Table of
Contents
Exhibit 33
MANAGEMENT
AGREEMENT
AGREEMENT made as of the 3rd day of
April, 2006, among CITIGROUP MANAGED FUTURES LLC, a Delaware
limited liability company (‘‘CMF’’ or the
"General Partner’’), CITIGROUP DIVERSIFIED FUTURES FUND
L.P., a New York limited partnership (the
"Partnership’’) and AAA CAPITAL MANAGEMENT ADVISORS,
LTD., a Texas limited partnership (the
"Advisor’’).
WITNESSETH:
WHEREAS, CMF is the general partner
of CITIGROUP DIVERSIFIED FUTURES FUND L.P., a limited partnership
organized for the purpose of speculative trading of commodity
interests, including futures contracts, options, swaps and forward
contracts with the objective of achieving substantial capital
appreciation initially through an investment in AAA Master Fund LLC
(the ‘‘Master Fund’’);
and
WHEREAS, the Limited Partnership
Agreement establishing the Partnership (the ‘‘Limited
Partnership Agreement’’) permits CMF to delegate to one
or more commodity trading advisors CMF’s authority to make
trading decisions for the Partnership; and
WHEREAS, the Advisor is registered
as a commodity trading advisor with the Commodity Futures Trading
Commission (‘‘CFTC’’) and is a member of
the National Futures Association ("NFA’’);
and
WHEREAS, CMF is registered as a
commodity pool operator with the CFTC and is a member of the NFA;
and
WHEREAS, CMF, the Partnership and
AAA Capital Management, Inc., a Texas corporation, entered into a
management agreement dated as of September 30, 2005 (the
‘‘Initial Management Agreement’’), pursuant
to which AAA Capital Management, Inc. agreed to render and
implement advisory services to the Partnership;
and
WHEREAS, the Advisor and AAA
Capital Management, Inc. have the same beneficial ownership;
and
WHEREAS, AAA Capital Management,
Inc. wishes to transfer all of its rights and obligations under the
Initial Management Agreement to the Advisor, and the Advisor wishes
to assume all such rights and obligations of AAA Capital
Management, Inc. under the Initial Management Agreement;
and
WHEREAS, CMF, the Partnership and
the Advisor wish to enter into this Agreement in order to set forth
the terms and conditions upon which the Advisor will (i) render and
implement advisory services in connection with the conduct by the
Partnership of its commodity trading activities during the term of
this Agreement and (ii) assume the rights and obligations of AAA
Capital Management, Inc. under the Initial Management
Agreement;
NOW, THEREFORE, the parties agree as
follows:
I .
DUTIES OF THE ADVISOR . (a) For the
period and on the terms and conditions of this Agreement, the
Advisor shall have sole authority and responsibility, as one of the
Partnership's agents and attorneys-in-fact, for directing the
investment and reinvestment of the assets and funds of the
Partnership allocated to it from time to time by the General
Partner in commodity interests, including commodity futures
contracts, options, swaps and forward contracts. All such trading
on behalf of the Partnership shall be in accordance with the
trading policies set forth in the Partnership's Prospectus and
Disclosure Document dated as of June 30, 2005, as supplemented (the
‘‘Prospectus’’), and as such trading
policies may be changed from time to time upon receipt by the
Advisor of prior written notice of such change and pursuant to the
trading strategy selected by CMF to be utilized by the Advisor in
managing the Partnership's assets. CMF has initially selected the
Advisor's Energy Program-Futures and Swaps (the
"Program’’) to manage the Partnership's assets
allocated to it. Any open positions or other investments at the
time of receipt of such notice of a change in trading policy shall
not be deemed to violate the changed policy and shall be closed or
sold in the ordinary course of trading. The Advisor may not deviate
from the trading policies set forth in the Prospectus without the
prior written consent of the Partnership
Table of
Contents
given by CMF. The Advisor makes no
representation or warranty that the trading to be directed by it
for the Partnership will be profitable or will not result in
losses.
