INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated and effective as of 12:00 A.M. EST
(New York time) June 1, 2019 (the "Agreement"), between
THE TAIWAN FUND, INC., a Maryland corporation of One
Lincoln Street, PO Box 5049 (02206-5049), Xxxxxx XX
00000 (herein referred to as the "Fund"), and Allianz Global
Investors U.S. LLC, a limited liability company organized in
Delaware with principal place of business 0000 Xxxxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (herein referred to as the
"Adviser").
NOW THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Adviser hereby undertakes and agrees, upon the terms
and conditions herein set forth, (i) to make investment
decisions for the Fund, to prepare and make available to the
Fund research and statistical data in connection therewith and
to supervise the acquisition and disposition of securities by the
Fund, including the selection of brokers or dealers to carry out
the transactions, all in accordance with the Fund's investment
objectives and policies and in accordance with guidelines and
directions from the Fund's Board of Directors; (ii) to assist the
Fund as it may reasonably request in the conduct of the Fund's
business, subject to the direction and control of the Fund's
Board of Directors; (iii) to maintain or cause to be maintained
for the Fund all books, records, reports and any other
information required under the Investment Company Act of
1940, as amended (the "1940 Act") and to furnish or cause to
be furnished all required reports or other information under
Taiwan securities laws, to the extent that such books, records
and reports and other information are not maintained or
furnished by the custodian or other agents of the Fund; (iv) to
report regularly to the Fund's Board of Directors on the
investment program for the Fund and to furnish the Fund's
Board of Directors such periodic and special reports as the
Fund's Board of Directors may reasonably request, including,
but not limited to, reports concerning investment transactions
and performance of the Fund; (v) to provide reasonable
assistance to the Fund's administrator as needed in the
preparation of reports and notices by the Fund to stockholders,
in the preparation of filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-
regulatory organizations, including preliminary and definitive
proxy materials and post-effective amendments to the Fund's
registration statement on Form N-2 under the Securities Act of
1933, as amended, and the 1940 Act, as amended from time to
time, (vi) to pay the salaries and expenses of such of the
Fund's officers and directors as are directors, officers or
employees of the Adviser (and to permit its directors, officers
or employees to so serve if elected to such positions by the
Fund's Board of Directors); provided, however, that the Fund,
and not the Adviser, shall bear travel expenses (or an
appropriate portion thereof) of directors and officers of the
Fund who are directors, officers or employees of the Adviser
to the extent that such expenses relate to attendance at
meetings of the Board of Directors of the Fund or any
committees thereof or advisers thereto and provided further
that such expenses are incurred in accordance with the Fund's
travel policy in effect at the time, (vii) to assist the Fund's
Treasurer in identifying passive foreign investment companies
(PFICs) in the Fund's portfolio, (viii) to provide sub-
certifications to support certifications made by officers of the
Fund in documents filed by the Fund with the SEC, (viii) to
identify securities in the Fund's portfolio that constitute
holdings of 5% or more of the voting shares of a portfolio
company, (ix) to assist in identifying securities that are
restricted or illiquid securities, (x) to provide the Fund with
information on brokerage commissions incurred by the Fund,
(xi) to assist in the implementation of the Fund's Discount
Management Program, (xii) to provide reasonable assistance
to the Fund's Board of Directors or the Fund's administrator
to determine or confirm the value of any portfolio security for
which the Fund's administrator seeks assistance from the
Adviser or identifies for review by the Adviser, (xiii) to the
extent permitted, to assist in such marketing and investor
relations activities with respect to the Fund as the Fund may
reasonably request, (xiv) to host and maintain the Fund's
website, (xv) to prepare the Fund's monthly "Insight" report to
investors, (xvi) to provide certain stockholder services,
(xvii) to permit one of its or its affiliate's directors, officers or
employees to serve without compensation as an officer of the
Fund if elected to such positions and to assume the obligations
herein for the compensation herein provided, and (xviii) to
vote the Fund's proxies only in accordance with the Adviser's
proxy voting policies in effect from time to time, provided that
the Fund's Board of Directors has approved the Adviser's
proxy voting guidelines including any amendments from time
to time. The Adviser shall bear all expenses arising out of its
duties hereunder but shall not be responsible for any expenses
of the Fund other than those specifically allocated to the
Adviser in this paragraph 1. In particular, but without limiting
the generality of the foregoing, the Adviser shall not be
responsible for the following expenses of the Fund:
organization and certain offering expenses of the Fund
(including out-of-pocket expenses, but not including overhead
or employee costs of the Adviser or of any one or more
organizations acting as "participating affiliate" of the
Adviser); fees payable to any consultants, including an
advisory board, if applicable; legal expenses; auditing and
accounting expenses; telephone, telex, facsimile, postage and
other communication expenses; taxes and governmental fees;
stock exchange listing fees; fees, dues and expenses incurred
by the Fund in connection with membership in investment
company trade organizations; fees and expenses of the Fund's
custodians, subcustodians, transfer agents and registrars;
payment for portfolio pricing or valuation services to pricing
agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates and other expenses in
connection with the issuance, offering, distribution, sale or
underwriting of securities issued by the Fund; expenses of
registering or qualifying securities of the Fund for sale;
expenses relating to investor and public relations; freight,
insurance and other charges in connection with the shipment
of the Fund's portfolio securities; brokerage commissions or
other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of preparing and distributing reports,
notices and dividends to stockholders; costs of stationery;
costs of stockholders' and other meetings; litigation expenses;
or expenses relating to the Fund's dividend reinvestment and
cash purchase plan (except for brokerage expenses paid by
participants in such plan).
