SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Penn Series Funds, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/ / Fee computed on table below per exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
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3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
<PAGE>
THE PENN MUTUAL LIFE INSURANCE COMPANY
PHILADELPHIA, PENNSYLVANIA 19172
Penn Mutual Variable Annuity Account III
Penn Mutual Variable Life Account I
------------------------------
To Our Contract Owners and Payees:
The enclosed Notice of Special Meeting of Shareholders of Penn Series
Funds, Inc. (the "Company") and Proxy Statement concern proposals to be voted on
by the shareholders of the Value Equity, Small Capitalization Fund and Emerging
Growth Funds ("Funds").
On July 22, 1997, Oppenheimer Group, Inc. and PIMCO Advisors, L.P.
announced an amended merger agreement pursuant to which PIMCO Advisors and its
affiliate, Thomson Advisory Group Inc., will acquire the one-third managing
general partner interest in Oppenheimer Capital, Oppenheimer Financial Corp.'s
one percent general partnership interest in OpCap Advisors and Oppenheimer
Financial Corp.'s one percent general partner interest in Oppenheimer Capital
L.P. Subject to certain conditions, it is anticipated that the transaction will
be completed in the second half of this year. If the transaction takes place as
planned, it will result in a change in control of OpCap Advisors, the investment
advisor to the Value Equity and Small Capitalization Funds.
On June 8, 1997, BankAmerica Corporation entered into an Agreement and
Plan of Merger with Robertson, Stephens & Company Group, L.L.C. and Robertson,
Stephens & Company, Inc., pursuant to which each of those entities would be
merged into a subsidiary of BankAmerica Corporation. Upon the consummation of
those mergers (expected to occur on or after September 30, 1997), BankAmerica
Corporation will become the owner of the entire beneficial interest of Robertson
Stephens Investment Management, Inc. Under the Merger Agreement, each of
Robertson, Stephens & Company Group, L.L.C. and Robertson Stephens & Company,
Inc. will be merged into a wholly owned subsidiary of BankAmerica Corporation,
and will cease to exist as a separate entity. If the transactions take place as
planned, it will result in a change of control of Robertson Stephens Investment
Management, Inc., the sub-advisor to the Emerging Growth Fund.
Following the mergers contemplated above, OpCap Advisors will continue
to provide investment advisory and management services to the Value Equity and
Small Capitalization Funds and Robert Stephens Investment Management, Inc. will
continue to provide sub-advisory services to the Emerging Growth Fund. The
primary purpose of the meeting is to permit variable contract owners and payees
participating in the investment performance of the Funds to consider a new
investment advisory agreement and a new sub-advisory agreement to take effect
following the mergers. The new investment advisory agreement will be identical
to the existing investment
<PAGE>
advisory agreements and the new sub-advisory agreement will be identical to the
existing sub-advisory agreement, except for the dates of execution and
effectiveness.
Shares of the Funds are held by The Penn Mutual Life Insurance Company
("Penn Mutual") and its subsidiary, The Penn Insurance and Annuity Company, in
separate accounts established to fund variable annuity contracts and variable
life insurance policies.
Shares of the Funds owned by Penn Mutual under variable annuity
contracts and variable life policies which it has issued are held in Penn Mutual
Variable Annuity Account III and Penn Mutual Variable Life Account I. As owners
or payees under the contracts and policies, you are entitled to instruct Penn
Mutual as to the voting of shares held in the separate accounts.
The proposals to be voted on at the meeting is described in the
accompanying Notice of Special Meeting and Proxy Statement of the Company. We
urge you to read the Proxy Statement carefully, and then exercise your right to
give voting instructions. Penn Mutual will vote, in accordance with your
instructions, the number of Fund shares held in the applicable separate account
or subaccount thereof which is related to your interest therein as of the close
of business on August 15, 1997.
Please complete, date and sign the enclosed voting instruction card(s)
and return the card(s) to us promptly in the enclosed postage paid envelope. A
separate card is enclosed for each Fund as to which you have the right to give
voting instructions. In order to be given effect, your voting instructions must
be received not later than ____________.
Sincerely,
Richard F. Plush
Vice-President
September __, 1997
<PAGE>
THE PENN INSURANCE AND ANNUITY COMPANY
PHILADELPHIA, PENNSYLVANIA 19172
PIA Variable Annuity Account I
------------------------------
To Our Contract Owners and Payees:
The enclosed Notice of Special Meeting of Shareholders of Penn Series
Funds, Inc. ("Company") and Proxy Statement concern a proposal to be voted on by
the shareholders of the Value Equity, Small Capitalization Funds and Emerging
Growth Funds ("Funds").
On July 22, 1997, Oppenheimer Group, Inc. and PIMCO Advisors, L.P.
announced an amended merger agreement pursuant to which PIMCO Advisors and its
affiliate, Thomson Advisory Group Inc., will acquire the one-third managing
general partner interest in Oppenheimer Capital, Oppenheimer Financial Corp.'s
one percent general partnership interest in OpCap Advisors and Oppenheimer
Financial Corp.'s one percent general partner interest in Oppenheimer Capital
L.P. Subject to certain conditions, it is anticipated that the transaction will
be completed in the second half of this year. If the transaction takes place as
planned, it will result in a change in control of OpCap Advisors, the investment
advisor to the Value Equity and Small Capitalization Funds.
On June 8, 1997, BankAmerica Corporation entered into an Agreement and
Plan of Merger with Robertson, Stephens & Company Group, L.L.C. and Robertson,
Stephens & Company, Inc., pursuant to which each of those entities would be
merged into a subsidiary of BankAmerica Corporation. Upon the consummation of
those mergers (expected to occur on or after September 30, 1997), BankAmerica
Corporation will become the owner of the entire beneficial interest of Robertson
Stephens Investment Management, Inc. Under the Merger Agreement, each of
Robertson, Stephens & Company Group, L.L.C. and Robertson, Stephens & Company,
Inc. will be merged into a wholly owned subsidiary of BankAmerica Corporation,
and will cease to exist as a separate entity. If the transactions take place as
planned, it will result in a change of control of Robertson Stephens Investment
Management, Inc., the sub-advisor to the Emerging Growth Fund.
Following the mergers discussed above, OpCap Advisors will continue to
provide investment advisory and management services to the Value Equity and
Small Capitalization Funds and Robertson Stephens Investment Management, Inc.
will continue to provide sub-advisory services to the Emerging Growth Fund. The
primary purpose of the meeting is to permit variable contract owners and payees
participating in the investment performance of the Funds to consider a new
investment advisory agreement and a new sub-advisory agreement to take effect
following the acquisition. The new investment advisory agreement will be
identical to the
<PAGE>
existing investment advisory agreements and the new sub-advisory agreement will
be identical to the existing sub-advisory agreement, except for the dates of
execution and effectiveness.
Shares of the Funds are held by The Penn Mutual Life Insurance Company
and its subsidiary, The Penn Insurance and Annuity Company ("Penn Insurance"),
in separate accounts established to fund variable annuity contracts and variable
life insurance policies.
Shares of the Funds owned by Penn Insurance under variable annuity
contracts which it has issued are held in the PIA Variable Annuity Account I. As
owners or payees under the contracts and policies, you are entitled to instruct
Penn Insurance as to the voting of shares held in the separate account.
