INVESTMENT ADVISORY AGREEMENT
THIS
AGREEMENT is
made
and entered into as of this 28th day of April, 2006 by and between Alternative
Investment Partners, LLC, a Delaware limited liability company (the “Adviser”)
and the Underlying Funds Trust, a Delaware statutory trust (the “Trust”),
regarding each series of the Trust (the “Funds”).
WHEREAS,
the
Trust is registered as an open-end, management investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”); and
WHEREAS,
the
Board of Trustees of the Trust has approved this Agreement, and the 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
of Investment Adviser.
The
Trust desires to employ the Funds’ capital by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in
its
Declaration of Trust dated ____---________ (the “Charter”), and in its
Prospectus as from time to time in effect (the “Prospectus”), and in the manner
and to the extent as may from time to time be approved by the Board of Trustees
of the Trust. The Trust desires to employ and hereby appoints the Adviser to
act
as investment adviser to the Funds. The Adviser accepts the appointment and
agrees to furnish the services for the compensation set forth
below.
2. Delivery
of Fund Documents.
The
Trust has furnished the Adviser with copies properly certified or authenticated
of each of the following:
(a) Charter.
(b) By-Laws-of
the Trust, as amended from time to time.
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(c)
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Resolutions
of the Trustees of the Trust selecting Alternative Investment Partners,
LLC as Adviser to the Funds and approving the form of this
Agreement.
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(d) Funds’
Prospectus.
The
Trust
will furnish the Adviser from time to time with copies, properly certified
or
authenticated, of all amendments of or supplements to the foregoing, if
any.
3. Name
of Funds.
The
Trust and the Funds may use the names set forth on Appendix A, respectively
only
for so long as this Agreement or any other Investment Advisory Agreement between
the Adviser and the Funds or any extension, renewal or amendment hereof or
thereof remains in effect, including any similar agreement with any organization
which shall have succeeded to the Adviser’s business as investment adviser. At
such time as such an agreement shall no longer be in effect, the Funds will
(to
the extent that they lawfully can) cease to use such names or any other name
indicating that they are advised by or otherwise connected with the Adviser
or
any organization which shall have so succeeded to the Adviser’s business. The
Trust acknowledges that the Adviser may grant the non-exclusive right to use
the
names set forth on Appendix A to any other corporation or entity, including
but
not limited to any investment company of which the Adviser or any subsidiary
or
affiliate thereof or any successor to the business thereof shall be an
investment adviser.
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4. Services
Provided by Adviser.
Subject
to the supervision and direction of the Board of Trustees of the Trust, the
Adviser will, either directly or by employing suitable Sub-Advisors (a) act
in strict conformity with the Trust's Declaration of Trust, the Investment
Company Act of 1940, as amended (the "1940 Act") and the Investment Advisers
Act
of 1940, as amended, (b) manage each Fund’s portfolio and furnish a
continual investment program for the Funds in accordance with each Fund’s
investment objective and policies as described in the Funds’ Prospectus,
(c) make investment decisions for the Funds, (d) provide the Funds
with investment research and statistical data, advice and supervision, data
processing and clerical services, (e) provide the Funds with office
facilities which may be the Adviser's own offices, (f) determine what
securities shall be purchased for the Funds, what securities shall be held
or
sold by the Funds, and allocate assets of the Funds to separate sub-accounts
of
the approved Sub-Advisers, and determine what portion of the Funds’ assets shall
be held uninvested, (g) review asset allocations and investment policies
with the Board of Trustees of the Funds every quarter, and (h) advise and
assist the officers of the Trust in taking such steps as are necessary or
appropriate to carry out the decisions of the Board of Trustees of the Trust
and
its committees with respect to the foregoing matters and the conduct of the
business of the Funds.
In
addition, the Adviser will furnish the Trust with whatever statistical
information AIP may reasonably request with respect to the securities that
the
Funds
may hold
or contemplate purchasing.
The
Adviser will keep the Trust informed of developments materially affecting
eachthe
Fund's
portfolio, and will, on its own initiative, furnish the Trust from time to
time
with whatever information the Adviser believes is appropriate for this
purpose.