2. The Fund acknowledges that in rendering investment
advisory services to the Fund under this Agreement, the
Adviser may use the resources of its affiliate, Allianz Global
Investors Taiwan, Limited ("Taiwan Affiliate") that is not
registered under the U.S. Investment Advisers Act of 1940
(the "Advisers Act") to provide discretionary investment
advice to the Adviser and execute portfolio trades for the
Fund. Taiwan Affiliate is a "participating affiliate" of the
Adviser as that term is used in relief granted by the staff of the
SEC allowing U.S. registered advisers to use investment
advisory and trading resources of unregistered non-
U.S. advisory affiliates subject to the regulatory supervision of
the registered adviser. Taiwan Affiliate and its employees who
provide services to the Fund are considered under the
Collaboration Agreement between the Adviser and Taiwan
Affiliate to be "associated persons" of the Adviser as that term
is defined in the Advisers Act for purposes of the Adviser's
required supervision.
3. In the selection of brokers or dealers and the placing of
orders for the purchase and sale of portfolio investments for
the Fund, the Adviser shall seek to obtain for the Fund the
most favorable price and execution available, except to the
extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Adviser, bearing
in mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the 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 transactions. Subject to such policies
as the Fund's Board of Directors may determine, 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 its having caused the Fund to pay a broker
or dealer that provides brokerage and research services to the
Adviser 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 Adviser determines in good faith that such
amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with
respect to the Fund and to other clients of the Adviser as to
which the Adviser exercises investment discretion. In
selecting brokers or dealers to execute a particular transaction
and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Fund and/or other accounts over
which the Adviser or an affiliate exercises investment
discretion. The Fund hereby agrees with the Adviser that any
entity or person associated with the Adviser which is a
member of a national securities exchange is authorized to
effect any transaction on such exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities
Exchange Act of 1934 (the "1934 Act"), subject to compliance
with the 1940 Act and the rules thereunder.
4. The Fund agrees to pay to the Adviser in United States
dollars, as full compensation for the services to be rendered
and expenses to be borne by the Adviser hereunder, the fee
based on the average net assets of the Fund set forth in
Schedule A hereto, which will include a performance fee
adjustment. The fee payable to the Adviser shall be computed,
accrued and paid as provided in Schedule A. The Fund shall
provide the Adviser with a monthly accounting of the
performance adjusted fee. The value of the net assets of the
Fund shall be determined pursuant to the applicable provisions
of the valuation policies of the Fund, as amended from time to
time.
5. The Adviser 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 otherwise than for investment. Where the
Adviser provides services to the Fund in relation to derivative
products, including futures contracts and options, the Adviser
shall provide to the Fund, upon request, product specifications
and prospectus or offering documents (if any).
6. Nothing herein shall be construed as prohibiting the Adviser
from providing investment advisory services to, or entering
into investment advisory agreements with, other clients
(including other registered investment companies), including
clients which may invest in securities of Taiwan issuers,
except that the Adviser shall notify the Fund where it acts as
the investment adviser or investment manager to any other
investment company that is listed on the New York Stock
Exchange and has a policy to invest primarily in Taiwan
securities. In addition, the Adviser may not utilize information
furnished to the Adviser by advisers and consultants to the
Fund in providing investment management services to another
New York Stock Exchange listed investment company with a
policy to invest primarily in Taiwan securities. Nothing
contained herein shall be construed as constituting the Adviser
as an agent of the Fund.