The proposal to be voted on at the meeting is described in the
accompanying Notice of Special Meeting and Proxy Statement of the Company. We
urge you to read the Proxy Statement carefully, and then exercise your right to
give voting instructions. Penn Insurance will vote, in accordance with your
instructions, the number of Fund shares held in the applicable separate account
or subaccount thereof which is related to your interest therein as of the close
of business on August 15, 1997.
Please complete, date and sign the enclosed voting instruction card(s)
and return the card(s) to us promptly in the enclosed postage paid envelope. A
separate card is enclosed for each Fund as to which you have the right to give
voting instructions. In order to be given effect, your voting instructions must
be received not later than ____________.
Sincerely,
Richard F. Plush
Vice-President
September __, 1997
<PAGE>
PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
--------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 10, 1997
--------------
A Special Meeting of Shareholders ("Meeting") of Penn Series Funds,
Inc. ("Company") will be held at the offices of The Penn Mutual Life Insurance
Company on Friday, October 10, 1997, at __:00 a.m. (Eastern time), in the Board
Room, Third Floor, at 600 Dresher Road, Horsham, Pennsylvania 19044, for the
following purposes:
1. To approve or disapprove a new investment advisory agreement
between the Company and OpCap Advisors with the respect to the
Value Equity Fund;
2. To approve or disapprove a new investment advisory agreement
between the Company and OpCap Advisors with the respect to the
Small Capitalization Fund;
3. To approve or disapprove a new sub-advisory agreement between
Independence Capital Management, Inc. and Robertson Stephens
Investment Management, Inc. with respect to the Emerging
Growth Fund;
4. To transact such other business as may properly come before
the Meeting.
Shareholders of the Value Equity Fund of the Company are entitled to
vote on Proposal 1. Shareholders of the Small Capitalization Fund of the Company
are entitled to vote on Proposal 2. Shareholders of the Emerging Growth Fund of
the Company are entitled to vote on Proposal 3.
Shareholders of record at the close of business on August 15, 1997 are
entitled to notice of and to vote at this meeting or any adjournment thereof.
By Order of the Board of Directors
C. Ronald Rubley
Secretary
September __, 1997
<PAGE>
PROXY STATEMENT
PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
--------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 10, 1997
--------------
This proxy statement is furnished in connection with the solicitation
by the Board of Directors ("Board") of the Penn Series Funds, Inc. ("Company")
of voting instructions to be voted at a Special Meeting of Shareholders and all
adjournments thereof ("Meeting"), to be held at the offices of The Penn Mutual
Insurance Company, Board Room, Third Floor, 600 Dresher Road, Horsham,
Pennsylvania on Friday, October 10, 1997 at _:00 a.m. (Eastern time). The
approximate mailing date of this proxy statement and the accompanying form of
voting instruction card is September __, 1997.
The primary purpose of the Meeting is to permit the Company's
shareholders to consider a New Advisory Agreement (as defined below) with
respect to the Value Equity and Small Capitalization Funds and a New
Sub-Advisory Agreement (as defined below) with respect to the Emerging Growth
Fund.
The New Advisory Agreement is to take effect following the consummation
of the transactions contemplated in an Amended and Restated Merger Agreement,
dated as of July 22, 1997 ("Oppenheimer Merger") between PIMCO Advisors L.P.
("PIMCO Advisors") and its affiliate, Thompson Advisory Group Inc. ("TAG"), and
Oppenheimer Group, Inc., and its subsidiary, Oppenheimer Financial Corp.
("Opfin"), which own a controlling interest in Oppenheimer Capital and its
subsidiary, OpCap Advisors ("OpCap" or "Advisor"). Pursuant to the Oppenheimer
Merger, Oppenheimer Capital and the Advisor will be controlled by PIMCO
Advisors, and its affiliates.
The New Sub-Advisory Agreement is to take effect following the
consummation of the transactions contemplated in an Agreement and Plan of
Merger, dated as of July 8, 1997 between BankAmerica Corporation ("BankAmerica")
and Robertson, Stephens & Company Group, L.L.C. ("RS Group") and Robertson,
Stephens & Company, Inc. ("RS Inc."), pursuant to which each of those entities
would be merged into a subsidiary of BankAmerica ("Robertson, Stephens Merger").
Following the Robertson, Stephens Merger, BankAmerica will become the owner of
<PAGE>
the entire beneficial interest in Robertson Stephens Investment Management, Inc.
("RSIM" or "Sub-Advisor").
The Oppenheimer Merger constitutes an assignment and termination of the
Current Advisory Agreements (as defined below) and the Robertson, Stephens
Merger constitutes an assignment and termination of the Current Sub-Advisory
Agreement (as defined below). Accordingly, to ensure continuity in the
management of the Value Equity, Small Capitalization, and Emerging Growth Funds
(each a "Fund"), shareholders of each Fund are being asked to vote on the
proposal that relates to their Fund. The proposals are as follows:
Proposal Fund
-------- ----
1 Approve New Advisory Agreement for Value Equity Fund.
2 Approve New Advisory Agreement for Small Capitalization Fund.
3 Approve New Sub-Advisory Agreement for Emerging Growth Fund.
The New Advisory Agreement is identical to each of the Current Advisory
Agreements, except for the dates of execution and effectiveness. The New
Sub-Advisory Agreement is identical to the Current Sub-Advisory Agreement,
except for the dates of execution and effectiveness.
The Company will furnish, without charge, a copy of its most recent
Annual and SemiAnnual Reports to Shareholders upon request. Requests should be
directed to the Company at The Penn Mutual Life Insurance Company, Customer
Service Group, Philadelphia, PA 19172 or by calling 1-800-523-0650.
The record date for determining shareholders entitled to vote at the
Meeting is August 15, 1997. Shareholders of the Value Equity and Small
Capitalization Funds of the Company will be entitled to one vote per share with
respect to approval or disapproval of the New Advisory Agreement and
shareholders of the Emerging Growth Fund will be entitled to one vote per share
with respect to approval or disapproval of the New Sub-Advisory Agreement. At
the close of business on August 15, 1997, there were issued and outstanding
________ shares of the Value Equity Fund, ______ shares of the Small
Capitalization Fund, and ______ shares of the Emerging Growth Fund.
Shares of the Company are sold only to The Penn Mutual Life Insurance
Company ("Penn Mutual") and its subsidiary, The Penn Insurance and Annuity
Company ("Penn Insurance"). Penn Mutual and Penn Insurance hold shares of the
Funds in one or more of the following separate accounts: Penn Mutual Variable
Annuity Account III, Penn Mutual Variable Life Account I, and PIA Variable
Annuity Account I. The Funds are held as investment vehicles for variable
annuity contracts and variable life insurance policies.
