Capitol Series Trust PRE 14A, filed Aug 30, 2021
Capitol Series Trust (NITE)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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| [X] | Preliminary Proxy Statement. |
| [ ] | Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2)). |
| [ ] | Definitive Proxy Statement. |
| [ ] | Definitive Additional Materials. |
| [ ] | Soliciting Material Pursuant to § 240.14a-12. |
CAPITOL SERIES TRUST
on behalf of its series
Guardian Capital Fundamental Global Equity Fund
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Guardian Capital Fundamental Global Equity Fund
a Series of Capitol Series Trust (the “Trust”)
225 Pictoria Drive, Suite 450,
Cincinnati, OH 45246
September [], 2021
Dear Guardian Capital Fundamental Global Equity Fund Shareholder,
You are cordially invited to attend the special meeting of Shareholders (the “Meeting”) of the Guardian Capital Fundamental Global Equity Fund (the “Fund”), a series of Capitol Series Trust (the “Trust”) with one share class (“Institutional Shares”), to be held on October [14], 2021 at [___ a.m./p.m.], Eastern Time.
At the Meeting, shareholders of the Fund (“Shareholders”) will vote on:
(1) a proposal to approve a new advisory agreement between the Trust and Guardian Capital LP (“Guardian”) as it relates to the Fund (the “New Guardian Advisory Agreement”). Guardian is a Toronto, Canada limited partnership which itself is a wholly-owned subsidiary of Guardian Capital Group Limited, a publicly traded firm listed on the Toronto Stock Exchange (“Guardian Ltd.”), and is registered the U.S. Securities and Exchange Commission (“SEC”) as an investment adviser; and
(2) a proposal to approve a new investment sub-advisory agreement as it relates to the Fund (the “New Sub-Advisory Agreement”) between Guardian and GuardCap Asset Management Limited (“GuardCap”), a wholly-owned subsidiary of Guardian domiciled in the United Kingdom and registered as an adviser with the SEC.
The advisory and sub-advisory changes that Guardian is proposing with respect to the Guardian Capital Fundamental Global Equity Fund are part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business. Guardian is seeking to create a product lineup of U.S. mutual funds that: (1) are consistently branded across all of the funds; (2) have streamlined, consistent, and standardized internal processes and procedures in areas such as trading, compliance, finance, and legal oversight; (3) are generally structured as single adviser funds with Guardian serving as the investment adviser, or as sub-advised funds, with Guardian, as the sponsor of the Guardian fund family, serving as the investment adviser and its affiliated advisory entities serving as sub-adviser; and (4) have a commonality of fiscal year ends so that the all of the Guardian Capital Funds can be offered in a single prospectus.
The Fund’s current investment adviser, Alta Capital Management, LLC (“Alta”), is an indirect, majority-owned subsidiary of Guardian. Alta has historically managed the Fund through a “participating affiliate” arrangement pursuant to which Alta has utilized the GuardCap’s advisory personnel and resources to manage the Fund’s investments. Under the terms of a Participating Affiliate Memorandum of Understanding among Alta, Guardian, and GuardCap (each an affiliated entity under the common control of Guardian Capital Group Limited), GuardCap is considered to be a “Participating Affiliate” of Alta, as that term is used in relief granted by the staff of the U.S. Securities and Exchange Commission (“SEC”), allowing US-registered advisers to use investment advisory and trading resources of unregistered advisory affiliates, subject to the regulatory supervision of the registered adviser (the “Participating Affiliate Arrangement”). This Participating Affiliate Arrangement was initially utilized because GuardCap’s pending application with the SEC to become a registered as an investment adviser had not yet been approved by the SEC when the Fund was launched in December, 2019. However, based on Alta’s representation that it might wish to utilize the sub-advisory fund management structure and employ GuardCap as a sub-adviser to the Fund once GuardCap became successfully registered as an adviser with the SEC, the Board of Trustees of the Trust (the “Board”), at the same Board meeting that it approved Alta as the Fund’s adviser utilizing the Participating Affiliate arrangement with GuardCap, also approved GuardCap as a sub-adviser to the Fund, subject to the following contingencies: (1) GuardCap’s pending application to register as an investment adviser with the SEC was approved and declared effective; (2) Alta Capital advised the Trust’s Board that it wished to convert to the sub-advisory fund management structure; (3) the Board approved a resolution to convert to the sub-advisory fund management structure; and (4) the total advisory and sub-advisory fees paid in the sub-advisory fund management structure did not exceed the advisory fee paid to Alta in the Participating Affiliate Arrangement. Effective December 7, 2020, GuardCap became registered as an investment adviser with the SEC, making the Participating Affiliate Arrangement no longer necessary.
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At a meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to: (1) appoint Guardian to serve as the investment adviser of the Fund and to assume responsibility for providing the advisory services that Alta currently provides to the Fund (the “Adviser Transition”), and to approve the New Guardian Advisory Agreement; and (2) appoint GuardCap to serve as the investment sub-adviser of the Fund and to assume responsibility for providing investment sub-advisory services to the Fund (the “Sub-Adviser Appointment”), and to approve the New Sub-Advisory Agreement. The New Guardian Advisory Agreement and the New Sub-Advisory Agreement must each be approved by Shareholders to become effective.
As described in the accompanying Proxy Statement, the terms of the New Guardian Advisory Agreement differ from the terms of the Current Alta Advisory Agreement between the Fund and Alta only with respect to revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, and (3) delete certain sections from the Current Alta Advisory Agreement that deal with the Participating Affiliate Arrangement. As also described in the accompanying Proxy Statement, the terms of the New Sub-Advisory Agreement differ from the terms of the previously approved contingent sub-advisory agreement between Alta and GuardCap only with respect to revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, (3) correct a non-material typographical error, and (4) update certain contact information. Effective upon the Transition Date (defined below), no investment management services will be provided by Alta. There will be no change in fees payable by the Fund under the New Guardian Advisory Agreement or the New Sub-Advisory Agreement, nor is it expected that the Fund will bear any increase in the aggregate amount of other fees or expenses as a result of the Adviser Transition or the Sub-Adviser Appointment. In addition, Guardian expects to enter into an operating expenses limitation agreement with the Fund, to be effective upon consummation of the Adviser Transition and Sub-Adviser Appointment (“New Guardian OELA”) with substantially identical terms to the current expense limitation agreement (“Current Alta OELA”). The expense cap in New Guardian OELA mirrors that of the Fund’s Current Alta OELA, and therefore the total fees and expenses borne by the Fund are expected to remain the same.
The Board, including a majority of Independent Trustees, has unanimously approved the New Guardian Advisory Agreement and the New Sub-Advisory Agreement and believes both Agreements to be in the best interests of the Fund and its Shareholders. Subject to obtaining approval by Shareholders of the New Guardian Advisory Agreement and the New Sub-Advisory Agreement, and to the satisfaction of various other conditions that are described in the enclosed Proxy Statement, it is expected that the Adviser Transition and Sub-Adviser Appointment will be effected on or about the date of the Meeting, October 14, 2021, but in no event later than [_________] (the “Transition Date”). This proposal is explained more fully in the accompanying Proxy Statement.
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The proxy includes two separate proposals. You will be eligible to vote on a proposal only if you were a Shareholder of the Fund as of August [24], 2021 (the “Record Date”). The proposals are as follows:
Proposal 1: Shareholders of the Fund will be asked to approve the New Guardian Advisory Agreement between Guardian and the Trust as it relates to the Fund; and
Proposal 2: Shareholders of the Fund will be asked to approve the New Sub-Advisory Agreement between Guardian and GuardCap as it relates to the Fund.
Shareholders may also transact such other business as may properly come before the Meeting or any adjournments or postponements thereof.
The question-and-answer section that follows discusses these two proposals. The Proxy Statement itself provides greater detail about the proposals. Please read the enclosed materials carefully. The Board unanimously recommends that you vote in favor of each proposal.
You may choose one of the following options to authorize a proxy to vote your shares (which is commonly known as proxy voting) or to vote in person at the Meeting.
| • | Mail Complete and return the enclosed Proxy Card. |
| • | Internet Access the website shown on your Proxy Card and follow the online instructions. |
| • | Telephone (automated service) Call the toll-free number shown on your Proxy Card and follow the recorded instructions. |
| • | In person Attend the special shareholder meeting on October 14, 2021. |
Thank you for your response and for your continued investment in the Guardian Capital Fundamental Global Equity Fund.
| Sincerely, | ||
| /s/ Matthew J Miller | ||
| Matthew J. Miller | ||
| President |
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Questions and Answers
We strongly encourage you to read the full text of the enclosed Proxy Statement, However, for your convenience, we have provided a brief overview of the proposals that require a Shareholder vote.
| Q1. | Why am I receiving this Proxy Statement? |
| A. | You are receiving these proxy materials — including the Proxy Statement and your Proxy Card — because you have the right to vote on two important proposals concerning the Guardian Capital Fundamental Global Equity Fund (the “Fund”), a series of Capitol Series Trust (the “Trust”). Shareholders of the Fund are being asked to consider and vote on the following two proposals: |
(1) a proposal to approve a new advisory agreement between the Trust and Guardian Capital LP as it relates to the Fund (the “New Guardian Advisory Agreement”); and
(2) a proposal to approve a new investment sub-advisory agreement between Guardian and GuardCap Asset Management Limited as it relates to the Fund (the “New Sub-Advisory Agreement”).
At a meeting of the Board held on June 16 and 17, 2021, the Board and the Independent Trustees voting separately unanimously approved the New Guardian Advisory Agreement and the New Sub-Advisory Agreement as in the best interest of the Fund and its Shareholders, subject to Shareholder approval. The Trust’s Board of Trustees (the “Board”) is soliciting your proxy to vote at the Meeting.
| Q2. | Who is Guardian Capital LP? |
| A. | Guardian Capital LP (“Guardian” or “New Adviser”) is a Toronto-based institutional investment adviser registered in both the United States and the provinces of Canada. Guardian is one of Canada's largest investment management firms, with a total AUM of $51.641 billion CAD ($41.703 billion USD) as of June 30, 2021. Guardian is the sponsor of a 45 fund Canadian mutual fund family with AUM of $10.378 billion CAD ($8.381 billion USD) as of June 30, 2021, and serves as the investment adviser for each fund in that fund family. Guardian is a wholly-owned subsidiary of Guardian Capital Group Limited (“Guardian Ltd.”), a publicly traded firm listed on the Toronto Stock Exchange. Guardian is also a 70% owner of Alta Capital Management, LLC, the Fund’s current investment adviser (“Alta”), and a 100% owner of GuardCap Asset Management Limited, the proposed sub-adviser to the Fund which currently provides portfolios management services to the fund through a “Participating Affiliate” relationship with Alta (described below). |
| Q3. | Who is GuardCap Asset Management Limited? |
| A. | GuardCap Asset Management Limited ("GuardCap" or “New Sub-Adviser) is a specialist investment company domiciled in London and registered as an investment adviser in the United States and the United Kingdom. GuardCap focuses solely on managing concentrated, bottom-up, strategies constructed on an "index-agnostic" basis for institutional investors. GuardCap currently has two investment strategies: Global Equities and Global Emerging Market Equities. GuardCap is a direct wholly-owned subsidiary of Guardian and a wholly owned indirect subsidiary of Guardian Ltd. GuardCap currently provides portfolio management services to the Fund through a “participating affiliate” relationship with Alta (described below), and is the proposed New Sub-Adviser to the Fund, with Guardian as the proposed New Adviser. |
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| Q5. | What is the Adviser Transition? |
| A. | Pursuant to an agreement with the Trust, Alta Capital Management, LLC (“Alta”) currently serves as the investment adviser to the Fund (the “Current Alta Advisory Agreement”). Alta is an indirect, majority-owned subsidiary of Guardian. As part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business, as described in more detail below, Guardian, which is the majority owner of Alta, wishes to take over as the investment adviser of the Fund and to assume responsibility for providing the advisory services that are now provided to the Fund by Alta (the “Adviser Transition”). To effectuate this change, the Trust will need to enter into the New Guardian Advisory Agreement, which will appoint Guardian as the Fund’s adviser. The New Guardian Advisory Agreement was approved by the Board and its Independent Trustees voting separately at its June 16-17 Board meeting, but must be approved by Shareholders to become effective. |
| Q6. | Why am I being asked to approve the New Guardian Advisory Agreement? |
| A. | The Investment Company Act of 1940, as amended (the “1940 Act”) requires that the New Guardian Advisory Agreement be approved by both a majority of the Trust’s “Independent Trustees and “a majority of the outstanding voting securities” of the Fund, as such term is defined under the 1940 Act. At a meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to (1) appoint Guardian to serve as the investment adviser of the Fund and to assume responsibility for providing the advisory services that Alta currently provides to the Fund (the “Adviser Transition”), and (2) to approve the New Guardian Advisory Agreement. Shareholders are therefore now being asked to approve the New Guardian Advisory Agreement. The Board of Trustees believes that approval of the New Guardian Advisory Agreement will provide the benefits to the Fund discussed below. As described in the accompanying Proxy Statement, the terms of the New Guardian Advisory Agreement differ from the terms of the Current Alta Advisory Agreement between the Fund and Alta only with respect to revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, and (3) delete certain sections from the Current Alta Advisory Agreement that deal with the Participating Affiliate Arrangement (discussed further below). The Board of Trustees, including a majority of Independent Trustees (as defined in the enclosed Proxy Statement), has approved the New Guardian Advisory Agreement and believe it to be in the best interests of the Fund and its Shareholders. |
Q7: What is the Sub-Adviser Appointment?
| A: | Alta, a majority-owned subsidiary of Guardian, currently serves as the investment adviser to the Fund pursuant to the Current Alta Advisory Agreement. Alta has historically managed the Fund through a “Participating Affiliate” arrangement pursuant to which Alta has utilized GuardCap’s personnel and resources to manage the Fund’s investments. Alta, Guardian, and GuardCap are affiliated entities. Guardian owns a 70% interest in Alta and a 100% interest in GuardCap. Guardian, Alta and GuardCap are all under the under the common control of Guardian Capital Group Limited (“Guardian Ltd”). Under the terms of a Participating Affiliate Memorandum of Understanding between and among Alta, Guardian, and GuardCap, GuardCap is considered to be a “Participating Affiliate” of Alta Capital, as that term is used in relief granted by the staff of the U.S. Securities and Exchange Commission (“SEC”), allowing US-registered advisers to use investment advisory and trading resources of unregistered advisory affiliates, subject to the regulatory supervision of the registered adviser (the “Participating Affiliate Arrangement”). |
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This Participating Affiliate Arrangement allows the Fund to benefit from GuardCap’s investment advisory and trading expertise. For example, the current portfolio managers of the Fund—Michael Boyd and Giles Warren—are both employed by GuardCap. As portfolio managers, Mr. Boyd and Mr. Warren are primarily responsible for determining the securities to be purchased and sold for the Fund and the timing of those transactions. Mr. Boyd and Mr. Warren are assisted in their portfolio management of the Fund by an Investment Committee of the Adviser comprised of Michael Tempest, Alta’s Chief Investment Officer, and Alta’s portfolio managers Melanie Peche, Tyler A. Partridge, and Casey D. Nelsen, CFA®. The Investment Committee has supervisory responsibility over GuardCap and its portfolio managers with respect to the services that they provide to the Fund in the Participating Affiliate Arrangement.
This Participating Affiliate Arrangement was initially utilized because GuardCap was not yet registered with the SEC when the Fund was launched, and therefore could not serve as the Fund’s adviser or sub-adviser. However, based on Alta’s and Guardian’s representations that they might wish to utilize GuardCap as a sub-adviser to the Fund after it became registered with the SEC, the Board and its Independent Trustees, at the same Board meeting that it approved Alta as the Fund’s investment adviser utilizing the Participating Affiliate Arrangement, also approved GuardCap as a sub-adviser to the Fund, subject to the following contingencies: (1) GuardCap’s pending application to register as an investment adviser with the SEC is approved and declared effective; (2) Alta Capital advises the Trust’s Board that it wishes to convert from the Participating Affiliate Arrangement to the sub-advisory fund management structure; (3) the Board approves a resolution to convert to the sub-advisory fund management structure; and (4) the total advisory and sub-advisory fees paid in the sub-advisory fund management structure do not exceed the advisory fee paid to Alta in the Participating Affiliate Arrangement. The Trust’s Board the Independent Trustees also approved a form of Sub-Advisory Agreement (the “Prior Form of Sub-Advisory Agreement”) pursuant to which the Adviser would be paid an annual fee of 0.80% of the Fund’s average daily net assets, of which out of which it would pay 0.60% of the Fund’s average daily net assets to GuardCap as sub-adviser.
Effective December 7, 2020, GuardCap became registered as an investment adviser with the SEC, which meant that the Participating Affiliate Arrangement was no longer necessary and that GuardCap could be appointed as a Sub-Adviser to the Fund. To date, however, Alta and GuardCap have continued to manage the Fund under the Participating Affiliate Arrangement and have not sought to officially appoint GuardCap as a Sub-Adviser to the Fund. Consequently, the Prior Form of Sub-Advisory Agreement that the Board approved in December, 2019 has not become effective. The previously approved Prior Form of Sub-Advisory Agreement cannot be utilized with Guardian as the Fund’s New Adviser because it lists Alta as the adviser to the Fund rather than Guardian, and by its terms the Prior Form of Sub-Advisory Agreement would terminate when the Current Alta Advisory Agreement with Alta terminates.
At the meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to appoint GuardCap to serve as the investment sub-adviser of the Fund and to assume responsibility for providing investment sub-advisory services to the Fund (the “Sub-Adviser Appointment”), and also unanimously approved the New Sub-Advisory Agreement. The New Sub-Advisory must be approved by Shareholders to become effective. Shareholders are therefore also now being asked to approve the New Sub-Advisory Agreement between Guardian and GuardCap. The Board of Trustees believes that approval of the New Sub-Advisory Agreement will provide the benefits to the Fund and its shareholders grouped as discussed below. As described in the accompanying Proxy Statement, the terms of the New Sub-Advisory Agreement differ from the terms of the Prior Form of Sub-Advisory Agreement between the Fund and Alta only with respect to revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser; (2) change the effective date; (3) correct a non-material typographical error; and (4) update certain contact information. The Board of Trustees, including a majority of Independent Trustees (as defined in the enclosed Proxy Statement), has approved the New Sub-Advisory Agreement, and believes it to be in the best interests of the Fund and its Shareholders.
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| Q8. | Why am I being asked to approve the New Sub-Advisory Agreement? |
| A. | The 1940 Act requires that a new sub-advisory agreement be approved by both a majority of an investment company’s “Independent Trustees and “a majority of the outstanding voting securities,” as that term is defined under the 1940 Act. At the meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to appoint GuardCap to serve as the investment sub-adviser of the Fund and to assume responsibility for providing investment sub-advisory services to the Fund (the “Sub-Adviser Appointment”), and also unanimously approved the New Sub-Advisory Agreement. The New Sub-Advisory must be approved by Shareholders to become effective. Shareholders are therefore also now being asked to approve the New Sub-Advisory Agreement between Guardian and GuardCap. The Board of Trustees believes that approval of the New Sub-Advisory Agreement will provide the benefits to the Fund and its shareholders grouped as discussed below. The Board of Trustees, including a majority of Independent Trustees (as defined in the enclosed Proxy Statement), has unanimously approved the New Sub-Advisory Agreement, and believes it to be in the best interests of the Fund and its Shareholders. |
| Q9. | Why does Guardian wish to take over as the investment adviser of the Fund and assume responsibility for providing the advisory services that are now provided to the Fund by Alta, and to appoint GuardCap as the sub-adviser to the Fund? |
| A. | The advisory and sub-advisory changes that Guardian has requested with respect to the Guardian Capital Fundamental Global Equity Fund are part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business. Guardian and its affiliates currently serve as the investment adviser for three series funds in the Trust: Alta Quality Growth Fund, which is advised by Alta Capital Management and has a fiscal year end of September 30; Guardian Capital Dividend Growth Fund, which is advised by Guardian and has an April 30 fiscal year end; and Guardian Capital Fundamental Global Equity Fund, which is advised by Alta with GuardCap providing portfolio management services pursuant to a Participating Affiliate Arrangement, and has a September 30 fiscal year end. Guardian also plans to start up other new series in the Trust, including series for which portfolio management services will be provided by other advisory firms that are majority-owned by Guardian. In anticipation of this growth, Guardian is seeking to create a product lineup of mutual funds that: (1) are consistently branded across all of the funds; (2) have streamlined, consistent, and standardized internal processes and procedures in areas such as trading, compliance, finance, and legal oversight; (3) are generally structured as single adviser funds with Guardian serving as the investment adviser or as sub-advised funds, with Guardian, as the sponsor of the Guardian fund family, serving as the investment adviser and its affiliated advisory entities serving as sub-adviser; and (4) have a commonality of fiscal year ends so that all of the Guardian Funds can be offered in a single prospectus. |
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When the Fund was launched in December 2019, Guardian believed that its majority-owned U.S. domiciled subsidiary, Alta, was best suited to be the Fund’s adviser given Alta’s experience as an adviser to U.S. mutual funds and its familiarity with relevant laws and regulations, as well as Alta’s experience with concentrated quality growth investment processes similar to those employed by GuardCap. Since that time, however, Guardian has launched and serves as the adviser to a second U.S. mutual fund in the Trust—the Guardian Capital Dividend Growth Fund (DIVGX) (the “Guardian Capital Dividend Fund”). Now that Guardian has had time to familiarize itself with the U.S. mutual fund structure and its legal and regulatory framework, and is serving as the adviser to the Guardian Capital Dividend Fund, it has come to believe that switching the Fund’s adviser from Alta to Guardian will bring multiple benefits to the Fund, consistent with the restructuring goals described above. Specifically, the Adviser believes that transitioning to Guardian as the Fund’s adviser will streamline Guardian’s and the Fund’s internal processes related to trading, compliance, finance, and legal oversight. Guardian believes that these changes will create efficiencies that will benefit the Fund and its Shareholders.
Guardian also believes that taking over as the Fund’s adviser is consistent with Guardian’s overall branding and marketing strategy and will also streamline Guardian’s and the Fund’s marketing approach for the GuardCap investment strategy in the U.S. Guardian already distributes separate account and model portfolios in the U.S. that are marketed and distributed under the Guardian name. The Fund, however, is currently marketed as an Alta Fund with Alta branding. Guardian believes that this has negatively affected the Fund’s potential for growth. Moving forward, Guardian plans to combine the Fund’s prospectus with the prospectus of the Guardian Capital Dividend Fund and thereby harmonize the financial reporting and prospectus timing for both funds. Guardian believes that this will create efficiencies that will benefit the Fund and its Shareholders. In addition, to the extent that the Fund is successful in attracting new Shareholders, Guardian believes that this will reduce the overall percentage of expenses and fees paid by each Shareholder in the Fund.
It is also Guardian’s belief that appointing GuardCap as a sub-adviser to the Fund will strengthen GuardCap’s relationship to the Fund and will enhance legal and regulatory oversight of GuardCap, to the benefit of Fund Shareholders. Because there will be no change in the overall fees paid by the Fund under the New Guardian Advisory Agreement and the New Sub-Advisory Agreement, and because the changes proposed are expected to streamline Guardian’s, GuardCap’s, and the Fund’s internal processes related to trading, compliance, finance, and legal oversight, Guardian believes that the proposed new management structure will create efficiencies that will benefit the Fund and its Shareholders, will attract new capital to the Fund so as to defray the overall percentage of expenses and fees paid by each Shareholder in the Fund, and will create a more defined relationship for GuardCap and more regulatory oversight over GuardCap. For these reasons, it is Guardian’s belief that appointing GuardCap as a sub-adviser to the Fund will significantly benefit the Fund and its Shareholders.
Finally, it is Guardian’s intention to grow the assets of its three existing mutual funds in the Trust and thereby boost its market presence in the financial advisory channel. Guardian believes that once these three current funds become economically viable, there are additional strategies that present compelling opportunities in the mutual fund marketplace, including: a concentrated Emerging Markets strategy managed by its UK-based subsidiary GuardCap, additional U.S. equity strategies managed by its Utah-based subsidiary Alta, and U.S. Fixed Income strategies managed by Guardian’s Virginia-based subsidiary Agincourt Capital Management LLC, which Guardian acquired in 2020. Should Guardian acquire additional boutique investment managers or portfolio management teams with strategies of interest to the U.S. market, it will consider launching additional U.S. mutual funds within the Trust. Any new funds launched within the Trust will likely follow the portfolio management structure that Guardian is proposing for the Fund in this proxy.
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| Q10. | What are the benefits of the Adviser Transition and the Sub-Adviser Appointment to the Fund and its Shareholders? |
| A. | In evaluating the New Guardian Advisory Agreement, the Board of Trustees considered materials detailing the services that Guardian will provide to the Fund, Guardian’s background and investment experience as a firm generally, as well as the experience of its senior management team. In evaluating the New Sub-Advisory Agreement, the Board of Trustees considered materials detailing the services that GuardCap will provide under the New Sub-Advisory Agreement, GuardCap’s background and investment experience as a firm generally, as well as the experience of its portfolio managers. |
Upon consummation of the Adviser Transition and the Sub-Adviser Appointment, which are conditioned on shareholder approval of the New Guardian Advisory Agreement and the New Sub-advisory Agreement, the Fund will continue to be managed by the global equity team at GuardCap in line with the Guardian Capital Fundamental Global Equity Strategy. GuardCap’s global equity team consists of four individuals: Michael Boyd, Giles Warren, Orlaith O’Connor, and Bojana Bidovec. Michael Boyd and Giles Warren currently serve as the Fund’s portfolio managers under the Participating Affiliate Arrangement and are primarily responsible for selecting the securities to be purchased and sold for the Fund and the timing of those transactions, subject to the oversight of Alta’s Investment Committee, which has had supervisory responsibility over GuardCap and its portfolio managers with respect to the services that they provide to the Fund.
