AMENDED AND RESTATED
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
INDEPENDENCE CAPITAL MANAGEMENT, INC.
AND
X. XXXX PRICE ASSOCIATES, INC.
AMENDED AND RESTATED INVESTMENT SUB-ADVISORY AGREEMENT, made as of
August 1, 2004 by and between INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"),
a corporation organized and existing under the laws of the State of
Pennsylvania, and X. XXXX PRICE ASSOCIATES, INC. ("Sub-Adviser"), a corporation
organized and existing under the laws of the State of Maryland.
WITNESSETH:
WHEREAS, Penn Series Funds, Inc. ("Penn Series") is an open-end
management investment company registered as such under the Investment Company
Act of 1940, as amended (the "Act"), and is authorized to issue shares in
separate series with each series representing interests in a separate fund of
securities and other assets;
WHEREAS, Adviser and Sub-Adviser are engaged principally in the
business of rendering investment advisory services and are registered as
investment advisers under the federal Investment Advisers Act of 1940, as
amended;
WHEREAS, Adviser renders investment advisory services to Penn Series
pursuant to an investment advisory agreement entered into by Penn Series and
Adviser;
WHEREAS, Adviser desires Sub-Adviser to render investment sub-advisory
services to Penn Series in the manner and on the terms and conditions
hereinafter set forth; and Sub-Adviser desires to render such services, in such
manner and under such terms;
WHEREAS, Sub-Adviser presently provides investment sub-advisory
services to the Flexibly Managed and High Yield Bond Funds, each a portfolio of
Penn Series, pursuant to an Investment Sub-Advisory Agreement, dated as of May
1, 1998, as amended as of May 11, 2000; and
WHEREAS, Adviser and Sub-Adviser desire to amend and restate their
existing Investment Sub-Advisory Agreement to reflect, inter alia, the addition
of the Growth Equity Fund, a portfolio of Penn Series, to the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. INVESTMENT SUB-ADVISORY SERVICES. Sub-Adviser shall serve as
investment sub-adviser and shall supervise and direct the cash, securities and
other assets of each portfolio of Penn Series listed on Schedule A (each, a
"Fund," and together, the "Funds"), and to exercise all rights incidental to
ownership in accordance with the investment objectives, program and restrictions
applicable to the Funds as provided in Penn Series' Prospectus and Statement of
Additional Information, as amended from time to time, and such other limitations
as may be imposed by law or as Penn Series may impose with notice in writing to
Sub-Adviser. To enable Sub-Adviser to fully exercise its discretion, Adviser
hereby appoints Sub-Adviser as agent and attorney-in-fact for the Funds with
full power and authority to buy, sell and otherwise deal in securities and
contracts for the Funds. No investment will be made by Sub-Adviser for Funds if
that investment would violate the objectives, investment restrictions or
limitations of a Fund set out in the prospectus and the Statement of Additional
Information ("SAI") previously delivered to the Sub-Adviser or to be delivered.
Sub-Adviser shall not take custody of any assets of Penn Series, but shall issue
settlement instructions to the custodian designated by Penn Series (the
"Custodian"). Sub-Adviser shall, in its discretion, obtain and evaluate such
information relating to the economy, industries, businesses, securities markets
and securities as it may deem necessary or useful in the discharge of its
obligations hereunder and shall formulate and implement a continuing program for
the management of the assets and resources of the Funds in a manner consistent
with the investment objectives of the Funds. In furtherance of this duty,
Sub-Adviser, as agent and attorney-in-fact with respect to Adviser and Penn
Series, is authorized, in its discretion and without prior consultation with
Penn Series, to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets; and
(ii) place orders and negotiate the commissions (if any) for the
execution of transactions in securities with or through such
brokers, dealers, underwriters or issuers as Sub-Adviser may
select, in conformance with the provisions of Paragraph 4
herein; and
(iii) take such other actions Sub-Adviser deems to be appropriate;
provided, however, that Sub-Adviser shall make no investment for the Funds that
would violate the objectives, program, restrictions or limitations of the Funds.
