Exhibit (d)(3)
FORM OF SUB-ADVISORY AGREEMENT
ALLEGIANT INTERNATIONAL EQUITY FUND
THIS SUB-ADVISORY AGREEMENT ("AGREEMENT") is made as of _______________
by and between PNC CAPITAL ADVISORS, LLC, a Delaware limited liability
company ("ADVISER"), and POLARIS CAPITAL MANAGEMENT, LLC, a Massachusetts
limited liability company ("SUB-ADVISER").
WHEREAS, Allegiant Funds, a Massachusetts business trust ("TRUST"), is
registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended ("1940 ACT"); and
WHEREAS, pursuant to an Advisory Agreement dated _______________
("ADVISORY AGREEMENT") by and between the Trust and the Adviser, the Trust has
appointed the Adviser to furnish investment advisory and other services to the
Trust to manage the Trust's International Equity Fund ("FUND"); and
WHEREAS, the Trust operates pursuant to the conditions in its
Manager-of-manager Order from the Securities and Exchange Commission (SEC File
No. 27596) ("Order"); and
WHEREAS, the Adviser has agreed to provide certain investment advisory
duties under the Advisory Agreement and the Adviser is permitted to delegate
certain of its investment advisory duties under the Advisory Agreement and
consistent with the Order; and
WHEREAS, subject to the terms and provisions of this Agreement, the
Adviser desires to retain the Sub-Adviser to furnish investment advisory
services to the Trust; and
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, in addition to the terms
defined elsewhere herein.
(a) the terms "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES","INTERESTED PERSONS", "INVESTMENT COMPANY", and "ASSIGNMENT" have
the meanings ascribed to those terms in the 1940 Act; and
(b) "AVERAGE DAILY ASSETS" means, as to a Monthly Period (as defined in
Section 9 below) an amount equal to the sum of the daily market value of that
portion of the assets of the Fund that have been allocated to the Sub-Adviser
pursuant to Section 3(a)(i) below for each calendar day in the Monthly Period
divided by the number of days in the Monthly Period.
2. APPOINTMENT AND ACCEPTANCE; DELIVERY OF DOCUMENTS.
(a) Subject to the supervision of the Adviser and the Trust's Board of
Trustees ("BOARD") and the terms and provisions of this Agreement, the Adviser
hereby appoints the Sub-Adviser to act as investment adviser for the Fund, and
the Sub-Adviser accepts such appointment and agrees to furnish the services set
forth herein for the compensation provided herein, during the Services Period
(as defined in Section 9 below).
(b) The Sub-Adviser acknowledges that it has received copies of the
Trust's most recent prospectuses and statements of additional information with
respect to the Fund.
3. SERVICES OF SUB-ADVISER.
(a) The Sub-Adviser will provide the following services to the Adviser:
(i) The Sub-Adviser will provide a continuous program of
investment management for that portion of the assets of the Fund that, from time
to time, may be allocated to it and according to the investment strategy stated
at the time of the allocation. The allocation may be determined by the Adviser
or the Board, in writing, by an authorized officer of the Trust. It is
understood that the assets so allocated may consist of all, a portion of, or
none of the assets of the Fund, and that the Board or the Adviser has the right
to allocate and reallocate such assets at any time, and from time to time, upon
such notice to the Sub-Adviser as may be reasonably necessary, in the view of
the Trust and the Adviser, to ensure orderly management of the Fund.
(ii) Assist the Adviser in providing a continuous investment
program for the Fund, including investment research and management with respect
to all securities, investments, cash and cash equivalents in the Fund. The
Sub-Adviser will assist the Adviser in determining from time to time what
securities and other investments will be purchased, retained or sold by the Fund
with respect to the Fund. The Sub-Adviser will provide the services rendered by
it under this Agreement in accordance with the Fund's investment objective,
policies, and restrictions as stated in the Prospectus, Statement of Additional
Information, and resolutions of the Board applicable to the Fund;
(b) Transmit trades to the Trust's custodian for proper settlement;
(c) Prepare a quarterly broker security transaction summary and monthly
security transaction listing for that portion of the assets of the Fund that may
be allocated to the Sub-Adviser pursuant to Section 3(a)(i) above;
(d) Maintain all books and records with respect to the Fund's
securities transactions effected by it as required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act; and
(e) Supply the Trust and the Board with reports and statistical data as
reasonably requested.