Following the Adviser Transition and the Sub-Adviser Appointment, GuardCap and its portfolio managers will still be primarily responsible for providing investment management services to the Fund, subject to Guardian’s ultimate oversight. Michael Boyd and Giles Warren will continue to serve as the Fund’s portfolio managers and will assume primary responsibility for selecting the securities to be purchased and sold for the Fund and the timing of those transactions. GuardCap will also provide compliance services and provide regular compliance attestations to Guardian for purposes of compliance oversight. Guardian will serve in an oversight role and its compliance, trading, legal, and finance teams will provide support to the Fund for operational and regulatory activities. Guardian will also be responsible for website maintenance and reporting activities.
In its deliberations as to whether to approve the New Guardian Advisory Agreement and the New Sub-advisory Agreement, the Board considered, among other things, Guardian’s and GuardCap’s qualifications, their philosophy of management, the historical performance of the Fund and the Guardian Fundamental Global Equity Strategy, and each firm’s operational capabilities. They also considered the following potential benefits to the Fund and its Shareholders:
| • | The Fund may benefit from Guardian’s and GuardCap’s investment expertise, especially with respect to Guardian’s Fundamental Global Equity Strategy. |
| • | There will be no change in the aggregate fees payable by the Fund under the New Guardian Advisory Agreement and the New Sub-Advisory Agreement, nor is it expected that the Fund will bear any increase in the aggregate amount of other fees or expenses as a result of the Adviser Transition or the Sub-Adviser Appointment. |
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| • | Guardian will enter into a New Guardian Operating Expenses Limitation Agreement with the Fund (“New OELA”), to be effective upon consummation of the Adviser Transition, on substantially the same terms as the current expense limitation agreement between the Fund and Alta (“Current OELA”). The expense cap in the New OELA mirrors that of the Fund’s current expense limitation agreement, and therefore, the total fees and expenses borne by the Fund are expected to remain the same. |
| • | Guardian (and not the Fund) is obligated to pay the Sub-Advisory Fee to GuardCap in the New Sub-Advisory Agreement. |
| • | Guardian is well-capitalized and well insured and is able to attract and retain personnel necessary to provide quality investment advisory services to the Fund. |
| • | GuardCap global equity team’s extensive investment experience. |
| Q11. | What are the conditions of the Adviser Transition and the Sub-Adviser Appointment? |
| A. | The consummation of the Adviser Transition conditioned upon the approval of the New Guardian Advisory Agreement by the Fund’s Shareholders. The consummation of the Sub-Adviser Appointment conditioned upon the approval of the New Sub-Advisory Agreement by the Fund’s Shareholders. It is expected that the Adviser Transition and the Sub-Adviser Appointment will be effected on or about the date of the Meeting, October [14], 2021, but in no event later than [________](the “Transition Date”). Effective upon the Transition Date, Alta will no longer provide any investment management services to the Fund, Guardian will take over as the Fund’s adviser and GuardCap will take over as the Fund’s sub-adviser. Alta will continue to be paid under the Current Alta Advisory Agreement through the Transition Date. |
| Q12. | How will the Adviser Transition and the Sub-Adviser Appointment affect the Fund’s investment objective and strategy? |
| A. | The Fund’s investment objective and strategy will remain the same following the Adviser Transition and Sub-Adviser Appointment. The Fund’s portfolio managers will also remain the same. |
| Q13: | Will the advisory fees payable to Guardian under the New Guardian Advisory Agreement increase as a result of the Adviser Transition? |
| A: | No. The advisory fee payable under the New Guardian Advisory Agreement will remain the same as the advisory fee under the Current Alta Advisory Agreement. Guardian will be entitled to receive an annual fee of 0.80% of the Fund’s average daily net assets. |
| Q14: | Will the sub-advisory fees payable to GuardCap under the New Sub-Advisory Agreement increase the total fees payable by the Fund? |
| A: | No. Under the New Sub-Advisory Agreement, Guardian will pay sub-advisory fees directly to GuardCap from its own fees, and GuardCap will not be paid directly from the Fund’s assets. Under this arrangement, Guardian will be entitled to receive an annual advisory fee from the Fund of 0.80% of the Fund’s average daily net assets. From this advisory fee, Guardian will then pay a sub-advisory fee to GuardCap equal to 0.60% of the Fund’s average daily net assets. This 0.60% sub-advisory fee is the same as the sub-advisory fee that would have been charged under the Prior Form of Sub-Advisory Agreement, if that agreement had become operational. |
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| Q15: | Will the Fund’s name change? |
| A: | Yes. The Board approved a change in the Fund’s name from “Guardian Fundamental Global Equity Fund” to the “Guardian Capital Fundamental Global Equity Fund.” This name change became effective as of August 23, 2021, as reflected in supplements to the Fund’s prospectus and SAI filed on July 28, 2021. |
Q16. How will this affect my account with the Fund?
| A. | The Adviser Transition and the Sub-Adviser Appointment will not affect your account with the Fund. You will still own the same number of shares in the Fund that you currently own, and the value of your investment will not change as a result of Guardian taking over as the adviser to the Fund or as a result of GuardCap taking over as sub-adviser to the Fund. In addition, the same experienced, high quality portfolio managers will continue managing the Fund without interruption. |
Q17: Will I be able to purchase additional shares of the Fund after the Transition Date?
| A: | Yes. The shares of the Fund will continue to be available for purchase directly from the Fund or other Financial Institutions both before and after the Transition Date. |
| Q18. | When will the Adviser Transition and Sub-Adviser Appointment Occur? |
| A: | It is expected that the Adviser Transition and the Sub-Adviser Appointment will be effected on or about the date of the Meeting, October [14], 2021, but in no event later than [_________] (the “Transition Date”). The Adviser Transition will not be consummated, however, unless and until the Shareholders of the Fund have approved the New Guardian Advisory Agreement. If such approval is not obtained, the Board will take such actions as it deems necessary and appropriate and in the best interests of Shareholders of the Fund. |
In addition, the Sub-Adviser Appointment will occur only if Shareholders of the Fund approve the New Sub-Advisory Agreement. The Sub-Adviser Appointment will not be consummated unless and until the Shareholders of the Fund have approved the New Sub-Advisory Agreement. If such approval is not obtained, the Board will take such actions as it deems necessary and appropriate and in the best interests of Shareholders of the Fund.
| Q19. | How will my approval of the New Guardian Advisory Agreement and New Sub-Advisory Agreement affect the management and operation of the Fund? |
| A. | The Fund’s investment strategies will not change as a result of the New Guardian Advisory Agreement or the New Sub-Advisory Agreement. In addition, there will be no change to the Fund’s portfolio management, investment objectives, principal investment strategies or principal risks. |
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Upon consummation of the Adviser Transition and the Sub-Adviser Appointment, the Fund will continue to be managed in line with the Guardian Fundamental Global Equity Strategy by the GuardCap’s global equity team, consisting of the four investment managers who currently provide such services in the Participating Affiliate Arrangement: Michael Boyd, Giles Warren, Orlaith O’Connor, and Bojana Bidovec. Michael Boyd and Giles Warren currently serve as the Fund’s portfolio managers and are primarily responsible for selecting the securities to be purchased and sold for the Fund and the timing of those transactions, subject to the authority of Alta’s Investment Committee, which has supervisory responsibility over GuardCap and the portfolio managers with respect to the services that they provide to the Fund, and has final decision-making authority on purchases and sales of securities recommended by the Fund’s portfolio managers.
Following the Adviser Transition and the Sub-Adviser Appointment, GuardCap will be primarily responsible for providing investment management services to the Fund, subject to Guardian’s ultimate oversight. Michael Boyd and Giles Warren will continue to serve as the Fund’s portfolio managers and will have primary responsibility for selecting the securities to be purchased and sold for the Fund and the timing of those transactions. GuardCap will also provide compliance services and provide regular compliance attestations to Guardian for compliance oversight purposes. Guardian will serve in an oversight role and its compliance, trading, legal, and finance teams will provide support to the Fund for operating and regulatory activities. Guardian will also be responsible for website maintenance and reporting activities.
| Q20. | How will the Adviser Transition and Sub-Adviser Appointment affect the fees and expenses I pay as a shareholder of the Fund? |
| A. | The fees and expenses that you pay as a shareholder of the Fund will not change as a result of the Adviser Transition. The approval of the New Guardian Advisory Agreement and the New Sub-Advisory Agreement will not result in any increase in the Fund’s advisory fee and no Fund will bear any portion of the costs associated with the Adviser Transition or Sub-Adviser Appointment or any costs and expenses associated with this proxy. |
| Q21. | Are there any material differences between the Current Alta Advisory Agreement and the New Guardian Advisory Agreement? |
| A. | No. There are no material differences between the Current Alta Advisory Agreement and the New Guardian Advisory Agreement. Non-material changes include revisions necessary to: (1) change the signatories to the agreement by adding Guardian and removing Alta as the adviser, (2) change the effective date of the agreement, and (3) delete certain sections from the Current Alta Advisory Agreement that deal with the Participating Affiliate Arrangement. Both the New Guardian Advisory Agreement and Current Alta Advisory Agreement contain identical fee structures. The advisory fee payable under the New Guardian Advisory Agreement will remain at an annual rate of 0.80% of the Fund’s average daily net assets. A copy of the New Guardian Advisory Agreement is attached as Exhibit A to the Proxy. |
| Q22. | Are there any material differences between the Prior Form of Sub-Advisory Agreement and the New Sub-Advisory Agreement? |
| A. | No. There are no material differences between the Prior Form of Sub-Advisory Agreement, which the Board conditionally approved prior to the Fund’s inception, and the New Sub-Advisory Agreement. Non-material changes include revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, (3) correct a non-material typographical error, and (4) update certain contact information. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement contain identical fee structures. The sub-advisory fee payable under the New Sub-Advisory Agreement will remain at an annual rate of 0.60% of the Fund’s average daily net assets. As discussed above, the Prior Form of Sub-Advisory Agreement was never executed or implemented, as the sub-advisory model has never been utilized by the Fund with Alta as the Fund’s adviser. A copy of the New Sub-Advisory Agreement is attached as Exhibit B to the Proxy. |
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| Q23. | Are there any material differences between the Fund’s Current Alta Operating Expenses Limitation Agreement and the New Guardian Operating Expenses Limitation Agreement? |
| A. | No. There are no differences between the Fund’s current operating expenses limitation agreement with Alta (the “Current OELA”) and the Fund’s new operating expenses limitation agreement with Guardian (the “New OELA”). The Board approved the New OELA, which is set to become effective concurrently with the execution of the New Guardian Advisory Agreement, at a meeting of the Board held on June 16 and 17, 2021. The contractual expense ratio caps that now apply to the Fund under the Current OELA will apply identically to the Fund under the New OELA. Specifically, Guardian has contractually agreed to waive its management fee and/or reimburse expenses so that total annual operating expenses for the Fund (excluding (i) interest; (ii) taxes; (iii) brokerage fees and commissions; (iv) other extraordinary expenses not incurred in the ordinary course of the Fund’s business; (v) dividend expense on short sales; and (vi) indirect expenses such as acquired fund fees and expenses) do not exceed 0.99% of the Fund’s average daily net assets through January 31, 2023. A copy of the New OELA is attached as Exhibit C to the Proxy. |
| Q24. | How does the Trust’s Board of Trustees recommend that I vote? |
| A. | After careful consideration, the Board, including its Independent Trustees voting separately, having determined that the proposals are in the best interest of the Fund and its Shareholders, unanimously recommends that shareholders vote to APPROVE the New Guardian Advisory Agreement in Proposal 1 and the New Sub-Advisory Agreement referenced in Proposal 2. |
| Q25. | Who is eligible to vote? |
| A. | Any person who owns shares of the Fund on the “Record Date,” which is August [24], 2021 (even if that person subsequently redeems those shares), is eligible to vote on the Proposals. |
| Q26. | Who is paying for this proxy mailing and for the other expenses and solicitation costs associated with the Meeting? |
| A. | The expenses incurred in connection with preparing the Proxy Statement and its enclosures and all related legal and solicitation expenses will be paid by Guardian. Guardian will not seek reimbursement from the Fund for any costs associated with the proxy. |
Q27. What vote is required to approve the Proposals?
| A. | Under the Trust’s Agreement and Declaration of Trust (“Declaration of Trust”), a majority of Shares (as defined by the “Declaration of Trust”) entitled to vote constitutes a quorum for the transaction of business at a Shareholders’ meeting, except that where any provision of law or of the Declaration of Trust permits or requires that holders of any Series or Class to vote as a Series or Class, then a majority of the aggregate number of Shares of that Series or Class who are entitled to vote is necessary to constitute a quorum for the transaction of business by that Series or Class. In this case, because the Fund has only a single share class, a majority of the aggregate number of Shares of the Fund that are entitled to vote at the Meeting will constitute a quorum for the Fund. |
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The proposal to approve the New Guardian Advisory Agreement and the proposal to approve the New Sub-Advisory Agreement both require the vote of the “majority of the outstanding voting securities” of the Fund. Under the 1940 Act and the terms of both the Current Alta Advisory Agreement and the New Guardian Advisory Agreement , a “majority of the outstanding voting securities” is defined as the lesser of: (1) 67% or more of the voting securities of the Fund entitled to vote present in person or by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities entitled to vote thereon are present in person or represented by proxy; or (2) more than 50% of the outstanding voting securities of the Fund entitled to vote thereon.
For purposes of determining the presence of a quorum and counting votes on the matters presented, Shares of the Funds represented by abstentions will be counted as present, but not as votes cast, at the Special Meeting. Under the Declaration of Trust, as amended, and the requirements of the 1940 Act, the affirmative vote necessary to approve each of the proposals may be determined with reference to a percentage of votes entitled to vote at the Special Meeting, which would have the effect of treating abstentions as if they were votes against the proposal. It is the Trust’s understanding that because each of the proposals presented for approval at the meeting is a “non-routine” matter, broker-dealers and other intermediaries will not have discretionary authority to vote on the matters expected to be presented at the Special Meeting in the absence of specific authorization from their customers. Consequently, there are unlikely to be any “broker non-votes” at the Special Meeting. “Broker non-votes” would otherwise have the same effect as abstentions (that is, they could be counted as present for purposes of determining the presence of a quorum and would treated as if they were votes against the proposal).
A majority of the votes cast at the Meeting, either in person or by proxy, is required to approve any adjournment(s) of the Meeting, even if the number of votes cast is fewer than the number required for a quorum.
| Q28. | How can I cast my vote? |
| A. | You may vote in any of four ways |
| • | By telephone, with a toll-free call to the phone number indicated on the Proxy Card. |
| • | By internet, by accessing the website shown on your Proxy Card and following the online instructions. |
| • | By mailing in your Proxy Card. If you properly sign and date the accompanying Proxy Card, and the Fund receives it in time for the Meeting, the persons named as proxies on the Proxy Card will vote the shares in the manner that you specified. If you sign the Proxy Card, but do not make specific choices, the shares represented by such proxy will be voted as recommended by the Board. |
| • | In person at the meeting in Cincinnati, OH on October 14, 2021. |
We encourage you to vote via telephone or over the internet using the control number on your Proxy Card and following the simple instructions. These methods result in the most efficient means of transmitting your vote and reduce the need for the Fund to conduct telephone solicitations and/or follow up mailings. If for any reasons you would like to change your previous vote or revoke your proxy, you may vote again using any of the methods described above.
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You have the power to revoke your proxy prior to its exercise by (1) mail addressed to Ultimus Fund Solutions, LLC, Attn: Secretary, 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246, (2) in person at the meeting, or (3) by executing a superseding proxy or by submitting a notice of revocation to the Fund. Mere attendance at the Meeting will not revoke a proxy; a Shareholder present at the Meeting must withdraw a previously submitted proxy and vote in person.
| Q29. | What is the difference between holding shares as a shareholder of record and as a beneficial owner? |
| A. | Shareholders of Record. You are a shareholder of record if at the close of business on the Record Date your shares were registered directly in your name with the Fund’s transfer agent, Ultimus Fund Solutions, LLC. |
Beneficial Owner. You are a beneficial owner if at the close of business on the Record Date your shares were held by a bank, brokerage firm or other nominee and not in your name. Being a beneficial owner means that your shares are held in “street name.” As the beneficial owner, you have the right to direct your bank, brokerage firm or other nominee how to vote your shares by following the voting instructions your bank, brokerage firm or other nominee provides. If you do not provide your bank, brokerage firm or other nominee with instructions on how to vote your shares, your bank, brokerage firm or other nominee will not be able to vote your shares with respect to any of the proposals. Please see “What if I do not specify how my shares are to be voted?” for additional information.
| Q30. | What if I do not specify how my shares are to be voted? |
| A. | Shareholders of Record. If you are a shareholder of record and you submit a proxy, but you do not provide voting instructions, your shares will be voted: |
| • | Proposal 1 – FOR the approval of the New Guardian Advisory Agreement between the Trust and Guardian as it relates to the Fund; and |
| • | Proposal 2 – FOR the approval of the New Sub-Advisory Agreement between Guardian and GuardCap as it relates to the Fund. |
| • | In the discretion of the named proxies regarding any other matters properly presented for a vote at the Meeting. |
Beneficial Owners. If you are a beneficial owner and you do not provide the bank, brokerage firm or other nominee that holds your shares with voting instructions, the bank, brokerage firm or other nominee will determine if it has the discretionary authority to vote on the particular matter. If you do not provide voting instructions to your bank, brokerage firm or other nominee, and your bank, brokerage firm or other nominee does not have discretionary voting authority, your bank, brokerage firm or other nominee will not vote your shares on Proposals 1 or 2 and your shares will not be counted as present for purposes of meeting the quorum requirement.
| Q31. | How do I find out the results of the voting at the Meeting? |
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| A. | Preliminary voting results will be announced at the Meeting. Final voting results will be included in the semi-annual report of the Fund for the period ended [March 31, 2022] which will be sent to Shareholders on or before [______]. |
| Q32. | Whom should I call if I have any questions? |
| A. | If you are a direct shareholder have any questions about the Meeting, voting or your ownership of the Fund’s shares, please contact: |
Ultimus Fund Solutions, LLC
Shareholder Services
225 Pictoria Drive, Suite 450,
Cincinnati, Ohio 45246
1-800-957-0681
If you are a beneficial owner of Fund shares and own your shares through an intermediary, please contact your intermediary with any questions.
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IMPORTANT INFORMATION FOR SHAREHOLDERS
Guardian Capital Fundamental Global Equity Fund
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held October 14, 2021
Notice is hereby given that Capitol Series Trust (the “Trust”) will hold a special meeting of shareholders (the “Meeting”) of the Guardian Capital Fundamental Global Equity Fund (the “Fund”) on October [14], 2021, at the offices of the Fund’s Administrator, Ultimus Fund Solutions, LLC, 225 Pictoria Drive, Suite 450, Cincinnati, Ohio, 45246 at [___ a.m./p.m.], Eastern Time.
The purpose of the Meeting is to consider and act upon the following proposals (each a “Proposal” and together the “Proposals”) and to transact such other business as may properly come before the Meeting or any adjournments thereof.
| Proposal | Description |
| 1 | To approve the New Guardian Advisory Agreement between Guardian Capital LP (“Guardian”) and the Trust as it relates to the Guardian Capital Fundamental Global Equity Fund. |
| 2 | To approve the New Sub-Advisory Agreement between Guardian and GuardCap Asset Management Limited (“GuardCap”) as it relates to the Guardian Capital Fundamental Global Equity Fund. |
| Other Business | To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
The Board of Trustees of the Trust unanimously recommends that you APPROVE Proposals 1 & 2. Shareholders of record of the Fund at the close of business on August 24, 2021 (the “Record Date”), are entitled to notice of and to vote at the Meeting and any adjournment(s) or postponements thereof. The Notice of Meeting of Shareholders, Proxy Statement, and Proxy Card are being mailed on or about [_______], 2021, to such Shareholders of record.
| By Order of the Board of Trustees, | |
| /s/ Matthew Miller | |
| President of the Trust | |
| September [____], 2021 |
IMPORTANT – WE NEED YOUR PROXY VOTE IMMEDIATELY
| Shareholders are invited to attend the Meeting in person. Any shareholder who does not expect to attend the Meeting in person is urged to vote using the touch-tone telephone voting and internet voting instructions found on the enclosed Proxy Card. Alternatively, you may cast your votes on the enclosed Proxy Card, date and sign it, and return it in the envelope provided, which needs no postage if mailed in the United States. To avoid unnecessary expense, we ask your cooperation in responding promptly, no matter how large or small your holdings may be. |
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Guardian Capital Fundamental Global Equity Fund
PROXY STATEMENT
c/o Ultimus Fund Solutions
225 Pictoria Drive, Suite 450,
Cincinnati, Ohio, 45246
SPECIAL MEETING OF SHAREHOLDERS
October 14, 2021
Introduction
This Proxy Statement is being provided to you on behalf of the Board of Trustees (the “Board”) of Capitol Series Trust (the “Trust”) in connection with the solicitation of proxies to be used at the special meeting of Shareholders of the Guardian Capital Fundamental Global Equity Fund (the “Fund”) to be held on October 14, 2021 (the “Meeting”). The purpose of the Meeting is to seek approval from the Shareholders of the Fund of: (1) a new investment advisory agreement (the “New Guardian Advisory Agreement”) between the Trust, as it relates to the Fund, and Guardian Capital LP (“Guardian”), and (2) a new sub-advisory agreement between Guardian and GuardCap Asset Management Limited (“GuardCap”), as it relates to the Fund.
Shareholders of record of the Fund at the close of business on the record date, established as of August 24, 2021 (the “Record Date”), are entitled to notice of, and to vote at, the Meeting. We anticipate that the Notice of Meeting of Shareholders, this Proxy Statement, and the Proxy Card (collectively, the “proxy materials”) will be mailed to shareholders beginning on or about September [___], 2021.
Important Notice Regarding the Availability of Proxy
Materials
for the Shareholder Meeting to be Held on October 14, 2021
The Notice of Meeting, Proxy Statement and Proxy Card
are available at https //______________________
Please read the Proxy Statement before voting on the proposals. If you need additional copies of this Proxy Statement or Proxy Card, please contact [AST] at [___]-[___]-[____]. Representatives are available to answer your call Monday through Friday, __. __ a.m. to __.__ p.m. and Saturday __. __ a.m. to __.__ p.m. Eastern Time. Additional copies of this Proxy Statement will be delivered to you promptly upon request.
For a free copy of the Fund’s annual report for the fiscal year ended September 30, 2020, or the most recent semi-annual report, please contact the Trust at 1-800-957-0681 or write to the Guardian Capital Fundamental Global Equity Fund, c/o Ultimus Fund Solutions, LLC, 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246.
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Proxy Statement
Purpose of the Meeting
Shareholders of Fund are being asked to: (1) approve a new investment advisory agreement (the “New Guardian Advisory Agreement”) between the Trust, as it relates to the Fund, and Guardian Capital LP (“Guardian”); (2) approve a new sub-advisory agreement between Guardian and GuardCap Asset Management Limited (“GuardCap”), as it relates to the Fund; and (3) transact such other business as may properly come before the meeting or any adjournments or postponements thereof.
Information About the Fund
The Fund is a series of the Trust. The Trust is an open-end management investment company organized as an Ohio Business Trust. Alta, located at 6440 South Wasatch Boulevard, Suite 260 Salt Lake City, Utah 84121, is the Fund’s Investment Adviser. The Fund’s administrator, transfer agent, and fund accountant is Ultimus Fund Solutions, LLC (“Ultimus”) located at 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. Ultimus Fund Distributors, LLC (the “Distributor”), also located at 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246, is the exclusive agent for distribution of shares of the Fund. The Distributor is a wholly-owned subsidiary of Ultimus. Shares of the Funds are offered to the public on a continuous basis.
Information About Guardian
Founded in 1962, Guardian is an independent, institutional investment firm. Guardian is a wholly-owned subsidiary of Guardian Capital Group Limited, a publicly listed company that trades on the Toronto Stock Exchange (TSE:GCG) (“Guardian Ltd.”). Guardian Ltd. is one of Canada’s largest and most established independent publicly listed financial services companies. Through a voting share structure (TSX: GCG), insiders have a 57.4% interest in Guardian Capital Group Limited and those associated with the founding of the company own an additional 20.7% (as of December 31, 2020). The remainder is owned by the public. Through the non-voting share structure (TSX: GCG.A), insiders have a 30.9% interest in Guardian Ltd. The remainder of the non-voting shares are owned by the public. There have been no material changes in the ownership structure over the past five years.
Guardian offers its investment management expertise in equity management and fixed-income management primarily to institutions, including defined benefit and defined contribution pension funds, insurance companies, foundations, endowments, charitable organizations and third-party mutual funds. Guardian is registered as a Portfolio Manager in all provinces of Canada and is an SEC-registered investment adviser. As of June 30, 2021, Guardian had assets under management of approximately $51.641 billion CAD ($41.703 billion USD). Guardian is also the sponsor of a 45 fund Canadian mutual fund family with AUM of $10.378 billion CAD ($8.381 billion USD) as of June 30, 2021, and serves as the investment adviser for each fund in that fund family.
Guardian’s address is 199 Bay Street, Suite 3100, P.O. Box 201, Toronto, Ontario M5L 1E8.
Information About GuardCap
GuardCap is a private limited company established in February 2003, with its principal place of business in London, United Kingdom, to provide equity investment management services to institutional, wrap and model-based clients. The ultimate holding company of GuardCap is Guardian Capital Group Limited, a Canadian company, the shares of which are listed on the Toronto Stock Exchange. GuardCap is wholly owned by Guardian Capital LP (a wholly owned subsidiary of Guardian Capital Group Limited) which, together with its predecessor firms, has been managing institutional client assets since 1962. GuardCap, with its principal place of business in the United Kingdom, is registered with the SEC as a foreign adviser to facilitate the offering of its investment management services in the U.S. GuardCap is also authorized and regulated by the Financial Conduct Authority (“FCA”) of the United Kingdom.
