Exhibit 5(d)
INVESTMENT ADVISORY AGREEMENT
Between
PENN SERIES FUNDS, INC.
and
INDEPENDENCE CAPITAL MANAGEMENT, INC.
Relating to
VALUE EQUITY FUND
SMALL CAPITALIZATION FUND
FLEXIBLY MANAGED FUND
INTERNATIONAL EQUITY FUND
HIGH YIELD BOND FUND
INVESTMENT ADVISORY AGREEMENT, made as of May 1, 1998 by and between PENN
SERIES FUNDS, INC. ("Penn Series"), a corporation organized and existing under
the laws of the State of Maryland, and INDEPENDENCE CAPITAL MANAGEMENT, INC.
("Adviser"), a corporation organized and existing under the laws of the State of
Pennsylvania.
WITNESSETH:
WHEREAS, 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; and
WHEREAS, Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended; and
WHEREAS, Penn Series desires Adviser to render investment advisory services
to Penn Series in the manner and on the terms and conditions hereinafter set
forth, and Adviser desires to render such services under such terms and
conditions:
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. Investment Advisory Services. Adviser shall serve as investment
adviser and shall supervise and direct the investments of the Value Equity,
Small Capitalization, Flexibly Managed, International Equity and the High
Yield Bond Funds of Penn Series (individually a "Fund" and collectively the
"Funds"), in accordance with the investment objectives, program and restrictions
applicable to the Fund 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
Adviser. No investment will be made by Adviser for a Fund if that investment
would be in violation of the objectives, program, restrictions or limitations of
the Fund. 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"). Adviser shall 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 each Fund in a manner consistent with the investment
objectives of the Fund. In furtherance of this duty, Adviser, as agent and
attorney-in-fact with respect to 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 Adviser may select, in conformance with
the provisions of Paragraph 4 herein;
provided, however, that Adviser shall make no investment for a Fund that is in
violation of the objectives, program, restrictions or limitations of the Fund.
2. Accounting and Related Services. 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
Agreement. As requested from time to time, 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 each
Fund.
3. Fees.
A. Payment of Fees. For the services rendered to Penn Series under
this Agreement, Penn Series will pay Adviser a fees based on
average daily net assets of each Fund.
B. Fee Rates. The fees shall be paid at the following rates:
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Value Equity Fund .50%
Small Capitalization Fund .50%
Flexibly Managed Fund .50%
International Equity Fund .75%
High Yield Bond Fund .50%
C. Method of computation. Each fee shall be accrued for each
calendar day and the sum of the daily fee accruals shall be paid
monthly to Adviser as of the first business day of the next succeeding
calendar month. The 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 above, and multiplying
this product by the net assets of the Fund. The Fund's net assets,
for purposes of the calculations described above, will be determined
in accordance with Penn Series' Prospectus and Statement of Additional
Information as of the close of business on the most recent previous
business day on which Penn Series was open for business.
D. Expense Limitation. The expense limitations of the Funds are as
follows:
Value Equity Fund 1.00%
Small Capitalization Fund 1.00%
Flexibly Managed Fund 1.00%
International Equity Fund 1.50%
High Yield Bond Fund 0.90%
With respect to each of the Value Equity, Small Capitalization
and International Equity Funds, 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 services fees before any adjustment pursuant to this
provision) exceed the expense limitation for the Fund in an amount up
to and including .10% of the average daily net assets of the Fund,
such excess amount shall be a liability of Adviser to Penn Series.
The liability (if any) of Adviser to pay Penn Series such excess
amount shall be determined on a daily basis. If, at the end of each
month, there is any liability of Adviser to pay Penn Series such
excess amount, the advisory fee shall be reduced by such liability.
If, at the end of each month, there is no liability of Adviser to pay
Penn Series such excess amount and if payments of the advisory fee at
the end of prior months during the fiscal year have been reduced in
excess of that required to maintain expenses within the expense
limitation, such excess reduction shall be recaptured by Adviser and
shall be payable by Penn Series to Adviser along with the advisory fee
payable to Adviser for that month.
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With respect to each of the Flexibly Managed Fund and the High
Yield Bond Funds, 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 Adviser to Penn Series. The liability (if any) of Adviser
to pay Penn Series 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 Adviser to pay Penn Series such excess amount, the advisory fee
shall be reduced by such liability. If, at the end of each month,
there is no liability of Adviser to pay Penn Series such excess amount
and if payments of the advisory fee at the end of prior months during
the fiscal year have been reduced in excess of that required to
maintain expenses within the expense limitation, such excess reduction
shall be recaptured by Adviser and shall be payable by Penn Series to
Adviser along with the advisory fee payable to Adviser for that month.
