EXHIBIT 5(C)
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
INDEPENDENCE CAPITAL MANAGEMENT, INC.
AND
RS INVESTMENT MANAGEMENT, INC.
RELATING TO
PENN SERIES EMERGING GROWTH FUND
INVESTMENT SUB-ADVISORY AGREEMENT, made as of October 1, 1997 by and
between INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a corporation
organized and existing under the laws of the State of Pennsylvania, and RS
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 cash, securities and
other assets of the Emerging Growth Fund of Penn Series ("the Fund"), and to
exercise all rights incidental to ownership 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. To enable Sub-Adviser to fully
exercise its discretion, Adviser hereby appoints Sub-Adviser as agent and
attorney-in-fact for the Fund with full power and authority to buy, sell and
otherwise deal in securities and contracts for the Fund. No investment will be
made by Sub-Adviser for the Fund if that investment is in violation of the
objectives investment restrictions or limitations of the Fund set out in the
prospectus and the SAI previously delivered to the Sub-Advisor 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 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; and
(iii) to take such other actions Sub-Adviser deems to be appropriate;
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.
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3. FEE.
A. PAYMENT OF FEE. For the services Sub-Adviser renders to Penn
Series under this Agreement, Adviser will pay Sub-Adviser a fee based
on the average daily net assets of the Fund.
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 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
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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 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 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 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
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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 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.
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 at or
prior to the time such documents are made available to the public.
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 upon reasonable notice to Sub-Adviser 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. Subject to compliance with the 1940 Act,
nothing herein contained shall be deemed to prohibit Sub-Adviser or any of its
affiliated persons from acting, and being separately compensated for acting, in
one or more capacities on behalf of the Fund. 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
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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 such information by duly constituted
authorities, when so requested by Adviser and Penn Series.
13. PROXIES. Subject to such 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 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; nor shall such persons be liable for any loss or damage
resulting from the imposition
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by any government of exchange control restrictions which might affect the
liquidity of the Fund's assets maintained with custodians or securities
depositories in foreign countries, or from any political acts of any foreign
governments to which such assets might be exposed, or for any tax of any kind,
including, without limitation, any statutory, governmental, state, provincial,
regional, local or municipal imposition, duty, contribution or levy imposed by
any government or governmental agency upon or with respect to such assets or
income earned with respect thereto (collectively, "Taxes"). Similarly, the Sub-
Adviser shall have no responsibility for and shall incur no liability to the
Fund, any shareholder of the Fund, or the Adviser relating to (i) the duty of
the Fund to register with any government or agency; (ii) the selection of
investment objectives and policies of the Fund; and (iii) the administration of
any plans or trusts investing in the Fund. 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; or (iii) any
action or omission of Adviser or any affiliated corporation, 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. Nothwithstanding the forgoing, 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
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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 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 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 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, 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
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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.
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 RS Investment
Management, Inc., 000 Xxxxxxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000,
Attention: General Counsel.
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 law.
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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.
H. NO THIRD PARTY BENEFICIARIES. Neither party intends for this
Agreement to benefit any third-party not expressly named in this
Agreement.
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/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Assistant Secretary Xxxxx X. Xxxxxxx
President
Attest: RS INVESTMENT MANAGEMENT, INC.
___________________________ By: /s/ Xxxxxx X. Xxxxx
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Secretary
Xxxxxx X. Xxxxx
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(Print Name)
President
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(Title)
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