INVESTMENT SUB-ADVISORY AGREEMENT
THIS INVESTMENT SUB-ADVISORY AGREEMENT, is made the __th day of
[_____], 2003, by and between U.S. Trust Hedge Fund Management, Inc., a
corporation organized under the laws of North Carolina ("Investment Adviser"),
and AIG Global Investment Corp., a corporation organized under the laws of New
Jersey ("Sub-Adviser").
WHEREAS, Excelsior Absolute Return Fund of Funds Master Fund,
LLC, a Delaware limited liability company (the "Fund"), is registered with the
Securities and Exchange Commission (the "Commission") under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a closed-end,
non-diversified management investment company;
WHEREAS, Investment Adviser has entered into an Investment
Advisory Agreement with the Fund dated as of [_____], 2003 (the "Investment
Advisory Agreement"), pursuant to which Investment Adviser has been appointed to
serve as the investment adviser of the Fund and pursuant to which Investment
Adviser is authorized to enter into investment sub-advisory agreements
delegating any or all of the investment advising services required to be
provided by Investment Adviser under Paragraph 1(a) of the Investment Advisory
Agreement;
WHEREAS, Sub-Adviser is an investment adviser registered as such
with the Commission under the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), and engages in the business of rendering investment advice; and
WHEREAS, Investment Adviser desires that Sub-Adviser act as the
investment sub-adviser to the Fund pursuant to this Agreement and Sub-Adviser
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.
Investment Adviser hereby appoints Sub-Adviser to render to the
Fund investment research and advisory services as set forth below in Section 2,
under the supervision of Investment Adviser and subject to the general oversight
of the Fund's Board of Managers (the "Board"), and Sub-Adviser hereby accepts
such appointment, subject to the terms and conditions contained herein.
Sub-Adviser 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 Investment Adviser or the Fund in
any way or otherwise to serve as or to be deemed an agent of the Fund.
Sub-Adviser shall, in all matters, give to Investment Adviser, 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 1940 Act and the rules and
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 as filed with the Securities and Exchange
Commission (the "Commission") and as such policies and restrictions may, from
time to time, be amended (the "Registration Statement"); and (v) the
Confidential Offering Memorandum of the Fund in effect,
as it may be amended from time to time. The appropriate officers and employees
of Sub-Adviser shall be available upon reasonable notice for consultation with
any members of the Board or officers of the Fund or Investment Adviser 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 SUB-ADVISER AND INVESTMENT ADVISER.
(a) Duties of Sub-Adviser.
Sub-Adviser shall regularly provide investment advice
with respect to the Fund and shall, subject to the terms of this
Agreement, and as the Fund's agent and attorney-in-fact, continuously
supervise the investment and reinvestment of cash, securities and
instruments and other property comprising the assets of the Fund. In
furtherance thereof, and subject to the provisions of sub-paragraph (b)
of this paragraph (2), Sub-Adviser's duties and authority shall include:
(A) Selecting alternative asset managers
(the "Portfolio Managers") with which to invest the
Fund's assets through private investment funds that they
manage ("Portfolio Funds") on the basis of various
criteria, provided by Investment Adviser and processes
developed by Sub-Adviser relating to, among other
things, the Portfolio Managers' skills and ability to
execute their investment programs, consistent with the
Fund's overall investment objective and strategies;
(B) Performing all due diligence review
regarding any potential Portfolio Fund to ensure
suitability for investment by the Fund in accordance
with all applicable laws and regulations and consistent
with the investment objective and investment policies of
the Fund as recited in its Confidential Offering
Memorandum, as it may be amended from time to time;
(C) Allocating the Fund's assets among the
Portfolio Managers and regularly reporting on the Fund's
portfolio holdings to Investment Adviser and, at the
request of Investment Adviser, to the Board in such form
and at such intervals as shall be agreed to by
Investment Adviser and Sub-Adviser or as may be
requested by law;
(D) Investing cash received by the Fund in
money market instruments and money market funds pending
the investment in Portfolio Funds or to maintain Fund
liquidity (which may be necessary to effect repurchases
of member interests in the Fund ("Interests") or for
other purposes);
(E) Obtaining and evaluating pertinent
information about significant developments and economic,
statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally
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or the Fund, and whether concerning the Portfolio
Managers or the activities in which such Portfolio
Managers engage; and
(F) Taking such actions incident to
implementation of the Fund's investment program, or as
otherwise directed by Investment Adviser, including: (i)
negotiating and executing investment advisory,
subscription, and such other agreements in connection
with investing the Fund's assets in Portfolio Funds;
(ii) transmitting withdrawal requests to Portfolio
Funds, either at the request of Investment Adviser in
connection with periodic repurchases of Interests by the
Fund or as part of the Fund's investment program; (iii)
valuing the portfolio investments of the Fund in
compliance with the Fund's valuation procedures; and
(iv) such other actions as Sub-Adviser deems necessary
or appropriate in executing its duties under this
Agreement.