-2-
<PAGE>
As of ________, 5% or more of the outstanding shares of each Fund were
owned as follows:
<TABLE>
<CAPTION>
Total Number Percentage of
Title of Class of Shares Name of Beneficial Owner of Shares Outstanding Shares
- ------------------------ ------------------------ ------------ ------------------
<S> <C> <C> <C>
Value Equity Fund Penn Mutual-Penn Mutual
Variable Annuity Account III
Penn Mutual-Penn Mutual
Variable Life Account I
Penn Insurance-PIA Variable
Annuity Account I
Small Capitalization Fund Penn Mutual-Penn Mutual
Variable Annuity Account III
Penn Mutual-Penn Mutual
Variable Life Account I
Penn Insurance-PIA Variable
Annuity Account I
Equity Growth Fund Penn Mutual-Penn Mutual
Variable Annuity Account III
Penn Mutual-Penn Mutual
Variable Life Account I
Penn Insurance-PIA Variable
Annuity Account I
</TABLE>
Voting
With respect to each Fund, a "vote of the majority of the outstanding
voting securities" is required which is defined under the Investment Company act
of 1940, as amended ("1940 Act") as the lesser of (i) 67% or more of the voting
shares of the Fund entitled to vote thereon present in person or by proxy at the
Meeting, if the holders of more than 50% of the outstanding voting shares of the
Fund entitled to vote thereon are present in person or represented by proxy, or
(ii) more than 50% of the outstanding voting securities of the Fund entitled to
vote thereon.
Shareholders of each of the Value Equity, Small Capitalization and
Emerging Growth Funds of the Company are entitled to vote on Proposals 1, 2 and
3, respectively. A Proposal shall be approved with respect to a Fund if approved
by the shareholders of that Fund, regardless of whether the shareholders of any
other Fund approve the proposal.
-3-
<PAGE>
Under current interpretation and administration of the 1940 Act, and
regulations thereunder, Penn Mutual and Penn Insurance are required to vote
their shares in accordance with instructions from their variable annuity
contract owners and variable life insurance policy owners. Instructions are
obtained by Penn Mutual and Penn Insurance by sending this proxy statement to
their contract owners and policy owners and soliciting instructions.
Shares held in registered separate accounts for which contract owners
and policy owners do not give instructions are voted for and against the
proposal in the same proportions as the shares voted pursuant to instructions.
In addition, any shares held by Penn Mutual or Penn Insurance in their general
accounts also will be voted for or against a proposal in the same proportion as
shares for which voting instructions have been received.
In the event that voting instructions are not received with respect to
50% or more of the shares held in the separate accounts, Penn Mutual and/or Penn
Insurance, at their discretion, may vote all Fund shares in such accounts for
one or more adjournments of the Special Meeting to permit further solicitation
of instructions.
Voting instructions given pursuant to this solicitation may be revoked
at any time prior to their exercise by filing with Penn Mutual or Penn
Insurance, as appropriate, a written notice of revocation prior to the Meeting,
by delivering a duly authorized voting instruction form bearing a later date, or
by attending the Meeting and voting in person.
The Board recommends that you cast your vote FOR approval of the New
Advisory Agreement with OpCap and FOR the approval of the New Sub-Advisory
Agreement with RSIM.
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<PAGE>
PROPOSALS 1 AND 2: APPROVAL OF THE NEW ADVISORY AGREEMENT
Information Concerning the Advisor
OpCap is a general partnership of which Oppenheimer Capital holds a 99%
interest. Oppenheimer Capital is a registered investment adviser with extensive
experience in the management of mutual funds and institutional accounts. As of
June 30, 1997, Oppenheimer Capital had $57.0 billion in assets under management.
The principal business address of Oppenheimer Capital and OpCap is Oppenheimer
Tower, 200 Liberty Street, One World Financial Center, New York, New York 10281.
Listed below are the names, addresses, and principal occupations of the
principal executive officers of Oppenheimer Capital and OpCap:
<TABLE>
<S> <C>
Name and Address Principal Occupation
---------------- --------------------
Joseph La Motta Chairman Emeritus, Oppenheimer Capital;
Oppenheimer Tower Chairman, OpCap Advisors
200 Liberty Street
One World Financial Center
New York, New York 10281
George Long Chairman and President, Oppenheimer Capital.
Oppenheimer Tower
200 Liberty Street
One World Financial Center
New York, New York 10281
Bernard Garil President, OpCap Advisors.
Oppenheimer Tower
200 Liberty Street
One World Financial Center
New York, New York 10281
</TABLE>
Opfin, a holding company, is the remaining 1.0% general partner of
OpCap Advisors. Opfin also holds a one-third managing general partner interest
in Oppenheimer Capital. Oppenheimer Capital, L.P., a Delaware limited
partnership whose units are traded on the New York Stock Exchange and of which
Opfin is the sole 1.0% general partner, owns the remaining two-thirds interest
in Oppenheimer Capital. Opfin is a wholly-owned subsidiary of Oppenheimer Group,
Inc., 71% of the common stock of which currently is owned by Oppenheimer & Co.,
L.P. The principal business address of Opfin, Oppenheimer Capital, L.P, and
Oppenheimer Group, Inc. is Oppenheimer Tower, 200 Liberty Street, One World
Financial Center, New York, New York 10281.
-5-
<PAGE>
Information Concerning PIMCO Advisors
PIMCO Advisors, with approximately $110 billion in assets under
management as of June 30, 1997, is one of the largest publicly traded money
management firms in the United States. PIMCO Advisors' address is 800 Newport
Center Drive, Suite 100, Newport Beach, California 92660.
PIMCO Partners, G.P. ("PIMCO GP") owns approximately 42.83% and 66.37%,
respectively (and will at the closing of the Oppenheimer Merger own a majority
of the voting stock of TAG which owns approximately 14.94% and 25.06%,
respectively), of the total outstanding Class A and Class B units of limited
partner interest ("Units") of PIMCO Advisors and is PIMCO Advisors' sole general
partner. PIMCO GP is a California general partnership with two general partners.
The first of these is Pacific Investment Management Company, a California
Corporation, wholly owned by Pacific Financial Asset Management Company, a
direct subsidiary of Pacific Mutual Life Insurance Company ("Pacific Mutual").
PIMCO Partners L.L.C. ("PPLLC"), a California limited liability
company, is the second, and managing, general partner of PIMCO GP. PPLLC's
members are the Managing Directors ("PIMCO Managers") of Pacific Investment
Management Company, a subsidiary of PIMCO Advisors ("PIMCO Subpartnership"). The
PIMCO Managers are: William H. Gross, Dean S. Meiling, James F. Muzzy, William
F. Podlich, III, Frank B. Rabinovitch, Brent R. Harris, John L. Hague, William
S. Thompson Jr., William C. Powers, David H. Edington, Benjamin L. Trosky,
William R. Benz, II and Lee R. Thomas, III.
PIMCO Advisors is governed by an Operating Board and an Equity Board.
Governance matters are allocated generally to the Operating Board and the
Operating Board delegates to the Operating Committee the authority to manage
day-to-day operations of PIMCO Advisors. The Operating Board is composed of
twelve members, including the chief executive officer of the PIMCO
Subpartnership as Chairman and six PIMCO Managers designated by the PIMCO
Subpartnership.
