1
EXHIBIT 5(b)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, dated March 1 , 1993, between Market Street Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland, and
Sentinel Advisors Company (the "Adviser"), a Vermont general partnership.
WHEREAS, the Fund is a registered investment company under the Investment
Company Act of 1940 ("Investment Company Act") and maintains several investment
portfolios for the use of the Fund's shareholders which are separate accounts
established and maintained by insurance companies;
WHEREAS, the Bond Portfolio of the Fund has the current objective of
generating a high level of current income, as is consistent with prudent
investment risk, by investing in a diversified portfolio of freely marketable
debt securities;
WHEREAS, the Managed Portfolio of the Fund has the current objective of
realizing as high a level of long-term total rate of return, as is consistent
with prudent investment risk, by investing in stocks, bonds, money market
instruments or a combination thereof;
WHEREAS, the Agressive Growth Portfolio of the Fund has the current
objective of achieving a high level of long-term capital appreciation by
investing in securities of a diverse group of smaller emerging growth companies;
WHEREAS, the Fund desires that Sentinel Advisors Company act as investment
adviser with respect to the Bond, Managed and Aggressive Growth Portfolios;
2
WHEREAS, the Fund desires that Sentinel Advisors Company act as investment
adviser with respect to the Bond, Managed and Aggressive Growth Portfolios;
WHEREAS, the Investment Company Act prohibits any person from acting as
investment company except pursuant to a written agreement;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
NOW, THEREFORE, the Fund and the Adviser hereby agree as follows:
1. At its own expense and subject to supervision of the Board of Directors
of the Fund ("the Directors"), the Adviser will provide investment advisory
services with respect to the Fund's Bond, Managed and Aggressive Growth
Portfolios (the "Portfolios") in accordance with the Portfolios' investment
objectives, policies and restrictions as stated in the Fund's Prospectus, as
from time to time in effect, the Articles of Incorporation and By-laws of the
Fund, and the Investment Company Act and appropriate State Insurance Laws, each
as amended from time to time. The Adviser agrees to furnish the services
described below for the compensation provided by this Agreement. The Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way, or otherwise be deemed an agent of the
Fund.
2. In connection with its obligations hereunder, the Adviser shall,
subject to supervision by the Directors, manage the investment and reinvestment
of the assets of the Portfolios. Subject to the limitations set forth in
Paragraph I above, the Adviser shall:
- 2 -
3
(a) perform research and obtain and evaluate pertinent economic,
statistical, and financial data relevant to the investment policies of the
Portfolios as set forth in the Fund's prospectus, as amended from time to time;
(b) consult with the Directors and furnish to the Directors
recommendations with respect to an overall investment plan and any changes
thereto for the Portfolios for approval, modification, or rejection by the
Directors;
(c) seek out, present, and recommend specific investment opportunities,
consistent with any overall investment plan approved by the Directors;
(d) take such steps as are necessary to implement any overall
investment plan approved by the Directors, including making and carrying out
decisions to acquire or dispose of permissible investments, management of
investments and any other property of the Portfolios, and providing or obtaining
such services as may be necessary in managing, acquiring or disposing of
investments; and
(e) determine the composition of the assets of each Portfolio,
including the purchase, retention or sale of the securities and cash contained
in each Portfolio.
3. The Adviser shall effect all purchases and sales of investments for the
Portfolios in a manner consistent with the limitations set forth in Paragraph I
above.
4. The Adviser shall regularly report to the Directors with respect to the
implementation of any approved overall investment plan and any other activities
in connection with management of the assets of the Portfolios. The Adviser,
either through
- 3 -
4
persons employed by it or at its own expense, shall furnish to the Directors, at
least once every three months, a schedule of the investments and other assets
held in each Portfolio and a statement of all purchases and sales for each
Portfolio made since the last report.
5. The Adviser shall maintain all accounts, records, memoranda,
instructions, or authorizations relating to the acquisition or disposition of
investments for the Portfolios as required by law.
