<PAGE>
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 240.14a-11(c) or 240.14a-12
Penn Series Funds, Inc.
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the 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)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11*
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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* Set forth the amount on which the filing fee is calculated and state how it
was determined:
/ / Fee paid previously with preliminary materials.
<PAGE>
/ / 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: ________________________________________
2) Form, Schedule or Registration Statement No.:___________________
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 Meeting of Shareholders of Penn Series Funds,
Inc. (the "Company") and Proxy Statement concerns a proposal to be voted on by
the shareholders of the Emerging Growth Fund (the "Fund")
On February 26, 1999, Robertson Stephens Investment Management Co. LLC
purchased Robertson Stephens Investment Management Co., Inc. and its subsidiary,
RS Investment Management, Inc. ("RSIM") from BankAmerica Corporation. RSIM is
investment sub-adviser to the Fund. As a result of the sale and change in
ownership of RSIM, the investment sub-advisory agreement that was in effect
between Independence Capital Management, Inc. ("ICMI"), investment adviser to
the Fund, and RSIM terminated. To ensure continuity in the management of the
Fund, shareholders of the Fund are being asked to approve a new sub-advisory
agreement between ICMI and RSIM. The new sub-advisory agreement will be
identical to the agreement that was in effect prior to the change in ownership
of RSIM, except for the dates of the agreements and their effectiveness.
RSIM continues to provide investment-advisory services to the Fund.
Pending approval of the proposed new investment sub-advisory agreement by
shareholders, the investment sub-advisory fees that would have been payable to
RSIM since termination of the investment sub-advisory agreement are being held
in escrow.
The Penn Mutual Life Insurance Company ("Penn Mutual") and its
subsidiary, The Penn Insurance and Annuity Company, own all of the shares of the
Fund. The shares are held in separate accounts for variable annuity contracts
and variable life insurance policies issued by the companies.
Penn Mutual holds its shares in Penn Mutual Variable Annuity Account
III and Penn Mutual Variable Life Account I. As owners or payees under variable
annuity or variable life insurance contracts, you are entitled to instruct Penn
Mutual as to the voting of shares held in the separate accounts.
The proposal to be voted on at the meeting is described in the
accompanying Notice of Meeting and Proxy Statement of the Company. Please read
the Proxy Statement carefully, and then exercise your right to give voting
instructions. Penn Mutual will vote, in accordance with
<PAGE>
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 March 1, 1999.
Please complete, date and sign the enclosed voting instruction card and
return the card to us promptly in the enclosed postage paid envelope. In order
to be given effect, your voting instructions must be received not later than
April 22, 1999.
Sincerely,
Richard F. Plush
Vice-President
April 1, 1999
<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 Meeting of Shareholders of Penn Series Funds,
Inc. (the "Company") and Proxy Statement concerns a proposal to be voted on by
the shareholders of the Emerging Growth Fund (the "Fund").
On February 26, 1999, Robertson Stephens Investment Management Co. LLC
purchased Robertson Stephens Investment Management Co., Inc. and its subsidiary,
RS Investment Management, Inc. ("RSIM") from BankAmerica Corporation. RSIM is
investment sub-adviser to the Fund. As a result of the sale and change in
ownership of RSIM, the investment sub-advisory agreement that was in effect
between Independence Capital Management, Inc. ("ICMI"), investment adviser to
the Fund, and RSIM terminated. To ensure continuity in the management of the
Fund, shareholders of the Fund are being asked to approve a new sub-advisory
agreement between ICMI and RSIM. The new sub-advisory agreement will be
identical to the agreement that was in effect prior to the change in ownership
of RSIM, except for the dates of the agreements and their effectiveness.
RSIM continues to provide investment-advisory services to the Fund.
Pending approval of the proposed new investment sub-advisory agreement by
shareholders, the investment sub-advisory fees that would have been payable to
RSIM since termination of the investment sub-advisory agreement during the
period are being held in escrow.
The Penn Insurance and Annuity Company ("Penn Insurance") and its
parent, The Penn Mutual Life Insurance Company ("Penn Mutual"), own all of the
shares of the Fund. The shares are held in separate accounts for variable
annuity contracts and variable life insurance policies issued by the companies.
Penn Insurance holds its shares in the PIA Variable Annuity Account I.
