INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT,
made as of January 29, 2010 between Salient Absolute Return Fund, a Delaware
statutory trust (the “Fund”), and Salient Advisors, L.P., a Delaware limited
partnership (the "Advisor”).
WHEREAS,
the Fund will be registered with the Securities and Exchange Commission (the
"SEC") as a closed-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS,
the Advisor is registered with the SEC as an investment advisor under the
Investment Advisors Act of 1940, as amended; and
WHEREAS,
the Fund desires to retain the Advisor so that it will render investment
management services to the Fund in the manner and on the terms and conditions
hereinafter set forth; and
WHEREAS,
the Advisor is willing to render such services and/or engage others to render
such services to the Fund;
NOW
THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed by the parties as follows:
1. Appointment. The Fund hereby
appoints the Advisor to act as investment advisor and provide investment
advisory services to such Fund, subject to the supervision of the Fund's Board
of Trustees (the "Board"), for the period and on the terms and conditions set
forth in this Agreement. The Advisor accepts such appointment and agrees to
render the services and to assume the obligations set forth in this Agreement
commencing on its effective date for the compensation herein
provided.
2. Responsibilities of the
Advisor.
(a) The
Advisor, or an affiliate of the Advisor ("Advisor Affiliate"), to the extent
permitted by applicable laws, rules and regulatory interpretations, hereby
undertakes and agrees, upon the terms and conditions herein set forth, subject
to the supervision of the Fund's Board, either directly or indirectly through
one or more SubAdvisors (as that term is defined in paragraph 4
below):
(i) to
make investment decisions and provide a program of continuous investment
management for the Fund; prepare, obtain, evaluate, and make available to the
Fund research and statistical data in connection therewith; obtain and evaluate
such information and advice relating to the economy, securities markets, and
securities as it deems necessary or useful to discharge its duties hereunder;
engage in or supervise the selection, acquisition, retention, and sale of
investments, securities, and/or cash; engage in or supervise the selection,
acquisition, retention, and sale of unregistered investment funds and/or other
investment vehicles (the "Investment Funds"); select brokers or dealers to
execute transactions; and all of the aforementioned shall be done in material
accordance with the Fund's investment objective, policies, and limitations as
stated in the Fund's registration statement filed with the SEC on Form N-2 under
the 1940 Act (the "Registration Statement"), as amended from time to time, and
in accordance with guidelines and directions from the Fund's Board and any
applicable laws and regulations;
(ii)
subject to the direction and control of the Board, to assist the Fund as it may
reasonably request in the conduct of the Fund's business, including oral and
written research, analysis, advice, statistical, and economic data, judgments
regarding individual investments, general economic conditions and trends, and
long-range investment policies; determine or recommend the securities,
instruments, repurchase agreements, options, and other investments (including
the Investment Funds), and techniques that the Fund will purchase, sell, enter
into, use, or provide in an ongoing evaluation of the Fund's portfolio;
continuously manage and supervise the investment program of the Fund and the
composition of its investment portfolio in a manner consistent with the
investment objective, policies, and restrictions of the Fund, as set forth in
its Registration Statement and as may be adopted from time to time by the Board,
and applicable laws and regulations; determine or recommend the extent to which
the Fund's portfolio shall be invested in securities, Investment Funds, and
other assets, and what portion, if any, should be held uninvested;
and
undertake
to do anything incidental to the foregoing to facilitate the performance of its
obligations hereunder;
(iii) to
furnish to or place at the disposal of the Fund information, evaluations,
analyses, and opinions formulated or obtained by the Advisor in the discharge of
its duties as the Fund may, from time to time, reasonably request, and maintain
or cause to be maintained for the Fund all books, records, reports, and any
other information required under the 1940 Act, to the extent that such books,
records, and reports, and other information are not maintained or furnished by
the custodian, transfer agent, administrator, sub-administrator, or other agent
of the Fund;
(iv) to
furnish to or place at the disposal of the Fund, such office space, telephone,
utilities, and facilities as the Fund may require for its reasonable needs and
to furnish at the expense of the Advisor, or an Advisor Affiliate, clerical
services related to research, statistical, and investment work;
(v) to
render or make available to the Fund management and administrative assistance in
connection with the operation of the Fund that shall include (i) compliance with
all reasonable requests of the Fund for information, including information
required in connection with the Fund's filings with the SEC, other federal and
state regulatory organizations, and self-regulatory organizations, and (ii) such
other services as the Advisor shall from time to time determine to be necessary
or useful to the administration of the Fund; and
(vi) to
pay the reasonable salaries, fees, and expenses of the Fund's employees
(including the Fund's share of any payroll taxes) and any fees and expenses of
the Fund's trustees ("Trustees") who are partners, directors, trustees, or
employees of or otherwise affiliated with the Advisor; provided, however, that
the Fund, and not the Advisor, shall bear travel expenses (or an appropriate
portion thereof) of Trustees of the Fund who are partners, directors, trustees,
or employees of the Advisor to the extent that such expenses relate to
attendance at meetings of the Fund's Board or any committees thereof or Advisors
thereto. The Advisor shall also bear all expenses arising out of its duties
hereunder, including travel and other expenses related to the selection and
monitoring of Investment Funds. The Advisor shall not be responsible for any
expenses of the Fund other than those specifically allocated to the Advisor in
this Agreement.
