EXHIBIT 99(d)(1)
NON-DISCRETIONARY INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT (the "Agreement") made as of this 29th day
of April, 2005 by and between THE FINANCE COMPANY OF PENNSYLVANIA (the "Fund"),
a Pennsylvania corporation registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and XXXXX & XXXXXX,
X.X. (the "Adviser"), a Pennsylvania limited partnership with its principal
place of business at 0000 Xxxxxx Xxxxxx Xxxxx 0000, Xxxxxxxxxxxx, XX 00000.
WITNESSETH
WHEREAS, the Board of Directors (the "Board") of the Fund has selected the
Adviser to act as a non-discretionary investment adviser to the Fund and to
provide certain related services, as more fully set forth below, and to perform
such services under the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and benefits set
forth herein, the Fund and the Adviser do hereby agree as follows:
1. THE ADVISER'S SERVICES.
(a) Non-Discretionary Investment Management Services. The Adviser
shall act as a non-discretionary investment adviser with respect to all of
the securities and other assets of the Fund entrusted to it hereunder (the
"Assets"). In such capacity, the Adviser shall, subject to the supervision
of the Board, regularly provide the Fund investment research, advice and
supervision and shall furnish continuously recommendations for an
investment program for the Assets, consistent with the investment
objectives and policies of the Fund. The Adviser shall recommend to the
Board, from time to time, what securities shall be purchased, what
securities shall be held or sold and what portion of the Assets shall be
held uninvested in cash, subject always to the provisions of the Fund's
Articles of Incorporation, Amended and Restated By-Laws and its
registration statement on Form N-1A (the "Registration Statement") under
the 1940 Act covering Fund shares, as filed with the Securities and
Exchange Commission (the "Commission"), and to the investment objectives,
policies and restrictions of the Fund, as each of the same shall be from
time to time in effect. The Board shall be responsible for making all
investment decisions with respect to the Fund, including the Assets, and
may elect not to follow advice provided by the Adviser. The Adviser will
not take any action with respect to the Assets except upon the Board's
instructions and authorization. Once instructions and authorization have
been provided, the Adviser shall act for the Fund in the same manner and
with the same force and effect as the Fund itself might or could do with
respect to purchases, sales or other transactions, as well as with respect
to all other such things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions. The Board, in its
sole discretion, may establish or revise policies in connection with the
management of the Fund and the Assets or to otherwise exercise its right
to control the overall management of the Fund.
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(b) Compliance. The Adviser agrees to comply with the requirements
of the 1940 Act, the Investment Advisers Act of 1940, as amended (the
"Advisers Act"), the Securities Act of 1933, as amended (the "1933 Act"),
the Securities Exchange Act of 1934, as amended (the "1934 Act"), the
Commodity Exchange Act and the respective rules and regulations
thereunder, as applicable, as well as with all other applicable federal
and state laws, rules, regulations and case law that relate to the
services and relationships described hereunder and to the conduct of its
business as a registered investment adviser. In the performance of its
duties hereunder, the Adviser further agrees to comply with the
objectives, policies and restrictions set forth in the Registration
Statement, as amended or supplemented, of the Fund, and with any policies,
guidelines, instructions and procedures approved by the Board and provided
to the Adviser. When recommending portfolio securities to the Board for
inclusion in or removal from the Assets and performing the Adviser's
obligations hereunder, the Adviser shall take all reasonable efforts to
inform the Board regarding any material effect of such actions on the
Assets' compliance with the diversification and source of income
requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company.
The Adviser shall maintain compliance procedures that it reasonably
believes are adequate to ensure its compliance with the foregoing.
(c) Proxy Voting. Except under the circumstances set forth below,
the Adviser shall not be responsible for reviewing proxy solicitation
materials or voting and handling proxies in relation to the Assets. If the
Adviser receives a misdirected proxy, it shall promptly forward such
misdirected proxy to the Fund. The Adviser hereby agrees that upon 60
days' written notice from the Fund, the Adviser shall assume
responsibility for reviewing proxy solicitation materials and voting
proxies in relation to the Assets. At such time, the Adviser shall carry
out such responsibility in accordance with any instructions that the Board
shall provide from time to time, and at all times in a manner consistent
with Rule 206(4)-6 under the Advisers Act and its fiduciary
responsibilities to the Fund. In addition, the Adviser shall provide
periodic reports and keep records relating to proxy voting as the Board
may reasonably request or as may be necessary for the Fund to comply with
the 1940 Act and other applicable law. Any delegation of proxy voting
responsibility to the Adviser may be revoked or modified by the Board at
any time.