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GuardCap is a specialist investment firm focused solely on managing concentrated, bottom-up, equity strategies constructed on an “index-agnostic” basis for institutional, wrap and model-based platform clients. GuardCap provides fee-based investment services to global investment clients, comprised of funds (pooled funds and mutual funds), pension and profit-sharing plans, charitable organizations, and other institutional investors. GuardCap offers long only Fundamental Global Equity and Fundamental Emerging Markets Equity strategies. GuardCap’s investment strategies seek to exploit a pervasive, ongoing anomaly in the way equity markets work: that markets focus primarily on the short-term future. Markets sometimes do not attribute sufficient value to the longer-term future earnings and cash flows of sustainably growing companies. GuardCap’s investment strategies emphasize long-term thinking, long-term forecasting and long holding periods, applied through a fundamental, company selection-based process designed to create concentrated portfolios of companies. As of June 30, 2021, GuardCap had assets under management of approximately $15.389 billion CAD ($12.369 billion USD).
GuardCap’s address is 11 Charles Street, 6th Floor, London, England SW1Y 4NS.
Current Alta Advisory Agreement
Pursuant to an agreement with the Trust, Alta Capital Management, LLC (“Alta”) currently serves as the investment adviser to the Fund (the “Current Alta Advisory Agreement”). Alta has served as the Adviser to the Fund since its inception, and is generally responsible for providing the day-to-day management of the Fund’s portfolio under the general oversight of the Trust’s Board. Alta provides those services pursuant to the Current Alta Advisory Agreement, which became effective with respect to the Fund on December 19, 2019.
At a quarterly meeting of the Trust’s Board held on December 11 and 12, 2019, the Board, including all of the Trustees who are not “interested persons” of the Trust as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Independent Trustees”), considered and approved for an initial two-year period the following advisory agreements and related arrangements with respect to the Fund:
| ● | The Current Alta Advisory Agreement between the Trust and Alta; |
| ● | A “participating affiliate” fund management structure pursuant to a Participating Affiliate Memorandum of Understanding among Alta, Guardian and GuardCap, each an affiliated entity under the common control of Guardian Capital Group Limited; and |
| ● |
A sub-advisory agreement between Alta and GuardCap (the “Prior Form of Sub-Advisory Agreement”) to become effective at such time that GuardCap’s status as a U.S. registered investment adviser is approved by the U.S. Securities and Exchange Commission (the “SEC”), and upon appropriate notification to the Board by Alta that it desires to proceed with effectuating the sub-advisory agreement.
|
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The Adviser Transition
Alta is an indirect, majority-owned subsidiary of Guardian. As part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business, Guardian wishes to take over as the investment adviser of the Fund and to assume responsibility for providing the advisory services that are now provided to the Fund by Alta (the “Adviser Transition”). To effectuate this change, the Trust will need to enter into the New Guardian Advisory Agreement with Guardian, which will appoint Guardian as the Fund’s adviser. The New Guardian Advisory Agreement must be approved by the Trust’s Board (in its Independent Trustee’s voting separately) and by fund shareholders to become effective.
At a meeting of the Board held on June 16 and 17, 2021, the Board and the Independent Trustees, after careful consideration, unanimously voted, subject to shareholder approval, to appoint Guardian to serve as the investment adviser of the Fund, replacing Alta, and to assume responsibility for providing investment advisory services to the Fund. In connection with Guardian’s appointment, to serve as adviser to the Fund, the Board and the Independent Trustees voting separately also unanimously approved a form of investment advisory agreement between Guardian and the Trust (the “New Guardian Advisory Agreement”),subject to shareholder approval. The terms of the New Guardian Advisory Agreement differ from the terms of the Current Alta Advisory Agreement only with respect to revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser; (2) change the effective date; and (3) delete certain sections from the Current Alta Advisory Agreement that relate to the Participating Affiliate Arrangement (discussed further below). A copy of the Form of the New Guardian Advisory Agreement is attached as Exhibit A.
The Participating Affiliate Arrangement
Alta has historically managed the Fund through a “participating affiliate” arrangement pursuant to which Alta has utilized the resources of GuardCap to manage the Fund’s investments. Alta, Guardian, and GuardCap are affiliated entities due to the fact that they are under the under the common control of Guardian Capital Group Limited. Under the terms of a Participating Affiliate Memorandum of Understanding between and among Alta, Guardian, and GuardCap, GuardCap is considered to be a “Participating Affiliate” of Alta Capital, as that term is used in relief granted by the staff of the U.S. Securities and Exchange Commission (“SEC”), allowing U.S.-registered advisers to use investment advisory and trading resources of unregistered advisory affiliates, subject to the regulatory supervision of the registered adviser (the “Participating Affiliate Arrangement”).
This Participating Affiliate Arrangement allows the Fund to benefit from the investment advisory and trading expertise at GuardCap. For example, the current portfolio managers of the Fund—Michael Boyd and Giles Warren—are both employed by GuardCap. As portfolio Managers, Mr. Boyd and Mr. Warren are primarily responsible for recommending the securities to be purchased and sold for the Fund and the timing of those transactions. Mr. Boyd and Mr. Warren are assisted in their portfolio management of the Fund by an Investment Committee of the Adviser comprised of Michael Tempest, Chief Investment Officer of Alta, Melanie Peche, Portfolio Manager of Alta, Tyler A. Partridge, Portfolio Manager of Alta and Casey D. Nelsen, CFA®, Portfolio Manager of Alta. The Investment Committee has supervisory responsibility over GuardCap and the Portfolio Managers with respect to the services that they provide to the Fund, and has final decision-making authority on purchases and sales of securities recommended by the Fund’s Portfolio Managers.
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This Participating Affiliate Arrangement was initially utilized because GuardCap’s pending application with the SEC to become a registered as an investment adviser had not yet been approved by the SEC when the Fund was launched in December, 2019. However, based on Alta’s representation that it might wish to utilize the sub-advisory fund management structure and employ GuardCap as a sub-adviser to the Fund once GuardCap became successfully registered as an adviser with the SEC, the Board and its Independent Trustees, at the same Board meeting that they approved Alta as the Fund’s adviser utilizing the Participating Affiliate arrangement with GuardCap, also approved GuardCap as a sub-adviser to the Fund, subject to the following contingencies: (1) GuardCap’s pending application to register as an investment adviser with the SEC was approved and declared effective; (2) Alta Capital advised the Trust’s Board that it wishes to convert to the sub-advisory fund management structure; (3) the Board approved a resolution to convert to the sub-advisory fund management structure; and (4) the total advisory and sub-advisory fees paid in the sub-advisory fund management structure did not exceed the advisory fee paid to Alta in the Participating Affiliate Arrangement. Under the Form of sub-advisory agreement that the Board approved (the “Prior Form of Sub-Advisory Agreement”), the Adviser would be paid an annual fee of 0.80% of the Fund’s average daily net assets, out of which it would pay 0.60% of the Fund’s average daily net assets to the sub-adviser.
The Sub-Adviser Appointment
Effective December 7, 2020, GuardCap became registered as an investment adviser with the SEC, which meant that the Participating Affiliate Arrangement was no longer necessary and that GuardCap could be appointed as a Sub-Adviser to the Fund. To date, however, Alta and GuardCap have continued to manage the Fund under the Participating Affiliate Arrangement and have not sought to officially appoint GuardCap as a Sub-Adviser to the Fund. Consequently, the Prior Form of Sub-Advisory Agreement that the Board approved in December, 2019 has not become operational. The previously approved Prior Form of Sub-Advisory Agreement cannot be utilized with Guardian as the Fund’s adviser because it lists Alta as the adviser to the Fund rather than Guardian, and by its terms terminates when the Current Alta Advisory Agreement with Alta terminates.
At a meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, also unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to appoint GuardCap to serve as the investment sub-adviser of the Fund and to assume responsibility for providing investment sub-advisory services to the Fund (the “Sub-Adviser Appointment”), and to approve the New Sub-Advisory Agreement. The New Sub-Advisory must also be approved by Shareholders to become effective.
The terms of the New Sub-Advisory Agreement differ from the terms of the Prior Form of Sub-Advisory Agreement between the Fund and Alta only with respect to the revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser; (2) change the effective date; (3) correct a non-material typographical error; and (4) update certain contact information. A copy of the Form of the New Sub-Advisory Agreement is attached as Exhibit B.
Impact of the Adviser Transition on the Fund’s Current Alta Advisory Agreement
Before Guardian can take over as the investment adviser of the Fund and assume responsibility for providing the advisory services that are now provided to the Fund by Alta, it will be required to enter into the New Guardian Advisory Agreement with the Trust. The 1940 Act requires that a New Guardian Advisory Agreement be approved by both a majority of an investment company’s independent trustees and “a majority of the outstanding voting securities,” as such term is defined under the 1940 Act. Therefore, Shareholders of the Fund are being asked to approve the New Guardian Advisory Agreement with Guardian. The Current Alta Advisory Agreement will terminate upon the execution of the New Guardian Advisory Agreement.
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The Adviser Transition will not be consummated unless and until the Shareholders of the Fund have approved the New Guardian Advisory Agreement. And the New Sub-Advisory Agreement. If such approvals are not obtained, the Board will take such actions as it deems necessary and appropriate and in the best interests of the Shareholders of the Fund.
Impact of the Sub-Adviser Appointment on the Fund’s Prior Form of Sub-Advisory Agreement
Before GuardCap can take over as the investment sub-adviser of the Fund and assume responsibility for providing sub-advisory services, it will be required to enter into the New Sub-Advisory Agreement with Guardian. The 1940 Act requires that a new sub-advisory agreement be approved by both a majority of an investment company’s Independent Trustees and “a majority of the outstanding voting securities,” as that term is defined under the 1940 Act. Therefore, Shareholders of the Fund are being asked to approve the New Sub-Advisory Agreement.
GuardCap has historically provided services to the Fund under the Participating Affiliate Arrangement and has not previously entered in a sub-advisory agreement with the Fund. Consequently, there is no current sub-advisory agreement in effect that will need to be terminated upon the execution of the New Sub-Advisory Agreement. The Prior Form of Sub-Advisory Agreement will simply be disregarded.
The Sub-Adviser Appointment will not be consummated unless and until the Shareholders of the Fund have approved the New Guardian Advisory Agreement and the New Sub-Advisory Agreement. If such approvals are not obtained, the Board will take such actions as it deems necessary and appropriate in the best interests of the Shareholders of the Fund.
Benefits of the Adviser Transition and Sub-Adviser Appointment
In its deliberations as to whether to approve the New Guardian Advisory Agreement and the New Sub-advisory Agreement, the Board considered, among other things, Guardian’s and GuardCap’s qualifications, their philosophy of management, the historical performance of the Fund and the Fundamental Global Equity Strategy, and their operational methods, and considered the following potential benefits to the Fund and its Shareholders:
| • | The Fund may benefit from Guardian’s and GuardCap’s extensive investment expertise, especially with respect to Guardian’s Fundamental Global Equity Strategy. |
| • | There will be no change in the aggregate fees payable by the Fund under the New Guardian Advisory Agreement and the New Sub-Advisory Agreement, nor is it expected that the Fund will bear any increase in the aggregate amount of other fees or expenses as a result of the Adviser Transition or the Sub-Adviser Appointment. |
| • | The Fund may benefit from a New Guardian Operating Expenses Limitation Agreement between Guardian and the Fund (“New OELA”), to be effective upon consummation of the Adviser Transition, on substantially the same terms as the current expense limitation agreement between the Fund and Alta (“Current OELA”). The expense cap in the New OELA mirrors that of the Fund’s current expense limitation agreement and therefore the total fees and expenses borne by the Fund are expected to remain the same. |
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| • | Guardian (and not the Fund) is obligated to pay the Sub-Advisory Fee to GuardCap in the New Sub-Advisory Agreement. |
| • | Guardian is well-capitalized and well insured and is able to attract and retain personnel necessary to provide quality investment advisory services to the Fund. |
| • | GuardCap’s global equity team’s extensive investment experience. |
Information Concerning the Ownership of Share of the Fund by Management, Trustees, and Principal Shareholders
Only shareholders of record at the close of business on August [24], 2021 (the “Record Date”), will be entitled to notice of, and to vote at, the Meeting. The information discussed below relates to beneficial ownership of shares in the Fund as of the Record Date by: (1) Trustees and Officers of the of the Fund; (2) Representatives of Fund Management (including the Adviser and Sub-Adviser); (3) shareholders beneficially owning more than 25% of a Fund’s shares (“Control Persons”); and (4) shareholders owning more than 5% of a Fund shares (“Principal Shareholders”).
In situations where representatives of Fund management, including the Adviser or Sub-Adviser, beneficially own a large percentage of Fund shares, there is the potential that such owners may influence or even control the outcome of any proposal submitted to Fund Shareholders for approval. In such situations, both the Trustees and the Adviser must evaluate whether there are any conflicts of interest between the representatives of Fund Management and Fund shareholders with respect to the proposals under consideration, and if so, disclose them. With respect to the proposals under consideration, because their approval will not result in any change to the services that the Adviser will provide to the Fund(s), the portfolio managers involved in providing such services, and the fees that the Adviser will be paid for such services, the Trustees and the Adviser both are of the view that no such material conflict of interest exists.
From time to time, certain shareholders may own a large percentage of the shares of the Fund. Accordingly, those shareholders may be able to greatly affect (if not determine) the outcome of a shareholder vote. “Control” for this purpose is the ownership of more than 25% or more of a Fund’s voting securities. Under Section 2(a) (9) of the 1940 Act, the beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates a presumption of control of the Fund. A controlling Shareholder could control the outcome of any proposal submitted to the Shareholders for approval.
Shareholders who beneficially own 5% or more of the voting securities of a Fund are characterized by SEC Rules as Principal Shareholders. Such Shareholders also may also influence the outcome of any proposal submitted to the Shareholders for approval.
Information concerning beneficial ownership of fund shares in each of these categories for the Fund is included in Exhibit D.
Voting Information
Who is Eligible to Vote? Shareholders of record of the Fund as of the close of business on the Record Date, are entitled to vote on the proposals at the Meeting and any adjournments thereof. Each whole share is entitled to one vote on each matter on which it is entitled to vote, and each fractional share is entitled to a proportionate fractional vote.
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Quorum. In order for a vote on each Proposal to occur at the Meeting, there must exist a quorum of shareholders of the Fund. Under the Trust’s Agreement and Declaration of Trust (“Declaration of Trust”), a majority of Shares (as defined by the “Declaration of Trust”) entitled to vote constitutes a quorum for the transaction of business at a Shareholders’ meeting. With respect to the Fund, the presence at the Meeting, in person or by proxy, of shareholders representing at least a majority of the Fund’s shares outstanding and entitled to vote as of the Record Date constitutes a quorum for the Meeting. For purposes of determining the presence of a quorum, abstentions, and broker “non-votes” will be counted as present. Broker “non-votes” occur when a nominee holding shares for a beneficial owner does not vote on a proposal because the nominee does not have discretionary voting powers with respect to that proposal and has not received instructions from the beneficial owner.
In the event the necessary quorum to transact business or the vote required to approve the Proposal is not obtained at the Meeting, the persons named as proxies may propose one or more adjournments of the Meeting with respect to the Proposal in accordance with applicable law to permit further solicitation of proxies. Any adjournment of the Meeting will require the affirmative vote of the holders of a simple majority of the Fund’s shares cast at the Meeting, even if the number of votes cast is fewer than the number required for a quorum, and any adjournment with respect to the Proposals will require the affirmative vote of the holders of a simple majority of the Fund’s shares entitled to vote on the Proposal cast at the Meeting. The persons named as proxies will vote for or against any adjournment in their discretion.
Vote Required to Pass the Proposals. As provided under the 1940 Act and required by the Current Management Agreement, approval of Proposals 1 and 2 will require the vote of a majority of the outstanding voting securities of the Fund. In accordance with the 1940 Act, a “majority of the outstanding voting securities” of the Fund means the lesser of (a) 67% or more of the shares of the Fund present at a shareholder meeting if the owners of more than 50% of the shares of the Fund then outstanding are present in person or by proxy, or (b) more than 50% of the outstanding shares of the Fund entitled to vote at the meeting. Abstentions and broker “non-votes” will have the effect of a “no” vote for purposes of obtaining the requisite approval of the proposal.
Proxies and Voting at the Meeting. Shareholders may use the Proxy Card provided if they are unable to attend the meeting in person or wish to have their shares voted by a proxy even if they do attend the meeting. Any shareholder of the Fund giving a proxy has the power to revoke it prior to its exercise by mail (addressed to the Secretary at the principal executive office of the Trust shown at the beginning of this Proxy Statement), or in person at the meeting, by executing a superseding proxy or by submitting a notice of revocation to the Fund. In addition, although mere attendance at the Meeting will not revoke a proxy, a shareholder present at the Meeting may withdraw a previously submitted proxy and vote in person. To obtain directions on how to attend the Meeting and vote in person, please call [1-800-___-_____].
All properly executed proxies received in time for the Meeting will be voted as specified in the proxy or, if no specification is made, FOR the Proposal referred to in the Proxy Statement and in the discretion of the persons named as proxies on such procedural matters that may properly come before the Meeting. If any other business comes before the Meeting, your shares will be voted at the discretion of the persons named as proxies.
Telephonic Voting. Shareholders may call the toll-free phone number indicated on their Proxy Card to vote their shares. Shareholders will need to enter the control number set forth on their Proxy Card and then will be prompted to answer a series of simple questions. The telephonic procedures are designed to authenticate a shareholder’s identity, to allow shareholders to vote their shares and to confirm that their instructions have been properly recorded.
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Method of Solicitation and Expenses
[AST] has been retained as [proxy solicitor and tabulator]. Guardian will assist in the solicitation of proxies under a contract with [AST]. The solicitation of proxies may occur principally by mail, but proxies may also be solicited by telephone, e-mail or other electronic means, facsimile or personal interview. If instructions are recorded by telephone, the person soliciting the proxies will use procedures designed to authenticate Shareholders’ identities to allow Shareholders to authorize the voting of their shares in accordance with their instructions, and to confirm that a Shareholder’s instructions have been properly recorded.
The cost of preparing, printing and mailing the enclosed Proxy Card and this Proxy Statement, and all other costs incurred in connection with the solicitation of proxies, including any additional solicitation made by letter, telephone, facsimile or telegraph is estimated to be $___________. The cost of solicitation will be borne by Guardian. In addition to the solicitation by mail, officers and employees of Guardian, who will receive no extra compensation for their services, may solicit proxies by telephone, e-mail or other electronic means, letter or facsimile.
The Fund will not bear any expenses in connection with the Adviser Transition or Sub-Adviser Appointment, including any costs of soliciting Shareholder approval. Guardian will not seek reimbursement from the Fund for any costs associated with the proxy.
Shareholder Proposals for Subsequent Meetings
The Fund does not hold annual shareholder meetings except to the extent that such meetings may be required under the 1940 Act or state law. Shareholders who wish to submit proposals for inclusion in the Proxy Statement for a subsequent Shareholder meeting should send their written proposals to the Trust’s Secretary at its principal office within a reasonable time before such meeting. The timely submission of a proposal does not guarantee its inclusion.
Householding
If possible, depending on Shareholder registration and address information, and unless you have otherwise opted out, only one copy of this Proxy Statement will be sent to Shareholders at the same address. However, each Shareholder will receive separate Proxy Cards. If you would like to receive a separate copy of the Proxy Statement, please call [1 - - ]. If you currently receive multiple copies of Proxy Statements or Shareholder reports and would like to request to receive a single copy of documents in the future, please call [1 - - ] or write to the Fund at 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246.
Other Matters to Come Before the Meeting
No business other than the matters described above is expected to come before the Meeting, but should any other matter requiring a vote of Shareholders arise the persons named as proxies will vote thereon in their discretion according to their best judgment in the interests of the Fund and its Shareholders.
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PROPOSAL 1
TO APPROVE THE NEW GUARDIAN ADVISORY AGREEMENT BETWEEN
CAPITOL SERIES TRUST AND Guardian Capital LP AS it relates to the
Guardian Capital Fundamental global equity fund
Background
Pursuant to an agreement with the Capitol Series Trust (the “Trust”), Alta Capital Management, LLC (“Alta”) currently serves as the investment adviser to the Fund (the “Current Alta Advisory Agreement”). Alta is an indirect, majority-owned subsidiary of Guardian Capital LP (“Guardian”). As part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business, Guardian wishes to take over as the investment adviser of the Fund and to assume responsibility for providing the advisory services that are now provided to the Fund by Alta (the “Adviser Transition”).
At a meeting of the Board held on June 16 and 17, 2021, the Board and its Independent Trustees voting separately, after careful consideration, unanimously voted, in the best interest of Fund shareholders and subject to shareholder approval, to appoint Guardian to serve as the investment adviser of the Fund and to assume responsibility for providing the advisory services that Alta currently provides to the Fund (the “Adviser Transition”). To appoint Guardian as adviser to the Fund, the Board and the Independent Trustees also unanimously approved a form of investment advisory agreement between Guardian and the Trust (the “New Guardian Advisory Agreement”). The New Guardian Advisory Agreement must be approved by Shareholders of the Fund to become effective.
The Board, including its Independent Trustees voting separately, has unanimously approved the New Guardian Advisory Agreement and believes it to be in the best interests of the Fund and its Shareholders. Shareholders are being asked to approve the New Guardian Advisory Agreement between the Trust and Guardian with respect to the Fund. The terms and conditions of the New Guardian Advisory Agreement will be substantially similar to all material terms and conditions of the Current Alta Advisory Agreement except for revisions necessary to: (1) change the signatories to the agreement by adding Guardian and removing Alta as the Fund’s Adviser; (2) change the effective date; and (3) delete certain sections from the Current Alta Advisory Agreement that deal with the Participating Affiliate.
The Board approved a change in the Fund’s name from “Guardian Fundamental Global Equity Fund” to the “Guardian Capital Fundamental Global Equity Fund.” This name change became effective as of August 23, 2021, as reflected in supplements to the Fund’s prospectus and SAI filed on July 28, 2021. The Adviser Transition, Sub-Adviser Appointment, and name change will not affect your account with the Fund. You will still own the same number of shares in the Fund that you currently own, and the value of your investment will not change as a result of Guardian taking over as the adviser to the Fund or GuardCap becoming a sub-adviser to the Fund. In addition, the same experienced, high quality portfolio managers will continue managing the Fund without interruption.
The expenses incurred in connection with preparing the Proxy Statement and its enclosures and all related legal and solicitation expenses will be paid by Guardian. Guardian will not seek reimbursement from the Fund for any costs associated with the proxy.
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Summary of the Terms of the Current Alta Advisory Agreement and the New Guardian Advisory Agreement
A copy of the New Guardian Advisory Agreement is attached as Exhibit A. The following description is a summary that discusses all relevant and material terms of that agreement. However, you should refer to Exhibit A for the full text of the New Guardian Advisory Agreement. There are no differences between the terms of the New Guardian Advisory Agreement and the Current Alta Advisory Agreement with respect to services provided by the adviser, and the Agreements are identical with respect to the advisory fees paid to the adviser. There are no material differences between the Current Alta Advisory Agreement and the New Guardian Advisory Agreement. Non-material changes include revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser; (2) change the effective date; and (3) delete certain sections from the Current Alta Advisory Agreement that deal with the Participating Affiliate Arrangement, which are no longer necessary in light of GuardCap becoming an SEC-registered adviser.
Services Rendered by the Adviser to the Funds. Both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement require the adviser (as applicable, Alta under the Current Alta Advisory Agreement and Guardian under the New Guardian Advisory Agreement) (the “Adviser”) to assume all investment duties and have full discretionary power and authority with respect to the investment of the assets of the Fund. Without limiting the generality of the foregoing, both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement require the Adviser, with respect to the assets of each Fund, to: (i) obtain and evaluate such information and advice relating to the economy, securities markets, and securities and other investments as it deems necessary or useful to discharge its duties hereunder; (ii) continuously invest Fund assets in a manner reasonably consistent with the directions and policies set from time to time by the Board and any amendments thereto (“Board Policies”), the Organic Documents, the Prospectus, the Procedures (the Board Policies, the Organic Documents, the Prospectus, and the Procedures, collectively, the “Governing Documents”), and any other written guidelines or restrictions agreed to in writing by the Trust and the Adviser with respect to the Fund that are not inconsistent with the Governing Documents (the “Adviser Guidelines”), each as promptly provided to the Adviser by the Trust; (iii) determine the securities and other investments to be purchased, sold or otherwise disposed of and the timing of such purchases, sales and dispositions; (iv) vote all proxies for securities owned by the Fund and exercise all other voting rights with respect to such securities in accordance with the proxy voting policies and procedures approved by the Board; (vi) promptly issue settlement instructions to custodians designated by the Trust on behalf of the Fund; (vii) evaluate the credit worthiness of securities dealers, banks and other entities with which the Trust, on behalf of the Fund, may engage in repurchase agreements and monitor the status of such agreements; and (viii) take such further action, including, the placing of purchase and sale orders, selecting broker-dealers to execute such orders on behalf of the Fund, negotiating commission rates to be paid to broker-dealers, opening and maintaining trading accounts in the name of the Fund, and executing for each Fund, as its agent and attorney-in-fact, standard institutional customer agreements with broker-dealers, each as the Adviser shall deem necessary or appropriate, in its sole discretion, to carry out its duties under the Agreement.
Advisory Fee. Both the New Guardian Advisory Agreement and Current Alta Advisory Agreement contain identical fee structures. Both agreements provide that the Adviser shall be entitled to receive a contractual advisory fee from the Fund equal to an annual rate of 0.80% of the Fund’s average daily net assets.
