FIRST DEFINED PORTFOLIO FUND, LLC
INTERIM INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This Interim Investment Advisory and Management Agreement (the
"Agreement") made this 12th day of October, 2010 by and between First Defined
Portfolio Fund, LLC, a Delaware limited liability company (the "Company"), on
behalf of each series listed on Schedule A attached hereto (each a "Fund" and
collectively, the "Funds") of the Company, and First Trust Advisors L.P. (the
"Adviser"), an Illinois limited partnership.
WHEREAS, the Company and the Adviser have entered into an Investment
Advisory and Management Agreement dated November 16, 1999 (the "Management
Agreement") pursuant to which the Adviser performs certain investment advisory
and management services with respect to each Fund;
WHEREAS, effective this date, Xxxxx X. Xxxxx, the President of the
Adviser, has acquired all the common stock of The Charger Corporation, the
general partner to the Adviser (the "Transaction");
WHEREAS, the Transaction operates as an "assignment" of the Management
Agreement that terminates the Management Agreement pursuant to Section 8
thereof;
WHEREAS, the Company desires to continue to retain the Adviser to furnish
certain investment advisory and portfolio management services for each Fund; and
WHEREAS, the Company and the Adviser desire to enter into this Agreement
pursuant to Rule 15a-4 under the 1940 Act (as defined below), under which the
Adviser will furnish certain investment advisory services and portfolio
management services for each Fund upon the terms and conditions hereafter set
forth:
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the Company and the Adviser hereby agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Section 1.1. During the Term (as such term is defined in Section 5 hereof)
of this Agreement, the Adviser shall serve as the investment adviser (within the
meaning of the Investment Advisers Act of 1940, as amended) of the Funds. In
such capacity, the Adviser shall render the following services and perform the
following functions for and on behalf of the Funds:
(a) Furnish continuous advice and recommendations to the Funds with
respect to the acquisition, holding or disposition of any or all of the
securities or other assets which the Funds may own or contemplate
acquiring from time to time;
(b) Cause its officers to attend meetings and furnish oral or
written reports, as the Company reasonably may request, in order to keep
the Trustees and appropriate officers of the Company fully informed
regarding the investment portfolios of the Funds, the investment
recommendations of the Adviser, and the considerations which form the
basis for such recommendations; and
(c) Supervise the management of the Fund's investments, including
the purchase, sale, retention or lending of securities and other
investments in accordance with the direction of the appropriate officers
of the Company.
Section 1.2. The services of the Adviser to the Funds are not exclusive,
and nothing contained herein shall be deemed or construed to prohibit, limit, or
otherwise restrict the Adviser from rendering investment or other advisory
services to any third person, whether similar to those to be provided to the
Funds hereunder or otherwise.
SECTION 2. COMPENSATION OF ADVISER.
Section 2.1. For its services hereunder, each Fund shall pay the Adviser an
annual fee (the "Fee") as set forth in Schedule B. The Fees will be computed
daily. 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 Company. If a new investment advisory and management
agreement (the "New Management Agreement") with the Adviser for the Fund is
approved by the vote of a "majority of the Outstanding Voting Securities" (such
term herein has such meaning as defined in Section 2(a)(42) of the 0000 Xxx) of
such 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 Adviser. If a
majority of the Outstanding Voting Securities of the applicable Fund does not
approve the New Management Agreement with the Adviser within the 150-day period,
the Adviser will be paid, out of the escrow account, the lesser of: (i) any
costs incurred by the Adviser in performing the Agreement for that Fund (plus
interest earned on that amount while in escrow); or (ii) the total amount in the
escrow account for that Fund (plus interest earned).
Section 2.2. Notwithstanding the provisions of Section 2.1 hereof, the
amount of the Fee to be paid with respect to the first and last months of this
Agreement shall be pro rated based on the number of calendar days in such
quarter.
Section 2.3. The Adviser may voluntarily waive Fees or reimburse expenses
at any time. Any amounts waived or reimbursed by the Adviser are subject to
reimbursement by the Fund within the following three years, to the extent such
reimbursement by the Fund would not cause the Fund to exceed any current expense
limitation.
SECTION 3. EXPENSES PAID BY THE ADVISER.
Section 3.1. Subject to the provisions of Section 3.2 hereof, the Adviser
shall pay the following expenses relating to the management and operation of the
Funds:
(a) All reasonable fees, charges, costs and expenses and all
reasonable compensation of all officers and Trustees of the Funds relating
to the performance of their duties to the Funds; provided, however, that
the Adviser shall not pay any such amounts to any Outside Trustees (for
purposes of this Agreement, an "Outside Trustee" is any Trustee of the
Company who is not an "Interested Person," within the meaning of Section
2(a)(19) of the Investment Company Act of 1940, as amended (the "1940
Act")); and provided, further, that in the event that any person serving
as an officer of the Company has both executive duties attendant to such
office and administrative duties to the Company apart from such office,
the Adviser shall not pay any amounts relating to the performance of such
duties;
(b) All costs of office equipment and personnel necessary for and
allocable to the performance of the obligations of the Adviser hereunder.
