SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made and entered into as of this ______ day of _________,
2002, by and between Alternative Investment Partners, LLC, a Delaware limited
liability company (the "Adviser"), AIP Alternative Strategies Funds, a Delaware
business trust ("AIS") and Zacks Investment Management, Inc., a ____________
("the Sub-Adviser") regarding Alpha Strategies I Fund, a series of AIS (the
"Fund).
WHEREAS, the Fund is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the " 1940 Act");
and
WHEREAS, the Adviser has been appointed investment adviser to the Fund,
pursuant to an Investment Advisory Agreement dated __________, 2002, which has
been approved by the Fund's Board of Trustees (the "Advisory Agreement"); and
WHEREAS, the Adviser shall have in its sole discretion the decision as to
the percentage of the Fund's net assets to be contributed into or subtracted
from the Separate Account to be advised by the Sub-Adviser; and
WHEREAS, the Adviser and the AIS desire to retain the Sub-Adviser to assist
the Adviser in providing a continuous investment program for one of the separate
accounts of the Fund's portfolio (the "Separate Account") and the Sub-Adviser is
willing to do so; and
WHEREAS, the Board of Trustees of the Fund has approved this Agreement, and
the Sub-Adviser is willing to furnish such services upon the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser and AIS hereby appoint the Sub-Adviser to serve
as sub-adviser to the Adviser with respect to the Separate Account. Intending to
be legally bound, the Sub-Adviser accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
2. Advisory Services. Subject to the supervision of AIS's Board of Trustees
and the Adviser, the Sub-Adviser will assist the Adviser in providing a
continuous investment program for the Separate Account, including investment
research and management with respect to the securities and investments and cash
equivalents comprising the Separate Account. The Sub-Adviser will provide
services under this Agreement in accordance with the Fund's investment
objective, policies and restrictions as stated in the Fund's Prospectus and
resolutions of AIS's Board of Trustees applicable to the Fund.
Without limiting the generality of the foregoing, the Sub-Adviser further
agrees that it:
(a) will assist in determining from time to time what securities and
other investments will be purchased, retained or sold for the Separate
Account;
(b) will manage in consultation with the Adviser the Separate
Account's temporary investments in securities, cash and cash equivalents;
(c) will place orders pursuant to its investment determinations for
the Separate Account either directly with the issuer or with any broker or
dealer;
(d) will consult with the Adviser on a continuous basis as to the
Fund's total assets which shall be invested in the Separate Account;
(e) will attend regular business and investment-related meetings with
AIS's Board of Trustees and the Adviser if requested to do so by AIS and/or
the Adviser; and
(f) will maintain books and records with respect to the securities
transactions for the Separate Account, furnish to the Adviser and AIS's
Board of Trustees such periodic and special reports as they may request
with respect to the Separate Account, and provide in advance to the Adviser
all reports to the Board of Trustees for examination and review within a
reasonable time prior to AIS's Board meetings.
3. Covenants by the Sub-Adviser. The Sub-Adviser agrees with respect to the
services provided to the Fund that it:
(a) will maintain its status as a Registered Investment Advisor with
the Securities and Exchange Commission;
(b) will conform with all Rules and Regulations of the Securities and
Exchange Commission;
(c) will telecopy trade information to the Fund's designated Fund
Accountant no later than the first business day following the day of the
trade and cause broker confirmations to be sent directly to the Fund's
designated Fund Accountant and adopt such other trade reporting, settlement
and clearance procedures with respect to the Fund as shall be in accordance
with the Fund's existing procedures and as mutually agreed by the parties
hereto; and
(d) will treat confidentially and as proprietary information of the
Fund all records and other information relative to the Fund and prior,
present or potential shareholders, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder (except after prior notification to and approval in
writing by AIS, which approval shall not be unreasonably withheld, and may
not be withheld and will be deemed granted where the Sub-Adviser may be
exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities,
or when so requested by AIS); and
(e) will maintain its own Code of Ethics and report to the Adviser's
Compliance Officer any violation of such Code.