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Duration and Termination. Both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement provide that they will become effective with respect to the Fund as of the date first written in the agreement after the requisite approval of the Independent Trustees of the Board and a vote of a majority of the Fund’s outstanding voting securities if required by the 1940 Act or applicable staff interpretations thereof. Both agreements provide that they shall remain in effect for the Fund for two years from the effective date and thereafter for successive periods of one year, subject to annual approval by the Board’s Independent Trustees or Shareholders as required by the 1940 Act. Both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement also provide, however, that if the continuation of the agreement is not approved, the Adviser may continue to render to that Fund the services described in the Advisory Agreement in the manner and to the extent permitted by applicable law.
Both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement provide that the Advisory Agreement may be terminated immediately by the Trust with respect to the Fund if the Board, in its reasonable discretion and having due regard to the protection of investors and to the effectuation of the policies declared in section 1(b) of the 1940 Act, find that the services being rendered by the Adviser under the agreement fail in a material way to provide responsible management to the Fund as reasonably expected by an investment adviser, as defined in the Advisers Act. In such circumstances, the Adviser is given the opportunity, within ten (10) days of receipt of a written notice describing any such failure and the reasons therefor in reasonable detail, to cure the failure that is the subject of such notice.
Both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement also permit the termination of the agreement by either party at any time by written notice of at least 60 days to the other party. Action by the Trust to terminate the Agreement may be taken either (i) by vote of a majority of its Independent Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Under both the Current Alta Advisory Agreement and the New Guardian Advisory Agreement, termination of the Agreement by either party pursuant to the referenced contractual provisions is not subject to the payment of any penalty. Finally, both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement provide that the Advisory Agreement shall terminate immediately upon its assignment.
Payment of Expenses. Under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, the Adviser is responsible for paying its own expenses in connection with rendering the services it is required to provide under the agreement. In addition, the Adviser is responsible under each agreement for: (i) the Fund’s organizational expenses (unless reimbursement from the Trust is requested pursuant to Section 4(b) of the Agreement); (ii) the costs of any special Board meetings or shareholder meetings convened for the primary benefit of, and specifically requested by, the Adviser (unless such cost is otherwise allocated by the Board); (iii) any costs of liquidating or reorganizing the Fund if the liquidation or reorganization is made at the request of the Adviser (unless such cost is otherwise allocated by the Board); (iv) amendments to the Registration Statement (other than amendments implemented in connection with the annual Registration Statement update) or supplements to the Prospectus as specifically requested by the Adviser (collectively, “Updates”) (unless such cost is otherwise allocated by the Board); and (v) the dissemination of such Updates (unless such cost is otherwise allocated by the Board). Under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, the Adviser is also responsible on a monthly basis for any operating expenses that exceed the agreed upon expense limit of the Current OELA and will continue to be responsible for such operating expenses under the New OELA, which is identical in its terms to the Current OELA.
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Under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, the Trust is responsible for and assumes the obligation for payment of all Trust expenses not waived, assumed or agreed to be paid by the Adviser, including but not limited to: (i) the fee payable under the Agreement; (ii) the fees payable to the administrator under an agreement between the administrator and the Trust; (iii) expenses of issuance, transfer, repurchase and redemption of Shares; (iv) interest charges, taxes, brokerage fees and commissions, dividends on short sales, and other fees and expenses incurred in connection with borrowings or the acquisition, holding, and disposition of securities and other investments; (v) premiums of insurance for the Trust, its Trustees and officers, and fidelity bond premiums; (vi) fees and expenses of third parties, including the Trust’s Independent public accountant(s), custodian, transfer agent, dividend disbursing agent and fund accountant; (vii) fees of pricing, interest, dividend, credit and other reporting services; (viii) costs of membership in trade associations; (ix) telecommunications expenses; (x) funds’ transmission expenses; (xi) auditing, legal and compliance expenses; (xii) costs of maintaining the Trust’s existence; (xiii) costs of preparing, filing and printing the Trust’s prospectuses, subscription application forms and shareholder reports, advertising materials, and other communications and delivering them to potential or existing record and beneficial shareholders; (xiv) expenses of meetings of Shareholders and proxy solicitations therefor; (xv) costs of maintaining books of original entry for portfolio and fund accounting and other required books and accounts, of calculating the net asset value of Shares and of preparing tax returns; (xvi) costs of reproduction, stationery, supplies and postage; (xvii) fees and expenses of the Trustees and officers (xviii) costs of Board, Board committee and other corporate meetings; (xix) SEC registration fees and related expenses; (xx) state, territory or foreign securities laws registration fees and related expenses; (xxi) all fees and expenses paid by the Trust in accordance with any Plan; and (xxii) all other costs of its operations including any extraordinary and non-reoccurring expenses including litigation, proceedings, claims and indemnification obligations to its trustees, officers, and service providers, except as herein otherwise prescribed.
Finally, under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, to the extent that the Adviser pays fees with respect to the Fund, in addition to any distribution or servicing fees paid by the Fund, to a third party, including without limitation banks, broker-dealers, financial advisors, or pension administrators, for sub-administration, sub-transfer agency or any other servicing or distribution services, the Adviser is required to report such payments (and to which third parties) regularly to the Trust.
Brokerage and Best Execution. Under both the Current Alta Advisory Agreement and New Guardian Advisory Agreement, the Adviser’s primary consideration in effecting transactions on behalf of the Fund is to seek best execution. In selecting broker-dealers to execute transactions, the Adviser may take the following, among other things, into consideration: the best net price available; the reliability, integrity and financial condition of the broker-dealer; the size of and the difficulty in executing the order; and the value of the expected contribution of the broker-dealer to the investment performance of the Fund on a continuing basis. The execution price of a transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the execution services offered.
Consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and applicable regulations and interpretations, the Adviser may allocate brokerage on behalf of the Fund to a broker-dealer who provides research services. Subject to compliance with Section 28(e), the Adviser may cause each Fund to pay to a broker-dealer who provides research services a commission that exceeds the commission each Fund might have paid to a different broker-dealer for the same transaction if the Adviser determines, in good faith, that such amount of commission is reasonable in relationship to the value of such brokerage or research services provided viewed in terms of that particular transaction or the Adviser’s overall responsibilities to the Fund or its other advisory clients.
The Adviser may aggregate sales and purchase orders of the assets of the Fund with similar orders being made simultaneously for other accounts advised by the Adviser or its affiliates. Whenever the Adviser simultaneously places orders to purchase or sell the same asset on behalf of a Fund and one or more other accounts advised by the Adviser, the orders must be allocated as to price and amount among all such accounts in a manner believed to be equitable and consistent with its fiduciary obligations to the Fund and such other accounts.
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Use of Sub-advisers. Under both the Current Alta Advisory Agreement and New Guardian Advisory Agreement, the Adviser, at its own expense, may carry out any of its obligations under this Agreement by employing, subject to the approval, direction and control of the Board, one or more Sub-advisers who are registered as investment advisers pursuant to the Advisers Act. The Adviser is authorized and/or required to (i) evaluate, select and recommend Sub-advisers to manage all or a portion of a Fund’s assets; (ii) allocate and, when appropriate, reallocate a Fund’s assets among multiple Sub-advisers; (iii) terminate any Sub-adviser; (iv) monitor and evaluate each Sub-adviser’s performance; and (v) implement procedures reasonable designed to help ensure that Sub-advisers, in providing services to a Fund, comply with the Fund’s investment objective, investment policies, and investment restrictions documented in the Board Policies and Procedures, and the Trust’s Organic Documents, and the Fund’s Prospectus, and comply with relevant securities ad tax laws. Despite the Advisor’s ability to employ Sub-advisers to perform the duties permitted by the Agreement, the Adviser retains overall supervisory responsibility for the general management and investment of a Fund’s assets. The Adviser is liable under each Agreement: (i) for its failure to exercise good faith in the employment of a Sub-adviser; (ii) for its failure to exercise appropriate supervision of a Sub-adviser; and (iii) as may be otherwise agreed by the Trust and the Adviser in writing. Subject to the review and approval of the Board, the Adviser and the requirements of the 1940 Act, the Adviser may enter into and amend Sub-advisory Agreements with new or current Sub-advisers; and may replace any Sub-adviser. Each Sub-adviser’s employment must be evidenced by a separate written agreement approved by the Board and, to the extent required by law or regulation, by the shareholders of the Fund.
Limitation on Liability and Indemnification. Under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, the Adviser agrees to indemnify the Trust, the Fund and the Trust’s officers, trustees, employees, affiliates and agents (each, a “Trust Indemnitee”) for, and to defend and hold each Trust Indemnitee harmless from, all losses, costs, damages and expenses (including reasonable legal fees) (collectively, “Losses”) incurred by the Trust Indemnitee and arising from or in connection with the performance of the agreement or a sub-advisory agreement and resulting from the Adviser’s bad faith, willful misfeasance, or negligence in the performance of its duties under the agreement or a sub-advisory agreement, the Adviser’s reckless disregard of its duties or obligations under the agreement or a sub-advisory agreement, or the breach of its fiduciary duty to the Trust under federal securities laws or state laws; provided, however, no such indemnification shall be required to the extent that the Losses result from the Trust’s bad faith, willful misfeasance, or negligence in the performance of its duties under this Agreement or the Trust’s reckless disregard of its duties or obligations under this Agreement.
Under both the New Guardian Advisory Agreement and the Current Alta Advisory Agreement, the Trust agrees to indemnify the Adviser, its officers, directors, employees, affiliates and agents (each, an “Adviser Indemnitee”) for, and to defend and hold each Adviser Indemnitee harmless from all Losses incurred by the Adviser Indemnitee and arising from or in connection with the performance of its duties under this Agreement; provided, however, no such indemnification shall be required to the extent that the Losses result from the Adviser’s bad faith, willful misfeasance, or negligence in the performance of its duties under the agreement or a sub-advisory agreement, the Adviser’s reckless disregard of its duties or obligations under the agreement or a sub-advisory agreement, or the Adviser’s breach of its fiduciary duty under federal securities laws and state law.
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Board Consideration of the Approval of the New Guardian Advisory Agreement
The Board approved the New Guardian Advisory Agreement at a meeting held on June 16 and 17, 2021 (the “June Meeting”). Prior to the June Meeting, the Board received and considered information from Guardian and the Trust’s administrator designed to provide the Board with the information necessary to evaluate the approval of the New Guardian Advisory Agreement (the “Support Materials”). In addition, at the June Meeting, representatives of Guardian met with the Board and Counsel to the Independent Trustees by videoconference to discuss the Adviser Transition and the New Guardian Advisory Agreement. Before voting to approve the New Guardian Advisory Agreement as in the best interest of the Fund and its shareholders, the Board reviewed the Support Materials with Trust management and with counsel to the Independent Trustees and discussed a memorandum from such counsel discussing the legal standards for the Board’s consideration of the New Guardian Advisory Agreement. In approving the New Guardian Advisory Agreement, the Board considered substantially the same factors as it considered in initially approving the Current Management Agreement, which occurred at the Board’s meeting on December 11 and 12, 2019, in addition to new information regarding the Adviser Transition, peer group expense and performance data provided by Broadridge for comparison purposes through April 30, 2021, performance data for the Fund compared to its benchmark index through April 30, 2021 as provided by Alta, and performance composite data of the Guardian Fundamental Global Equity Composite for various time periods through March 31, 2021 as provided by Guardian. This information formed the primary basis for the Board’s determinations.
In determining whether to approve the New Guardian Advisory Agreement, the Trustees considered all factors they believed relevant, including the following: (1) the nature, extent, and quality of the services to be provided by Guardian with respect to the Fund; (2) the cost of the services to be provided and the profits to be realized by Guardian from services rendered to the Trust with respect to the Fund; (3) comparative fee and expense data for the Fund and other investment companies with similar investment objectives; (4) the extent to which economies of scale may be realized as the Fund grows, and whether the advisory fees for the Fund reflects such economies of scale for the Fund’s benefit; and (5) other financial benefits to Guardian resulting from services rendered to the Fund. In their deliberations, the Trustees did not identify any particular information that was all-important or controlling.
Based upon the information provided to the Board throughout the course of the year and the Support Materials, the Board considered whether the overall arrangements between the Trust and Guardian set forth in the New Guardian Advisory Agreement are fair and reasonable in light of the services Guardian will perform, the investment advisory fees that the Fund will pay to Guardian, and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment. After reviewing the Support Materials and considering other information provided to the Board during the course of the previous year, the Board determined that it had all the information it deemed reasonably necessary to make an informed decision about the approval of the New Guardian Advisory Agreement. The material factors and conclusions that formed the basis of the Trustees’ determination to approve the New Guardian Advisory Agreement are summarized below.
Nature, Extent and Quality of Services Provided. The Trustees considered the scope of services that Guardian will provide under the New Guardian Advisory Agreement, noting that such services include, but are not limited to, the following: (1) investing the Fund’s assets consistent with the Fund’s investment objective and investment policies; (2) determining the portfolio securities to be purchased, sold or otherwise disposed of and the timing of such transactions; (3) voting all proxies with respect to the Fund’s portfolio securities; (4) maintaining the required books and records for transactions that Guardian effects on behalf of the Fund; (5) selecting broker-dealers to execute orders on behalf of the Fund; (6) performing compliance services on behalf of the Fund; and (7) engaging in marketing activities. The Trustees noted no changes to the services that the Fund would receive under the terms of the New Guardian Advisory Agreement compared to that of the Current Alta Advisory Agreement with Alta. The Trustees considered Guardian’s capitalization and its assets under management. The Trustees further considered Guardian’s investment philosophy, research process, the industry experience of its management team, and the industry experience of the Fund’s portfolio managers. The Trustees also noted the Fund’s performance compared to its benchmark index, including the fact that the Fund had underperformed its benchmark index for the one-year, year-to-date, and since inception periods ended April 30, 2021. The Trustees also considered the Fund’s performance compared to the World Large Stock Growth Morningstar category and the custom peer group. The Trustees noted that the Fund underperformed both the medians of the Morningstar category and custom peer group for the one-year and since inception periods ended April 30, 2021. The Trustees further considered Guardian’s discussion and explanation with regard to periods of unfavorable performance. Based upon the foregoing, the Trustees concluded that they are satisfied with the nature, extent, and quality of services that Guardian would provide to the Fund under the New Guardian Advisory Agreement.
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Cost of Advisory Services and Profitability. The Trustees considered the annual advisory fee that the Fund would pay to Guardian under the New Guardian Advisory Agreement, as well as Guardian’s projected profitability from the services that it will render to the Fund. The Board noted the overall profitability of Guardian, as reflected in its financial statements. The Trustees noted the financial commitment by Guardian to the Fund pursuant to the New OELA, and emphasized that Guardian had contractually agreed to reduce its management fees, and if necessary, to reimburse the Fund for its operating expenses, to the extent necessary to ensure that Total Annual Fund Operating Expenses (excluding acquired fund fees and expenses, brokerage fees and commissions, dividend expense on short sales, interest, taxes, and extraordinary expenses) do not exceed the amount specified in the New OELA through January 31, 2023.
Comparative Fee and Expense Data. The Trustees noted that the Fund’s contracted advisory fee paid to the current adviser, Alta, would not change under the New Guardian Advisory Agreement with Guardian. The Trustees noted that the Fund’s contracted advisory fee was higher than the average and median of both the Morningstar peer group and the custom peer group, but not exceedingly so. The Trustees then reviewed the Fund’s gross and net total expense ratios (reflected with and without the effect of fee waivers and expense reimbursements) relative to the custom peer group and the Morningstar category. The Trustees noted that the Fund’s total net expense ratio was higher than the average and median of both the Morningstar peer group and the custom peer group, but not exceedingly so. With regard to the Fund’s gross total expense ratio, the Trustees noted that the Fund’s gross total expense ratio was below the average and above the median reported for the Morningstar peer group category, and above both the average and median reported for the custom peer group. Further, it was noted that the Fund was the smallest of the peer group funds with $15.97 million in average net assets, relative to the Morningstar peer group median of $86.57 million and the custom peer group median of $333.80 million in average net assets. They further considered the fees paid by Guardian’s separately managed accounts and other investment advisory relationships to other accounts with similar investment objectives and strategies to that of the Fund, noting the differences in the services provided to these accounts compared to the services to be provided to the Fund. In particular, they noted that Guardian would perform additional responsibilities with respect to the Fund, including compliance, reporting and operational responsibilities. While recognizing that it is difficult to compare advisory fees because the scope of advisory services provided may vary from one investment adviser to another, or from one investment product to another, the Trustees concluded that Guardian’s advisory fee would be fair and reasonable, and that the services provided to the Fund by Guardian and its affiliated companies would continue substantially unchanged.
Economies of Scale. The Trustees considered whether the Fund would benefit from any economies of scale, but did not find that any material economies exist at this time. Nevertheless, the Trustees were satisfied with Guardian’s commitment to the Fund, and also satisfied with Guardian’s projections of future profitability. The Trustees noted Guardian’s view that that due to the Fund’s low net asset total, fee breakpoints are not necessary or appropriate at this time.
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Other Benefits. The Trustees noted that Guardian does not utilize soft dollar arrangements with respect to portfolio transactions and does not use affiliated brokers to execute portfolio transactions. The Trustees also considered Guardian’s selection of its affiliate, GuardCap, to serves as Sub-Adviser to the Fund and the fees to be received by GuardCap for providing the sub-advisory services. The Trustees further noted that any sub-advisory fee paid to GuardCap would be paid out of the investment advisory fees paid by the Fund to Guardian and not be paid by the Fund. The Trustees noted that Guardian had confirmed that there were no economic or other benefits to Guardian associated with the selection or use of any particular providers for the Fund’s portfolio. The Trustees concluded that all things considered, Guardian would not receive material additional financial benefits from services rendered to the Fund.
Other Considerations. The Trustees also considered potential conflicts for Guardian with respect to relationships forged with service providers to the Fund. The Trustees noted that both they and Counsel have discussed with representatives of Guardian their duty of loyalty relative to the selection of service providers and the conflicts that could develop relative to any relationship that Guardian may form with a specific service provider. Based on the assurances and representations from Guardian, the Trustees concluded that no conflict of interest currently exists that could adversely impact the Fund.
Based on all of the information presented to and considered by the Board and the conclusions that it reached, the Board and the Independent Trustees voting separately unanimously approved the New Guardian Advisory Agreement for the Fund on the basis that its terms and conditions are fair and reasonable and in the best interests of the Fund and its shareholders.
Required Vote
Approval of this proposal requires the affirmative vote of “a majority of outstanding voting securities” of the Fund. Under the 1940 Act and the terms of the Current Alta Advisory Agreement, a “majority of the outstanding voting securities” is defined as the lesser of: (1) 67% or more of the voting securities of the Fund entitled to vote present in person or by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities entitled to vote thereon are present in person or represented by proxy; or (2) more than 50% of the outstanding voting securities of the Fund entitled to vote thereon.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE NEW GUARDIAN ADVISORY AGREEMENT BETWEEN THE TRUST AND GUARDIAN as it relates to the Fund
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PROPOSAL 2
TO APPROVE THE NEW SUB-ADVISORY AGREEMENT BETWEEN
Guardian
Capital LP AND GuardCap Asset Management Limited AS it relates to the
Guardian Capital Fundamental global equity fund
Background
Pursuant to an agreement with the Capitol Series Trust (the “Trust”), Alta Capital Management, LLC (“Alta”) currently serves as the investment adviser to the Fund (the “Current Alta Advisory Agreement”). Alta is an indirect, majority-owned subsidiary of Guardian Capital LP (“Guardian”). As part of an overall restructuring and rebranding of Guardian’s U.S. mutual fund business, Guardian proposes to take over as the investment adviser of the Fund from and to assume responsibility for providing the advisory services that are now provided to the Fund by Alta (the “Adviser Transition”).
Alta has historically managed the Fund through a “participating affiliate” arrangement pursuant to which Alta has utilized the resources of GuardCap Asset Management Limited (“GuardCap”) to manage the Fund’s investments. Alta, Guardian, and GuardCap are affiliated entities due to the fact that they are under the under the common control of Guardian Capital Group Limited. Under the terms of a Participating Affiliate Memorandum of Understanding between and among Alta, Guardian, and GuardCap, GuardCap is considered to be a “Participating Affiliate” of Alta Capital, as that term is used in relief granted by the staff of the U.S. Securities and Exchange Commission (“SEC”), allowing US-registered advisers to use investment advisory and trading resources of unregistered advisory affiliates, subject to the regulatory supervision of the registered adviser (the “Participating Affiliate Arrangement”). This Participating Affiliate Arrangement allows the Fund to benefit from the investment advisory and trading expertise at GuardCap. For example, the current portfolio managers of the Fund—Michael Boyd and Giles Warren—are both employed by GuardCap. As portfolio Managers, Mr. Boyd and Mr. Warren are primarily responsible for recommending the securities to be purchased and sold for the Fund and the timing of those transactions.
This Participating Affiliate Arrangement was initially utilized due to the fact that GuardCap was not yet registered with the SEC at the launch of the Fund, and therefore, could not serve as the Fund’s adviser or sub-adviser. However, anticipating that GuardCap would become a registered adviser with the SEC in the future, at a meeting of the Trust’s Board held on December 11 and 12, 2019, the Board, including all of the Trustees who are not “interested persons,” also considered and approved for an initial two-year period a sub-advisory agreement between Alta and GuardCap (the “Prior Form of Sub-Advisory Agreement”) to become effective at such time that GuardCap’s status as a U.S. registered investment adviser is approved by SEC, and upon appropriate notification to the Board by Alta that it desires to proceed with effectuating the sub-advisory agreement. Effective December 7, 2020, GuardCap became registered as an investment adviser with the SEC, which meant that the Participating Affiliate Arrangement was no longer necessary and that GuardCap could be appointed as a Sub-Adviser to the Fund. However, GuardCap was never appointed as a sub-adviser under the Prior Form of Sub-Advisory Agreement. Now that Guardian is taking over as adviser to the Fund, the Prior Form of Sub-Advisory Agreement will no longer be effective as it will no longer contain the correct advisory entity.
At a meeting of the Board held on June 16 and 17, 2021, the Independent members of the Board, after careful consideration, determined to select GuardCap to serve as the investment sub-adviser of the Fund and to assume responsibility for providing investment sub-advisory services to the Fund (the “Sub-Adviser Appointment”). In order to appoint GuardCap as sub-adviser, the Board has approved an investment sub-advisory agreement between Guardian and GuardCap (the “New Sub-Advisory Agreement”). The New Sub-Advisory Agreement must be approved by Shareholders to become effective.
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The Board, including a majority of Independent trustees, has approved the New Sub-Advisory Agreement and believes it to be in the best interests of the Fund and its Shareholders. Shareholders are being asked to approve the New Sub-Advisory Agreement between Guardian and GuardCap with respect to the Fund. The terms and conditions of the New Sub-Advisory Agreement will be substantially similar to all material terms and conditions of the Prior Form of Sub-Advisory Agreement, which was approved by the Board but never entered into, except for revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, (3) correct a non-material typographical error, and (4) update certain contact information.
The Board approved a change in the Fund’s name from “Guardian Fundamental Global Equity Fund” to the “Guardian Capital Fundamental Global Equity Fund.” This name change became effective as of August 23, 2021, as reflected in supplements to the Fund’s prospectus and SAI filed on July 28, 2021. The Adviser Transition, Sub-Adviser Appointment, and name change will not affect your account with the Fund. You will still own the same number of shares in the Fund that you currently own, and the value of your investment will not change as a result of Guardian taking over as the adviser to the Fund or GuardCap becoming a sub-adviser to the Fund. In addition, the same experienced, high quality portfolio managers will continue managing the Fund without interruption.
The expenses incurred in connection with preparing the Proxy Statement and its enclosures and all related legal and solicitation expenses will be paid by Guardian. Guardian will not seek reimbursement from the Fund for any costs associated with the proxy.
Terms of the Prior Form of Sub-Advisory Agreement and the New Sub-Advisory Agreement
A copy of the New Sub-Advisory Agreement is attached as Exhibit B. The following description is a summary that discusses all relevant and material terms of that agreement. However, you should refer to Exhibit B for the full text of the New Sub-Advisory Agreement. There are no differences between the terms of the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement with respect to services provided by the sub-adviser, and the agreements are identical with respect to the sub-advisory fees paid to the sub-adviser. There are no material differences between the Prior Form of Sub-Advisory Agreement and the New Sub-Advisory Agreement. Non-material changes include revisions necessary to: (1) change the signatories by adding Guardian and removing Alta as the adviser, (2) change the effective date, (3) correct a non-material typographical error, and (4) update certain contact information. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement contain identical fee structures. The sub-advisory fee payable under the New Sub-Advisory Agreement will remain at an annual rate of 0.60% of the Fund’s average daily net assets. The Prior Form of Sub-Advisory Agreement was never executed or implemented.
Services Rendered by the Sub-Adviser to the Funds. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement require GuardCap (the “Sub-Adviser”) to, subject to the control and supervision of the Board and the Adviser, continuously furnish to the Fund an investment program for such portion, if any, of Fund assets that are allocated to it by the Adviser from time to time.
Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Sub-Adviser is: (i) responsible for making investment decisions and placing all brokerage orders for the purchase and sale of portfolio securities consistent with all applicable laws, the stated investment objective, policies and restrictions of the Fund, as stated in the then-current registration statement of the Fund, and such other guidelines as the Adviser may establish; (ii) required to provide the Adviser and the Trust’s Chief Compliance Officer (“CCO”) with quarterly compliance reports relating to its duties under the Sub-Advisory Agreement and on an as needed basis; (iii) upon the Adviser’s request, required to provide assistance in the valuation of the portfolio securities of the Fund and obtaining information about securities that may be purchased for the Fund by the Sub-Adviser with respect to which reliable prices are not available through customary pricing services and otherwise assisting the Fund in pricing such assets appropriately, and promptly bring to the attention of Adviser any events that Sub-Adviser determines to be “significant events” that may come to the attention of Sub-Adviser and that Sub-Adviser believes are reasonably likely to affect the price of such securities; (iv) required to vote proxies for the Fund in a manner consistent with the Sub-Adviser’s Proxy Voting Policy and the Fund’s disclosure documents and keep the Fund and Adviser informed as to such voting; and (v) required to assist the Trust CCO in compiling the proxy voting record for submission to the SEC on Form N-PX on a periodic basis and shall, upon request, review drafts of such submission prior to filing.
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Sub-Advisory Fee. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement contain identical fee structures. The sub-advisory fee payable under the New Sub-Advisory Agreement will remain at an annual rate of 0.60% of the Fund’s average daily net assets. In addition, under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the sub-advisory fee paid to GuardCap will be paid out of the investment advisory fees paid by the Fund to Guardian and will not be paid by the Fund. In addition, under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, in recognition of the Adviser’s contractual agreement to cap the operating expenses of the Fund, the Sub-Adviser contractually agrees with the Adviser that it will waive its sub-advisory fee to 0.40% of the Fund’s average daily net assets until the Fund’s average daily net assets exceed $100 million.
Duration and Termination. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement provide that they will become effective with respect to the Fund upon execution; provided that the agreements will not become effective until after the requisite approval of the Independent Trustees of the Board and a vote of a majority of the Fund’s outstanding voting securities if required by the 1940 Act. Both agreements provide that the agreement will terminate automatically, without the payment of any penalty, unless within two years after its initial effectiveness and at least annually thereafter, the continuance of the agreement is specifically approved by (i) the Board or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Independent Trustees, by vote cast in person at a meeting called for the purpose of voting on such approval. Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement also provide, however, that if the continuation of the agreement is not approved, the Sub-Adviser may continue to render to the Fund the services described in the agreement in the manner and to the extent permitted by applicable law.
Both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement also permit the termination of the agreement by either party at any time by written notice of at least 60 days to the other party. Action by the Trust to terminate the Agreement may be taken either (i) by vote of a majority of its Trustees, or (ii) by the affirmative vote of a majority of the outstanding shares of the Fund. Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, termination of the agreement by either party pursuant to the referenced contractual provisions is not subject to the payment of any penalty. Finally, both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement provide that the Advisory Agreement shall terminate immediately upon its assignment.
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Payment of Expenses. Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Sub-Adviser is responsible for paying all expenses that are required for it to execute its duties under the agreement and any other expenses the Sub-Adviser agrees in writing to bear.
Brokerage and Best Execution. Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Sub-Adviser is required to place all orders pursuant to its investment determinations for the Fund either directly with the issuer or through broker-dealers selected by the Adviser. Under both agreements the Sub-Adviser is also required to recommend brokers for inclusion on an approved broker list for the Fund, subject to approval by the Adviser.
Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Sub-Adviser’s primary consideration in effecting transactions on behalf of the Fund is to seek best execution. In selecting broker-dealers to execute transactions, the Sub-Adviser may take the following, among other things, into consideration: price, the size of the transaction, the nature of the market for the security, the amount of the commission and dealer’s spread or mark-up, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the general execution and operational facilities of the broker-dealer, and the quality of service rendered by the broker-dealer in other transactions. The execution price of a transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the execution services offered.
Consistent with Section 28(e) of the 1934 Act and applicable regulations and interpretations, the Sub-Adviser may allocate brokerage on behalf of the Fund to a broker-dealer who provides research services. Subject to compliance with Section 28(e), the Sub-Adviser may cause the Fund to pay to a broker-dealer who provides research services a commission that exceeds the commission the Fund might have paid to a different broker-dealer for the same transaction if the Sub-Adviser determines, in good faith, that such amount of commission is reasonable in relationship to the value of such brokerage or research services provided viewed in terms of that particular transaction or the Adviser’s overall responsibilities to the Fund or its other advisory clients.
Limitation on Liability and Indemnification. Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Sub-Adviser shall not be subject to any liability for any act or omission in the course of rendering services under the agreement in the absence of its bad faith, negligence, willful default, fraud, or reckless disregard of its obligations and duties under the agreement.
Under both the New Sub-Advisory Agreement and the Prior Form of Sub-Advisory Agreement, the Adviser and the Sub-Adviser agree to indemnify, defend and hold harmless the other party and its affiliates, and their respective officers, directors, partners, managers, employees and authorized agents from and against any and all claims, damages, liabilities, losses, costs and expenses, including reasonable attorneys’ fees and costs, that such party and its affiliates and their respective officers, directors, partners, employees and authorized agents may suffer, which arise, result from, or relate to, the agreement other than those caused by the bad faith, negligence, willful default, fraud, or willful misconduct of such party or the reckless disregard of such party’s duties under the agreement.
Under both agreements, the Sub-Adviser is also required to indemnify and hold harmless the Adviser, the Fund, the Board of Trustees, officers, and shareholders from any and all claims, losses, expenses, obligations and liabilities (including reasonable attorney’s fees) which arise or result from the Sub-Adviser’s bad faith, negligence, willful default, fraud, willful misconduct or reckless disregard of its duties under the agreement.
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Board Approval of the New Sub-Advisory Agreement
The Board also approved the New Sub-Advisory Agreement at the June Meeting. Prior to the June Meeting, the Board received and considered information from GuardCap and the Trust’s administrator designed to provide the Board with the information necessary to evaluate the approval of the New Sub-Advisory Agreement (the “Support Materials”). In addition, at the June Meeting, representatives of GuardCap met with the Board and Counsel to the Independent Trustees by videoconference to discuss the Sub-Adviser Appointment and the New Sub-Advisory Agreement. Before voting to approve the New Sub-Advisory Agreement as in the best interest of the Fund and its shareholders, the Board reviewed the Support Materials with Trust management and with counsel to the Independent Trustees and discussed a memorandum from such counsel discussing the legal standards for the Board’s consideration of the New Sub-Advisory Agreement. In approving the New Sub-Advisory Agreement, the Board considered substantially the same factors as it considered in initially approving the Prior Form of Sub-Advisory Agreement, which occurred at the Board’s meeting on December 11 and 12, 2019, in addition to new information regarding the Sub-Adviser Appointment, peer group expense and performance data provided by Broadridge for comparison purposes through April 30, 2021, updated performance information for the Fund compared to its benchmark index through April 30, 2021 provided by Alta, and performance composite data of the Guardian Fundamental Global Equity Composite for various time periods through March 31, 2021 as provided by Guardian. This information formed the primary basis for the Board’s determinations.
In determining whether to approve the New Sub-Advisory Agreement, the Trustees considered all factors they believed relevant, including the following: (1) the nature, extent, and quality of the services to be provided by GuardCap with respect to the Fund; (2) the cost of the services to be provided and the profits to be realized by GuardCap and its affiliated companies from services rendered to the Fund; (3) comparative fee and expense data for the Fund and other investment companies with similar investment objectives; (4) the extent to which economies of scale may be realized as the Fund grows, and whether the sub-advisory fees for the Fund reflects such economies of scale for the Fund’s benefit; and (5) other financial benefits to GuardCap and its affiliated companies resulting from services rendered to the Fund. In their deliberations, the Trustees did not identify any particular information that was all-important or controlling.
Based upon the information provided to the Board throughout the course of the year and the Support Materials, the Board considered whether the overall arrangements between Guardian and GuardCap as set forth in the New Sub-Advisory Agreement are fair and reasonable in light of the services GuardCap will perform, the investment advisory fees that the Fund pays, the sub-advisory fees that Guardian will be required to pay to GuardCap, and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment. After reviewing the Support Materials and considering other information provided to the Board during the course of the June Meeting and during the previous year, the Board determined that it had all the information it deemed reasonably necessary to make an informed decision about the approval of the New Sub-Advisory Agreement. The material factors and conclusions that formed the basis of the Trustees’ determination to approve the New Sub-Advisory Agreement are summarized below.
Nature, Extent and Quality of Services Provided. The Trustees noted that GuardCap personnel currently serve as the portfolio managers for the Fund under the Participating Affiliate Arrangement and that these same persons will continue to serve as the portfolio managers under the New Sub-Advisory Agreement. The Trustees also noted that the day-to-day investment management services provided by these GuardCap personnel would continue substantially unchanged. The Trustees considered the scope of services that GuardCap would provide under the New Sub-Advisory Agreement, noting that such services include, but are not limited to, the following: (1) investing the Fund’s assets and determining the portfolio securities to be purchased, sold or otherwise disposed of and timing of such transactions consistent with the Fund’s investment objective and investment policies; (2) placing orders for securities transactions; (3) providing quarterly compliance reports, (4) voting all proxies with respect to the Fund’s portfolio securities and providing assistance to the Trust’s CCO in compiling the proxy voting record for submission to the SEC; (5) providing assistance in the valuation of the portfolio securities of the Fund, (6) recommending brokers for inclusion on an approved broker list for the Fund, subject to approval by the Adviser, (7) conducting in-house proprietary quantitative analysis and fundamental research; and (8) providing marketing support. The Trustees noted no changes to the services that the Fund would receive under the terms of the New Sub-Advisory Agreement relative to the services provided pursuant to the Participating Affiliate Arrangements currently governing the operation of the Fund. The Trustees considered GuardCap’s capitalization and its assets under management. The Trustees further considered the investment philosophy and investment industry experience of the portfolio managers. The Trustees also noted the Fund’s performance compared to its benchmark index, including the fact that the Fund had underperformed its benchmark index for the one-year, year-to-date, and since inception periods ended April 30, 2021. The Trustees also considered the Fund’s performance compared to the World Large Stock Growth Morningstar category and the custom peer group. The Trustees noted that the Fund underperformed both the medians of the Morningstar category and custom peer group for the one-year and since inception periods ended April 30, 2021. The Trustees further considered GuardCap’s discussion and explanation with regard to periods of unfavorable performance, and also noted that the reported performance of the Fund covered a short time period. Based upon the foregoing, the Trustees concluded that they were satisfied with the nature, extent, and quality of services that GuardCap would provide to the Fund under the New Sub-Advisory Agreement.
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Cost of Advisory Services and Profitability. The Trustees considered the proposed annual sub-advisory fee that Guardian would pay to GuardCap pursuant to the New Sub-Advisory Agreement, as well as Guardian’s profitability from the services that Guardian and its related companies render to the Fund. The Trustees considered that under the terms of the New Sub-Advisory Agreement, GuardCap had agreed with Guardian to contractually waive 20 basis points of its sub-advisory fee until average net assets in the Fund reach $100 million. It was also noted that the services provided under the existing advisory agreement with Alta were slightly unprofitable during the last fiscal year and were projected to be slightly unprofitable in the current fiscal year and also noted that the realignment of the investment advisory arrangements would not have a material impact on the costs of investment advisory services and projections thereof. The Trustees also noted that, although the overall relationship was projected to be slightly unprofitable to Guardian in the current fiscal year, that the Sub-Advisory portion of the contract was projected to be profitable to GuardCap.
Comparative Fee and Expense Data. It was noted that GuardCap had provided comparisons of the sub-advisory fee and contractual expenses of the Fund with those of other funds that GuardCap manages across the rest of its business. The Trustees noted that the Fund’s proposed sub-advisory fee is lower than the fee that GuardCap charges to its other sub-advised entities or separately managed accounts. While recognizing that it is difficult to compare management fees because the scope of advisory services provided may vary from one investment adviser to another, and from one investment vehicle type to another, the Trustees concluded that GuardCap’s proposed sub-advisory fee is reasonable at this time.
Economies of Scale. The Trustees also considered that the sub-advisory fee to be paid by Guardian to GuardCap pursuant to the New Sub-advisory Agreement does not contain breakpoints and determined that breakpoints are not appropriate at this time. In addition, the Trustees noted that under the terms of the New Sub-Agreement, GuardCap had agreed to contractually waive 20 basis points of its sub-advisory fee until the assets of the Fund reach $100 million. The Trustees noted that the Fund is a fairly young fund with less than three years in operation, and that an increase in assets would mostly likely not decrease the extent of advisory services that GuardCap would need to provide to the Fund at the present time. The Trustees concluded that the Fund is not likely to benefit from any economies of scale at this time.
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Other Benefits. The Trustees noted that GuardCap does not utilize soft dollar arrangements with respect to portfolio transactions and does not use affiliated brokers to execute the Fund’s portfolio transactions. The Trustees noted that Guardian, an affiliate of GuardCap, will also receive advisory fees under the New Guardian Advisory Agreement. The Trustees noted that GuardCap had confirmed that there were no economic or other benefits associated with the selection or use of any particular providers for the Fund. The Trustees concluded that all things considered, GuardCap will not receive material additional financial benefits from services rendered to the Fund.
Based on all of the information presented to and considered by the Board and the conclusions that it reached, the Board and the Independent Trustees voting separately unanimously approved the New Sub-Advisory Agreement for the Fund on the basis that its terms and conditions are fair and reasonable and in the best interests of the Fund and its shareholders.
Required Vote
Approval of this proposal requires the affirmative vote of “a majority of outstanding voting securities” of the Fund. Under the 1940 Act, a “majority of the outstanding voting securities” is defined as the lesser of: (1) 67% or more of the voting securities of the Fund entitled to vote present in person or by proxy at the Meeting, if the holders of more than 50% of the outstanding voting securities entitled to vote thereon are present in person or represented by proxy; or (2) more than 50% of the outstanding voting securities of the Fund entitled to vote thereon.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE NEW SUB-ADVISORY AGREEMENT BETWEEN GUARDIAN AND GUARDCAP AS IT RELATES TO THE FUND
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OTHER BUSINESS
TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF
The proxy holders have no current intention to bring any additional matters before the Meeting other than those specifically referred to above or matters in connection with or for the purpose of effecting such matters. Neither the proxy holders nor the Board of Trustees are aware of any matters which may be presented by others. If any business shall properly come before the Meeting, the proxy holders intend to vote thereon in accordance with their best business judgment.
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EXHIBIT A
CAPITOL SERIES TRUST
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND
This AGREEMENT is made effective as of ______________, 2021, by and between Capitol Series Trust (the “Trust”), an Ohio business trust, with its principal office and place of business at 225 Pictoria Drive, Suite 450, Cincinnati, Ohio, 45246, and Guardian Capital LP, a limited partnership organized under the laws of the Province of Ontario, Canada, with its principal office and place of business at 199 Bay Street, Suite 3100, Toronto, Ontario, M5L1E8 (the “Adviser”).
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end, management investment company and may issue shares of beneficial interest (“Shares”), no par value, in separate series;
WHEREAS, the Adviser is registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), as an investment adviser and is engaged in the business of rendering investment advice and investment management services as an independent contractor; and
WHEREAS, the Trust desires that the Adviser perform investment advisory services for each series of the Trust listed in Appendix A hereto (each a “Fund”), and the Adviser is willing to provide those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, the Trust and the Adviser hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs the Adviser, subject to the direction and control of the Board of Trustees of the Trust (“Board”), to manage the investment and reinvestment of the assets in each Fund and to provide other services as specified herein. The Adviser accepts this employment and agrees to render its services for the compensation set forth herein. The Adviser shall for all purposes herein be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or be an agent of the Trust.
(b) In connection therewith, the Trust shall deliver to the Adviser copies of: (i) the Trust’s Agreement and Declaration of Trust and By-laws (collectively, as currently in effect and as amended from time to time, “Organic Documents”); (ii) the Trust’s current Registration Statement filed with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and the 1940 Act with respect to each Fund (as amended from time to time, the “Registration Statement”); (iii) the Trust’s current Prospectus and Statement of Additional Information of each Fund (collectively, as currently in effect and as amended or supplemented, the “Prospectus”); (iv) any shareholder service plan, distribution plan or similar documents adopted by the Trust with respect to each Fund (collectively, and as may be amended from time to time, the “Plans”); and (v) all written policies and procedures adopted by the Trust with respect to each Fund (e.g., repurchase agreement procedures, Rule 17a-7 Procedures and Rule 17e-1 Procedures, collectively, as currently in effect and as amended for time to time, the “Procedures”). The Trust shall furnish the Adviser with all amendments of or supplements to the foregoing.
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The Trust shall also deliver to the Adviser: (vi) a certified copy of the resolution of the Board, including a majority of the Trustees who are not interested persons of the Trust, appointing the Adviser and any subadviser (each a “Subadviser”) and approving this Agreement and any subadvisory agreement relating to a Fund (each, a “Subadvisory Agreement”); (vii) a certified copy of the resolution of each Fund’s shareholder(s), if applicable, appointing the Adviser; (viii) a copy of all proxy statements and related materials relating to each Fund; (ix) a certified copy of the resolution of the Trust electing officers of the Trust; and (x) any other documents, materials or information that the Adviser shall reasonably request to enable it to perform its duties pursuant to this Agreement.
(c) The Adviser has delivered to the Trust a copy of its: (i) Form ADV as most recently filed with the SEC, (ii) code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act (the “Code”), (iii) compliance manual adopted and implemented pursuant to Rule 206(4)-7 under the Advisers Act (the “Compliance Manual”). The Trust acknowledges receipt of the Adviser’s Form ADV, Code and Compliance Manual.
The Adviser shall promptly furnish the Trust with all amendments of or supplements to the foregoing.
SECTION 2. DUTIES OF THE TRUST
In order for the Adviser to perform the services required by this Agreement, the Trust: (i) shall cause all service providers to the Trust to furnish information to the Adviser and to assist the Adviser as may be reasonably requested by the Adviser; and (ii) shall ensure that the Adviser has reasonable access to all records and documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISER
Subject to the delegation of any of the following duties to one or more persons as permitted by Section 11 of this Agreement, the Adviser, at its own expense, shall render the following services to the Trust:
(a) The Adviser shall assume all investment duties and have full discretionary power and authority with respect to the investment of the assets of each Fund. Without limiting the generality of the foregoing, the Adviser shall, with respect to the assets of each Fund: (i) obtain and evaluate such information and advice relating to the economy, securities markets, and securities and other investments as it deems necessary or useful to discharge its duties hereunder; (ii) continuously invest Fund assets in a manner reasonably consistent with the directions and policies set from time to time by the Board and any amendments thereto (“Board Policies”), the Organic Documents, the Prospectus, the Procedures (the Board Policies, the Organic Documents, the Prospectus, and the Procedures, collectively, the “Governing Documents”), and any other written guidelines or restrictions agreed to in writing by the Trust and the Adviser with respect to a Fund that are not inconsistent with the Governing Documents (the “Adviser Guidelines”), each as promptly provided to the Adviser by the Trust; (iii) determine the securities and other investments to be purchased, sold or otherwise disposed of and the timing of such purchases, sales and dispositions; (iv) vote all proxies for securities owned by a Fund and exercise all other voting rights with respect to such securities in accordance with the proxy voting policies and procedures approved by the Board; (vi) promptly issue settlement instructions to custodians designated by the Trust on behalf of each Fund; (vii) evaluate the credit worthiness of securities dealers, banks and other entities with which the Trust, on behalf of each Fund, may engage in repurchase agreements and monitor the status of such agreements; and (viii) take such further action, including, the placing of purchase and sale orders, selecting broker-dealers to execute such orders on behalf of each Fund, negotiating commission rates to be paid to broker-dealers, opening and maintaining trading accounts in the name of each Fund, and executing for each Fund, as its agent and attorney-in-fact, standard institutional customer agreements with broker-dealers, each as the Adviser shall deem necessary or appropriate, in its sole discretion, to carry out its duties under this Agreement.
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(b) In effecting transactions on behalf of each Fund, the Adviser’s primary consideration shall be to seek best execution. In selecting broker-dealers to execute transactions, the Adviser may take the following, among other things, into consideration: the best net price available; the reliability, integrity, and financial condition of the broker-dealer; the size of and the difficulty in executing the order; and the value of the expected contribution of the broker-dealer to the investment performance of each Fund on a continuing basis. The execution price of a transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the execution services offered.
Consistent with Section 28(e) of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and applicable regulations and interpretations, the Adviser may allocate brokerage on behalf of each Fund to a broker-dealer who provide research services. Subject to compliance with Section 28(e), the Adviser may cause each Fund to pay to a broker-dealer who provides research services a commission that exceeds the commission each Fund might have paid to a different broker-dealer for the same transaction if the Adviser determines, in good faith, that such amount of commission is reasonable in relationship to the value of such brokerage or research services provided viewed in terms of that particular transaction or the Adviser’s overall responsibilities to each Fund or its other advisory clients.
The Adviser may aggregate sales and purchase orders of the assets of each Fund with similar orders being made simultaneously for other accounts advised by the Adviser or its affiliates. Whenever the Adviser simultaneously places orders to purchase or sell the same asset on behalf of a Fund and one or more other accounts advised by the Adviser, the orders shall be allocated as to price and amount among all such accounts in a manner believed to be equitable and consistent with its fiduciary obligations to the Fund and such other accounts.
(c) The Adviser shall report to the Board at each meeting thereof as requested by the Board all material changes in each Fund since the prior report, and shall also keep the Board informed of important developments affecting each Fund and the Adviser, on its own initiative, or as requested by the Board, shall furnish the Board from time to time with such information as the Adviser may believe appropriate for this purpose, whether concerning the individual investments comprising each Fund’s portfolio, the performance of each Fund’s portfolio or otherwise. The Adviser shall also furnish the Board with such statistical and analytical information with respect to investments of each Fund as the Adviser may believe appropriate or as the Board reasonably may request. In providing investment advisory services pursuant to this Agreement, the Adviser shall comply with: (i) the Board Policies, the Organic Documents, each Fund’s objective, investment policies, and investment restrictions as set forth in the Prospectus, the Adviser Guidelines, and the Procedures, each as promptly provided to the Adviser by the Trust; (ii) the 1940 Act; (iii) the Advisers Act; (iv) the Securities Act; (v) the 1934 Act; (vi) the Internal Revenue Code of 1986, as amended; and (vii) other applicable laws.
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(d) The Adviser shall from time to time employ or associate with such persons as the Adviser believes to be particularly fitted to assist in the execution of the Adviser’s duties hereunder, the cost of performance of such duties to be borne and paid by the Adviser. No obligation may be incurred on the Trust’s behalf in any such respect.
(e) The Adviser shall report to the Board all matters related to the Adviser that are material to the Adviser’s performance of this Agreement. The Adviser shall notify the Trust as soon as reasonably practicable, and where possible, in advance of any change of control of the Adviser and any changes in the key personnel who are either the portfolio manager(s) of a Fund or senior management of the Adviser.
(f) The Adviser shall maintain the Compliance Manual that includes policies and procedures relating to the services it provides to the Trust that are reasonable designed to prevent violations of the federal securities laws as defined in Rule 38a-1 under the 1940 Act (“Federal Securities Laws”) as they relate to each Fund, and shall employ personnel to administer the policies and procedures who have the requisite level of skill and competence required to effectively discharge its responsibilities.
(g) The Adviser shall provide the Trust’s chief compliance officer (the “Trust CCO”), upon reasonable request, with direct access to the Adviser’s chief compliance officer and, upon reasonable request, shall provide the Trust CCO, at its own expense, with information the Trust CCO reasonably believes is required to administer the Trust’s compliance program implemented pursuant to Rule 38a-1 under the 1940 Act including, without limitation: (i) periodic reports/certifications regarding the Adviser’s compliance with the Federal Securities Laws and the Adviser’s compliance program as set forth in the Compliance Manual; (ii) special reports in the event of any Material Compliance Matter (as defined in Rule 38a-1 under the 1940 Act); and (iii) periodic reports regarding the Adviser’s compliance with Federal Securities Laws and its compliance program as set forth in the Compliance Manual. Upon the written request of the Trust, the Adviser shall also permit the Trust or its representatives to examine the reports required to be made to the Adviser under the Code.
(h) The Adviser shall maintain records relating to its duties hereunder (including portfolio transactions and placing and allocation of brokerage orders) as are required to be maintained by the Trust under the 1940 Act. The Adviser shall prepare and maintain, or cause to be prepared and maintained, in such form, for such periods and in such locations as may be required by applicable law, all documents and records relating to the services provided by the Adviser pursuant to this Agreement required to be prepared and maintained by the Adviser or the Trust pursuant to applicable law. To the extent required by applicable law, the books and records pertaining to the Trust which are in possession of the Adviser shall be the property of the Trust (the “Trust Records”). The Trust, or its representatives, shall have access to such books and records at all times during the Adviser’s normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided promptly by the Adviser to the Trust or its representatives.
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(i) The Adviser shall cooperate with each Fund’s independent public accountants and shall take reasonable action to make all necessary information available to those accountants for the performance of the accountants’ duties.
(j) The Adviser shall provide the Trust and each Fund’s custodian and fund accountant on each business day with such information relating to each Fund’s transactions and each Fund’s assets and liabilities as the Trust or each Fund’s custodian and fund accountant may reasonably require, including but not limited to information required to be provided under the Trust’s Valuation and NAV Error Correction Procedures, provided, however, the Adviser shall not be deemed to be the pricing agent for any Fund.
(k) Except as permitted by the Procedures, the Adviser shall not disclose and shall treat confidentially all information specifically relating to each Fund’s investments including, without limitation, the identification and market value or other pricing information of any and all portfolio securities or other investments held by each Fund, and any and all trades effected for each Fund (including past, pending and proposed trades). The foregoing shall not in any way restrict the Adviser’s ability to disclose information relating to any Fund assets to the extent that such assets are held in other accounts managed or advised by the Adviser.
(l) The Adviser shall, consistent with the Procedures: (i) cooperate with and provide reasonable assistance to each Fund’s administrator, custodian, fund accountant transfer agent and pricing agents and all other agents and representatives of each Fund; (ii) provide such persons with Fund data as they may reasonably deem necessary to the performance of their obligations to each Fund; and (iii) maintain any appropriate interfaces with each so as to promote the efficient exchange of information.
