AMENDED AND RESTATED SUB-ADVISORY
INVESTMENT MANAGEMENT AGREEMENT
AMENDED AND RESTATED AGREEMENT, made as of the 6th day of August, 2004 by
and between OppenheimerFunds, Inc., a Colorado corporation ("OFI"), and Tremont
Partners, Inc., a Connecticut corporation ("Tremont").
RECITAL
WHEREAS, OFI and Tremont are parties to the Sub-Advisory Agreement, dated
January 2, 2003, as previously amended on June 2, 2004 (the "Agreement") in
connection with services to be provided by Tremont; and
WHEREAS, OFI Tremont Core Strategies Hedge Fund, a Massachusetts business
trust, that changed its name from OFI Tremont Core Diversified Hedge Fund as of
August 6, 2004, (the "Fund"), is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act") with the Securities and Exchange
Commission (the "Commission") as a closed- end management investment company;
WHEREAS, OFI has entered into an Investment Advisory Agreement with the
Fund (the "Investment Advisory Agreement"), pursuant to which OFI has been
appointed to serve as the investment adviser of the Fund and pursuant to which
OFI is authorized to retain investment subadvisers affiliated with OFI to
provide any or all of the services required to be provided by OFI under the
Investment Advisory Agreement;
WHEREAS, Tremont is an affiliate of OFI that is registered under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"), as an
investment adviser and engages in the business of rendering investment advice;
WHEREAS, OFI desires that Tremont shall act as the investment manager to
the Fund pursuant to this Agreement and Tremont desires to act in such capacity;
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, it is agreed by and between the parties, as follows:
1. GENERAL PROVISIONS.
OFI hereby appoints Tremont to render to OFI, with respect to the Fund,
investment research and advisory services as set forth below in Section 2, under
the supervision of OFI and subject to the approval and direction of the Fund's
Board of Trustees (the "Board"), and Tremont hereby accepts such appointment,
subject to the terms and conditions contained herein. Tremont shall, for
purposes of this Agreement, be deemed an independent contractor and shall not
have, except as expressly provided or authorized herein, any authority to act
for or represent OFI or the Fund in any way or otherwise to serve as or to be
deemed an agent of the Fund. Tremont shall, in all matters, give to OFI, the
Fund and the Board the benefit of its best judgment, effort, advice and
recommendations and shall at all times, conform to and use its best efforts to
enable the Adviser and the Fund to conform to (i) the provisions of the
Investment Company Act and any rules or regulations thereunder; (ii) any other
applicable provisions of state or Federal law; (iii) policies and determinations
of the Board, (iv) the investment policies and investment restrictions of the
Fund as reflected in the registration statement of the Fund under the Investment
Company Act or as such policies may, from time to time, be amended; and (v) the
Prospectus and Statement of Additional Information of the Fund in effect, as
they may be amended from time to time. The appropriate officers and employees of
Tremont shall be available upon reasonable notice for consultation with any
members of the Board or officers of the Fund or OFI with respect to any matters
dealing with the business and affairs of the Fund including, without limitation,
review of the general investment strategy of the Fund, economic considerations
and general conditions affecting the marketplace.
2. DUTIES OF TREMONT AND OFI.
(a) Duties of Tremont.
Tremont shall regularly provide investment advice with respect to the Fund
and shall, subject to the terms of this Agreement, continuously supervise the
investment and reinvestment of cash, securities and instruments or other
property comprising the assets of the Fund, and in furtherance thereof,
Tremont's duties and authority shall include:
(A) Selecting alternative asset managers ("Portfolio Managers") with whom
to invest the Fund's assets, either through private investment funds that they
manage ("Portfolio Funds") or directly through separate managed accounts or
separate investment vehicles managed by a Portfolio Manager and in which the
Fund is the only investor ("Portfolio Accounts"), on the basis of various
criteria relating to their skills and ability to execute their investment
programs, consistent with the Fund's overall investment objective and
strategies; provided, however, that the Fund's participation in Portfolio
Accounts will be subject to approval at least annually by the Board, including
the vote of the majority of the Trustees who are not parties to this Agreement
or "interested persons" (as defined in the Investment Company Act and the rules
thereunder) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the holders of a "majority of the
outstanding voting securities of the Fund" (as defined in the Investment Company
Act), subject in such case to the approval by a vote of the majority of the
Trustees who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act and the rules thereunder) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval;
(B) Determining how the Fund's assets should be allocated among the
Portfolio Managers and regularly reporting on the Fund's portfolio holdings to
OFI and, at the request of OFI, to the Board;
(C) Monitoring and reporting as to the Fund's investment compliance with
applicable laws, rules and regulations as set forth in the Fund's prospectus and
statement of additional information, as summarized in the attached Appendix A.
