INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 28th day of March,
2006, by and between FIRST TRUST STRATEGIC HIGH INCOME FUND II, 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 l940 (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
..90% of the Fund's Managed Assets, as such term is defined herein.
"Managed Assets" means the average daily gross asset value of the
Fund which includes 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, minus the sum of the Fund's
accrued and unpaid dividends on any outstanding Preferred Shares
and accrued liabilities (other than the principal amount of any
borrowings incurred, commercial paper or notes issued by the Fund
and the liquidation preference of outstanding Preferred Shares).
For the month and year in which this Agreement becomes
effective, or terminates, there shall be an appropriate proration
on the basis of the number of days that the Agreement shall have
been in effect during the month and year, respectively. The
services of the Adviser to the Fund under this Agreement are not to
be deemed exclusive, and the Adviser shall be free to render
similar services or other services to others so long as its
services hereunder are not impaired thereby.
4. The Adviser shall arrange for suitably qualified officers or
employees of the Adviser to serve, without compensation
from the Fund, as trustees, officers or agents of the Fund, if duly
elected or appointed to such positions, and subject to their
individual consent and to any limitations imposed by law.
5. For purposes of this Agreement, brokerage commissions
paid by the Fund upon the purchase or sale of the Fund's portfolio
securities shall be considered a cost of securities of the Fund and
shall be paid by the Fund.
6. 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 conform in all material respects to all applicable
rules and regulations of the Securities and Exchange Commission and
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, in addition, will 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
ecords 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 by a vote of a majority of the
outstanding voting securities of the Fund in accordance with the
requirements of the 1940 Act. This Agreement shall continue in
effect until the two-year anniversary of the date of its
effectiveness, unless and until terminated by either party as
hereinafter provided, and shall continue in force from year to year
thereafter, but only as long as such continuance is specifically
approved, at least annually, in the manner required by the 1940
Act.
This Agreement shall automatically terminate in the event of
its assignment, and may be terminated at any time without the
payment of any penalty by the Fund or by the Adviser upon sixty
(60) days' written notice to the other party. The Fund may effect
termination by action of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund,
accompanied by appropriate notice. This Agreement may be
terminated, at any time, without the payment of any penalty, by the
Board of Trustees of the Fund, or by vote of a majority of the
outstanding voting securities of the Fund, in the event that it
shall have been established by a court of competent jurisdiction
that the Adviser, or any officer or director of the Adviser, has
taken any action which results in a breach of the 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 STRATEGIC HIGH
INCOME FUND II
By:
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: ____/s/_James A. Bowen__
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
FIRST TRUST ADVISORS L.P.
By:
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: ____/s/ Xxxx X. Bradley___
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
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