SECTION 4. COMPENSATION
(a) In consideration of the foregoing, the Trust shall pay the Adviser, with respect to each Fund, a fee at an annual rate as listed in Appendix A hereto. Such fees shall be accrued by the Trust daily and shall be payable monthly in arrears on the first business day of each calendar month for services performed hereunder during the prior calendar month. If fees begin to accrue in the middle of a month or if this Agreement terminates before the end of any month, all fees for the period from that date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. Upon the termination of this Agreement with respect to a Fund, the Trust shall pay to the Adviser such compensation as shall be payable prior to the effective date of termination.
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(b) The Adviser shall reimburse expenses of a Fund or waive its fees to the extent necessary to maintain a Fund’s expense ratio at an agreed-upon amount for a period of time specified in a separate expense limitation agreement (“Expense Limitation Agreement”). The Adviser’s reimbursement of a Fund’s expenses shall be estimated and paid to the Trust monthly in arrears, at the same time as the Trust’s payment to the Adviser for such month. Any such reductions made by the Adviser in its fees or payment of expenses which are the Fund’s obligation may be subject to reimbursement by the Fund consistent with the terms of the Expense Limitation Agreement.
(c) The fee payable to the Adviser under this Agreement may be reduced to the extent of any receivable owed by the Adviser to the Trust (provided that such obligation is not subject to a good faith dispute) or as required under any operating expense limitation agreement applicable to a Fund.
(d) No fee shall be payable hereunder with respect to that portion of a Fund’s assets which are invested in any other account or investment company for which the Adviser serves as investment adviser or subadviser and for which the Adviser already receives an advisory fee.
SECTION 5. EXPENSES
(a) The Adviser shall pay its own expenses in connection with rendering the services to be provided by it pursuant to this Agreement. In addition, the Adviser shall be responsible for: (i) each Fund’s organizational expenses (unless reimbursement from the Trust is requested pursuant to Section 4(b) of this Agreement); (ii) the costs of any special Board meetings or shareholder meetings convened for the primary benefit of, and specifically requested by, the Adviser (unless such cost is otherwise allocated by the Board); (iii) any costs of liquidating or reorganizing a Fund if the liquidation or reorganization is made at the request of the Adviser (unless such cost is otherwise allocated by the Board); (iv) amendments to the Registration Statement (other than amendments implemented in connection with the annual Registration Statement update) or supplements to the Prospectus as specifically requested by the Adviser (collectively, “Updates”) (unless such cost is otherwise allocated by the Board); and (v) the dissemination of such Updates (unless such cost is otherwise allocated by the Board).
(b) The Trust shall be responsible for and assumes the obligation for payment of all Trust expenses not waived, assumed or agreed to be paid by the Adviser, including but not limited to: (i) the fee payable under this Agreement; (ii) the fees payable to the administrator under an agreement between the administrator and the Trust; (iii) expenses of issuance, transfer, repurchase and redemption of Shares; (iv) interest charges, taxes, brokerage fees and commissions, dividends on short sales, and other fees and expenses incurred in connection with borrowings or the acquisition, holding, and disposition of securities and other investments; (v) premiums of insurance for the Trust, its Trustees and officers, and fidelity bond premiums; (vi) fees and expenses of third parties, including the Trust’s independent public accountant(s), custodian, transfer agent, dividend disbursing agent and fund accountant; (vii) fees of pricing, interest, dividend, credit and other reporting services; (viii) costs of membership in trade associations; (ix) telecommunications expenses; (x) funds’ transmission expenses; (xi) auditing, legal and compliance expenses; (xii) costs of maintaining the Trust’s existence; (xiii) costs of preparing, filing and printing the Trust’s prospectuses, subscription application forms and shareholder reports, advertising materials, and other communications and delivering them to potential or existing record and beneficial shareholders; (xiv) expenses of meetings of shareholders and proxy solicitations therefor; (xv) costs of maintaining books of original entry for portfolio and fund accounting and other required books and accounts, of calculating the net asset value of Shares and of preparing tax returns; (xvi) costs of reproduction, stationery, supplies and postage; (xvii) fees and expenses of the Trust’s Trustees and officers (xviii) costs of Board, Board committee and other corporate meetings; (xix) SEC registration fees and related expenses; (xx) state, territory or foreign securities laws registration fees and related expenses; (xxi) all fees and expenses paid by the Trust in accordance with any Plan; and (xxii) all other costs of its operations including any extraordinary and non-reoccurring expenses including litigation, proceedings, claims and indemnification obligations to its directors, officers, and service providers, except as herein otherwise prescribed.
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(c) To the extent that the Adviser pays fees with respect to a Fund, in addition to any distribution or servicing fees paid by the Fund, to a third party, including without limitation banks, broker-dealers, financial advisors, or pension administrators, for sub-administration, sub-transfer agency or any other servicing or distribution services, the Adviser shall report such payments (and to which third parties) regularly to the Trust.
SECTION 6. STANDARD OF CARE
(a) The Adviser shall be responsible for the accuracy and completeness (and shall be liable for any material lack thereof) of any information with respect to the Adviser or a Fund’s strategies contained in the Trust’s offering materials (including the Registration Statement, the Prospectus and advertising and sales materials) or proxy materials if such disclosure has been reviewed and approved by the Adviser.
(b) The Trust shall expect of the Adviser, and the Adviser shall give the Trust the benefit of, the Adviser’s best judgment and reasonable efforts in rendering the services to the Trust contemplated under this Agreement. In performing its duties under this Agreement, the Adviser shall act at all times in the best interests of the Trust and each Fund. The Adviser shall not be liable hereunder to the Trust, any Fund, or any Fund shareholders for any mistake of judgment or mistake of law, for any loss arising out of any investment, or for any act or omission taken or in any event whatsoever in the absence of: (i) bad faith, willful misfeasance, or negligence in the performance of the Adviser’s duties or obligations under this Agreement or (ii) the Adviser’s reckless disregard of its duties and obligations under this Agreement. The Adviser acknowledges that federal and state securities laws impose liabilities under certain circumstances on persons who act in good faith and, therefore, nothing herein shall in any way constitute a waiver or limitation of any rights which the Trust, a Fund or a Fund’s shareholders may have under applicable federal or state securities laws.
(c) The Adviser shall not be liable for the errors of other service providers to the Trust, including the errors of pricing services, the administrator, the fund accountant, the custodian, or the transfer agent to the Trust unless such errors arise from the Adviser’s providing false or misleading information to such service providers. The Adviser shall not be liable to the Trust, a Fund or any of the Fund’s shareholders for any action taken or failure to act in good faith reliance upon: (i) information, instructions or requests, whether oral or written, with respect to the Fund made to the Adviser by a duly authorized officer of the Trust (other than a duly authorized Trust officer that is also a member of, affiliated with or interested person of the Adviser, its affiliates, or successors thereto (each an “Advisory Representative”); (ii) the advice of counsel to the Trust; and (iii) any written instruction or certified copy of any resolution of the Board or any agent of the Board.
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(d) The Adviser shall not be responsible or liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control including, without limitation, acts of civil or military authority, national emergencies, labor difficulties (other than those related to the Adviser’s employees), fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply.
SECTION 7. INDEMNIFICATION
(a) The Adviser shall indemnify the Trust, each Fund and the Trust’s officers, directors, employees, affiliates and agents (each, a “Trust Indemnitee”) for, and shall defend and hold each Trust Indemnitee harmless from, all losses, costs, damages and expenses (including reasonable legal fees) (collectively, the “Losses”) incurred by the Trust Indemnitee and arising from or in connection with the performance of this Agreement or a Subadvisory Agreement and resulting from the Adviser’s bad faith, willful misfeasance, or negligence in the performance of its duties under this Agreement or a Subadvisory Agreement, the Adviser’s reckless disregard of its duties or obligations under this Agreement or a Subadvisory Agreement, or the breach of the Adviser’s fiduciary duty to the Trust under federal securities laws or state laws; provided, however, no such indemnification shall be required to the extent that the Losses result from the Trust’s bad faith, willful misfeasance, or negligence in the performance of its duties under this Agreement or the Trust’s reckless disregard of its duties or obligations under this Agreement.
(b) The Trust shall indemnify the Adviser, its officers, directors, employees, affiliates and agents (each, an “Adviser Indemnitee”) for, and shall defend and hold each Adviser Indemnitee harmless from all Losses incurred by the Adviser Indemnitee and arising from or in connection with the performance of its duties under this Agreement; provided, however, no such indemnification shall be required to the extent that the Losses result from the Adviser’s bad faith, willful misfeasance, or negligence in the performance of its duties under this Agreement or a Subadvisory Agreement, the Adviser’s reckless disregard of its duties or obligations under this Agreement or a Subadvisory Agreement, or the Adviser’s breach of its fiduciary duty under federal securities laws and state law.
(c) Upon the assertion of a claim for which a party may be required to indemnify a Trust Indemnitee or an Adviser Indemnity (each, an “Indemnitee”), the Indemnitee must promptly notify the indemnifying party of such assertion, and shall keep the indemnifying party advised with respect to all developments concerning such claim. The indemnifying party shall have the option to participate with the Indemnitee in the defense of such claim or to defend against said claim in its own name or in the name of the Indemnitee. The Indemnitee shall in no case confess any claim or make any compromise in any case in which the indemnifying party may be required to indemnify it except with the indemnifying party’s prior written consent, which shall not be unreasonably withheld, conditioned, or delayed; notwithstanding Sections 7(a) and 7(b) hereof, in the event the Indemnitee has not secured such consent from the indemnifying party, the indemnifying party shall have no obligation to indemnify the Indemnitee.
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SECTION 8. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund as of the date first written above after approval: (i) by a vote of the majority of those Trustees of the Trust who are not parties to this Agreement or interested persons of such party (other than as Trustees of the Trust) cast in person at a meeting called for the purpose of voting on the Agreement, and (ii) if required by the 1940 Act or applicable staff interpretations thereof, by vote of a majority of the Fund’s outstanding voting securities.
(b) This Agreement shall remain in effect with respect to a Fund for a period of two years from the effective date of this Agreement and shall continue in effect with respect to that Fund for successive annual periods thereafter; provided, however, that such continuance is specifically approved at least annually: (i) by the Board or by the vote of a majority of the outstanding voting securities of the Fund, and, in either case; (ii) by a majority of the Trust’s Trustees who are not parties to this Agreement or interested persons of any such party (other than as Trustees of the Trust) by votes cast in person at a meeting called for the purpose of voting on such approval; provided, however, that if the continuation of this Agreement as to a Fund is not approved, the Adviser may continue to render to that Fund the services described herein in the manner and to the extent permitted by applicable law.
(c) This Agreement may be terminated immediately by the Trust with respect to a Fund if the Board, in its reasonable discretion and having due regard to the protection of investors and to the effectuation of the policies declared in section 1(b) of the 1940 Act, find that the services being rendered by the Adviser under this Agreement fail in a material way to provide responsible management to the Fund as reasonably expected by an investment adviser, as defined in the Advisers Act; provided that the Adviser shall have the opportunity, within ten (10) days of receipt of a written notice describing any such failure and the reasons therefor in reasonable detail, to cure the failure that is the subject of such notice.
(d) This Agreement may also be terminated with respect to a Fund at any time, without the payment of any penalty: (i) by the Board or by a vote of a majority of the outstanding voting securities of the Fund on 60 days’ written notice to the Adviser; or (ii) by the Adviser on 60 days’ written notice to the Trust. This Agreement shall terminate immediately upon its assignment.
SECTION 9. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder, nothing herein shall be deemed to limit or restrict the Adviser’s right, or the right of any of the Adviser’s directors, officers, or employees to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other person.
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SECTION 10. REPRESENTATIONS OF ADVISER
The Adviser represents and warrants that it: (i) is registered as an investment adviser under the Advisers Act (and shall continue to be so registered for so long as this Agreement remains in effect); (ii) is not prohibited by the 1940 Act or the Advisers Act from performing the services contemplated by this Agreement; (iii) has met, and shall seek to continue to meet for so long as this Agreement remains in effect, any other applicable federal or state requirements, or the applicable requirements of any self-regulatory agency, necessary to be met in order to perform the services contemplated by this Agreement; (iv) shall promptly notify the Trust of the occurrence of any event that would disqualify the Adviser from serving as an investment adviser of an investment company pursuant to Section 9(a) of the 1940 Act or otherwise; (v) shall promptly notify the Trust if the Adviser is the subject of an administrative proceeding or enforcement action by the SEC or other regulatory authority; (vi) shall promptly notify the Trust of any material fact known to the Adviser regarding or relating to the Adviser that would make any written information provided to the Trust materially inaccurate or incomplete or if any written information becomes untrue in any material respect; (vii) shall promptly notify the Trust if the Adviser suffers a material adverse change in its business that would materially impair its ability to perform its duties under the Agreement; (viii) has adopted and implemented (and shall continue to maintain and implement for so long as this Agreement remains in effect) a Code that complies with the requirements of Rule 17j-1 under the 1940 Act; and (ix) has adopted and implemented (and shall continue to maintain and implement for so long as this Agreement remains in effect) a Compliance Manual that is reasonably designed to prevent violations of Federal Securities Laws by the Adviser, its employees, officers, and agents. For purposes of this paragraph, a “material adverse change” shall include, but shall not be limited to, a material loss of assets or accounts under management or the departure (or threatened departure) of senior investment professionals to the extent such professions are not replaced promptly with professions of comparable experience and quality.
SECTION 11. SUBADVISERS
(a) At its own expense, the Adviser may carry out any of its obligations under this Agreement by employing, subject to the approval, direction, and control of the Board, one or more Subadvisers who are registered as investment advisers pursuant to the Advisers Act. The Adviser shall: (i) evaluate, select and recommend Subadvisers to manage all or a portion of a Fund’s assets; (ii) allocate and, when appropriate, reallocate a Fund’s assets among multiple Subadvisers; (iii) terminate any Subadviser; (iv) monitor and evaluate each Subadviser’s performance; and (v) implement procedures reasonable designed to help ensure that Subadvisers, in providing services to a Fund, comply with the Fund’s investment objective, investment policies, and investment restrictions documented in the Board Policies, the Organic Documents, the Prospectus, the Adviser Guidelines, and the Procedures, each as provided to the Adviser by the Trust; the 1940 Act; the Advisers Act, the Securities Act; the 1934 Act; the Internal Revenue Code of 1986, as amended; and other applicable laws. Despite the Advisor’s ability to employ Subadvisers to perform the duties set forth in Section 3 of this Agreement, the Adviser shall retain overall supervisory responsibility for the general management and investment of a Fund’s assets.
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The Adviser shall be liable under this Agreement: (i) for its failure to exercise good faith in the employment of a Subadviser; (ii) for its failure to exercise appropriate supervision of a Subadviser; and (iii) as may be otherwise agreed by the Trust and the Adviser in writing.
(b) Subject to the review and approval of the Board, the Adviser may (i) enter into and amend Subadvisory Agreements with new or current Subadvisers; and (ii) replace any Subadviser.
(c) Each Subadviser’s employment shall be evidenced by a separate written agreement approved by the Board and, to the extent required by law or regulation, by the shareholders of each applicable Fund.
SECTION 12. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trust’s Trustees and each Fund’s shareholders shall not be personally liable for any obligations of the Trust or a Fund under this Agreement, and the Adviser agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Fund to which the Adviser’s rights or claims relate in settlement of such rights or claims, and not to the Trust’s Trustees or that Fund’s shareholders.
SECTION 13. RIGHTS TO NAME
(a) If the Adviser ceases to act as investment adviser to any Fund whose name includes the term “Guardian” (the “Mark”) or, if the Adviser requests in writing, the Trust shall take prompt action to change the name of any Fund to a name that does not include the Mark. The Adviser may from time to time make available, without charge, for use by a Fund other marks or symbols owned by the Adviser or its parent entity, including marks or symbols containing the Mark or any variation thereof, as the Adviser deems appropriate (“Other Marks”). Upon the Adviser’s written request, the Trust shall cease to use any Mark or Other Marks. The Trust acknowledges that any rights in the Mark and Other Marks which may exist on the date of this Agreement or arise hereafter are, and under any and all circumstances shall continue to be, the sole property of the Adviser or its parent entity, as applicable. The Adviser may permit other parties, including other investment companies, to use the Marks and Other Marks without the consent of the Trust. The Trust shall not use the Mark or Other Marks in conducting any business other than that of an investment company registered under the 1940 Act without the consent of the Adviser.
(b) The Adviser shall not use the name of the Trust or a Fund on any checks, bank drafts, bank statements or forms for other than internal use in a manner not approved by the Trust prior thereto in writing; provided however, that the approval of the Trust shall not be required for the use of the Trust’s or a Fund’s name which merely refers in accurate and factual terms to the Trust or a Fund in connection with Adviser’s role hereunder or which is required by any appropriate regulatory, governmental or judicial authority; and further provided that in no event shall such approval be unreasonably withheld or delayed.
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SECTION 14: AFFILIATIONS OF PARTIES
Subject to and in accordance with the Organic Documents, the organizational documents of the Adviser, and the 1940 Act, the Trustees, officers, agents, or shareholders of a Fund are or may be Advisory Representatives of the Adviser as directors, officers, shareholders, agents, or otherwise and Advisory Representatives are or may be interested persons of the Trust as Trustees, officers, agents, shareholders, or otherwise. The Adviser and its affiliates may be interested persons of the Trust. Such relationships shall be governed by the aforementioned governing instruments.
SECTION 15. CONFIDENTIALITY
(a) “Confidential Information” includes Trust Records and all tangible and intangible information and materials being disclosed in connection with this Agreement by one of the parties to this Agreement (“Disclosing Party”) to another party to this Agreement (“Receiving Party”), in any form or medium (and without regard to whether the information is owned by a party to this Agreement (each, a “Party”) or by a third party), that satisfy at least one of the following criteria:
(i) information related to a Disclosing Party’s, its respective affiliates’ or its third-party licensors’ or vendors’ trade secrets, customers, business plans, procedures, strategies, forecasts or forecast assumptions, operations, methods of doing business, records, finances, assets, technology, software, systems data or other proprietary or confidential business or technical information;
(ii) information designated as confidential in writing by the Disclosing Party or information that the Receiving Party should reasonably know to be information that is of a confidential or proprietary nature; or
(iii) any information derived from, or developed by reference to or use of, any information described in the preceding clauses (i) and (ii);
provided, however, that, notwithstanding the foregoing, the following shall not be considered Confidential Information: (iv) information that is disclosed to the Receiving Party without any obligation of confidentiality by a third person who has a right to make such disclosure; (v) information that is or becomes publicly known without violation of this Agreement by the Receiving Party; or (vi) information that is independently developed by the Receiving Party or its employees or affiliates without reference to the Disclosing Party’s information.
(b) Except as expressly provided otherwise herein, each Party shall, during the term of this Agreement: (i) use a level of care no less rigorous than that taken to protect its own Confidential Information of a similar nature (but in no event less than a reasonable level of care) to keep confidential, and to prevent any unauthorized disclosure of, any Confidential Information of the other Party, (ii) use such Confidential Information only in connection with this Agreement, (iii) not make any commercial use of such Confidential Information for the benefit of itself or any third party beyond the scope of this Agreement, and (iv) except where required by law, order, or demand of any governmental or regulatory authority, or as required or permitted by this Agreement, not make any such Confidential Information, or parts thereof, available to any third party. If any Party receives a request or demand from a third party to inspect any documents or other hard or electronic materials containing Confidential Information, the Party receiving such a request or demand shall endeavor to notify the applicable Party and to secure instructions to produce the requested Confidential Information from that Party or an authorized person of that Party.
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(c) Each Party shall only reproduce another Party’s Confidential Information to a third party to the extent necessary to permit it to meet its obligations under this Agreement, and shall notify the other party promptly if the other Party’s Confidential Information is disclosed in violation of the provisions of this Agreement or is otherwise lost or unaccounted for. Each party shall have the right to disclose another Party’s Confidential Information to its employees, officers, directors, advisers, attorneys, consultants, vendors, affiliates, and third-party service providers (the “Representatives”) who have an obligation to keep such Confidential Information confidential in accordance with the terms of this Agreement or substantially similar terms. Each Party shall be liable for a breach of confidentiality by its Representatives.
(d) The Trust consents to the disclosure by the Adviser to third parties of its investment results from management of a Fund’s assets: (i) as part of composite investment results; or (ii) otherwise, if approved in advanced by the Trust, which such approval shall not be unreasonably withheld. Each Party consents to the disclosure to third parties of its relationship with the other Party, including the value of Trust assets, collectively, managed by the Adviser from time to time.
SECTION 16. CERTIFICATIONS; DISCLOSURE CONTROLS AND PROCEDURES
The Adviser acknowledges that, in compliance with the Sarbanes-Oxley Act of 2002 (“SOX”), and the implementing regulations thereunder, the Trust is required to make certain certifications and has adopted disclosure controls and procedures (“DCP”). To the extent reasonably requested by the Trust, the Adviser agrees to use its commercially reasonable efforts to assist the Trust in complying with SOX and implementing the DCP. The Adviser agrees to inform the Trust of any material developments relating to the services it provided under this Agreement that the Adviser reasonably believes is relevant to the Trust’s certification obligations under SOX.
SECTION 17. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both Parties hereto and, if required by the 1940 Act, by a vote of a majority of the outstanding voting securities of each Fund.
(b) Neither party to this Agreement shall be liable to the other Party for consequential damages under any provision of this Agreement.
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(c) This Agreement shall be governed by, and the provisions of this Agreement shall be construed and interpreted under and in accordance with, the laws of the State of Ohio; provided, however, that applicable federal law shall apply if such law preempts relevant state law.
(d) This Agreement constitutes the entire agreement between the Parties hereto and supersedes any prior agreement between those Parties with respect to the subject matter hereof, whether oral or written.
(e) This Agreement may be executed by the Parties hereto on any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument.
(f) If any part, term, or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the Parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid.
(g) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.
(h) Notices, requests, instructions, and communications received by the Parties at their respective principal places of business, as indicated above, or at such other address as a Party may have designated in writing, shall be deemed to have been properly given.
(i) The terms “vote of a majority of the outstanding voting securities”, “interested person”, “affiliated person,” “control” and “assignment” shall have the meanings ascribed thereto in the 1940 Act. 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.
(j) Each of the undersigned warrants and represents that they have full power and authority to sign this Agreement on behalf of the Party indicated and that their signature shall bind the Party indicated to the terms hereof and each Party hereto warrants and represents that this Agreement, when executed and delivered, shall constitute a legal, valid and binding obligation of the Party, enforceable against the party in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties.
(k) The provisions of Sections 3(g)-(i), 3(k), 6, 7, the second paragraph of 11(a), 12-13, 15, 16, and 17 shall survive any termination of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written.
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CAPITOL SERIES TRUST on behalf of its Series listed in Appendix A
| ||
| By: | ||
| Name: Matthew J. Miller | ||
| Title: President | ||
| GUARDIAN CAPITAL LP | ||
| By: | ||
| Name: | ||
| Title: | ||
| By: | ||
| Name: | ||
| Title: | ||
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CAPITOL SERIES TRUST
INVESTMENT ADVISORY AGREEMENT
Appendix A
|
Fund |
Fee as a % of the Annual Average Daily Net Assets of the Fund |
|
Guardian Capital Fundamental Global Equity Fund |
0.80% |
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EXHIBIT B
CAPITOL SERIES TRUST
FORM OF NEW INVESTMENT SUBADVISORY AGREEMENT
GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND
THIS SUB-ADVISORY AGREEMENT (“Agreement”) is made as of _____________, 2021 (the “Effective Date”), by and between Guardian Capital LP, a limited partnership organized under the laws of the Province of Ontario, Canada, with its principal office and place of business at 199 Bay Street, Suite 3100, Toronto, Ontario, M5L1E8 (“Manager”), and GuardCap Asset Management Limited a company incorporated and registered in the United Kingdom (no. 04667528), having its registered office at 6th Floor, 11 Charles II Street, St. James’s, London SW1Y 4NS (“Sub-Adviser”).
WHEREAS, Manager has by separate contract agreed to serve as the investment adviser to the Guardian Capital Fundamental Global Equity Fund (the “Fund”), a series portfolio of the Capitol Series Trust (the “Trust”), an Ohio business trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end diversified management investment company;
WHEREAS, Manager’s contract with the Trust allows it to delegate certain investment advisory services to other parties; and
WHEREAS, Manager desires to retain Sub-Adviser to perform certain discretionary investment sub-advisory services for the Fund, and Sub-Adviser is willing to perform such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows:
| 1. | SERVICES TO BE RENDERED BY SUB-ADVISER. |
| (a) | INVESTMENT PROGRAM. Subject to the control and supervision of the Board of Trustees of the Fund (the “Board”) and Manager, Sub-Adviser shall, at its expense, continuously furnish to the Fund an investment program for such portion, if any, of Fund assets that are allocated to it by Manager from time to time. With respect to such assets, Sub-Adviser will make investment decisions and will place all brokerage orders for the purchase and sale of portfolio securities. |
In the performance of its duties, Sub-Adviser will act in the best interests of the Fund and will comply with:
| (i) | applicable laws and regulations, including, but not limited to, the 1940 Act; |
| (ii) | the terms of this Agreement; |
| (iii) | the stated investment objective, policies and restrictions of the Fund, as stated in the then-current registration statement of the Fund; and |
| (iv) | such other guidelines as the Board or Manager may establish. |
Manager shall be responsible for providing Sub-Adviser with the Trust's Declaration of Trust, as filed with the Secretary of State of Ohio on September 27, 2013, and all amendments thereto or restatements thereof, the Trust’s Bylaws and amendments thereto, resolutions of the Trust’s Board authorizing the appointment of Sub-Adviser and approving this Agreement and current copies of the materials specified in Subsections (a)(iii) and (iv) of this Section 1. At such times as may be reasonably requested by the Board or Manager, Sub-Adviser will provide them with economic and macro investment analysis and reports, and make available to the Board any economical, statistical, or investment services.
