FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
between
INDEPENDENCE CAPITAL MANAGEMENT, INC.
and
ROYCE & ASSOCIATES, INC.
relating to
SMALL CAP VALUE FUND
INVESTMENT SUB-ADVISORY AGREEMENT, made as of May 1, 2000 by and
between INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a corporation
organized and existing under the laws of the State of Pennsylvania, and ROYCE &
ASSOCIATES, INC. ("Sub-Adviser"), a corporation organized and existing under the
laws of the State of New York.
WITNESSETH:
WHEREAS, Penn Series Funds, Inc. ("Penn Series") is a Maryland
corporation and 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 and Sub-Adviser are engaged principally in the
business of rendering investment advisory services and are registered as
investment advisers under the Investment Advisers Act of 1940, as amended; and
WHEREAS, Adviser is authorized to render investment advisory services
to Penn Series and to enter into a sub-advisory agreement with a sub-adviser for
the rendering of investment advisory services by the Sub-Adviser to Adviser;
WHEREAS, Adviser desires Sub-Adviser to render investment sub-advisory
services to Penn Series in the manner and on the terms and conditions
hereinafter set forth; and Sub-Adviser desires to render such services, in such
manner and under such terms;
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
Small Cap Value Fund (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 ("SAI"), as amended from time to time, and such other
limitations as may be imposed by law or as Penn Series or Adviser 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 the investment would violate the investment
objectives, investment restrictions or limitations of the Fund set out in the
Prospectus and the SAI delivered to the Sub-Adviser and as may be amended and
delivered to Sub-Adviser in the future. 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 Adviser or Penn Series, to:
(i) buy, sell, exchange, convert, lend, and otherwise trade in any
stocks, bonds, and other securities or assets; and
(ii) place orders and negotiate the commissions (if any) for the
execution of transactions in securities with or through such
brokers, dealers, underwriters or issuers as Sub-Adviser may
select, in conformance with the provisions of Paragraph 4
herein; and
(iii) take such other actions Sub-Adviser deems to be appropriate;
provided, however, that Sub-Adviser shall make no investment for the Fund that
would violate the objectives, investment program, or 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. Sub-Advisory Fee.
A. Payment of Fee. For the services Sub-Adviser renders to Penn
Series under this Agreement, Adviser will pay Sub-Adviser fees based
on the average daily net assets of the Fund.
B. Fee Rate.
(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 $75,000,000 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 $100,000,000.
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. A 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.
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 execution of its orders. In assessing the best price and the 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. In determining whether it is receiving best price and
execution, the Sub-Adviser may take into account the research and related
services that the broker has provided to Penn Series, the Sub-Adviser and/or
other clients of the Sub-Adviser. The Sub-Adviser may pay certain brokers a
higher commission than may be charged by other brokers, in return for research
and brokerage advice, provided that payment of such commission is in accord with
the provisions of Section 28(e) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"). 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 1934 Act, or as described from time to time in the Penn Series'
Prospectus and Statement of Additional Information. In addition, Sub-Adviser is
authorized (but shall not be required) to take into
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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. Penn Series has provided Sub-Adviser with a letter
identifying all broker-dealers affiliated with either Penn Series or Adviser,
other than those whose sole business is the distribution of mutual fund shares,
who effect securities transactions for customers. Adviser shall promptly furnish
a written notice to Sub-Adviser if any representations made in such letter are
no longer accurate.
5. Use of the Services of Others. Sub-Adviser may (at its cost except
as contemplated by Section 4 of this Agreement) employ, retain or otherwise
avail itself of the services or facilities of other persons or organizations for
the purpose of providing Penn Series, Adviser or itself, as appropriate, with
such statistical and other factual information, such advice regarding economic
factors and trends, such advice as to occasional transactions in specific
securities or such other information, advice or assistance as Sub-Adviser may
deem necessary, appropriate or convenient for the discharge of its obligations
hereunder or otherwise helpful to Penn Series and Adviser, or in the discharge
of Sub-Adviser's overall responsibilities with respect to the other accounts
which it serves as investment adviser.
