SUB-ADVISORY AGREEMENT
This Agreement (the "Agreement"), dated as of April ___, 2006, is entered into
by and between Citigroup Alternative Investments LLC ("Investment Manager"),
Spectrum Asset Management, Inc. ("Sub-Adviser"), and, solely with respect to
Sections 13, 14 and 15 hereof, Citigroup Alternative Investments Tax Advantaged
Short Term Fund (the "Fund"), a separate series of Citigroup Alternative
Investments Trust (the "Trust"). Investment Manager hereby retains Sub-Adviser
to perform the services set forth below under the following terms and
conditions.
1. INVESTMENT MANAGEMENT
Investment Manager hereby retains Sub-Adviser to provide investment management
and advisory services for Investment Manager including, but not limited to, the
supervision, review, recommendation, advice and analysis with respect to the
account (the "Account") in the name of the Fund, a separate series of the Trust.
Sub-Adviser shall invest and reinvest the securities, cash and/or other
investments held in the Account in accordance with (a) the Fund's investment
objectives, policies and restrictions as set out in the Trust's registration
statement on Form N-2 filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, and the Investment Company Act of 1940,
as amended, relating to the Fund, as the same may be amended or supplemented
from time to time (the "Registration Statement"), and (b) Investment Manager's
written investment policies and restrictions supplemental thereto (the
"Investment Guidelines"), as such Investment Guidelines are set forth in Exhibit
A hereto. Investment Manager may modify these Investment Guidelines from time to
time in writing with the prior written consent of Sub-Adviser, which consent
shall not be unreasonably withheld.
Sub-Adviser accepts such employment and agrees, at its own expense, to render
the services set forth herein and to provide the office space, furnishings,
equipment and personnel required by it to perform such services on the terms and
for the compensation provided in this Agreement. Sub-Adviser will carry out its
obligations with reasonable care and in good faith and shall render the services
provided for herein with a degree of skill and attention no less than that which
Sub-Adviser exercises with respect to comparable assets managed by it, except as
expressly provided otherwise in this Agreement.
2. OTHER SERVICES TO BE PROVIDED
Sub-Adviser will provide Investment Manager with daily trade tickets and weekly
portfolio reports in the form as agreed by the parties from time to time, and
will concurrently provide the custodian named in Exhibit B (the "Custodian")
with a copy of each such ticket and report.
Sub-Adviser will not have custody of the securities, cash or other investments
of the Account, which will be held for the Fund by the Custodian. Fees of the
Custodian shall be paid by the Fund and are not included in the fee schedules
set forth in Exhibit C. Investment Manager grants Sub-Adviser full authorization
to issue such instructions to, and engage in such transactions with, the
Custodian as may be appropriate in connection with the management of the
Account. Subject to any procedures established therefor by the Custodian or the
Trust's Board of Trustees, Investment Manager will instruct the Custodian to
follow Sub-Adviser's instructions to make and to accept payments for, and to
deliver for value or receive securities, cash or other investments purchased,
sold, redeemed, exchanged, pledged or loaned for the Account. Sub-Adviser will
not be responsible for any loss or liability incurred by reason of any action or
failure to act on the part of the Custodian, provided any relevant instructions
from Sub-Adviser to the Custodian were given in that format and time frame as
agreed among the parties and the Custodian from time to time.
3. INSURANCE
Sub-Adviser agrees to maintain a level of errors and omissions or professional
liability insurance coverage that is from time to time reasonably satisfactory
to Investment Manager.
4. SERVICES TO OTHER CLIENTS
Investment Manager recognizes that Sub-Adviser or its affiliates may provide
investment management services to other clients, regardless of whether the
investment policies of such clients are similar to, or differ from, those that
Sub-Adviser hereby undertakes to perform on behalf of Investment Manager. In
addition, Sub-Adviser or its affiliates may give advice and take action in the
performance of their duties to clients that may differ from advice given, or the
timing and nature of action taken, with respect to the Account. Nothing in this
Agreement shall be deemed to impose upon Sub-Adviser any obligation to purchase
or sell or recommend for purchase or sale for the Account any security or other
property that Sub-Adviser or its affiliates may purchase or sell, or recommend
for purchase or sale, for its own account or the account of any other client.