As owners or payees under variable annuity or variable life insurance contracts,
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 Meeting and Proxy Statement of the Company. Please 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
<PAGE>
subaccount thereof which is related to your interest therein as of the close of
business on March 1, 1999.
Please complete, date and sign the enclosed voting instruction card and
return the card 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 April 22, 1999.
Sincerely,
Richard F. Plush
Vice-President
April 1, 1999
<PAGE>
PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April 26, 1999
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A Meeting of Shareholders ("Meeting") of Penn Series Funds, Inc.
("Company") will be held at the offices of The Penn Mutual Life Insurance
Company on April 26, 1999, at 9:00 a.m., Eastern time, in the Board Room, Third
Floor, at 600 Dresher Road, Horsham, Pennsylvania 19044, for the following
purpose:
1. To approve or disapprove a new investment sub-advisory
agreement between Independence Capital Management, Inc. and RS
Investment Management, Inc., for investment sub-advisory
services to the Emerging Growth Fund;
2. To transact such other business as may properly come before
the meeting.
Shareholders of record at the close of business on March 1, 1999 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
April 1, 1999
<PAGE>
PROXY STATEMENT
PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
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SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1999
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This proxy statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of the Penn Series Funds, Inc. (the
"Company") of instructions for the voting of shares at a Meeting of Shareholders
of the Emerging Growth Fund (the "Fund") and all adjournments thereof (the
"Meeting"), to be held at the offices of The Penn Mutual Insurance Company,
Board Room, Third Floor, 600 Dresher Road, Horsham, Pennsylvania on Monday,
April 26, 1999 at 9:00 a.m. (Eastern time). The approximate mailing date of this
proxy statement and the accompanying form of voting instruction card is April 1,
1999.
The primary purpose of the Meeting is to permit shareholders of the
Fund to consider and to vote to approve or disapprove a proposed new investment
sub-advisory agreement between Independence Capital Management, Inc. ("ICMI")
and RS Investment Management, Inc. ("RSIM"). RSIM is a subsidiary of Robertson
Stephens Investment Management Co. LLC. ("RSIM Co. LLC"). The principal business
address of RSIM and RSIM Co. LLC is 555 California Street, San Francisco,
California 94104. ICMI is investment adviser to the Fund and is a subsidiary of
Penn Mutual. The proposed sub-advisory agreement is included with this proxy
statement as Exhibit A.
The record date for determining shareholders entitled to vote at the
Meeting is March 1, 1999. Shareholders of the Fund will be entitled to one vote
per share to approve or disapprove the proposed sub-advisory agreement. At the
close of business on March 1, 1999, there were issued and outstanding ________
shares of the Fund.
Shares of the Fund 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
Fund 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. Shares of the Fund are held as investment vehicles for
variable annuity contracts and variable life insurance policies.
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As of March 1, 1999, 5% or more of the outstanding shares of the 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>
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>
The Company will furnish, upon request and without charge, a copy of
its most recent Annual Report to Shareholders. 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.
Voting
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A "vote of the majority of the outstanding voting securities" of the
Fund is required. This 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.
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 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
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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 the approval of the
proposed new sub-advisory agreement between ICMI and RSIM.
PROPOSAL: APPROVAL OF THE NEW SUB-ADVISORY AGREEMENT
Under investment sub-advisory agreements with Independence Capital
Management, Inc.("ICMI"), RSIM has served as investment sub-adviser to the Fund
since formation of the Fund in 1997.
The sub-advisory agreement between RSIM and ICMI, dated May 1, 1997,
terminated on February 26, 1999 as a result of the sale and change in control of
RSIM (the "Transaction"). RSIM has continued to provide investment-advisory
services to the Fund since the Transaction. Pending approval of a new
sub-advisory agreement between ICMI and RSIM, the sub-advisory fees that would
be payable to RSIM under an effective sub-advisory agreement are being held in
escrow.
We are asking shareholders of the Fund to approve a new sub-advisory
agreement between ICMI and RSIM. The new sub-advisory agreement will be
identical to the agreement that was in effect prior to the change in ownership
and control of RSIM, except for the dates of the agreements and their
effectiveness. The portfolio manager of the Fund since its inception, James
Callinan, has remained senior portfolio manager of the Fund. Mr. Callinan is a
major owner and a member of the senior management team of RSIM and its
affiliated companies.