2. ACCOUNTING AND RELATED SERVICES. Sub-Adviser agrees to cooperate
with the Accounting Services Agent appointed by Penn Series pursuant to the
Accounting Services Agreement entered into by Penn Series and the Accounting
Services Agent. As requested from time to time, Sub-Adviser shall provide Penn
Series and its Accounting Services Agent with such information as may be
reasonably necessary to properly account for financial transactions with respect
to the Funds.
3. FEES.
A. PAYMENT OF FEES. For the services Sub-Adviser renders to Penn Series
under this Agreement, Adviser will pay Sub-Adviser fees based on the
average daily net assets of each Fund.
B. FEE RATES. The fee rate payable under this Agreement with respect to
each of the Funds are set forth on Schedule B, which is attached hereto
and made a part of this Agreement.
C. METHOD OF COMPUTATION. Each Fund's fee shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid
monthly to Sub-Adviser as of the first business day of the next
succeeding calendar month. Said daily fee will be computed by
multiplying the fraction of one over the number of calendar days in the
year by the annual rate applicable to the Fund as set forth in Schedule
B, and multiplying this product by the net assets of the Fund. A Fund's
net assets, for purposes of the calculations described above, will be
determined in accordance with Penn Series' Prospectus and SAI as of the
close of business on the most recent previous business day on which
Penn Series was open for business. If this Agreement is terminated
before the end of the month, the fee for the period from the beginning
of such month to the date of termination shall be prorated based upon
services provided through the date of termination.
4. BROKERAGE. In executing portfolio transactions and selecting brokers
or dealers for the Funds, Sub-Adviser will use its best efforts to seek the best
price and the most favorable execution of its orders. In assessing the best
price and the most favorable execution for any transaction, Sub-Adviser shall
consider the breadth of the market in the security, the price of the security,
the skill, financial condition and execution capability of the broker or dealer,
and the reasonableness of the commission, if any. Where best price and most
favorable execution will not be compromised, Sub-Adviser may take into account
the research and related services that the broker has provided to the Funds or
the Sub-Adviser. It is understood that the Sub-Adviser will not be deemed to
have acted unlawfully or to have breached a fiduciary duty to the Funds or be in
breach of any obligation owing to the Funds under this Agreement, or otherwise,
by reason of its having directed a securities transaction on behalf of the Funds
to a broker-dealer in compliance with the provisions of Section 28(e) of the
Securities Exchange Act of 1934, as amended, or as described from time to time
in the Penn Series' Prospectus and SAI. Sub-Adviser shall advise Penn Series'
Board of Directors, when requested, as to all payments of commissions and as to
its brokerage policies and practices and shall follow such reasonable
instructions with respect thereto as may be given by Penn Series' Board.
5. USE OF THE SERVICES OF OTHERS. Sub-Adviser may (at its cost except
as contemplated by Section 4 of this Agreement) employ, retain or otherwise
avail itself of the services or facilities of other persons or organizations for
the purpose of providing Penn Series, Adviser or itself, as appropriate, with
such statistical and other factual information, such advice regarding economic
factors and trends, such advice as to occasional transactions in specific
securities or such other information, advice or assistance as Sub-Adviser may
deem necessary, appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to Penn Series and Adviser, or in the discharge
of Sub-Adviser's overall responsibilities with respect to the other accounts
which it serves as investment adviser.
6. PERSONNEL, OFFICE SPACE, AND FACILITIES. Sub-Adviser at its own
expense shall furnish or provide and pay the cost of such office space, office
equipment, office personnel, and office services as it, or any affiliated
corporation of Sub-Adviser, requires in the performance of services under this
Agreement.
7. OWNERSHIP OF SOFTWARE AND RELATED MATERIAL. All computer programs,
magnetic tapes, written procedures and similar items developed and used by
Sub-Adviser or any affiliate in performance of this Agreement are the property
of Sub-Adviser and will not become the property of Penn Series or Adviser.