5. INVESTMENT MANAGER REPRESENTATIONS, WARRANTIES AND COVENANTS
Investment Manager represents, warrants and agrees that:
A. it is a limited liability company in good standing under the laws of the
state of its formation and is (and at all times during the term of this
Agreement will be) in good standing and qualified to do business as a limited
liability company in each jurisdiction in which the nature or conduct of its
business requires such qualification and the failure to be so qualified would
materially adversely affect its ability to act as a limited liability company
and perform its obligations under this Agreement;
B. this Agreement is a valid and binding agreement enforceable in accordance
with its terms (except as may be limited by bankruptcy laws and general equity
principles) and the performance of Investment Manager's obligations under this
Agreement will not result in any violation, breach or default under any term or
provision of any material undertaking, contract, agreement or order to which
Investment Manager is a party or by which Investment Manager is bound;
C. this Agreement has been duly and validly authorized, executed and delivered
on behalf of Investment Manager;
D. the consummation of this Agreement and the transactions set forth herein are
not contrary to Investment Manager's constituent documents or any material
statute, law or regulation of any jurisdiction;
E. there is not pending or, to the best of Investment Manager's knowledge,
threatened, any action, suit or proceeding before or by any court or other
governmental body to which Investment Manager is a party, or to which any of the
assets of Investment Manager is subject, which might reasonably be expected to
result in any material adverse change in the condition, financial or otherwise,
of Investment Manager; and
F. Investment Manager shall deliver to Sub-Adviser a copy of each Registration
Statement, including any amendment or supplement thereto, that Investment
Manager intends to file with the SEC no later than one business day prior to
such filing, and shall deliver to Sub-Advisor a copy of each Registration
Statement filed with the SEC promptly after filing, but in no event more than
one business day thereafter.
All representations, warranties and covenants hereunder shall be continuing
during the term of this Agreement, including any renewal period and shall
survive termination of this Agreement with respect to any matter arising while
this Agreement is in effect. In addition, if at any time, any event has occurred
which would make, or tend to make, the foregoing representations, warranties and
covenants not true, Investment Manager will promptly notify Sub-Adviser of such
event and the facts related thereto in the
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manner provided below. Furthermore, all representations, warranties and
covenants hereunder shall inure to the benefit of each of the parties to whom it
is addressed, and their respective heirs, executors, administrators, successors
and permitted assigns.
6. SUB-ADVISER REPRESENTATIONS, WARRANTIES AND COVENANTS.
Sub-Adviser represents, warrants and agrees that:
A. it is a corporation in good standing under the laws of the state of its
formation and is (and at all times during the term of this Agreement will be) in
good standing and qualified to do business as a corporation in each jurisdiction
in which the nature or conduct of its business requires such qualification and
the failure to be so qualified would materially adversely affect its ability to
act as a corporation and perform its obligations under this Agreement;
B. this Agreement is a valid and binding agreement enforceable in accordance
with its terms (except as may be limited by bankruptcy laws and general equity
principles) and the performance of Sub-Adviser's obligations under this
Agreement will not result in any violation, breach or default under any term or
provision of any material undertaking, contract, agreement or order to which
Sub-Adviser is a party or by which Sub-Adviser is bound;
C. this Agreement has been duly and validly authorized, executed and delivered
on behalf of Sub-Adviser;
D. the consummation of this Agreement and the transactions set forth herein are
not contrary to Sub-Adviser's constituent documents or any material statute, law
or regulation of any jurisdiction;
E. it is duly registered with the United States Securities and Exchange
Commission ("SEC") under the Investment Advisers Act of 1940, as amended (the
"Investment Advisers Act"), as an investment adviser and Sub-Adviser will
maintain such registration during the term of this Agreement;
F. there is not pending or, to the best of Sub-Adviser's knowledge, threatened,
