INVESTMENT MANAGEMENT AGREEMENT
INVESTMENT MANAGEMENT AGREEMENT made this 24th day of May, 2007,
by and between FIRST TRUST/GALLATIN SPECIALTY FINANCE AND FINANCIAL
OPPORTUNITIES FUND, a Massachusetts business trust (the "Fund"), and
FIRST TRUST ADVISORS L.P., an Illinois limited partnership (the
"Adviser").
WITNESSETH:
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:
1. The Fund hereby engages the Adviser to act as the
investment adviser for, and to manage the investment and
reinvestment of the assets of, the Fund in accordance with the
Fund's investment objectives and policies and limitations, and to
administer the Fund's affairs to the extent requested by and
subject to the supervision of the Board of Trustees of the Fund
for the period and upon the terms herein set forth. The
investment of the Fund's assets shall be subject to the Fund's
policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's then current registration
statement under the Investment Company Act of 1940 (the "1940
Act"), and all applicable laws and the regulations of the
Securities and Exchange Commission relating to the management of
registered closed-end management investment companies.
The Adviser accepts such employment and agrees during such
period to render such services, to furnish office facilities and
equipment and clerical, bookkeeping and administrative services
(other than such services, if any, provided by the Fund's
transfer agent, administrator or other service providers) for the
Fund, to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to
such positions, and to assume the obligations herein set forth
for the compensation herein provided. The Adviser shall at its
own expense furnish all executive and other personnel, office
space, and office facilities required to render the investment
management and administrative services set forth in this
Agreement. In the event that the Adviser pays or assumes any
expenses of the Fund not required to be paid or assumed by the
Adviser under this Agreement, the Adviser shall not be obligated
hereby to pay or assume the same or similar expense in the
future; provided that nothing contained herein shall be deemed to
relieve the Adviser of any obligation to the Fund under any
separate agreement or arrangement between the parties.
2. The Adviser shall, for all purposes herein provided, be
deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act
for nor represent the Fund in any way, nor otherwise be deemed an
agent of the Fund.
3. For the services and facilities described in Section 1,
the Fund will pay to the Adviser, at the end of each calendar
month, and the Adviser agrees to accept as full compensation
therefor, an investment management fee equal to the annual rate
of 1.00% of the Fund's Managed Assets, as such term is defined
herein. For purposes of calculating the management fee, "Managed
Assets" means the average daily gross asset value of the Fund
(including assets attributable to the Fund's Preferred Shares (as
such term is defined in the Fund's prospectus), if any, and the
principal amount of borrowings, if any), minus the sum of the
Fund's accrued and unpaid dividends on any outstanding Preferred
Shares and accrued liabilities (other than the principal amount
of any borrowings incurred, commercial paper or notes issued by
the Fund). For purposes of determining Managed Assets, the
liquidation preference of any outstanding Preferred Shares of the
Fund is not treated as a liability.
For the month and year in which this Agreement becomes
effective, or terminates, there shall be an appropriate proration
on the basis of the number of days that the Agreement shall have
been in effect during the month and year, respectively. The
services of the Adviser to the Fund under this Agreement are not
to be deemed exclusive, and the Adviser shall be free to render
similar services or other services to others so long as its
services hereunder are not impaired thereby.
4. The Adviser shall arrange for suitably qualified
officers or employees of the Adviser to serve, without
compensation from the Fund, as trustees, officers or agents of
the Fund, if duly elected or appointed to such positions, and
subject to their individual consent and to any limitations
imposed by law.
5. For purposes of this Agreement, brokerage commissions
paid by the Fund upon the purchase or sale of the Fund's
portfolio securities shall be considered a cost of securities of
the Fund and shall be paid by the Fund.
6. The Adviser is authorized to select the brokers or
dealers that will execute the purchases and sales of the Fund's
securities on behalf of the Fund, and is directed to use its
commercially reasonable efforts to obtain best execution, which
includes most favorable net results and execution of the Fund's
orders, taking into account all appropriate factors, including
price, dealer spread or commission, size and difficulty of the
transaction and research or other services provided. Subject to
approval by the Fund's Board of Trustees and to the extent
permitted by and in conformance with applicable law (including
Rule 17e-1 of the 1940 Act), the Adviser may select brokers or
dealers affiliated with the Adviser. It is understood that the
Adviser will not be deemed to have acted unlawfully, or to have
breached a fiduciary duty to the Fund, or be in breach of any
obligation owing to the Fund under this Agreement, or otherwise,
solely by reason of its having caused the Fund to pay a member of
a securities exchange, a broker or a dealer a commission for
effecting a securities transaction for the Fund in excess of the
amount of commission another member of an exchange, broker or
dealer would have charged if the Adviser determined in good faith
that the commission paid was reasonable in relation to the
brokerage or research services provided by such member, broker or
dealer, viewed in terms of that particular transaction or the
Adviser's overall responsibilities with respect to its accounts,
including the Fund, as to which it exercises investment
discretion.