(d) Recordkeeping. The Adviser shall not be responsible for the
provision of administrative, bookkeeping or accounting services to the
Fund, except as otherwise provided herein or as may be necessary for the
Adviser to supply to the Fund or its Board the information required to be
supplied under this Agreement.
The Adviser shall maintain separate books and detailed records of
all matters pertaining to the Assets required by Rule 31a-1 under the 1940
Act (other than those records being maintained by any administrator,
custodian or transfer agent appointed by the Fund) relating to its
responsibilities provided hereunder with respect to the Assets, and shall
preserve such records for the periods and in a manner prescribed therefore
by Rule 31a-2 under the 1940 Act (the "Fund Books and Records"). The Fund
Books and Records shall be available to the Board at any time upon
request, shall be delivered to the
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Fund upon the termination of this Agreement and shall be available without
delay during any day the Fund is open for business.
(e) Holdings Information and Pricing. The Adviser shall provide
regular reports regarding the Assets, and shall, on its own initiative,
furnish the Fund and its Board from time to time with whatever information
the Adviser believes is appropriate for this purpose. The Adviser agrees
to immediately notify the Fund if the Adviser reasonably believes that the
value of any security held as part of the Assets may not reflect fair
value. The Adviser agrees to provide any pricing information of which the
Adviser is aware to the Fund, its Board and/or any Fund pricing agent to
assist in the determination of the fair value of those Fund holdings for
which market quotations are not readily available or as otherwise required
in accordance with the 1940 Act or the Fund's valuation procedures for the
purpose of calculating the Fund net asset value in accordance with
procedures and methods established by the Board.
(f) Cooperation with Agents of the Fund. The Adviser agrees to
cooperate with and provide reasonable assistance to the Fund, any Fund
custodian or foreign sub-custodians, any Fund pricing agents and all other
agents and representatives of the Fund, with respect to such information
regarding the Fund as they may reasonably request from time to time in the
performance of their obligations, provide prompt responses to reasonable
requests made by such persons and establish appropriate interfaces with
each so as to promote the efficient exchange of information and compliance
with applicable laws and regulations.
2. CODE OF ETHICS. The Adviser has adopted a written code of ethics that
it reasonably believes complies with the requirements of Rule 17j-1 under the
1940 Act and Rule 204A-1 under the Advisers Act, which it has provided to the
Fund. The Adviser shall ensure that its Access Persons (as defined in Rule 17j-1
and Rule 204A-1) comply in all material respects with the Adviser's Code of
Ethics, as in effect from time to time. Upon request, the Adviser shall provide
the Fund with a (i) copy of the Adviser's current Code of Ethics, as in effect
from time to time, and (ii) certification that it has adopted procedures
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by the Adviser's Code of Ethics. Annually, the Adviser shall furnish
a written report, which complies with the requirements of Rule 17j-1, concerning
the Adviser's Code of Ethics to the Fund's Board. The Adviser shall respond to
requests for information from the Fund as to violations of the Code by Access
Persons and the sanctions imposed by the Adviser. The Adviser shall immediately
notify the Fund of any material violation of the Code, whether or not such
violation relates to a security held by any Fund.
3. INFORMATION AND REPORTING. The Adviser shall provide the Fund and its
respective officers with such periodic reports concerning the obligations the
Adviser has assumed under this Agreement as the Fund may from time to time
reasonably request.