6. Personnel, Office Space, and Facilities. Sub-Adviser at its own
expense shall furnish or provide and pay the cost of such office space, office
equipment, office personnel, and office services as it, or any affiliated
corporation of Sub-Adviser, requires in the performance of services under this
Agreement.
7. Ownership of Software and Related Material. All computer programs,
magnetic tapes, written procedures and similar items developed and used by
Sub-Adviser or any affiliate in performance of this Agreement are the property
of Sub-Adviser and will not become the property of Penn Series or Adviser.
8. Reports to Penn Series and Cooperation with Accountants.
Sub-Adviser, and any affiliated corporation of Sub-Adviser performing services
for Adviser and Penn Series described in this Agreement, shall furnish to or
place at the disposal of Penn Series and Adviser, such information, reports,
evaluations, analyses and opinions as Penn Series and Adviser may, at any time
or from time to time, reasonably request or as Sub-Adviser may deem helpful, to
reasonably ensure compliance with applicable laws and regulations or for any
other purpose. Sub-Adviser and its affiliates shall cooperate with Penn Series'
independent public accountants and take all reasonable action in the performance
of services and obligations under this Agreement to assure that the information
needed by such accountants is made available to them for the expression of their
opinion without any qualification as to the scope of their examination,
including, but not limited to, their opinion included in Penn Series' annual
report under the Act and annual amendment to Penn Series' registration statement
under the Act.
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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 from
time to time under the Act. Such records may be inspected by representatives of
Penn Series and Adviser at reasonable times and, in the event of termination of
this Agreement, will be promptly delivered to Adviser and Penn Series upon
request.
11. Services to Other Clients. Nothing herein contained shall limit the
freedom of Sub-Adviser or any affiliated person of Sub-Adviser to render
investment advisory, 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; but so
long as this Agreement or any extension, renewal or amendment hereof shall
remain in effect as to Fund, or until Sub-Adviser shall otherwise consent,
Sub-Adviser shall be the only investment sub-adviser to the Fund. 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 a Fund. Sub-Adviser is not obligated to initiate transactions for a
Fund in any security which Sub-Adviser, its principals, affiliates or
employees may purchase or sell for its or their own accounts or other clients.
12. Confidential Relationship. Information furnished by Penn Series or
by one party to another, including Penn Series' or a party's respective agents
and employees, is confidential and shall not be disclosed to third parties
unless required by law. Adviser and Sub-Adviser, on behalf of themselves and
their affiliates and representatives, agree to keep confidential all records and
other information relating to the other party or Penn Series (as the case may
be), except after prior notification to and approval in writing by Adviser,
Sub-Adviser or Penn Series (as the case may be), which approval shall not be
unreasonably withheld, and may not be withheld, where Adviser, 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, Sub-Adviser or 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 a Fund.
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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. 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
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counsel, incurred by Sub-Adviser resulting from: (i) any action or omission of
Sub-Adviser or any affiliate, with respect to any service described in this
Agreement, upon instructions reasonably believed by Sub-Adviser or any affiliate
to have been executed by an individual who has been identified in writing by
Penn Series or Adviser as a duly authorized officer of Penn Series or Adviser;
(ii) any action of Sub-Adviser or any affiliate, 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 Adviser; or (iii) 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. 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; 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 the confession of any claim
against Adviser which may be subject to this indemnification, Sub-Adviser shall
give Adviser reasonable opportunity to defend against said claim in its own name
or in the name of Sub-Adviser.
19. Indemnification by Sub-Adviser. Sub-Adviser will indemnify and hold
harmless Penn Series and Adviser from all loss, cost, damage and expense,
including reasonable expenses for legal counsel, incurred by Penn Series and
Adviser and resulting from any claim, demand, action or suit arising out of
Sub-Adviser's or any affiliate's failure to comply with any term of this
Agreement or which arise out of the willful misfeasance, bad faith, negligence
or misconduct of Sub-Adviser, its affiliates, their agents or contractors.
