INTERIM INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 12th day of October by and among First
Trust/Aberdeen Emerging Opportunity Fund, a Massachusetts business trust (the
"Fund"), First Trust Advisors L.P., an Illinois limited partnership (the
"Manager") registered as an investment adviser with the Securities and Exchange
Commission ("SEC"), and Aberdeen Asset Management, Inc., a Delaware company
registered as an 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 have retained the Sub-Adviser to furnish
investment advisory services for the Fund's investment portfolio pursuant to an
Investment Sub-Advisory Agreement dated August 22, 2006 (the "Sub-Advisory
Agreement");
WHEREAS, effective this date, Xxxxx X. Xxxxx, the President of the
Manager, has acquired all the common stock of The Charger Corporation, the
general partner to the Manager (the "Transaction");
WHEREAS, the Transaction may operate as an "assignment" of the
Sub-Advisory Agreement that terminates the Sub-Advisory Agreement pursuant to
Section 9 thereof;
WHEREAS, the Fund and the Manager desire to continue to retain the
Sub-Adviser to furnish certain investment advisory services for the Fund's
investment portfolio; and
WHEREAS, the Fund and the Manager desire to enter into this agreement (the
"Agreement") pursuant to Rule 15a-4 under the 1940 Act, under which the
Sub-Adviser will furnish certain investment advisory services for the Fund 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 most recent effective registration statement
on Form N-2, 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 shall have authority and discretion to select brokers and
dealers to execute portfolio transactions for the Fund initiated by the
Sub-Adviser and to select the markets on or in which the transactions will be
executed. In placing orders for the sale and purchase of securities for the
Fund, the Sub-Adviser's primary responsibility shall be to seek the best
execution of orders at the most favorable prices. However, this responsibility
shall not obligate the Sub-Adviser to solicit competitive bids for each
transaction or to seek the lowest available commission cost to the Fund, so long
as the Sub-Adviser reasonably believes that the broker or dealer selected by it
can be expected to obtain a "best execution" market price on the particular
transaction and determines in good faith that the commission cost is reasonable
in relation to the value of the brokerage and research services (as defined in
Section 28(e)(3) of the Securities Exchange Act of 1934) provided by such broker
or dealer to the Sub-Adviser, viewed in terms of either that particular
transaction or of the Sub-Adviser's overall responsibilities with respect to its
clients, including the Fund, as to which the Sub-Adviser exercises investment
discretion, notwithstanding that the Fund may not be the direct or exclusive
beneficiary of any such services or that another broker may be willing to charge
the Fund a lower commission on the particular transaction.
Subject to 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. The Sub-Adviser has
adopted Best Execution policies and procedures which detail the factors
considered in brokerage selection. Notwithstanding the foregoing, the selection
of brokers or dealers to execute portfolio transactions for the Fund will be
made by the Sub-Adviser in a manner consistent with its fiduciary duties and
applicable law.
Portfolio transactions for the Fund will generally be completed
independently of transactions of other Sub-Adviser's clients, except when the
Sub-Adviser is in the position of buying or selling the same security for a
number of its clients (including the Fund) at approximately the same time.
Because of market fluctuations, the prices obtained on such transactions within
a single day may vary substantially. In order to avoid having clients receive
different prices for the same security on the same day, the Sub-Adviser
endeavors, when possible, to use an "averaging" procedure.
Under this procedure, purchases or sales of a particular security for the
Fund will at times be combined or "batched" with purchases or sales for other
advisory clients by the Sub-Adviser unless the Fund has expressly directed
otherwise. Such batched trades may be used to facilitate best execution,
including negotiating more favorable prices, obtaining more timely or equitable
execution or reducing overall commission charges. In such cases, the price shown
on confirmations of the Fund's purchases or sales will be the average execution
price on all of the purchases and sales that are aggregated for this purpose.
Allocation of securities so sold or purchased, as well as the expenses incurred
in the transaction, will be made by the Sub-Adviser in the manner the
Sub-Adviser considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
The Sub-Adviser will vote all proxies solicited by or with respect to the
issuers of securities which assets of the Fund's investment portfolio allocated
by the Manager to the Sub-Adviser are invested, consistent with the
Sub-Adviser's written Proxy Policies and Procedures. The Sub-Adviser will
maintain appropriate records in accordance with applicable law detailing its
voting of proxies on behalf of the Fund and upon request will provide a report
setting forth the proposals voted on and how the Fund's shares were voted,
including the name of the corresponding issuers.
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 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.
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.
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 portfolio securities be 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 applicable law.
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 fiduciary accounts for which
it has investment responsibilities;
(b) will conform in all material respects to all applicable rules
and regulations of the SEC and 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, 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 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 and 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 requested by the Manager 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 (i) the cost of securities and other assets purchased for
the Fund, and (ii) the costs directly associated with purchasing and selling
securities and other assets for the Fund, if any, including, but not limited to,
brokerage commissions, stamps, duties, taxes and custody fees related to
transfers.
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). The compensation accrued hereunder
will be held in an interest-bearing escrow account with the Fund's custodian or
another bank (as defined in the 0000 Xxx) designated by the Fund. If a new
investment sub-advisory agreement (the "New Sub-Advisory Agreement") with the
Sub-Adviser for the Fund is approved by the vote of a majority of the
outstanding voting securities of the Fund by the end of the 150-day term of this
Agreement, the amount in the escrow account (including the interest earned) will
be paid to the Sub-Adviser. If a majority of the outstanding voting securities
of the Fund does not approve the New Sub-Advisory Agreement with the Sub-Adviser
within the 150-day period, the Sub-Adviser will be paid, out of the escrow
account, the lesser of: (i) any costs incurred by the Sub-Adviser in performing
this Agreement (plus interest earned on that amount while in escrow) or (ii) the
total amount in the escrow account (plus interest earned).
For purposes of calculating the Management Fee, 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
any outstanding Preferred Shares of the Fund).
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. 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 investment sub-adviser to
one or more other investment companies. 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.
7. 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 material obligations and duties
under this Agreement.
8. Term; Termination; Amendment. This Agreement shall become effective
upon consummation of the Transaction (the "Effective Date") and shall remain in
full force for (i) 150 days following the Effective Date or (ii) until a vote of
a majority of the outstanding voting securities of the Fund shall approve the
New Sub-Advisory Agreement with the Sub-Adviser or (iii) unless sooner
terminated as hereinafter provided, whichever occurs first.
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 or by a vote of a majority of the outstanding voting
securities of such Fund upon ten (10) calendar 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 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.
9. 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/Aberdeen Emerging Opportunity Fund Aberdeen Asset Management, Inc.
First Trust Advisors L.P. 0000 Xxxxxx Xxxxxx
000 X. Xxxxxxx Xxxxx Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Xxxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxxxx Xxxxxxx
Attention: Secretary
If by Facsimile: (000) 000-0000
If by Facsimile: (000) 000-0000
10. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's 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
certified 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 for the enforcement of any claims.
11. 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.
12. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 10 hereof which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
13. 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.
14. 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.
15. 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.
16. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matters 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 L.P. ABERDEEN ASSET MANAGEMENT, INC.
By /s/ Xxxxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxx
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Title: President Title: Chief Executive Officer
FIRST TRUST/ABERDEEN EMERGING
OPPORTUNITY FUND
By /s/ Xxxxx X. Xxxxx
-----------------------------
Title: President
