INVESTMENT SUB-ADVISORY AGREEMENT
CONSTELLATION FUNDS
AGREEMENT made this 1st day of August, 2004, by and between Constellation
Investment Management Company, LP (the "Adviser") and Pitcairn Investment
Management, a separately identifiable division of Pitcairn Trust Company (the
"Sub-Adviser").
WHEREAS, Constellation Funds, a Delaware business trust (the "Trust") is
registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated March 1, 2004 (the "Advisory Agreement") with the Trust, pursuant to which
the Adviser will act as investment adviser to each series of the Trust set forth
on Schedule A of this Agreement (each a "Fund" and collectively the "Funds");
and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain the
Sub-Adviser to provide investment advisory services to the Adviser in connection
with the management of a Fund, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and the
Trust's Board of Trustees, the Sub-Adviser shall manage those assets of a
Fund that the Adviser determines to allocate to the Sub-Adviser (the
"Allocated Assets"), including the purchase, retention and disposition of
the Allocated Assets, in accordance with each Fund's investment objectives,
policies and restrictions as stated in the Fund's prospectus and statement
of additional information, as currently in effect and as amended or
supplemented from time to time (referred to collectively as the
"Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, subject to the direction of the Adviser,
determine from time to time what Allocated Assets will be purchased,
retained or sold by the Fund, and what portion of the Allocated
Assets will be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Trust's
Declaration of Trust (as defined herein) and the Prospectus and with
the instructions and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each
is amended from time to time.
(c) The Sub-Adviser shall determine the Allocated Assets to be purchased
or sold by the Fund as provided in subsection (a) and will place
orders with or through such persons, brokers or dealers to carry out
the policy with respect to brokerage set forth in each Fund's
Registration Statement (as defined herein) and Prospectus or as the
Board of Trustees or the Adviser may direct from time to time, in
conformity with federal securities laws. In executing Fund
transactions and selecting brokers or dealers, the Sub-Adviser will
use its best efforts to seek on behalf of each Fund the best overall
terms available. In assessing the best overall terms available for
any transaction, the Sub-Adviser shall consider all factors that it
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deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In evaluating the best overall terms available, and
in selecting the broker-dealer to execute a particular transaction,
the Sub-Adviser may also consider the brokerage and research services
provided (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934). Consistent with any guidelines
established by the Board of Trustees of the Trust, the Sub-Adviser is
authorized to pay to a broker or dealer who provides such brokerage
and research services a commission for executing a fund transaction
for a Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction
if, but only if, the Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer -- viewed in
terms of that particular transaction or in terms of the overall
responsibilities of the Sub-Adviser to the Fund and other accounts as
to which it exercises investment discretion. In addition, the
Sub-Adviser is authorized to allocate purchase and sale orders for
securities to brokers or dealers (including brokers and dealers that
are affiliated with the Adviser, Sub-Adviser or the Trust's principal
underwriter) to take into account the sale of shares of the Trust if
the Sub-Adviser believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified
firms. In no instance, however, will a Fund's Allocated Assets be
purchased from or sold to the Adviser, Sub-Adviser, the Trust's
principal underwriter, or any affiliated person of either the Trust,
Adviser, the Sub-Adviser or the principal underwriter, acting as
principal in the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records with respect to
transactions involving the Allocated Assets required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1
under the 1940 Act. The Sub-Adviser shall provide to the Adviser or
the Board of Trustees such periodic and special reports, balance
sheets or financial information, and such other information with
regard to its affairs as the Adviser or Board of Trustees may
reasonably request.
The Sub-Adviser shall keep the books and records relating to the
Allocated Assets required to be maintained by the Sub-Adviser under
this Agreement and shall timely furnish to the Adviser all
information relating to the Sub-Adviser's services under this
Agreement needed by the Adviser to keep the other books and records
of a Fund required by Rule 31a-1 under the 1940 Act. The Sub-Adviser
shall also furnish to the Adviser any other information relating to
the Allocated Assets that is required to be filed by the Adviser or
the Trust with the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any exemptive or other
relief that the Adviser or the Trust obtains from the SEC. The
Sub-Adviser agrees that all records that it maintains on behalf of a
Fund are property of the Fund and the Sub-Adviser will surrender
promptly to the Fund any of such records upon the Fund's request;
provided, however, that the Sub-Adviser may retain a copy of such
records. In addition, for the duration of this Agreement, the
Sub-Adviser shall preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained
by it pursuant to this Agreement, and shall transfer said records to
any successor sub-adviser upon the termination of this Agreement (or,
if there is no successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide each Fund's custodian on each business
day with information relating to all transactions concerning the
Fund's Allocated Assets and shall provide the Adviser with such
information upon request of the Adviser.
