursuant to a vote of the Board, or by a
vote of a majority of the outstanding voting securities of the Fund upon 10
calendar days prior written notice to the Investment Manager or by the
Investment Manager upon 60 days prior written notice to the Board, or upon
such shorter notice as may be mutually agreed upon. This Agreement shall
terminate automatically and immediately in the event of its assignment.
The terms assignment and vote of a majority of the outstanding voting
securities shall have the meanings set forth for such terms in the 1940 Act.
This Agreement shall also be automatically terminated if the Investment
Manager ceases to be licensed by the Securities and Futures Commission
of Hong Kong.
9. Amendment. This Agreement may be amended by mutual agreement if
required by the 1940 Act or other applicable law, provided, that, any
such amendment shall only become effective after the affirmative vote
of (1) the holders of a majority of the outstanding voting securities
of the Fund, and (2) a majority of the members of the Funds Board of
Directors who are not interested persons of the Fund or of the Investment
Manager, cast in person at a meeting called for the purpose of voting on
such approval.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act.
11. Notices. Any communication hereunder must be in writing and must be
made by letter, telex or facsimile. Any communication or document to be made
or delivered by one person to another pursuant to this Agreement shall (unless
that other person has by fifteen (15) days' notice to the other specified
another address) be made or delivered to that other person at the following
relevant address:
If to the Investment Manager:
RCM Asia Pacific Limited
00xx Xxxxx, XXXX Xxxxx,
0 Xxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx
Attention: Xxxxxx Xxxx, Head of Compliance
Telephone No.: x000 0000 0000
Facsimile No.: x000 0000 0000
If to the Fund:
The China Fund, Inc.
x/x Xxxxx Xxxxxx Xxxx and Trust Company
X.X. Xxx 0000
0 Xxxxxx xx Xxxxxxxxx, Xxxxxx, XX 00000-0000
Attention: Xxxxxx X. Coop
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
With copies to:
Xxxxxxxx Chance US LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention; Xxxxxxx Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and shall, if made by letter, be deemed to have been received when delivered
by hand or if sent by mail within two days if both the sender and the
addressee are in Hong Kong and within 10 days if the sender and/or the
addressee are outside Hong Kong and the letter is sent by prepaid airmail,
and shall if made by telex be deemed to have been received when acknowledged
by the addressees correct answer back code, and shall, if sent by facsimile,
be deemed to have been received upon production of a transmission report by
the machine from which the facsimile was sent which indicates that the
facsimile was sent in its entirety to the facsimile number of the recipient
and provided that a hard copy of the notice so served by telex or facsimile
was posted that same days as the notice was served by electronic means.
12. Jurisdiction. Each party hereto irrevocably agrees that any suit,
action or proceeding against either of the Investment Manager or the Fund
arising out of or relating to this Agreement shall be subject non-exclusively
to the jurisdiction of the United States District Court for the Southern
District of New York or the Supreme Court of the State of New York, New York
County, and each party hereto irrevocably submits non-exclusively to the
jurisdiction of each such court in connection with any such suit, action or
proceeding. Each party hereto waives any objection to the laying of venue of
any such suit, action or proceeding in either such court, and waives any
claim that such suit, action or proceeding has been brought in an inconvenient
forum Each party hereto irrevocably consents to service of process in
connection with any such suit, action or proceeding by mailing a copy thereof
in English by registered or certified mail, postage prepaid, to their
respective addresses as set forth in the Agreement.
13. Representations and Warranties of the Investment Manager. The
Investment Manager represents and warrants that: (a)it is duly registered
as an investment adviser under the U.S. Investment Advisers Act of 1940, as
amended, and (b) it is duly licensed by the Securities and Futures Commission
of Hong Kong, and that it will use its reasonable efforts to maintain
effective such registration and license during the term of this Agreement.
14. Representation and Warranty of the Fund. The Fund represents and
warrants that it has full legal right to enter into this Agreement and to
perform the obligations hereunder and that it has obtained all necessary
consents and approvals to enter into this Agreement.
15. Provision of Certain Information by the Fund. The Fund shall
furnish the Investment Manager with copies of the Funds Articles of
Incorporation, By-laws and Registration Statement on Form N-2, as amended or
restated from time to time, any press releases made by the Fund and any
reports made by the Fund to its shareholders, as soon as practicable after
such documents become available. The Investment Manager shall not be bound
by the terms of these documents until delivered to the Investment Manager
in accordance with Section 11 herein. The Fund shall furnish the Investment
Manager with any further documents, materials or information that the
Investment Manager may reasonably request to enable it to perform its
duties pursuant to this Agreement.
16. Press Releases, Reports, Other Disclosures. Any reports, press
releases or other disclosures made by the Fund which contain statements
of the Direct Investment Manager about the Investment Manager or about
the management of assets by the Investment Manager shall be subject to
the prior approval of the Investment Manager.
17. Severability. If any provision of the Agreement is determined
by a court of competent jurisdiction to be invalid or unenforceable,
such finding shall not affect the validity or enforceability of the
remaining portions of this Agreement.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define any of the provisions
hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have executed this Agreement by their officers
thereunto duly authorized as of the day and year first written above.
THE CHINA FUND, INC.
By:/s/ Xxxxx Dell
Name: Xxxxx Dell
Title: Treasurer
RCM ASIA PACIFIC LIMITED
By:/s/ Xxxxxxx Eu
Name: Xxxxxxx Eu
Title: Director
By:./s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Director
EXHIBIT A
The Investment Manager shall receive a fee for its services under the
Agreement, computed weekly and payable monthly, at the annual rates as set
forth below:
0.70% of the first $315,000,000 of the Funds average weekly net
assets consisting of Listed Assets; and
0.50% of the Funds average weekly net assets for all Listed
Assets in excess of $315,000,000.
The net asset value of the Listed Assets shall be determined in the manner
provided in the Funds Registration Statement on Form N-2.
28394065_5
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28394065_5
Exhibit 77Q1E1 Copies of any new or amended Registrant investment
advisory contracts
28394065_5
