INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 26th day of August, 2004 by and among First
Trust/Fiduciary Asset Management Covered Call Fund, a Massachusetts business
trust (the "Fund"), First Trust Advisors L.P., an Illinois limited partnership
and a federally registered investment adviser ("Manager"), and Fiduciary Asset
Management, LLC, a Missouri limited liability company and a federally registered
investment adviser ("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 Manager to serve as the investment
manager for the Fund pursuant to an Investment Management Agreement between
Manager and the Fund (as such agreement may be modified from time to time, the
"Management Agreement");
WHEREAS, the Management Agreement provides that 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 Manager desire to retain Sub-Adviser to furnish
investment advisory services for the Fund's investment portfolio, 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 Manager hereby appoint Sub-Adviser to
provide certain sub-investment advisory services to the Fund for the period and
on the terms set forth in this Agreement. 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 Manager in any way,
nor otherwise be deemed an agent of the Fund or Manager.
2. Services to be Performed. Subject always to the supervision of the
Fund's Board of Trustees and the Manager, Sub-Adviser will act as sub-adviser
for, and manage 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
investment policy sections of the Fund's initial registration statement on Form
N-2 (File No. 333-116023) as declared effective by the Securities and Exchange
Commission, and as the same may thereafter be amended from time to time. In the
performance of its duties, 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
Manager to 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 Manager to Sub-Adviser in writing. The Fund or
Manager has provided 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 Sub-Adviser's performance under this
Agreement.
Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio investments for 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 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),
Sub-Adviser may select brokers or dealers affiliated with 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.
In addition, Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities placed with respect to the
assets of the Fund with similar orders being made simultaneously for other
accounts managed by Sub-Adviser or its affiliates, if in Sub-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 Sub-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 and Manager acknowledge 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 Sub-Adviser have
available funds for investment, investments suitable and appropriate for each
will be allocated in a manner believed by Sub-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, Sub-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.
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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 Manager to Sub-Adviser are invested, consistent with the Fund's
proxy voting guidelines and based upon the best interests of the Fund. The
Sub-Adviser will maintain appropriate records in accordance with applicable law
detailing its voting of proxies on behalf of the Fund and upon reasonable
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.
Sub-Adviser will not arrange purchases or sales of securities between
the Fund and other accounts advised by 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) 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, Sub-Adviser or any affiliated person of either the Fund,
Manager, or Sub-Adviser, except as may be permitted under the 1940 Act.
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 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
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 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 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 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 Manager or the Board of Trustees of the Fund; and
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(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 Manager
and will prepare and furnish Manager and Fund's Board of Trustees such
periodic and special reports as the Board or 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 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, Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
brokerage commission, if any) purchased for the Fund.
4. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Manager will pay Sub-Adviser, and Sub-Adviser
agrees to accept as full compensation therefor, a portfolio management fee (the
"Management Fee") equal to the annual rate of .50% of the Fund's Managed Assets
(as defined below), subject to paragraph 5 below. For purposes of calculating
the Management Fee, Managed Assets means the average daily gross assets of the
Fund, minus the sum of the Fund's accrued and unpaid dividends on any
outstanding common shares and accrued liabilities (including the value of call
options written (sold)). The Management Fee shall be payable in arrears on or
about the first day of each month during the term of this Agreement.
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.
5. Expense Reimbursement. Sub-Adviser agrees to pay Manager one-half
of (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 $0.04 per Common Share (as such
term is defined 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.
6. Services to Others. The Fund and Manager acknowledge that
Sub-Adviser now acts, and may in the future 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 and Manager acknowledge that the persons employed by
Sub-Adviser to assist in 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.
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7. Limitation of Liability. The Sub-Adviser shall not be liable for,
and the Fund and Manager will not take any action against the Sub-Adviser to
hold 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
with respect to the Fund on the same date as the Management Agreement between
the Fund and the Manager becomes effective (it being understood that the Manager
shall notify the Sub-Adviser of the date of effectiveness of the Management
Agreement as soon as reasonably practical after effectiveness), provided that 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, and shall
remain in full force until the two-year anniversary of the date of its
effectiveness unless sooner terminated as hereinafter provided. This Agreement
shall continue in force from year to year thereafter, but only as long as such
continuance is specifically approved for the Fund at least annually in the
manner required by the 1940 Act and the rules and regulations thereunder;
provided, however, that if the continuation of this Agreement is not approved
for the Fund, the Sub-Adviser may continue to serve in such capacity for the
Fund in the manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
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 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 sixty (60) 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 4 earned prior to such termination and for any additional
period during which 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
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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 Fund: If to the Sub-Adviser:
First Trust/Fiduciary Asset Management Fiduciary Asset Management, LLC
Covered Call Fund 0000 Xxxxxxxx Xxxxxx, Xxxxx 000
First Trust Advisors Xx. Xxxxx, Xxxxxxxx 00000
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000 Xxxxxxxxx: Xxxxxxx X. Xxxxxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel 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 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 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 and those assets belonging
to the subject Fund, for the enforcement of any claims.
11. References to the Sub-Adviser. The Manager may not use the names
"Fiduciary Asset Management" or any variations thereof or the logo of the
Sub-Adviser in the Fund's registration statement or any promotional or sales
materials without the prior approval of the Sub-Adviser, which the Sub-Adviser
may grant in its sole discretion. Such prior approval shall not be unreasonably
withheld. The Sub-Adviser shall provide to the Manager upon reasonable request
information relating to it for inclusion in any promotional materials, and shall
review and approve prior to first use any statements in such promotional
materials relating to the Sub-Adviser. The Sub-Adviser will prepare and/or
review such promotional materials on a basis which it believes in good faith is
accurate, not misleading and appropriate under the circumstances. In connection
with any such assistance, the Manager understands and agrees that it is the sole
responsibility of the Manager to ensure that the contents, distribution and use
of any promotional materials that are required to be filed with the National
Association of Securities Dealers comply at all times with any applicable
provisions of law in any relevant jurisdiction. The Manager further understands
and agrees that the Sub-Adviser has no expertise in such laws and has not
prepared or reviewed the promotional materials with reference to such laws, and
that the Manager's approval of the contents of the promotional materials shall
constitute its agreement that the contents thereof comply with such law.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
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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.
13. 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.
14. 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.
15. 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 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.
16. 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 4 are not severable.
17. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto. Any written or oral agreements, statements,
promises, negotiations or representations not expressly set forth in this
Agreement are of no force and effect.
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IN WITNESS WHEREOF, the Fund, 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. FIDUCIARY ASSET MANAGEMENT, LLC
By: ______________________________ By: ______________________________
Title: _____________________ Title: _____________________
FIRST TRUST/FIDUCIARY ASSET MANAGEMENT
COVERED CALL FUND
By: ___________________________________
Title: ______________________________
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