The authority of PIMCO Advisors' Operating Board and Operating
Committee to take certain specified actions is subject to the approval of PIMCO
Advisors' Equity Board. Equity Board approval is required for certain major
transactions (e.g., issuance of additional PIMCO Advisors' Units and appointment
of PIMCO Advisors' chief executive officer). In addition, the Equity Board has
jurisdiction over matters such as actions which would have a material effect
upon PIMCO Advisors' business taken as a whole and (after an appeal from an
Operating Board decision) matters likely to have a material adverse economic
effect on any subpartnership of PIMCO Advisors. The Equity Board is composed of
twelve members, including the chief executive officer of PIMCO Advisors, three
members designated by a subsidiary of Pacific Mutual, the chairman of the
Operating Board and two members designated by PPLLC.
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<PAGE>
Because of its power to appoint (directly or indirectly) seven of the
twelve members of the Operating Board as described above, the PIMCO
Subpartnership may be deemed to control PIMCO Advisors. Because of the direct or
indirect power to appoint 25% of the members of the Equity Board, (i) Pacific
Mutual and (ii) the PIMCO Managers and/or the PIMCO Subpartnership may each be
deemed, under applicable provisions of the Investment Company Act to control
PIMCO Advisors. Pacific Mutual, PIMCO Subpartnership and the PIMCO Managers
disclaim such control.
The Oppenheimer Merger
On July 22, 1997, PIMCO Advisors and TAG entered into an Amended Merger
Agreement with Oppenheimer Group, Inc. and certain related parties which
modified the merger agreement entered into by the parties on February 13, 1997.
Pursuant to the Amended Merger Agreement, PIMCO Advisors and TAG (and its
successor) will acquire, among other interests, the one-third managing general
partner interest in Oppenheimer Capital, its 1.0% general partnership interest
in OpCap Advisors, and its 1.0% general partner interest in Oppenheimer Capital
L.P. The aggregate purchase price is approximately $262 million including
convertible preferred stock of TAG and assumption of certain indebtedness. The
amount preferred stock comprising the purchase price is subject to reduction in
certain circumstances. The obligations of the parties to consummate the
Oppenheimer Merger are subject to the satisfaction or waiver of certain
conditions prior to the effective date, including the consummation of the sale
by Oppenheimer Group, Inc and Oppenheimer Equities, Inc. of all of the stock of
Oppenheimer Holdings, Inc. and Oppenheimer & Co., Inc. ("Opco"), OpCap Advisors'
broker-dealer affiliate, to CIBC Wood Gundy Securities Corp. ( "CIBC Sale"),
approval of the transaction by certain regulatory authorities and the consent of
certain clients. All of the issued and outstanding stock of Opco is owned by
Oppenheimer Holdings, Inc., which in turn is a wholly-owned subsidiary of
Oppenheimer Equities, Inc. Oppenheimer Equities, Inc. is a wholly-owned
subsidiary of Opfin, which in turn is a wholly-owned subsidiary of Oppenheimer
Group, Inc. The CIBC Sale will have no effect on the ownership of Oppenheimer
Group, Inc. and Opfin including its general partner interests in Oppenheimer
Capital and OpCap Advisors. Under the terms of the Amended Merger Agreement, the
Oppenheimer Merger can take place only if the CIBC Sale takes place first. It is
contemplated that the Oppenheimer Merger will be consummated shortly after the
CIBC Sale is concluded. As a result, there will only be a change of control of
Oppenheimer Capital and OpCap Advisors upon consummation of the Oppenheimer
Merger. [In addition, the Oppenheimer Merger is conditioned on the approval by
the shareholders of the Funds of the New Advisory Agreement.]
Upon consummation of the Oppenheimer Merger, Oppenheimer Capital and
OpCap Advisors will be controlled by PIMCO Advisors. PIMCO Advisors has advised
Oppenheimer Group, Inc. that it anticipates that the senior portfolio management
team of Oppenheimer Capital will continue in their present capacities; that the
eligibility of OpCap Advisors to serve as an investment adviser will not be
affected by the Oppenheimer Merger; and that Oppenheimer Capital and OpCap
Advisors will be able to continue to provide advisory and management
-7-
<PAGE>
services with no material changes in operating conditions. PIMCO has further
advised Oppenheimer Group, Inc. that it currently anticipates that the
Oppenheimer Merger will not affect the ability of Oppenheimer Capital and OpCap
Advisors to fulfill their obligations under their investment advisory
agreements.
The Advisory Agreements
In anticipation of the Oppenheimer Merger, a majority of the Directors
of the Company, including a majority of the Directors who are not (i) parties to
the New Advisory Agreement (defined below) or (ii) interested persons of any
such party, approved a new advisory agreement between the Company and OpCap
("New Advisory Agreement") The form of the New Advisory Agreement is identical
to the Current Advisory Agreements (defined below) except for the dates of
execution and effectiveness.
The following summary of the Current Advisory Agreements and the New
Advisory Agreement is qualified by reference to Appendix A.
The Current Advisory Agreements
Currently, there are two identical investment advisory agreements
between the Company and OpCap Advisors - one for the Value Equity Fund, dated
November 1, 1992, and one for the Small Capitalization Fund, dated March 1, 1995
("Current Advisory Agreements"). At a meeting of the Board of Directors held on
February 4, 1997, a majority of the Directors who were not "interested persons,"
as defined in the 1940 Act ("Independent Directors") approved the Current
Advisory Agreements. The 1992 agreement was approved by shareholders on October
15, 1992. The 1995 agreement was approved by the sole shareholder on March 1,
1995.
The Current Advisory Agreements provide that OpCap, as investment
adviser, shall supervise and direct the investments of the Funds in accordance
with their investment objectives including the selection of securities for the
Company to purchase, sell, convert or lend, and the selection of brokers through
whom the Funds' portfolio transactions are executed.
Under the Current Advisory Agreements, OpCap shall not be liable for
any error of judgment or mistake of law or any loss suffered by the Company,
except for a loss resulting from willful misfeasance, bad faith, negligence, or
misconduct in the performance of its duties. OpCap shall not be liable for any
loss incurred by an act or omission of a custodian, broker, dealer, underwriter,
or issuer selected by OpCap with reasonable care.
The Current Advisory Agreements require OpCap to render periodic
reports as the Company may request or deem helpful and cooperate with the
Company's independent public accountant. The Current Advisory Agreements may be
terminated, without penalty, upon 60 days' prior written notice from the Company
to OpCap, or upon 90 days' prior written notice
-8-
<PAGE>
from OpCap to the Company; provided that in the case of termination by the
Company, such action shall have been authorized by (1) a resolution of a
majority of its directors who are not interested persons of any party to the
agreement; or (2) a vote of the majority of the outstanding voting securities of
the applicable Fund.
Under the Current Advisory Agreements, the Company pays OpCap as
compensation for services, an annual fee of 0.50% of each Fund's average daily
net assets. In the fiscal year ended December 31, 1996, the Company paid OpCap
advisory fees of $800,404 for services provided to the Value Equity Fund. During
this same period, the Company paid OpCap advisory fees of $51,982 for services
provided to the Small Capitalization Fund after a waiver of $7,964.00, resulting
in a net advisory fee, after fee waivers, of 0.__%.
The net assets, advisory fees, and net advisory fees after fee waivers
and/or reimbursements for other funds advised by OpCap are set forth in Annex B
hereto.