(a) Notification of Breach / Compliance Reports. The Adviser shall
notify the Fund's chief compliance officer immediately upon detection of
(i) any material failure to manage the Assets in accordance with the
Fund's investment objectives and policies or any applicable law; or (ii)
any material breach of the Fund's or the Adviser's policies,
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guidelines or procedures. The Adviser agrees to promptly advise the Board
regarding a recommendation to correct any such failure and will take such
action that the Board authorizes to correct such failure. The Adviser
further agrees to take such action that the Board may reasonably request
in connection with any breach of the Fund's or the Adviser's policies. In
addition, the Adviser shall provide a quarterly report regarding the
Assets' compliance with the Fund's investment objectives and policies,
applicable law, including, but not limited to the 1940 Act and Subchapter
M of the Code, and the Fund's policies, guidelines or procedures as
applicable to the Adviser's obligations under this Agreement. Upon
request, the Adviser shall also provide the officers of the Fund with
supporting certifications in connection with such certifications of Fund
financial statements and disclosure controls pursuant to the
Xxxxxxxx-Xxxxx Act. The Adviser will promptly notify the Fund in the event
(i) the Adviser is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in equity, before or
by any court, public board, or body, involving the affairs of the Fund
(excluding class action suits in which the Fund is a member of the
plaintiff class by reason of the Fund's ownership of shares in the
defendant) or the compliance by the Adviser with the federal or state
securities laws or (ii) an actual change in control of the Adviser
resulting in an "assignment" (as defined in the 1940 Act) has occurred or
is otherwise proposed to occur.
(b) Board and Filings Information. The Adviser will also provide the
Fund with any information reasonably requested regarding the services
provided hereunder required for any meeting of the Board, or for any
shareholder report, Form N-CSR, Form N-Q, Form N-PX (if applicable),
amended registration statement, proxy statement, or prospectus supplement
to be filed by the Fund with the Commission. The Adviser will make its
officers and employees available to meet with the Board from time to time
on due notice to review its services to the Fund in light of current and
prospective economic and market conditions and shall furnish to the Board
such information as may reasonably be necessary in order for the Board to
evaluate this Agreement or any proposed amendments thereto.
(c) Transaction Information. The Adviser shall furnish to the Fund
such information concerning portfolio transactions as may be necessary to
enable the Fund or its designated agent to perform such compliance testing
on the Assets and the Adviser's services as the Fund may, in its sole
discretion, determine to be appropriate. The provision of such information
by the Adviser to the Fund or its designated agent in no way relieves the
Adviser of its own responsibilities under this Agreement.
4. BROKERAGE.
(a) Principal Transactions. In connection with purchases or sales of
securities for the account of the Fund, neither the Adviser nor any of its
directors, officers or employees will act as a principal or agent or
receive any commission except as permitted by the 1940 Act and the Fund's
policies and procedures.
(b) Placement of Orders. Once Board authorization and instructions
have been provided, the Adviser shall arrange for the placing of all
orders for the purchase and sale of securities for the Fund's account with
brokers or dealers selected by the Adviser.
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In the selection of such brokers or dealers and the placing of such
orders, the Adviser is directed at all times to seek for the Fund the most
favorable execution and net price available under the circumstances. The
Adviser is not authorized to enter into any arrangements for receipt of
brokerage, research or other benefits in connection with transactions
effected on behalf of the Fund and may not use commissions paid on Fund
portfolio transactions to obtain brokerage or research services, as
defined in Section 28(e) of the 1934 Act.
(c) Aggregated Transactions. On occasions when the Adviser deems the
purchase or sale of a security to be in the best interest of the Fund as
well as other clients of the Adviser, the Adviser may, to the extent
permitted by applicable law and regulations, aggregate the order for
securities to be sold or purchased. In such event, the Adviser will
allocate securities so purchased or sold, as well as the expenses incurred
in the transaction, in a manner the Adviser reasonably considers to be
equitable and consistent with its fiduciary obligations to the Fund and to
such other clients under the circumstances.
(d) Affiliated Brokers. The Adviser or any of its affiliates may not
act as broker in connection with the purchase or sale of securities or
other investments for the Fund.
5. CUSTODY. Nothing in this Agreement shall permit the Adviser to take or
receive physical possession of cash, securities or other investments of the
Fund.
6. ALLOCATION OF CHARGES AND EXPENSES. The Adviser will bear its own costs
of providing services hereunder. Other than as herein specifically indicated,
the Adviser shall not be responsible for the Fund's expenses, including
brokerage and other expenses incurred in placing orders for the purchase and
sale of securities and other investment instruments.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Properly Registered. The Adviser is registered as an investment
adviser under the Advisers Act, and will remain so registered for the
duration of this Agreement. The 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 the Adviser, there is no
proceeding or investigation that is reasonably likely to result in the
Adviser being prohibited from performing the services contemplated by this
Agreement. The Adviser agrees to promptly notify the Fund of the
occurrence of any event that would disqualify the Adviser from serving as
an investment adviser to a registered investment company. The Adviser is
in compliance in all material respects with all applicable federal and
state law in connection with its investment management operations.