any action, suit or proceeding before or by any court or other governmental body
to which Sub-Adviser is a party, or to which any of the assets of Sub-Adviser is
subject, which might reasonably be expected to result in any material adverse
change in the condition, financial or otherwise, of Sub-Adviser;
G. if Investment Manager instructs Sub-Adviser to suspend trading, Sub-Adviser
will suspend all trading activity for Investment Manager upon receipt of such
instructions in writing and, as instructed by Investment Manager, will act in
accordance with delivery instructions provided by Investment Manager or
liquidate positions held by the Account as soon as practicable under the
circumstances;
H. Sub-Adviser's management of client accounts other than that of the Fund,
which it has, in its sole discretion, agreed to or may in the future agree to
manage, will be conducted in such a manner as to assure that the Account will
receive equitable treatment, it being understood that the foregoing is subject
to Section 4 hereof and that Sub-Adviser may adjust the implementation of
Sub-Adviser's trading system in a good faith effort to accommodate additional
accounts or accounts of different sizes, different trading policies, different
leverage and other significant differences in the nature of the accounts;
I. Sub-Adviser's operations and investment management activities on behalf of
the Fund will at all times be in compliance with all applicable federal and
state laws governing the Fund's operations and investments. Without limiting the
foregoing, Sub-Adviser represents and warrants, solely with respect to the
assets covered by this Agreement, that the Sub-Adviser will (i) invest and
reinvest the Fund's assets in a manner that will enable the Fund to be treated
as a "regulated investment company" under subchapter M, chapter 1 of the
Internal Revenue Code of 1986, as amended (the "Code"); and (ii) comply with (1)
the provisions of the Investment Company Act of 1940, as amended (the
"Investment Company Act") and rules adopted thereunder; (2) applicable federal
and state securities, commodities and banking laws; and (3)
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the distribution requirements necessary to avoid payment of any excise tax
pursuant to section 4982 of the Code; and
J. To the extent that any statements or omissions made in any registration
statement for shares of the Trust, or any amendments or supplements thereto, are
made in reliance upon and in conformity with information furnished in writing by
Sub-Adviser for use therein, such registration statement and any amendments or
supplements thereto will conform in all material respects to the requirements of
the Securities Act of 1933 and the rules and regulations of the Securities and
Exchange Commission thereunder (the "1933 Act") and the Investment Company Act
and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
All representations, warranties and covenants hereunder shall be continuing
during the term of this Agreement, including any renewal period and shall
survive termination of this Agreement with respect to any matter arising while
this Agreement is in effect. In addition, if at any time, any event has occurred
which would make, or tend to make, the foregoing representations, warranties and
covenants not true, Sub-Adviser will promptly notify Investment Manager of such
event and the facts related thereto in the manner provided below. Furthermore,
all representations, warranties and covenants hereunder shall inure to the
benefit of each of the parties to whom it is addressed, and their respective
heirs, executors, administrators, successors and permitted assigns.
7. FEES
In consideration of the performance of the obligations of Sub-Adviser hereunder,
Investment Manager shall pay Sub-Adviser the fee set forth on Exhibit C. The fee
is paid quarterly and for any period less than a quarter shall be reduced pro
rata based on the number of days during such quarter that Sub-Adviser managed
the Account.
8. RECORDS; CONFIDENTIALITY
Sub-Adviser hereby undertakes and agrees to maintain, in the form and for the
period required by Rule 204-2 under the Investment Advisers Act, all books and
records relating to the Fund or its shareholders that are required to be
maintained by Sub-Adviser pursuant to the requirements of such Rule. Sub-Adviser
agrees that all books and other records maintained and preserved by it as
required hereby shall be subject at any time, and from time to time, to such
reasonable periodic, special and other examinations by the SEC, the Trust's
auditors, the Trust or any representative of the Trust, Investment Manager, or
any governmental agency or other instrumentality having regulatory authority
over the Trust.