(G) Nothing in this Agreement shall prevent
Sub-Adviser or any affiliate thereof from acting as an
investment adviser for any other person, firm, fund,
corporation or other entity and shall not in any way
limit or restrict Sub-Adviser, 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 Sub-Adviser 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 Sub-Adviser governing personal securities
trading by persons who are "access persons," as defined
by such code, of the Fund.
(b) Duties of Investment Adviser.
Investment Adviser shall consult with Sub-Adviser to
assist Sub-Adviser in maintaining an overall portfolio composition for
the Fund that is consistent with the Fund's investment strategy.
Investment Adviser shall monitor the Fund's portfolio composition to
ensure its compliance with this Agreement and its consistency with the
investment objective and investment policies and restrictions of the
Fund as recited in its confidential memorandum, as it may be amended
from time to time.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Representations, Warranties and Covenants of
Sub-Adviser.
(A) Sub-Adviser 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.
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(B) Sub-Adviser is registered as an
investment adviser with the Commission under the
Advisers Act and shall maintain such registration in
effect at all times during the term of this Agreement.
(C) Sub-Adviser at all times shall provide
its best judgment and effort to Investment Adviser and
the Fund in carrying out its obligations hereunder.
(D) Sub-Adviser shall provide to the Fund a
sub-certification letter, in substantially the form
attached at Appendix A, each time the Fund files
shareholder reports on Form N-CSR, to assist the
principal executive and financial officers of the Fund
in performing their obligations to certify such reports
as required to be filed by rules and regulations adopted
by the Commission.
(E) Sub-Adviser further agrees that: (i) 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
Investment Adviser and to the Board such periodic and
special reports as Investment Adviser or the Board may
reasonably request; (ii) all books and records
maintained in compliance with this sub-paragraph, are
the property of the Fund and Sub-Adviser shall surrender
promptly to the Fund or to Investment Adviser any of
such records upon request; (iii) Sub-Adviser will
preserve the books and records for the periods
prescribed by applicable laws, rules and regulations;
(iv) Investment Adviser has the right to review all of
Sub-Advisers books, records, compliance procedures, and
compliance records for its activities related to its
role as Sub-Adviser; (v) after reasonable notice to
Sub-Adviser, Investment Adviser may visit Sub-Adviser at
any place in which it transacts business for purposes of
reviewing compliance with this Agreement or applicable
laws and regulations related to its role as Sub-Adviser;
and (vi) Sub-Adviser 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 Investment Adviser or the Fund or
when so requested by Investment Adviser or the Fund, or
required by law or regulation.
(b) Representations, Warranties and Covenants of Investment
Adviser.
(A) Investment Adviser is now, and will
continue to be, duly organized and in good standing
under the laws of its jurisdiction of formation, fully
authorized to enter into this Agreement and to carry out
its duties and obligations hereunder.
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(B) Investment Adviser is registered as an
investment adviser with the Commission under the
Advisers Act and shall maintain such registration in
effect at all times during the term of this Agreement.