-2-
4. OTHER COVENANTS. The Sub-Adviser agrees that it:
(a) will comply with all applicable rules and regulations of the
Securities and Exchange Commission ("SEC") and will in addition conduct its
activities under this Agreement in accordance with other applicable laws;
(b) will use the same skill and care in providing such services as it
uses in providing services to similar fiduciary accounts for which it has
investment responsibilities;
(c) will not make loans to any Person to purchase or carry shares in
the Fund or make interest-bearing loans to the Trust or the Fund;
(d) will maintain a policy and practice of conducting its investment
advisory services hereunder independent of any affiliated person of Polaris or
the Adviser;
(e) will place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer. In selecting
brokers or dealers for executing portfolio transactions, the Sub-Adviser will
use its best efforts to seek on behalf of the Fund the best overall terms
available. In assessing the best overall terms available for any transaction the
Sub-Adviser will consider all factors it 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 or dealer to execute a particular transaction, the
Sub-Adviser also may consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) provided to any fund and/or other accounts over which the Sub-Adviser
or any affiliate of the Sub-Adviser exercises investment discretion. The
Sub-Adviser is authorized, subject to the prior approval of the Board, to
negotiate and pay to a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for the 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 with respect to the accounts as to which it
exercises investment discretion. Notwithstanding the foregoing, no prior
approval by the Board will be required so long as the broker or dealer selected
by the Sub-Adviser provides best price and execution on a particular
transaction. In no instance will Fund securities be purchased from or sold to
the Adviser, any Sub-Adviser, Professional Funds Distributors, LLC ("PFD") (or
any other principal underwriter to the Trust) or an affiliated person of either
the Trust, the Adviser, the Sub-Adviser, or PFD (or such other principal
underwriter) unless permitted by rule, regulation, or order of the SEC. In
executing portfolio transactions for the Fund, the Sub-Adviser may, but will not
be obligated to, to the extent permitted by applicable laws and regulations,
aggregate the securities to be sold or purchased with those of other funds and
its other clients where such aggregation is not inconsistent with the policies
set forth in the Trust's registration statement. In such event, the Sub-Adviser
will allocate the securities so purchased or sold, and the expenses incurred in
the transaction, in the manner it considers to be the most equitable and
consistent with its fiduciary obligations to the Fund and such other clients;
-3-
(f) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Fund and prior, present
or potential shareholders, and will not use such 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 the Trust, which
approval shall not be unreasonably withheld and may not be withheld and will be
deemed granted where the Sub-Adviser may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities or when so requested by the Trust).
(g) in providing the services described in this Agreement, the
Sub-Adviser will not consult with any other investment advisory firm that
provides investment advisory services to the Fund or any other investment
company sponsored by the Adviser regarding transactions for the Fund in
securities or other assets, except as permitted by applicable law.
(h) The Sub-Adviser acknowledges that the Adviser and the Trust may
rely on Rules 17a-7, 17a-10, 10f-3 and 17e-1 under the 1940 Act, and the
Sub-Adviser herby agrees that it shall not consult with any other investment
adviser to the Trust with respect to transactions in securities for the
sub-advised assets or any other transactions in the Trust's assets, other than
for the purposes of complying with the conditions of paragraphs (a) and (b) of
Rule 12d3-1 under the 1940 Act.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains
for the Fund are the property of the Trust and further agrees to surrender
promptly to the Trust any of such records upon the Trust's written request;
provided, however, that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records required to be maintained by it pursuant to
Section 3(d) of this Agreement.
6. EXPENSES. The Sub-Adviser will pay all expenses incurred by it in connection
with its activities under this Agreement other than the cost of securities,
commodities and other investments (including brokerage commissions and other
transaction costs, if any) purchased or sold for the Fund; provided, however,
that the Sub-Adviser need not pay more than $10,000 per Annual Period (as
defined in Section 9 below) for expenses incurred by it in providing marketing
support to the Adviser as requested by the Adviser.
7. FEES. For each Monthly Period (as defined in Section 9 below), the Adviser
will pay to the Sub-Adviser, monthly in arrears within ten days after the end of
the relevant Monthly Period, an annualized fee (each, a "FEE" and collectively,
the "FEES"), calculated as follows:
(a) If the Average Daily Assets for the Monthly Period is less than or
equal to $125,000,000, the Fee for the Monthly Period will equal the product of
(i) the Average Daily Assets for the Monthly Period multiplied by (ii) .029167%.
(b) If the Average Daily Net Assets for the Monthly Period is greater
than $125,000,000 but less than or equal to $200,000,000, the Fee for the
Monthly Period will equal the sum of (i) $36,458 plus (ii) the product of (A)
the difference between the Average Daily Assets for the Monthly Period less
$125,000,000 multiplied by (B) .03333%.