The New Advisory Agreement
The Board approved the New Advisory Agreement on April 2, 1997, the
form of which is attached as Annex A. The New Advisory Agreement is for both the
Value Equity And Small Capitalization Funds. The form of the New Advisory
Agreement is identical to each of the Current Advisory Agreements, except for
the dates of execution and effectiveness.
The investment advisory fee as a percentage of net assets payable by
each Fund will be the same under the New Advisory Agreement. If the investment
advisory fee under the New Advisory Agreement had been in effect for the
Company's most recently completed fiscal year, advisory fees paid to OpCap would
have been identical to those paid under the Current Advisory Agreements.
The Board held a meeting on April 2, 1997, at which meeting, the
Directors, including the Independent Directors, unanimously approved the New
Advisory Agreement for the Company and recommended the New Advisory Agreement
for approval by the shareholders of the Funds. The New Advisory Agreement would
take effect upon the later of (i) the obtaining approval or (ii) the closing of
the Oppenheimer Merger. The New Advisory Agreement will continue in effect for
as long as such continuance be approved at least annually in accordance with the
1940 Act.
In evaluating the New Advisory Agreement, the Board took into account
that the Funds' Current Advisory Agreements, including their terms relating to
services to be provided thereunder by the Adviser and the fees and expenses
payable by the Company, are identical, except for the dates of execution and
effectiveness. The Board also reviewed the performance of OpCap in managing the
Value Equity and Small Capitalization Funds.
-9-
<PAGE>
The Board considered the terms of the Oppenheimer Merger Agreement and
the possible effects of the Oppenheimer Merger upon the organization of OpCap to
provide advisory services to the Company. In this regard, the Board reviewed (i)
PIMCO Advisors' investment philosophy; (ii) PIMCO Advisors' plans for an
autonomous structure under which OpCap would continue to operate as a separate
business unit; and (iii) PIMCO Advisors' strategy in encouraging key OpCap
personnel to remain with the advisor.
After consideration of the above factors and such other factors as the
Board deemed relevant, the Directors, including the Independent Directors,
unanimously (i) approved the New Advisory Agreement; and (ii) voted to recommend
the approval of the New Advisory Agreement to shareholders of the Value Equity
and Small Capitalization Funds.
In the event that the shareholders of a Fund do not approve the New
Advisory Agreement, the applicable Current Advisory Agreement will remain in
effect with respect to that Fund and the Board will take such action as it deems
in the interest of the Fund and its shareholders, which may include proposing
that shareholders approve an agreement in lieu of such New Advisory Agreement.
If the Oppenheimer Merger is not consummated, OpCap would continue to serve as
investment adviser to the Funds pursuant to the terms in the Current Advisory
Agreements.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE NEW ADVISORY AGREEMENT
-10-
<PAGE>
PROPOSAL 3: APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
Information Concerning the Sub-Advisor
RSIM serves as sub-advisor to the Emerging Growth Fund pursuant to a
sub-advisory agreement with Independence Capital Management, Inc. ("ICM") dated
April 15, 1997 ("Current Sub-Advisory Agreement"). RSIM is indirectly owned by
RS Group and RS Inc. with RS Group holding a controlling interest.1/ RS Group is
also the majority owner of Robertson, Stephens & Company LLC (RS&Co.), a
distributor of mutual funds and a major investment bank which has managed over
$15.23 billion in public offerings of emerging growth companies since 1978.
Sanford R. Robertson and Paul H. Stephens may be deemed to control RSIM due to
their percentage ownership interests in RS Group and RS Inc.2/ The principal
business address of RSIM, RS Group, RS Inc. and RS&Co. is 555 California Street,
San Francisco, California 94104. Mr. G. Randall Hecht is the sole director and
officer of RSIM. Mr. Hecht's principal business address is 555 California
Street, San Francisco, California 94104.
Information Concerning the Advisor
ICM, located at 600 Dresher Road, Horsham Pa., 19044 serves as
investment adviser to the Emerging Growth Fund. ICM is a wholly owned subsidiary
of Penn Mutual. The Fund's investment advisory agreement with ICM is unaffected
by the Robertson, Stephens Merger.
Information Concerning BankAmerica
BankAmerica is a bank holding company that was incorporated on October
7, 1968 under the laws of the State of Delaware, and is registered under the
Bank Holding Company Act of 1956, as amended. Through its network of
subsidiaries, BankAmerica provides banking and other financial services
throughout the United States and in selected international markets to consumers
and business customers, including corporations, governments and other
institutions. As a global financial intermediary, BankAmerica provides
capital-raising services, trade finance, cash management, investment banking,
capital markets and credit products, and financial advisory services to large
public- and private-sector institutions that are part of the global economy. At
December 31, 1996, BankAmerica Corporation, together with its subsidiaries, was
one of the three largest bank holding companies in the United States, with total
assets of $250.8 billion.
- --------
1/ RSIM is a wholly owned subsidiary of RS Regulated I, L.L.C. ("RSRI").
RS Group owns 99% of RSRI with RS Inc. owning the remaining 1%. The
principal business address of RSRI is 555 California Street, San
Francisco, California 94104.
2/ Mr. Robertson owns approximately 15% of the outstanding voting
securities of each of RS Group and RS Inc. Mr. Stephens owns
approximately 12% of such securities.
-11-
<PAGE>
Bank of America National Trust and Savings Association is the largest
subsidiary of BankAmerica Corporation. The Bank, which was organized in 1904,
provides commercial banking and trust business through an extensive system of
branches across the western United States. The Bank's principal banking
affiliates operate branches in eleven U.S. states as well as corporate banking
offices in major U.S. cities and branches, corporate offices, and representative
offices in 37 other countries and territories. The Bank and its affiliates act
as investment advisers to assets of over $50 billion, including over $14 billion
in mutual funds.
The Robertson, Stephens Merger
On June 8, 1997, BankAmerica entered into an Agreement and Plan of
Merger with RS Group and RS Inc., pursuant to which each of those entities would
be merged into a subsidiary of BankAmerica. Upon the consummation of those
mergers (expected to occur on or about September 30, 1997), BankAmerica will
become the owner of the entire beneficial interest RSIM. Under the Merger
Agreement, each of RS Group and RS Inc. will be merged into a wholly owned
subsidiary of BankAmerica, and will exist only as an operating unit of
BankAmerica ("Robertson, Stephens").
BankAmerica will pay a total amount of consideration of up to $540
million. Of that amount $245 million will be paid to the members of RS Group and
the stockholders of RS Inc. upon consummation of the Robertson, Stephens Merger;
$225 million will be paid to them in additional installments during each of the
next three years if they remain employed by Robertson, Stephens. The remaining
$70 million will be paid into a "retention pool" for the benefit of certain key
Robertson, Stephens employees, who will receive payments out of the pool in
installments during the four-year period following the Robertson, Stephens
Merger if they remain employed by Robertson, Stephens.
RSIM has informed the Fund that the consideration for the Merger is
being paid in installments principally in order to provide an incentive to
Robertson, Stephens employees, including key investment professionals at RSIM to
continue their association with Robertson, Stephens. Any person whose employment
with Robertson, Stephens is terminated before he or she receives all of the
consideration under the Merger Agreement or payments from the retention pool to
which he or she is entitled (unless that person's employment is terminated by
Robertson, Stephens without cause or unless that person leaves for "good
reason", as defined in his or her employment contract) will forfeit any such
amount not yet paid at the time of the termination.
