INVESTMENT ADVISORY CONTRACT
AGREEMENT, made by and between Pennsylvania Avenue Funds, a
Delaware business trust, (hereinafter called "Trust") and Pennsylvania
Avenue Advisers LLC, a District of Columbia limited liability company
(hereinafter called "Investment Adviser")
WITNESSETH: WHEREAS, Trust engages in the business of investing
and reinvesting its assets and property in various stocks and
securities and Investment Adviser engages in the business of providing
investment advisory services.
1. The Company hereby employs the Investment Adviser, for the
period set forth in Paragraph 6 hereof, and on the terms set forth
herein, to render investment advisory services to the Trust, subject to
the supervision and direction of the Board of Trustees of the Trust.
The Investment Adviser hereby accepts such employment and agrees,
during such period, to render the services and assume the obligations
herein set forth, for the compensation provided. The Investment Adviser
shall, for all purposes herein, be deemed to be an independent
contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Trust in any
way, or in any way be deemed an agent of the Trust.
2. As a compensation for the services to be rendered to the Trust
by the Investment Adviser under the provisions of this Agreement, the
Trust shall pay to the Investment Adviser monthly a fee equal to (i)
one-twelfth of one percent per month, (the equivalent of 1% per annum)
of the daily average net assets of the Trust during the month on the
first $10million of daily average net assets, plus (ii) one-twelfth of
nine tenths of a percent per month, (the equivalent of 0.9% per annum)
of the daily average net assets of the Trust during the month on daily
average net assets exceeding $10 million. The first payment of fee
hereunder shall be prorated on a daily basis from the date this
Agreement takes effect.
3. It is expressly understood and agreed that the services to be
rendered by the Investment Adviser to the Trust under the provisions of
this Agreement are not to be deemed to be exclusive, and the Investment
Adviser shall be free to render similar or different services to others
so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
4. It is understood and agreed that directors, officers,
employees, agents and shareholders of the Trust may be interested in
the Investment Adviser as directors, officers, employees, agents and
shareholders, and that directors, officers, employees, agents and
shareholders of the Investment Adviser may be interested in the Trust,
as directors, officers, employees, agents and shareholders or
otherwise, and that the investment Adviser, itself, may be interested
in the Trust as a shareholder or otherwise, specifically, it is
understood and agreed that directors, officers, employees, agents and
shareholders of the Investment Adviser may continue as directors,
officers, employees, agents and shareholders of the Trust; that the
Investment Adviser, its directors, officers, employees, agents
and shareholders may engage in other business, may render investment
advisory services to other investment companies, or to any other
corporation, association, firm or individual, may render underwriting
services to the Trust, or to any other investment company, corporation,
association, form or individual. The Trust shall bear expenses and
salaries necessary and incidental to the conduct of its business,
including but not in limitation of the foregoing, the costs incurred in
the maintenance of its own books, records, and procedures; dealing with
its own shareholders; the payment of dividends; transfers of stock
(including issuance & redemption of shares); reports and notices to
shareholders; expenses of annual stockholders; meetings; miscellaneous
office expenses; brokerage commissions; taxes; and custodian, legal,
accounting and registration fees. Employees, officers and agents of the
Investment Adviser who are, or may in the future be, directors and/or
senior officers of the Trust shall receive no remuneration from the
Trust for acting in such capacities for the Trust. In the conduct of the
respective businesses of the parties hereto and in the performance of
this agreement, the Trust & Investment Adviser may share common
facilities and personnel common to each, with appropriate proration of
expenses.
5. Investment Adviser shall give the Trust the benefit of its best
judgment and efforts in rendering these services, and Trust agrees as
an inducement to the undertaking of these services that Investment
Adviser shall not be liable hereunder for any mistake of judgment or
any event whatsoever, provided that nothing herein shall be deemed to
protect, or purport to protect, Investment Adviser against any
liability to Trust or to its security holders to which Investment
Adviser would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of duties hereunder,
or by reason of reckless disregard of obligations and duties hereunder.
6. This agreement shall continue in effect until January 22nd,
2005, and, thereafter, only so long as such continuance is approved at
least annually by votes of the Trust's Board of Trustees, cast in
person at a meeting called for the purpose of voting on such approval,
including the votes of a majority of the Trustees who are not parties
to such agreement or interested persons of any such party. This
agreement may be terminated at any time upon 60 days prior written
notice, without the payment of any penalty, by the Trust's Board of
Trustees or by vote of a majority of the outstanding voting securities
of the Trust. The contract will automatically terminate in the event of
its assignment by the Investment Adviser (within the meaning of the
Investment Company Act of 1940), which shall be deemed to include a
transfer of control of the Investment Adviser. Upon the termination of
this agreement, the obligations of all the parties hereunder shall
cease and terminate as of the date of such termination, except for any
obligation to respond for a breach of this Agreement committed prior to
such termination and except for the obligation of the Trust to pay to
the Investment Adviser the fee provided in Paragraph 2 hereof, prorated
to the date of termination.
7. This Agreement shall not be assigned by the Trust without prior
written consent thereto of the Investment Adviser. This Agreement shall
terminate automatically in the event of its assignment by the
Investment Adviser unless an exemption from such automatic termination
is granted by order or rule of the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused their
corporate seals to be affixed and duly attested and their presence to
be signed by their duly authorized officers this 22nd day of January,
2003.
Pennsylvania Avenue Funds By __/s/ THOMAS_KIRCHNER _______
XXXXXX XXXXXXXX, President
Pennsylvania Avenue Funds By _____/s/_GARY_TERNULLO_______
XXXX XXXXXXXX, Trustee
Pennsylvania Avenue Funds By ___/s/_GALE_WITOONCHATREE____
XXXX WITOONCHATREE, Trustee
Pennsylvania Avenue Advisers LLC By __/s/ THOMAS_KIRCHNER __
XXXXXX XXXXXXXX, Managing Member
