THE PENN STREET FUND, INC.
SUB-INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of the 15th day of December, 2005, between The
Penn Street Fund, Inc. (the "Company"), Penn Street Investment Advisors, Inc. a
registered investment adviser and investment adviser to each series of the
Company (the "Fund Manager") and Berkshire Advisors, Inc. (the "Sub-Adviser").
RECITALS
WHEREAS, the Company is organized under the laws of the state of Maryland
as a corporation and operates and is registered as an open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act");
WHEREAS, the Company is authorized by its Articles of Incorporation and
by-laws to issue separate Portfolios of shares representing interests in
separate investment portfolios (the "Portfolios");
WHEREAS, the Company has authorized the issuance of shares of beneficial
interest in, among others, a Portfolio known as The Berkshire Advisors Select
Equity Portfolio (the "Portfolio");
WHEREAS, Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Adviser's Act") and engages in
the business of asset management;
WHEREAS, the Company has retained Fund Manager to furnish investment
advisory services to each series of the Company, including the Portfolio,
pursuant to a written agreement for such services;
WHEREAS, the Fund Manager desires to retain Sub-Adviser to furnish
day-to-day investment advisory services to the Portfolio pursuant to the terms
and conditions of this Agreement, Sub-Adviser is willing to so furnish such
services, and the Company has approved such engagement;
NOW THEREFORE, in consideration of the foregoing and the agreements and
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
1. Appointment.
The Company and Fund Manager hereby appoint the Sub-Adviser to provide
day-to-day investment advisory services to the Portfolio for the periods and on
the terms set forth in this Agreement. Sub-Adviser accepts the appointment and
agrees to furnish the services herein set forth for the compensation herein
provided.
2. Delivery of Documents.
The Company and/or Fund Manager have furnished or will furnish Sub-Adviser
with properly certified or authenticated copies of each of the following:
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a. Resolutions of the Company's Board of Directors authorizing the
appointment of Sub-Adviser and approving this Agreement;
b. The Company's most current Registration Statement on Form N-1A
promulgated under the 1940 Act and under the Securities Act of 1933,
as amended (the "1933 Act");
c. The Company's current Prospectus and Statement of Additional
Information (together called the "Prospectus")
d. All compliance policies and/or procedures adopted by the Board of
Directors of the Company that are applicable to the operations of
the Portfolio.
The Company and/or Fund Manager will furnish Sub-Adviser with properly
certified or authenticated copies of all amendments of or supplements to the
foregoing at the same time as such documents are required to be filed with the
SEC and/or state authorities, or at such time as officially adopted by the Board
of Directors of the Company.
3. Management.
Subject to the supervision of the Company's Board of Directors and Fund
Manager, Sub-Adviser will provide a continuous investment program for the
Portfolio, including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Portfolio. Sub-Adviser
will determine from time to time what securities and other investments will be
purchased, retained or sold by the Portfolio. Sub-Adviser will provide the
services under this Agreement in accordance with the Portfolio's investment
objectives, policies and restrictions as such are set forth in the Portfolio's
prospectus from time to time. Sub-Adviser further agrees that it:
a. will conform its activities in all material respects to all
applicable rules and regulations adopted by the U.S. Securities and
Exchange Commission (the "SEC") and will, in addition, conduct its
activities under this agreement in accordance with the regulations
of any other federal and state agency which may now or in the future
have jurisdiction over its activities under this Agreement;
b. will place orders pursuant to its investment determinations for the
Portfolio either directly with the respective issuers or with any
broker or dealer. In placing orders with brokers or dealers,
Sub-Adviser will attempt to obtain the best net price and the most
favorable execution of its orders under the circumstances.