Neither Penn Series nor Adviser shall be entitled to such indemnification in
respect of actions or omissions constituting negligence or willful misconduct of
Penn Series or Adviser, or their agents or contractors or constituting a failure
by Adviser to comply with any term of this Agreement; provided, that such
negligence or misconduct is not attributable to Sub-Adviser or any person that
is an affiliate of Sub-Adviser or an affiliate of an affiliate of Sub-Adviser.
Prior to confessing any claim against it which may be subject to this
indemnification, Adviser shall give Sub-Adviser reasonable opportunity to defend
against said claim in its own name or in the name of Adviser. For purposes of
this Section 19 and of Section 18 hereof, no broker or dealer shall be deemed to
be acting as agent or contractor of Sub-Adviser or any affiliate of Sub-Adviser,
in effecting or executing any portfolio transaction for the Fund.
20. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
21. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect until two years from date of execution.
Thereafter, this Agreement shall continue in effect from year to year with
respect to the Fund, subject to the termination provisions and all other terms
and conditions hereof, so long as such continuation shall be specifically
approved at
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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 of Agreement. This Agreement may be amended only by
written agreement of the Adviser and the Sub-Adviser and only in accordance with
the provisions of the Act, the rules and regulations promulgated under the Act
and the provisions of any other applicable law or regulation.
23. Assignment of Agreement. This Agreement shall terminate
automatically in the event of its assignment, as required by the Act and rules
and regulations promulgated thereunder.
24. Termination of Agreement. This Agreement may be terminated by
Adviser, Penn Series or by Sub-Adviser, with respect to a Fund, without payment
of any penalty, upon 60 days' prior notice in writing from Adviser to
Sub-Adviser, or upon 90 days' prior notice in writing from Sub-Adviser to
Adviser; provided, that in the case of termination by Adviser or Penn Series,
such action shall have been authorized by resolution of a majority of its
directors who are not interested persons of any party to this Agreement, or by
vote of a majority of the outstanding voting securities of the series of shares
of Penn Series representing interests in the affected Fund. Notwithstanding any
such termination, the provisions of Sections 18 and 19 of this Agreement shall
remain in full force and effect and both the Adviser and the Sub-Adviser shall
remain entitled to the benefit of such provisions.
25. Miscellaneous.
A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any
of the provisions hereof or otherwise affect their construction or
effect.
B. Interpretation. Nothing herein contained shall be deemed to
require Penn Series to take any action contrary to its Articles of
Incorporation or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Directors of Penn
Series of its responsibility for and control of the conduct of the
affairs of Penn Series.
C. Definitions. Any question of interpretation of any terms or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be resolved by
reference to such term or provision of the
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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., Attention: President, 000
Xxxxxxx Xxxx, Xxxxxxx, XX 00000, and that of Sub-Adviser is Royce &
Associates, Inc., Attention: Xxxx X. Xxxxxxxxx, 0000 Xxxxxx xx xxx
Xxxxxxxx, Xxx Xxxx, XX 00000.
E. State Law. The Agreement shall be construed and enforced in
accordance with and governed by the laws of Maryland except where
such state laws have been preempted by Federal law.
F. Counterparts. This Agreement may be entered into in
counterparts, each of which when so executed and delivered shall be
deemed to be an original, and together shall constitute one
document.
G. Entire Agreement; Severability. This Agreement is the entire
agreement of the parties and supersedes all prior or
contemporaneous written or oral negotiations, correspondence,
agreements and understandings regarding the subject matter hereof.
The invalidity or unenforceability of any provision hereof shall in
no way affect the validity or enforceability of any and all other
provisions hereof.
H. No Third-Party Beneficiaries. Neither party intends for this
Agreement to benefit any third-party not expressly named in this
Agreement.
I. Changes in Sub-Adviser Organization. The Sub-Adviser agrees to
notify the Adviser within a reasonable period of time regarding a
material change in the members of Sub-Adviser.
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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.
___________________________ By:_______________________________
Xxxxxxx X. Xxxx Xxxxx X. Xxxxxxx
Secretary President
Attest: ROYCE & ASSOCIATES, INC.
___________________________ By:_______________________________
Xxxxx X. X'Xxxxx Xxxxxxx X. Xxxxx
Vice President President
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