Whenever the Fund and one or more other accounts or
investment companies advised by the Adviser have available
funds for investment, investments suitable and appropriate for
each shall be allocated in accordance with procedures believed
by the Adviser to be equitable to each entity, which
procedures and any amendments thereto shall be provided to
the Fund's Board for review. Similarly, opportunities to sell
securities shall be allocated in a manner believed by the
Adviser to be equitable. The Fund recognizes that in some
cases this procedure may adversely affect the size of the
position that may be acquired or disposed of for the Fund. In
addition, the Fund acknowledges that the persons employed by
the Adviser to assist in the performance of the Adviser's
duties hereunder will not devote their full time to such service
and nothing contained herein shall be deemed to limit or
restrict the right of the Adviser or
any affiliate of the Adviser to engage in and devote time and
attention to other businesses or to render services of whatever
kind or nature.
7. (a) The Adviser does not guarantee the future performance
of the Fund or any specific level of performance, the success
of any investment decision or strategy that the Adviser may
use, or the success of the Adviser's overall management of the
Fund. The Fund understands that investment decisions made
for the Fund by the Adviser are subject to various market,
currency, economic, political and business risks, and that those
investment decisions will not always be profitable.
(b) The Adviser may rely on information reasonably believed
by it to be accurate and reliable. Neither the Adviser nor its
officers, directors, employees or agents 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 Adviser in the
performance of its duties or by reason of reckless disregard on
the part of the Adviser of its obligations and duties under this
Agreement. Any person, even though also employed by the
Adviser, who may be or become an employee of the Fund and
paid by 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 Adviser.
(c) Neither party shall be liable to the other for any indirect,
consequential, punitive or special loss or damages under this
Agreement.
8. (a) The Adviser agrees to indemnify the Fund for, and hold
it harmless against, any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Adviser) or litigation (including
reasonable legal and other expenses) to which the Fund may
become subject ("Losses") as a direct result of Adviser's
willful misfeasance, bad faith or gross negligence in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement; provided,
however, that nothing contained herein shall require that the
Fund be indemnified for Losses that resulted from the Fund's
or its agent's willful misfeasance, bad faith or gross
negligence in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Agreement; further provided that the Adviser shall have been
given written notice concerning any matter for which
indemnification is claimed under this Section.
(b) The Fund agrees to indemnify the Adviser for, and hold it
harmless against, any and all Losses to which the Adviser may
become subject as a direct result of this Agreement or the
Adviser's performance of its duties hereunder; provided,
however, that nothing contained herein shall require that the
Adviser be indemnified for Losses that resulted from the
Adviser's willful misfeasance, bad faith or gross negligence in
the performance of its duties or from reckless disregard by it
of its obligations and duties under this Agreement; provided
that the Fund shall have been given written notice concerning
any matter for which indemnification is claimed under this
Section.
9. This Agreement shall be in effect for an initial term of two
years from the date of this Agreement and shall continue in
effect from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the
affirmative vote of (i) a majority of the members of the Fund's
Board of Directors who are not parties to this Agreement or
interested persons of any party to this Agreement, or of any
entity regularly furnishing investment advisory services with
respect to the Fund pursuant to an agreement with any party to
this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) a majority of the
Fund's Board of Directors or the holders of a majority of the
outstanding voting securities of the Fund. This Agreement
may nevertheless be terminated at any time without penalty,
on 60 days' written notice, by the Fund's Board of Directors,
by vote of holders of a majority of the outstanding voting
securities of the Fund, or by the Adviser.
This Agreement shall automatically be terminated in the event
of its assignment. Any notice to the Fund or the Adviser shall
be deemed given when received by the addressee.
10. This Agreement may not be transferred, assigned, sold or
in any manner hypothecated or pledged by either party hereto,
except as permitted under the 1940 Act or rules and
regulations adopted thereunder. It may be amended by mutual
agreement of the parties, but only after authorization of such
amendment by the affirmative vote of (i) a majority of the
members of the Fund's Board of Directors who are not parties
to this Agreement or interested persons of any party to this
Agreement, or of any entity regularly furnishing investment
advisory services with respect to the Fund pursuant to an
agreement with any party to this Agreement, cast in person at
a meeting called for the purpose of voting on such approval
and (ii) if required by applicable SEC rules, regulations or
orders, a vote of the holders of a majority of the outstanding
voting securities of the Fund.