Information Concerning the Transaction
- --------------------------------------
On February 26, 1999, RSIM Co. LLC purchased Robertson Stephens
Investment Management Co. Inc. from BankAmerica Corporation. RSIM Co. LLC, a
Delaware limited liability company, owns all of the outstanding common stock of
Robertson Stephens Investment Management Co., Inc. Through its ownership of
Robertson Stephens Investment Management Co. Inc., RSIM Co. LLC indirectly owns
RSIM. RS Regulated I, LLC, a subsidiary of Robertson Stephens Investment
Management Co. Inc., owns all of the common stock of RSIM.
RSIM Co. LLC is principally owned by four individuals. G. Randall Hecht
owns approximately 29%, Paul H. Stephens owns approximately 22%, Andrew P.
Pilara, Jr., owns approximately 15% and James Callinan owns approximately 20%,
respectively, of the membership interest in RSIM Co. LLC. The remainder of the
membership interest is owned by other employees of RSIM Co. LLC or its
affiliates. Each of Messrs. Callinan, Hecht, Pilara, and Stephens, and Messrs.
David Evans and James Foster, is a member of the Board of Managers of RSIM Co.
LLC. Mr. Hecht is director and sole officer of RSIM.
-3-
<PAGE>
The Proposed Sub-Advisory Agreement
- -----------------------------------
The proposed sub-advisory agreement between ICMI and RSIM is identical
to the sub-advisory agreement that was terminated as a result of the sale of
RSIM and its affiliated companies, except for the dates of execution and
effectiveness.
The proposed agreement provides that RSIM, as sub-adviser, will
supervise and direct the investments of the Fund in accordance with its
investment objective, policies and restrictions of the Funds, 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.
The proposed agreement requires RSIM to render periodic reports as the
Company or ICMI may request and to cooperate with the Company's independent
public accountants. The proposed agreement may be terminated by ICMI, the
Company or RSIM upon 60 days' prior written notice or upon 90 days' prior
written notice from RSIM, provided that in the case of termination by ICMI 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 proposed agreement, ICMI will pay 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. 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 assets, RSIM is liable for the first 0.10% of the excess
with the Advisor liable for all amounts in excess of 1.25%.
The proposed agreement provides that 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 proposed
agreement provides indemnification to both ICMI and RSIM for losses arising
under the agreement under certain other conditions.
During the fiscal year ended December 31, 1998, the Fund paid RSIM
[$200,369 (net of fee waivers of $8,604)] for advisory services.
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:
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Approximate
Net Assets
as of Advisory
Fund (12/31/98) Fee Rate
-------------------- ------------ --------
Emerging Growth Fund $___________ 1.00%
At a meeting of the Board of Directors of the Company on February 17,
1999, the Directors, including Directors who are not "interested persons" as
defined in the 1940 Act, unanimously approved the proposed agreement and
directed that the form of agreement be submitted to shareholders for approval.
The proposed agreement will take effect when approved by shareholders. The
agreement will continue in effect for as long as continuance is approved at
least annually in accordance with the 1940 Act.
The Board considered the services that were provided under the
terminated agreement and that will be provided under the proposed agreement, and
the fees and expenses that were payable under the terminated agreement and that
will be payable under proposed agreement.
The Board considered the change in ownership and control of RSIM and
the effects of the change on the ability of RSIM to provide sub-advisory
services to the Company. In this regard, the Board discussed with RSIM
management the human, technical and financial resources that will be in place
under the new ownership.
At a meeting held on February 17, 1999, the Directors, including
Directors who are not "interested persons," as defined in the 1940 Act,
concluded that the payment of investment sub-advisory fees for the period
February 26, 1999 (the closing of the Transaction) to the date the proposed new
sub-advisory agreement is approved by shareholders (the "Interim Period"), would
be appropriate and fair and recommended that the shareholders of the Fund vote
to approve the payment of advisory fees earned by RSIM during the Interim
Period, under the following conditions.
Investment sub-advisory fees earned by RSIM during the Interim Period
will be placed in escrow until such time as the shareholders approve the
proposed new sub-advisory agreement. Approval of the Proposal by shareholders of
the Fund will also be deemed to be approval of the payment of advisory fees to
RSIM during the Interim Period. Should shareholders fail to approve the proposed
agreement, any advisory fees placed in escrow will be returned to the Fund.