8. REPORTS TO PENN SERIES AND COOPERATION WITH ACCOUNTANTS.
Sub-Adviser, and any affiliated corporation of Sub-Adviser performing services
for Adviser and Penn Series described in this Agreement, shall furnish to or
place at the disposal of Penn Series and Adviser, such information, reports,
evaluations, analyses and opinions as Penn Series and Adviser may, at any time
or from time to time, reasonably request or as Sub-Adviser may deem helpful, to
reasonably ensure compliance with applicable laws and regulations or for any
other purpose. Sub-Adviser and its affiliates shall cooperate with Penn Series'
independent public accountants and take all reasonable action in the performance
of services and obligations under this Agreement to assure that the information
needed by such accountants is made available to them for the expression of their
opinion without any qualification as to the scope of their examination,
including, but not limited to, their opinion included in Penn Series' annual
report under the Act and annual amendment to Penn Series' registration statement
under the Act.
9. REPORTS TO SUB-ADVISER. Penn Series and/or Adviser shall furnish or
otherwise make available to Sub-Adviser such prospectuses, SAI, financial
statements, proxy statements, reports, articles of incorporation, by-laws and
other information relating to the business and affairs of Penn Series as
Sub-Adviser may, at any time or from time to time, reasonably require in order
to discharge its obligations under this Agreement. Any printed matter, or other
material prepared for distribution to the stockholders of Penn Series or the
public, which refers in any way to Sub-Adviser or any affiliated corporation of
Adviser other than merely to identify Sub-Adviser as the Sub-Adviser, shall be
furnished to Sub-Adviser at least 14 days prior to use thereof. Penn Series and
Adviser shall not use such material if Sub-Adviser shall object thereto in
writing within 7 days after its receipt by Sub-Adviser. In the event of
termination of this Agreement, Penn Series and Adviser shall, on written request
of Sub-Adviser, forthwith delete any reference to Sub-Adviser or any affiliated
corporation of Sub-Adviser from any materials prepared on behalf of Penn Series.
10. OWNERSHIP OF RECORDS. All records required to be maintained and
kept current by Penn Series pursuant to the provisions of rules or regulations
of the Securities and Exchange Commission under Section 31(a) of the Act and
that are maintained and kept current by Sub-Adviser or any affiliated
corporation of Sub-Adviser on behalf of Penn Series are the property of Penn
Series. Such records will be preserved by Sub-Adviser itself or through an
affiliated corporation for the periods prescribed in Rule 3la-2 under the Act,
where applicable, or in such other applicable rules that may be adopted from
time to time under the Act. Such records may be inspected by representatives of
Penn Series and Adviser at reasonable times and, in the event of termination of
this Agreement, will be promptly delivered to Adviser and Penn Series upon
request.
11. SERVICES TO OTHER CLIENTS. Nothing herein contained shall limit the
freedom of Sub-Adviser or any affiliated person of Sub-Adviser to render
investment supervisory and other services to other investment companies, to act
as investment advisor or investment counselor to other persons, firms or
corporations or to engage in other business activities; but so long as this
Agreement or any extension, renewal or amendment hereof shall remain in effect
as to the Funds, or until Sub-Adviser shall otherwise consent, Sub-Adviser shall
be the only investment Sub-Adviser to the Funds. It is understood that
Sub-Adviser may give advice and taken action for its other clients which may
differ from advice given, or the timing or nature of action taken, for a Fund.
Sub-Adviser is not obligated to initiate transactions for a Fund in any security
which Sub-Adviser, its principals, affiliates or employees may purchase or sell
for its or their own accounts or other clients.
12. CONFIDENTIAL RELATIONSHIP. Information furnished by Penn Series or
by one party to another, including Penn Series' or a party's respective agents
and employees, is confidential and shall not be disclosed to third parties
unless upon request of regulatory authority or as otherwise required by law.
Sub-Adviser, on behalf of itself and its affiliates and representatives, agrees
to keep confidential all records and other information relating to Adviser or
Penn Series (as the case may be), except after prior notification to and
approval in writing by Adviser or Penn Series (as the case may be), which
approval shall not be unreasonably withheld, and may not be withheld, where
Sub-Adviser or any affiliate may be exposed to civil or criminal contempt
proceedings for failure to comply, when requested to divulge such information by
duly constituted authorities, when so requested by Adviser and Penn Series.
