DIRECT INVESTMENT 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 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 N2 File 333-124392 (the
Registration Statement)); and
WHEREAS, the Fund and the Investment Manager are parties to
an Investment Advisory and Management Agreement dated as of
March , 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 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 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 (1) 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 (2) 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
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/ 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
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 77Q1E4 Copies of any new or amended Registrant investment
advisory contracts
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Exh. A-1
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