(b) CMF
acknowledges receipt of the Advisor's draft Disclosure Document
dated March 31, 2006, as filed with the NFA (the
‘‘Disclosure Document’’). All trades made
by the Advisor for the account of the Partnership, whether directly
or indirectly through the Master Fund, shall be made through such
commodity broker or brokers as CMF shall direct, and the Advisor
shall have no authority or responsibility for selecting or
supervising any such broker in connection with the execution,
clearance or confirmation of transactions for the Partnership or
for the negotiation of brokerage rates charged therefor. However,
the Advisor, with the prior written permission (by either original
or fax copy) of CMF, may direct all trades in commodity futures and
options to a futures commission merchant or independent floor
broker it chooses for execution with instructions to give-up the
trades to the broker designated by CMF, provided that the futures
commission merchant or independent floor broker and any give-up or
floor brokerage fees are approved in advance by CMF. All give-up or
similar fees relating to the foregoing shall be paid by the
Partnership after all parties have executed the relevant give-up
agreements (by either original or fax copy).
(c) The
allocation of the Partnership's assets to the Advisor will be made
to the Program as described in the Disclosure Document. In the
event the Advisor wishes to use a trading system or methodology
other than or in addition to the system or methodology outlined in
the Disclosure Document in connection with its trading for the
Partnership, either in whole or in part, it may not do so unless
the Advisor gives CMF prior written notice of its intention to
utilize such different trading system or methodology and CMF
consents thereto in writing. In addition, the Advisor will provide
five days' prior written notice to CMF of any change in the trading
system or methodology to be utilized for the Partnership which the
Advisor deems material. If the Advisor deems such change in system
or methodology or in markets traded to be material, the changed
system or methodology or markets traded will not be utilized for
the Partnership without the prior written consent of CMF. In
addition, the Advisor will notify CMF of any changes to the trading
system or methodology that would require a change in the
description of the trading strategy or methods described in the
Disclosure Document. Further, the Advisor will provide the
Partnership with a current list of all commodity interests to be
traded for the Partnership's account and will not trade any
additional commodity interests for such account without providing
notice thereof to CMF and receiving CMF’s written approval.
The Advisor also agrees to provide CMF, on a monthly basis, with a
written report of the assets under the Advisor's management
together with all other matters deemed by the Advisor to be
material changes to its business not previously reported to
CMF.
(d) The
Advisor agrees to make all material disclosures to the Partnership
regarding itself and its principals as defined in Part 4 of the
CFTC’s regulations (‘‘principals’’),
partners, shareholders, directors, officers and employees, their
trading performance and general trading methods, its customer
accounts (but not the identities of or identifying information with
respect to its customers) and otherwise as are required in the
reasonable judgment of CMF to be made in any filings required by
Federal or state law or NFA rule or order. Notwithstanding Sections
1(d) and 4(d) of this Agreement, the Advisor is not required to
disclose the actual trading results of proprietary accounts of the
Advisor or its principals unless CMF reasonably determines that
such disclosure is required in order to fulfill its fiduciary
obligations to the Partnership or the reporting, filing or other
obligations imposed on it by Federal or state law or NFA rule or
order. The Partnership and CMF acknowledge that the trading advice
to be provided by the Advisor is a property right belonging to the
Advisor and that they will keep all such advice confidential.
Further, CMF agrees to treat as confidential any results of
proprietary accounts and/or proprietary information with respect to
trading systems obtained from the Advisor.
(e) The
Advisor understands and agrees that CMF may designate other trading
advisors for the Partnership and apportion or reapportion to such
other trading advisors the management of an amount of Net Assets
(as defined in Section 3(b) hereof) as it shall determine in its
absolute discretion. The designation of other trading advisors and
the apportionment or reapportionment of Net Assets to any such
trading advisors pursuant to this Section 1 shall neither terminate
this Agreement nor modify in any regard the respective rights and
obligations of the parties hereunder.
Table of
Contents
(f) CMF may,
from time to time, in its absolute discretion, select additional
trading advisors and reapportion funds among the trading advisors
for the Partnership as it deems appropriate. CMF shall use its best
efforts to make reapportionments, if any, as of the first day of a
month. The Advisor agrees that it may be called upon at any time
promptly to liquidate positions in CMF’s sole discretion so
that CMF may reallocate the Partnership's assets, meet margin calls
on the Partnership's account, fund redemptions, or for any other
reason, except that CMF will not require the liquidation of
specific positions by the Advisor. CMF will use its best efforts to
give two days' prior notice to the Advisor of any reallocations or
liquidations.
(g) The
Advisor will not be liable for trading losses in the
Partnership’s account including losses caused by errors;
provided, however, that (i) the Advisor will be liable to the
Partnership with respect to losses incurred due to errors committed
or caused by it or any of its principals or employees in
communicating improper trading instructions or orders to any broker
on behalf of the Partnership and (ii) the Advisor will be liable to
the Partnership with respect to losses incurred due to errors
committed or caused by any executing broker (other than any CMF
affiliate) selected by the Advisor, (it also being understood that
CMF, with the assistance of the Advisor, will first attempt to
recover such losses from the executing broker).
