Exhibit 5(e)
INVESTMENT SUB-ADVISORY AGREEMENT
Between
INDEPENDENCE CAPITAL MANAGEMENT, INC.
and
OPCAP ADVISORS
Relating to
VALUE EQUITY FUND
SMALL CAPITALIZATION FUND
INVESTMENT SUB-ADVISORY AGREEMENT, made as of May 1, 1998 by and between
INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a corporation organized and
existing under the laws of the State of Pennsylvania, and OPCAP ADVISORS ("Sub-
Adviser"), a partnership organized and existing under the laws of the State of
Delaware.
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 and Sub-Adviser are engaged principally in the business of
rendering investment advisory services and each is registered as an investment
advisers under the federal 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
Value Equity and Small Capitalization Funds (each a "Fund" and together the
"Funds"), and to exercise all rights incidental to ownership in accordance with
the investment objectives, program and restrictions applicable to the Funds 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 Funds with
full power and authority to buy, sell and otherwise deal in securities and
contracts for the Funds. No investment will be made by Sub-Adviser for a Fund
if that investment would violate the investment objectives or investment
restrictions or limitations of a 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 Funds
in a manner consistent with the investment objectives of the Funds. 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 Funds that
would violate the objectives, investment program, or restrictions or limitations
of the Funds.
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. Fees.
A. Payment of Fees. 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 each Fund.
B. Fee Rates. The fee rates, based on the average daily net assets of
each Fund, shall be as follows:
0.40% with respect to the first $50,000,000 of the combined total
average daily net assets of the two Funds;
0.35% with respect to the next $200,000,000 of the combined total
average daily net assets of the two Funds;
0.30% with respect to the combined total average daily net assets
of the two Funds in excess of $250,000,000.
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. If this
Agreement is terminated before the end of the month, the fee for the
period from the beginning of such month to the date of termination
shall be prorated based upon services provided through the date of
termination.
D. Expense Limitation. The expense limitation of each Fund, as a
percentage of the Fund's average daily net assets, is 1.00%. To the
extent that a 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
accounting, 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 of the Fund, such excess amount shall be a liability
of Sub-Adviser to Adviser. The liability (if any) of Sub-Adviser to
pay Adviser 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 advisory fee shall be reduced by
such liability. If, at the end of each
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month, there is no liability of Sub-Adviser to pay Adviser 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 Sub-Adviser and shall be payable by Adviser to
Sub-Adviser along with the advisory fee payable to Sub-Adviser for
that month.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for the Funds, 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 the Funds 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 Funds or be in
breach of any obligation owing to the Funds under this Agreement, or otherwise,
by reason of its having directed a securities transaction on behalf of the Funds
to a broker-dealer in compliance with the provisions of Section 28(e) of the
Securities Exchange Act of 1934, as amended, 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.
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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.
9. Reports to Sub-Adviser. Penn Series and/or Adviser shall furnish
or otherwise make available to Sub-Adviser such prospectuses, statements of
additional information, financial statements, proxy statements, reports, and
other information relating to the business and affairs of Penn Series, as Sub-
Adviser may, at any time or from time to time, reasonably require in order to
discharge its obligations under this Agreement.
10. Ownership of Records. All records required to be maintained and
kept current by Penn Series pursuant to the provisions of rules or regulations
of the Securities and Exchange Commission under Section 31(a) of the Act and
that are maintained and kept current by Sub-Adviser or any affiliated
corporation of Sub-Adviser on behalf of Penn Series are the property of Penn
Series. Such records will be preserved by Sub-Adviser itself or through an
affiliated corporation for the periods prescribed in Rule 3la-2 under the Act,
where applicable, or in such other applicable rules that may be adopted time
under the Act. Such records may be inspected by representatives of Penn Series
and Adviser at reasonable times and, in the event of termination of this
Agreement, will be promptly delivered to Adviser and Penn Series 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 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 Funds, 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-
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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. 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 a 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
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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 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. 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 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
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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 each 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
each 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 affected
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, 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.
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.
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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 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 OpCap
Advisors, 0 Xxxxx Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: President.
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.
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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.
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:
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Secretary
Attest: OPCAP ADVISORS
By:
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Secretary
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