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| (b) | AVAILABILITY OF SUB-ADVISER. Sub-Adviser, at its expense, will provide or make available to Manager and/or the Board information and access to its portfolio managers and other appropriate personnel for periodic commentaries regarding the performance of the Fund as may be reasonably requested from time to time by Manager, the Board, Chief Compliance Officer of the Trust (“Trust CCO”) or as otherwise may be specified by Manager in any due diligence and oversight procedures, including any quarterly certifications and compliance reports, that the Manager and/or Trust CCO may establish and amend from time to time (the “Procedures”). |
| (c) | SUB-ADVISER EXPENSES. Sub-Adviser, at its expense, will pay for all expenses that are required for it to execute its duties under this Agreement and any other expenses the Sub-Adviser agrees in writing to bear. Sub-Adviser shall not be obligated pursuant to this Agreement to pay any expenses of or for the Fund not expressly assumed by Sub-Adviser pursuant to this Agreement. |
| (d) | COMPLIANCE REPORTS. Sub-Adviser, at its expense, will provide Manager and/or Trust CCO with periodic compliance reports relating to its duties under this Agreement and on an as needed basis, but shall furnish such compliance reports at least on a quarterly basis. Such compliance reports shall, at a minimum, contain information required by the Procedures, and they shall be delivered as frequently as the Procedures may call for or as frequently as may be reasonably requested by the Manager, Board and/or the Trust CCO. |
| (e) | VALUATION. As may be reasonably requested from time to time by the Manager and the Fund’s other service providers, Sub-Adviser shall assist in the valuation of the portfolio securities of the Fund and obtain information about securities that may be purchased for the Fund by the Sub-Adviser with respect to which reliable prices are not available through customary pricing services and otherwise assist the Fund in pricing such assets appropriately. Sub-Adviser agrees to make commercially reasonable efforts to promptly bring to the attention of Manager any events that Sub-Adviser determines to be “significant events” that may come to the attention of Sub-Adviser and that Sub-Adviser believes are reasonably likely to affect the price of such securities. Manager acknowledges and agrees that (i) any such information provided by Sub-Adviser may be proprietary to Sub-Adviser or otherwise consist of nonpublic information, (ii) nothing in this Agreement shall require Sub-Adviser to provide any information in contravention of applicable legal or contractual requirements, and (iii) any such information will be used only for the purpose of pricing portfolio securities and will be maintained as confidential; provided, however, that none of the conditions in this sentence shall preclude the Trust’s CCO (x) from having access to such information, (y) from making appropriate public disclosures or (z) from maintaining such information as part of the Trust’s books and records as required by federal securities laws. |
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| (f) | EXECUTING PORTFOLIO TRANSACTIONS. Sub-Adviser will place all orders pursuant to its investment determinations for the Fund either directly with the issuer or through broker-dealers selected by Manager. Additional broker-dealers may be suggested by Sub-Adviser, and Manager’s approval of such broker-dealers may not be unreasonably withheld. Sub-Adviser shall use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain the most favorable price and execution available, Sub-Adviser, bearing in mind the Fund’s best interests at all times, shall consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission and dealer’s spread or mark-up, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the general execution and operational facilities of the broker- dealer and the quality of service rendered by the broker-dealer in other transactions. Subject to such policies as the Board may determine, Sub-Adviser shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused the Fund to pay a broker-dealer that provides brokerage and research services to Sub-Adviser an amount of commission for effecting a portfolio investment transaction in excess of the amount of commission another broker-dealer offering equally good execution capability in the portfolio investment would have charged for effecting that transaction if Sub-Adviser determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker-dealer, viewed in terms of either that particular transaction or Sub-Adviser’s overall responsibilities with respect to the Fund and to other clients of Sub-Adviser as to which Sub-Adviser exercises investment discretion. Any entity or person associated with Manager or Sub-Adviser that is a member of a national securities exchange is authorized to effect any transaction on such exchange for the account of the Fund that is permitted by Section 11(a) of the Securities Exchange Act of 1934, as amended, and Sub-Adviser and/or Manager may retain compensation for such transactions. |
Sub-Adviser shall recommend brokers for inclusion on an approved broker list for the Fund, subject to approval by the Manager.
The Sub-Adviser's policy with regards Best Execution has been provided to Manager.
| (g) | PROXY VOTING. Sub-Adviser shall vote proxies for the Fund in a manner consistent with the Sub-Adviser’s Proxy Voting Policy and the Fund’s disclosure documents and keep the Fund and Manager informed as to such voting. Sub-Adviser shall assist the Trust CCO in compiling the proxy voting record for submission to the Securities and Exchange Commission (“SEC”) on Form N-PX on a periodic basis and shall, upon request, review drafts of such submission prior to filing. |
| 2. | CODE OF ETHICS. Sub-Adviser has adopted a written code of ethics (“Sub-Adviser’s Code of Ethics”) that complies with the requirements of Rule 17j-1 under the 1940 Act. Sub-Adviser shall provide the Sub-Adviser’s Code of Ethics to the Trust prior to this Agreement being presented to the Board for initial approval, as well as the certification contemplated by Rule 17j-1. Sub-Adviser shall seek to ensure that its Access Persons (as defined in the Sub-Adviser’s Code of Ethics) comply in all material respects with the Sub-Adviser’s Code of Ethics, as in effect from time to time. Thereafter, upon request, Sub-Adviser shall provide the Trust with a (i) copy of Sub-Adviser’s Code of Ethics, as in effect from time to time, and any proposed amendments thereto that the Trust CCO determines should be presented to the Board, and (ii) certification that it has adopted procedures reasonably necessary to prevent Access Persons from engaging in any conduct prohibited by Sub-Adviser’s Code of Ethics. Annually, Sub-Adviser shall furnish a written report to the Board, which complies with the requirements of Rule 17j-1, concerning Sub-Adviser’s Code of Ethics. Sub-Adviser shall respond to requests for information from the Trust as to violations of Sub-Adviser’s Code of Ethics by Access Persons and the sanctions imposed by Sub-Adviser. Sub-Adviser shall notify the Trust as soon as practicable after it becomes aware of any material violation of Sub-Adviser’s Code of Ethics, whether or not such violation relates to a security held by any Fund. |
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| 3. | BOOKS AND RECORDS. Pursuant to applicable rules under the 1940 Act and other relevant laws, including the Investment Advisers Act of 1940 (the “Advisers Act”), Sub-Adviser agrees that: (a) all records it maintains for the Fund are the property of the Fund; (b) it will surrender promptly to the Trust or Manager any such records (or copies of such records) upon request from the Manager, Trust or the Trust’s CCO; (c) it will maintain the records that the Fund and the Adviser are required to maintain pursuant to the 1940 Act and the Advisers Act insofar as such records relate to Sub-Adviser’s services pursuant to this Agreement; and (d) it will preserve for the periods prescribed by the 1940 Act and the Advisers Act the records it maintains for the Fund. Notwithstanding subsection (b) above, Sub-Adviser may maintain copies of such records to comply with its recordkeeping obligations. |
| 4. | OTHER RELATIONSHIPS. It is understood that Sub-Adviser and persons controlled by or under common control with Sub-Adviser have, and will continue to have, advisory, management service and other agreements with other organizations and persons, as well as other interests and businesses. Nothing in this Agreement is intended to preclude such other business relationships. |
| 5. | REPRESENTATIONS AND WARRANTIES. |
| (a) | Sub-Adviser represents and warrants to Manager as follows: |
| (i) | PROPERLY REGISTERED. Sub-Adviser is registered with the SEC as an investment adviser under the Advisers Act, and will remain so registered for the duration of this Agreement. Sub-Adviser is not prohibited by the Advisers Act or the 1940 Act from performing the services contemplated by this Agreement, and to the best knowledge of Sub-Adviser, there is no proceeding or investigation that is reasonably likely to result in Sub-Adviser being prohibited from performing the services contemplated by this Agreement. Sub-Adviser agrees to promptly notify the Trust of the occurrence of any event that would disqualify Sub-Adviser from serving as an investment adviser to an investment company. Sub-Adviser is in compliance in all material respects with all applicable federal and state law in connection with its investment management operations. |
| (ii) | ADV DISCLOSURE. Sub-Adviser has provided the Board with a copy of its Form ADV and will, promptly after amending its Form ADV, furnish a copy of such amendments to the Trust. The information contained in Sub-Adviser’s Form ADV is accurate and complete in all material respects and does not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The Manager on behalf of itself and on behalf of the Fund acknowledges receipt of a copy of Part 2a and Part 2b of the Sub-Adviser’s Form ADV in compliance with Rule 204-3(b) under the Investment Advisor’s Act of 1940, as amended. |
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| (iii) | FUND DISCLOSURE DOCUMENTS. Sub-Adviser has reviewed and will in the future review the registration statement and any amendments or supplements thereto, the annual or semi-annual reports to shareholders, other reports filed with the Commission and any marketing material of the Fund (collectively the “Disclosure Documents”) and represents and warrants that with respect to disclosure about Sub-Adviser, the manner in which Sub-Adviser manages the Fund or information relating directly or indirectly to Sub-Adviser, such information provided by Sub-Adviser in connection with the preparation of such Disclosure Documents contain or will contain, as of the date thereof, no untrue statement of any material fact and does not and will not omit any statement of material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. |
| (iv) | INSURANCE. Sub-Adviser maintains errors and omissions insurance coverage in an appropriate amount and shall provide prior written notice to the Trust (i) of any material changes in its insurance policies or insurance coverage, or (ii) if any material claims will be made on its insurance policies. Furthermore, Sub-Adviser shall, upon reasonable request, provide the Trust and Manager with any information it may reasonably require concerning the amount of or scope of such insurance. |
| (v) | NO DETRIMENTAL AGREEMENT. Other than allocation and aggregation policies and procedures that are reasonably designed to seek to treat all of the Sub Advisor’s clients equitably, Sub-Adviser has no arrangement or understanding with any party, other than Manager and the Trust, that would influence the decision of Sub-Adviser with respect to its selection of securities for the Fund and its management of the assets of the Fund, and that all selections shall be done in accordance with what is in the best interest of the Fund. |
| (vi) | CONFLICTS. Sub-Adviser shall act honestly, in good faith and in the best interests of its clients and the Fund. Sub-Adviser maintains a Code of Ethics, which defines the standards by which Sub-Adviser conducts its operations consistent with its fiduciary duties and other obligations under applicable law. The Sub-Adviser’s policy dealing with the identification and management of conflicts of interest has been provided to Manager. |
| (vii) | REPRESENTATIONS. The representations and warranties in this Section 5(a) shall be deemed to be made on the date this Agreement is executed and at the time of delivery of the quarterly compliance report required by Section 1(d). |
| (b) | Manager represents and warrants to Sub-Adviser as follows: |
| (i) | PROPERLY REGISTERED. Manager is registered with the SEC as an investment adviser under the Advisers Act, and will remain so registered for the duration of this Agreement. Adviser is not prohibited by the Advisers Act or the 1940 Act from performing the services contemplated by this Agreement, and to the best knowledge of Manager, there is no proceeding or investigation that is reasonably likely to result in Manager being prohibited from performing the services contemplated by this Agreement. Manager agrees to promptly notify Sub-Adviser of the occurrence of any event that would disqualify Manager from serving as an investment adviser to an investment company. Manager is in compliance in all material respects with all applicable federal and state law in connection with its investment management operations. |
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| (ii) | ADV DISCLOSURE. Manager has provided the Board with a copy of its Form ADV and will, promptly after amending its Form ADV, furnish a copy of such amendments to the Sub-Adviser. The information contained in Manager’s Form ADV is accurate and complete in all material respects and does not omit to state any material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. |
| (iii) | FUND DISCLOSURE DOCUMENTS. Manager has reviewed and will in the future review the Disclosure Documents and represents and warrants that with respect to disclosure about Manager, the manner in which Manager overseas the Fund or information relating directly or indirectly to Manager, such information provided by Manager in connection with the preparation of such Disclosure Documents contain or will contain, as of the date thereof, no untrue statement of any material fact and does not and will not omit any statement of material fact which was required to be stated therein or necessary to make the statements contained therein not misleading. |
| (iv) | INSURANCE. Manager maintains errors and omissions insurance coverage in an appropriate amount and shall provide prior written notice to the Sub-Adviser (i) of any material changes in its insurance policies or insurance coverage, or (ii) if any material claims will be made on its insurance policies. |
| (v) | CONFLICTS. Manager shall act honestly, in good faith and in the best interests of its clients and the Fund. Manager maintains a Code of Ethics, which defines the standards by which Manager conducts its operations consistent with its fiduciary duties and other obligations under applicable law. |
| (vi) | REPRESENTATIONS. The representations and warranties in this Section 5(b) shall be deemed to be made on the date this Agreement is executed. |
| 6. | COMPENSATION. Manager will pay Sub-Adviser for Sub-Adviser’s services rendered pursuant to this Agreement the compensation as set forth in Schedule A (“Compensation”), which schedule can be modified from time to time, subject to any necessary approvals required by the 1940 Act, the rules promulgated thereunder, and the interpretations of the staff of the Securities and Exchange Commission. Such Compensation shall be paid by Manager (and not by the Fund). Such Compensation shall be payable for each quarter within twenty (20) Business Days after the end of such quarter. If Sub-Adviser shall serve for less than the whole of a quarter, the Compensation as specified shall be prorated as of termination date. The calculation of such Compensation shall be determined at a valuation as of the last trading day for the quarter end and shall be paid in arrears, within twenty (20) Business days after the last trading day. |
| 7. | CONFIDENTIALITY. Due to the nature of the relationships between the parties to this Agreement, the terms of this Agreement related to the compensation payable hereunder shall be kept in confidence by Manager and Sub-Adviser. Except as required by law, including but not limited to, the 1940 Act, or otherwise permitted by the Manager, the only permitted disclosure of the terms of this Agreement shall be by Manager to its auditors, legal and compliance counsel, the Board, the Fund’s other service providers, and by Sub-Adviser to its auditors, accounting firm and legal, compliance counsel, the board of trustees/directors of any other investment company that the Sub-Adviser currently serves in an advisory capacity, and in response to due diligence questionnaires related to its investment advisory business, and in the marketing of the Sub-Adviser’s other products. Either party may disclose the terms of this Agreement if under subpoena, but has to provide the other party with written notice first, to the extent permissible by law. Either party may also disclose the terms of this Agreement during an SEC examination. For all other disclosures of the terms of this Agreement, the disclosing party shall receive written approval from the other party prior to disclosure. |
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Due to the sensitivity of the Agreement any violation of this section by the Manager shall be deemed to be a Material Breach (defined below).
Notwithstanding the foregoing, the Board and/or the Trust shall not be precluded from disclosing anything in this Agreement as the Board and/or the Trust deems necessary and/or appropriate.
| 8. | AMENDMENT OF AGREEMENT. Except to the extent permitted by applicable law, interpretation of the SEC and its staff and any exemptive orders issued by the SEC, this Agreement shall not be materially amended unless such amendment is approved by the vote, cast in person at a meeting called for the purpose of voting on such approval, of a majority of the members of the Board of Trustees who are not parties to this Agreement or interested persons of any such party, the Fund, Manager or Sub-Adviser (the “Independent Trustees”) and, to the extent required by the 1940 Act, by the affirmative vote of a majority of the outstanding shares of the Fund. |
| 9. | DURATION AND TERMINATION OF THE AGREEMENT. This Agreement shall become effective upon its execution; provided, however, that this Agreement shall not become effective unless it has first been approved (a) by a vote of the Independent Trustees, cast in person at a meeting called for the purpose of voting on such approval, and (b) if required under the 1940 Act, by an affirmative vote of a majority of the outstanding voting shares of the Fund. This Agreement shall remain in full force and effect continuously thereafter, except as follows: |
| (a) | DURATION. This Agreement will terminate automatically, without the payment of any penalty, unless within two years after its initial effectiveness and at least annually thereafter, the continuance of the Agreement is specifically approved by (i) the Board or the shareholders of the Fund by the affirmative vote of a majority of the outstanding shares of the Fund, and (ii) a majority of the Independent Trustees, by vote cast in person at a meeting called for the purpose of voting on such approval. If the continuance of this Agreement is submitted to the shareholders of the Fund for their approval and such shareholders fail to approve such continuance as provided herein, Sub-Adviser may continue to serve hereunder in a manner consistent with the 1940 Act and the rules thereunder. |
| (b) | TERMINATION BY THE BOARD OR SHAREHOLDERS. The Board, or pursuant to a vote of a majority of the outstanding voting shares of the Fund, the Trust, on behalf of the Fund, may at any time terminate this Agreement, without the payment of any penalty, by providing sixty (60) days’ written notice delivered or mailed by registered mail, postage prepaid, to Sub-Adviser. The Board may also terminate this Agreement upon a Material Breach (as defined below) effective immediately or as of such time as the Board deems appropriate. |
| (c) | TERMINATION BY PARTIES. Either party may at any time terminate this Agreement, without the payment of any penalty, by providing sixty (60) days’ advance written notice delivered or mailed by registered mail, postage prepaid, to the other party. |
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| (d) | ASSIGNMENT. This Agreement shall terminate, without the payment of any penalty, in the event of its assignment as that term is defined under the 1940 Act. |
| (e) | NO PREJUDICE AND TRANSITION. Any notice of termination served on Sub-Adviser by Manager shall be without prejudice to the obligation of Sub-Adviser to complete transactions already initiated or acted upon with respect to the Fund. Upon termination without proper notice as defined in this Agreement by Manager, Sub-Adviser will be paid all reasonable expenses Sub-Adviser necessarily incurs in terminating the Agreement. Upon termination of this Agreement, the duties of Manager delegated to Sub-Adviser under this Agreement automatically shall revert to Manager. |
| 10. | MATERIAL BREACH. Due to the nature of this Agreement and of the services that are to be offered under it, violations of Sections 1(d) (Compliance Reports), 5 (Representations and Warranties), 6 (Compensation), 7 (Confidentiality), or 11 (Notification to Manager) would be deemed a violation of a severe nature (each a “Material Breach”). With respect to Section 6 of this Agreement, a failure to comply with the provisions thereof that is not remedied within thirty (30) days from written notification received from Sub-Adviser, shall be deemed a Material Breach. Upon a Material Breach, the injured party shall be able to: |
| (a) | Terminate this Agreement without penalty and without any future or further payments; |
| (b) | Cease to perform all actions and responsibilities to the other party; |
| (c) | Seek arbitration as well as court remedies both “in law” as well as “in equity;” provided that no punitive or penalty damages may be awarded; and |
| (d) | Recover reasonable attorney’s fees. |
| 11. | NOTIFICATIONS |
To Manager.
Sub-Adviser promptly, within two (2) Business Days, shall notify Manager in writing of the occurrence of any of the following events:
| (a) | Sub-Adviser shall fail to be registered as an investment adviser under the Advisers Act with the SEC; |
| (b) | Sub-Adviser shall fail to comply or maintain any state or federal registration requirements for all governing entities, as well as SROs, that Sub-Adviser (whether through its own business or through activities that relate to the Fund) is subject to; |
| (c) | Sub-Adviser or any personnel shall have been served or otherwise have reason to believe that service is imminent of any action, suit, proceeding, formal inquiry or formal investigation, at law or in equity, before or by any court, public board or body, in each case, involving the affairs of the Fund; |
| (d) | Sub-Adviser or any personnel are required to answer affirmatively any of the disciplinary questions found in Form ADV or on the Form U-4; |
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| (e) | The departure of, or transfer of controlling interest in Sub-Adviser by, any key personnel responsible for the day to day management of the Fund or any material change to the ownership structure of the Sub-Advisor or any controlling entity thereof; |
| (f) | Any other occurrence that reasonably could have a material adverse impact on the ability of Sub-Adviser to provide the services provided for under this Agreement. |
Sub-Adviser promptly, within thirty (30) days, shall notify Manager in writing of the occurrence of any of the following events:
| (g) | Sub-Adviser changes its auditor, accountant, bookkeeper, counsel, or any other third-party service provider that participates in a material role in the financials or reporting of financials of the firm; |
| (h) | Sub-Adviser hires or terminates any key personnel that perform a material role in the investment decision making process of Sub-Adviser; |
| (i) | Sub-Adviser hires or terminates any personnel that perform a material role in the financials or reporting of financial information of Sub-Adviser; |
| (j) | If there is a material change in any of the roles or responsibilities of any key personnel that perform a material role in the investment decision making process of Sub-Adviser; or |
| (k) | If there is a material change in any of the roles or responsibilities of any key personnel that perform a material role in the financials or reporting of financials of Sub-Adviser. |
To The Sub-Adviser.
Manager promptly, within two (2) Business Days, shall notify Sub-Adviser in writing of the occurrence of any of the following events:
| (l) | Manager shall fail to be registered as an investment adviser under the Advisers Act with the SEC; |
| (m) | Manager shall fail to comply or maintain any state or federal registration requirements for all governing entities, as well as SROs, that Manager (whether through its own business or through activities that relate to the Fund) is subject to; |
| (n) | Manager or any personnel shall have been served or otherwise have reason to believe that service is imminent of any action, suit, proceeding, formal inquiry or formal investigation, at law or in equity, before or by any court, public board or body, in each case, involving the affairs of the Fund; |
| (o) | Manager or any personnel are required to answer affirmatively any of the disciplinary questions found in Form ADV or on the Form U-4; |
| (p) | The departure of, or transfer of controlling interest in Manager by, any management or other key personnel; |
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| (q) | Any other occurrence that reasonably could have a material adverse impact on the ability of Manager to provide the services provided for under this Agreement; or |
Manager promptly, within thirty (30) days, shall notify Sub-Adviser in writing of the occurrence of any of the following events:
| (r) | Manager changes its auditor, accountant, bookkeeper, counsel, or any other third party service provider that participates in a material role in the financials or reporting of financials of the firm; |
| (s) | Manager hires or terminates any key personnel that perform a material role in the operations of Manager; |
| (t) | Manager hires or terminates any personnel that perform a material role in the financials or reporting of financial information of Manager; |
| (u) | If there is a material change in any of the roles or responsibilities of any key personnel that perform a material role in the operations of Manager; or |
| (v) | If there is a material change in any of the roles or responsibilities of any key personnel that perform a material role in the financials or reporting of financials of Sub-Adviser. |
| 12. | USE OF NAME. Manager is specifically authorized to use the name, track record, and reputation of Sub-Adviser in relation to promoting the Fund until the termination of this Agreement. However, this shall not grant Manager or Sub-Adviser any ownership in each other’s firm. Also, this authorization specifically excludes discussion with potential investors as to the terms of this Agreement; except as required by applicable law. |
| 13. | BOARD COMMUNICATION. Sub-Adviser shall be permitted reasonable access and communication with the Board, provided that Sub-Adviser shall make commercially reasonable efforts to provide Manager with prior notice of such communication unless otherwise (i) required by the Fund’s policies and procedures, as determined in good faith by Sub-Adviser, or (ii) requested in writing by the Board. All other communications shall be directed through Manager. Sub-Adviser shall make itself (as well as its management) available to the Board as reasonably requested and as otherwise specified in this Agreement. |
| 14. | LIABILITY OF SUB-ADVISER. In the absence of its bad faith, negligence, willful default, fraud, or reckless disregard of its obligations and duties hereunder, Sub-Adviser shall not be subject to any liability to Manager, the Fund or their directors, Board of Trustees, officers or shareholders, for any act or omission in the course of, or connected with, rendering services hereunder. However, Sub-Adviser shall indemnify and hold harmless such parties from any and all claims, losses, expenses, obligations and liabilities (including reasonable attorney’s fees) which arise or result from Sub-Adviser’s bad faith, negligence, willful default, fraud, willful misconduct or reckless disregard of its duties hereunder. |
| 15. | LIABILITY OF TRUSTEES AND SHAREHOLDERS. Any obligations of the Fund under this Agreement are not binding upon the Board or the shareholders individually but are binding only upon the assets and property of the Trust with respect to the Fund. |
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| 16. | LIMITATION OF LIABILITY. Sub-Adviser is expressly put on notice of the limitation of liability as set forth in the Declaration of Trust or other Trust organizational documents and agrees that the obligations assumed by the Fund shall be limited in all cases to the Fund and the Fund’s assets, and Sub-Adviser shall not seek satisfaction of any such obligation from shareholders. In addition, Sub-Adviser shall not seek satisfaction of any such obligations from the Trustees of the Trust or any individual Trustee. Sub-Adviser understands that the rights and obligations of any Fund under the Declaration of Trust or other organizational document are separate and distinct from those of any of and all other funds within the Trust. |
| 17. | INDEMNIFICATION. Manager and Sub-Adviser agree to indemnify, defend and hold harmless the other party and its affiliates, and their respective officers, directors, partners, managers, employees and authorized agents from and against any and all claims, damages, liabilities, losses, costs and expenses, including reasonable attorneys' fees and costs, that such party and its affiliates and their respective officers, directors, partners, employees and authorized agents may suffer, which arise, result from, or relate to, this Agreement other than those caused by the bad faith, negligence, willful default, fraud, or willful misconduct of such party or the reckless disregard of such party’s duties hereunder. The parties hereto acknowledge and agree that the Sub-Adviser’s obligation to “defend” pursuant to the foregoing sentence shall be limited to circumstances where the Sub-Adviser is named or identified as a party in any claim, action, arbitration or other dispute that may invoke the terms of this Section 17. The indemnification provided for hereunder shall be in addition to any rights that the parties may have at law or otherwise and shall survive the termination of this Agreement. |
| 18. | ENFORCEABILITY. If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. This Agreement shall be severable as to each Fund. |
| 19. | GOVERNING LAW. This Agreement shall be construed in accordance with the laws of (i) the State of Ohio with respect to matters in which the Trust is a named party or (ii) the State of New York with respect to matters in which the Trust is not a named party, and in either case without giving effect to the conflicts of laws principles thereof, and in accordance with the 1940 Act. To the extent that the applicable laws of the State of Ohio or State of New York conflict with the applicable provisions of the 1940 Act, the latter shall control. |
| 20. | VENUE/JURISDICTION. In the event of the institution of any such action, suit or proceeding, each of the parties hereto hereby consents to the exclusive jurisdiction and venue of the courts of the (i) State of Ohio with respect to any matter in which the Trust is a named party, or (ii) State of New York or such other state where Manager’s corporate office is located with respect to any matter in which the Trust is not a named party, and each of the parties hereto further consents to the personal jurisdiction of such courts. Any action, suit or proceeding brought by or on behalf of any of the parties hereto relating to such matters shall be commenced, pursued, defended and resolved only in such courts and any appropriate appellate court having jurisdiction to hear an appeal from any judgment entered in such courts. The parties hereto agree that service of process may be made in any manner permitted by the rules of such courts and the laws of the State of Ohio or State of New York, as applicable. Each party further agrees that the exclusive choice of forum set forth in this section 20 does not prohibit the enforcement of any judgment obtained in that forum or any other appropriate forum. |
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| 21. | SEVERABILITY. 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 shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. |
| 22. |
PRIVACY POLICY.