Section 3.2. Except as provided in this Section, nothing contained in this
Agreement shall be deemed or construed to impose upon the Adviser any obligation
to incur, pay, or reimburse the Funds for any other costs of or relating to the
Funds.
SECTION 4. EXPENSES PAID BY THE FUNDS.
Section 4.1. Except as provided in Section 3 hereof, the Funds hereby
assume and shall pay all fees, costs and expenses incurred by, or on behalf, or
for the benefit of the Funds, including without limitation:
(a) All costs of any custodian or depository;
(b) All costs for bookkeeping, accounting, pricing and auditors'
services;
(c) All costs of leased office space of or allocable to the Funds
within the offices of the Adviser or in such other place as may be
mutually agreed upon between the parties from time to time;
(d) All costs of any transfer agent and registrar of interests of
the Funds ("Interests");
(e) All costs incurred by any Outside Trustee of the Company in
connection with the performance of his duties relating to the affairs of
the Company in such capacity as an Outside Trustee of the Company, and
costs relating to the performance by any officer of the Company,
performing duties on behalf of the Funds apart from such office, all in
accordance with Section 3.1 (a) hereof;
(f) All brokers' commissions and other costs incurred in connection
with the execution of the Funds' portfolio transactions;
(g) All taxes and other costs payable by or on behalf of the Funds
to federal, state or other governmental agencies;
(h) All costs of printing, recording and transferring certificates
representing Interests;
(i) All costs in connection with the registration of the Funds and
the Interests with the Securities and Exchange Commission ("SEC"), and the
continuous maintenance of the effectiveness of such registrations, and the
registration and qualification of Interests of the Funds under state or
other securities laws, including, without limitation, the preparation and
printing of registration statements, prospectuses and statements of
additional information for filing with the SEC and other authorities;
(j) All costs of preparing, printing and mailing prospectuses,
statements of additional information and reports to holders of Interests;
(k) All costs of Interest holders' and Trustees' meetings and of
preparing, printing and mailing all information and documents, including
without limitation all notices, financial reports and proxy materials, to
holders of Interests;
(l) All costs of legal counsel for the Company and for Trustees of
the Company in connection with the rendering of legal advice to or on
behalf of the Funds, including, without limitation, legal services
rendered in connection with the Funds' existence, corporate and financial
structure and relations with its Interest holders, registrations and
qualifications of securities under federal, state and other laws, issues
of securities, expenses which the Funds have herein assumed whether
customary or not, and extraordinary matters, including, without
limitation, any litigation involving the Company, Trustees, or officers of
the Company relating to the affairs of the Funds, employees or agents of
the Funds;
(m) All costs of licenses to utilize trademarks, trade names,
service marks or other proprietary interests;
(n) All costs associated with membership in trade associations; and
(o) All costs of filing annual and other reports with the SEC and
other regulatory authorities.
In the event that the Adviser provides any of the foregoing services or
pays any of these expenses, the Funds promptly shall reimburse the Adviser
therefor.
SECTION 5. TERM; TERMINATION.
Section 5.1. With respect to each Fund, 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 respective Fund
shall approve the New Management Agreement with the Adviser or (iii) unless
sooner terminated for the respective Fund as provided in Section 5.2 below,
whichever occurs first (collectively, the "Term").
Section 5.2. This Agreement may be terminated at any time, without penalty,
as follows:
(a) By a majority of the Trustees of the Company who are not
parties hereto or Interested Persons of any such party, or by the
affirmative vote of a majority of the Outstanding Voting Securities of the
Fund, upon at least ten (10) calendar days' prior written notice to the
Adviser at its principal place of business; and
(b) By the Adviser, upon at least 60 days' prior written notice to
the Company at its principal place of business.
SECTION 6. RETENTION OF CONTROL BY FUNDS.
The Company acknowledges that the investment advice and recommendations to
be provided by the Adviser hereunder are advisory in nature only. The Company
further acknowledges that, at all times during the Term hereof, the Funds (and
not the Adviser) shall retain full control over the investment policies of the
Funds. Nothing contained herein shall be deemed or construed to limit, prohibit
or restrict the right or ability of the Trustees of the Company to delegate to
the appropriate officers of the Company, or to a committee of Trustees of the
Company, the power to authorize purchases, sales or other actions affecting the
portfolios of the Funds between meetings of the Trustees of the Company;
provided, however, that all such purchases, sales or other actions so taken
during such time shall be consistent with the investment policies of the Funds
and shall be reported to the Board of Trustees of the Company at its next
regularly scheduled meeting.
SECTION 7. BROKERS AND BROKERAGE COMMISSIONS.
Section 7.1. For purposes of this Agreement, brokerage commissions paid by
the Funds upon the purchase or sale of the Funds' portfolio securities shall be
considered a cost of securities of the Funds and shall be paid by the Funds in
accordance with Section 4.1(e) hereof.