At any time during or after the term of this Agreement, Sub-Adviser shall keep
confidential any and all information relating to the Investment Manager or any
subsidiary or affiliate thereof, including information relating to shareholders
of the Fund (regardless of whether such information is presented on a
shareholder-by-shareholder basis, aggregated or presented as a composite or
otherwise) acquired by it prior to, during the course of, or incident to, its
appointment hereunder and shall not disclose, use, publish, or in any other
manner reveal, directly or indirectly, any such information except (i) with the
prior written consent of Investment Manager in each instance, which consent
shall not be unreasonably withheld or delayed, (ii) as may be necessary to
perform Sub-Adviser's services hereunder, (iii) as required by law, regulation,
court order or the rules or regulation of any self-regulating organization, body
or official having jurisdiction of Sub-Adviser, (iv) to its professional
advisers, (v) such information as shall have been publicly disclosed other than
in violation of this Agreement, or (vi) such information as was or is obtained
by Sub-Adviser on a non-confidential basis, provided that Sub-Adviser does not
know, after reasonable inquiry, of any breach by such source of any
confidentiality obligations with respect thereto. Consistent with the foregoing,
Investment Manager shall treat all information, recommendations and advice
furnished to Investment Manager by Sub-Adviser as confidential. In addition,
Investment Manager shall keep confidential any and all information regarding the
operations of Sub-Adviser, including its trading and hedging policies, obtained
in connection with the services rendered hereunder and shall not disclose any
such information to non-affiliated third parties except (i) with the prior
written consent of Sub-Adviser, (ii) as required by law,
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regulation, court order or the rules or regulation of any self-regulating
organization, body or official having jurisdiction of Investment Manager, (iii)
to its professional advisers or the Trust's Board of Trustees or professional
advisers to such Trustees (iv) such information as shall have been publicly
disclosed other than in violation of this Agreement, (v) such information as was
or is obtained by Investment Manager on a non-confidential basis, provided that
Investment Manager does not know, after reasonable inquiry, of any breach by
such source of any confidentiality obligations with respect thereto. Investment
Manager and its designated auditors have the right to examine, audit and review
all documents, reports, transaction confirmation and other materials relating to
the Sub-Adviser's management of the Account at any time (subject to the
restrictions set forth in the first sentence of this Section 8) on reasonable
notice.
9. DISCRETIONARY TRADING AUTHORIZATION
Investment Manager hereby appoints Sub-Adviser as Investment Manager's agent and
attorney-in-fact with discretionary trading authorization to buy and sell
securities for the Account and at the Account's risk through or with brokers or
dealers. Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Account, and is
directed to use its commercially reasonable efforts to obtain best execution,
which includes most favorable net results and execution of the Account's orders,
taking into account all appropriate factors, including price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided. Sub-Adviser may select itself as a broker, in an agency
capacity, to execute transactions in portfolio securities for the Account in
accordance with policies and procedures adopted by the Board of Trustees from
time to time, provided the Sub-Adviser is given written notice of the same. It
is understood that the Sub-Adviser will not be deemed to have acted unlawfully,
or to have breached a fiduciary duty to the Fund, or be in breach of any
obligation owing to Investment Manager or the Fund in respect of this Agreement,
or otherwise, solely by reason of its having caused the Account to pay a member
of a securities exchange, a broker or a dealer (including the Sub-Adviser's
internal broker-dealer) a commission for effecting a securities transaction for
the Account in excess of the amount of commission another member of an exchange,
broker or dealer would have charged if the Sub-Adviser determined in good faith
that the commission paid was reasonable in relation the brokerage or research
services provided by such member, broker or dealer, viewed in terms of that
particular transaction or the Sub-Adviser's overall responsibilities with
respect to its accounts, including the Account, as to which it exercises
investment discretion. The Sub-Adviser will properly communicate to Investment
Manager or to the Trust's Chief Compliance Officer (the "CCO") and the Trust's
officers and Board of Trustees such information relating to transactions for the
Account as they may reasonably request. In no instance will portfolio securities
be purchased from or sold to Investment Manager, or Sub-Adviser or any
affiliated person of either the Trust, Investment Manager or Sub-Adviser, except
as may be permitted under the 1940 Act.
10. GOVERNING LAW
Investment Manager and Sub-Adviser agree that this Agreement and all of the
terms herein shall be governed and construed in accordance with (i) the laws of
the State of New York without giving effect to principles of conflict of laws
except Sections 5 1401 and 5 1402 of the New York General Obligations Law and
(ii) the applicable provisions of the Investment Company Act. To the extent the
applicable laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, the
latter shall control.