If, at the end of the fiscal year, there is any remaining liability of
Adviser to pay Penn Series such excess amount (which has not been paid
through reduction of the advisory fee), Adviser shall remit to Penn
Series an amount sufficient to pay such remaining liability.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for a Fund, 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, 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, Adviser may take into account the research
and related services that the broker has provided to Penn Series or the Adviser.
It is understood that the Adviser will not be deemed to have acted unlawfully or
to have breached a fiduciary duty to a Fund or be in breach of any obligation
owing to a Fund under this Agreement, or otherwise, by reason of its having
directed a securities transaction on behalf of the Fund to a broker-dealer in
compliance with the provisions of Section 28(e) of the Securities Exchange Act
of 1934 or as described from time to time in the Penn Series' Prospectus and
Statement of Additional Information. In addition, Adviser is authorized to take
into account the sale of variable contracts which are invested in Penn Series
shares in allocating to brokers or dealers purchase and sale orders for
portfolio securities, provided that Adviser believes that the quality of the
transaction and commission are comparable to what they would be with other
qualified firms. Adviser shall regularly advise Penn Series' Board of Directors
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. Adviser may (at its cost except as
contemplated in Section 4 of this Agreement) employ, retain or otherwise avail
itself of a sub-adviser or sub-
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advisors to assist it in performing its duties and meeting its responsibilities
under this Agreement, and may delegate to such sub-adviser sub-advisers duties
assumed by the Adviser under this Agreement. In addition, Adviser may (at its
cost, except as contemplated in 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 itself or Penn Series, 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
Adviser may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or otherwise helpful to Penn Series, or in the discharge
of Adviser's overall responsibilities with respect to the other accounts which
it serves as investment adviser.
6. Personnel, Office Space, and Facilities. 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 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
Adviser or any affiliate in performance of this Agreement are the property of
Adviser and will not become the property of Penn Series.
8. Certain Personnel. Adviser agrees to permit individuals who are
officers or employees of Adviser to serve (if duly elected or appointed) as
officers, directors, members of any committee of directors, members of any
advisory board, or members of any other committee of Penn Series, without
remuneration or other cost to Penn Series. Adviser shall pay all salaries,
expenses, and fees of officers and/or directors of Penn Series who are
affiliated with Adviser.
9. Reports to Penn Series and Cooperation with Accountants. Adviser, and
any affiliated corporation of Adviser performing services for Penn Series
described in this Agreement, shall furnish to or place at the disposal of Penn
Series, such information, reports, evaluations, analyses and opinions as Penn
Series may, at any time or from time to time, reasonably request or as Adviser
may deem helpful, to reasonably ensure compliance with applicable laws and
regulations or for any other purpose. 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.
10. Reports to Adviser. Penn Series shall furnish or otherwise make
available to Adviser such prospectuses, financial statements, proxy statements,
reports, and other information relating to the business and affairs of Penn
Series, as Adviser may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
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11. 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 Adviser or any affiliated corporation of Adviser
on behalf of Penn Series are the property of Penn Series. Such records will be
preserved by Adviser itself or through or sub-adviser or 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 time under the
Act. Such records may be inspected by representatives of Penn Series at
reasonable times, and, in the event of termination of this Agreement, will be
promptly delivered to Penn Series.
12. Services to Other Clients. Nothing herein contained shall limit the
freedom of Adviser or any affiliated person of Adviser to render investment
supervisory and other services to other investment companies, to act as
investment adviser or investment counselor to other persons, firms or
corporations, or to engage in other business activities. It is understood that
Adviser may give advice and take action for its other clients which may differ
from advice given, or the timing or nature of action taken, for a Fund. Adviser
is not obligated to initiate transactions for a Fund in any security which
Adviser, its principals, affiliates or employees may purchase or sell for its or
their own accounts or for other clients.
13. Confidential Relationship. Information furnished by one party to
another, including a party's respective agents and employees, is confidential
and shall not be disclosed to third parties unless required by law. Adviser, on
behalf of itself and its affiliates and representatives, agrees to keep
confidential all records and other information relating to Penn Series, except
after prior notification to and approval in writing by Penn Series, which
approval shall not be unreasonably withheld, and may not be withheld where
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, or when so requested by Penn Series.
14. Proxies. Subject to such direction and oversight by Penn Series as
the Board of Directors of Penn Series shall deem appropriate, Adviser shall vote
proxies solicited by or with respect to the issuers of securities held in the
Funds.