13. PROXIES. Subject to such oversight as the Board of Directors of
Penn Series shall deem appropriate, Sub-Adviser shall vote proxies solicited by
or with respect to the issuers of securities held in a Fund.
14. INSTRUCTIONS, OPINION OF COUNSEL AND SIGNATURES. At any time
Sub-Adviser may apply to an officer of Penn Series for instructions, and may
consult legal counsel for Penn Series, in respect of any matter arising in
connection with this Agreement, and Sub-Adviser shall not be liable for any
action taken or omitted by it or by any affiliate in good faith in accordance
with such instructions or with the advice or opinion of Penn Series' legal
counsel. Sub-Adviser and its affiliates shall be protected in acting upon any
instruction, advice, or opinion provided by Penn Series or its legal counsel and
upon any other paper or document delivered by Penn Series or its legal counsel
believed by Sub-Adviser to be genuine and to have been signed by the proper
person or persons and shall not be held to have notice of any change of
authority of any officer or agent of Penn Series, until receipt of written
notice thereof from Penn Series.
15. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as such
responsibility may be placed upon Sub-Adviser or any affiliate by the terms of
this Agreement, and except for the accuracy of information furnished to Penn
Series by Sub-Adviser or any affiliate, Sub-Adviser does not assume
responsibility for the preparation, contents and distribution of the
prospectuses for Penn Series, for complying with any applicable requirements of
the Act, the Securities Exchange Act of 1934, the Securities Act of 1933, or any
other laws, rules and regulations of governmental authorities having
jurisdiction over Penn Series.
16. LIMITATION OF LIABILITY. Neither Sub-Adviser nor any of its
affiliates, their respective officers, directors, employees or agents, or any
person performing executive, administrative, trading, or other functions for
Penn Series (at the direction or request of Sub-Adviser), or Sub-Adviser or its
affiliates in connection with the discharge of obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for any error
of judgment or mistake of law or for any loss suffered by Penn Series in
connection with the matters to which this Agreement relates, except for such
error, mistake or loss resulting from willful misfeasance, bad faith, negligence
or willful misconduct in the performance of its, his or her duties on behalf of
Penn Series or constituting or resulting from a failure to comply with any term
of this Agreement. Sub-Adviser shall not be responsible for any loss incurred by
reason of any act or omission of the Custodian or of any broker, dealer,
underwriter or issuer selected by Sub-Adviser with reasonable care.
17. OBLIGATIONS OF ADVISER AND SUB-ADVISER. It is expressly agreed that
the obligations of Adviser and Sub-Adviser hereunder shall not be binding upon
any of their directors, shareholders, nominees, officers, agents or employees,
personally. The execution and delivery of this Agreement have been authorized in
accordance with the governing documents of each party and in accordance with
applicable law, and shall be signed by an authorized officer of each party,
acting as such, and shall be binding on each party.
18. INDEMNIFICATION BY ADVISER. Adviser will indemnify and hold
Sub-Adviser harmless from all loss, cost, damage and expense, including
reasonable expenses for legal counsel, incurred by Sub-Adviser resulting from:
(i) any action or omission of Sub-Adviser or any affiliated corporation, with
respect to any service described in this Agreement, upon instructions reasonably
believed by Sub-Adviser or any affiliated corporation to have been executed by
an individual who has been identified in writing by Penn Series as a duly
authorized officer of Penn Series or Adviser; (ii) any action of Sub-Adviser or
any affiliated corporation, with respect to any service described in this
Agreement upon information provided by Penn Series or Adviser in form and under
policies agreed to by Sub-Adviser and Penn Series or Adviser. Sub-Adviser shall
not be entitled to such indemnification in respect of actions or omissions
constituting negligence or willful misconduct of Sub-Adviser or its affiliates,
agents or contractors, or constituting a failure by Sub-Adviser or any affiliate
to comply with any term of this Agreement. Prior to the confession of any claim
against Adviser which may be subject to this indemnification, Sub-Adviser shall
give Adviser reasonable opportunity to defend against said claim in its own name
or in the name of Sub-Adviser.