(D) Obtaining and evaluating pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Fund, and whether
concerning the Portfolio Managers or the activities in which such Portfolio
Managers engage; and
(E) Taking such actions incident to implementation of the Fund's investment
program, or as otherwise directed by OFI, including: (i) executing investment
advisory, subscription, and such other agreements in connection with investing
the Fund's assets in Portfolio Funds or Portfolio Accounts; (ii) transmitting
withdrawal requests to Portfolio Funds and Portfolio Accounts, either at the
request of OFI in connection with periodic repurchases of shares in the Fund
("Shares") by the Fund or as part of Tremont's investment program; and (iii)
such other actions as Tremont deems necessary or appropriate in executing its
duties under this Agreement.
(F) Nothing in this Agreement shall prevent Tremont or any affiliate
thereof from acting as investment adviser for any other person, firm, fund,
corporation or other entity and shall not in any way limit or restrict Tremont,
or any of its affiliates, or their respective directors, officers, stockholders
or employees from buying, selling or trading any securities or other investments
for its or their own account or for the account of others for whom it or they
may be acting, provided that such activities do not adversely affect or
otherwise impair the performance by Tremont of its duties and obligations under
this Agreement and under the Advisers Act and further provided that such
activities do not violate any provisions of the code of ethics of Tremont
governing personal securities trading by persons who are "access persons," as
defined by such code, of the Fund.
(b) Duties of OFI.
Without limiting the obligations of Tremont under this Agreement, OFI shall
monitor the investment program maintained by Tremont for the Fund to ensure that
the Fund's assets are invested in compliance with this Agreement and consistent
with the investment objective and investment policies of the Fund as recited in
its Prospectus and Statement of Additional Information, as they may be amended
from time to time.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Representations, Warranties and Covenants of Tremont.
(A) Tremont is now, and will continue to be, a corporation duly formed and
validly existing under the laws of its jurisdiction of formation, fully
authorized to enter into this Agreement and carry out its duties and obligations
hereunder.
(B) Tremont is registered as an investment adviser with the Commission
under the Advisers Act. Tremont shall maintain such registration in effect at
all times during the term of this Agreement.
(C) Tremont at all times shall provide its best judgment and effort to OFI
and the Fund in carrying out its obligations hereunder.
(b) Other Covenants. Tremont further agrees that:
(A) as required by applicable laws and regulations, it will maintain books
and records with respect to the Fund's securities transactions and it will
furnish to OFI and to the Board such periodic and special reports as OFI or the
Board may reasonably request; and
(B) it will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund, and will not use 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 OFI or the Fund or when so requested by OFI or the Fund, or required by law
or regulation.
(c) Representations, Warranties and Covenants of OFI.
(A) OFI is now, and will continue to be, duly organized and in good
standing under the laws of its state of incorporation, fully authorized to enter
into this Agreement and to carry out its duties and obligations hereunder.
(B) OFI is registered as an investment adviser with the Commission under
the Advisers Act. OFI shall maintain such registration in effect at all times
during the term of this Agreement.
(C) OFI at all times shall provide its best judgment and effort to the Fund
in carrying out its obligations hereunder.
4. CONTROL BY THE BOARD.
Any investment program undertaken by Tremont pursuant to this Agreement, as
well as any other activities undertaken by Tremont with respect to the Fund,
shall at all times be subject to any directives of OFI and the Board.
5. BOOKS AND RECORDS.
Tremont agrees that all records that it maintains for the Fund, on behalf
of OFI, are the property of the Fund and further agrees to surrender promptly to
the Fund or to OFI any of such records upon request. Tremont further agrees to
preserve for the periods prescribed by applicable laws, rules and regulations
all records required to be maintained by Tremont on behalf of OFI under such
applicable laws, rules and regulations, or such longer period as OFI may
reasonably request from time to time.
6. PORTFOLIO TRANSACTIONS AND BROKERAGE.
(a) Tremont is authorized, in arranging the purchase and sale of the
portfolio securities and other investments of the Fund to employ or deal with
such members of securities or commodities exchanges, brokers or dealers,
including "affiliated" broker-dealers, as may, in its best judgment, implement
the policy of the Fund to obtain, at reasonable expense, the "best execution"
(prompt and reliable execution at the most favorable security price obtainable)
of the portfolio transactions of the Fund as well as to obtain, consistent with
the provisions of the subparagraph (c) of this paragraph 6, the benefit of such
investment information or research as may be of significant assistance to the
performance by Tremont of its investment advisory functions.
