INTERIM DIRECT INVESTMENT MANAGEMENT AGREEMENT
Agreement, dated as of February 10, 2012 between THE CHINA FUND, INC.,
a Maryland corporation (the Fund), and RCM Asia Pacific Limited, a
company organized in Hong Kong and registered as an investment adviser
with the U.S. Securities and Exchange Commission and licensed by
the Securities and Futures Commission of Hong Kong (the Investment
Manager).
WHEREAS, the Fund is a closed-end, non-diversified
management investment company registered under the U.S.
Investment Company Act of 1940, as amended (the 1940 Act),
shares of common stock of which are registered under the
Securities Act of 1933, as amended; and
WHEREAS, the Funds investment objective is long-term
capital appreciation which it seeks to achieve by investing
primarily in equity securities of China companies (as that
term is defined in the Prospectus dated June 27, 2005 (the
Prospectus) contained in the Funds Registration Statement on
Form N-2 (File 333-124392) (the Registration Statement))
and
WHEREAS, the Fund and the Investment Manager are to
become parties to an Interim Investment Advisory and Management
Agreement dated as of February 10, 2012 (the Listed Agreement)
relating to management of the Funds investments in listed
securities; and
WHEREAS, the Fund desires to retain the Investment Manager
to render investment management services with respect to
investment of certain of the Funds assets in direct investments
(as that term is defined below), and the Investment Manager
is willing to render such services.
NOW, THEREFORE, in consideration of the mutual covenants
hereafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. Appointment of Investment Manager of Direct Investments.
(a) The Fund hereby employs the Investment Manager for
the period and on the terms and conditions set forth herein,
subject at all times to the supervision of the Board of Directors
of the Fund, to:
(1) manage the assets of the Fund that are, on the date
of this Agreement, invested in securities that at the time of
such investment are not listed (or approved for listing) on a
securities exchange (direct investments), and
(2) arrange for the disposition of each of the direct
investments at such times and on such terms as the Investment
Manager determines is in the best interests of the Fund,
and with respect to clauses (1) and (2), in each case
in accordance with the investment objective and policies of the
Fund set forth in the Funds Prospectus, and as such investment
objective and policies are amended from time to time by the Funds
Board of Directors, and subject always to the restrictions of
the Funds Articles of Incorporation and By-Laws, as amended or
restated from time to time, and the provisions of the 1940 Act.
Should the Board of Directors of the Fund at any time make any
definite determination as to investment policy and notify the
Investment Manager thereof, the Investment Manager shall be bound
by such determination for the period, if any, specified in such
notice or until similarly notified that such determination has
been revoked. For purposes of this Agreement, direct investments
shall not include any investment by the Fund in an instrument,
such as, but not limited to, a warrant, swap, structured note or
other equity derivative, that provides the Fund with exposure
to a security that is listed on a securities exchange or (b)
any security owned by the Fund that is listed on a securities
exchange even if that security was a direct investment at the
time of its purchase by the Fund. The Investment Manager shall
vote the Funds proxies in connection with the direct
investments, in accordance with the Funds proxy voting policies
which may be amended from time to time by the Board, however,
the Investment Manager will not be required to comply with any
such amendment until 30 days after it has been communicated to
the Investment Manager. The Investment Manager shall make such
reports to the Board concerning such proxy voting as the Board may
deem necessary or advisable. It is understood and acknowledged
that no assurance has been or can be provided that the investment
objective of the Fund can or will be achieved. The Investment
Manager shall take, on behalf of the Fund, all actions which it
deems necessary to implement the investment policies of the Fund
applicable to the direct investments and to monitor the execution
of transactions and the settlement and clearance of the Funds
securities transactions in direct investments. By and in
connection therewith, the Investment Manager is authorized as
agent of the Fund to give instructions to the custodians from
time to time of the direct investments as to deliveries of
securities and payments of cash for the account of the Fund;
(3) Identify regulatory and other governmental
requirements (or amendments thereto) that become applicable to the
Fund after the date of this Agreement in connection with the
direct investment program, but only as far as its duties as a
professional investment manager so require;
(4) Provide information regarding corporate actions,
repatriation restrictions, currency restrictions and other matters
of which the Investment Manager is aware as may be reasonably
requested by the Fund; and
(5) Maintain or cause to be maintained for the Fund all books
and records required under the 1940 Act, to the extent that such
books and records are not maintained or furnished by administrators,
custodians or other agents of the Fund.
