INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
Agreement, dated as of April 7, 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 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 desires to retain the Investment Manager to render
interim investment management services with respect to the Funds assets
other than those Fund assets invested in direct investments (as that term
is defined below), and the Investment Manager is willing to render such
services on an interim basis in accordance with Rule 15a-4 of the 1940 Act.
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.
(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. Other than with respect to the portion of the Funds
assets invested in direct investments (assets of the Fund that are invested
in securities that at the time of such investment are not listed (or
approved for listing) on a securities exchange), make all investment
decisions for the assets of the Fund (the Listed Assets) and to manage the
investment and reinvestment of the Listed Assets 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, the provisions of the 1940 Act. Should the
Board of Directors for 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. The Investment Manager shall vote the Funds
proxies in connection with its Listed Assets 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 Funds Listed Assets and, with respect to the
Funds Listed Assets, to place all orders for the purchase or sale of
portfolio securities for the Fund with brokers or dealers selected by it,
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
Funds Listed Assets as to deliveries of securities and payments of cash for
the account of the Fund. In connection with the selection of such brokers or
dealers and the placing of such orders, the Investment Manager is directed
at all times to seek to use its best efforts to obtain for the Fund the most
favorable net results available (best execution). In using its best efforts to
obtain for the Fund best execution, the Investment Manager shall consider
all factors it deems relevant, including, by way of illustration, price, the
size of the transaction, the nature of the market security, the amount of the
commission, the timing of the transaction taking into account market prices and
trends, the reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker or dealer in
other transaction. Subject to such policies as the Fund may communicate to the
Investment Manager in writing, the Investment Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement
solely by reason of its having caused the Fund to pay a broker or dealer that
provides brokerage and research services to the Investment Manager or its
affiliates an amount of commission for effecting a portfolio investment
transaction in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction, if the Investment Manager
determines in good faith that such amount of commission was reasonable. Subject
to these requirements and the provision of the 1940 Act, the U.S. Securities
Exchange Act of 1934 and any other applicable provisions of law, nothing shall
prohibit the Investment Manager from selecting brokers or dealers with which it
or the Fund is affiliated;
2. Prepare and make available to the Fund as reasonably
requested by the Board of Directors pertinent research and statistical data;
and
3. 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 or 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 the Offering (as defined in the Prospectus) 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 actually invested in direct investments shall be managed by
such entity as may be appointed by the Fund to manage the assets of the
Fund other than the Listed Assets (the Direct Investment Manager) in
accordance with the terms of a separate investment management and advisory
services agreement entered into by and between the Fund and the Direct
Investment Manager (the Direct Investment Management Agreement). The
portion of the Direct Investment Amount as is not actually invested in
direct investments shall be treated as Listed Assets to be managed by
the Investment Manager pursuant to the terms of this Agreement. Whenever
the Direct Investment Manager shall recommend the investment of Fund
assets in a direct investment, the Fund shall instruct the Investment
Manager in writing as to the amount of Fund assets sought to be invested
in such direct investment, and the Investment Manager shall, within ten
business days thereafter (or such other period of time as the Fund may
direct in writing, but such period may not be less than 10 business days),
liquidate sufficient portfolio securities to realize such amount and
make the net proceeds thereof available for investment in such direct
investment Upon the sale of a direct investment, the Direct Investment
Manager shall make the net proceeds thereof available as soon as
reasonably practicable for investment pursuant to this Agreement by
the Investment Manager. 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 for any portion of the Fund other
than the Listed Assets or for the acts or omissions of the Direct Investment
Manager 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 Listed Assets
is such that the Listed Assets would not be in such violation or if the
Fund would not fail to qualify if the Listed Assets 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 Directors
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, the Fund shall
assume and pay the following expenses: fees of the Direct 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 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 purchase or sale of
securities for the Fund and other advisory clients of the Investment Manager
at or about the same time, transactions in such securities will be made for
the Fund and such other clients in accordance with the Investment Managers trade
allocation procedures, 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 any
such amendment.
8. Duration and Termination.
(a) This Agreement shall be effective for a period of two years
from the date hereof and will continue in effect from year to year thereafter,
provided that such continuance is specifically approved at least annually by (i)
a majority of the members of the Funds Board
of Directors who are neither parties
to this Agreement nor interested persons of
the Fund or of the Investment Manager
or of any entity regularly furnishing investment advisory services with respect
to the Fund pursuant to an agreement with the Investment Manager, cast in person
at a meeting called for the purpose of voting on such approval, and (ii)
separately by the Funds Board of Directors (all Directors voting) or by
vote of a majority of the Funds outstanding voting securities.
(b) This Agreement may nevertheless be terminated at any time,
without payment of penalty by the Investment Manager or by the Fund acting
pursuant to a vote of its Board of Directors or by vote of a majority of the
Funds outstanding securities upon sixty (60) days written notice. This
Agreement shall automatically be terminated in the event of its assignment,
provided, however, that a transaction which does not, in accordance with the
1940 Act, result in a change of actual control or management of the Investment
Managers business shall not be deemed to be an assignment for the purposes of
this Agreement. This Agreement shall also be automatically terminated if the
Investment Manager ceases to be licensed by the Securities and Futures
Commission of Hong Kong.
(c) Termination of this Agreement shall not (1) affect the
right of the Investment Manager to receive payments of any unpaid balance of
the compensation described in Section 2 earned prior to such termination, or
(2) extinguish the Investment Managers right of indemnification under Section
5. As used herein, the terms interested person, assignment, and vote of a
majority of the outstanding voting securities shall have the meanings set
forth in the 1940 Act.
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 (1) the
holders of a majority of the outstanding voting securities of the Fund, and
(2) 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, Xxx Xxxx 00000-0000
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 telex be deemed to have been received
when acknowledged by the addressees correct answer back code, 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 telex or 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. Representations and Warranties of the Investment Manager. The
Investment Manager represents and warrants that: (a)it is duly
registered as an investment adviser under the U.S. Investment Advisers
Act of 1940, as amended, and (b) it is 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 shareholders, 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 Direct 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/ Xxxxxx X. Coop
Name: Xxxxxx X. Coop
Title: Secretary
RCM ASIA PACIFIC LIMITED
By:/s/ Aza Yung
Name: Aza Yung
Title: Authorized Signatory
By:/s/ Xxxxx Xxxxxxxxxxx
Name: Xxxxx Xxxxxxxxxxx
Title: Authorized Signatory
EXHIBIT A
The Investment Manager shall receive a fee for its services under the
Agreement, computed weekly and payable monthly, at the annual rates as
set forth below:
0.70% of the first $315,000,000 of the Funds average weekly net
assets consisting of Listed Assets; and
0.50% of the Funds average weekly net assets for all Listed Assets
in excess of $315,000,000.
The net asset value of the Listed Assets shall be determined in the manner
provided in the Funds Registration Statement on Form N-2.
28394065_5
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28394065_5
Exhibit 77Q1E3 Copies of any new or amended Registrant investment advisory
contracts
28394065_5