11. TERM
This Agreement shall become effective on the date hereof (or, if later, that
date as of which this Agreement may be first approved by both a vote of the
Trust's Board of Trustees and the Trust's shareholders eligible to vote thereon,
all in the manner contemplated by Section 15 of the Investment Company Act) and
shall continue in effect for a period of two years from the date hereof, and
from year to year thereafter so long as such continuance is specifically
approved at least annually (i) by either the vote of the Board of Trustees of
the Trust, or by the affirmative vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the Fund, and (ii) by
the vote of a majority of the Trust's trustees who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the
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purpose of voting on such approval. This Agreement shall terminate (i)
immediately if the Account shall terminate trading activities or liquidate or if
Sub-Adviser's registration as an investment adviser under the Investment
Advisers Act is terminated, revoked or suspended; (ii) at the discretion of
Investment Manager if there has been a material breach by Sub-Adviser of any
provision of this Agreement; (iii) at the discretion of Investment Manager upon
sixty (60) days' written notice to Sub-Adviser; (iv) at the discretion of the
Board of Trustees of the Trust upon sixty (60) days' written notice to the
Sub-Adviser by vote of the Board of Trustees, or by vote a majority of the
outstanding voting securities (as defined in the Investment Company Act) of the
Fund, (v) at the discretion of Sub-Adviser if there has been any material breach
by Investment Manager of any provision of this Agreement; or (vi) at the
discretion of Sub-Adviser following the end of the first year following the date
of this Agreement upon ninety (90) days' notice; provided, however, that this
Agreement may not be terminated by Sub-Adviser unless another sub-advisory
agreement has been approved by the Trust in accordance with the Investment
Company Act, or after six months' written notice, whichever is earlier. This
Agreement shall also terminate in the event that the Investment Advisory
Agreement by and between Investment Manager and the Trust on behalf of the Fund
is terminated. The termination of this Agreement shall not affect the
effectiveness of the Investment Advisory Agreement by and between Investment
Manager and the Trust on behalf of the Fund. Upon termination of this Agreement,
Investment Manager shall pay Sub-Adviser all fees accrued prior to the effective
date of termination. The provisions of Sections 8, 10, 14, 15, 17, 21, 22 and 23
shall survive the termination of this Agreement.
12. PROXIES AND OTHER LEGAL NOTICES
Sub-Adviser shall not take any action or render any advice in connection with
the voting of proxies with respect to securities held in the Account, which
proxies are solicited by, or with respect to, the issuers of any securities held
in the Account, nor shall Sub-Adviser be obligated to render any advice or take
any action on behalf of Investment Manager with respect to securities or other
investments held in the Account, or the issuers thereof, that become the subject
of any legal proceedings, including bankruptcies. Investment Manager hereby
expressly retains the right and obligation to vote any proxies or take action
relating to securities held in the Account; provided, however, that Investment
Manager may delegate said rights and obligations to a properly authorized agent
or adviser, including, without limitation, Sub-Adviser.
13. LIABILITY OF SUB-ADVISER; DELEGATION
Sub-Adviser assumes no responsibility under this Agreement other than to render
the services called for hereunder. Except as otherwise provided herein, none of
Sub-Adviser, its directors, officers, shareholders and employees ("Sub-Adviser
Parties") shall have any liability to Investment Manager or the Fund for any
error of judgment, mistake of law, or for any loss arising out of any
investment, or for any other act or omission in the performance of its
obligations to Investment Manager or the Fund, or for any act of Investment
Manager or the Fund in following or declining to follow any direction of
Sub-Adviser, except for liability which is the result of the failure of
Sub-Adviser to comply with any stated investment restriction for the Account of
which the Sub-Adviser has prior written notice (including those set out in the
Investment Guidelines) or of the willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations hereunder of the relevant
Sub-Adviser Parties, except to the extent specified in Section 36(b) of the
Investment Company Act concerning loss resulting from a breach of fiduciary duty
with respect to the receipt of compensation for services.