4. COMPENSATION OF SUB-ADVISER.
In consideration of the services provided by Sub-Adviser under
this Agreement, the Adviser will pay Sub-Adviser a quarterly fee computed at the
rate of 0.20% (0.80% on an annualized basis) of the Fund's net assets; provided,
however, that the rate at which the fee is computed shall be reduced as follows
based on the total net assets of "U.S. Trust Related Accounts" (as defined
below) that are managed by Sub-Adviser ("Relationship Assets"): 0.175% (0.70% on
an annualized basis) if Relationship Assets exceed $200 but less than $400
million; 0.150% (0.60% on an annualized basis) if Relationship Assets exceed
$400 but less than $800 million and 0.125% (0.50% on an annualized basis) if
Relationship Assets are in excess of $800 million. The fee shall be computed
based on the net assets of the Fund determined as of the start of business on
the first business day of each quarter, after adjustment for any subscriptions
effective on that date, and is due and payable in arrears within ten business
days after the end of the quarter. The term "U.S. Trust Related Accounts" means
pooled investment vehicles for which the Adviser or its affiliates serve as
investment adviser (including the Master Fund) and managed accounts maintained
by the Adviser or its affiliates for customers. The term "Relationship Assets"
means U.S. Trust Related Accounts for which AIG Global has been retained as
adviser or sub-adviser.
5. ALLOCATION OF EXPENSES.
Sub-Adviser shall pay all costs and 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.
6. DURATION.
This Agreement shall become effective on the date first set
forth above (the "Effective Date"). Unless earlier terminated pursuant to
paragraph 7 below, this Agreement shall remain in effect for an initial term
expiring two (2) years from the Effective Date and shall continue in effect from
year to year thereafter, provided such continuance is approved at least annually
by the vote of a "majority of the outstanding voting securities of the Fund," as
defined by the 1940 Act and the rules thereunder, or by the Board; and provided
that in either event such continuance is also approved by a majority of the
Managers who are not "interested persons," as defined by the 1940 Act, of the
Fund, Sub-Adviser or Investment Adviser (the "Independent Managers"), by vote
cast in person at a meeting called for the purpose of voting on such approval.
7. TERMINATION
This Agreement may be terminated, any time, without payment of
any penalty: (i) by the Fund upon sixty days' prior written notice to
Sub-Adviser and Investment Adviser, either
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by majority vote of the Board or by the vote of a "majority of the outstanding
voting securities of the Fund," as defined by the 1940 Act and the rules
thereunder; (ii) by Investment Adviser upon sixty days' prior written notice to
Sub-Adviser and the Fund; and (iii) by Sub-Adviser upon six months' prior
written notice to the Fund and Investment Adviser. This Agreement shall
terminate automatically in the event that: (i) Investment Adviser (or one of its
affiliates) ceases to serve as the investment adviser of the Fund, or (ii) there
is an "assignment" of this Agreement, as defined by the 1940 Act and rules
thereunder.
8. LIABILITY OF SUB-ADVISER.
Sub-Adviser will use its best efforts in the supervision and
management of the investment activities of the Fund and in providing services
hereunder, but in the absence of willful misfeasance, bad faith, negligence or
reckless disregard of its obligations hereunder, Sub-Adviser, its directors,
officers or employees and its affiliates, successors or other legal
representatives (collectively, the "Affiliates") shall not be liable to the Fund
or to Investment Adviser for any error of judgment, for any mistake of law, for
any act or omission by Sub-Adviser or for any loss suffered by the Fund.
9. AMENDMENT.
This Agreement may be amended only by the written agreement of
the parties. Any amendment shall be required to be approved by the Board and by
a majority of the Independent Managers in accordance with the provisions of
Section 15(c) of the 1940 Act and the rules thereunder. If required by the 1940
Act, any amendments shall also be required to be approved by the vote of a
"majority of the outstanding voting securities of the Fund," as defined by the
1940 Act and the rules thereunder.
10. NOTICES.
Any notice under this Agreement shall be given in writing and
shall be deemed to have been duly given when delivered by hand or facsimile or
five days after mailed by certified mail, post-paid, by return receipt requested
to the other party at the principal office of such party.
11. QUESTIONS OF INTERPRETATION.
This Agreement shall be construed in accordance with the laws of
the State of New York and the applicable provisions of the 1940 Act. To the
extent the applicable law of the State of New York, or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
12. DEFINITIONS.
The terms and provisions of the Agreement shall be interpreted
and defined in a manner consistent with the terms and provisions of the 1940 Act
and the rules thereunder.