(b) In
particular, but without limiting the generality of the foregoing, the Advisor
shall not be responsible, except to the extent of the reasonable compensation of
the Fund's employees who are partners, directors, trustees, or employees of the
Advisor whose services may be involved, for the following expenses of the Fund:
all fees and expenses directly related to portfolio transactions and positions
for the Fund's account such as direct and indirect expenses associated with the
Fund's investments, including its investments in Investment Funds, and enforcing
the Fund's rights in respect of such investments; brokerage commissions;
interest and fees on any borrowings by the Fund; professional fees (including,
without limitation, expenses of consultants, experts and specialists); research
expenses; fees and expenses of outside legal counsel (including fees and
expenses associated with the review of documentation for prospective investments
by the Fund), including foreign legal counsel; accounting, auditing and tax
preparation expenses; fees and expenses in connection with repurchase offers and
any repurchases or redemptions of Fund shares of beneficial interest; taxes and
governmental fees (including tax preparation fees); fees and expenses of any
custodian, subcustodian, transfer agent, and registrar, and any other agent of
the Fund; all costs and charges for equipment or services used in communicating
information regarding the Fund's transactions among the Advisor and any
custodian or other agent engaged by the Fund; bank services fees; expenses of
preparing, printing, and distributing copies of offering memoranda and any other
sales material (and any supplements or amendments thereto), reports, notices,
other communications to holders of shares of beneficial interest in the Fund
(each a “Shareholder”), and proxy materials; expenses of preparing, printing,
and filing reports and other documents with government agencies; expenses of
Shareholders’ meetings; expenses of corporate data processing and related
services; Shareholder recordkeeping and Shareholder account services, fees, and
disbursements; expenses relating to investor and public relations; and
extraordinary expenses such as litigation expenses.
3. Use of Name. Upon
receiving notice from the Advisor, the Fund will assist the Advisor to a
reasonable extent in protecting the use and sublicensing of names or trademarks
that the Advisor has the rights to use and sublicense.
- 2
-
4. SubAdvisors. The
Advisor may, at its expense and subject to its supervision, engage one or more
persons, including, but not limited to, subsidiaries and affiliated persons of
the Advisor, to render any or all of the investment advisory services that the
Advisor is obligated to render under this Agreement, including, subject to
approval of the Fund's Board, a person or persons to render investment advisory
services including the provision of a continuous investment program and the
determination of the composition of the securities and other assets of the Fund
(each, a "SubAdvisor"). Shareholder approval of the appointment of a SubAdvisor
by the Advisor pursuant to this paragraph is required only to the extent
required by applicable law, as may be modified by any exemptive order or other
interpretation issued by the SEC or its staff.
5. Regulatory
Compliance. In performing its duties hereunder, the Advisor
(and any SubAdvisors selected by the Advisor) shall in all material respects
comply with the 1940 Act and all rules and regulations thereunder, all other
applicable federal and state laws and regulations, with any applicable
procedures adopted by the Board, and with the provisions of the Registration
Statement.