14. INDEMNITY
A. The Fund shall indemnify, defend and hold harmless the Sub-Adviser
Parties from and against any and all losses, claims, damages,
liabilities (joint and several), costs and expenses (including any
investigatory, legal and other expenses incurred in connection with,
and any amounts paid in, any settlement; provided that the Fund shall
have approved such settlement) resulting from a demand, claim, lawsuit,
action or proceeding relating to or arising out of this Agreement;
provided that the conduct of such Sub-Adviser Party which was the
subject of the demand, claim, lawsuit, action or proceeding did not
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties and obligations hereunder. In no case, however,
shall such an indemnity be owed by
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the Fund to a Sub-Adviser Party with respect to liabilities not arising
from conduct of the Fund, the Investment Manager or the Trust. Any
obligations of the Trust or the Fund under this Agreement, and in
particular this Section 14, are binding only upon the assets of the
Fund (and not, for avoidance of doubt, upon the assets and property
associated with any other separate series of the Trust as may be
organized from time to time).
B. Sub-Adviser shall indemnify, defend and hold harmless Investment
Manager and the Fund, their affiliates and their respective directors,
officers, shareholders, employees and controlling persons within the
meaning of section 15 of the 1933 Act from and against any and all
losses, claims, damages, liabilities (joint and several), costs and
expenses (including any reasonable investigatory, legal and other
expenses incurred in connection with, and any amounts paid in, any
settlement; provided that Sub-Adviser shall have approved such
settlement) resulting from a demand, claim, lawsuit, action or
proceeding relating to any action or omission of the relevant
Sub-Adviser Parties relating to the business or activities of such
person under this Agreement or relating to the management of the
Account, provided the action or omission of such Sub-Adviser Party that
was the subject of the demand, claim, lawsuit, action or proceeding
constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations and duties hereunder.
C. The foregoing agreements of indemnity shall be in addition to, and
shall in no respect limit or restrict, any other remedies which may be
available to an indemnified party.
D. The indemnities granted herein shall survive termination of this
Agreement.
15. INDEMNITY PROCEDURE
Promptly after receipt by any indemnified party ("Indemnitee") under Section 14
of a notice of the commencement of an action or claim to which such Section may
apply, the Indemnitee shall notify the indemnifying party ("Indemnitor") in
writing of the commencement of such action or claim if a claim for
indemnification in respect of such action or claim may be made against the
Indemnitor under such Section; but the omission to so notify the Indemnitor
shall not relieve the Indemnitor from any liability which the Indemnitor may
have to the Indemnitee under such Section, except where such omission shall have
materially prejudiced the Indemnitor. In case any such action or claim shall be
brought against an Indemnitee and the Indemnitee shall notify the Indemnitor of
the commencement of such action or claim, the Indemnitor shall be entitled to
participate in such action or claim and, to the extent that the Indemnitor may
desire, to assume the defense of such action or claim with counsel selected by
the Indemnitor and reasonably acceptable to the Indemnitee, and after notice
from the Indemnitor to the Indemnitee of the Indemnitor's election to assume the
defense of such action, the Indemnitor shall not be liable to the Indemnitee
under such Section for any legal, accounting and other expenses subsequently
incurred by the Indemnitee in connection with the defense of such action or
claim other than reasonable costs of investigation.
Notwithstanding any provision of this Section 15 to the contrary, if any action
or claim as to which indemnity is or may be available an Indemnitee shall
reasonably determine that its interests are or may be adverse, in whole or in
part, to the interests of the Indemnitor or that there may be legal defenses
available to the Indemnitee which are or may be different from, in addition to,
or inconsistent with, the defenses available to the Indemnitor, the Indemnitee
may retain its own counsel in connection with such action or claim, in which
case the Indemnitee shall be responsible for any legal, accounting and other
expenses reasonably incurred by or on behalf of it in connection with
investigating or defending such action or claim. In no event shall an Indemnitor
be liable for the fees and expenses of more than one counsel for all indemnities
in connection with any one action or claim or in connection with separate but
similar or related actions or claims in the same jurisdiction arising out of the
same general allegations. An Indemnitor shall not be liable for a settlement of
any such action or claim effected without its prior written consent.
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16. CLIENT DIRECTIONS
The names of each individual who is authorized to give directions to Sub-Adviser
on Investment Manager's behalf under this Agreement are set forth on Exhibit D.
Investment Manager agrees to inform Sub-Adviser in writing of any change to that
list.