(b) The Investment Manager accepts such appointment and
agrees during the term of this Agreement to render such services,
to permit one of its of its affiliates directors, officers or
employees to serve without compensation as a director and/or
officer of the Fund if elected to such positions and to assume
the obligations herein for the compensation herein provided.
The Investment Manager 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 or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
(c) The Fund hereby acknowledges (and the Investment
Manager hereby acknowledges the Fund has informed it) that
the Fund has allocated 25% of the net proceeds of its offerings
of its Common Stock less 25% of the aggregate repurchase price
of any shares of the Funds Common Stock repurchased by the
Fund to direct investments; provided, however, that such
allocation shall be subject to review and modification by the
Board of Directors of the Fund (the Direct Investment Amount).
The portion of the Direct Investment Amount as is invested
in direct investments shall be managed by the Investment Manager
and such other entity, if any, as may be appointed by the Fund
to manage the assets of the Fund invested in direct investments.
The portion of the Direct Investment Amount as is not invested
in direct investments shall be managed by the Investment Manager
pursuant to the terms of the Listed Agreement. Upon the sale of
a direct investment, the Investment Manager shall make the net
proceeds thereof available as soon as reasonably practicable for
investment pursuant to the Listed Agreement. For the avoidance
of doubt, the Investment Manager shall not be under any obligation
to comply with or to ensure that the amount of direct investments
are within the Direct Investment Amount.
(d) The Fund hereby agrees that the Investment Manager
shall be entitled to delegate all or any of its functions, powers,
discretions, duties and obligations, to any person or persons,
and any such delegation may be on such terms and conditions as
the Investment Manager thinks fit provided that any such
delegation shall not relieve the Investment Manager of its
obligations under this Agreement; provided, however, that no
delegation of investment management powers and functions may
occur unless approved in advance by the Board of Directors of
the Fund and, if required by the 1940 Act, by the Funds
stockholders; and provided further that no delegation of any
other powers or functions may occur unless the Investment Manager
has given the Board of Directors of the Fund at least 30 days
prior notice of such delegation.
2. Compensation. For the services and facilities
described in Section 1, the Fund agrees to pay in United States
dollars to the Investment Manager, a fee in accordance with the
schedule set forth as Exhibit A hereto. 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 this Agreement is in effect during such month and year,
respectively.
3. Investment in Fund Stock. The Investment Manager
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.
4. Non-Exclusivity of Services. Nothing herein shall be
construed as prohibiting the Investment Manager or any of its
affiliates from providing investment advisory services to, or
entering into investment advisory agreements with, any other
clients (including other registered investment companies),
including clients which may invest in Chinese equity securities,
so long as the Investment Managers services to the Fund pursuant
to this Agreement are not materially impaired thereby. The Investment
Manager is not obligated to purchase or sell for the Fund any
security which the Investment Manager or its affiliates may purchase
or sell for their own accounts or other clients.
5. Standard of Care; Indemnification. The Investment Manager
may rely on information reasonably believed by it to be accurate
and reliable. Neither the Investment Manager nor its officers,
directors, employees, agents or controlling persons (as defined in
the 0000 Xxx) 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 Investment Manager in
the performance of its duties or by reason of reckless disregard on
the part of the Investment Manager of its obligations and duties under
this Agreement. Any person, even though also employed by the Investment
Manager, who may be or become an employee of 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 Investment Manager. In no event will
the Investment Manager have any responsibility under this Agreement
for any portion of the Fund other than the Investment Managers
Direct Investments or for the acts or omissions of any other manager
of direct investments for the Fund or any other adviser of the Fund.
In particular, the Investment Manager shall have no responsibility
for the Funds being in violation of any applicable law or regulation
or investment policy or restriction or instruction applicable to the
Fund as a whole or for the Funds failing to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the Code), if the Funds holding of the direct investments
is such that the direct investments would not be in such violation
or if the Fund would not fail to qualify if the direct investments
were deemed a separate series of the Fund or a separate regulated
investment company under the Code.
The Fund agrees to indemnify and hold harmless the Investment
Manager, its officers, directors, employees, agents, shareholders,
controlling persons or other affiliates (each an Indemnified Party),
for any losses, costs and expenses incurred or suffered by any
Indemnified Party arising from any action, proceeding or claims which
may be brought against such Indemnified Party in connection with the
performance or non-performance in good faith of its functions under
this Agreement, except losses, costs and expenses resulting from
willful misfeasance, bad faith or gross negligence in the performance
of such Indemnified Partys duties or from reckless disregard on the
part of such Indemnified Party of such Indemnified Partys obligations
and duties under this Agreement.