6. Compensation.
(a) As
compensation for the services performed and the facilities and personnel
provided by the Advisor pursuant to this Agreement, the Fund (subject to Section
6(b)) will pay the Advisor monthly in arrears a fee, calculated on the last
business day of such month at the annual rate of 0.75% of the Fund's month-end
net assets. If the Advisor shall serve hereunder for less than the whole of any
month, the fee hereunder shall be prorated according to the proportion that such
period bears to the full month and shall be payable within 30 days after the end
of the relevant month or the date of termination of this Agreement, as
applicable. The value of the net assets of the Fund shall be determined pursuant
to the applicable provisions of the agreement and declaration of trust of the
Fund, the Fund's valuation procedures, and its Registration Statement, each as
amended from time to time. If the determination of the net asset value of the
Fund has been suspended for a period including the end of any month when the
Advisor's compensation is payable pursuant to this paragraph, then the Advisor's
compensation payable with respect to such month shall be computed on the basis
of the value of the net assets of the Fund as last determined (whether during or
prior to such month). If the Fund determines the value of the net assets of its
portfolio more than once in any month, then the last such determination thereof
in that month shall be deemed to be the sole determination thereof in that month
for the purposes of this paragraph.
(b) For
so long as the Fund invests some or all of its investable assets in Salient
Absolute Return Master Fund (the “Master Fund”), any successor investment
vehicle to the Master Fund, or one or more other or additional investment
vehicles that operate as a master or hub fund (subject to applicable statutes,
regulations, and interpretations thereof or exemptions therefrom), the Advisor
shall not be entitled to any fee pursuant to Section 6(a) with respect to that
portion of the Fund's assets that are so invested. Should the Fund's Board
determine that it is in the best interests of the Fund and its shareholders to
withdraw some or all of the Fund's investment in the Master Fund (or any other,
additional, or successor investment vehicle), the Advisor will directly manage,
or supervise the direct management of, such assets of the Fund in accordance
with the terms of this Agreement.
7. Portfolio
Transactions.
(a) In
executing transactions for the Fund and selecting brokers or dealers, the
Advisor (either directly or through SubAdvisors) shall place orders pursuant to
its investment determinations for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Registration Statement and in accordance with any applicable legal requirements.
Without limiting the foregoing, the Advisor (or a SubAdvisor) shall seek to
obtain for the Fund the best execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate compliance
with this requirement. Subject to the appropriate policies and procedures
approved by the Fund's Board, the Advisor (or the SubAdvisor) may, to the extent
authorized by Section 28(e) of the Securities Exchange Act of 1934, as amended
(the "Securities Exchange Act"), cause the Fund to pay a broker or dealer that
provides brokerage or research services to the Advisor (or the SubAdvisor) an
amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Advisor (or the SubAdvisor) determines, in good faith,
that such amount of commission is reasonable in relationship to the value of
such brokerage or research services provided viewed in terms of that particular
transaction or the Advisor's (or the SubAdvisor's) overall responsibilities to
the Fund or its other advisory clients. To the extent authorized by Section
28(e) of the Securities Exchange Act
- 3
-
and the
Fund's Board, the Advisor (or the SubAdvisor) shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement with respect
to the Fund or otherwise solely by reason of such action.
(b) To
the extent applicable to the Fund and consistent with these standards, in
accordance with Section 11(a) of the Securities Exchange Act and Rule 11a2-2(T)
thereunder, and subject to any other applicable laws and regulations, the
Advisor (or the SubAdvisor) is further authorized to allocate the orders placed
by it on behalf of the Fund to the Advisor (or the SubAdvisor) if it is
registered as a broker or dealer with the SEC, to its affiliate that is
registered as a broker or dealer with the SEC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Fund or the Advisor (or the SubAdvisor). Such allocation shall
be in such amounts or proportions as the Advisor (or the SubAdvisor) shall
determine consistent with the above standards, and, upon request, the Advisor
(or the SubAdvisor) will report on said allocation regularly to the Fund's Board
indicating the broker and dealers to which such allocations have been made and
the basis therefor.
8. Proxy Voting. The
Fund may delegate to the Advisor, subject to revocation at the discretion of its
Board, the responsibility for voting proxies relating to the Fund's portfolio
securities pursuant to written proxy voting policies and procedures established
by the Advisor. Notwithstanding such delegation, with respect to securities
issued by the Master Fund (or any other investment vehicle or fund in which the
Fund may invest in the future and that is managed by the Advisor, or an Advisor
Affiliate), the Fund will reserve the right, and will not delegate
responsibility to the Advisor, to vote any proxies relating to such securities,
pursuant to applicable law including the 1940 Act.