-4-
(c) If the Average Daily Assets for the Monthly Period is greater than
$200,000,000, the Fee for the Monthly Period shall equal the sum of (i) $61,458
plus (ii) the product of (A) the difference between the Average Daily Assets for
the Monthly Period less $200,000,000 multiplied by (B) .04167%. The foregoing
provisions are consistent with the description of fees set forth in SCHEDULE A.
8. LIMITATION OF LIABILITY. The Sub-Adviser will not be liable for any error of
judgment or for any loss suffered by the Fund in connection with the performance
of this Agreement, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Sub-Adviser in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement.
9. TERM; TERMINATION.
(a) The initial term of this Agreement will be two years ("INITIAL
TERM"), unless it is terminated earlier in accordance with its terms.
Thereafter, this Agreement will continue in effect for successive twelve month
periods (each a "RENEWAL TERM") so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of those members of the
Board who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (ii)
by the Board or by vote of a majority of the outstanding voting securities of
the Fund. For purposes of this Agreement, "SERVICES PERIOD" means the Initial
Term and any Renewal Term. The Services Period will be divided into (i)
consecutive annual periods of twelve months each that commence on October 1 and
expire on September 30 (each, an "ANNUAL PERIOD"), (ii) each Annual Period will
be divided into four consecutive, three-month periods (each, a "QUARTERLY
PERIOD"), and (iii) each Quarterly Period will be divided into three consecutive
calendar months (each, a "MONTHLY PERIOD").
(b) Notwithstanding any contrary provision in this Agreement, this
Agreement may be terminated as follows:
(i) This Agreement will terminate automatically upon the effective
date of the termination of the Advisory Agreement with respect to the Fund for
any reason (whether by the Trust, by the Adviser, or by operation of law).
(ii) This Agreement may be terminated as to the Fund at any time
by the Adviser or by the Trust (by vote of the majority of those members of the
Board who are not interested persons of any party to this Agreement or by vote
of a majority of the outstanding voting securities of the Fund) on sixty days
written notice to the Sub-Adviser, or by the Sub-Adviser on one hundred eighty
days written notice to the Trust, provided that in the case of termination by
the Trust or the Sub-Adviser, notice shall be given simultaneously to the
Adviser.
(iii) This Agreement will terminate immediately in the event of
its assignment.
-5-
10. REPRESENTATIONS AND WARRANTIES.
10.1 The Sub-Adviser hereby represents and warrants to the Adviser, the
Trust, and the Fund as follows:
(a) ORGANIZATION, AUTHORITY AND QUALIFICATION OF SUB-ADVISER. The
Sub-Adviser is a limited liability company duly organized and validly existing
under the laws of the Commonwealth of Massachusetts and has all necessary power
and authority to enter into this Agreement, to carry out its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Sub-Adviser, the performance by the
Sub-Adviser of its obligations hereunder and the consummation by the Sub-Adviser
of the transactions contemplated hereby have been duly authorized by all
requisite action on the part of the Sub-Adviser. This Agreement has been duly
executed and delivered by the Sub-Adviser, and this Agreement constitutes a
legal, valid and binding obligation of the Sub-Adviser enforceable against the
Sub-Adviser in accordance with its terms, except as the enforcement thereof may
be limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally or by general equitable principles.
(b) NO CONFLICT. The execution, delivery and performance of this
Agreement by the Sub-Adviser do not and will not (i) violate, conflict with or
result in the breach of any provision of the organizational or governing
documents of the Sub-Adviser, (ii) conflict with or violate any law or
governmental order applicable to the Sub-Adviser or its business, or (iii)
conflict with or result in any breach of or constitute a default (or event which
with the giving of notice or lapse or time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation, or cancellation of, or result
in the creation of any encumbrance on any of the assets or properties of the
Sub-Adviser pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Sub-Adviser is a party or by which any of such assets
or properties are bound or affected which would have a material adverse effect
on the ability of the Sub-Adviser to provide the services contemplated by this
Agreement.
(c) CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by the Sub-Adviser do not and will not require any consent,
approval, authorization or other order of, action by, filing with or
notification to any governmental authority, or any other person. The Sub-Adviser
possesses all necessary licenses and governmental approvals and meets all other
legal requirements needed to provide the services required hereunder.
(d) LITIGATION. No action by or against the Sub-Adviser is pending or,
to the knowledge of the Sub-Adviser after due inquiry, threatened, that (i)
could affect the legality, validity or enforceability of this Agreement or (ii)
seeks to delay or prevent the consummation of, or that would be reasonably
likely to materially adversely affect the Sub-Adviser's ability to provide, the
services contemplated by this Agreement.
