THE HOMESTATE GROUP
INVESTMENT ADVISORY AGREEMENT
THE EMERALD SELECT BANKING AND FINANCE FUND
THIS AGREEMENT is made and executed this 14th day of December, 2001, between the
HomeState Group (the "Fund"), a Pennsylvania common law trust, having its
principal place of business in Lancaster, Pennsylvania and Emerald Advisers,
Inc. (the "Adviser"), a Pennsylvania corporation, registered with the United
Stated Securities and Exchange Commission as an investment adviser.
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
company and offers for public sale one or more distinct series of shares of
beneficial interest ("Series"), each corresponding to a distinct portfolio;
WHEREAS, each share of a Series represents an undivided interest in the assets,
subject to the liabilities, allocated to that Series and each Series has a
separate investment objective and policies;
WHEREAS, at the present time the Fund consists of three Series: the Emerald
Growth Fund, the Emerald Select Technology Fund and the Emerald Select Banking &
Finance Fund;
WHEREAS, the Fund and the Adviser wish to enter into an agreement setting forth
the terms on which the Adviser will perform certain services for the Fund;
NOW, THEREFORE, INTENDING TO BE LEGALLY BOUND HEREBY, it is agreed by and
between the parties hereto as follows:
1. APPOINTMENT OF INVESTMENT ADVISER. The Fund hereby appoints the Adviser
to manage the investment and reinvestment of the assets of the Fund and to
administer its affairs, subject to supervision by the Fund's Board of Trustees,
for the period and on the terms set forth in this Agreement. In furnishing such
management and administration services, the Adviser will be guided by the Fund's
distinct investment objectives and policies for each Series as set forth in the
statements contained in the a Fund's Registration Statement on Form N-1A filed
with the Securities and Exchange Commission, as such Registration Statement may
be amended or supplemented from time to time. The Adviser hereby accepts such
appointment and agrees to render the services required by this Agreement for the
compensation and upon other terms and conditions set forth in this Agreement. In
performing the investment advisory services under this Agreement, the Adviser is
authorized to engage such sub-advisers and other persons as deemed necessary or
desirable.
The fees of any such persons shall be borne entirely by the Adviser, and
the engagement of such persons shall not relieve the Adviser of any
responsibility under this Agreement. The Adviser shall for all purposes
contained herein be deemed an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. OFFICE SPACE AND FACILITIES. The Adviser shall furnish to the Fund space
in the offices of the Adviser or in such other place as may be agreed upon from
time to time and all necessary office facilities, equipment and personnel for
managing the affairs and investments and keeping the books of the Fund.
3. ALLOCATION OF EXPENSES.
(a) (1) Adviser shall pay the organizational expenses of the Fund, which
the Fund shall reimburse to Adviser over a sixty-month period commencing after
the date of the Fund's initial public offering of its shares. The Fund shall not
be obligated to reimburse the Adviser for aggregate organizational expenses in
excess of $25,000. (2) The Adviser shall be responsible for the compensation (if
any) paid to officers of the Fund for serving in that capacity.
(b) The Fund shall bear all expenses of its organization, operations, and
business not specifically assumed or agreed to be paid by the Adviser as
provided in this Agreement. In particular, but without limiting the generality
of the foregoing, the Fund shall pay:
(1) Custody and Accounting Service. All expenses of the transfer, receipt,
safekeeping, servicing and accounting for the Fund's cash, securities, and other
property, including all charges of depositories, custodians, and other agents,
if any;
(2) Shareholder Servicing. All expenses of maintaining and servicing
shareholder accounts, including all charges of the Fund's transfer, shareholder
recordkeeping, dividend disbursing, redemption, and other agents, if any;
(3) Shareholder Communications. All expenses of preparing, setting in type,
printing, and distributing reports and other communications to shareholders;
(4) Shareholder Meetings. All expenses incidental to holding duly called
meetings of Fund shareholders, including the printing of notices and proxy
material;
(5) Prospectuses. All expenses of preparing, setting in type, and printing
of annual or more frequent revisions of the Fund's prospectus and of mailing
them to shareholders;
(6) Communication Equipment. All charges for equipment or services used for
communication between the Adviser or the Fund and the custodian, transfer agent
or any other agents selected by the Fund;
(7) Legal and Accounting Fees and Expenses. All charges for services and
expenses of the Fund's legal counsel and independent auditors;
(8) Trustee's Fees and Expenses. All compensation of Trustees, other than
those affiliated with the Adviser, and all expenses incurred in connection with
their service;
(9) Issue and Redemption of the Fund Shares. All expenses incurred in
connection with the issue, redemption and transfer of Fund shares, including the
expense of confirming all share transactions, and of preparing and transmitting
the Fund's stock certificates (if any);
(10) Brokerage Commissions. All broker's commission and other charges
incident to the purchase, sale, or lending of the Fund's portfolio securities;
(11) Taxes and Fees. All taxes or governmental fees payable by or with
respect of the Fund to federal, state, or other governmental agencies, domestic
or foreign, including stamp or other transfer taxes;
(12) Non-recurring and Extraordinary Expenses. Such non-recurring expenses
as may arise, including the costs of actions, suits, or proceeding to which the
Fund is a party and the expense the Fund may incur as a result of its legal
obligation to provide indemnification to its officers, trustees and agents.