In the event that the shareholders of the Fund do not approve the
proposed new sub-advisory agreement, 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.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
NEW SUB-ADVISORY AGREEMENT
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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 RSIM if any. No Director or Officer owns shares of
the Company.
Name and Position with the Company Affiliation with RSIM
- ---------------------------------- ---------------------
Eugene Bay None
Director
James S. Greene None
Director
Robert E. Chappell None
Director
Larry L. Mast None
Director
Daniel J. Toran None
Director
William H. Loesche, Jr. None
Director
M. Donald Wright None
Director
James B. McElwain None
President
Richard F. Plush None
Vice President
C. Ronald Rubley None
Secretary
Steven M. Herzberg None
Treasurer
Ann M. Strootman None
Controller
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Administrator
Penn Mutual is the administrative and corporate services agent for the
Company. Penn Mutual is a Pennsylvania mutual life insurance company located at
600 Dresher Road, Horsham, PA 19044. Under an administrative and corporate
services agreement, 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.
Brokerage
Affiliates of RSIM receive brokerage commissions from the Fund in
accordance with procedures adopted by the Board of Directors. During the fiscal
year ended December 31, 1998, the aggregate amount of brokerage commissions paid
by the Fund to affiliates of RSIM was $___ representing ___% of the total
brokerage commissions paid by the Fund during that period.
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 RSIM. The Company
will not pay for expenses relating to the approval of the 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
Proposal 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.
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<PAGE>
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.
March __, 1999.
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<PAGE>
EXHIBIT A
PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT
Between
INDEPENDENCE CAPITAL MANAGEMENT, INC.
and
RS INVESTMENT MANAGEMENT, INC.
Relating to
PENN SERIES EMERGING GROWTH FUND
INVESTMENT SUB-ADVISORY AGREEMENT, made as of April __, 1998 by and
between INDEPENDENCE CAPITAL MANAGEMENT, INC. ("Adviser"), a corporation
organized and existing under the laws of the State of Pennsylvania, and RS
INVESTMENT MANAGEMENT, INC. ("Sub-Adviser"), a corporation organized and
existing under the laws of the State of California.
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 is engaged principally in the business of rendering
investment advisory services and is registered as an investment adviser under
the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, Sub-Adviser is engaged principally in the business of
rendering investment advisory services and is registered as an investment
adviser under the federal Investment Advisers Act of 1940, as amended; and
WHEREAS, Adviser renders investment advisory services to Penn Series
pursuant to an investment advisory agreement entered into by Penn Series and
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;
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 cash, securities and
other assets of the Emerging Growth Fund of Penn Series ("the Fund"), and to
exercise all rights incidental to ownership in accordance with the investment
objectives, program and restrictions applicable to the Fund as provided in Penn
Series' Prospectus and Statement of Additional Information, as amended from time
to time, and such other limitations as may be imposed by law or as Penn Series
may impose with notice in writing to Sub-Adviser. To enable Sub-Adviser to fully
exercise its discretion, Adviser hereby appoints Sub-Adviser as agent and
attorney-in-fact for the Fund with full power and authority to buy, sell and
otherwise deal in securities and contracts for the Fund. No investment will be
made by Sub-Adviser for the Fund if that investment is
-1-
<PAGE>
in violation of the objectives investment restrictions or limitations of the
Fund set out in the prospectus and the SAI previously delivered to the
Sub-Advisor or to be delivered. Sub-Adviser shall not take custody of any assets
of Penn Series, but shall issue settlement: instructions to the custodian
designated by Penn Series (the "Custodian"). Sub-Adviser shall, in its
discretion, obtain and evaluate such information relating to the economy,
industries, businesses, securities markets and securities as it may deem
necessary or useful in the discharge of its obligations hereunder and shall
formulate and implement a continuing program for the management of the assets
and resources of the Fund in a manner consistent with the investment objectives
of the Fund. In furtherance of this duty, Sub-Adviser, as agent and
attorney-in-fact with respect to Adviser and Penn Series, is authorized, in its
discretion and without prior consultation with 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) to take such other actions Sub-Adviser deems to be
appropriate;
provided, however, that Sub-Adviser shall make no investment for the Fund that
is in violation of the objectives, program, restrictions or limitations of the
Fund.