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(f) The investment management services provided by the Sub-Adviser under
this Agreement are not to be deemed exclusive and the Sub-Adviser
shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the
Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of any financial
condition that is likely to impair the Sub-Adviser's ability to
fulfill its commitment under this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation materials and be
responsible for voting and handling all proxies in relation to the
Allocated Assets. The Adviser shall instruct the custodian and other
parties providing services to the Fund to promptly forward
misdirected proxies to the Sub-Adviser.
(i) Except as specifically permitted in writing by the Adviser, or as
otherwise permitted or required to comply with the requirements of
the 1940 Act (including the rules adopted thereunder), the
Sub-Adviser shall not consult with any other sub-adviser to the Trust
or a Fund concerning the purchase, retention or disposition of Fund
Allocated Assets.
Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners, officers
or employees.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have responsibility
for all services to be provided to each Fund pursuant to the Advisory
Agreement and shall oversee and review the Sub-Adviser's performance of its
duties under this Agreement; provided, however, that in connection with its
management of the Allocated Assets, nothing herein shall be construed to
relieve the Sub-Adviser of responsibility for compliance with the Trust's
Declaration of Trust (as defined herein), the Prospectus, the instructions
and directions of the Board of Trustees of the Trust, the requirements of
the 1940 Act, the Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations, as each is amended from time to
time.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
copies properly certified or authenticated of each of the following
documents:
(a) The Trust's Agreement and Declaration of Trust, as filed with the
Secretary of State of the State of Delaware (such Agreement and
Declaration of Trust, as in effect on the date of this Agreement and
as amended from time to time, herein called the "Declaration of
Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(c) Prospectus(es) of each Fund.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by the
Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation
therefor, a sub-advisory fee at the rate specified on Schedule B of this
Agreement. The fee will be calculated based on the monthly average net
value of the Allocated Assets under the Sub-Adviser's management and will
be paid to the Sub-Adviser monthly. Except as may otherwise be prohibited
by law or regulation (including any then current SEC staff interpretation),
the Sub-Adviser may, in its discretion and from time to time, waive a
portion of its fee.
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5. INDEMNIFICATION. The Sub-Adviser shall indemnify and hold harmless the
Adviser from and against any and all claims, losses, liabilities or damages
(including reasonable attorney's fees and other related expenses) howsoever
arising from or in connection with the performance of the Sub-Adviser's
obligations under this Agreement; provided, however, that the Sub-Advisers
obligation under this Section 5 shall be reduced to the extent that the
claim against, or the loss, liability or damage experienced by the Adviser,
is caused by or is otherwise directly related to the Adviser's own, or any
other sub-adviser's, willful misfeasance, bad faith or negligence, or to
the reckless disregard of its duties under this Agreement.
6. DURATION AND TERMINATION. This Agreement shall become effective upon its
approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of each Fund. This Agreement shall
continue in effect for a period of more than two years from the date hereof
only so long as continuance is specifically approved at least annually in
conformance with the 1940 Act; provided, however, that this Agreement may
be terminated with respect to a Fund (a) by the Fund at any time, without
the payment of any penalty, by the vote of a majority of Trustees of the
Trust or by the vote of a majority of the outstanding voting securities of
the Fund, (b) by the Adviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to
the Sub-Adviser, or (c) by the Sub-Adviser at any time, without the payment
of any penalty, on 90 days' written notice to the Adviser. This Agreement
shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement
with the Trust. As used in this Section 6, the terms "assignment" and "vote
of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the SEC under
the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws of the
Commonwealth of Pennsylvania, without regard to conflict of law principles;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall
not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to this Agreement
shall be deemed sufficient if delivered or mailed by registered, certified
or overnight mail, postage prepaid addressed by the party giving notice to
the other party at the last address furnished by the other party:
To the Adviser at: Constellation Investment Management Company, LP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxxx X. Xxxxx
To the Sub-Adviser at: Pitcairn Investment Management
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
000 Xxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx III
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10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to this Agreement's subject matter.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument
11. LICENSE OF NAMES. The Sub-Adviser hereby agrees to grant a non-exclusive,
non-assignable license to the Trust for use of the names "Pitcairn" and
"Family Heritage(R)" in the name of each series of the Trust for which the
Sub-Adviser provides investment management services pursuant to this
Agreement for so long as the Sub-Adviser continues to provide such
services to such series, and such license shall terminate upon termination
of this Agreement.