19. INDEMNIFICATION BY SUB-ADVISER. Sub-Adviser will indemnify and hold
harmless Penn Series and Adviser from all loss, cost, damage and expense,
including reasonable expenses for legal counsel, incurred by Penn Series and
Adviser and resulting from any claim, demand, action or suit arising out of
Sub-Adviser's or any affiliate's failure to comply with any term of this
Agreement or which arise out of the willful misfeasance, bad faith, negligence
or misconduct of Sub-Adviser, its affiliates, their agents or contractors.
Neither Penn Series nor Adviser shall be entitled to such indemnification in
respect of actions or omissions constituting negligence or willful misconduct of
Penn Series or Adviser, or their agents or contractors or constituting a failure
by Adviser to comply with any term of this Agreement; provided, that such
negligence or misconduct is not attributable to Sub-Adviser or any person that
is an affiliate of Sub-Adviser or an affiliate of an affiliate of Sub-Adviser.
Prior to confessing any claim against it which may be subject to this
indemnification, Adviser shall give Sub-Adviser reasonable opportunity to defend
against said claim in its own name or in the name of Adviser. For purposes of
this Section 19 and of Section 18 hereof, no broker or dealer shall be deemed to
be acting as agent or contractor of Sub-Adviser or any affiliate of Sub-Adviser,
in effecting or executing any portfolio transaction for the Fund.
20. FURTHER ASSURANCES. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
21. TERM OF AGREEMENT. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect until two years from date of execution.
Thereafter, this Agreement shall continue in effect from year to year with
respect to each Fund, subject to the termination provisions and all other terms
and conditions hereof, so long as such continuation shall be specifically
approved at least annually (a) by either the Board of Directors of Penn Series,
or by a vote of a majority of the outstanding voting securities of the series of
shares of Penn Series representing interests in the Fund and (b) in either event
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the directors of Penn Series who are not parties
to this Agreement or interested persons of any such party. Sub-Adviser shall
furnish to Penn Series, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement with respect to
each Fund or any extension, renewal or amendment hereof.
22. AMENDMENT AND ASSIGNMENT OF AGREEMENT. This Agreement may not be
amended or assigned without the written consent of the parties hereto, and
without the affirmative vote of a majority of the outstanding voting securities
of the series of shares of Penn Series representing interests in the affected
Fund, and, without affecting any claim for damages or other right that any party
hereto may have as a result thereof, this Agreement shall automatically and
immediately terminate in the event of its assignment.
23. TERMINATION OF AGREEMENT. This Agreement may be terminated by
Adviser, Penn Series or by Sub-Adviser, with respect to a Fund, without payment
of any penalty, upon 60 days' prior notice in writing from Penn Series to
Sub-Adviser, or upon 90 days' prior notice in writing from Sub-Adviser to Penn
Series; provided, that in the case of termination by Adviser or Penn Series,
such action shall have been authorized by resolution of a majority of its
directors who are not interested persons of any party to this Agreement, or by
vote of a majority of the outstanding voting securities of the series of shares
of Penn Series representing interests in the affected Fund.
24. MISCELLANEOUS.
A. CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect
their construction or effect.
B. INTERPRETATION. Nothing herein contained shall be deemed to
require Penn Series to take any action contrary to its
Articles of Incorporation or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or
by which it is bound, or to relieve or deprive the Board of
Directors of Penn Series of its responsibility for and control
of the conduct of the affairs of Penn Series.
C. DEFINITIONS. Any question of interpretation of any terms or
provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Act shall be
resolved by reference to such term or provision of the Act and
to interpretations thereof, if any, by the United States
courts or, in the absence of any controlling decision of any
such court, by rules, regulations or orders of the Securities
and Exchange Commission validly issued pursuant to the Act.