2. Accounting and Related Services. 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.
3. Fee.
A. Payment of Fee. For the services Sub-Adviser renders to
Penn Series under this Agreement, Adviser will pay Sub-Adviser
a fee based on the average daily net assets of the Fund.
B. Fee Rate. The fee shall be paid at the following
rates:
(i) Seventy basis points (0.70%) of the first $25,000,000
of average daily net assets of the Fund;
(ii) Sixty-five basis points (0.65%) of the next
$25,000,000 of average daily net assets of the Fund;
and
(iii) Sixty basis points (0.60%) of average daily net
assets of the Fund in excess of $50,000,000.
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. The Fund's net assets, for purposes of
the calculations described above, will be determined in
accordance with Penn Series' Prospectus and Statement of
Additional Information as of the close of business on the most
recent previous business day on which Penn Series was open for
business.
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<PAGE>
D. Expense Limitation. The expense limitation of the Fund, as
a percentage of the Funds average daily net assets, is 1.15%.
To the extent that the Fund's total expenses for a fiscal year
(excluding interest, taxes, brokerage, other expenses which
are capitalized in accordance with generally accepted
accounting principles, and extraordinary expenses, but
including investment advisory and administrative and corporate
service fees before any adjustment pursuant to this provision)
exceed the expense limitation for the Fund, one-half of such
excess amount shall be a liability of Sub-Adviser to Adviser.
The liability (if any) of Sub-Adviser to pay Adviser one-half
of such excess amount shall be determined on a daily basis.
If, at the end of each month, there is any liability of
Sub-Adviser to pay Adviser such excess amount, the fee shall
be reduced by such liability. If, at the end of each month,
there is no liability of Sub-Adviser to pay Adviser such
excess amount and if payments of the fee at the end of prior
months during the fiscal year have been reduced in excess of
that required in this subsection, such excess reduction shall
be recaptured by Sub-Adviser and shall be payable by Adviser
to Sub-Adviser along with the fee payable to Sub-Adviser for
that month. If, at the end of the fiscal year, there is any
remaining liability of Sub-Adviser to pay Adviser such excess
amount (which has not been paid through reduction of the fee),
Sub-Adviser shall remit to Adviser an amount sufficient to pay
such remaining liability.
4. Brokerage. In executing portfolio transactions and selecting brokers
or dealers for the Fund, Sub-Adviser will use its best efforts to seek the best
price and 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 Penn Series 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 Fund or be in
breach of any obligation owing to the Fund under this Agreement, or otherwise,
by reason of its having directed a securities transaction on behalf of the Fund
to a broker-dealer in compliance with the provisions of Section 28(e) of the
Securities Exchange Act of 1934 or as described from time to time in the Penn
Series' Prospectus and Statement of Additional Information. In addition,
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.
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.
-3-
<PAGE>
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 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.
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 at or
prior to the time such documents are made available to the public.
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 upon reasonable notice to Sub-Adviser 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. Subject to compliance with the 1940 Act,
nothing herein contained shall be deemed to prohibit Sub-Adviser or any of its
affiliated persons from acting, and being separately compensated for acting, in
one or more capacities on behalf of the Fund. 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 Sub-Adviser or investment counselor to other persons, firms
or corporations, or to engage in other business activities. 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 the Fund.
Sub-Adviser is not obligated to initiate transactions for the Fund in any
security which Sub-Adviser, its principals, affiliates or employees may purchase
or sell for its or their own accounts or for 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 the 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
-4-
<PAGE>
believed by Sub-Adviser to be genuine and to have been signed by the proper
person or persons and shall not be held to have notice of any change of
authority of any officer or agent of Penn Series, until receipt of written
notice thereof from Penn Series. Sub-Adviser shall inform Adviser of all
applications to Penn Series for instructions and all consultations with legal
counsel for Penn Series at the time of such application or consultation.
15. Compliance with Governmental Rules and Regulations. Except as such
responsibility may be placed upon Sub-Adviser or any affiliate by the terms of
this Agreement, and except for the accuracy of information furnished to Penn
Series by Sub-Adviser or any affiliate, Sub-Adviser does not assume
responsibility for the preparation, contents and distribution of the
prospectuses for Penn Series, for complying with any applicable requirements of
the Act, the Securities Exchange Act of 1934, the Securities Act of 1933, or any
other laws, rules and regulations of governmental authorities having
jurisdiction over Penn Series.