(b) ADV Disclosure. The Adviser has provided the Fund with a copy of
its Form ADV as most recently filed with the SEC and will, promptly after
filing any amendment to its Form ADV with the SEC, furnish a copy of such
amendments to the Fund. The information contained in the 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
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make the statements made, in light of the circumstances under which they
were made, not misleading.
(c) Fund Disclosure Documents. The Adviser has reviewed and will in
the future review, the Registration Statement (and any amendments or
supplements thereto) and any other applicable report filed with the
Commission presented to the Adviser for its review (collectively, the
"Disclosure Documents") and represents and warrants that with respect to
disclosure about the Adviser, the manner in which the Adviser manages the
Assets or information relating directly or indirectly to the Adviser, such
Disclosure Documents contain or will contain, as of the date thereof, no
untrue statement of any material fact and does not omit any statement of
material fact which was required to be stated therein or necessary to make
the statements contained therein not misleading.
(d) Insurance. The Adviser maintains errors and omissions insurance
coverage in an appropriate amount and shall provide prior written notice
to the Fund (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, the Adviser shall, upon reasonable
request, provide the Fund with any information it may reasonably require
concerning the amount of or scope of such insurance.
(e) No Detrimental Agreement. The Adviser represents and warrants
that it has no arrangement or understanding with any party, other than the
Fund, that would influence the decision of the Adviser with respect to its
selection of securities recommended for purchase or sale by the Fund, and
that all selections and recommendations shall be done in accordance with
what is in the best interest of the Fund.
(f) Conflicts. The Adviser shall act honestly, in good faith and in
the best interests of the Fund including requiring any of its personnel
with knowledge of Fund activities to place the interest of the Fund first,
ahead of their own interests, in all personal trading scenarios that may
involve a conflict of interest with the Fund, consistent with its
fiduciary duties under applicable law.
(g) Representations. The representations and warranties in this
Section 7 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 3(a), whether or not specifically referenced in such
report.
8. ADVISER'S COMPENSATION. The Fund shall pay to the Adviser, as
compensation for the Adviser's services hereunder, a fee, determined as
described in Schedule A that is attached hereto and made a part hereof.
In the event of termination of this Agreement, the fee provided in this
Section shall be computed on the basis of the period ending on the last business
day on which this Agreement is in effect subject to a pro rata adjustment based
on the number of days elapsed in the current month as a percentage of the total
number of days in such month.
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9. INDEPENDENT CONTRACTOR. In the performance of its duties hereunder, the
Adviser is and shall be an independent contractor and, unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund in any way or otherwise be deemed to
be an agent of the Fund.
10. ASSIGNMENT AND AMENDMENTS. This Agreement shall automatically
terminate, without the payment of any penalty, in the event of its assignment
(as defined in section 2(a)(4) of the 1940 Act); provided that such termination
shall not relieve the Adviser of any liability incurred hereunder.
This Agreement may not be added to or changed orally and may not be
modified or rescinded except by a writing signed by the parties hereto and in
accordance with the 1940 Act, when applicable.
11. DURATION AND TERMINATION.
(a) This Agreement shall become effective as of the date executed
and shall remain in full force and effect continually thereafter, subject
to renewal as provided in Section 11(d) and unless terminated
automatically as set forth in Section 10 hereof or until terminated as
follows:
(b) The Fund may cause this Agreement to terminate either (i) by
vote of its Board or (ii) upon the affirmative vote of a majority of the
outstanding voting securities of the Fund; or
(c) The Adviser may at any time terminate this Agreement by not more
than sixty (60) days' nor less than thirty (30) days' written notice
delivered or mailed by registered mail, postage prepaid, to the Fund; or
(d) This Agreement shall automatically terminate two years from the
date of its execution unless its renewal is specifically approved at least
annually thereafter by (i) a majority vote of the Directors, including a
majority vote of such Directors who are not interested persons of the Fund
or the Adviser, at a meeting called for the purpose of voting on such
approval; or (ii) the vote of a majority of the outstanding voting
securities of the Fund; provided, however, that 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 of this Agreement
as provided herein, the Adviser may continue to serve hereunder as to the
Fund in a manner consistent with the 1940 Act and the rules and
regulations thereunder; and
Termination of this Agreement pursuant to this Section shall be without
payment of any penalty.