5. Allocation
of Charges and Expenses.
The
Adviser will make available, without expense to the Funds,
the
services of such of its officers, directors and employees as may be duly elected
officers or trustees of the Funds,
subject
to the individual consent of such persons to serve and to any limitations
imposed by law. The Adviser will pay all expenses incurred in performing its
investment advisory services under this Agreement, including compensation of
and
office space for officers and employees of the Adviser connected with investment
and economic research, trading and investment management of the Funds.
The
Adviser will not be required to pay any investment advisory related expenses
of
the Funds
other
than those specifically allocated to it in this paragraph 5. In particular,
but
without limiting the generality of the foregoing, the Funds
will be
required to pay: brokerage and other expenses of executing portfolio
transactions; taxes or governmental fees; interest charges and other costs
of
borrowing funds; litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's’
business.
6. Compensation
of the Adviser.
In
consideration of the services rendered pursuant to this Agreement, the
Funds
will pay
to the Adviser, as compensation for the services provided by the Adviser under
this Agreement, a monthly fee of 2.50% (on an annualized basis) of the average
net assets of eachthe
Fund.
In
the
event of any termination of this Agreement, the fee provided for in this
paragraph 6 shall be calculated on the basis of a period ending on the last
day
on which this Agreement is in effect, subject to a pro rata
adjustment
based on the number of days elapsed in the current period as a percentage of
the
total number of days in such period.
7. Services
to Other Accounts.
The
Trust understands that the Adviser may act in the future as investment adviser
to fiduciary and other managed accounts, and the Trust has no objection to
the
Adviser so acting, provided that whenever the Funds
and one
or more other accounts advised by the Adviser are prepared to purchase, or
desire to sell, the same security, available investments or opportunities for
sales will be allocated in a manner believed by the Adviser to be equitable
to
each entity. The Trust recognizes that in some cases this procedure may affect
adversely the price paid or received by the Funds
or the
size of the position purchased or sold by the Funds.
In
addition, the Trust understands that the persons employed by the Adviser to
provide service to the Funds
in
connection with the performance of the Adviser's duties under this Agreement
will not devote their full time to that service. Moreover, nothing contained
in
this Agreement will be deemed to limit or restrict the right of the Adviser
or
any "affiliated person" of the Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature
to other persons or entities, including serving as investment adviser to, or
employee, officer, director or trustee of, other investment
companies.
2
8. Brokerage
and Avoidance of Conflicts of Interest.
In
connection with purchases or sales of portfolio securities for the account
of
the Funds,
neither
the Adviser nor any of its trustees, officers or employees will act as a
principal or agent or receive any commission with respect to such purchases
or
sales. The Adviser or its agents shall arrange for the placing of all orders
for
the purchase and sale of portfolio securities for eachthe
Fund's
account with brokers or dealers selected by the Adviser. In the selection of
such brokers or dealers and the placing of such orders, the Adviser will use
its
best efforts to seek for the Funds
the most
favorable execution and net price available and will consider all factors it
deems relevant in making such decisions including, but not limited to, price
(including any applicable brokerage commission or dealer spread), size of order,
difficulty of execution, and operational facilities of the firm involved and
the
firm's risk in positioning a block of securities.
The
parties agree that it is in the interests of the Funds
that the
Adviser have access to supplemental investment and market research and security
and economic analyses provided by brokers who may execute brokerage transactions
at a higher cost to the Funds
than may
result when brokerage is allocated to other brokers on the basis of the best
price and execution. The Adviser is authorized to place orders for the purchase
and sale of securities for the Funds
with
such brokers, subject to review by the Fund's’
Trustees
from time to time. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best price and execution available, the
Adviser may consider the brokerage and research services (as such terms are
defined in Section 28(e) of the Securities Exchange Act of 1934, as amended)
provided to the Fund and/or other accounts over which the Adviser exercises
investment discretion.
9. Standard
of Care; Limitation of Liability.
