INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 24th day of May, 2007, by and
between FIRST TRUST/GALLATIN 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 objectives 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 then current registration statement under
the Investment Company Act of 1940 (the "1940 Act"), 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 therefor, an investment management fee equal to the
annual rate of 1.00% of the Fund's Managed Assets, as such term is defined
herein. 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.
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. The 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), the Adviser may select brokers or dealers
affiliated with the Adviser. It is understood that the 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
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 Adviser's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the 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 the Adviser or its affiliates, if
in the 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 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 the Adviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in a manner believed by the 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 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 Adviser will not arrange purchases or sales of securities between
the Fund and other accounts advised by the 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 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.
The 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 by or sold to the
Adviser or any affiliated person of either the Fund or the Adviser, except as
may be permitted under the 1940 Act.
The 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 (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 Adviser
and, (iii) conduct its activities under this Agreement in all material
respects 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
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 of Trustees may
reasonably request. The Adviser further agrees that all records which it
maintains for the Fund are the property of the Fund and the 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. The Adviser agrees to pay (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 $.04 per Common Share (as described 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.
8. 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.
9. 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.
10. 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.
11. The Fund acknowledges that the Adviser now acts, and intends in the
future to 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 acknowledges
that the persons employed by the Adviser to assist in the Adviser's duties under
this Agreement will not devote their full time to such efforts. It is also
agreed that the 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.
12. This Agreement shall be effective on the date provided above,
provided it has been approved in the manner required by 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 material 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 and for any additional period during which
the Adviser serves as such for the Fund, subject to applicable law. 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.
13. 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.
14. 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.
15. 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. 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 and
those assets belonging to the subject Fund, for the enforcement of any claims.
16. This Agreement shall be construed in accordance with applicable
federal law and (except as to Section 15 hereof which shall be construed in
accordance with the laws of Massachusetts) the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement
to be executed on the day and year above written.
FIRST TRUST/GALLATIN 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: President
ATTEST: /s/ Xxxx X. Xxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