4. Services Not Exclusive. The services furnished by the Sub-Adviser
hereunder are deemed not to be exclusive, and nothing in this Agreement shall
(i) prevent the Sub-Adviser or any affiliated person (as defined in the 0000
Xxx) of the Sub-Adviser or any employee, agent, manager or affiliated person of
such person from acting as investment adviser or manager for any other person or
persona, including other management investment companies or investment vehicles
or accounts of any type with investment objectives and policies the same as or
similar to those of the Fund or (ii) limit or restrict the Sub-Adviser or any
such employee, agent, manager or affiliated person from buying, selling or
trading any securities or other investments (including any securities or other
investments which the Fund is eligible to buy) for its or their own accounts or
for the accounts of others for whom it or they may be acting; provided, however.
that the Sub-Adviser agrees that it will not undertake any activities which, in
its reasonable judgment, will adversely affect the performance of its material
obligations under this Agreement.
5. Separate Account Transactions. Investment decisions for the Separate
Account shall be made by the Sub-Adviser independently from those for any other
investment companies and accounts advised or managed by the Sub-Adviser. The
Separate Account and such investment companies and accounts may, however, invest
in the same securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Separate Account and/or another
investment company or account, the transaction will be averaged as to price, and
available investments allocated as to amount, in a manner which the Sub-Adviser
believes to be equitable to the Fund and such other investment company or
account. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or sold
by the Fund. To the extent permitted by law, the Sub-Adviser may aggregate the
securities to be sold or purchased for the Separate Account with those to be
sold or purchased for other investment companies or accounts in order to obtain
best execution.
The Sub-Adviser shall place orders for the purchase and sale of portfolio
securities for the Separate Account and will solicit broker-dealers to execute
transactions in accordance with the Fund's policies and restrictions regarding
brokerage allocations. If applicable, the Sub-Adviser shall place orders
pursuant to its investment determinations for the Separate Account either
directly with the issuer or with any broker or dealer. If it executes portfolio
transactions and selects brokers or dealers, the Sub-Adviser shall use its
reasonable best efforts to seek the most favorable execution of orders, after
taking into account all factors the Sub-Adviser deems relevant, including the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. Consistent with this obligation, the Sub-Adviser may, to
the extent permitted by law, purchase and sell portfolio securities to and from
brokers and dealers who provide brokerage and/or research services (within the
meaning of Section 28(e) of the Securities Exchange Act of 1934) to or for the
benefit of the Separate Account and/or other accounts over which the Sub-Adviser
or any of its affiliates exercises investment discretion. The Sub-Adviser is
authorized to pay to a broker or dealer who provides such brokerage and/or
research services a commission for executing a portfolio transaction for the
Separate Account which is in excess of the amount of commission another broker
or dealer would have charged for effecting that transaction if the Sub-Adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and/or research services provided by such broker or
dealer, viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund. In no instance will
portfolio securities be purchased from or sold to the Adviser or the Sub-Adviser
or any affiliated person of either thereof, except as permitted by Rules and
Regulations of the Securities and Exchange Commission.
6. Covenants of the Adviser. The Adviser agrees with respect to the
services provided to the Adviser hereunder that the Adviser will conform with
the applicable Rules and Regulations of the Securities and Exchange Commission.
7. Certain Representations and Warranties. Each of the parties hereto
represents and warrants to the other that, as of the date hereof, this Agreement
has been duly and validly authorized by all necessary action (corporate, limited
liability company or otherwise) on the part of such party, has been duly
executed and delivered by such party and constitutes the valid and legally
binding obligation of such party, enforceable against such party in accordance
with its terms and conditions.
8. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Fund are the property of AIS and further agrees to surrender
promptly to AIS any of such records upon AIS's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
9. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Fund. Nothing herein, however, shall be deemed to require the
Sub-Adviser to pay any expenses of the Fund or the Adviser.
10. Compensation. In consideration of the services rendered pursuant to
this Agreement, the Adviser will pay to the Sub-Adviser, as compensation for the
services provided by the Sub-Adviser under this Agreement, a monthly fee of
1.00% (on an annualized basis) of the average net assets of the Separate
Account. The Adviser shall pay the Sub-Adviser as soon as practical after the
last day of each calendar month, but no later than 5 business days after the end
of each month. In case of termination or expiration of this Agreement during any
calendar month, the fee with respect to such month shall be reduced
proportionately based upon the number of calendar days during which it is in
effect and the fee shall be computed upon the average net assets of the Fund in
accordance with the prospectus.
