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 Valley Forge Capital 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 Penn Street Sector
Rotational Portfolio (the "Fund");
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 Fund, pursuant to
a written agreement for such services;
WHEREAS, the Fund Manager has recommended that the Sub-Adviser be retained
to furnish day-to-day investment advisory services to the Fund 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 hereby appoints the Sub-Adviser to provide day-to-day
investment advisory services to the Fund 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:
a. Resolutions of the Company's Board of Directors authorizing the
appointment of Sub-Adviser and approving this Agreement;
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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 Fund.
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 Fund,
including investment research and management with respect to all securities,
investments, cash and cash equivalents in the Fund. Sub-Adviser will determine
from time to time what securities and other investments will be purchased,
retained or sold by the Fund. Sub-Adviser will provide the services under this
Agreement in accordance with the Fund's investment objectives, policies and
restrictions as such are set forth in the Fund'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
Fund 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 Fund, Adviser,
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 Fund and affiliated persons and
the Fund and Affiliated broker/dealers, respectively; 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 Fund.
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 Fund.
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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 or the Fund Manager and shall, unless otherwise
expressly provided or authorized, have no authority to act for or
represent the Company, Fund 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 Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund any of such records upon the Fund'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 Fund 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 Fund other than the costs of securities and other investments (including
brokerage commissions and other transaction charges) purchased or sold for the
Fund.
7. Compensation.
The Fund 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 Fund. All parties to this Agreement do hereby authorize and instruct the
Fund'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 Fund 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.
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 Fund 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
Fund 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:
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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, 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 Fund. 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 Fund'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.
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:
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If to the Company: If to the Sub-Adviser:
----------------- ---------------------
The Penn Street Fund, Inc. Valley Forge Capital Advisors, Inc.
00 Xxxxxxx Xxxxxx Xxxx., Xxxxx 000 83 General Xxxxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxx Attn: G. Xxxxxxx Xxxx
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 Fund 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 Fund hereunder shall be binding only upon the
assets of the Fund and shall not be binding upon any Director, officer,
employee, agent or shareholder of the Fund. Neither the authorization of any
action by the Directors or shareholders of the Fund nor the execution of this
Agreement on behalf of the Fund shall impose any liability upon any Director,
officer or shareholder of the Fund.
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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: President
PENN STREET INVESTMENT ADVISORS, INC.
s/Xxxx Xxxxx
----------------------------
By: Xxxx X. Xxxxx
Title: President
VALLEY FORGE CAPITAL ADVISORS, INC.
s/G. Xxxxxxx Xxxx
----------------------------
By: G. Xxxxxxx Xxxx
Title: President
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