(i) Sub-Adviser acknowledges that nonpublic customer information (as defined in Regulation S-P, including any amendments thereto) of customers of the Fund received from Manager is subject to the limitations on redisclosure and reuse set forth in Section 248.11 of such Regulation, and agrees such information (i) shall not be disclosed to any third party for any purpose without the written consent of Trust CCO unless permitted by exceptions set forth in Sections 248.14 or 248.15 of such Regulation and (ii) shall be safeguarded pursuant to procedures adopted under Section 248.30 of such Regulation if so required.
(ii) Notwithstanding Section 22(i), where the Sub-Adviser does receive and hold personal information, as defined under the EU General Data Protection Regulation (GDPR), in relation to the Manager and the Trust, for the purposes of performing its duties under this Agreement, the Sub-Adviser acknowledges and agrees that such information will only be held and processed in accordance with GDPR. |
| 23. | MIFID REGULATIONS AND DISCLOSURES. Under the MIFID Regulations the Sub-Adviser is required to make certain disclosures and representations to its clients. These disclosures and representations are set out in Schedule B. |
| 24. | ANTI-MONEY LAUNDERING AND SANCTIONS. The Sub-Adviser is subject to and strictly adheres to all applicable anti-money laundering laws and international embargoes and sanctions issued by competent entities and/or authorities and notably the European Union, United Nations and United States of America (OFAC). |
The Manager represents and warrants that the Fund has an appropriate program in place to adequately identify all underlying shareholders in the Fund in accordance with all applicable anti-money laundering regulations and international embargoes and sanctions issued by U.S. regulators and/or authorities.
| 25. | ENTIRE AGREEMENT. This Agreement contains the entire understanding and agreement of the parties. |
| 26. | DEFINITIONS. For the purposes of this Agreement, the terms “vote of a majority of the outstanding shares,” “affiliated person,” “control,” “interested person” and “assignment” shall have their respective meanings as defined in the 1940 Act and the rules thereunder subject, however, to such exemptions as may be granted by the SEC under said Act; and references to annual approvals by the Board of Trustees shall be construed in a manner consistent with the 1940 Act and the rules thereunder. “Business Day” means any day on which banks are open for business in New York City. |
| 27. | MISCELLANEOUS. The captions 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. Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is made less restrictive by a rule, or order of the SEC, whether of special or general application, such provision shall be deemed to incorporate the effect of such rule, or order. |
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IN WITNESS WHEREOF, Guardian Capital LP and GuardCap Asset Management Limited have each caused this instrument to be signed in duplicate on its behalf by its duly authorized representative, all as of the day and year first above written.
| Name and Title: | |||||
| Guardian Capital LP | |||||
| Attest: | By: | ||||
| Name: | |||||
| By: | Title: | ||||
| Attest: | By: | ||||
| Name: | |||||
| By: | Title: | ||||
| Name and Title: | |||||
| GuardCap Asset Management Limited | |||||
| Attest: | By: | ||||
| Name: | |||||
| By: | Title: | ||||
| Attest: | By: | ||||
| Name: | |||||
| By: | Title: | ||||
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SCHEDULE A
TO THE
GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND
SUB-ADVISORY AGREEMENT
BETWEEN
GUARDIAN CAPITAL LP
AND
GUARDCAP ASSET MANAGEMENT LIMITED
COMPENSATION
As compensation pursuant to Section 6 (Compensation) of the Guardian Capital LP (“Manager”) and GuardCap Asset Management Limited (”Sub-Adviser”), Manager shall pay Sub-Adviser the Compensation, computed and paid quarterly according to the schedule below.
Fees:
Sub-advisory fee: 0.60%
Expense Limitation:
The Manager has entered into an Expense Limitation Agreement with the Fund pursuant to which it is contractually responsible to the Fund for waiving fees and reimbursing expenses to meet the Fund’s expense ratio cap. In recognition of the expenses that will borne by the Manager in connection with the launch of the Fund, the Sub-Advisor has agreed with the Manager to contractually waive 20bps of its Sub-Advisory Fee until Fund assets under management reach $100 million.
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SCHEDULE B
TO THE
GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND
SUB-ADVISORY AGREEMENT
BETWEEN
GUARDIAN CAPITAL LP
AND
GUARDCAP ASSET MANAGEMENT LIMITED
MIFID REGULATIONS
This Schedule contains important information for all clients regarding The European Union (Markets in Financial Instruments) Regulations 2017 (the “Regulations”), which became effective from 3 January 2018.
The Regulations implement Directive 2014/65/EU of the European Parliament and of the Council on Markets in Financial Instruments (“MiFID II”) and Regulation (EU) No.600/2014 of the European Parliament and of the Council into Irish law. MiFID II is supplemented by, inter alia, the following Delegated Acts of the European Commission: Commission Delegated Regulation (EU) 2017/565, Commission Delegated Regulation (EU) 2017/567 and Commission Delegated Directive (EU) 2017/593.
The Regulations are intended to improve standards of investment services provided by investment management firms located and regulated in the EU to its clients. Investor protection rules are harmonized at an EU level so that investors, wherever they are residing, can feel confident in using the services of investment firms in any EU Member State, and benefit from increased protection, increased transparency and increased competition.
(i) Services
The Sub-Adviser provides portfolio management services in respect of the following financial instruments:
a. Transferrable securities;
b. Money-market Instruments;
c. Units in collective investment undertakings; and
d. FX forward contracts.
(ii) Financial Instruments
Under the Regulations the Sub-Adviser is required to inform its clients that Financial Instruments carry certain risks. A summary of information on Financial Instruments is set out in Appendix 1 to this Schedule.
(iii) Material Interests, Potential Conflicts of Duty and Inducements
The Manager’s attention is drawn to the fact that the Sub-Adviser is active in the management of a number of clients’ assets. In conducting such services, the Sub-Adviser, its affiliates or other persons connected with it or its other clients may have an interest, relationship or arrangement that is material or contrary to the service that the Sub-Adviser provides to you. In this regard the Sub-Adviser acknowledges its responsibility to effectively identify and prevent or manage any conflicts of interest that may arise bearing in mind the best interests of its clients. The Sub-Adviser has a Conflict of Interest Policy in place and it is available on request.
As required under the Regulations the Sub-Adviser will transfer to you any fees, commissions or non-monetary benefits received from any third party as soon as reasonably possible after receipt. It may retain minor nonmonetary benefits that it receives where such benefits enhance the quality of service provided to the Fund, are reasonable and proportionate and do not influence its duty to act in the Fund’s best interests. Where permitted by the Regulations, the Sub-Adviser may pay fees, commissions or provide non-monetary benefits to any third party. Details of the nature and amount of any such monetary or non-monetary benefit shall be disclosed to the Manager as required under the Regulations.
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The Sub-Adviser may also receive non-substantive information and material from third parties that is exempt from the restrictions on the receipt and payment of research under the Regulations.
(iv) Basis of Dealing and Best Execution
In effecting transactions for the Fund, the Sub-Adviser shall comply with the requirements in the Regulations to take all sufficient steps in executing relevant transactions for its clients to deliver the best possible result. These steps are documented in the Sub-Adviser’s Best Execution Policy which is available upon request. By providing the Sub-Adviser with an order after receipt of this Agreement the Trust is deemed to have provided consent to the Sub-Adviser’s Best Execution Policy. Further information on the entities the Sub-Adviser selects to provide order execution services are available on the Sub-Adviser’s website.
(v) Legal Entity Identifiers
By agreeing to this Agreement, the Manager confirms that it has obtained and will renew and maintain the Legal Entity Identifier (“LEI”) that pertains to it and the Fund as applicable. The Manager agrees to immediately inform the Sub-Adviser in writing of any changes to such LEI codes and of any new LEI codes issued to the Fund or any principals on behalf of which it acts upon request from the Sub-Adviser, the Manager will provide the Sub-Adviser with such information as is necessary for it to perform our obligations under applicable law or regulation.
If the Manager fails to provide the Sub-Adviser with the relevant LEI, the Sub-Adviser will be prohibited from entering into transactions on the Fund’s behalf and as a consequence the reserves the right to suspend activity on the Fund’s account until it has provided the Sub-Adviser with its LEI. Further, the Sub-Adviser reserves the right to terminate the portfolio management service if the Manager fails to provide an accurate and complete LEI.
“LEI code” means a validated and issued legal entity identifier code the length and construction of which are compliant with the ISO 17442 standard and which is included in the Global LEI database maintained by the Central Operating Unit appointed by The Legal Entity Identifier Regulatory Oversight Committee.
(vi) Reporting
The Sub-Adviser will send the Manager portfolio management valuation reports at a frequency agreed with the Manager but no less than annually.
The Sub-Adviser will send the Manager a report on losses by the end of that business day where the overall value of its portfolio, as evaluated at the beginning of each reporting period, depreciates by 10% and thereafter at multiples of 10%. If the threshold is exceeded on a non-business day, the Sub-Adviser will send this report by the end of the next business day.
(vii) Costs and Charges
The Sub-Adviser will separately provide the Manager with appropriate information in good time with regard to all costs and related charges in accordance with the Regulations. Such information shall include information relating to the portfolio management services and any third-party payments. The information about all costs and charges may be aggregated, and an itemized breakdown may be provided on request. Without prejudice to these obligations, the Manager hereby agrees to a limited application of the detailed information requirements on costs and associated charges contained in Article 50 of Commission Delegated Regulation (EU) 2017/565 of 25 April2016.
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(viii) Recording of Telephone Communications
Telephone conversations and electronic communications will be recorded where such communications result or may result in a transaction in a financial instrument. Internal telephone conversations and electronic communications that relate to the handling of orders and transactions will be recorded. A copy of the recording of such conversations and communications will be available on request for a period of up to seven years. By dealing with the Sub-Adviser after receiving signing this Agreement, it will assume that the Manager gives its consent to this practice.
(ix) Complaints
Should the Manager have any complaint about the Sub-Adviser’s conduct or performance under this Agreement, please direct such complaints to the Sub-Adviser’s Compliance Department UKComplianceTeam@guardiancapital.com. All complaints will be handled in accordance with the Sub-Adviser’s Complaints Policy, which is available on request.
(X) MiFID Consent
Under the Regulations the Sub-Adviser is required to obtain certain consents related to the publication of information and the execution of orders. Further information relating to this is set out in Appendix 2 to this Schedule.
APPENDIX 1
Information on Financial Instruments
Descriptions of the most comment types of Financial Instruments are outlined below.
| 1. | COLLECTIVE INVESTMENT SCHEMES |
| 1.1 These funds operate by allowing the monies to be pooled together and managed on behalf of the unit-holders by a management company. The investment strategy is set out in a prospectus, which is available upon request. These investment products are commonly known as investment funds. | |
| 1.2 These funds may be subject to volatility, especially in the short term and some are likely to be more volatile than others. This will be based, among other things, on the nature and size of the underlying securities and the liquidity/price of the underlying securities. The performance in any market environment will be impacted by the strategy being implemented and the underlying assets held within the fund. | |
| 1.3 In the event of the insolvency of the issuer of the instrument, there is a risk that you may lose some or all of your initial investment. |
| 2. | COMPANY SHARES (EQUITIES) |
| 2.1 Equities are shares in the ownership of a company - hence why they are sometimes simply called 'shares'. Share prices can be volatile and for this reason they should be considered as higher risk investments. However, because of the higher risks involved, equities generally provide better return over the longer term than other types of investment. Companies that make a profit may reward their shareholders by issuing dividends on a semi-annual or annual basis. Shareholders also benefit from any growth in the share price of the company, which is commonly known as capital gain. |
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2.2 Share portfolios are at a greater risk of significant loss if there is a lack of diversity i.e. an overreliance on stocks in one particular company, industry sector or country. The liquidity of shares is a critical factor, this refers to your ability to realize shares when you so wish. Shares in companies that are not traded frequently can be very difficult to sell. Many shares that are traded on Stock Exchanges are bought and sold infrequently and finding a buyer may not always be easy. As well as the Official List, the Irish Stock Exchange also operates a market called the Irish Enterprise Market, or IEX. The UK equivalent of IEX is the Alternative Investment Market, or AIM. IEX and AIM are markets designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached by comparison to larger or more established companies. Shares listed on these markets may not trade as frequently as other shares; in which case you may find it very difficult to sell shares that you buy.
2.3 In positive market conditions shares will tend to be one of the best performing asset classes, while in negative environments there is potential to lose much of your initial investment.
2.4 In the event of insolvency of the issuer of the share, there is a risk that you may lose some or all of your investment.
| 3. | MONEY MARKET INSTRUMENTS |
3.1 The money market is a highly liquid professional dealer market that facilitates the transfer of funds (generally in very large denominations) between borrowers and lenders. It generally relates to those instruments that allow for borrowing and lending periods ranging from one day to one year.
3.2 Although money market instruments carry less risk than long-term debt they are not completely without risk. Different instruments carry varying degrees of risk depending on the nature of the lending agreement and the identity of the lender. Potential investors should be aware of such details prior to entering into any money market transactions. In positive economic environments, money market instruments tend to be low-risk investments with returns in line with the prevailing interest rates available. However, in negative market conditions or times of market stress investors may suffer a capital loss. While generally very liquid instruments, in times of market crises, investors may have to exit their position at a discount to capital originally invested.
3.3 Common money market instruments include: Exchequer Notes, Commercial Paper, Treasury Bills, Repurchase Agreements and Bankers Acceptances.
3.4 In general, other than the cost of acquiring money market instruments, investors are not subject to any margin requirements or financial commitments / liabilities. As the value of money market instruments may fall as well as rise there is a risk that you may lose some or all of your original investment.
3.5 In the event of the insolvency of the issuer of the instrument, there is a risk that you may lose some or all of your original investment.
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APPENDIX 2
MIFID II Consent
| 1. | MIFID II and certain other laws and regulations permit the Sub-Adviser to provide information (e.g. policies) that are not addressed to the Manager personally by means of a website. By signing this Agreement, you give consent to the Sub-Adviser to provide such information via a website. |
| 2. | When executing orders on behalf of the Fund, the Sub-Adviser is required by the Markets in Financial Instruments Directive (“MiFID II”) to obtain consents in relation to how it instructs its approved brokers to handle certain of those orders. Upon signing this Agreement the Manager consents to: |
| a. | The execution of the Fund’s orders outside of a MiFID trading venue e.g. outside a Regulated Market, Multilateral Trading Facility or Organised Trading facility. |
| b. | Allowing the Sub-Adviser’s approved brokers to use their discretion not to immediately make public unexecuted limit orders in shares. The Sub-Adviser shall not request the broker they trade with to immediately make public any limit order in respect of shares admitted to trading on a Regulated Market or traded on a Trading Venue which is not immediately executed under prevailing market conditions. |
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EXHIBIT C
CAPITOL SERIES TRUST
FORM OF NEW OPERATING'S EXPENSES LIMITATION AGREEMENT
GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND
THIS AGREEMENT is made and entered into as of __________________, 2021, by and between Capitol Series Trust (the “Trust”), on behalf of its series portfolios as set forth on Appendix A (each a “Fund”), and Guardian Capital LP (the “Adviser”), a limited partnership organized under the laws of the Province of Ontario, Canada.
WHEREAS, the Trust is an Ohio business trust organized under an Agreement and Declaration of Trust dated September 18, 2013 (the “Trust Instrument”), and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company of the series type; and
WHEREAS, the Trust, on behalf of each Fund, and the Adviser have entered into an Investment Advisory Agreement dated _________________, 2021 (the “Advisory Agreement”), as amended, pursuant to which the Adviser provides investment advisory services to each Fund; and
WHEREAS, the Trust’s Board of Trustees (the “Board”) and the Adviser have determined that it is appropriate and in the best interests of each Fund and its shareholders to limit the expenses of each Fund and, therefore, have entered into this Agreement to maintain each Fund’s expense ratio within the Operating Expense Limit, as defined below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
| 1. | EXPENSE LIMITATION. |
| a. | Applicable Expense Limit. To the extent that the aggregate expenses of every character, including but not limited to investment advisory fees of the Adviser (but excluding (i) interest, (ii) taxes, (iii) brokerage fees and commissions, (iv) other extraordinary expenses not incurred in the ordinary course of a Fund’s business, (v) dividend expense on short sales, and (vi) indirect expenses such as acquired fund fees and expenses), incurred by a Fund in any fiscal year (“Fund Operating Expenses”), exceed the Operating Expense Limit, as defined in Section 1(b) below, such excess amount (the “Excess Amount”) shall be the liability of the Adviser. In determining the Fund Operating Expenses, expenses that a Fund would have incurred but did not actually pay because of expense offset or brokerage/service arrangements shall be added to the aggregate expenses so as not to benefit the Adviser. Additionally, fees reimbursed to a Fund relating to brokerage/services arrangements shall not be taken into account in determining the Fund Operating Expenses so as to benefit the Adviser. |
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| b. | Operating Expense Limit. A Fund’s maximum operating expense limit (each an “Operating Expense Limit”) in a year shall be that percentage of the average daily net assets of the Fund as set forth on Appendix A attached hereto and incorporated by this reference. |
| c. | Method of Computation. To determine the Adviser’s liability with respect to the Excess Amount, each month the Fund Operating Expenses for a Fund shall be annualized as of the last Fund business day of the month. If a Fund’s annualized Fund Operating Expenses for any month exceeds the Operating Expense Limit of that Fund, the Adviser shall first waive or reduce its investment advisory fee for such month by an amount sufficient to reduce the annualized Fund Operating Expenses to an amount no higher than the Fund’s Operating Expense Limit. If the amount of the waived or reduced investment advisory fee for any such month is insufficient to pay the Excess Amount, the Adviser shall also remit to the Fund an amount that, together with the waived or reduced investment advisory fee, is sufficient to pay such Excess Amount. |
| d. | Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the amount of the investment advisory fees waived or reduced and other payments remitted by the Adviser to each Fund with respect to the previous fiscal year shall equal the Excess Amount. |
| 2. | REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS. |
| a. | Reimbursement. During any fiscal year that the Advisory Agreement is in effect, if the estimated aggregate Fund Operating Expenses of a Fund are less than the Fund’s Operating Expense Limit, the Adviser may be entitled to reimbursement by such Fund, in whole or in part as provided below, of the fees or expenses waived or reduced by the Adviser and other payments remitted by the Adviser to such Fund pursuant to Section 1 hereof. The total amount of reimbursement to which the Adviser may be entitled (“Reimbursement Amount”) shall equal, at any time, the sum of all fees previously waived or reduced by the Adviser and all other payments remitted by the Adviser to the Fund pursuant to Section 1 hereof, for a period of 36 months from the date the fee waiver or expense reimbursement first occurred, less any reimbursement previously paid by such Fund to the Adviser pursuant to this Section 2, with respect to such waivers, reductions, and payments. Notwithstanding the foregoing, the Adviser shall only be entitled to reimbursement if the reimbursement payment does not cause the Fund to exceed the Operating Expense Limit set forth on Appendix A as well as any expense limitation in effect at the time the reimbursement is made. The Reimbursement Amount shall not include any additional charges or fees whatsoever, including, e.g., interest accruable on the Reimbursement Amount. |
| b. | Method of Computation. To determine a Fund’s accrual, if any, to reimburse the Adviser for the Reimbursement Amount, each month the Fund Operating Expenses of the Fund shall be annualized as of the last day of the month. If the annualized Fund Operating Expenses of the Fund for any month are less than the Operating Expense Limit of such Fund, such Fund, shall accrue into its net asset value an amount payable to the Adviser sufficient to increase the annualized Fund Operating Expenses of that Fund to an amount no greater than (i) the Operating Expense Limit of that Fund set forth on Appendix A, and (ii) any expense limitation in effect at the time the amount payable is accrued, provided that such amount paid to the Adviser will in no event exceed the total Reimbursement Amount. For accounting purposes, when the annualized Fund Operating Expenses of a Fund are below the Operating Expense Limit, a liability will be accrued daily for these amounts. |
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| c. | Year-End Adjustment. If necessary, on or before the last day of the first month of each fiscal year, an adjustment payment shall be made by the appropriate party in order that the actual Fund Operating Expenses of a Fund for the prior fiscal year (including any reimbursement payments hereunder with respect to such fiscal year) do not exceed the Operating Expense Limit. |
| d. | Limitation of Liability. The Adviser shall look only to the assets of a Fund for which it waived or reduced fees or remitted payments for reimbursement under this Agreement for payment of any claim hereunder, and neither the Fund, nor any of the Trust’s directors, officers, employees, agents, or shareholders, whether past, present or future shall be personally liable therefor. |
| 3. | TERM, MODIFICATION AND TERMINATION OF AGREEMENT. |
This Agreement with respect to a Fund shall continue in effect until the expiration date set forth on Appendix A (the “Expiration Date”). The Board may terminate this agreement at any time. This Agreement shall terminate automatically upon the termination of the Advisory Agreement.
| 4. | MISCELLANEOUS. |
| a. | Captions. The captions in this Agreement are included for convenience of reference only and in no other way define or delineate any of the provisions hereof or otherwise affect their construction or effect. |
| b. | Interpretation. Nothing herein contained shall be deemed to require the Trust or a Fund to take any action contrary to the Trust Instrument or the Trust’s Bylaws, or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Board of its responsibility for and control of the conduct of the affairs of the Trust or each Fund. |
| c. | Definitions. Any question of interpretation of any term or provision of this Agreement, including but not limited to the investment advisory fee, the computations of net asset values, and the allocation of expenses, having a counterpart in or otherwise derived from the terms and provisions of the Advisory Agreement or the 1940 Act, shall have the same meaning as and be resolved by reference to such Advisory Agreement or the 1940 Act. |
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the day and year written above.
| CAPITOL SERIES TRUST, on behalf each of its series set forth on Appendix A | ||
| Name: Matthew J. Miller | ||
| Title: President | ||
| GUARDIAN CAPITAL LP | ||
| Name: | ||
| Title: | ||
| Name: | ||
| Title: |
4
Expense Limitation Agreement
between
Capitol Series Trust
and
Guardian Capital LP
Appendix A
_________________, 2021
| Fund | Operating Expense Limit | Effective Date | Expiration Date |
| Guardian Capital Fundamental Global Equity Fund | 0.99% | ** | 1/31/23 |
| ** | The Effective Date of the Operating Expense Limit for the Fund shall be the date on which the Investment Advisory Agreement between Capitol Series Trust and Guardian Capital LP on behalf of the Fund is declared effective by the shareholders of the Fund at a Special Meeting of shareholders of the Fund called for that p |
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EXHIBIT D
INFORMATION CONCERNING OWNERSHIP OF SHARES OF THE GUARDIAN CAPITAL FUNDAMENTAL GLOBAL EQUITY FUND BY MANAGEMENT, TRUSTEES AND PRINCIPAL SHAREHOLDERS
| Guardian Capital Fundamental Global Equity Fund |
Outstanding Shares
On the Record Date, the Guardian Capital Fundamental Global Equity Fund had 2,315,091.3940 shares outstanding. The Fund has only one share class – Institutional Shares.
Ownership of Shares By Trustees and Representatives of Fund Management, Including Employees of the Adviser
As of the Record Date, to the best of the knowledge of the Trust, Trustees and Officers of the Trust beneficially owned less than 1% of the outstanding shares of the Guardian Capital Fundamental Global Equity Fund. Employees of the Adviser, as a group, owned less than 1% of the outstanding shares of the Guardian Capital Fundamental Global Equity Fund.
Greater than 25% Shareholders
As of the Record Date, beneficial owners of more than 25% of the shares of the Guardian Capital Fundamental Global Equity Fund are listed in the table below:
| Guardian Capital Fundamental Global Equity Fund – 25% Shareholders | ||
| Name and Address | No. of Shares | % of Fund |
|
Alexandria Bancorp Limited P.O. Box 2428 Georgetown KY 1-1105 Grand Cayman |
2,006,032.5490 | 86.65% |
Greater than 5% Shareholders
As of the Record Date, beneficial owners of more than 5% of the shares of the Guardian Capital Fundamental Global Equity Fund are listed in the table below:
| Guardian Capital Fundamental Global Equity Fund – 5% Shareholders | ||
| Name and Address | No. of Shares | % of Fund |
|
Alexandria Bancorp Limited P.O. Box 2428 Georgetown KY 1-1105 Grand Cayman |
2,006,032.5490 | 86.65% |