The Adviser agrees that all accounts and records which it maintains for
the Fund's Portfolios shall be the property of the Fund and that it will
surrender promptly to the designated officers of the Fund, or to the Directors,
any or all such accounts and records upon request. The Fund or its authorized
representative shall have the right to copy any records in the possession of the
Adviser which pertain to the Portfolios. The Adviser further agrees to preserve
for the period prescribed by the rules and regulations of the Securities and
Exchange Commission all such records as are required to be maintained pursuant
to said rules. The Adviser also agrees that it will maintain all records and
accounts regarding the investment activities of the Portfolios in a confidential
manner. All such accounts or records shall be made available, within five (5)
business days of a written request, to the Fund's accountants or auditors during
regular business hours at the Adviser's offices. In addition, the Adviser will
provide any materials, reasonably related to the investment advisory services
provided hereunder, as may be reasonably requested in writing by the Directors,
or as may be required by any governmental agency having jurisdiction over the
Fund or any insurance companies investing in the Fund.
- 4 -
5
6. (a) For the services provided to the Portfolios, the Adviser will be
compensated monthly at the effective annual rates set forth below:
Bond Portfolio -- 0.35% of the first $100 million of the average daily net
assets of the Bond Portfolio and 0.30% of the average daily net assets of the
Bond Portfolio in excess of $100 million.
Managed Portfolio -- 0.40% of the first $100 million of the average daily
net assets of the Managed Portfolio and 0.35% of the average daily net assets of
the Managed Portfolio in excess of $100 million.
Aggressive Growth Portfolio -- 0.50% of the first $20 million of the
average daily net assets of the Aggressive Growth Portfolio, 0.40% of the next
$20 million of the average daily net assets of the Aggressive Growth Portfolio,
and 0.30% of the average daily net assets of the Aggressive Growth Portfolio in
excess of $40 million.
(b) If this Agreement is terminated at any time, any compensation owed
the Adviser pursuant to subparagraph (a) above shall be payable upon the date of
termination of this Agreement.
7. The Adviser shall be responsible for all expenses incurred in
performing the investment advisory services herein set forth, including costs of
compensating and furnishing office space for officers and employees of the
Adviser connected with investment and economic research, trading and investment
management of the Portfolios. All brokers' commissions, transfer taxes and other
fees relating to purchases and sales of investments for each Portfolio shall be
paid out of assets allocated to that Portfolio.
- 5 -
6
8. The Adviser shall, subject to the supervision of the Directors, arrange
for the placement of orders for the Portfolios, either directly with the issuer,
with any broker-dealer or underwriter that specializes in the securities for
which the order is made, or with any other broker or dealer selected by the
Adviser, subject to the following limitation: the Adviser shall use its best
judgment to choose brokers who will obtain the best prices and executions and
securities transactions and whose commissions are most reasonable. In addition
to seeking the best price and execution, the Adviser may also take into
consideration research and statistical information and wire and other quotation
services provided to the Adviser. However, the Adviser shall select only brokers
whose commissions it believes are reasonable. The Adviser will periodically
evaluate the statistical data, research and other investment services provided
by brokers and dealers to it. Such services may be used by the Adviser in
connection with the performance of its obligations under this Agreement or in
connection with other advisory or investment operations.
9. The Adviser shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Portfolios in connection with the subject
matter of this Agreement unless such loss arises from willful misfeasance, bad
faith or gross negligence on its part in the performance of its obligations and
duties or by reason of its reckless disregard of its obligations and duties
under this Agreement.
10. The Adviser and any affiliate of the Adviser may engage in any other
business or act as adviser to or investment manager of any other person, even
though the Adviser, any affiliate of the Adviser, or any such other person has
or may have investment
- 6 -
7
policies similar to those for the Portfolios, so long as the Adviser's services
under this Agreement are not impaired. It is understood that directors,
officers, employees and shareholders of the Fund are or may become interested in
the Adviser, as directors, officers, employees, shareholders or otherwise and
that directors, officers, employees and shareholders of the Adviser are or may
become similarly interested in the Fund, and that the Adviser may become
interested in the Fund; and that the existence of any such dual interest shall
not affect the validity hereof or any transaction hereunder except as otherwise
provided in the Articles of Incorporation or By-laws of the Fund and the
Adviser, respectively, or by specific provisions of applicable law.