16. Limitation of Liability. Neither Sub-Adviser nor any of its
affiliates, their respective officers, directors, employees or agents, or any
person performing executive, administrative, trading, or other functions for
Penn Series (at the direction or request of Sub-Adviser), or Sub-Adviser or its
affiliates in connection with the discharge of obligations undertaken or
reasonably assumed with respect to this Agreement, shall be liable for any error
of judgment or mistake of law or for any loss suffered by Penn Series in
connection with the matters to which this Agreement relates, except for such
error, mistake or loss resulting from willful misfeasance, bad faith, negligence
or willful misconduct in the performance of its, his or her duties on behalf of
Penn Series or constituting or resulting from a failure to comply with any term
of this Agreement; nor shall such persons be liable for any loss or damage
resulting from the imposition by any government of exchange control restrictions
which might affect the liquidity of the Fund's assets maintained with custodians
or securities depositories in foreign countries, or from any political acts of
any foreign governments to which such assets might be exposed, or for any tax of
any kind, including, without limitation, any statutory, governmental, state,
provincial, regional, local or municipal imposition, duty, contribution or levy
imposed by any government or governmental agency upon or with respect to such
assets or income earned with respect thereto (collectively, "Taxes"). Similarly,
the Sub-Adviser shall have no responsibility for and shall incur no liability to
the Fund, any shareholder of the Fund, or the Adviser relating to (i) the duty
of the Fund to register with any government or agency; (ii) the selection of
investment objectives and policies of the Fund; and (iii) the administration of
any plans or trusts investing in the Fund. 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; or (iii) any
action or omission of Adviser or any affiliated corporation, constituting
negligence or willful misconduct of Adviser or its affiliates, agents or
contractors, or constituting a failure by Adviser or any affiliate to comply
with any term of this Agreement. Notwithstanding the forgoing, 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
-5-
<PAGE>
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 resulting from any claim, demand, action or suit arising out of
Sub-Adviser's or any affiliate's failure to comply with any term of this
Agreement or which arise out of the willful misfeasance, bad faith, negligence
or misconduct of Sub-Adviser, its affiliates, their agents or contractors.
Neither Penn Series nor Adviser shall be entitled to such indemnification in
respect of actions or omissions constituting negligence or willful misconduct of
Penn Series or Adviser, or their agents or contractors or constituting a failure
by Adviser to comply with any term of this Agreement; provided, that such
negligence or misconduct is not attributable to Sub-Adviser or any person that
is an affiliate of Sub-Adviser or an affiliate of an affiliate of Sub-Adviser.
Prior to confessing any claim against it which may be subject to this
indemnification, Adviser shall give Sub-Adviser reasonable opportunity to defend
against said claim in its own name or in the name of Adviser. For purposes of
this Section 19 and of Section 18 hereof, no broker or dealer shall be deemed to
be acting as agent or contractor of Sub-Adviser or any affiliate of Sub-Adviser,
in effecting or executing any portfolio transaction for the Fund.
20. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
21. Term of Agreement. The term of this Agreement shall begin on the
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect until two years from date of execution.
Thereafter, this Agreement shall continue in effect from year to year with
respect to the Fund, subject to the termination provisions and all other terms
and conditions hereof, so long as such continuation shall be specifically
approved at least annually (a) by either the board of directors of Penn Series,
or by a vote of a majority of the outstanding voting securities of the series of
shares of Penn Series representing interests in the Fund and (b) in either event
by the vote, cast in person at a meeting called for the purpose of voting on
such approval, of a majority of the directors of Penn Series who are not parties
to this Agreement or interested persons of any such party. Sub-Adviser shall
furnish to Penn Series, promptly upon its request, such information as may
reasonably be necessary to evaluate the terms of this Agreement with respect to
the Fund or any extension, renewal or amendment hereof.
22. Amendment 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 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, without payment of any penalty, upon 60
days' prior notice in writing from Penn Series to Sub-Adviser, or upon 90 days'
prior notice in writing from Sub-Adviser to Penn Series; 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 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.
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
-6-
<PAGE>
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
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.,
600 Dresser Road, Horsham, PA 19044, Attention: President, and
that of Sub-Adviser is RS Investment Management, Inc., 555
California Street, San Francisco, CA 94104, Attention: General
Counsel.