(b) To the extent applicable, Tremont shall select broker-dealers to effect
the portfolio transactions of the Fund on the basis of its estimate of their
ability to obtain best execution of particular and related portfolio
transactions. In such case, the abilities of a broker-dealer to obtain best
execution of particular portfolio transactions will be judged by Tremont on the
basis of all relevant factors and considerations including, insofar as feasible,
the execution capabilities required by the transactions or transactions; the
ability and willingness of the broker-dealer to facilitate the portfolio
transactions of the Fund by participating therein for its own account; the
importance to the Fund of speed, efficiency or confidentiality; the
broker-dealer's apparent familiarity with sources form or to whom particular
securities or other investments might be purchased or sold; as well as nay other
matters relevant to the selection of a broker-dealer for particular and related
transactions of the Fund.
(c) To the extent applicable, Tremont shall have discretion, in the
interests of the Fund, to allocate brokerage on the portfolio transactions of
the Fund to broker-dealers, other than an affiliated broker-dealer, qualified to
obtain best execution of such transactions who provide research services (as
such services are defined in Section 28(e)(3) of the Securities Exchange Act of
1934) to Tremont, which may assist Tremont in managing the assets of the Fund or
other accounts for which Tremont or any affiliate of Tremont exercises
"investment discretion" (as that term is defined in Section 3(a)(35) of the
Securities Exchange Act of 1934) and to cause the Fund to pay such
broker-dealers a commission for effecting a portfolio transaction for the Fund
that is in excess of the amount of commission another broker-dealer adequately
qualified to effect the transaction would have charged for effecting that
transaction, if Tremont determines, in good faith, that such commission is
reasonable in relation to the value of the of the broker or research services
provided by such broker-dealer viewed in terms of either that particular
transaction or the overall responsibilities of Tremont or its affiliates with
respect to accounts as to which they exercise investment discretion. In reaching
such determination, Tremont will not be required to place or attempt to place a
specific dollar value on the brokerage or research services provided or being
provided by such broker-dealer. In demonstrating that such determinations were
made in good faith, Tremont shall be prepared to show that all commissions were
allocated for purposes contemplated by this Agreement and that the total
commissions paid by the Fund over a representative period selected by the Board
were reasonable in relation to the benefits to the Fund.
(d) Tremont shall have no obligation to seek advance competitive bidding
for the most favorable commission rate applicable to any particular portfolio
transactions or to select any broker-dealer on the basis of its purported or
"posted" commission rate but will, to the best of its ability, endeavor to be
aware of the current level of the charges of eligible broker-dealers and to
minimize the expense incurred by the Fund for effecting its portfolio
transactions to the extent consistent with the interests and policies of the
Fund.
(e) Subject to the foregoing provisions of this paragraph 6, to the extent
applicable, Tremont may also consider sales of Shares as a factor in the
selection of broker-dealers for its portfolio transactions.
7. COMPENSATION OF TREMONT.
In consideration of the services provided by Tremont under this Agreement,
OFI will pay Tremont a monthly fee equal to 50% of the amount of the Management
Fee earned by OFI pursuant to the Investment Advisory Agreement.
8. ALLOCATION OF EXPENSES.
Tremont shall pay the expenses incurred by it in providing services under
this Agreement, including, but not limited to, the salaries, employment benefits
and other related costs of those of its personnel engaged in providing
investment advice to the Fund hereunder, including, without limitation, office
space, office equipment, telephone and postage costs and other expenses.
9. USE OF NAME "TREMONT."
Tremont hereby grants to the Fund a royalty-free, non-exclusive license to
use the "Tremont" in the name of the Fund for the duration of this Agreement any
extensions or renewals thereof. Such license may, upon termination of this
Agreement, be terminated by Tremont, in which event the Fund shall promptly take
whatever action may be necessary to change its name and discontinue and further
use of the name "Tremont" in the name of the Fund or otherwise. The name
"Tremont" may be used or licensed by Tremont in connection with any of its
activities, or licensed by Tremont to any other party.