6. Allocation of Charges and Expenses.
(a) The Investment Manager shall assume and pay for maintaining
its staff and personnel, and shall at its own expense provide the
equipment, office space and facilities, necessary to perform its
obligations hereunder. The Investment Manager shall pay the salaries
and expenses of such officer of the Fund and any fees and expenses of
such Director of the Fund who, as contemplated by Section 1(b) hereof
is a director, officer or employee of the Investment Manager or any of
its affiliates, provided, however, that the Fund, and not the
Investment Manager, shall bear travel expenses or an appropriate
fraction thereof of any Director and/or officer of the Fund who is a
director, officer or employee of the Investment Manager to the extent
that such expenses relate to attendance at meetings of the Board of
Directors of the Fund or any committee thereof and provided, further,
that such expenses are incurred in accordance with the Funds travel
policy.
(b) In addition to the fee of the Investment Manager under this
Agreement, the Fund shall assume and pay the following expenses: fees
of the Investment Manager under the Listed Agreement; fees of any
manager of the Funds direct investments other than the Investment
Manager; legal fees and expenses of counsel to the Fund; auditing and
accounting expenses; taxes and governmental fees; New York Stock
Exchange listing fees; dues and expenses incurred in connection with
membership in investment company organizations; fees and expenses of
the Funds custodian, sub-custodian, transfer agents and registrars;
fees and expenses with respect to administration, except as may be
herein expressly provided otherwise; expenses for portfolio pricing
services by a pricing agent, if any; expenses of preparing share
certificates and other expenses in connection with the issuance,
offering and underwriting of shares issued by the Fund; expenses
relating to investor and public relations; expenses of registering
or qualifying securities of the Fund for public sale; freight,
insurance and other charges in connection with the shipment of the
Funds portfolio securities; brokerage commissions or other third-party
costs of acquiring or disposing of any portfolio holding of the Fund;
expenses of preparation and distribution of reports, notices and
dividends to shareholders; expenses of the Funds dividend reinvestment
and cash purchase plan; costs of stationery; any litigation expenses;
and costs of stockholders and other meetings.
7. Potential Conflicts of Interest.
(a) Subject to applicable statutes and regulations, it is
understood that directors, officers or agents of the Fund are or
may be interested in the Investment Manager as directors, officers,
employees, agents, shareholders or otherwise, and that the directors,
officers, employees, agents or shareholders of the Investment Manager
may be interested in the Fund as a director, officer, agent or
otherwise.
(b) If the Investment Manager considers the sale of direct
investments for the Fund and/or other advisory clients of the Investment
Manager, transactions in such direct investments will be made for the
Fund and/or such other clients in accordance with the Investment Managers
allocation procedures for direct investments, as may be amended from
time to time provided that the Board of Directors of the Fund receives
at least ten days advance notice of such amendment.
8. Duration and Termination.
(a) This Agreement shall become effective at noon on
February 12, 2012 (New York time)and continue in effect until
April 6, 2012 (New York time), unless earlier terminated as provided herein.
(b) This Agreement may be terminated at any time without
payment of any penalty, by the Fund acting pursuant to a vote of the
Board, or by a vote of a majority of the outstanding voting securities
of the Fund upon 10 calendar days prior written notice to the
Investment Manager or by the Investment Manager upon 60 days prior
written notice to the Board, or upon such shorter notice as may be
mutually agreed upon. This Agreement shall terminate automatically and
immediately in the event of its assignment. The terms assignment and
vote of a majority of the outstanding voting securities shall have
the meanings set forth for such terms in the 1940 Act. This Agreement
shall also be automatically terminated if the Investment Manager
ceases to be licensed by the Securities and Futures Commission of
Hong Kong.
9. Amendment. This Agreement may be amended by mutual agreement
if required by the 1940 Act or other applicable law, provided, that,
any such amendment shall only become effective after the affirmative vote
of the holders of a majority of the outstanding voting securities of
the Fund, and a majority of the members of the Funds Board of
Directors who are not interested persons of the Fund or of the Investment
Manager, cast in person at a meeting called for the purpose of voting on
such approval.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, provided,
however, that nothing herein shall be construed in a manner inconsistent
with the 1940 Act.