Specifically, the terms "vote of a majority of the outstanding
voting securities," "interested person," "assignment," and
"affiliated person," as used herein, shall have the meanings
assigned to them by Section 2(a) of the Act. In addition,
where the effect of a requirement of the Act reflected in any
provision of this Agreement is relaxed by a rule, regulation
or order of the Securities and Exchange Commission, whether of
special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation or
order.
D. NOTICE. Notice under the Agreement shall be in writing,
addressed and delivered or sent by registered or certified
mail, postage prepaid, to the addressed party at such address
as such party may designate for the receipt of such notices.
Until further notice, it is agreed that for this purpose the
address of Adviser is Independence Capital Management, Inc.,
000 Xxxxxxx Xxxx, Xxxxxxx, XX 00000, Attention: President, and
that of Sub-Adviser is X. Xxxx Price Associates, Inc., 000
Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention:
General Counsel.
E. STATE LAW. The Agreement shall be construed and enforced in
accordance with and governed by the laws of Maryland except
where such state laws have been preempted by Federal law.
F. COUNTERPARTS. This Agreement may be entered into in
counterparts, each of which when so executed and delivered
shall be deemed to be an original, and together shall
constitute one document.
G. ENTIRE AGREEMENT; SEVERABILITY. This Agreement is the entire
agreement of the parties and supersedes all prior or
contemporaneous written or oral negotiations, correspondence,
agreements and understandings regarding the subject matter
hereof. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any and all other provisions hereof. In the event the terms
of this Agreement are applicable to more than one portfolio of
Penn Series, the Adviser is entering into this Agreement with
the Sub-Adviser on behalf of each respective Fund severally
and not jointly, with the express intention that the
provisions contained in each numbered section hereof shall be
understood as applying separately with respect to each Fund as
if contained in separate agreements between the Adviser and
Sub-Adviser for each such Fund. In the event that this
Agreement is made applicable to any additional Funds by way of
a Schedule executed subsequent to the date first indicated
above, provisions of such Schedule shall be deemed to be
incorporated into this Agreement as it relates to such Fund so
that, for example, the execution date for purposes of Section
21 of this Agreement with respect to such Fund shall be the
execution date of the relevant Schedule.
H. NO THIRD PARTY BENEFICIARIES. Neither party intends for this
Agreement to benefit any third-party not expressly named in
this Agreement.
I. CONSULTATION AMONG SUB-ADVISERS. In performance of its duties
and obligations under this Agreement, the Sub-Adviser shall
not consult with any other sub-adviser to a Penn Series
portfolio concerning transactions in securities or other
assets for a Fund, except as permitted by Rule 12d3-1 under
the Act.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
Attest: INDEPENDENCE CAPITAL MANAGEMENT, INC.
/s/ Xxxxxxx X. Xxxx By: /s/ Xxxxx X. Xxxxxxx
----------------------- ---------------------------------
Xxxxxxx X. Xxxx Xxxxx X. Xxxxxxx
Secretary President
Attest: X. XXXX PRICE ASSOCIATES, INC.
/s/ Xxxxx X. Xxxxx By: /s/ Xxxxxxx X. Xxxxxx
----------------------- ---------------------------------
Name: Xxxxx X. Xxxxx Name: Xxxxxxx X. Xxxxxx
Title: Assistant Vice President Title: Vice President
SCHEDULE A
TO THE
AMENDED AND RESTATED INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
INDEPENDENCE CAPITAL MANAGEMENT, INC.
AND
X. XXXX PRICE ASSOCIATES, INC.
DATED AS OF AUGUST 1, 2004
PENN SERIES FUNDS, INC.
----------------------
Flexibly Managed Fund
High Yield Bond Fund
Growth Equity Fund
SCHEDULE B
TO THE
AMENDED AND RESTATED INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
INDEPENDENCE CAPITAL MANAGEMENT, INC.
