INVESTMENT SUB-ADVISORY AGREEMENT
CONSTELLATION FUNDS
AGREEMENT made this 4th day of March, 2004, by and
between Constellation Investment Management Company,
LP the Adviser and Xxxxxx Investment Partners, Inc.
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 4, 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 Trusts 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 Funds investment
objectives, policies and restrictions as stated in
the Funds 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, in consultation with
and 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 Trusts 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 subparagraph 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 Funds 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 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 28e 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 terms of the overall responsibilities
of the Sub-Adviser to the Fund. 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 Trusts
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 Funds Allocated Assets be purchased from or
sold to the Adviser, Sub-Adviser, the Trusts
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 b5, 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-Advisers 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 Funds 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 Funds
custodian on each business day with information
relating to all transactions concerning the Funds
Allocated Assets and shall provide the Adviser with
such information upon request of the Adviser.
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-Advisers 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-Advisers 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-
Advisers 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 Trusts
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 Trusts 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 Prospectuses 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 or Schedule C, as
applicable, of this Agreement. The fee will be
calculated based on the average monthly market 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.
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 attorneys 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-Adviser s 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 Advisers own, or
any other sub-advisers, 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
Trusts 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 Advisers
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:
Xxxxxx Investment Partners, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attn: Xxx Xxxxx
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 Agreements
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.
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
Company, XX
Xxxxxx Investment Partners, Inc.
By: ______________________
By: _____________________
Name: ____________________
Name: ___________________
Title: _____________________
Title: ____________________
Schedule A
to the
Investment Sub-Advisory Agreement
as Amended
April 14, 2005
Listing of Funds
Name of Fund
Date Added
Constellation TIP Small Cap Value
Opportunities Fund
May 7, 2004
Constellation TIP Financial Services
Fund
May 7, 2004
Constellation TIP Healthcare &
Biotechnology Fund
May 7, 2004
Constellation TIP Mid Cap Fund
April 14, 2005
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-Advisers
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 1940 Act 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 Funds 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 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, provided, however, that the Adviser may
calculate a Performance Adjustment for the
Constellation TIP Financial Services Fund and
Constellation TIP Healthcare & Biotechnology Fund
based upon performance achieved by such Fund prior
to the effective date of this Agreement.
g Measurement Calculation. The Funds
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.
Schedule B-1
to the
Investment Sub-Advisory Agreement
as Amended
April 14, 2005
Listing of Funds with Performance Adjustments
Name of Fund
Performance Index
Annual Basic
Fee Rate
Constellation TIP Small Cap
Value
Opportunities Fund
Xxxxxxx 2000 Value Index
0.50%
Constellation TIP Financial
Services
Fund
S&P Financials Index
0.50%
Constellation TIP Healthcare
and
Biotechnology Fund
S&P 500 Healthcare Index
0.50%
Constellation TIP Mid Cap
Fund
Xxxxxxx Xxxxxx Index
0.45%
Schedule B-2
to the
Investment Sub-Advisory Agreement
as Amended
April 14, 2005
Performance Adjustment Rate
Name of Fund / Class
Maximum Rate
Adjustment
Methodology
Constellation TIP Small
Cap
Value Opportunities Fund
Class II Shares
+/0.1125%
As detailed in Schedule B-3
Constellation TIP
Financial
Services Fund
Class I Shares
+/0.1875%
As detailed in Schedule B-3
Constellation TIP
Healthcare
and Biotechnology Fund
Class II Shares
+/0.1875%
As detailed in Schedule B-3
Constellation TIP Mid
Cap Fund
+/0.075%
As detailed in Schedule B-3
Schedule B-3
to the
Investment Sub-Advisory Agreement
as Amended
April 14, 2005
Methodology for Performance Adjustment Rate
The tables below describes the applicable sub-
advisory fees that the Sub-Adviser would receive
based on each Funds performance as compared to its
benchmark index over a given performance period:
1. Constellation TIP Small Cap Value Opportunities
Fund.
If the Fund:
The Base
Fee
Increase
s by:
If the Fund:
The Base
Fee
Decrease
s by:
Outperforms the Index by
3.01% or more
+
0.1125%
Underperforms the Index by
3.01% or more
0.1125%
Outperforms the Index by
3.00% or less
0.00%
Underperforms the Index by
3.00% or less
0.00%
2. Constellation TIP Financial Services Fund.
If the Fund:
The Base
Fee
Increase
s by:
If the Fund:
The Base
Fee
Decrease
s by:
Outperforms the Index by
3.01% or more
+
0.1875%
Underperforms the Index by
3.01% or more
0.1875%
Outperforms the Index by
3.00% or less
0.00%
Underperforms the Index by
3.00% or less
0.00%
3. Constellation TIP Healthcare & Biotechnology
Fund.
If the Fund:
The Base
Fee
Increase
s by:
If the Fund:
The Base
Fee
Decrease
s by:
Outperforms the Index by
3.01% or more
+
0.1875%
Underperforms the Index by
3.01% or more
0.1875%
Outperforms the Index by
3.00% or less
0.00%
Underperforms the Index by
3.00% or less
0.00%
4. Constellation TIP Mid Cap Fund.
If the Fund:
The Base
Fee
Increase
s by:
If the Fund:
The Base
Fee
Decrease
s by:
Outperforms the Index by
3.01% or more
+ 0.075%
Underperforms the Index by
3.01% or more
0.075%
Outperforms the Index by
3.00% or less
0.00%
Underperforms the Index by
3.00% or less
0.00%
Schedule C
to the
Investment Sub-Advisory Agreement
For Funds With No Performance Adjustment
This Schedule C shall apply to each of the Funds
identified on Schedule C-1 hereto.
a The Adviser shall pay to the Sub-Adviser a fee
for each Fund calculated daily and payable monthly
in arrears, computed as a percentage of the average
net assets of the Fund for such month at the rate
set forth in Schedule C-1 hereto.
b The average net assets of the Fund for any
month shall be equal to the quotient produced by
dividing i the sum of the net assets of such Fund,
determined in accordance with procedures established
from time to time by or under the direction of the
Board of Trustees of the Trust, for each calendar
day of such month, by ii the number of such days.
Schedule C-1
to the
Investment Sub-Advisory Agreement
Listing of Funds and Fee Rates
Name of Fund
None
7
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