It is agreed that the Adviser or its affiliates may use any investment
research obtained for the benefit of the Portfolios in providing investment
advice to its other investment advisory accounts or for use in managing their
own accounts. Conversely, such supplemental information obtained by the
placement of business for the Adviser or the entities advised by the Adviser may
be considered by and may be useful to the Adviser in carrying out its
obligations to the Portfolios.
Nothing herein contained shall prevent the Adviser or any affiliate of the
Adviser from buying or selling, or from recommending or directing any other
person to buy or sell, at any time, securities of the same kind or class
recommended by the Adviser to be purchased or sold for any of the Portfolios.
When the Adviser deems the purchase or sale of a security to be in the best
interests of any of the Portfolios as well as other accounts or companies, it
may, to the extent permitted by applicable laws and regulations, but will not be
- 7 -
8
obligated to, aggregate the securities to be sold or purchased for such
Portfolios with those to be sold or purchased for other accounts or companies in
order to obtain favorable execution and low brokerage commissions. In that
event, allocation of the securities purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Adviser in the manner it
considers to be most equitable and consistent with its fiduciary obligations to
the Portfolios and to such other accounts or companies. The Fund recognizes that
in some cases this procedure may adversely affect the size of the position
obtainable for the Portfolios.
11. This Agreement shall not be effective unless and until it is approved
by the Directors, including a majority of the Directors who are not "interested
persons" (as defined in the Investment Company Act), by vote cast in person at a
meeting called for the purpose of voting such approval and by the parties to
this Agreement. This Agreement shall come into full force and effect on March 1,
1993, or upon the effectiveness of the amendment to the Fund's Registration
Statement reflecting this Agreement filed with the Securities and Exchange
Commission under the Securities Act of 1933, whichever is later, provided this
Agreement shall have been approved by a vote of the "majority" (as defined in
the Investment Company Act) of the outstanding shares of the applicable
Portfolio.
12. This Agreement shall continue until December 31, 1993 and thereafter
for successive annual periods ending December 31, of each year, provided such
continuance is specifically approved at least annually by (i) the Directors or
(ii) by the vote of a "majority" of the shareholders of the applicable
Portfolio as set forth in paragraph II above, provided that in either event the
continuance is also approved by a majority of the Directors
- 8 -
9
who are not "interested persons" (as defined in the Investment Company
Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting such approval. The Fund agrees that it
will notify the Adviser in writing each year of such annual approval.
13. (a) This Agreement shall terminate automatically in the event of its
assignment.
(b) This Agreement may be terminated at any time without the payment
of any penalty, (i) by a majority of the Directors for cause or upon sixty days
written notice addressed to the Adviser or (ii) by a vote of a "majority" of the
shareholders as set forth in paragraph 11 above, or (iii) by the Adviser on
sixty days written notice addressed to the Fund at its principal place of
business. Cause is defined and limited for this purpose to mean willful
misfeasance, bad faith, or gross negligence by the Adviser in the performance of
its duties or reckless disregard by the Adviser of its obligations and duties
under this Agreement.
14. This Agreement shall be construed in accordance with Pennsylvania law.
15. The Fund understands that the Adviser now acts, will continue to act,
or may act in the future, as investment adviser to fiduciary and other managed
accounts including other investment companies, and the Fund has no objection to
the Adviser's so acting, provided that the Adviser duly performs all
obligations under this Agreement.
- 9 -
10
16. The Fund understands that the persons employed by the Adviser to
assist in the performance of its duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Adviser or any of its affiliates to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature, provided that the Adviser duly performs all obligations under
this Agreement.
17. This Agreement shall be subject to the provisions of the Investment
Company Act and the Investment Advisers Act and the rules, regulations, and
rulings thereunder, as from time to time in effect, including such exemptions
therefrom as the Securities and Exchange Commission may grant. The terms used in
this Investment Advisory Agreement, and any amendments thereof, shall be
interpreted and construed in accordance therewith. Without limiting the
generality of the foregoing, the term "assignment" shall not include any
transaction exempted from section 15(a)(4) of the Investment Company Act by an
order of the Securities and Exchange Commission.