AND
X. XXXX PRICE ASSOCIATES, INC.
DATED AS OF AUGUST 1, 2004
1. FLEXIBLY MANAGED FUND AND HIGH YIELD BOND FUND
A. FEE RATE. Pursuant to Section 3B, the Adviser shall pay the
Sub-Adviser compensation at an annual rate based on the average daily net assets
of the Flexibly Managed Fund and High Yield Bond Fund (for purposes of this
Section 1, collectively, the "Funds") as follows:
(i) 0.50% (50 basis points) with respect to the first $250,000,000 of
the combined total average daily net assets of the Funds;
(ii) 0.40% (40 basis points) with respect to the next $250,000,000 of
the combined total average daily net assets of the Funds; and
Provided, the fee rate shall be 0.40% (40 basis points) with respect to
all average daily net assets of the Funds at such time the combined
total average daily net assets of the Funds exceed $500,000,000.
To eliminate any discontinuity between the tiered fee schedule and the
flat fee at the $500,000,000 breakpoint, Sub-Adviser will provide
Adviser a transitional credit described below. This credit will apply
at asset levels between $450,000,000 and $500,000,000.
To best accommodate the circumstances where the Funds' combined assets
fall beneath $500,000,000 and to prevent a decline in the Funds'
combined assets from causing an increase in the absolute dollar fee,
Sub-Adviser will provide a transitional credit to cushion the impact of
reverting to the original-tiered fee schedule. This credit will be
applied against the fees assessed under the existing fee schedule and
will have the effect of reducing the dollar fee until assets either (a)
exceed $500,000,000, when the flat fee schedule would be triggered or,
(b) fall below a threshold of $450,000,000 where the original-tiered
fee schedule would be fully reapplied.
The credit is determined by prorating the difference between the tiered
fee schedule and the flat fee ($250,000 per annum at all asset levels)
over the difference between $500,000,000 and the current portfolio size
for billing purposes. The credit would approach $250,000 annually when
the Funds' combined assets were close to $500,000,000 and fall to zero
at $450,000,000.
The transitional credit is determined as follows:
Funds' Combined Assets - $450,000,000 x $250,000
--------------------------------------------------
$50,000,000
B. EXPENSE LIMITATION FOR THE FLEXIBLY MANAGED AND HIGH YIELD BOND
FUNDS. The expense limitations of each of the Flexibly Managed Fund and High
Yield Bond Fund (for purposes of this Section 2, each, a "Fund"), as a
percentage of such Fund's average daily net assets, are 1.00% and 0.90%,
respectively. To the extent that a Fund's total expenses for a fiscal year
(excluding interest, taxes, brokerage, other expenses which are capitalized in
accordance with generally accepted accounting principles, and extraordinary
expenses, but including investment advisory and accounting, administrative and
corporate service fees before any adjustment pursuant to this provision) exceed
the expense limitation for the Fund, one-half of such excess amount shall be a
liability of Sub-Adviser to Adviser. The liability (if any) of Sub-Adviser to
pay Adviser one-half of such excess amount shall be determined on a daily basis.
If, at the end of each month, there is any liability of Sub-Adviser to pay
Adviser such excess amount, the fee shall be reduced by such liability. If, at
the end of each month, there is no liability of Sub-Adviser to pay Adviser such
excess amount and if payments of the fee at the end of prior months during the
fiscal year have been reduced in excess of that required in this subsection,
such excess reduction shall be recaptured by Sub-Adviser and shall be payable by
Adviser to Sub-Adviser along with the fee payable to Sub-Adviser for that month.
If, at the end of the fiscal year, there is any remaining liability of
Sub-Adviser to pay Adviser such excess amount (which has not been paid through
reduction of the fee), Sub-Adviser shall remit to Adviser an amount sufficient
to pay such remaining liability.
2. GROWTH EQUITY FUND.
A. FEE RATE. Pursuant to Section 3B, the Adviser shall pay the
Sub-Adviser compensation at an annual rate as follows:
(i) Forty basis points (0.40%) of the first $500,000,000 of
average daily net assets of the Growth Equity Fund;
(ii) Thirty-five basis points (0.35%) of average daily net assets
of the Growth Equity Fund in excess of $500,000,000.