E. State Law. The Agreement shall be construed and enforced in
accordance with and governed by the laws of Pennsylvania
except where such state laws have been preempted by Federal
law.
F. Counterparts. This Agreement may be entered into in
counterparts, each of which when so executed and delivered
shall be deemed to be an original, and together shall
constitute one document.
G. Entire Agreement; Severability. This Agreement is the
entire agreement of the parties and supersedes all prior or
contemporaneous written or oral negotiations, correspondence,
agreements and understandings regarding the subject matter
hereof. The invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability
of any and all other provisions hereof.
H. No Third Party Beneficiaries. Neither party intends for
this Agreement to benefit any third-party not expressly named
in this Agreement.
-7-
<PAGE>
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:________________________________
Attest: RS INVESTMENT MANAGEMENT, INC.
___________________________ By:________________________________
(Print Name)
(Title)
-8-
<PAGE>
THE PENN INSURANCE AND ANNUITY COMPANY
PIA VARIABLE ANNUITY ACCOUNT I
Voting Instruction Form
At a Meeting of Shareholders of the Emerging Growth Fund (the "Fund")
of Penn Series Funds, Inc. (the "Company") scheduled to be held on April 26,
1999, and at any adjournments thereof, the undersigned owner of a variable
annuity contract (or contracts) participating in PIA Variable Annuity Account I
hereby instructs The Penn Insurance and Annuity Company ("PIA") to vote shares
of the Fund held under my contract (or contracts) 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 Meeting and
Proxy Statement that accompanied this Voting Instruction Form.
The undersigned acknowledges receipt of this Voting Instruction Form
along with a copy of the Notice of Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
|X| Please mark your choice like this and sign and date below.
PIA recommends a vote FOR the proposal set forth below.
<TABLE>
<CAPTION>
Units Proposal For Against Abstain
----- -------- --- ------- -------
<S> <C> <C> <C> <C>
Approve the proposed Investment Sub- [ ] [ ] [ ]
Advisory Agreement between Independence
Capital Management, Inc. and RS
Investment Management, Inc. for the
Emerging Growth Fund
</TABLE>
Shares will be voted as directed. 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 PIA.
PLEASE VOTE, SIGN EXACTLY AS LISTED ABOVE AND DATE THIS VOTING
INSTRUCTION AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. IMPORTANT: Your signature(s) should be exactly as your name or names
appear on this Voting Instruction Form. 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.
Dated:_____________, 1999 ___________________ ___________________
Signature Signature
<PAGE>
THE PENN MUTUAL LIFE INSURANCE COMPANY
PENN MUTUAL VARIABLE ANNUITY ACCOUNT III
PENN MUTUAL VARIABLE LIFE ACCOUNT I
Voting Instruction Form
At a Meeting of Shareholders of the Emerging Growth Fund (the "Fund")
of Penn Series Funds, Inc. (the "Company") scheduled to be held on April 26,
1999, and at any adjournments thereof, the undersigned owner of one or more
variable annuity contracts and/or policies participating in Penn Mutual Variable
Annuity Account III and/or Penn Mutual Variable Life Account I hereby instructs
The Penn Mutual Life Insurance Company ("Penn Mutual") to vote shares of the
Fund held under my contract(s) and/or policy(ies) 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 Meeting and
Proxy Statement that accompanied this Voting Instruction Form.
The undersigned acknowledges receipt of this Voting Instruction Form
along with a copy of the Notice of Meeting of Shareholders and the Proxy
Statement of the Board of Directors of the Company.
|X| Please mark your choice like this and sign and date below.
Penn Mutual recommends a vote FOR the proposal set forth below.
<TABLE>
<CAPTION>
Units Proposal For Against Abstain
----- -------- --- ------- -------
<S> <C> <C> <C> <C>
Approve the proposed Investment Sub- [ ] [ ] [ ]
Advisory Agreement between Independence
Capital Management, Inc. and RS
Investment Management, Inc. for the
Emerging Growth Fund
</TABLE>
Shares will be voted as directed. Penn Mutual 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.
PLEASE VOTE, SIGN EXACTLY AS LISTED ABOVE AND DATE THIS VOTING
INSTRUCTION AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. IMPORTANT: Your signature(s) should be exactly as your name or names
appear on this Voting Instruction Form. 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.
Dated:_____________, 1999 _____________________ _____________________
Signature Signature