In addition, the Adviser may, to the extent permitted by
applicable law, aggregate purchase and sale orders of securities
with similar orders being made simultaneously for other accounts
managed by the Adviser or its affiliates, if in the Adviser's
reasonable judgment such aggregation shall result in an overall
economic benefit to the Fund, taking into consideration the
selling or purchase price, brokerage commissions and other
expenses. In the event that a purchase or sale of an asset of
the Fund occurs as part of any aggregate sale or purchase orders,
the objective of the Adviser and any of its affiliates involved
in such transaction shall be to allocate the securities so
purchased or sold, as well as expenses incurred in the
transaction, among the Fund and other accounts in an equitable
manner. Nevertheless, the Fund acknowledges that under some
circumstances, such allocation may adversely affect the Fund with
respect to the price or size of the securities positions
obtainable or salable. Whenever the Fund and one or more other
investment advisory clients of the Adviser have available funds
for investment, investments suitable and appropriate for each
will be allocated in a manner believed by the Adviser to be
equitable to each, although such allocation may result in a delay
in one or more client accounts being fully invested that would
not occur if such an allocation were not made. Moreover, it is
possible that due to differing investment objectives or for other
reasons, the Adviser and its affiliates may purchase securities
of an issuer for one client and at approximately the same time
recommend selling or sell the same or similar types of securities
for another client.
The Adviser will not arrange purchases or sales of
securities between the Fund and other accounts advised by the
Adviser or its affiliates unless (a) such purchases or sales are
in accordance with applicable law (including Rule 17a-7 of the
0000 Xxx) and the Fund's policies and procedures, (b) the Adviser
determines the purchase or sale is in the best interests of the
Fund, and (c) the Fund's Board of Trustees have approved these
types of transactions.
To the extent the Fund seeks to adopt, amend or eliminate
any objectives, policies, restrictions or procedures in a manner
that modifies or restricts Adviser's authority regarding the
execution of the Fund's portfolio transactions, the Fund agrees
to use reasonable commercial efforts to consult with the Adviser
regarding the modifications or restrictions prior to such
adoption, amendment or elimination.
The Adviser will communicate to the officers and trustees of
the Fund such information relating to transactions for the Fund
as they may reasonably request. In no instance will portfolio
securities be purchased by or sold to the Adviser or any
affiliated person of either the Fund or the Adviser, except as
may be permitted under the 1940 Act.
The Adviser further agrees that it:
(a) will use the same degree of skill and care in
providing such services as it uses in providing services to
fiduciary accounts for which it has investment
responsibilities;
(b) will (i) conform in all material respects to all
applicable rules and regulations of the Securities and
Exchange Commission, (ii) comply in all material respects
with all policies and procedures adopted by the Board of
Trustees for the Fund and communicated to the Adviser and,
(iii) conduct its activities under this Agreement in all
material respects in accordance with any applicable
regulations of any governmental authority pertaining to its
investment advisory activities;
(c) will report regularly to the Board of Trustees of
the Fund (generally on a quarterly basis) and will make
appropriate persons available for the purpose of reviewing
with representatives of the Board of Trustees on a regular
basis at reasonable times the management of the Fund,
including, without limitation, review of the general
investment strategies of the Fund, the performance of the
Fund's investment portfolio in relation to relevant standard
industry indices and general conditions affecting the
marketplace and will provide various other reports from time
to time as reasonably requested by the Board of Trustees of
the Fund; and
(d) will prepare and maintain such books and records
with respect to the Fund's securities and other transactions
as required under applicable law and will prepare and
furnish the Fund's Board of Trustees such periodic and
special reports as the Board of Trustees may reasonably
request. The Adviser further agrees that all records which
it maintains for the Fund are the property of the Fund and
the Adviser will surrender promptly to the Fund any such
records upon the request of the Fund (provided, however,
that Adviser shall be permitted to retain copies thereof);
and shall be permitted to retain originals (with copies to
the Fund) to the extent required under Rule 204-2 of the
Investment Advisers Act of 1940 or other applicable law.
