Ex-99.B(5)(e)
INVESTMENT ADVISORY AGREEMENT
Between
PENN SERIES FUNDS, INC.
and
INDEPENDENCE CAPITAL MANAGEMENT, INC.
Relating to
PENN SERIES EMERGING GROWTH FUND
INVESTMENT ADVISORY AGREEMENT, made as of by and between PENN SERIES FUNDS,
INC. ("Penn Series"), a corporation organized and existing under the laws of the
State of Maryland, and INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a
corporation organized and existing under the laws of the State of Pennsylvania.
WITNESSETH:
WHEREAS, Penn Series is an open-end management investment company
registered as such under the Investment Company Act of 1940, as amended (the
"Act") and is authorized to issue shares in separate series with each series
representing interests in a separate fund of securities and other assets; and
WHEREAS, Adviser is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the 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 mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. Investment Advisory Services. Adviser shall serve as investment
adviser and shall supervise and direct the investments of the 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 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 entered into by Penn Series and the Accounting Services
Agreement. As requested from time to time, Adviser shall provide Penn Series
and its Accounting Services Agent with such information as may be reasonably
necessary to properly account for financial transactions with respect to the
Fund.
3. Fee.
A. Payment of Fee. For the services rendered to Penn Series under
this Agreement, Penn Series will pay Adviser a fee based on
average daily net assets of the Fund.
B. Fee Rate. The fee shall be paid at the following rates:
(i) Eighty basis points (0.80%) of the first $25,000,000 of average
daily net assets of the Fund;
(ii) Seventy-five basis points (0.75%) of the next $25,000,000 of
average daily net assets of the Fund; and
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(iii) Seventy basis points (0.70%) of average daily net assets of the
Fund in excess of $50,000,000.
C. 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.
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 Adviser
to Penn Series. The liability (if any) of Adviser to pay Penn Series
one-half of such excess amount shall be determined on a daily basis.
If, at the end of each month, there is any liability of Adviser to pay
Penn Series such excess amount, the advisory fee shall be reduced by
such liability. If, at the end of each month, there is no liability of
Adviser to pay Penn Series such excess amount and if payments of the
advisory fee at the end of prior months during the fiscal year have
been reduced in excess of that required to maintain expenses within
the expense limitation, such excess reduction shall be recaptured by
Adviser and shall be payable by Penn Series to Adviser along with the
advisory fee payable to Adviser for that month. If, at the end of the
fiscal year, there is any remaining liability of Adviser to pay Penn
Series such excess amount (which has not been paid through reduction
of the advisory fee), Adviser shall remit to Penn Series an amount
sufficient to pay such remaining liability.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for 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. It is understood that the Adviser will not be deemed to have acted
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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,
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 in Section 4 of this Agreement) employ, retain or otherwise avail
itself of a subadviser to assist it in performing its duties and meeting its
responsibilities under this Agreement, and may delegate to such subadviser
duties assumed by the Adviser under this Agreement. In addition, Adviser may (at
its cost, except as contemplated in Section 4 of this Agreement) employ, retain
or otherwise avail itself of the services or facilities of other persons or
organizations for the purpose of providing itself or Penn Series, as
appropriate, with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions
in specific securities or such other information, advice or assistance as
Adviser may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or otherwise helpful to Penn Series, or in the discharge
of Adviser's overall responsibilities with respect to the other accounts which
it serves as investment adviser.
6. Personnel, Office Space, and Facilities. Adviser at its own expense
shall furnish or provide and pay the cost of such office space, office
equipment, office personnel, and office services as it, or any affiliated
corporation of Adviser, requires in the performance of services under this
Agreement.
7. Ownership of Software and Related Material. All computer programs,
magnetic tapes, written procedures and similar items developed and used by
Adviser or any affiliate in performance of this Agreement are the property of
Adviser and will not become the property of Penn Series.
8. Certain Personnel. Adviser agrees to permit individuals who are
officers or employees of Adviser to serve (if duly elected or appointed) as
officers, directors, members of any committee of directors, members of any
advisory board, or members of any other committee of Penn Series, without
remuneration or other cost to Penn Series. Adviser shall pay all salaries,
expenses, and fees of officers and/or directors of Penn Series who are
affiliated with Adviser.