9. Reports. The
Advisor (or the SubAdvisor) shall regularly report to the Fund's Board on the
investment program of the Fund and the issuers and securities generally
represented in the Fund's portfolio, including reports received from the
Investment Funds, and will furnish the Board such periodic and special reports
as the Board may reasonably request.
10. Not
Exclusive. Nothing herein shall be construed as prohibiting
the Advisor, SubAdvisor, or any director, trustee, partner, employee, or
affiliate thereof from providing investment management or advisory services to,
or entering into investment management or advisory agreements with, other
clients (including other registered investment companies), including clients
which may from time to time purchase and/or sell securities of issuers in which
the Fund invests, or from utilizing (in providing such services) information
furnished to the Advisor by advisors and consultants to the Fund and others
(including SubAdvisors); provided however, that the Advisor will undertake no
activities that, in its judgment, will adversely affect the performance of its
obligations under this Agreement.
11. Conflicts of
Interest. Whenever the Fund and one or more other accounts or
investment companies managed or advised by the Advisor, an Advisor Affiliate, or
a SubAdvisor have available funds for investment, investments suitable and
appropriate for each shall be allocated in accordance with procedures approved
by the Fund's Board and believed by the Advisor, Advisor Affiliate or the
SubAdvisor to be equitable to each entity. Similarly, opportunities to sell
securities shall be allocated in accordance with procedures approved by the
Fund's Board and believed by the Advisor, Advisor Affiliate or the SubAdvisor to
be equitable. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Fund. In addition, the Fund acknowledges that any partner, director, or
trustee of, or persons employed by, the Advisor, an Advisor Affiliate, or a
SubAdvisor, who may also be a Shareholder, Trustee, or person employed by, the
Fund, to assist in the performance of the Advisor's or the SubAdvisor's duties
hereunder will not devote his or her full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of the Advisor,
any Advisor Affiliate or a SubAdvisor to engage in and devote time and attention
to other businesses or to render services of whatever kind or
nature.
12. Independent
Contractor. The Advisor shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Fund's Board from time to time, have no
authority to act for or represent the Fund in any way or otherwise be deemed its
agent.
13. Liability. The
Advisor may rely on information reasonably believed by it to be accurate and
reliable, including but not limited to, any information or report from the
Investment Funds, and shall give the Fund the benefit of its best judgment and
effort in rendering services hereunder. Neither the Advisor nor its partners,
officers, directors,
- 4
-
employees,
affiliates, successors, or other legal representatives shall be subject to any
liability for any act or omission, error of judgment, 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 Advisor in the performance of
its duties or by reason of reckless disregard on the part of the Advisor of its
obligations and duties under this Agreement. Any person, even though also
employed by the Advisor, who may be or become an employee of the Fund and paid
by 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 Advisor.
14. Indemnification.
(a) The
Fund will indemnify the Advisor and any Advisor Affiliate, and each of their
partners, members, directors, officers, and employees and any of their
affiliated persons, executors, heirs, assigns, successors, or other legal
representatives (each an "Indemnified Person") against any and all costs,
losses, claims, damages, or liabilities, joint or several, including, without
limitation, reasonable attorneys' fees and disbursements, resulting in any way
from the performance or non-performance of any Indemnified Person's duties in
respect of the Fund, except those resulting from the willful misfeasance, bad
faith or gross negligence of an Indemnified Person or the Indemnified Person's
reckless disregard of such duties and, in the case of criminal proceedings,
unless such Indemnified Person had reasonable cause to believe its actions
unlawful (collectively, "disabling conduct"). Indemnification shall be made
following: (i) a final decision on the merits by a court or other body before
whom the proceeding was brought that the Indemnified Person was not liable by
reason of disabling conduct; or (ii) a reasonable determination that the
Indemnified Person is entitled to indemnification hereunder, provided that such
determination is based upon a review of the facts and reached by (A) the vote of
a majority of the Fund's trustees who are not parties to the proceeding or (B)
legal counsel selected by a vote of a majority of the Fund's Board, further
provided that such counsel's determination be written and provided to the Board.
A Fund shall advance to an Indemnified Person reasonable attorneys' fees and
other costs and expenses incurred with respect to the Fund in connection with
defense of any action or proceeding arising out of such performance or
non-performance. The Advisor agrees, and each other Indemnified Person will be
required to agree as a condition to any such advance from a Fund, that if one of
the foregoing parties receives any such advance, the party will reimburse the
Fund for such fees, costs, and expenses to the extent that it shall be
determined that the party was not entitled to indemnification under this
paragraph. The rights of indemnification provided hereunder shall not be
exclusive of or affect any other rights to which any person may be entitled by
contract or otherwise under law.