The Sub-Advisory Agreement
In anticipation of the Robertson, Stephens Merger, a majority of the
Directors of the Company, including a majority of the Directors who are not (i)
parties to the New Sub-Advisory Agreement (defined below) or (ii) interested
persons of any such party, approved a new sub-advisory agreement between the
ICM and RSIM ("New Sub-Advisory Agreement") The form of the New Sub-Advisory
Agreement is identical to the Current Sub-Advisory Agreement (defined
-12-
<PAGE>
below) except for the dates of execution and effectiveness. The holders of the
majority of the outstanding voting securities (within the meaning of the 1940
Act) of the Emerging Growth Fund are being asked to approve the New Sub-Advisory
Agreement.
The following summary of the Current Sub-Advisory Agreement and the New
Sub-Advisory Agreement is qualified by reference to Annex B.
The Current Sub-Advisory Agreement
The Current Sub-Advisory Agreement was last approved by the initial
shareholder on May 1, 1997. At a meeting of the Board of Directors held on
February 4, 1997, a majority of the Independent Directors approved the Current
Sub-Advisory Agreement.
The Current Sub-Advisory Agreement provides that RSIM, as sub-advisor,
shall supervise and direct the investments of the Fund in accordance with its
investment objective including the selection of securities for the Company to
purchase, sell, convert or lend, and the selection of brokers through whom the
Fund's portfolio transactions are executed.
Under the Current Sub-Advisory Agreement, RSIM shall not be liable for
any error of judgment or mistake of law or any loss suffered by the Company,
except for a loss resulting from willful misfeasance, bad faith, negligence, or
willful misconduct in the performance of its duties. RSIM shall not be liable
for any loss incurred by an act or omission of a custodian, broker, dealer,
underwriter, or issuer selected by RSIM with reasonable care. In addition, the
Current Sub-Advisory Agreement provides indemnification to both ICM and RSIM for
losses arising under the agreement under certain conditions.
The Current Sub-Advisory Agreement requires RSIM to render periodic
reports as the Company or ICM may request and cooperate with the Company's
independent public accountants. The Current Sub-Advisory Agreement may be
terminated by ICM, the Company or RSIM upon 60 days' prior notice in writing
from the Company to RSIM, or upon 90 days' prior notice in writing from RSIM to
the Company, provided that in the case of termination by ICM or the Company,
such action shall have been authorized by (1) a majority of the directors who
are not interested persons of any party to the agreement; or by (2) a vote of
the majority of the outstanding voting securities of the Fund.
Under the Current Sub-Advisory Agreement, ICM pays RSIM as compensation
for services, an annual fee of 0.70% of the first $25,000,000 of average daily
net assets of the Fund, 0.65% of the next $25,000,000 of average daily net
assets of the Fund, and 0.60% of average daily net assets of the Fund in excess
of $50,000,000. As the Fund commenced operations on May 1, 1997, RSIM did not
receive any compensation from the Fund for the fiscal year ended December 31,
1996. To the extent that the Fund's total expenses for a fiscal year (excluding
interest, taxes, brokerage, and certain other expenses) exceeds 1.15% of the
Fund's daily net
-13-
<PAGE>
assets, RSIM is liable for the first .10% of the excess with the Advisor liable
for all amounts in excess of 1.25%.
Currently, RSIM provides investment advisory services to one other fund
with an investment objective similar to the Fund. The name, net assets, and
contractual advisory fee for this fund are listed below:
Approximate Net
Assets As Of
Fund (6/30/97) Advisory Fee Rate
---- --------------- -----------------
Emerging Growth Fund $222,198,131 1.00%
The New Sub-Advisory Agreement
The Board approved the New Sub-Advisory Agreement on August 5, 1997,
the form of which is attached as Annex B. The form of the New Sub-Advisory
Agreement is identical to the Current Advisory Sub-Agreement, except for the
dates of execution and effectiveness.
The investment advisory fee as a percentage of net assets payable by
the Fund will be the same under the New Sub-Advisory Agreement.
The Board held a meeting on August 5, 1997, at which meeting, the
Directors, including the Independent Directors, unanimously approved the New
Sub-Advisory Agreement for the Company and recommended the New Sub-Advisory
Agreement for approval by the shareholders of the Fund. The New Sub-Advisory
Agreement would take effect upon the later of (i) the obtaining approval or (ii)
the closing of the Robertson, Stephens Merger. The New Sub-Advisory Agreement
will continue in effect for as long as such continuance be approved at least
annually in accordance with the 1940 Act.
In evaluating the New Sub-Advisory Agreement, the Board took into
account that the Fund's Current Sub-Advisory Agreement, including its terms
relating to services to be provided thereunder by the Sub-Advisor and the fees
and expenses payable by the Company, are identical, except for the dates of
execution and effectiveness.
The Board considered the terms of the Robertson, Stephens Merger and
the possible effects of the Robertson, Stephens Merger upon the ability of RSIM
to provide advisory services to the Company. In this regard, the Board reviewed
(i) BankAmerica's plans for an autonomous structure under which RSIM would
continue to operate as a separate business unit and retain its investment
approach and philosophy; and (ii) the incentives in the Merger Agreement to
encourage key RSIM personnel to remain with the Sub-Advisor.
-14-
<PAGE>
After consideration of the above factors and such other factors as the
Board deemed relevant, the Directors, including the Independent Directors,
unanimously (i) approved the New Sub-Advisory Agreement; and (ii) voted to
recommend the approval of the New Sub-Advisory Agreement to shareholders of the
Emerging Growth Fund.
In the event that the shareholders of the Fund do not approve the New
Sub-Advisory Agreement, the Current Sub-Advisory Agreement will remain in effect
and the Board will take such action as it deems in the interest of the Fund and
their shareholders, which may include proposing that shareholders approve an
agreement in lieu of such New Sub-Advisory Agreement. If the Robertson, Stephens
Merger is not consummated, RSIM would continue to serve as investment adviser to
the Fund pursuant to the terms in the Current Sub-Advisory Agreement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR"
APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
-15-
<PAGE>
ADDITIONAL INFORMATION
Directors and Officers of the Company
Information is set forth below about the Company's current Directors
and principal executive officers, including their name, position with the
company, and relationship to OpCap or RSIM, if any. No Director or Officer owns
shares of the Company.
Name and Position Affiliation Affiliation
with the Company with Op Cap with RSIM
----------------- ----------- -----------
Eugene Bay None
Director
James S. Greene None
Director
L. Stockton Illoway None
President and Director
Richard J. Liberdi None
Director
William H. Loesche, Jr. None
Director
M. Donald Wright None
Director
James B. McElwain None
Executive Vice President
Richard F. Plush None
Vice President
C. Ronald Rubley None
Secretary
Steven M. Herzberg None
Treasurer
James D. Benson None
Controller
Administrator
Penn Mutual is the administrative and corporate services agent for the
Company. Penn Mutual is a Pennsylvania mutual life insurance company located at
Independence Square, Philadelphia, Pennsylvania 19172. Under an administrative
and corporate services agreement,
-16-
<PAGE>
Penn Mutual administers the Company's corporate affairs, subject to the
supervision of the Board and, in connection therewith, furnishes the Company
with office facilities, prepares regulatory filings, provides staff assistance
to the Board, and provides ordinary bookkeeping services.