10. DURATION.
This Agreement will take effect on the date first set forth above. Unless
earlier terminated pursuant to paragraph 13 hereof, this Agreement shall remain
in effect for a period of two (2) years from such date and thereafter from year
to year, so long as such continuance shall be approved at least annually by the
Board, including the vote of the majority of the Trustees who are not parties to
this Agreement or "interested persons" (as defined in the Investment Company Act
and the rules thereunder) of any such party, cast in person at a meeting called
for the purpose of voting on such approval, or by the holders of a "majority of
the outstanding voting securities of the Fund" (as defined in the Investment
Company Act), subject in such case to the approval by a vote of the majority of
the Trustees who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act and the rules thereunder) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
11. LIABILITY OF TREMONT.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of Tremont or
any of its officers, directors or employees, Tremont shall not be liable to OFI
for any act or omission in the course of, or connected with, rendering services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any interest in a Portfolio Fund or allocation to any Portfolio Manager.
12. ASSIGNMENT OR AMENDMENT.
Any amendment to this Agreement shall be in writing and shall be subject
to: (i) the approval of the Board, including the vote of a majority of the
Trustees who are not "interested persons," as defined by the Investment Company
Act and the rules thereunder; (ii) the affirmative vote or written consent of
the holders of a "majority of the outstanding voting securities" of the Fund,"
as defined by the Investment Company Act, to the extent such a vote of security
holders is required by the Investment Company Act. This Agreement shall
automatically and immediately terminate in the event of its "assignment," as
defined in the Investment Company Act.
13. TERMINATION.
(a) Termination by the Fund and Tremont. This Agreement may be terminated
at any time, without the payment of any penalty, by vote of the Board or by vote
of a majority of the Fund's outstanding voting securities or Tremont, on sixty
(60) days' written notice. The notice provided for herein may be waived by the
party required to be notified.
(b) Assignment. This Agreement shall automatically terminate in the event
of its "assignment," as defined in Section 2 (a) (4) of the 1940 Act. In the
event of an assignment that occurs solely due to the change in control of
Tremont (provided that no condition exists that permits, or, upon the
consummation of the assignment, will permit, the termination of this Agreement
by OFI pursuant to subparagraph (c) of this paragraph 13), OFI and Tremont, at
the sole expense of Tremont, shall use their reasonable best efforts to obtain
shareholder approval of a successor Subadvisory Agreement on substantially the
same terms as contained in this Agreement.
(c) Termination by OFI. OFI may terminate this Agreement without penalty
and without the payment of any fee or penalty, immediately after giving written
notice, upon the occurrence of any of the following events:
1. Any of Tremont, its respective partners, subsidiaries, affiliates,
directors, officers, employees or agents engages in an action or omits to take
an action that would cause Tremont to be disqualified in any manner under
Section 9(a) of the 1940 Act, if the SEC were not to grant an exemptive order
under Section 9(c) thereof or that would constitute grounds for the SEC to deny,
revoke or suspend the registration of Tremont as an investment adviser with the
SEC; or
2. Tremont breaches the representations contained in subparagraphs (a) and
(b) of paragraph 3 of this Agreement or any other material provision of this
Agreement, and any such breach is not cured within a reasonable period of time
after notice thereof from OFI to Tremont.
(d) Transactions in Progress upon Termination. OFI and Tremont will
cooperate with each other to ensure that portfolio or other transactions in
progress at the date of termination of this Agreement shall be completed by OFI
in accordance with the terms of such transactions, and to this end Tremont shall
provide OFI with all necessary information and documentation to secure the
implementation thereof.
14. NOTICES.
Any notice or other communication required to be or that may be given
hereunder shall be in writing and shall be delivered personally, telecopied,
sent by certified, registered or express mail, postage prepaid or sent by
national next-day delivery service and shall be deemed given when so delivered
personally or telecopied, or if mailed, two days after the date of mailing, or
if by next-day delivery service, on the business day following delivery thereto:
(a) If to OFI, to:
OppenheimerFunds, Inc.
Two World Financial Center
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx X. Xxxx
Executive Vice President and General Counsel
Telecopier: 212-323- 4070
(b) If to Tremont, to:
Tremont Partners, Inc.
Rye Corporate Center
000 Xxxxxxxx Xxxxx Xxxxxx
Xxx, Xxx Xxxx 00000
Attention: Xxxxx X. XxXxxxxxx
Vice President & General Counsel
Telecopier: 000-000-0000
15. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of New York
applicable to agreements made and to be performed entirely within the State of
New York (without regard to any conflicts of law principles thereof). Any
question of interpretation of any term or provision of this Agreement having a
counterpart in or otherwise derived from a term or provision of the Investment
Company Act shall be resolved by reference to such term or provision of the
Investment Company Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Commission issued pursuant to the
Investment Company Act. In addition, where the effect of a requirement of the
Investment Company Act reflected in any provision of this Agreement is revised
by rule, regulation or order of the Commission, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
16. DEFINITIONS.
The terms and provisions of the Agreement shall be interpreted and defined
in a manner consistent with the terms and provisions of the Investment Company
Act and the rules thereunder.
OppenheimerFunds, Inc.
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President & Treasurer
Tremont Partners, Inc.
By: /s/ Xxxxx X. XxXxxxxxx
-----------------------------------
Name: Xxxxx X. XxXxxxxxx
Title: Vice President & General Counsel
The provisions of Section 9 are hereby agreed to and accepted.
OFI Tremont Core Strategies Hedge Fund
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxxx X. Xxxx
Title: Assistant Secretary
Appendix A
Compliance Testing Procedures
Procedure Responsible Party Comments
-------------------------- --------------------------- ------------------------------------------------------
5% Issuer Test(1) RiskMetrics Completed monthly. Reports distributed to Tremont
for review and sign-off. Non-quarter-end months
used to identify potential problems. Portfolio Fund
ownership percentages obtained by Tremont Client
Relations Group and provided to Risk Metrics.
10% of Issuer's Voting RiskMetrics Completed monthly. Reports distributed to Tremont
Securities(1) for review and sign-off. Non-quarter-end months
used to identify potential problems. Portfolio Fund
ownership percentages obtained by Tremont Client
Relations Group and provided to Risk Metrics.
25% Issuer Test(1) RiskMetrics Completed monthly. Reports distributed to Tremont
for review and sign-off. Non-quarter-end months
used to identify potential problems. Portfolio Fund
ownership percentages obtained by Tremont Client
Relations Group and provided to Risk Metrics.
90% Gross Income Test(1) RiskMetrics/Tremont RiskMetrics identifies "bad assets" monthly.
Reports distributed to Tremont for review and
sign-off. Tremont controls investments in Portfolio
Funds likely to generate "bad income". Tremont
requests monthly certification from Portfolio Funds
stating non-existence of "bad income" or percentage
of "bad income" earned. Non-quarter-end months used
to identify potential problems.
25% Industry RiskMetrics/Tremont/BloomberCompleted monthly. Reports distributed to Tremont
Concentration Test(1) Categories for review and sign-off. Non-quarter-end months
used to identify potential problems. RiskMetrics
involvement expands testing currently done on
existing products (see SEC Comment letter response
#26)
No more than 10% of Tremont Completed monthly as part of investment portfolio
total assets in any one allocation process. Sign-off by Tremont.
Portfolio Manager Test(2)
No more than 20% of Tremont Completed monthly as part of investment portfolio
total assets in allocation process. Sign-off by Tremont.
Portfolio pursuing same
Portfolio Strategy
Test(2)
Cannot own more than 5% Tremont Completed monthly as part of investment portfolio
of Portfolio Fund's allocation process. Sign-off by Tremont.
Voting Equity(3)
Cannot own more than 25% Tremont Completed monthly as part of investment portfolio
of Portfolio Fund's allocation process. Sign-off by Tremont.
equity(3)
Asset Coverage 300% Tremont Completed monthly as part of investment portfolio
Test(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Daily Segregation Test(3) Tremont Completed monthly as part of investment portfolio
allocation process. Sign-off by Tremont. Presently
not applicable.
Senior Security Issuance Tremont Completed monthly as part of investment portfolio
Prohibition(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Monitoring of Tremont Completed monthly as part of investment portfolio
Borrowings(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Underwriting of Tremont Completed monthly as part of investment portfolio
Securities Prohibition(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Loan Writing Tremont Completed monthly as part of investment portfolio
Prohibition(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Real Estate Tremont Completed monthly as part of investment portfolio
Prohibition(3) allocation process. Sign-off by Tremont. Presently
not applicable.
Commodity Prohibition(3) Tremont Completed monthly as part of investment portfolio
allocation process. Sign-off by Tremont. Presently
not applicable.
CFTC 5% Limit on margin Tremont Completed monthly as part of investment portfolio
deposits & option allocation process. Sign-off by Tremont. Presently
premiums(3) not applicable.
________________________
(1) IRS Compliance Test
(2) Fund Investment guidelines Compliance Test
(3) SEC Test