11. The Adviser may, without cost to the Fund, employ an
affiliate or a third party to perform any accounting,
administrative, reporting and ancillary services required to
enable the Adviser to perform its functions under this
Agreement. Notwithstanding any other provision of the
Agreement, the Adviser may provide information about the
Fund to any such affiliate or other third party for the purpose
of providing the services contemplated under this clause. The
Adviser will act in good faith in the selection, use and
monitoring of affiliates and other third parties, and any
delegation or appointment hereunder shall not relieve the
Adviser of any of its obligations under this Agreement.
12. This Agreement shall be construed in accordance with the
laws of the State of New York, without giving effect to the
conflicts of laws principles thereof, provided, however, that
nothing herein shall be construed as being inconsistent with
the 1940 Act. As used herein, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the 1940
Act, the rules and regulations thereunder and interpretations
thereof by the SEC or its staff.
13. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original,
and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such
counterpart.
14. Each party hereto irrevocably agrees that any suit, action
or proceeding against either of the Adviser or the Fund arising
out of or relating to this Agreement shall be subject 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 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
by registered or certified mail, postage prepaid, to its address
as set forth in this Agreement.
15. The Adviser represents and warrants that it is duly
registered as an investment adviser under the U.S. Investment
Advisers Act of 1940. Taiwan Affiliate has received a license
from the Financial Supervisory Commission in the Republic
of China to provide services under the Collaboration
Agreement. The Adviser will use its reasonable efforts to, and
to cause Taiwan Affiliate to, maintain in effect such
registration and license during the term of this Agreement.
The Collaboration Agreement complies with the laws and
regulations of the United States and the Republic of China.
The Fund acknowledges that the Fund may have provided and
may, from time to time, provide certain personal information
on individuals relating to the Fund and/or a third party
("Data") to the Adviser. The Fund acknowledges that the
Adviser has informed the Fund of its right to request access to
and/or correction of the Data which the Adviser may hold and
that request may be made to the Personal Data Officer of the
Adviser at its principal place of business in the State of New
York as stated at the beginning of this Agreement. The Fund
further acknowledges that the Adviser has informed the Fund
and the Fund hereby consents that Data may be collected,
held, processed, disclosed or used by the Adviser and
transferred to any office of the Adviser, any of Adviser's
holding companies or Associates, any of the Adviser's agents
and any other third party which provides services to the
Adviser, within or outside the State of New York, for the
purposes of the Adviser or any such other entity providing the
services contemplated under this Agreement and to facilitate
the provision by an affiliate to the Fund of potential additional
products and services. The Fund represents and warrants that
appropriate consent has been obtained from the relevant
individuals for such collection, storage, processing, disclosure,
usage and transfer of Data.
16. 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.
17. The parties will inform each other in writing within a
reasonable time of material changes to the information
provided to each other under this Agreement.
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 TAIWAN FUND, INC
By: /s/ Xxxxxxx X. Xxxxx
Name: Xxxxxxx Xxxxx
Title: Chairman
ALLIANZ GLOBAL INVESTORS U.S. LLC
BY: /s/ Xxxxxx X. Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: Managing Director, Head of U.S. Funds
SCHEDULE A
MANAGEMENT FEE
In consideration of the services described in the agreement,
the Fund will pay the Adviser a fee ("Management Fee") that
will be composed of a Base Fee (defined below) and a
Performance Adjustment (defined below) to the Base Fee
based upon the investment performance of the Fund's shares
in relation to the investment record of a securities index
determined by our Board of Directors to be appropriate
("Index") over the same performance period.
Base Fee. The base fee is calculated and accrued daily at the
annual rate of 0.70% of the Fund's average daily net assets
("Base Fee").
Performance Adjustment. The Adviser's compensation is
increased or decreased from the Base Fee by a performance
adjustment ("Performance Adjustment") that depends on
whether, and to what extent, the investment performance of
the Fund's shares exceeds, or is exceeded by, the performance
of the TAIEX Total Return, expressed in US dollars (the
"Index").