Expenses
All costs of solicitation (including printing and mailing of this proxy
statement, meeting notice, and voting instruction cards, as well as any
necessary supplementary solicitations) will be paid for by Oppenheimer Group,
Inc. and PIMCO Advisors for Proposal 1 and by RSIM for Proposal 2. The Company
will not pay for expenses relating to the approval of either Proposal.
Submission of Shareholder Proposals
The Company does not hold annual shareholder meetings. Shareholders
wishing to submit proposals for inclusion in a proxy statement for a shareholder
meeting subsequent to the Meeting, if any, should send their written proposals
to Secretary, Penn Series Funds, Inc., 600 Dresher Road, Horsham, PA 19044.
General
The Company knows of no business other than that mentioned in the
Proposals contained in the Notice that will be presented for consideration at
the Meeting. If any other matters are properly presented, it is the intention of
the persons named on the enclosed voting instruction card to vote instructions
in accordance with their best judgment.
A list of shareholders of the Company entitled to be present and vote
at the meeting will be available at the offices of the Company, 600 Dresher
Road, Horsham, PA 19044, for inspection by any shareholder during regular
business hours for ten days prior to the date of the Meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN,
SIGN AND RETURN THE ENCLOSED VOTING INSTRUCTION CARD PROMPTLY.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
C. Ronald Rubley
Secretary
September __, 1997.
-17-
<PAGE>
ANNEX A
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
[Insert Form of Agreement]
A-1
<PAGE>
ANNEX B
FORM OF NEW SUB-ADVISORY AGREEMENT
[Insert Form of Agreement]
A-2
<PAGE>
APPENDIX A
The following tables indicate the name, net assets, contractual
advisory fee and net advisory fee after fee waiver and/or expense reimbursement
for the last fiscal year for other registered investment companies managed by
OpCap. These investment companies have similar investment objectives to either
the Value Equity Fund or the Small Capitalization Fund.
<TABLE>
<CAPTION>
Approximate Net
Assets
Fund (as of 8/4/97) Advisory Fee Rate
- ---- --------------- -----------------
<S> <C> <C>
Oppenheimer Quest Value Fund, Inc. $1,003,593,276 1.0% on the first $400
million; .90% on the next
$400 million; .85% of net
assets in excess of $800
million(1)
Oppenheimer Quest Opportunity Value Fund $3,741,816,265 1.0% on the first $400
million; .90% on the next
$400 million; .85% of net
assets in excess of $800
million(1)
Oppenheimer Quest Small Cap Value Fund $ 230,070,963 1.0% on the first $400
million; .90% on the next
$400 million; .85% of net
assets in excess of $800
million(1)
Oppenheimer Quest Officers Value Fund $ 8,466,426 1.0% of its daily net assets(1,2)
Oppenheimer Quest Capital Value Fund, Inc. $ 353,495,645 1.0% on the first $400
million; .90% on the next
$400 million; .85% of net
assets in excess of $800
million(3)
Enterprise Accumulation Trust:
Equity Portfolio $ 458,862,923 .40% on the first $1 billion;
.30% on assets over $1
billion; and .25% for assets in
excess of $2 billion(4)
Managed Portfolio $2,540,520,544 .40% on the first $1 billion;
.30% on assets over $1
billion; and .25% for assets in
excess of $2 billion(4)
Enterprise Group of Funds
</TABLE>
B-1
<PAGE>
<TABLE>
<CAPTION>
Approximate Net
Assets
Fund (as of 8/4/97) Advisory Fee Rate
- ---- --------------- -----------------
<S> <C> <C>
Managed Portfolio $ 319,313,017 .40% on the first $100
million; .30% on assets in
excess of $100 million(5)
Equity Portfolio $ 3,021,498 .40% on the first $100
million; .30% on assets in
excess of $100 million(5)
Endeavor Series Trust:
Value Equity Portfolio $ 188,046,428 .40%(6)
Opportunity Value Portfolio $ 14,892,045 .40%(6)
WL Series Trust:
Elite Value Asset Allocation Portfolio $ 6,421,530 .40%(7)
The Saratoga Advantage Trust:
Large Capitalization Value Portfolio $ 29,884,830 .30%(7)
OCC Accumulation Trust
Equity Portfolio $ 23,162,792 .80% of the first $400 million
of average net assets; .75% on
the next $400 million of
average net assets and .70% of
assets in excess of $800
million(8)
Small Cap Portfolio $ 51,238,610 .80% of the first $400 million
of average net assets; .75% on
the next $400 million of
average net assets and .70% of
assets in excess of $800
million(8)
Managed Portfolio $ 252,558,478 .80% of the first $400 million
of average net assets; .75% on
the next $400 million of
average net assets and .70% of
assets in excess of $800
million(8)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
B-2
<PAGE>
(1) With respect to each of these funds, Oppenheimer Funds, Inc. ("OFI") is
the investment adviser and OpCap Advisors is the sub-adviser. OFI also
receives a .25% administrative fee with respect to the Oppenheimer
Quest Global Value Fund, Inc. OFI pays OpCap Advisors monthly an annual
fee based on the average daily net assets of the fund equal to 40% of
the advisory fee (and administrative fee with respect to the
Oppenheimer Quest Global Value Fund, Inc.) collected by OFI based on
the total net assets of the fund as of November 22, 1995 (the "base
amount") plus 30% of the investment advisory fee (and administrative
fee with respect to the Oppenheimer Quest Global Value Fund, Inc.)
collected by OFI based on the total net assets of the fund that exceed
the base amount.
(2) OFI's advisory fee for the Oppenheimer Quest Officers Value Fund is
1.00%. However, effective August 1, 1996, OFI is waiving the portion of
its management fee equal to what OFI would have been required to pay
OpCap as the sub-advisory fee and OpCap has agreed to waive its
sub-advisory fee.
(3) OFI is the investment adviser and OpCap Advisors is the sub-advisor.
OFI pays OpCap a sub-advisory fee equal to 40$ of the net advisory fee
calculated by OFI for the fund based on the total net assets of the
fund as of February 28, 1997 and remaining 120 days later (the "base
amount") plus 30% of the investment advisory fee collected by OFI based
on the total net assets that exceed the base amount.
(4) These fees are for investment advisory services only. Management
services are provided to the portfolios by a third party, not OpCap
Advisors. The Manager, who pays the investment advisory fee to OpCap
Advisors, receives a management fee, on an annual basis, of 0.80% of
the first $400 million of the average daily net assets; .75% on the
next $400 million and .70% on assets above $800 million of each of the
portfolios.
(5) This fee is for investment advisory services only. Management services
are provided to the portfolio by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors,
receives a management fee of .75% of the average daily net assets of
the Portfolio.
(6) This fee is for investment advisory services only. Management services
are provided to the portfolio by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee of OpCap Advisors,
receives a management fee of .80% of average daily net assets of the
portfolios.