18. The Adviser shall submit to all regulatory and administrative bodies
having jurisdiction over the operations of Provident Mutual Life Insurance
Company of Philadelphia or Providentmutual Life and Annuity Company of America
or the Fund, present or future, any materials reasonably related to the
investment advisory services provided hereunder, as may be reasonably requested
in writing by the Directors or as may be required by any governmental agency
having jurisdiction.
- 10 -
11
19. In the event of termination for any reason all records shall promptly
be returned to the Fund free from any claim or retention of rights by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this agreement in any manner whatsoever except as expressly
authorized herein and further the Adviser will keep confidential any information
pursuant to the service relationship set forth herein and disclose such
information only if the Fund has authorized such disclosure or such disclosure
is expressly required by applicable federal or state regulatory authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC.
Witness:
[sig]
-------------------------- By: /s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
----------------------
SENTINEL ADVISORS COMPANY
Witness:
-------------------------- By:
----------------------
- 11 -
12
19. In the event of termination for any reason all records shall promptly
be returned to the Fund free from any claim or retention of right by the
Adviser.
20. The Adviser shall not disclose or use any records or information
obtained pursuant to this agreement in any manner whatsoever except as expressly
authorized herein and further the Adviser will keep confidential any information
pursuant to the service relaltionship set forth herein and disclose such
information only if the Fund has authorized such disclosure or such disclosure
is expressly required by applicable federal or state regulatory authorities.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC.
Witness:
--------------------- By
-----------------------------
SENTINEL ADVISORS COMPANY
Witness:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman
- 12 -
13
EXHIBIT 5(b)
Amendment No. 1 to Investment Advisory Agreement
This is Amendment No. 1, dated as of March 11, 1996, to the Investment
Advisory Agreement (the "Agreement") dated March 1, 1993, between Market Street
Fund, Inc. (the "Fund"), a corporation organized under the laws of the State of
Maryland, and Sentinel Advisors Company (the "Adviser"), a Vermont general
partnership.
WHEREAS, the Fund is a registered investment company under the Investment
Company Act of 1940 ("Investment Company Act") and maintains several investment
portfolios for the use of the Fund's shareholders which are separate accounts
established and maintained by insurance companies; and
WHEREAS, the Adviser currently provides investment advisory services in
accordance with the Agreement for the Fund's Bond, Managed and Aggressive Growth
Portfolios; and
WHEREAS, the Fund has created two new portfolios, the Common Stock
Portfolio and the Sentinel Growth Portfolio, for which the Fund desires that the
Adviser act as investment adviser; and
WHEREAS, the Common Stock Portfolio of the Fund has the current investment
objective of seeking a combination of long-term growth of capital and current
income with relatively low risk by investing in common stocks of many
well-established companies; and
WHEREAS, the Sentinel Growth Portfolio has the current investment
objective of seeking long-term growth of capital through equity participation in
companies having growth potential believed by the Adviser to be more favorable
than the U.S. economy as a whole, with a focus on relatively well-established
companies; and
WHEREAS, the Adviser desires to act as investment adviser to the Common
Stock and Sentinel Growth Portfolios under the terms hereof; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Investment Company Act prohibits any person from acting as an
adviser to an investment company except pursuant to a written agreement;
NOW, THEREFORE, the Fund and the Adviser hereby agree as follows:
1. The Agreement shall continue in full force and effect as to the Fund's
Bond, Managed and Aggressive Growth Portfolios, without change.
2. At its own expense and subject to supervision of the Board of Directors
of the Fund (the "Directors"), the Adviser will provide investment advisory
services
14
with respect to the Fund's Common Stock and Sentinel Growth Portfolios
(the "Portfolios"), in accordance with the Portfolios' investment
objectives, policies and restrictions as stated in the Fund's prospectus,
as from time to time in effect, the Articles of Incorporation and Bylaws
of the Fund, the Investment Company Act, and appropriate state insurance
laws, each as amended from time to time. The Adviser agrees to furnish
the services described below for the compensation provided in this
Amendment No. 1. The Adviser shall for all purposes herein be deemed to be
an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any
way, or otherwise be deemed an agent of the Fund.