A copy of the Declaration of Trust is on file with the Secretary of State of
the State of Delaware, and notice is hereby given that the obligations of this
instrument are not binding upon any of the Trustees, officers or shareholders of
the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
CONSTELLATION INVESTMENT MANAGEMENT PITCAIRN INVESTMENT MANAGEMENT, A DIVISION OF
COMPANY, LP PITCAIRN TRUST COMPANY
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxx X. Xxxx III
__________________________________________ _________________________________________
Name: Xxxx X. Xxxxx Name: Xxxxx X. Xxxx III
__________________________________________ _________________________________________
Title: President and Chief Executive Officer Title: President and Chief Executive Officer
__________________________________________ _________________________________________
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SCHEDULE A
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
AUGUST 1, 2004
LISTING OF FUND(S)
Name of Fund
Constellation Pitcairn Diversified Value Fund
Constellation Pitcairn Diversified Growth Fund
Constellation Pitcairn Select Value Fund
Constellation Pitcairn Small Cap Fund
Constellation Pitcairn Family Heritage(R) Fund
Constellation Pitcairn Taxable Bond Fund
Constellation Pitcairn Tax-Exempt Bond Fund
6
SCHEDULE B
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
JUNE 24, 2005
FOR FUNDS WITH PERFORMANCE ADJUSTMENTS
This Schedule B shall apply to each of the Funds identified on Schedule B-1
hereto.
(a) GENERAL. The Adviser shall pay to the Sub-Adviser, as compensation for
the Sub-Adviser's services and expenses assumed hereunder, a fee determined with
respect to each Fund, which shall be composed of the Basic Fee (defined below)
and a Performance Adjustment (defined below) to the Basic Fee based upon the
investment performance of a class of shares of the Fund in relation to the
investment record of a securities index determined by the Trustees of the Trust
to be appropriate over the same period.
(b) INDEX, CLASS AND CHANGES TO THE CLASS. The Trustees have initially
designated for each Fund the index and class of shares of the Fund identified on
Schedule B-1 as the index and class to be used for purposes of determining the
Performance Adjustment (referred to herein as the "Index" and the "Class,"
respectively). From time to time, the Trustees may, by a vote of the Trustees of
the Trust voting in person, including a majority of the Trustees who are not
parties to this Agreement or "interested persons" (as defined in the 0000 Xxx)
of any such parties, determine that a different class of shares of the Trust
representing interests in a Fund other than the Class is most appropriate for
use in calculating the Performance Adjustment. If a different class of shares
(the "Successor Class") is substituted in calculating the Performance Adjustment
the use of a Successor Class of shares for purposes of calculating the
Performance Adjustment shall apply to the entire performance period so long as
such Successor Class was outstanding at the beginning of such period. In the
event that such Successor Class of shares was not outstanding for all or a
portion of the Performance Period, it may only be used in calculating that
portion of the Performance Adjustment attributable to the period during which
such Successor Class was outstanding and any prior portion of the Performance
Period shall be calculated using the Successor Class of shares previously
designated.
(c) BASIC FEE. The basic fee for a Fund (the "Basic Fee") for any period
shall equal: (i) the average net asset value of the Fund's assets allocated to
the Sub-Adviser, multiplied by (ii) the annual rate identified for such Fund on
Schedule B-1 hereto, multiplied by (iii) a fraction, the numerator of which is
the number of calendar days in the payment period and the denominator of which
is 365 (366 in leap years).
(d) PERFORMANCE ADJUSTMENT. The amount of the performance adjustment (the
"Performance Adjustment") shall equal: (i) the average net assets of the Fund
over the Performance Period (as defined below), multiplied by (ii) the
Adjustment Rate (as defined below), multiplied by (iii) a fraction, the
numerator of which shall be the number of days in the last month of the
Performance Period and the denominator of which shall be 365 (366 in leap
years). The resulting dollar figure will be added to or subtracted from the
Basic Fee depending on whether the Fund experienced better or worse performance
than the Index.
(e) ADJUSTMENT RATE. The adjustment rate (the "Adjustment Rate") shall be
as set forth in Schedule B-2 for each Fund, provided, however, that the
Performance Adjustment may be further adjusted to the extent necessary to insure
7
that the total adjustment to the Basic Fee on an annualized basis does not
exceed the maximum Performance Adjustment identified for such Fund in Schedule
B-2.