11. Standard of Care: Limitation of Liability; Limited Indemnity. The
Sub-Adviser shall exercise due care and diligence and use the same skill and
care in providing its services hereunder as it uses in providing services to
other investment companies, accounts and customers, but shall not be liable for
any action taken or omitted by the Sub-Adviser in the absence of bad faith,
willful misconduct, gross negligence or reckless disregard of its duties. The
Adviser further agrees to indemnify, defend and hold the Sub-Adviser, and its
managers, officers, directors, equityholders, employees and agents ("Related
Persons"), harmless from and against all losses, claims, damages, liabilities,
costs and expenses arising by reason of being or having been Sub-Adviser to the
Adviser, or in connection with the past or present performance of services to
the Adviser in accordance with this Agreement, except to the extent that the
loss, claim, damage, liability, cost or expense was caused by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties on
the part of the Sub-Adviser in the performance of its duties and obligations
under this Agreement. These losses, claims, damages, liabilities, costs and
expenses include, but are not limited to, amounts paid in satisfaction of
judgments, in compromise, or as fines or penalties, and counsel fees and
expenses, incurred in connection with the defense or disposition of any action,
suit, investigation or other proceeding, whether civil or criminal, before any
judicial, arbitral, administrative or legislative body, in which the indemnitee
may be or may have been involved as a party or otherwise, or with which such
indemnitee may be or may have been threatened, while in office or thereafter.
Federal and various state securities laws may afford the Adviser and/or the Fund
certain rights and remedies under certain circumstances, even in the absence of
bad faith, willful misconduct, gross negligence or reckless disregard by the
Sub-Adviser or its Related Persons, and nothing contained herein shall in any
way constitute a waiver or limitation of any such rights and remedies that the
Adviser and/or the Fund may have under any such federal or state securities
laws.
12. Reference to the Sub-Adviser. Neither the Adviser nor any affiliate or
agent of it shall make reference to this Agreement, or use the name of the
Sub-Adviser or any of its affiliates, (except references in regulatory filings
and communications with shareholders concerning the identity of and services
provided by the Sub-Adviser to the Fund, which references shall not differ in
substance from those typically included in a proxy statement or annual report of
the Fund, or the Fund's current registration statement, ; provided that the
Adviser shall give the Sub-Adviser a reasonable opportunity to review such
references in advance and to comment thereon), in any advertising or promotional
materials without the prior approval of the Sub-Adviser, which approval shall
not be unreasonably withheld or delayed. The Adviser hereby agrees to make all
reasonable efforts to cause the Fund and any affiliate thereof to satisfy the
foregoing obligation.
13. Duration and Termination. Unless sooner terminated, this Agreement
shall be for an initial period of one year, and thereafter shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by the Fund's Board of Trustees provided
that its continuance also is approved by a majority of the Fund's Trustees who
are not "interested persons" (as defined in the 0000 Xxx) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable at any time without penalty, on
sixty (60) days' notice, by the Fund's Board of Trustees, by the Adviser or by
the Sub-Adviser or by vote of a majority of the outstanding voting securities of
the Fund. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act). Termination or expiration of this
Agreement, however caused, shall be without prejudice to any compensation
accrued to the date of termination or expiration and Sections 3(d), 8, 9, 10, 11
and 12 shall survive any termination or expiration.
14. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by the Board of Trustees of the Fund, including a
majority of the Trustees who are not interested persons of the Adviser or the
Sub-Adviser, cast in person at a meeting called for the purpose of voting on
such approval.
15. Notice. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed:
To the Sub-Adviser at:
---------------------
Zacks Investment Management, Inc.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
To the Adviser at:
-----------------
Alternative Investment Partners, LLC
000 Xxxxxxxxxxx Xxxx Xx.
Xxxxxxxxx, XX 00000
To the Fund at:
--------------
AIP Alternative Strategies Funds
000 Xxxxxxxxxxx Xxxx Xx.
Xxxxxxxxx, XX 00000
with a copy to:
--------------
Xxxxxxx & Xxxxxxx P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
16. Miscellaneous. Neither the holders of Shares of the Fund nor the
Trustees shall be personally liable hereunder. The captions in this Agreement
are included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or effect.
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. This Agreement may be executed simultaneously 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.
17. Governing Law. This Agreement constitutes the entire agreement of the
parties, shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law in
a manner not in conflict with the provisions of the 1940 Act.
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.
AIP ALTENATIVE STRATEGIES FUNDS
By: /s/ Xxxxxx X. Xxxxxx
--------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Trustee
SUB-ADVISOR
Zacks Investment Management, Inc.
By:
Name:
Title:
