AMENDED AND RESTATED
SUB-ADVISORY
INVESTMENT MANAGEMENT
AGREEMENT
AMENDED AND RESTATED AGREEMENT, made as of the 2nd day of June, 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, (the "Agreement") in connection with services to be provided by
Tremont; and
WHEREAS, OFI Tremont Core Diversified Hedge Fund, a Massachusetts business
trust (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 dated as of June 2, 2004 (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, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President and General Counsel
Telecopier: 212-323- 4070
(b) If to Tremont, to:
Tremont Partners, Inc. Rye Corporate Center ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, Secretary & Treasurer
Telecopier: 914.921.3499
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: ______________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President &
Treasurer
Tremont Partners, Inc.
By: ______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President,
Secretary
&
Treasurer
The provisions of Section 9 are hereby agreed to and accepted.
OFI Tremont Core Diversified Hedge Fund
By:
----------------------
Name: ▇▇▇▇ ▇. ▇▇▇
Title:
Assistant Secretary
Appendix A Responsible Party Comments
Compliance Testing
Procedures
Procedure
---------------------------------------------------------
5% Issuer Test1 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 RiskMetrics Completed monthly. Reports
Voting distributed to Tremont for review
Securities1 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 Test1 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 RiskMetrics/Tremont RiskMetrics identifies "bad assets"
Test1 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/Completed monthly. Reports
Concentration Categories distributed to Tremont for review
Test1 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% Tremont Completed monthly as part of
of total assets investment portfolio allocation
in any one process. Sign-off by Tremont.
Portfolio
Manager Test2
No more than 20% Tremont Completed monthly as part of
of total assets investment portfolio allocation
in Portfolio process. Sign-off by Tremont.
pursuing same
Portfolio
Strategy Test2
Cannot own more Tremont Completed monthly as part of
than 5% of investment portfolio allocation
Portfolio Fund's process. Sign-off by Tremont.
Voting Equity3
Cannot own more Tremont Completed monthly as part of
than 25% of investment portfolio allocation
Portfolio Fund's process. Sign-off by Tremont.
equity3
Asset Coverage Tremont Completed monthly as part of
300% Test3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
Daily Tremont Completed monthly as part of
Segregation Test3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
Senior Security Tremont Completed monthly as part of
Issuance investment portfolio allocation
Prohibition3 process. Sign-off by Tremont.
Presently not applicable.
Monitoring of Tremont Completed monthly as part of
Borrowings3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
Underwriting of Tremont Completed monthly as part of
Securities investment portfolio allocation
Prohibition3 process. Sign-off by Tremont.
Presently not applicable.
Loan Writing Tremont Completed monthly as part of
Prohibition3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
Real Estate Tremont Completed monthly as part of
Prohibition3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
Commodity Tremont Completed monthly as part of
Prohibition3 investment portfolio allocation
process. Sign-off by Tremont.
Presently not applicable.
CFTC 5% Limit on Tremont Completed monthly as part of
margin deposits investment portfolio allocation
& option process. Sign-off by Tremont.
premiums3 Presently not applicable.
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1 IRS Compliance Test
2 Fund Investment guidelines Compliance Test
3 SEC Test