SUB-ADVISORY AGREEMENT ALLEGIANT INTERNATIONAL EQUITY FUND
Exhibit (d)(2)
ALLEGIANT INTERNATIONAL EQUITY FUND
THIS SUB-ADVISORY AGREEMENT (“AGREEMENT”) is made as of Jan. 4, 2010 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 January 4, 2010 (“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.
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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;
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(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
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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%.
(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.
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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.
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(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.
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.
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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.
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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: | /s/ Xxxxxxx X. Xxxx, Xx. | |||
| Name: | Xxxxxxx X. Xxxx, Xx. | |||
| Title: | President | |||
| PNC CAPITAL ADVISORS, LLC |
||||
| By: | /s/ Xxxxx XxXxxxxxx | |||
| Name: | Xxxxx XxXxxxxxx | |||
| Title: | President | |||
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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.