(7) This fee is for investment advisory services only. Management services
are provided to the portfolio by a party other than OpCap Advisors. The
Manager, who pays the investment advisory fee to OpCap Advisors,
receives a management fee of 0.65% of the average daily net assets of
the portfolio.
(8) OpCap Advisors will waive its management fee and reimburse expenses so
that total operating expenses (net of any expense offsets and excluding
the amount of any interest, taxes, brokerage commissions and
extraordinary expenses) do not exceed 1.25% of each Portfolio's average
daily net assets and until December 31, 1997, will waive its management
fee and reimburse expenses of those Portfolios so that their total
operating expenses do not exceed 1.00% of their average daily net
assets.
B-3
<PAGE>
[The Penn Mutual Insurance Company]
[The Penn Insurance and Annuity Company]
[Penn Mutual Variable Annuity Account III and
Penn Mutual Variable Life Account II]
[PIA Variable Annuity Account I]
VOTING INSTRUCTION CARD
At the Special Meeting of Shareholders of Penn Series Funds, Inc. (the
"Company") scheduled to be held on June 26, 1997, and at any adjournments
thereof, the undersigned owner of [a variable annuity contract] [variable life
policy] participating in [Name of Separate Account] hereby instructs [The Penn
Mutual Insurance Company ("Penn Mutual")] [The Penn Insurance and Annuity
Company ("PIA")] to vote shares of the Value Equity Fund of the Company held
under my [contract or policy] (the "Shares") in accordance with the instructions
below, and to vote the Shares on any other matters that may properly come before
the meeting, all as set forth in the Notice of Special Meeting and Proxy
Statement that accompanied this Voting Instruction Card.
[Penn Mutual] [PIA] recommends that you vote FOR the Proposal
set forth on this voting instruction card.
- --------------------------------------------------------------------------------
Proposals
Proposal 1: Approve the proposed investment advisory agreement between
the Company and OpCap Advisors with respect to Value Equity Fund
Proposal 2: [Intentionally Omitted]
The undersigned instructs [Penn Mutual] [PIA] to vote the Shares as follows:
___ FOR ___ AGAINST ___ ABSTAIN
Proposal 3: [Intentionally Omitted]
The Shares will be voted as directed. [Penn Mutual] [PIA] will vote on
any other business that may properly come before the meeting in the discretion
of its management. This voting instruction is solicited by [Penn Mutual] [PIA].
The undersigned acknowledges receipt with this voting instruction card
along with a copy of the Notice of Special Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
Please date, sign and return promptly.
Dated: _______________________________, 1997
Your signature(s) should be exactly as your name or names appear on
this Voting Instruction Card. If the shares are held jointly, each holder should
sign. If signing is by attorney, executor, administrator, trustee or guardian,
please print your full title below your signature.
- ---------------------------------------------
Signature
- ---------------------------------------------
Signature
<PAGE>
[The Penn Mutual Insurance Company]
[The Penn Insurance and Annuity Company]
[Penn Mutual Variable Annuity Account III and
Penn Mutual Variable Life Account II]
[PIA Variable Annuity Account I]
VOTING INSTRUCTION CARD
At the Special Meeting of Shareholders of Penn Series Funds, Inc. (the
"Company") scheduled to be held on June 26, 1997, and at any adjournments
thereof, the undersigned owner of [a variable annuity contract] [variable life
policy] participating in [Name of Separate Account] hereby instructs [The Penn
Mutual Insurance Company ("Penn Mutual")] [The Penn Insurance and Annuity
Company ("PIA")] to vote shares of the Small Capitalization Fund of the Company
held under my [contract or policy] (the "Shares") in accordance with the
instructions below, and to vote the Shares on any other matters that may
properly come before the meeting, all as set forth in the Notice of Special
Meeting and Proxy Statement that accompanied this Voting Instruction Card.
[Penn Mutual] [PIA] recommends that you vote FOR the Proposal
set forth on this voting instruction card.
- --------------------------------------------------------------------------------
Proposals
Proposal 1: [Intentionally Omitted]
The undersigned instructs [Penn Mutual] [PIA] to vote the Shares as follows:
___ FOR ___ AGAINST ___ ABSTAIN
Proposal 2: Approve the proposed investment advisory agreement between the
Company and OpCap Advisors with respect to the Small
Capitalization Fund
Proposal 3: [Intentionally Omitted]
The Shares will be voted as directed. [Penn Mutual] [PIA] will vote on
any other business that may properly come before the meeting in the discretion
of its management. This voting instruction is solicited by [Penn Mutual] [PIA].
The undersigned acknowledges receipt with this voting instruction card
along with a copy of the Notice of Special Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
Please date, sign and return promptly.
Dated: _______________________________, 1997
Your signature(s) should be exactly as your name or names appear on
this Voting Instruction Card. If the shares are held jointly, each holder should
sign. If signing is by attorney, executor, administrator, trustee or guardian,
please print your full title below your signature.
- ---------------------------------------------
Signature
- ---------------------------------------------
Signature
<PAGE>
[The Penn Mutual Insurance Company]
[The Penn Insurance and Annuity Company]
[Penn Mutual Variable Annuity Account III and
Penn Mutual Variable Life Account II]
[PIA Variable Annuity Account I]
VOTING INSTRUCTION CARD
At the Special Meeting of Shareholders of Penn Series Funds, Inc. (the
"Company") scheduled to be held on June 26, 1997, and at any adjournments
thereof, the undersigned owner of [a variable annuity contract] [variable life
policy] participating in [Name of Separate Account] hereby instructs [The Penn
Mutual Insurance Company ("Penn Mutual")] [The Penn Insurance and Annuity
Company ("PIA")] to vote shares of the Emerging Growth Fund of the Company held
under my [contract or policy] (the "Shares") in accordance with the instructions
below, and to vote the Shares on any other matters that may properly come before
the meeting, all as set forth in the Notice of Special Meeting and Proxy
Statement that accompanied this Voting Instruction Card.
[Penn Mutual] [PIA] recommends that you vote FOR the Proposal
set forth on this voting instruction card.
- --------------------------------------------------------------------------------
Proposals
Proposal 1: [Intentionally Omitted]
Proposal 2: [Intentionally Omitted]
Proposal 3: Approve the proposed sub-advisory agreement between Independence
Capital Management, Inc. and Robertson Stephens Investment
Management, Inc. for the Emerging Growth Fund
The undersigned instructs [Penn Mutual] [PIA] to vote the Shares as follows:
___ FOR ___ AGAINST ___ ABSTAIN
The Shares will be voted as directed. [Penn Mutual] [PIA] will vote on
any other business that may properly come before the meeting in the discretion
of its management. This voting instruction is solicited by [Penn Mutual] [PIA].
The undersigned acknowledges receipt with this voting instruction card
along with a copy of the Notice of Special Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
Please date, sign and return promptly.
Dated: _______________________________, 1997
Your signature(s) should be exactly as your name or names appear on
this Voting Instruction Card. If the shares are held jointly, each holder should
sign. If signing is by attorney, executor, administrator, trustee or guardian,
please print your full title below your signature.
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Signature
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Signature
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