Section 7.2. The Adviser shall place Funds portfolio transactions with
brokers and dealers who render satisfactory service in the execution of orders
at the most favorable prices and at reasonable commission rates; provided,
however, that the Adviser may pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker or dealer would have charged for effecting such transaction, if the
Adviser determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, in terms of either that particular transaction or the overall
responsibilities of the Adviser.
Section 7.3. In placing portfolio business with broker-dealers for or on
behalf of the Funds, the Adviser shall seek the best execution of each such
transaction, and all such brokerage placements shall be consistent with the
Rules of Conduct of Financial Industry Regulatory Authority (FINRA).
Notwithstanding the foregoing, the Funds shall retain the right to direct the
placement of all portfolio transactions for or on behalf of the Funds, and, in
furtherance thereof, the Funds may establish policies or guidelines to be
followed by the Adviser in its placement of the Funds' portfolio transactions
pursuant to the foregoing provisions. The Adviser shall report to the Trustees
of the Company at least on a quarterly basis regarding the placement of the
Funds' portfolio transactions.
Section 7.4. The Adviser shall not deal with any affiliate in any
transaction hereunder in which such affiliate acts as a principal, nor shall the
Adviser, in rendering services to the Funds hereunder, execute any negotiated
trade with any affiliate if execution thereof involves such affiliate's acting
as a principal with respect to any part of an order for or on behalf of the
Funds.
SECTION 8. ASSIGNMENT.
This Agreement may not be assigned by either party hereto. This Agreement
shall terminate automatically in the event of any assignment (as such term is
defined in Section 2(a)(4) of the 1940 Act). Any attempted assignment of this
Agreement shall be of no force and effect.
SECTION 9. AMENDMENTS.
This Agreement may be amended in writing signed by both parties hereto;
provided, however, that no such amendment shall be effective unless approved by
a majority of the Trustees of the Company who are not parties hereto or
Interested Persons of any such party cast at a meeting called for the purpose of
voting on such amendment and by the affirmative vote of a majority of the
Outstanding Voting Securities of the Funds.
SECTION 10. LIABILITY.
The Adviser, its partners, directors, officers, employees, and certain
other persons performing specific functions for a Fund will only be liable to
the Fund for losses resulting from willful misfeasance, bad faith, gross
negligence, or reckless disregard of their obligations and duties under the
Agreement.
SECTION 11. SECTION 817(h) DIVERSIFICATION.
The Adviser is responsible for compliance with the provisions of Section
817(h) of the Internal Revenue Code of 1986, as amended ("Code"), applicable to
each Fund (relating to the diversification requirements applicable to
investments in underlying variable annuity contracts).
SECTION 12. GOVERNING LAW.
This Agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of Illinois, without reference to the
conflict of laws provisions thereof. In the event of any inconsistency between
this Agreement and the 1940 Act, the 1940 Act shall govern, and the inconsistent
provisions of this Agreement shall be construed so as to eliminate such
inconsistency.
SECTION 13. NON-LIABILITY OF CERTAIN PERSONS.
Any obligation of the Company hereunder shall be binding only upon the
assets of the Company (or the applicable Fund thereof) and shall not be binding
upon any Trustee, officer, employee, agent, member or interest-holder of the
Company. Neither the authorization of any action by any Trustee, officer,
employee, agent, member or interest-holder of the Company nor the execution of
this agreement on behalf of a Fund shall impose any liability upon any Trustee,
officer, employee, agent, member or interest-holder of the Company.
SECTION 14. USE OF ADVISER'S NAME.
The Company may use the name "First Defined Portfolio Fund, LLC" and the
Portfolio names listed in Schedule A or any other name derived from the name
"First Trust" or "Nike Securities" only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect, including any similar
agreement with any organization which shall have succeeded to the business of
Adviser as investment adviser. At such time as this Agreement or any extension,
renewal or amendment hereof, or such other similar agreement shall no longer be
in effect, the Company will cease to use any name derived from the name "First
Trust" or "Nike Securities" or otherwise connected with Adviser, or with any
organization which shall have succeeded to Adviser's business as investment
adviser.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
FIRST DEFINED PORTFOLIO FUND, LLC
By /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: President
FIRST TRUST ADVISORS L.P.
By /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: President
SCHEDULE A
1. Target Managed VIP Portfolio
2. The Dow(R) DART 10 Portfolio
3. The Dow(R) Target Dividend Portfolio
4. Global Dividend Target 15 Portfolio
5. S&P(R) Target 24 Portfolio
6. NASDAQ(R) Target 15 Portfolio
7. First Trust Target Focus Four Portfolio
8. Value Line(R) Target 25 Portfolio
Schedule B
FEE RATE
1. Target Managed VIP Portfolio 0.60%
2. The Dow(R) Target Dividend Portfolio 0.60%
3. The Dow(R) Dart 10 Portfolio 0.60%
4. Global Dividend Target 15 Portfolio 0.60%
5. S&P(R) Target 24 Portfolio 0.60%
6. First Trust Target Focus Four Portfolio 0.60%
7. Value Line(R) Target 25 Portfolio 0.60%
8. NASDAQ(R) Target 15 Portfolio 0.60%