In the event of termination of this Agreement for any reason, the Adviser
shall, immediately upon notice of termination or on such later date as may be
specified in such notice, cease all activity on behalf of the Fund with respect
to the Assets, except as otherwise required by any fiduciary duties of the
Adviser under applicable law. In addition, the Adviser shall deliver the Fund
Books and Records to the Fund by such means and in accordance with such
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schedule as the Fund shall direct and shall otherwise cooperate, as reasonably
directed by the Fund, in the transition of portfolio asset management to any
successor of the Adviser.
12. CERTAIN DEFINITIONS. For the purposes of this Agreement:
(a) "Affirmative vote of a majority of the outstanding voting
securities of the Fund" shall have the meaning as set forth in the 1940
Act, subject, however, to such exemptions as may be granted by the
Commission under the 1940 Act or any interpretations of the Commission
staff.
(b) "Interested persons" and "Assignment" shall have their
respective meanings as set forth in the 1940 Act, subject, however, to
such exemptions as may be granted by the Commission under the 1940 Act or
any interpretations of the Commission staff.
13. LIABILITY OF THE ADVISER. The Adviser shall indemnify and hold
harmless the Fund and all affiliated persons thereof (within the meaning of
Section 2(a)(3) of the 0000 Xxx) and all controlling persons (as described in
Section 15 of the 0000 Xxx) against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses) by
reason of or arising out of the Adviser's willful misfeasance, bad faith or
gross negligence generally in the performance of its duties hereunder or its
reckless disregard of its obligations and duties under this Agreement.
14 ENFORCEABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
15. JURISDICTION. This Agreement shall be governed by and construed in
accordance with the substantive laws of Commonwealth of Pennsylvania and the
Adviser consents to the jurisdiction of courts, both state or federal, in
Pennsylvania, with respect to any dispute under this Agreement.
16. PARAGRAPH HEADINGS. The headings of paragraphs contained in this
Agreement are provided for convenience only, form no part of this Agreement and
shall not affect its construction.
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17. COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed on their behalf by their duly authorized officers as of the date first
above written.
THE FINANCE COMPANY OF PENNSYLVANIA
By: ______________________________________
Name: Xxxxxxx X. Xxxxxx III
Title: President
XXXXX & XXXXXX, X.X.
By: ______________________________________
Name:
Title:
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SCHEDULE A
TO THE
NON-DISCRETIONARY INVESTMENT ADVISORY AGREEMENT
BETWEEN
THE FINANCE COMPANY OF PENNSYLVANIA
AND
XXXXX & XXXXXX, X.X.
DATED APRIL __, 2005
The Fund will pay the Adviser as compensation for the Adviser's services
rendered, a fee, at an annual rate of fifty basis points (0.50%) payable monthly
in arrears on the last day of each month (the "Fee"). The Fee will be determined
based upon the value of the assets of the Company the Adviser is managing at the
end of the month immediately preceding the date of payment (the "Portfolio
Value"). The Portfolio Value shall equal the market value of such assets,
including cash (except as excluded below), which shall be computed in the same
manner as that used to establish the net asset value of Fund shares, less (a)
the value of the holdings of the Fund at the applicable dates in PNC Bank Corp.
(formerly PNC Financial Corporation), Pennsylvania Warehousing & Safe Deposit
Company and Penn Virginia Corporation, Exxon Mobil Corporation, their
successors, United States Treasury Notes, the Artisan International Fund, a
portfolio of Artisans Fund, Inc., Harbor International Fund, a series of Harbor
Fund and fixed income securities; (b) the value of any cash being managed by C&B
which exceeds three percent (3%) of the Portfolio Value at the applicable dates;
(c) the value of the holdings of the Fund at the applicable dates in such other
companies as may be mutually agreed upon by the Fund and the Adviser; and (d)
the amount of any accrued liability for the payment of taxes on the net gains
from the sales of the Fund's portfolio securities. In no event, shall the Fee
payable for any month exceed one-twelfth (1/12) of one half of one percent
(0.50%) of the Portfolio Value.
A-1