The Performance Adjustment is calculated and accrued,
according to a schedule that adds or subtracts an amount at a
rate of 0.0005% (0.05 basis points) of the Fund's average
daily net assets for the current Performance Period through the
prior business day for each 0.01% (1 basis point) of absolute
performance by which the total return performance of the
Fund's shares exceeds or lags the performance of the Index for
the period from the beginning of the current Performance
Period through the prior business day. The maximum
Performance Adjustment (positive or negative) will not exceed
an annualized rate of +/-0.25% (25 basis points) of the Fund's
average daily net assets, which would occur when the
performance of the Fund's shares exceeds, or is exceeded by,
the performance of the Index by 5 percentage points (500
basis points) for the Performance Period. For purposes of
calculating the Performance Adjustment, the NAV of the Fund
and the level of the Index will be determined as of the close of
trading on the Taiwan Stock Exchange on each business day;
the exchange rate to be used for purposes of converting the
TAIEX Total Return Index into the Index on each business
day shall be the same exchange rate as used to determine the
NAV on that business day; and "business day" shall mean any
day that on which trading occurs on the New York Stock
Exchange. The Performance Adjustment will be calculated
and accrued pursuant to a process agreed to by the Adviser
and the Fund.
For purposes of calculating the Performance Adjustment, the
total return performance of the Fund's shares will be the sum
of:
1) the change in the net asset net asset value per share
("NAV") during the Performance Period, after deducting any
accretion in the NAV resulting from the repurchase of shares
by the Fund; plus
2) the value of the cash distributions per share paid by
the Fund during the Performance Period; plus
3) the value of capital gains taxes per share paid or
payable on undistributed realized long-term capital gains
accumulated during the Performance Period; expressed as a
percentage of the NAV per share at the beginning of the
Performance Period.
For this purpose, the value of distributions per share of
realized capital gains, of dividends per share paid from
investment income and of capital gains taxes per share paid or
payable on undistributed realized long-term capital gains shall
be treated as reinvested in shares of the Fund at the NAV per
share in effect at the close of business on the ex-dividend date
for the payment of such distributions and dividends and the
date on which provision is made for such taxes, after giving
effect to such distributions, dividends and taxes.
The investment record of the Index will be the sum of:
1) the change in the level of the Index during the
Performance Period, as expressed in US dollars; plus
2) if not reflected in the Index, the value, computed
consistently with the Index, of cash distributions made by
companies whose securities comprise the Index during the
Performance Period, expressed as a percentage of the Index
level at the beginning of the Performance Period. For this
purpose, cash distributions on the securities which comprise
the Index shall be treated as reinvested in the Index at least as
frequently as the end of each calendar quarter following the
payment of the dividend.
To the extent an event occurs that impacts the Fund's NAV
per share or the investment record of the Index and results
from circumstances out of the ordinary course of business
including, but not limited to, the receipt of litigation proceeds,
an NAV error correction, a change in the Index performance
resulting from market news, or some other event that is
outside of the ordinary course of business, the Board will
consult with Adviser to determine whether such impact should
be excluded from the performance adjustment calculation.
Notwithstanding any other provision in this Schedule A, any
calculations of the investment performance of the Fund's
shares and the investment performance of the Index will be
made in accordance with the Investment Advisers Act of
1940, as amended, and any applicable rules thereunder.
Performance Period. The period over which performance is
measured ("Performance Period") is initially from
September 1, 2019 to August 31, 2020 and thereafter each 12-
month period beginning on September 1 immediately
following the prior Performance Period through August 31 of
the following year.
Payment of Fees. The Fund will pay the Adviser, on a monthly
basis, a fee at the annual rate of the Base Fee applied to the
average daily net assets of the Fund for the month. At the end
of each Performance Period, the Fund will pay the Adviser, or
the Adviser will pay the Fund, the positive or negative
amount, as the case may be, of the Performance Adjustment
for the Performance Period. From the date on which the
Adviser begins to manage the Fund to August 31, 2019, the
Fund will pay the Adviser only the Base Fee, without any
Performance Adjustment.
Index. The initial Index for the Performance Fee is set forth
above. If the Fund's Board of Directors determines, based on
consultation with the Adviser, that another appropriate Index
should be substituted as the Index, the Board may determine to
use such other appropriate Index for purposes of the
Performance Adjustment (the "Replacement Index") without
stockholder approval, unless stockholder approval of the
change is otherwise required by applicable law. Any
Replacement Index will be applied prospectively to determine
the amount of the Performance Adjustment. The Index will
continue to be used to determine the amount of the
Performance Adjustment for that part of the Performance
Period prior to the effective date of the Replacement Index.
