Exhibit (5)(d)
INVESTMENT ADVISORY AGREEMENT
Between
PENN SERIES FUNDS, INC.
and
QUEST FOR, VALUE ADVISORS
Relating to
PENN SERIES SMALL CAPITALIZATION FUND
INVESTMENT ADVISORY AGREEMENT, made as of the first day of March, 1995, by
and between PENN SERIES FUNDS, INC. ("Penn Series"), a corporation organized and
existing under the laws of the State of Maryland, and QUEST FOR VALUE ADVISORS
("Adviser"), a general partnership organized and existing under the laws of the
State of Delaware.
WITNESSETH:
WHEREAS, Penn Series is an open-end management investment company
registered as such under the federal Investment Company Act of 1940, as amended
(the "Act"); and
WHEREAS, Penn Series 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, Penn Series desires Adviser to render investment 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 hereinafter set
forth, the parties hereto agree as follows:
1. Investment Advisory Services. Adviser shall serve as investment
adviser and shall super-vise and direct the investments of the Small
Capitalization Fund of Penn Series ("xxx Xxxx") 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 the Fund if that
investment is 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 the 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 the 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. 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 the Fund.
3. Fees.
A. Fee Rate. For all of the services rendered to Penn Series
hereunder, Adviser shall be paid a fee by Penn Series, at the annual
rate of .50% of the Fund's average daily net assets.
B. Method of computation. The fee for the Fund 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.
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C. Expense Limitation. The expense limitation of the Fund, as a
percentage of the Fund's average net assets, is 1.00%. 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 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 oil 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.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for the 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. 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
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 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 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.
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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 affairs of Penn Series,
as Adviser may, at any time or from time to reasonably require in order to
discharge its obligations under this Agreement.
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 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 at reasonable
times, and, in the event of termination of this Agreement, will be promptly
delivered to Penn Series.
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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, but so long as this
Agreement or any extension, renewal or amendment hereof shall remain in effect
as to the Fund, or until Adviser shall otherwise consent, Adviser shall be the
only investment adviser to the Fund. 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 the Fund. Adviser is not obligated
to initiate transactions for the 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
Fund.
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 by any 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.
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.
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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 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.
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
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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 Penn
Series, Adviser or any affiliate of Adviser, in effecting or executing any
portfolio transaction for the 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 date first
above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect through February 28, 1997. 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 (1) 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 are not parties to this Agreement or
interested persons of any such (2) Adviser shall not have notified Penn Series,
in writing, at least 90 days prior to March 1, 1997 or prior to March 1 of any
year thereafter, that it does not desire such continuation. 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 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.
25. Change in Partners of Adviser. Adviser will notify Penn Series of
any change in the membership of Adviser's partnership within a reasonable time
after such change.
26. Termination of Agreement. This Agreement may be terminated by Penn
Series or by Adviser, 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
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vote of a majority of the outstanding voting securities of the series of shares
of Penn Series representing interests in the Fund.
27. 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 derived from a
term or provision of the Act shall be resolved l)-y 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 000
Xxxxxxx Xxxx, Xxxxxxx, XX 00000, Attention: Xxxxxxx X. Xxxxxxxxx,
President, and that of Adviser is Xxx Xxxxx Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxx, General Counsel.
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 law.
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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: PENN SERIES FUNDS, INC.
/s/ C. Xxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------- -------------------------
Secretary Xxxxxxx X. Xxxxxxxxx
President
Attest: QUEST FOR VALUE ADVISORS
/s/ By: /s/
------------------------- -------------------------
Secretary
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