17. NO PARTNERSHIP OR JOINT VENTURE
Investment Manager and Sub-Adviser are not partners or joint venturers with each
other and nothing herein shall be construed to make them such partners or joint
venturers or impose any liability as such on either of them.
Sub-Adviser shall be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust, the Fund or Investment Manager in any way or otherwise be
deemed an agent of the Trust, the Fund or Investment Manager.
18. SUCCESSION
This Agreement shall inure to the benefit of and be binding upon the successors
to the parties hereto. Notwithstanding the foregoing, this Agreement shall
terminate immediately in the event of its "assignment," as such term is defined
in the Investment Company Act and the rules thereunder.
19. CODE OF ETHICS
Sub-Adviser agrees to observe and comply with Rule 17j-1 under the Investment
Company Act, as the same may be amended from time to time. In this regard,
Sub-Adviser shall, among other things, maintain internal procedures, including a
Code of Ethics, and shall periodically report any issues arising under such
procedures to Investment Manager and the Board of Trustees of the Trust.
20. REPORTS AND COMPLIANCE MONITORING
In furtherance of Sub-Adviser's duties, in addition to the reports described in
Section 2, Sub-Adviser shall (i) prepare such written and oral reports for the
Board of Trustees of the Trust or Investment Manager related to the investment
operations of the Fund as Investment Manager reasonably shall direct, (ii)
provide the Board of Trustees of the Trust on a periodic basis with such
information as to Sub-Adviser's services (whether with respect to the Fund or
otherwise) as may be reasonably necessary to enable the Trustees to evaluate the
performance of Sub-Adviser and the reasonableness of its fees hereunder, (iii)
provide periodic listings of Sub-Adviser's affiliated persons (as such term is
defined for purposes of Section 2(a)(3) of the Investment Company Act) in such
form and at such frequency as Investment Manager, or the CCO, may reasonably
request from time to time, and (iv) coordinate with and provide access to its
offices to Investment Manager to the extent necessary for Investment Manager to
monitor compliance by Sub-Adviser with the Fund's investment objectives,
policies and limitations, applicable compliance or similar policies or
procedures and with applicable regulations.
In addition, Sub-Adviser shall reasonably cooperate with the Trust's CCO in
respect of the CCO's initial and periodic reviews of those aspects of
Sub-Adviser's compliance program relevant to the Trust and provide prompt
reporting to the CCO of material compliance matters relevant thereto (as the
same are defined for purposes of Rule 38a-1 under the Investment Company Act).
21. RETURN OF BOOKS AND RECORDS
In the event of the termination of this Agreement, Sub-Adviser shall deliver to
Investment Manager (and shall not keep in its possession or deliver to anyone
other than Investment Manager) any and all books and records with respect to
Investment Manager, the Trust, the Fund or its shareholders (in their capacity
as shareholders of the Fund) in Sub-Adviser's control, including, without
limitation, disks, tapes and print-
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outs relating to shareholder files, data, notes, reports, correspondence and
other documents or property, together with all copies thereof (in whatever
medium recorded) belonging to Investment Manager.
22. NOTICES
Any notice under this Agreement shall be in writing and sent by hand, facsimile
(with confirmation of receipt from the addressee) or addressed and delivered or
sent by overnight courier or certified mail, postage prepaid, return receipt
requested to the other party at such other party may designate for the receipt
of such notice. Until further notice to the other party, it is agreed that the
address of Investment Manager for this purpose shall be:
Citigroup Alternative Investments LLC
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx Xxx, General Counsel
Sub-Adviser's address for this purpose shall be:
0 Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx
The Fund's address for this purpose shall be:
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attn: SAI COO
23. MISCELLANEOUS
a. Investment Manager acknowledges receipt of a copy of this Agreement
and receipt of Sub-Adviser's Form ADV, Part II.
b. This Agreement (including the exhibits thereto) represents the
entire agreement between the parties with respect to the services described
herein. Except as otherwise provided herein, this Agreement may not be modified
or amended except by a writing signed by the parties hereto. This Agreement
supersedes all previous agreements and understandings between the parties hereto
with respect to the subject matter hereof.
c. The provisions of this Agreement shall be deemed to be severable.