(e) INFRINGEMENT. No program or application used by the Sub-Adviser in
the performance or delivery of services hereunder will violate any copyright or
patent right or infringe on any proprietary rights.
-6-
10.2 The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
(a) ORGANIZATION, AUTHORITY AND QUALIFICATION OF ADVISER. The Adviser
is a corporation duly organized and validly existing under the laws of the State
of Delaware and has all necessary power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Adviser, the performance by the Adviser of its obligations hereunder and
the consummation by the Adviser of the transactions contemplated hereby have
been duly authorized by all requisite action on the part of the Adviser. This
Agreement has been duly executed and delivered by the Adviser, and this
Agreement constitutes a legal, valid and binding obligation of the Adviser
enforceable against the Adviser in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the rights of creditors generally or by
general equitable principles.
(b) NO CONFLICT. The execution, delivery and performance of this
Agreement by the Adviser do not and will not (i) violate, conflict with or
result in the breach of any provision of the organizational or governing
documents of the Adviser, (ii) conflict with or violate any law or governmental
order applicable to the Adviser or its business, or (iii) conflict with or
result in any breach of or constitute a default (or event which with the giving
of notice or lapse or time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any encumbrance on any of the assets or properties of the Adviser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
the Adviser is a party or by which any of such assets or properties are bound or
affected which would have a material adverse effect on the ability of the
Adviser to provide the services contemplated by this Agreement.
(c) CONSENTS AND APPROVALS. The execution, delivery and performance of
this Agreement by the Adviser do not and will not require any consent, approval,
authorization or other order of, action by, filing with or notification to any
governmental authority, or any other person, except as otherwise provided
herein.
(d) LITIGATION. No action by or against the Adviser is pending or, to
the knowledge of the Adviser after due inquiry, threatened, that (i) could
affect the legality, validity or enforceability of this Agreement or (ii) seeks
to delay or prevent the consummation of this Agreement.
11. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. No amendment of this Agreement shall be effective until
approved by vote of a majority of the outstanding voting securities of the Fund
to the extent required under the 1940 Act.
-7-
12. MISCELLANEOUS.
(a) The Adviser may use the Sub-Adviser's name in all prospectuses,
proxy statements, reports to shareholders, sales literature or other materials
prepared for distribution to shareholders of the Fund, to broker-dealers, or to
the public as long as the Sub-Adviser does not notify the Adviser in writing
that such use infringes the rights of any third party ("Materials"). The Adviser
will furnish the Sub-Adviser with a copy of all Materials that refer to the
Sub-Adviser before they are used. The Sub-Adviser will consent to such
references unless it reasonably objects in writing within five business days (or
such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the portions of
the materials that expressly relate to the Sub-Adviser, its services, and its
clients.
(b) The headings in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their permitted successors or assigns, and will be governed by Ohio
law. This Agreement may be executed in separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
13. NAMES. The names "ALLEGIANT FUNDS" and "Trustees of ALLEGIANT FUNDS" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under a Declaration of
Trust dated January 28, 1986, as amended, which is hereby referred to and a copy
of which is on file at the office of the State Secretary of the Commonwealth of
Massachusetts and the principal office of the Trust. The obligations of
"ALLEGIANT FUNDS" entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but in such
capacities, and are not binding upon any of the Trustees, shareholders or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
POLARIS CAPITAL MANAGEMENT, LLC
By: ________________________________
Name: ______________________________
Title: _____________________________
PNC CAPITAL ADVISORS, LLC
By: ________________________________
Name: ______________________________
Title: _____________________________
-9-
SCHEDULE A
TO
SUB-ADVISORY AGREEMENT
ALLEGIANT INTERNATIONAL EQUITY FUND
FEES
The Adviser will pay the Sub-Adviser an annualized fee with respect to the
portion of assets of the Fund allocated to the Sub-Adviser pursuant to Section
3(a)(i) of the Agreement consistent with the following schedule:
--------------------------------------------------------------------------------
Up to $125 million - 35 basis points
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
$125 to $200 million - 40 basis points
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Over $200 million - 50 basis points
--------------------------------------------------------------------------------
Each specified number of basis points applies only to assets within its adjacent
dollar range. For example, if the size of the Sub-Adviser's allocation is $300
million, the Sub-Adviser would be paid 35 basis points on the first $125
million; 40 basis points on the next $75 million; and 50 basis points on the
amount over $200 million.