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U.S. TRUST HEDGE FUND MANAGEMENT, INC.
By:
-----------------------------------
Name:
Title:
AIG GLOBAL INVESTMENT CORP.
By:
-----------------------------------
Name:
Title:
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Appendix A
[SUB-ADVISER LETTERHEAD]
Date
U.S. Trust Company, N.A.
Excelsior Absolute Return Fund of Funds Master Fund, LLC
000 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Dear :
_________________________________________ ("Sub-Adviser"), in its role as
sub-adviser to the Excelsior Absolute Return Fund of Funds Master Fund, LLC (the
"Fund") pursuant to the Investment Sub-Advisory Agreement between U.S. Trust
Company (the "Adviser") and Sub-Adviser dated _____________, 2003 "Agreement"),
is providing this letter at your request to assist you with meeting your
certification requirements under the Xxxxxxxx-Xxxxx Act of 2002. Sub-Adviser's
representations solely relate to the shareholder report filed on Form N-CSR with
the U. S. Securities and Exchange Commission for the period ended _________ (the
"Report").
Certain representations in this letter are described as being limited to matters
that are material. Items are considered material, regardless of size, if (a)
there is a substantial likelihood that a reasonable investor would view the
information as significantly altering the mix of information contained in the
material to which the statement relates; or (b) the material to which the
statement relates would be misleading to a reasonable investor if the
information were omitted from such material.
Sub-Adviser makes the following representations to you with respect to the
Report, as of the date of this letter:
1. Sub-Adviser has reviewed the Report.
2. Based on Sub-Adviser's knowledge, the Report fully complies with
the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to
the period covered by the Report.
3. Based on Sub-Adviser's knowledge, Sub-Adviser is not aware of
any data, information or reports relating to the Fund that was
provided by Sub-Adviser to the Fund or its service providers
with respect to the Report (collectively "Data") that (a)
contained any untrue statement of material fact; (b) omitted to
state a material fact necessary to make the information, in
light of surrounding circumstances, not misleading; (c) failed
to reasonably reflect the underlying transactions or events of
the Fund; or (d) failed to present an accurate picture of the
Fund's operations or financial condition.
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4. Sub-Adviser has established and maintained internal controls
with respect to the investment advisory services that it is
required to provide to the Fund pursuant to the Agreement
("Sub-Adviser Internal Controls").
5. Sub-Adviser has disclosed to the Fund (a) any significant
deficiencies in the design or operating effectiveness of
Sub-Adviser Internal Controls that could adversely affect
Sub-Adviser's ability to record, process and summarize Data
relating to the Fund and to report such Data to the Fund and its
service providers and (b) any corrective actions taken by
Sub-Adviser with regard to any significant deficiencies and/or
material weaknesses.
6. Sub-Adviser has disclosed to the Fund any fraud, whether or not
material, involving Sub-Adviser management or employees who have
significant roles in the execution of Sub-Adviser Internal
Controls.
7. Sub-Adviser has established and maintained disclosure controls
and evaluated such controls as of a date within 90 days prior to
the filing date of the Report with respect to the services that
it is required to provide to the Fund pursuant to the Agreement
to ensure that (a) information relating to paragraphs 3 through
6 above; and (b) any other material information relating to the
Fund that is required to be disclosed in the Report is
accumulated, processed and communicated by Sub-Adviser to Fund
to allow timely decisions by the Fund regarding required
disclosure.
This letter is intended for use only by you, the Fund, the Fund's Board of
Managers, the Fund's auditors, and U.S. Trust Hedge Fund Management, Inc., and
their respective affiliates (collectively "Relying Parties"). Relying Parties
may not disclose the existence or contents of this letter to any other party
except to the extent, such disclosure may be required by law, court order or
regulatory request.
-------------------------------------------
Sub-Adviser
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Date:
-----------------------------------
______ Sub-Adviser has no exceptions to paragraphs 2 through 7 to report.
______ Sub-Adviser has the following exceptions to paragraphs 2 through 7 to
report.
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