3. In connection with its obligations hereunder, the Adviser shall,
subject to supervision by the Directors, manage the investment and reinvestment
of the assets of the Portfolios, and in so doing, shall provide the same
services as set forth in paragraphs 2, 3, 4 and 5 of the Agreement with respect
to the Bond, Managed and Aggressive Growth Portfolios.
4. (a) For the services provided to the Portfolios, the Adviser will be
compensated monthly at the effective annual rates set forth below:
Common Stock Portfolio -- 0.40% of the first $100 million of the average
daily net assets of the Common Stock Portfolio and 0.35% of the average daily
net assets of the Common Stock Portfolio in excess of $100 million.
Sentinel Growth Portfolio -- 0.50% of the first $20 million of the average
daily net assets of the Sentinel Growth Portfolio, 0.40% of the next $20
million of the average daily net assets of the Sentinel Growth Portfolio, and
0.30% of the average daily net assets of the Sentinel Growth Portfolio in excess
of $40 million.
(b) If this Amendment No. 1 is terminated at any time, any compensation
owed the Adviser pursuant to subparagraph (a) above shall be payable upon the
date of termination of this Agreement.
5. The provisions of paragraphs 7, 8, 9, 10, 13, 14, 15, 16, 17, 19 and 20
of the Agreement shall apply to the provision of investment advisory services to
the Common Stock and Sentinel Growth Portfolios under this Amendment No. 1 in
the same way that such provisions apply to the provision of investment advisory
services to the Bond, Managed and Aggressive Growth Portfolios pursuant to the
Agreement.
6. This Amendment No. 1 shall not be effective unless and until it is
approved by the Directors, including a majority of the Directors who are not
"interested persons" (as defined in the Investment Company Act), by vote cast in
person at a meeting called for the purpose of voting such approval and by the
parties to this Amendment No. 1. This Amendment No. 1 shall come into full force
and effect on March 11, 1996, or upon effectiveness of the amendment to the
Fund's registration statement reflecting this Amendment No. 1 filed with the
Securities and Exchange Commission under the Securities Act of 1933, whichever
is later, provided this Amendment No. 1 shall have been approved by a vote of
the "majority" (as defined in the Investment Company Act) of the outstanding
shares of the applicable Portfolio.
7. This Amendment No. 1 shall continue until December 31, 1997 and
thereafter for successive annual periods ending December 31, of each year,
provided such continuance is specifically approved at least annually by (i) the
Directors or (ii) by the vote of a "majority" of the shareholders of the
applicable Portfolio set forth in
15
paragraph 6 above, provided that in either event the continuance is also
approved by a a majority of the Directors who are not "interested persons"
(as defined in the Investment Company Act) of any party to this Amendment
No. 1, by vote cast in person at a meeting called for the purpose of
voting such approval. The Fund agrees that it will notify the Adviser in
writing each year of such annual approval.
8. The Adviser shall submit to all regulatory and administrative bodies
having Jurisdiction over the operations of any insurance company whose separate
accounts have any interest in the Portfolios, or in any of the other portfolios
of the Fund, present or future, any materials reasonably related to the
investment advisory services provided hereunder or in the Agreement, as may be
reasonably requested in writing by the Directors or as may be required by any
governmental agency having jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be executed by their duly authorized officers on the date and year first above
written.
MARKET STREET FUND, INC
by /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
SENTINEL ADVISORS COMPANY
by /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive
Officer
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Fund, Inc.
Common Stock Portfolio
As sole shareholder of the Common Stock Portfolio of Market Street Fund,
Inc., the undersigned hereby approves Amendment No. 1 dated as of March 11, 1996
to the Investment Advisory Agreement dated March 1, 1993, between Market Street
Fund, Inc., and Sentinel Advisors Company.
Dated: March 18, 1996
NATIONAL LIFE INSURANCE COMPANY
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Senior Vice President and Chief
Investment Officer