7. The Adviser agrees to pay (i) all organizational costs
and (ii) all offering costs of the Fund (other than sales load
but including the reimbursement of underwriting expenses as
described in the Fund's prospectus) that exceed $.04 per Common
Share (as described in the Fund's prospectus). The term
"organizational costs" and "offering costs" shall have the
meanings ascribed to them in Sections 8.18-8.25 of the AICPA
Audit and Accounting Guide, Audits for Investment Companies, with
Conforming Changes as of May 1, 2002.
8. Subject to applicable statutes and regulations, it is
understood that officers, trustees, or agents of the Fund are, or
may be, interested persons (as such term is defined in the 1940
Act and rules and regulations thereunder) of the Adviser as
officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Adviser
may be interested persons of the Fund otherwise than as trustees,
officers or agents.
9. The Adviser shall not be liable for any loss sustained
by reason of the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been
based upon the investigation and research made by any other
individual, firm or corporation, if such recommendation shall
have been selected with due care and in good faith, except loss
resulting from willful misfeasance, bad faith, or gross
negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
10. Subject to obtaining the initial and periodic approvals
required under Section 15 of the 1940 Act, the Adviser may retain
one or more sub-advisers at the Adviser's own cost and expense
for the purpose of furnishing one or more of the services
described in Section 1 hereof with respect to the Fund.
Retention of a sub-adviser shall in no way reduce the
responsibilities or obligations of the Adviser under this
Agreement and the Adviser shall be responsible to the Fund for
all acts or omissions of any sub-adviser in connection with the
performance of the Adviser's duties hereunder.
11. The Fund acknowledges that the Adviser now acts, and
intends in the future to act, as an investment adviser to other
managed accounts and as investment adviser or sub-investment
adviser to one or more other investment companies that are not a
series of the Fund. In addition, the Fund acknowledges that the
persons employed by the Adviser to assist in the Adviser's duties
under this Agreement will not devote their full time to such
efforts. It is also agreed that the Adviser may use any
supplemental research obtained for the benefit of the Fund in
providing investment advice to its other investment advisory
accounts and for managing its own accounts.
12. This Agreement shall be effective on the date provided
above, provided it has been approved in the manner required by
the 1940 Act. This Agreement shall continue in effect until the
two-year anniversary of the date of its effectiveness, unless and
until terminated by either party as hereinafter provided, and
shall continue in force from year to year thereafter, but only as
long as such continuance is specifically approved, at least
annually, in the manner required by the 1940 Act.
This Agreement shall automatically terminate in the event of
its assignment, and may be terminated at any time without the
payment of any penalty by the Fund or by the Adviser upon sixty
(60) days' written notice to the other party. The Fund may
effect termination by action of the Board of Trustees or by vote
of a majority of the outstanding voting securities of the Fund,
accompanied by appropriate notice. This Agreement may be
terminated, at any time, without the payment of any penalty, by
the Board of Trustees of the Fund, or by vote of a majority of
the outstanding voting securities of the Fund, in the event that
it shall have been established by a court of competent
jurisdiction that the Adviser, or any officer or director of the
Adviser, has taken any action which results in a breach of the
material covenants of the Adviser set forth herein. Termination
of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation,
described in Section 3, earned prior to such termination and for
any additional period during which the Adviser serves as such for
the Fund, subject to applicable law. The terms "assignment" and
"vote of the majority of outstanding voting securities" shall
have the same meanings set forth in the 1940 Act and the rules
and regulations thereunder.
13. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule, or otherwise, the
remainder shall not be thereby affected.
14. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to the other
party at such address as such other party may designate for
receipt of such notice.
15. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments
thereto, a copy of which is on file with the Secretary of the
Commonwealth of Massachusetts and the limitation of shareholder
and trustee liability contained therein. This Agreement is
executed on behalf of the Fund by the Fund's officers as officers
and not individually and the obligations imposed upon the Fund by
this Agreement are not binding upon any of the Fund's Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund, and persons dealing with the
Fund must look solely to the assets of the Fund and those assets
belonging to the subject Fund, for the enforcement of any claims.
16. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 15 hereof which
shall be construed in accordance with the laws of Massachusetts)
the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed on the day and year above written.
FIRST TRUST/GALLATIN SPECIALTY FINANCE
AND FINANCIAL OPPORTUNITIES FUND
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
FIRST TRUST ADVISORS L.P.
By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: President
ATTEST: /s/ Xxxx X. Xxxxxxx
Name: Xxxx X. Xxxxxxx
Title: Chief Financial Officer