11. Notices. Any communication hereunder must be in writing and
must be made by letter, telex or facsimile. Any communication or document
to be made or delivered by one person to another pursuant to this Agreement
shall (unless that other person has by fifteen (15) days notice to the other
specified another address) be made or delivered to that other person at
the following relevant address:
If to the Investment Manager:
RCM Asia Pacific Limited
00xx Xxxxx, XXXX Xxxxx,
0 Xxxxxx Xxxx, Xxxxxxx, Xxxx Xxxx
Attention: Xxxxxx Xxxx, Head of Compliance
Telephone No.: x000 0000 0000
Facsimile No.: x000 0000 0000
If to the Fund:
The China Fund, Inc.
x/x Xxxxx Xxxxxx Xxxx and Trust Company
X.X. Xxx 0000
0 Xxxxxx xx Xxxxxxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxxx X. Coop
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
With copies to:
Xxxxxxxx Chance US LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and shall, if made by letter, be deemed to have been received
when delivered by hand or if sent by mail within two days if both
the sender and the addressee are in Hong Kong and within 10 days
if the sender and/or the addressee are outside Hong Kong and the
letter is sent by prepaid airmail, and shall if made by e-mail be
deemed to have been received upon production of a read receipt,
and shall, if sent by facsimile, be deemed to have been received
upon production of a transmission report by the machine from which
the facsimile was sent which indicates that the facsimile was
sent in its entirety to the facsimile number of the recipient and
provided that a hard copy of the notice so served by facsimile
was posted that same days as the notice was served by electronic
means.
12. Jurisdiction. Each party hereto irrevocably agrees
that any suit, action or proceeding against either of the Investment
Manager or the Fund arising out of or relating to this Agreement
shall be subject non-exclusively 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 non-exclusively 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 in English by registered
or certified mail, postage prepaid, to their respective addresses
as set forth in the Agreement.
13. Representation and Warranty of the Investment Manager.
The Investment Manager represents and warrants that it is: (a)duly
registered as an investment adviser under the U.S. Investment
Advisers Act of 1940, as amended, and (b) duly licensed by the
Securities and Futures Commission of Hong Kong and that it will
use its reasonable efforts to maintain effective such registration
and license during the term of this Agreement.
14. Representation and Warranty of the Fund. 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.
15. Provision of Certain Information by the Fund. The Fund
shall furnish the Investment Manager with copies of the Funds Articles
of Incorporation, By-laws and Registration Statement on Form N-2, as
amended or restated from time to time, any press releases made by the
Fund and any reports made by the Fund to its stockholders, as soon
as practicable after such documents become available. The Investment
Manager shall not be bound by the terms of these documents until
delivered to the Investment Manager in accordance with Section 11
herein. The Fund shall furnish the Investment Manager with any further
documents, materials or information that the Investment Manager may
reasonably request to enable it to perform its duties pursuant to this
Agreement.
16. Press Releases, Reports, Other Disclosures. Any reports,
press releases or other disclosures made by the Fund which contain
statements of the Investment Manager about the Investment Manager or
about the management of assets by the Investment Manager shall be
subject to the prior approval of the Investment Manager.
17. Severability. If any provision of the Agreement is
determined by a court of competent jurisdiction to be invalid or
unenforceable, such finding shall not affect the validity or
enforceability of the remaining portions of this Agreement.
18. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
19. Captions. The captions in this Agreement are included
for convenience of reference only and in no way define any of the
provisions hereof or otherwise affect their construction or effect.
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 CHINA FUND, INC.
By:/s/ Xxxxx Dell
Name: Xxxxx Dell
Title: Treasurer
RCM ASIA PACIFIC LIMITED
By:/s/ Xxxxxxx Eu
Name: Xxxxxxx Eu
Title: Director
By:./s/ Xxxxxxx Xxxx
Name: Xxxxxxx Xxxx
Title: Director
EXHIBIT A
The Investment Manager shall receive a fee for its services
under the Agreement, computed weekly and payable monthly, at the annual
rate of 1.50% of the average weekly value of the Funds assets
invested in the direct investments.
The net asset value of Investment Managers Direct Investments
shall be determined in the manner provided in the Funds Prospectus.
2
NYB 1548711v4
Exhibit 77Q1E2 Copies of any new or amended Registrant investment
advisory contracts
NYB 1548711v4
Exh. A-1
NYB 1548711v4
