Exhibit (5)(g)
INVESTMENT SUB-ADVISORY AGREEMENT
Between
INDEPENDENCE CAPITAL MANAGEMENT, INC.
and
XXXXXXXXX XXXXXXXX INVESTMENT MANAGEMENT, INC.
Relating to
PENN SERIES EMERGING GROWTH FUND
INVESTMENT SUB-ADVISORY AGREEMENT, made as of April 15, 1997 by and between
INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a corporation organized and
existing under the laws of the State of Pennsylvania, and XXXXXXXXX XXXXXXXX
INVESTMENT MANAGEMENT, INC. ("Sub-Adviser"), a corporation organized and
existing under the laws of the State of California.
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; and
WHEREAS, Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, Sub-Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended; and
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;
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 investments of the
Emerging Growth Fund of Penn Series ("the Fund"), 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 Sub-Adviser. No
investment will be made by Sub-Adviser for the Fund if that investment is in
violation of the objectives, program, restrictions or limitations of the Fund.
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 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 Fund in a manner consistent with the investment
objectives of the Fund. 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;
provided, however, that Sub-Adviser shall make no investment for the Fund that
is in violation of the objectives, program, restrictions or limitations of the
Fund.
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 Fund.
3. Fee.
A. Payment of Fee. For the services Sub-Adviser renders to Penn
Series under this this Agreement, Adviser will pay Sub-Adviser a fee
based on the average daily net assets of the Fund.
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B. Fee Rate. The fee shall be paid at the following rates:
(i) Seventy basis points (0.70%) of the first $25,000,000 of average
daily net assets of the Fund;
(ii) Sixty-five basis points (0.65%) of the next $25,000,000 of
average daily net assets of the Fund; and
(iii) Sixty basis points (0.60%) of of average daily net assets of
the Fund in excess of $50,000,000.
C. Method of computation. The 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. 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 limitation of the Fund, as a
percentage of the Funds average daily net assets, is 1.15%. To the
extent that the 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
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.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for the Fund, Sub-Adviser will use its best efforts to seek the best
price and the most favorable
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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 Penn Series 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 Fund or be in
breach of any obligation owing to the 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, Sub-
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 Sub-Adviser believes
that the quality of the transaction and commission are comparable to what they
would be with other qualified firms. Sub-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 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 Adviser may, at any
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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, statements of
additional information, financial statements, proxy statements, reports, 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.
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 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.
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 Sub-Adviser or investment counselor to other persons, firms or
corporations, or to engage in other business activities. It is understood that
Sub-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 the Fund.
Sub-Adviser is not obligated to initiate transactions for the Fund in any
security which Sub-Adviser, its principals, affiliates or employees may purchase
or sell for its or their own accounts or for 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 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
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such information by duly constituted authorities, or when so requested by
Adviser and Penn Series.
13. Proxies. Subject to such direction and oversight by Penn Series
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 the 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. Sub-Adviser shall inform Adviser of all
applications to Penn Series for instructions and all consultations with legal
counsel for Penn Series at the time of such application or consultation.
15. Compliance with Governmental Rules and Regulations. Except as
such responsibility may be placed upon Sub-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 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 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.
16. Limitation of Liability. Neither Sub-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 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 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,
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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 omitting to act by 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; or (ii) any action by 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 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. Adviser
shall not 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
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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. 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 the Fund or any extension, renewal
or amendment hereof.
22. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned without the consent of Adviser, 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 Fund, and, without affecting any
claim for damages or other right that Penn Series or Adviser 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, 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 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 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.
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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 Xxxxxxxxx Xxxxxxxx Investment Management, Inc., 000
Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000, Attention: President.
E. State Law. The Agreement shall be construed and enforced in
accordance with and governed by the laws of Pennsylvania 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.
Attest: INDEPENDENCE CAPITAL
MANAGEMENT, INC.
/s/ C. Xxxxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Secretary Xxxxx X. Xxxxxxx
President
Attest: XXXXXXXXX XXXXXXXX
INVESTMENT MANAGEMENT, INC.
By:
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Secretary
-------------------------------
(Print Name)
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(Title)
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