4. SERVICE TO OTHER ACCOUNTS. The service of the Adviser to the Fund
hereunder shall not be deemed exclusive, and the Adviser shall be free to render
similar services to others so long as its services hereunder are not impaired
hereby.
5. COMPENSATION FOR SERVICES.
(a) For the facilities and services to be furnished by the Adviser, the
Fund shall pay the Adviser an annual fee computed on the basis of the average
net asset value of the Fund as ascertained each business day and paid monthly in
accordance with the fee schedule as determined by the Board of Trustees for each
Series.
The fee schedule for the Emerald Select Banking and Finance Fund is as follows:
NET ASSETS FEE
Up to and including $100,000,000 1.00%
In excess of 100,000,000 0.90 of 1%
For purposes of computing the annual fee, the net asset value of the Fund
shall be equal to the difference between its total assets and its total
liabilities (excluding from such liabilities its capital stock and surplus) with
its assets and liabilities to be valued in accordance with the procedures set
forth in the Fund's Declaration of Trust.
(b) The Fund and the Adviser may mutually agree to reduce the fees payable
by the Fund if the reduction is in the best long-range interest of the Fund and
the Adviser. The fees may not be increased under any circumstances. If the
Adviser shall serve for less than the whole of any month, the monthly payment
shall be prorated.
6. REIMBURSEMENT BY ADVISER. The Adviser agrees to reimburse the Fund for
the amount by which the adviser's fee in any fiscal year exceeds the limits
prescribed by any state in which the Fund's shares are qualified for sale. For
the purposes of determining whether the Fund is entitled to reimbursements, the
adviser's fee is calculated on a monthly basis. If the Fund is entitled to a
reimbursement, that month's advisory fee will be reduced or postponed, with any
adjustments made at the end of the fiscal year.
7. BOOKS AND RECORDS. The Fund shall cause its books and accounts to be
audited at least once each year by a reputable, independent public accountant or
organization of public accountants who shall render a report to the Fund.
8. AFFILIATION. It is understood that trustees, officers, agents and
stockholders of the Fund are or may not be interested in the Adviser (or any
successor thereof) as directors, officers, stockholders, or otherwise, and that
the Adviser (or any such successor) is or may be interested in the Fund as a
stockholder or otherwise.
9. APPROVAL OF AGREEMENT; TERMINATION. This Agreement shall become
effective as of January 1, 2002, and shall continue in effect for successive
yearly terms each ended on December 31 of each year, unless terminated by either
party, provided that the renewal of the Agreement and its terms are specifically
approved annually by (i) the vote of a majority of those members of the Fund's
Board of Trustees who are not interested persons of any party to this Agreement,
cast in person at a meeting called for the purpose of voting on such approval;
and (ii) by the Fund's Board of Trustees or such vote of a majority of the
outstanding voting securities of such Series. The Agreement may be terminated
with respect to a particular Series at any time, without payment of any penalty,
by the Fund (by vote of the Fund's Board of Trustees or by vote of a majority of
outstanding voting securities of such Series, or by the Adviser, on sixty days
written notice). This Agreement will terminate automatically in the event of an
assignment, unless as order is issued by the Securities and Exchange Commission
conditionally or unconditionally exempting such assignments from the provisions
of Section 15(a) of the Act, in which event this contract shall continue in full
force and effect.
This Agreement may not be amended, transferred, sold or in any manner
hypothecated or pledged, nor may a new advisory agreement become effective with
respect to a particular Series without the affirmative vote or written consent
of the holders of a majority of the shares of such Series; provided, that this
limitation shall not prevent any minor amendments to the Agreement which may be
required pursuant to federal or state law.
10. DEFINED TERMS. For the purpose of this Agreement, the terms "Vote of a
majority of the outstanding securities," "assignment," and "interested persons"
shall have the respective meaning specified in the Investment Company Act of
1940 when such terms are used in reference to the Fund.
11. MISCELLANEOUS. This Agreement embodies the entire agreement between the
Adviser and the Fund with respect to the services to be provided by the Adviser
and supercedes any prior written or oral agreement between those parties. This
Agreement shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania and, to the extent it involves any United States
statutes, in accordance with the laws of the United States. In the event that
either party should be required to take legal action in order to enforce its
rights under this Agreement, the prevailing party in any such action or
proceeding shall be entitled to recover from the other party costs and
reasonable attorney's fees.
IN WITNESS THEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
HOMESTATE GROUP
By: /s/ Xxxxx X. Xxxx
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Xxxxx X. Xxxx, President
ATTEST:
By: /s/ Xxxxxx X. Xxxxx XX
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Xxxxxx X. Xxxxx XX, Secretary
EMERALD ADVISERS, INC.
By: /s/ Xxxxxxx X. Xxxxx XX
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Xxxxxxx X. Xxxxx XX, President
ATTEST:
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx, Secretary