The
Adviser will exercise its best judgment in rendering the services described
in
paragraph 4 above. The Adviser shall not be liable for any error of judgment
or
mistake of law or for any loss suffered by the Funds
in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in
the performance of its duties or from reckless disregard by the Adviser of
its
obligations and duties under this Agreement, or a loss resulting from a breach
of fiduciary duty with respect to receipt of compensation for services (in
which
case any award of damages shall be limited to the period and amount set forth
in
Section 36(b)(3) of the 1940 Act). Any person, even though an officer, director,
employee, or agent of the Adviser, who may be or become an officer, trustee,
employee or agent of the Funds,
will be
deemed, when rendering services to the Funds,
to be
rendering such services to, or acting solely for, the Funds
and not
as an officer, director, employee or agent, or one under the control or
direction of the Adviser, even though paid by it.
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10. Duration
and Termination of this Agreement.
This
Agreement shall remain in force for an initial term of two years and from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually by the vote of a majority of the Trustees who are
not
interested persons of the Adviser or of the Funds,
cast in
person at a meeting called for the purpose of voting on such approval and by
a
vote of the Board of Trustees or of a majority of the outstanding voting
securities of the Funds.
The
aforesaid requirement that continuance of this Agreement be specifically
approved at least annually shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder. This Agreement may, on sixty
(60) days, written notice, be terminated at any time without the payment of
any
penalty, by the Board of Trustees of the Funds,
or by
vote of a majority of the outstanding voting securities of the Funds,
or by
the Adviser. This Agreement shall automatically terminate in the event of its
assignment. In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"interested person", "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject, however,
to such exemptions, as may be granted by the Securities and Exchange Commission
by any rule, regulation or order.
11. Amendment
of this Agreement.
No
provisions of this Agreement may be amended, changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the amendment, change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by vote of the holders of a majority of the outstanding voting
securities of the Funds
and by
the Board of Trustees of the Funds,
including a majority of the Trustees who are not interested persons of the
Adviser or of the Funds,
cast in
person at a meeting called for the purpose of voting on such
approval.
12. Notice.
Any
notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To
the
Adviser at:
Alternative
Investment Partners, LLC
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000000X
Xxxxx
Xxxxxx, XX 00000
To
the
Trust and the Funds
at:
AIP
Alternative Strategies Funds
000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000000X
Xxxxx
Xxxxxx, XX 00000
with
a
copy to:
Blank
Rome LLP
000
Xxxxxxxxx Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attn:
Xxxxxx X. Xxxxxx, Esq.
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13. 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.
14. Miscellaneous.
Neither
the holders of Shares of the Funds
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.
15. 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.
If
you
are in agreement with the foregoing, please sign the form of acceptance on
the
accompanying counterpart of this letter and return such counterpart to the
Funds,
whereupon this letter shall become a binding contract between the Trust, on
behalf of the Funds,
and the
Adviser.
IN
WITNESS WHEREOF,
the
parties hereto have caused this instrument to be executed by their officers
designated below as of the day and year first above written.
By:
/s/Xxx Xxxxxxxxxx
Name:
Xxx
Xxxxxxxxxx
Title:
President
ALTERNATIVE
INVESTMENT PARTNERS, LLC
By:
/s/Xxx Xxxxxxxxxx
Name:
Xxx
Xxxxxxxxxx
Title:
Chief
Executive Officer
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APPENDIX
A
Separate
Series of the Underlying Funds Trust
| Ø |
Convertible
Bond Arbitrage - 1
|
| Ø |
Fixed
Income Arbitrage - 1
|
| Ø |
Merger
Arbitrage - 1
|
| Ø |
Long/Short
Equity - Earnings Revision - 1
|
| Ø |
Long/Short
Equity - Momentum - 1
|
| Ø |
Long/Short
Equity - Deep Discount Value - 1
|
| Ø |
Long/Short
Equity - International - 1
|
| Ø |
Long/Short
Equity - Global - 1
|
| Ø |
Long/Short
Equity - REIT - 1
|
| Ø |
Distressed
& Special Situations - 1
|
| Ø |
Distressed
& Special Situations - 2
|
| Ø |
Distressed
& Special Situations - 3
|
6
