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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 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ 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 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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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 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 these 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 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 18, 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 5, 1999
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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 subaccount
thereof which is related to your interest therein as of the close of business
on March 18, 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 5, 1999
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PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
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NOTICE OF MEETING OF SHAREHOLDERS
April 26, 1999
----------------
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 18, 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 5, 1999
<PAGE>
PROXY STATEMENT
PENN SERIES FUNDS, INC.
600 DRESHER ROAD
HORSHAM, PENNSYLVANIA 19044
----------------
MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 1999
----------------
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 5, 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 18, 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 18, 1999, there were issued and outstanding
2,550,864.024 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, Penn Mutual Separate Account
E/A, Penn Mutual Separate Account E/B, and PIA Variable Annuity Account I.
Shares of the Fund are held as investment vehicles for variable annuity
contracts and variable life insurance policies.
As of March 18, 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 1,063,343.790 42%
Penn Mutual-Penn Mutual
Variable Life Account I 390,454.171 15%
Penn Insurance-PIA Variable
Annuity Account I 408,604.636 16%
Penn Mutual Separate
Account E/A 196,568.548 8%
Penn Mutual Separate
Account E/B 491,896.690 19%
</TABLE>
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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
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 held in registered separate accounts 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.
Shares held in unregistered separate accounts will be voted by Penn Mutual
in the same proportions that shares held in registered separate accounts are
voted.
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 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 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 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 October 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.
2
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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. G. Randall Hecht is director and sole officer of RSIM. His principal
occupation is Chairman and Chief Executive Officer of RSIM Co. LLC. Mr. Hecht's
principal business address is 555 California Street, San Francisco, California
94014.
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 former sub-advisory agreement was last approved by
shareholders on October 10, 1997. The purpose of this shareholder vote was to
approve a new investment sub-advisory agreement in light of the purchase of
RSIM and its affiliated companies by BankAmerica Corporation.
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 or Company
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, ICMI and RSIM will waive their fees
proportionately. If at the end of the fiscal year RSIM is liable to ICMI for an
excess amount that has not been paid by fee waivers, RSIM and ICMI have agreed
that RSIM will be liable for the first 0.10% of such excess and ICMI will be
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
$175,491 for sub-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:
Approximate
Net Assets
as of Advisory
Fund (3/31/99) Fee Rate
- ------------------------ --------------- ---------
Emerging Growth Fund $613,874,623 1.00%
At the 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
3
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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 the 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 set forth in the following paragraphs.
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 proposed new sub-advisory
agreement.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE NEW SUB-ADVISORY AGREEMENT
4
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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 beneficially 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
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 $1,267 representing 11.9% of the
total brokerage commissions paid by the Fund during that period.
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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.
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.
April 5, 1999.
6
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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 __, 1999 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.
W I T N E S S E T H:
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 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-1
<PAGE>
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.
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
A-2
<PAGE>
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.
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.
A-3
<PAGE>
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 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
A-4
<PAGE>
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 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
A-5
<PAGE>
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 or Penn Series 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 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.
A-6
<PAGE>
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.
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)
A-7
<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