(b)
Notwithstanding any of the foregoing, the provisions of this section 14 shall
not be construed so as to relieve the Indemnified Person of, or provide
indemnification with respect to, any liability (including liability under
federal securities laws, which, under certain circumstances, impose liability
even on persons who act in good faith) to the extent (but only to the extent)
that such liability may not be waived, limited, or modified under applicable law
or that such indemnification would be in violation of applicable law, but shall
be construed so as to effectuate the provisions of this paragraph to the fullest
extent permitted by law. The provisions of this paragraph shall survive the
termination or cancellation of this Agreement.
15. Term of Agreement;
Termination. This Agreement shall remain in effect with
respect to the Fund until January 31, 2012, and shall continue in effect year to
year thereafter, but only so long as such continuance is specifically approved
at least annually by the affirmative vote of: (i) a majority of the members of
the Fund's Board who are not parties to this Agreement or interested persons (as
defined in the 0000 Xxx) of any party to this Agreement, or of any entity
regularly furnishing investment advisory services with respect to the Fund
pursuant to an agreement with any party to this Agreement, cast in person at a
meeting called for the purpose of voting on such approval; and (ii) a majority
of the Fund's Board or the holders of a majority of the outstanding voting
securities of the Fund. This Agreement may nevertheless be terminated at any
time without penalty, on 60 days' written notice, by the Fund's Board, by vote
of holders of a majority of the outstanding voting securities of the Fund, or by
the Advisor. Any notice to a Fund or the Advisor shall be deemed given when
received by the addressee.
16. Assignment. This
Agreement may not be transferred, assigned, sold, or in any manner hypothecated
or pledged by either party hereto, except as permitted under the 1940 Act or
rules and regulations adopted thereunder. This Agreement shall automatically be
terminated in the event of its assignment, provided that an assignment to a
corporate successor to all or substantially all of the Advisor's business or to
a wholly-owned subsidiary of such
- 5
-
corporate
successor which does not result in a change of actual control or management of
the Advisor's business shall not be deemed to be an assignment for the purposes
of this Agreement.
17. Amendment. This
Agreement may be amended only by the written agreement of the parties whose
rights are affected by the amendment. Any amendment shall be required to be
approved by the Fund's Board and by a majority of its independent Directors in
accordance with the provisions of Section 15(c) of the 1940 Act and the rules
and regulations adopted thereunder. If required by the 1940 Act, any material
amendment shall also be required to be approved by such vote of Shareholders of
the Fund as is required by the 1940 Act and the rules thereunder.
18. Conflicts of
Laws. This Agreement shall be construed in accordance with the
laws of the State of Delaware, without giving effect to the conflicts of laws
principles thereof, provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act. 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.
19. Management of
Subsidiaries. If the Fund's Board determines that it is in the
best interests of the Fund and its Shareholders to carry on all or part of the
business of the Fund through one or more subsidiaries, the Board may cause the
substantive terms of this Agreement to apply to the management of any such
subsidiary or subsidiaries.
20. Fund
Obligations. This Agreement is made by the Fund and executed
on behalf of the Fund by an officer of the Fund, and the obligations created
hereby are not binding on any of the Shareholders, Trustees, employees, or
agents, whether past, present, or future, of the Fund individually, but bind
only the assets and property of the Fund.
21. Severability. If
any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby and, to this extent, the provisions of this Agreement shall
be deemed to be severable.
22. Counterparts. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making proof
of this Agreement to produce or account for more than one such
counterpart.
23. Supersedes Other
Agreements. This Agreement supersedes all prior investment
advisory, management, and/or administration agreements in effect between the
Fund and the Advisor.
IN
WITNESS WHEREOF, the parties have executed this Agreement by their trustees
thereunto duly authorized as of the day and year first written
above.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
- 6
-
|
|
|||
|
By:
/s/ Xxxxxx
Xxxxxxxxx
|
|||
|
Xxxxxx
Xxxxxxxxx
|
|||
|
Secretary
|
|||
|
SALIENT
ADVISORS, L.P.
|
|||
|
By:
/s/ A. Xxxx
Xxxxxxx
|
|||
|
A.
Xxxx Xxxxxxx
Managing
Director
|
|||