15. Instructions, Opinion of Counsel and Signatures. At any time 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 Adviser shall not be liable for any action taken or omitted
by it or an affiliate in good faith in accordance with such instructions or with
the advice or opinion of Penn Series' legal counsel. 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 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.
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16. Compliance with Governmental Rules and Regulations. Except as such
responsibility may be placed upon Adviser or any affiliate expressly by, or by
fair implication of, the terms of this Agreement, and except for the accuracy of
information furnished to Penn Series by Adviser or any affiliate, Penn Series
assumes full responsibility for the preparation, contents and distribution of
the prospectuses for Penn Series, for complying with all applicable requirements
of the Act, the Securities Exchange Act of 1934, the Securities Act of 1933, and
any other laws, rules and regulations of governmental authorities having
jurisdiction over Penn Series.
17. Limitation of Liability. Neither Adviser nor any of its affiliates,
their officers, directors, employees or agents, or any person performing
executive, administrative, trading, or other functions for Penn Series (at the
direction or request of Adviser), or 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 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. Adviser shall not be
responsible for any loss incurred by reason of any act or omission of the
Custodian Transfer Agent, Accounting Services Agent, or other third party with
which Company has a contractual arrangement, or of any broker, dealer,
underwriter or issuer selected by Adviser with reasonable care.
18. Obligations of Penn Series and Adviser. It is expressly agreed that
the obligations of Penn. Series and 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
by the Board of Directors of Penn Series and signed by an authorized officer of
Penn Series, acting as such, and shall bind Penn Series.
19. Indemnification by Penn Series. Penn Series will indemnify and hold
Adviser harmless from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by Adviser resulting from: (i) any action
or omitting to act by Adviser or any affiliated corporation, with respect to any
service described in this Agreement, upon instructions reasonably believed by
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 (ii) any action by Adviser or any affiliated corporation, with
respect to any service described in this Agreement, upon information provided by
Penn Series in form and under policies agreed to by Adviser and Penn Series.
Adviser shall not be entitled to such indemnification in respect of actions or
omissions constituting negligence or willful misconduct of Adviser or its
affiliates, agents or contractors, or constituting a failure by 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, Adviser
shall give Penn Series reasonable opportunity to defend against said claim in
its own name or in the name of Adviser.
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20. Indemnification by Adviser. Adviser will indemnify and hold harmless
Penn Series from all loss, cost, damage and expense, including reasonable
expenses for legal counsel, incurred by Penn Series resulting from any claim,
demand, action or suit arising out of 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 Adviser, its affiliates,
their agents or contractors. Penn Series shall not be entitled to such
indemnification in respect of actions or omissions constituting negligence or
willful misconduct of Penn Series or its agents or contractors or constituting a
failure by Penn Series to comply with any term of this Agreement; provided, that
such negligence or misconduct is not attributable to Adviser or any person that
is an affiliate of Adviser or an affiliate of an affiliate of Adviser. Prior to
confessing any claim against it which may be subject to this indemnification,
Penn Series shall give Adviser reasonable opportunity to defend against said
claim in its own name or in the name of Penn Series. For purposes of this
Section 20 and of Section 19 hereof, no broker or dealer shall be deemed to be
acting as agent or contractor of Adviser or any affiliate of Adviser, in
effecting or executing any portfolio transaction for a Fund.
21. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
22. Dual Interests. It is understood that some person or persons may
be, or from time to time become, directors, officers, or shareholders of both
Penn Series and Adviser (including its affiliates), and that the existence of
any such dual interest shall not affect the validity hereof or of any
transactions hereunder except as otherwise provided by a specific provision of
applicable law.
23. 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 the 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. 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
the Fund or any extension, renewal or amendment hereof.
24. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned 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 Penn Series may have as a result thereof, this
Agreement shall automatically and immediately terminate in the event of its
assignment.
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25. Termination of Agreement. This Agreement may be terminated by Penn
Series or by Adviser with respect to any Fund, without the payment of any
penalty, upon 60 days' prior notice in writing from Penn Series to Adviser, or
upon 90 days' prior notice in writing from Adviser to Penn Series; provided,
that in the case of termination by 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 Fund.
26. 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 term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be 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 Penn Series is Penn Series
Funds, Inc., 000 Xxxxxxx Xxxx, Xxxxxxx, XX 00000, Attention:
President, and that of Adviser is Independence Capital Management,
Inc., 000 Xxxxxxx Xxxx, Xxxxxxx, XX 00000, Attention: President.
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E. State Law. The Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland
except where such state laws have been preempted by Federal
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.
PENN SERIES FUNDS, INC.
By:
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INDEPENDENCE CAPITAL
MANAGEMENT, INC.
By:
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