Investment Sub-Advisory Agreement
Agreement made as of this 24th day of May, 2007 by and among First
Trust/Gallatin Specialty Finance and Financial Opportunities Fund, a
Massachusetts business trust (the "Fund"), First Trust Advisors L.P., an
Illinois limited partnership (the "Manager") and a registered investment adviser
with the Securities and Exchange Commission ("SEC"), and Gallatin Asset
Management, Inc., a Delaware Corporation and a registered investment adviser
with the SEC (the "Sub-Adviser").
Whereas, the Fund is a closed-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
Whereas, the Fund has retained the Manager to serve as the investment
manager for the Fund pursuant to an Investment Management Agreement between the
Manager and the Fund (as such agreement may be modified from time to time, the
"Management Agreement");
Whereas, the Management Agreement provides that the Manager may, subject
to the initial and periodic approvals required under Section 15 of the 1940 Act,
appoint a sub-adviser at its own cost and expense for the purpose of furnishing
certain services required under the Management Agreement;
Whereas, the Fund and the Manager desire to retain the Sub-Adviser to
furnish investment advisory services for the Fund's investment portfolio, upon
the terms and conditions hereafter set forth;
Now, Therefore, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Appointment. The Fund and the Manager hereby appoint the Sub-Adviser
to provide certain sub-investment advisory services to the Fund for the period
and on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Fund or the Manager in any way, nor otherwise be deemed an agent of the Fund or
the Manager.
2. Services to Be Performed. Subject always to the supervision of the
Fund's Board of Trustees and the Manager, the Sub-Adviser will act as
sub-adviser for, and manage on a discretionary basis the investment and
reinvestment of the assets of the Fund, furnish an investment program in respect
of, make investment decisions for, and place all orders for the purchase and
sale of securities for the Fund's investment portfolio, all on behalf of the
Fund and as described in the Fund's initial registration statement on Form N-2
(File No. 333-141457) as declared effective by the SEC, and as the same may
thereafter be amended from time to time. In the performance of its duties, the
Sub-Adviser will in all material respects (a) satisfy any applicable fiduciary
duties it may have to the Fund, (b) monitor the Fund's investments, and (c)
comply with the provisions of the Fund's Declaration of Trust and By-laws, as
amended from time to time and communicated by the Fund or the Manager to the
Sub-Adviser in writing, and the stated investment objectives, policies and
restrictions of the Fund as such objectives, policies and restrictions may
subsequently be changed by the Fund's Board of Trustees and communicated by the
Fund or the Manager to the Sub-Adviser in writing. The Fund or the Manager has
provided the Sub-Adviser with current copies of the Fund's Declaration of Trust,
By-laws, prospectus, statement of additional information and any amendments
thereto, and any objectives, policies or limitations not appearing therein as
they may be relevant to the Sub-Adviser's performance under this Agreement.
The Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio investments for 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
compliance with the policies and procedures adopted by the Board of Trustees for
the Fund and to the extent permitted by and in conformance with applicable law
(including Rule 17e-1 of the 1940 Act), the Sub-Adviser may select brokers or
dealers affiliated with the Sub-Adviser. It is understood that the Sub-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 the
Sub-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 the Sub-Adviser's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities placed with respect to the
assets of the Fund with similar orders being made simultaneously for other
accounts managed by the Sub-Adviser or its affiliates, if in the Sub-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 sale of an asset
of the Fund occurs as part of any aggregate sale or purchase orders, the
objective of the Sub-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 a
fair and equitable manner. Nevertheless, the Fund and Manager acknowledge 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,
and neither the Fund nor Manager shall object to any such fair and equitable
allocation. Whenever the Fund and one or more other investment advisory clients
of the Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in a manner believed by the Sub-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, the Sub-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.
The Sub-Adviser will not arrange purchases or sales of securities
between the Fund and other accounts advised by the Sub-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) the Sub-Adviser reasonably believes the purchase or sale is in the best
interests of the Fund, and (c) the Fund's Board of Trustees has approved these
types of transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein. However, no such policy or procedure shall be
binding on the Sub-Adviser unless it is communicated to the Sub-Adviser in
writing.
The Sub-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 the Fund's portfolio securities be
knowingly purchased from or sold to the Manager, the Sub-Adviser or any
affiliated person of either the Fund, the Manager, or the Sub-Adviser, except as
may be permitted under the 1940 Act.
The Sub-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 other accounts for which it
has investment responsibilities under the Investment Advisers Act of
1940;
(b) will (i) conform in all material respects to all applicable
rules and regulations of the Securities and Exchange Commission, (ii)
comply in all material respects with all policies and procedures adopted
by the Board of Trustees for the Fund and communicated to the
Sub-Adviser in writing and (iii) conduct its activities under this
Agreement in all material respects in accordance with any applicable law
and regulations of any governmental authority pertaining to its
investment advisory activities;
(c) will report to the Manager and to the Board of Trustees of
the Fund on a quarterly basis and will make appropriate persons
available for the purpose of reviewing with representatives of the
Manager and the Board of Trustees on a regular basis at such times as
the Manager or the Board of Trustees may reasonably request in writing
regarding 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 Manager or 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 for the Fund's
investment portfolio as required for registered investment advisers
under applicable law or as otherwise reasonably agreed to by the parties
and will prepare and furnish the Manager and Fund's Board of Trustees
such periodic and special reports as the Board or the Manager may
reasonably request. The Sub-Adviser further agrees that all records that
it maintains for the Fund are the property of the Fund and the
Sub-Adviser will surrender promptly to the Fund any such records upon
the request of the Manager or the Fund (provided, however, that the
Sub-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.
3. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
brokerage commissions, if any) purchased for the Fund.