(f) PERFORMANCE PERIOD. The performance period (the "Performance Period")
shall commence on the first day of the month next occurring after this Agreement
becomes effective with respect to the Fund (the "Commencement Date"), provided,
however, that if this Agreement should become effective on the first day of a
month with respect to a Fund, then the Commencement Date shall be the first day
of such month. The Performance Period shall consist of a rolling 12-month period
that includes the most current month for which performance is available plus the
previous 11 months following the commencement of Fund operations under this
Agreement. No Performance Adjustment shall be made with respect to any period
that is less than 12 months.
(g) MEASUREMENT CALCULATION. The Fund's investment performance will be
measured by comparing the (i) opening net asset value of one share of the Class
of the Fund on the first business day of the Performance Period with (ii) the
closing net asset value of one share of the Class of the Fund as of the last
business day of such period. In computing the investment performance of the Fund
and the investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Fund, and all cash
distributions of the companies whose securities comprise the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable rule
under the Investment Advisers Act of 1940, as the same from time to time may be
amended.
(h) PAYMENT OF FEES. The sub-advisory fee payable hereunder shall be
computed daily and paid monthly in arrears.
(i) AVERAGE NET ASSETS. The term "average net assets" of a Fund as used
herein for any period shall mean the quotient produced by dividing (i) the sum
of the net assets of the Fund, as determined in accordance with procedures
established from time to time under the direction of the Board of Trustees of
the Trust, for each calendar day of such period, by (ii) the number of such
days.
(j) TERMINATION. In the event this Agreement with respect to any Fund is
terminated as of a date other than the last day of any month, the Basic Fee
shall be computed on the basis of the period ending on the last day on which
this Agreement is in effect for such Fund, subject to a pro rata adjustment
based on the number of days elapsed in the current month as a percentage of the
total number of days in such month. The amount of any Performance Adjustment to
the Basic Fee will be computed on the basis of and applied to the average net
assets over the Performance Period ending on the last day on which this
Agreement is in effect for such Fund.
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SCHEDULE B-1
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
AUGUST 1, 2004
LISTING OF FUND(S) WITH PERFORMANCE ADJUSTMENTS
-------------------------------------------------------------------------------------------------------------------------
NAME OF FUND PERFORMANCE INDEX ANNUAL BASIC
-------------------------------------------------------------------------------------------------------------------------
FEE RATE
-------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Diversified Xxxxxxx 1000 Value Index 0.65% on the first $150 million, and
Value 0.45% on the value of assets above that amount
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Constellation Pitcairn Diversified Xxxxxxx 1000 Growth Index 0.65% on the first $102 million, and
Growth 0.45% on the value of assets above that amount
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Constellation Pitcairn Select Value Xxxxxxx 1000 Value Index 0.65% on the first $61 million, and
Fund 0.45% on the value of assets above that amount
-------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Small Cap Xxxxxxx 2000 Index 0.65% on the first $141 million, and
Fund 0.50% on the value of the assets above that amount
-------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Family Wilshire 5000 Index 0.80% on the first $127 million, and
Heritage(R) Fund 0.50% on the value of the assets above that amount
-------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Taxable Bond Xxxxxx U.S. 0.30% on the first $43 million, and
Fund Government/Credit Index 0.25% on the value of the assets above that amount
-------------------------------------------------------------------------------------------------------------------------
Constellation Pitcairn Tax-Exempt Xxxxxx Municipal Bond Index 0.25% on the value of assets in the Fund
Bond Fund
-------------------------------------------------------------------------------------------------------------------------
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SCHEDULE B-2
TO THE
INVESTMENT SUB-ADVISORY AGREEMENT
AUGUST 1, 2004
PERFORMANCE ADJUSTMENT RATE
RATE
NAME OF FUND / CLASS ADJUSTMENT METHODOLOGY
------------------------------------------------------- ----------------------- --------------------------------
Constellation Pitcairn Diversified Value Fund - +/- 0.075% Adjustment to Basic Fee
Class II Shares Rate if exceed or lag
the benchmark by at
least 2.00%
Constellation Pitcairn Diversified Growth Fund +/- 0.075% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 2.00%
Constellation Pitcairn Select Value Fund +/- 0.075% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 3.00%
Constellation Pitcairn Small Cap Fund +/- 0.075% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 2.50%
Constellation Pitcairn Family Heritage(R) Fund +/- 0.075% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 2.50%
Constellation Pitcairn Taxable Bond Fund +/- 0.060% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 1.00%
Constellation Pitcairn Tax-Exempt Bond Fund +/- 0.045% Adjustment to Basic Fee
Rate if exceed or lag
the benchmark by at
least 1.00%
10