Consistent with this obligation, when Sub-Adviser believes two or
more brokers or dealers are comparable in price and execution,
Sub-Adviser may prefer: (I) brokers and dealers who provide
Sub-Adviser with research advice and other services, or who
recommend or sell Company shares, and (II) brokers who are
affiliated with the Portfolio, Fund Manager, and/or Sub-Adviser;
provided, however, that in no instance will portfolio securities be
purchased from or sold to Sub-Adviser in principal transactions. The
Board of Directors of the Company has adopted procedures pursuant to
Rule 17a-7 and Rule 17e-1 with respect to transactions between the
Portfolio and affiliated persons and the Portfolio and Affiliated
broker/dealers, respectively; which procedures Sub-Adviser expressly
agrees to comply with; and
c. will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the Portfolio.
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4. Services not Exclusive.
a. Services to Other Funds. The advisory services to be furnished by
Sub-Adviser hereunder are not to be considered exclusive, and
Sub-Adviser shall be free to furnish similar services to others so
long as its services under this Agreement are not materially
impaired thereby; provided, however, that without the written
consent of the Company's Board of Directors, which consent will not
be unreasonably withheld, Sub-Adviser will not serve as an
investment advisor to any other registered management investment
company having a fund with investment objectives and principal
investment strategies substantially similar to those of the
Portfolio.
b. Status of Sub-Adviser. Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and not an agent for the
Company, the Fund Manager or the Portfolio and shall, unless
otherwise expressly provided or authorized herein, have no authority
to act for or represent the Company, Portfolio or Fund Manager in
any way.
5. Books and Records.
In compliance with Rule 31a-3 promulgated under the 1940 Act, Sub-Adviser
hereby agrees that all records which it maintains for the benefit of the
Portfolio are the property of the Portfolio and further agrees to surrender
promptly to the Portfolio any of such records upon the Portfolio's request.
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
promulgated under the 1940 Act, the records required to be maintained by it
pursuant to Rule 31a-1 promulgated under the 1940 Act resulting from the
services to the Portfolio provided by Sub-Adviser pursuant to Section 3 of this
Agreement.
6. Expenses.
During the term of this Agreement, Sub-Adviser will pay all expenses
incurred by it in connection with its investment advisory services furnished to
the Portfolio other than the costs of securities and other investments
(including brokerage commissions and other transaction charges) purchased or
sold for the Portfolio.
7. Compensation.
The Fund Manager will pay to Sub-Adviser, and Sub-Adviser will accept as
full compensation for its services rendered hereunder, an investment advisory
fee, computed at the end of each month and payable within five (5) business days
thereafter, equal to the annual rate of 0.75% of the average daily net assets of
the Portfolio. All parties to this Agreement do hereby authorize and instruct
the Portfolio's Administrator, Citco Mutual Fund Services, Inc., or its
successor, to provide a calculation each month of the gross amount due the
Sub-Advisor and to remit such fee payments directly to Sub-Adviser. In the event
that Sub-Adviser's services to the Portfolio begin or end at a time other than
the beginning or end of a month, fees payable to the Sub-Adviser will be
prorated for that portion of the month during which services were actually
provided.
During the term of this Agreement, Sub-Adviser may, from time to time,
waive receipt of some or all of its fee and/or reimburse the Portfolio for other
expenses incurred by the Portfolio in order to assist the Portfolio to maintain
a certain overall expense ratio, such expense ratio to be determined by the
Sub-Adviser at its discretion. Sub-Adviser is under no obligation to waive
receipt of its fees, reimburse the Portfolio for expenses, or attempt in any
manner to maintain any predetermined expense cap. Such actions and/or waivers on
the part of Sub-Adviser are entirely voluntary. However, in the event
Sub-Adviser does undertake such waivers and/or reimbursements, Sub-Adviser may
recover such waived fees and/or reimbursed expenses, at Sub-Adviser's
discretion, at any time for a period of thirty-six months subsequent to the time
such waiver or reimbursement is made.
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8. Limitation of Liability.
Sub-Adviser shall not be liable for any error of judgment, mistake of law
or for any other loss suffered by the Portfolio in connection with the
performance of this Agreement, except a loss resulting from a breach of
Sub-Adviser's fiduciary duty with respect to the receipt of compensation for
services or a loss to the Portfolio resulting from willful malfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties under this Agreement.