4. Additional Sub-Advisers. Subject to obtaining the initial and
periodic approvals required under Section 15 of the 1940 Act and the approval of
the Manager, the Sub-Adviser may retain one or more additional sub-advisers at
the Sub-Adviser's own cost and expense for the purpose of furnishing one or more
of the services described in Section 2 hereof with respect to the Fund.
Retention of a sub-adviser hereunder shall in no way reduce the responsibilities
or obligations of the Sub-Adviser under this Agreement and the Sub-Adviser shall
be responsible to the Fund for all acts or omissions of any sub-adviser in
connection with the performance of the Sub-Adviser's duties hereunder.
5. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Manager will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a portfolio
management fee (the "Management Fee") equal to the annual rate of 0.50% of the
Fund's Managed Assets (as defined below), subject to paragraph 6 below. For
purposes of calculating the Management Fee, Managed Assets means the average
daily gross asset value of the Fund (including assets attributable to the Fund's
Preferred Shares (as such term is defined in the Fund's prospectus), if any, and
the principal amount of borrowings, if any), 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). For purposes of determining Managed Assets, the
liquidation preference of any outstanding Preferred Shares of the Fund is not
treated as a liability. The Management Fee shall be payable in arrears on or
about the first day of each month during the term of this Agreement.
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 is in effect during the month and year, respectively.
6. Expense Reimbursement. The Sub-Adviser agrees to pay the Manager
one-half of (i) all organizational costs and (ii) all offering costs of the Fund
(other than sales load, but including the reimbursement of underwriting expenses
as described in the Fund's prospectus) that exceed $0.04 per Common Share (as
such term is defined in the Fund's prospectus). The term "organizational costs"
and "offering costs" shall have the meanings ascribed to them in Sections
8.18-8.25 of the AICPA Audit and Accounting Guide, Audits for Investment
Companies, with Conforming Changes as of May 1, 2002.
7. Services to Others. The Fund and the Manager acknowledge that the
Sub-Adviser now acts, or may in the future act, as an investment adviser to
other managed accounts and as investment adviser or sub-investment adviser to
one or more other investment companies that are not a series of the Fund. In
addition, the Fund and the Manager acknowledge that the persons employed by the
Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not
devote their full time to such efforts. It is also agreed that the Sub-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.
8. Limitation of Liability. The Sub-Adviser shall not be liable for, and
the Fund and the Manager will not take any action against the Sub-Adviser to
hold the Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by the Fund or the Manager (including, without limitation, by
reason of the purchase, sale or retention of any security) in connection with
the performance of the Sub-Adviser's duties under this Agreement, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its duties under this Agreement,
or by reason of its reckless disregard of its obligations and duties under this
Agreement.
9. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Fund on the same date as the Management Agreement between
the Fund and the Manager becomes effective (it being understood that the Manager
shall notify the Sub-Adviser of the date of effectiveness of the Management
Agreement as soon as reasonably practical after effectiveness), provided that it
has been approved in the manner required by the 1940 Act, and shall remain in
full force until the two-year anniversary of the date of its effectiveness
unless sooner terminated as hereinafter provided. This Agreement shall continue
in force from year to year thereafter, but only as long as such continuance is
specifically approved for the Fund at least annually in the manner required by
the 1940 Act and the rules and regulations thereunder; provided, however, that
if the continuation of this Agreement is not approved for the Fund, the
Sub-Adviser may continue to serve in such capacity for the Fund in the manner
and to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
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 Manager or the Sub-Adviser upon sixty (60) days' written notice to the
other parties. This Agreement may also be terminated by the Fund by action of
the Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of such Fund upon sixty (60) days' written notice to the
Sub-Adviser by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, 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
Sub-Adviser or any officer or director of the Sub-Adviser has taken any action
that results in a breach of the material covenants of the Sub-Adviser set forth
herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 5 earned prior to such termination and for any additional
period during which the Sub-Adviser serves as such for the Fund, subject to
applicable law.
10. Compliance Certification. From time to time the Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the Investment
Company Act of 1940, as amended, as are reasonably requested by the Fund or
Manager. In addition, the Sub-Adviser will, from time to time, provide a written
assessment of its compliance program in conformity with current industry
standards that is reasonably acceptable to the Fund to enable the Fund to
fulfill its obligations under Rule 38a-1 of the Investment Company Act of 1940,
as amended.
11. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
If to the Manager or the Fund: If to the Sub-Adviser:
First Trust/Gallatin Specialty Finance and Gallatin Asset Management, Inc.
Financial Opportunities Fund One North Jefferson Avenue
First Trust Advisors Xx. Xxxxx, Xxxxxxxx 00000
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000 Xxxxxxxxx: Chief Executive Officer
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
12. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Agreement and 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 and a copy of which has been provided to the Sub-Adviser prior to the
date hereof. This Agreement is executed on behalf of the Fund by the Fund's
officers in their capacity as officers and not individually and are not binding
upon any of the Trustees, officers, or shareholders of the Fund individually but
the obligations imposed upon the Fund by this Agreement 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 and those assets belonging to the subject Fund,
for the enforcement of any claims.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
14. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 12 hereof which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
15. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
16. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Fund represents that engagement of the Sub-Adviser has been duly authorized
by the Fund and is in accordance with the Fund's Declaration of Trust and other
governing documents of the Fund.
17. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Management Fee described
in Section 5 are not severable.
18. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
In Witness Whereof, the Fund, the Manager and the Sub-Adviser have
caused this Agreement to be executed as of the day and year first above written.
First Trust Advisors X.X. Xxxxxxxx Asset Management, Inc.
By ________________________________ By ________________________________
Title: ________________________ Title: ________________________
First Trust/Gallatin Specialty Finance
and Financial Opportunities Fund
By _________________________________
Title: ________________________