9. Reports to Penn Series and Cooperation with Accountants. Adviser, and
any affiliated corporation of Adviser performing services for Penn Series
described in this Agreement,
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shall furnish to or place at the disposal of Penn Series, such information,
reports, evaluations, analyses and opinions as Penn Series may, at any time or
from time to time, reasonably request or as Adviser may deem helpful, to
reasonably ensure compliance with applicable laws and regulations or for any
other purpose. Adviser and its affiliates shall cooperate with Penn Series'
independent public accountants and take all reasonable action in the performance
of services and obligations under this Agreement to assure that the information
needed by such accountants is made available to them for the expression of their
opinion without any qualification as to the scope of their examination,
including, but not limited to, their opinion included in Penn Series' annual
report under the Act and annual amendment to Penn Series' registration statement
under the Act.
10. Reports to Adviser. Penn Series shall furnish or otherwise make
available to Adviser such prospectuses, financial statements, proxy statements,
reports, and other information relating to the business and affairs of Penn
Series, as Adviser may, at any time or from time to time, reasonably require in
order to discharge its obligations under this Agreement.
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 time under the Act. Such records may
be inspected by representatives of Penn Series at reasonable times, and, in the
event of termination of this Agreement, will be promptly delivered to Penn
Series.
12. Services to Other Clients. Nothing herein contained shall limit
the freedom of Adviser or any affiliated person of Adviser to render investment
supervisory and other services to other investment companies, to act as
investment adviser or investment counselor to other persons, firms or
corporations, or to engage in other business activities. It is understood that
Adviser may give advice and take action for its other clients which may differ
from advice given, or the timing or nature of action taken, for 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.
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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.
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,
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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 may be subject to this
indemnification, Penn Series shall give Adviser reasonable opportunity to defend
against said claim in its own name or in the name of Penn Series. For purposes
of this Section 20 and of Section 19 hereof, no broker or dealer shall be deemed
to be acting as agent or contractor of Adviser or any affiliate of Adviser, in
effecting or executing any portfolio transaction for 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 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
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outstanding voting securities of the series of shares of Penn Series
representing interests in the Fund and (b) in either event by the vote, cast in
person at a meeting called for the purpose of voting on such approval, of a
majority of the directors of Penn Series who are not parties to this Agreement
or interested persons of any such party. Adviser shall furnish to Penn Series,
promptly upon its request, such information as may reasonably be necessary to
evaluate the terms of this Agreement with respect to the Fund or any extension,
renewal or amendment hereof.
24. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the series of shares of Penn Series
representing interests in the 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. 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 vote of a majority of the outstanding voting securities of
the series of shares of Penn Series representing interests in the Fund.
26. Miscellaneous.
A. Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect.
B. Interpretation. Nothing herein contained shall be deemed to
require Penn Series to take any action contrary to its Articles
of Incorporation or By-Laws, or any applicable statutory or
regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the board of directors of Penn
Series of its responsibility for and control of the conduct of
the affairs of Penn Series.
C. Definitions. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the Act shall be 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
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rule, regulation or order of the Securities and Exchange
Commission, whether of special or of general application, such
provision shall be deemed to incorporate the effect of such rule,
regulation or order.
D. Notice. Notice under the Agreement shall be in writing,
addressed and delivered or sent by registered or certified mail,
postage prepaid, to the addressed party at such address as such
party may designate for the receipt of such notices, Until
further notice, it is agreed that for this purpose the address of
Penn Series is Penn Series Funds, Inc., 000 Xxxxxxx Xxxx,
Xxxxxxx, XX 00000, Attention: President, and that of Adviser is
Independence Capital Management, Inc., 000 Xxxxxxx Xxxx, Xxxxxxx,
XX 00000, Attention: President.
E. State Law. The Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland
except where such state laws have been preempted by Federal
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the day and
year first above written.
PENN SERIES FUNDS, INC.
By: /s/ X. Xxxxxxxx Xxxxxxx
---------------------------
X. Xxxxxxxx Xxxxxxx
President
INDEPENDENCE CAPITAL
MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
President
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