9. Duration and Termination.
This Agreement shall become effective as of the date first written above
and, unless sooner terminated as provided herein, shall continue in effect until
June 30, 2006. Thereafter, this Agreement shall be renewable for successive
periods of one year each, provided such continuance is specifically approved
annually:
a. By the vote of a majority of those members of the Board of Directors
who are not parties to the Agreement or interested persons of any
such party (as that term is defined in the 1940 Act), cast in person
at a meeting called for the purpose of voting on such approval; and
b. By vote of either the Board of Directors or a majority (as that term
is defined in the 0000 Xxx) of the outstanding voting securities of
the Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the
Company or by Fund Manager or by Sub-Adviser at any time upon sixty (60) days
written notice, without payment of any penalty. Any such termination by the
Company must be authorized by vote of the Board of Directors or by vote of a
majority of the outstanding voting securities of the Portfolio. This Agreement
will automatically terminate in the event of its assignment (as that term is
defined in the 1940 Act).
10. Amendment of this Agreement.
No provision of this Agreement may be changed, waived, discharged, or
terminated orally, but only by a written instrument signed by the party against
which enforcement of the change, waiver, discharge or termination is sought. No
material amendment of this Agreement shall be effective until approved by vote
of the holders of a majority of the Portfolio's outstanding voting securities
(as defined in the 1940 Act).
11. Miscellaneous.
The captions in this Agreement are included for convenience of reference
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby. This Agreement shall
be binding on, and shall inure to the benefit of, the parties hereto and their
respective successors.
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12. Counterparts.
This Agreement may be executed in counterparts by the parties hereto, each
of which shall constitute an original, and all of which, together, shall
constitute one Agreement.
13. Governing Law.
This Agreement shall be construed in accordance with, and governed by, the
laws of the Commonwealth of Pennsylvania.
14. Notices.
Except as otherwise provided in this Agreement, any notice or other
communication required by or permitted to be given in connection with this
Agreement will be in writing and will be delivered in person or sent by first
class mail, postage prepaid or by prepaid overnight delivery service to the
respective parties as follows:
If to the Company: If to the Sub-Adviser:
----------------- ---------------------
The Penn Street Fund, Inc. Berkshire Advisors, Inc.
00 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000 0000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx Attn: Xxx X. Xxxxxxxx
President President
If to the Fund Manager:
-----------------------
Penn Street Investment Advisors, Inc.
00 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx
President
15. Disclosures.
Neither the Company, the Portfolio nor the Fund Manager shall, without the
written consent of Sub-Adviser, which consent shall not be unreasonably
withheld, make representations regarding the Sub-Adviser or any of its
affiliates in any disclosure document, advertisement, sales literature or other
promotional materials. The Sub-Adviser shall respond in writing within five (5)
business days of any such request for prior written consent and in the event
Sub-Adviser does not so respond, Sub-Adviser shall be deemed to have consented
to the disclosure document, advertisement, sales literature or other promotional
materials submitted to the Sub-Adviser.
16. Non-Liability of Directors and Shareholders.
All obligations of the Portfolio hereunder shall be binding only upon the
assets of the Portfolio and shall not be binding upon any Director, officer,
employee, agent or shareholder of the Portfolio. Neither the authorization of
any action by the Directors or shareholders of the Portfolio nor the execution
of this Agreement on behalf of the Portfolio shall impose any liability upon any
Director, officer or shareholder of the Portfolio.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
THE PENN STREET FUND, INC.
s/Xxxx Xxxxx
-----------------------------
By: Xxxx Xxxxx
Title: Chairman
PENN STREET INVESTMENT ADVISORS, INC.
s/Xxxx Xxxxx
-----------------------------
By: Xxxx X. Xxxxx
Title: President
BERKSHIRE ADVISORS, INC.
s/Xxx X. Xxxxxxxx
-----------------------------
By: Xxx X. Xxxxxxxx
Title: President
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