2.
INDEPENDENCE OF THE ADVISOR . For all
purposes herein, the Advisor shall be deemed to be an independent
contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Partnership in
any way and shall not be deemed an agent, promoter or sponsor of
the Partnership, CMF, or any other trading
advisor.
3.
COMPENSATION . (a) In consideration
of and as compensation for all of the services to be rendered by
the Advisor to the Partnership under this Agreement, the
Partnership shall pay the Advisor (i) an incentive fee payable as
of the end of each calendar quarter equal to 20% of New Trading
Profits (as such term is defined below) earned by the Advisor for
the Partnership and (ii) a monthly fee for professional management
services equal to 1/6 of 1% (2% per year) of the month-end Net
Assets of the Partnership allocated to the
Advisor.
(b) ‘‘Net
Assets’’ shall have the meaning set forth in Paragraph
7(d)(1) of the Limited Partnership Agreement dated as of December
3, 2002, and without regard to further amendments thereto, provided
that in determining the Net Assets of the Partnership on any date,
no adjustment shall be made to reflect any distributions,
redemptions or incentive fees payable as of the date of such
determination.
(c) ‘‘New
Trading Profits’’ shall mean the excess, if any, of Net
Assets managed by the Advisor at the end of the fiscal period over
Net Assets managed by the Advisor at the end of the highest
previous fiscal period or Net Assets allocated to the Advisor at
the date trading commences, whichever is higher, and as further
adjusted to eliminate the effect on Net Assets resulting from new
capital contributions, redemptions, reallocations or capital
distributions, if any, made during the fiscal period decreased by
interest or other income, not directly related to trading activity,
earned on the Partnership's assets during the fiscal period,
whether the assets are held separately or in margin accounts.
Ongoing expenses shall be attributed to the Advisor based on the
Advisor's proportionate share of Net Assets. Ongoing expenses shall
not include expenses of litigation not involving the activities of
the Advisor on behalf of the Partnership. Interest income earned,
if any, will not be taken into account in computing New Trading
Profits earned by the Advisor. If Net Assets allocated to the
Advisor are reduced due to redemptions, distributions or
reallocations (net of additions), there will be a corresponding
proportional reduction in the related loss carryforward amount that
must be recouped before the Advisor is eligible to receive another
incentive fee.
(d) Quarterly
incentive fees and monthly management fees shall be paid within
twenty (20) business days following the end of the period for which
such fee is payable. In the event of the termination of this
Agreement as of any date which shall not be the end of a calendar
quarter or month, as the case may be, the quarterly incentive fee
shall be computed as if the effective date of termination were the
last day of the then current quarter and the monthly management fee
shall be prorated to the effective date of termination. If, during
any month, the Partnership does not conduct business operations or
the Advisor is unable to provide the services contemplated herein
for more than two successive business days, the monthly management
fee shall be prorated by the ratio which the number of business
days during which
Table of
Contents
CMF conducted the Partnership's
business operations or utilized the Advisor's services bears in the
month to the total number of business days in such
month.
(e) The
provisions of this Paragraph 3 shall survive the termination of
this Agreement.
4. RIGHT
TO ENGAGE IN OTHER ACTIVITIES . (a) The
services provided by the Advisor hereunder are not to be deemed
exclusive. CMF on its own behalf and on behalf of the Partnership
acknowledges that, subject to the terms of this Agreement, the
Advisor and its officers, directors, employees and shareholder(s),
may render advisory, consulting and management services to other
clients and accounts. The Advisor and its officers, directors,
employees and shareholder(s) shall be free to trade for their own
accounts and to advise other investors and manage other commodity
accounts during the term of this Agreement and to use the same
information, computer programs and trading strategies, programs or
formulas which they obtain, produce or utilize in the performance
of services to CMF for the Partnership. However, the Advisor
represents, warrants and agrees that it believes the rendering of
such consulting, advisory and management services to other accounts
and entities will not require any material change in the Advisor's
basic trading strategies and will not affect the capacity of the
Advisor to continue to render services to CMF for the Partnership
of the quality and nature contemplated by this
Agreement.
(b) If, at
any time during the term of this Agreement, the
Ad