Paragraph headings are for convenience of reference only and do not form a part
of this Agreement.
d. Notwithstanding any provision herein to the contrary, Investment
Manager shall have the right to terminate this Agreement without penalty within
5 business days after its acceptance by Sub-Adviser.
e. This Agreement may be executed in any number of counterparts, all of
which together shall constitute a single instrument.
9
CITIGROUP ALTERNATIVE INVESTMENTS LLC
By:___________________________________
Title:________________________________
CITIGROUP ALTERNATIVE INVESTMENTS TAX ADVANTAGED
SHORT TERM FUND (solely with respect to Sections
13, 14, and 15)
By:___________________________________
Title:________________________________
SPECTRUM ASSET MANAGEMENT, INC.
By: __________________________________
Title: _______________________________
EXHIBITS
--------
Exhibit A - Investment Guidelines
Exhibit B - Custodian
Exhibit C - Fees
Exhibit D - Authorized Persons
10
EXHIBIT A
Investment Guidelines
Sub-Adviser shall have discretionary authority to engage in Fund portfolio
transactions relating to preferred securities, but limited to that portion of
the Fund's portfolio designated by Investment Manager to be invested in
preferred securities (which presently is not expected to exceed 10%-25%)
(previously defined as "the Account"). Allocation of money will be determined
and communicated from time to time.
Sub Adviser shall seek to purchase preferred securities that it believes at the
time of investment are eligible to pay dividends that qualify for certain
favorable federal income tax treatment when received by Shareholders of the
Fund, and whose prices do not, in such party's judgment, fully reflect the
current tax advantage. This treatment consists of either characterization as
"qualified dividend income" to individuals and subject to federal taxation at
the rates applicable to long-term capital gains, which for individuals currently
reach a maximum of 15%, or eligibility for the "dividends received deduction,"
which is available to corporate shareholders and which is generally 70% of the
amount of dividends received by them. Investors who meet holding period and
other requirements may be eligible to receive the benefit of this favorable tax
treatment.
Investments that satisfy all of the following criteria shall be considered
eligible investments for the Account:
1. Account duration not to exceed 7 years (unhedged)
2. Minimum rating at the time of purchase of A- from S&P. If the rating of a
security drops below A-, the security must be sold with reasonable
promptness.
3. Average issuer concentration of 3.0% based on the underlying securities in
the Account, not including cash.
4. Maximum issuer concentration of 5.0% based on the underlying securities in
the Account not including cash, provided that up to 5 issuers with minimum
ratings of A3/A- may have issuer concentrations of up to 7%.
5. Average S&P industry concentration of 15.0% based on the underlying
securities in the Account not including cash.
6. Maximum S&P industry concentration of 35% based on the underlying
securities in the Account not including cash.
7. All securities in the Account, not including cash, in preferred securities.
8. All underlying securities must be USD denominated.
9. Maximum of 35% of the Account in USD denominated securities issued by
non-US corporations.
10. No securities issued by issuers organized in emerging market countries.
11
EXHIBIT B
Custodian
U.S. Bank National Association
12
EXHIBIT C
Fee Schedule
Investment Manager agrees to pay Sub-Adviser a fee for all of its investment
management and advisory services hereunder that shall be computed and payable
quarterly as promptly as practicable following each quarter end, which is
expected to be no later than twenty days after the last day of each calendar
quarter, based on the average market value of the assets in the Account (which
in the case of total return swaps whose reference assets are preferred
securities shall be the average market value of such preferred securities) as of
the last business day of each calendar month during each calendar quarter, and
shall be .05% per quarter (0.20% per annum) of the assets of the Account. For
purposes of the foregoing calculation, assets of the Account shall exclude: (1)
cash and other assets pledged as collateral for interest rate hedging
transactions or for total return swaps whose reference assets are preferred
securities and (2) cash that has not yet been invested in securities
constituting eligible investments or is being held pending re-investment in such
securities. The fee for any period less than a calendar quarter shall be reduced
pro rata based on the number of days during such quarter that Sub-Adviser
managed the Account.
13
EXHIBIT D
Authorized Persons
Xxxx Xxxxx
Xxxxxx Xxxxx
Xxxxxxx Xxxxx
Xxxxxx Xxxxx
14
