Board Approval of Investment Advisory and Sub-Advisory Agreements
The Penn Series Funds, Inc. (the “Company”) and Penn Mutual Asset Management, LLC (“PMAM”) have entered into an investment advisory agreement (the “Advisory Agreement”) pursuant to which PMAM (i) provides day-to-day investment management services to certain of the Company’s Funds (collectively, the “Directly Managed Funds”) and (ii) is responsible for the selection and oversight of various investment sub-advisers who perform day-to-day investment management services for other of the Company’s Funds (collectively, the “Sub-Advised Funds” and, together with the Directly Managed Funds, the “Funds”). The Directly Managed Funds consist of the Money Market, Limited Maturity Bond, Quality Bond, High Yield Bond, Balanced, Aggressive Allocation, Moderately Aggressive Allocation, Moderate Allocation, Moderately Conservative Allocation, and Conservative Allocation Funds. The Sub-Advised Funds consist of the Flexibly Managed, Large Growth Stock, Large Cap Growth, Large Core Growth, Large Cap Value, Large Core Value, Index 500, Mid Cap Growth, Mid Cap Value, Mid Core Value, SMID Cap Growth, SMID Cap Value, Small Cap Value, Small Cap Growth, Small Cap Index, Developed International Index, International Equity, Emerging Markets Equity, and Real Estate Securities Funds.
PMAM acts as a “manager of managers” for the Sub-Advised Funds. In this capacity, PMAM has entered into, and the Company’s Board of Directors (the “Board”) has approved, separate sub-advisory agreements (each, a “Sub-Advisory Agreement” and, collectively with the Advisory Agreement, the “Agreements”) with each of the sub-advisers identified below (each, a “Sub-Adviser” and collectively, the “Sub-Advisers”, and together with PMAM, the “Advisers”). The Sub-Advisers provide their services to the Sub-Advised Funds subject to the oversight of PMAM and the Board. Each Sub-Adviser is selected based primarily upon the research and recommendations of PMAM, which quantitatively and qualitatively evaluates, among other factors, each Sub-Adviser’s (i) investment expertise and resources, (ii) investment results in managing assets for relevant asset classes, investment styles and strategies, and (iii) regulatory compliance infrastructure and culture. PMAM oversees each Sub-Adviser’s activities with respect to the Fund it manages to ensure compliance with the Fund’s investment policies and guidelines and monitors each Sub-Adviser’s adherence to its investment style and investment performance.
The Investment Company Act of 1940, as amended (the “1940 Act”), requires that the initial approval of, as well as the continuation of, each Fund’s investment advisory agreement and sub-advisory agreement, if any, be specifically approved by: (i) the vote of the Board or by a vote of the shareholders of the Fund; and (ii) the vote of a majority of the Company’s Directors who are not “interested persons,” as defined in the 1940 Act (collectively, the “Independent Directors”), cast in person at a meeting called for the purpose of voting on such approval. In connection with its consideration of such approvals, the Board must request and evaluate, and the Advisers are required to furnish, such information as may be reasonably necessary for the Board to evaluate the terms of the Agreements. In light of the ongoing coronavirus pandemic, the Funds and the Advisers relied on exemptive relief granted by the Securities and Exchange Commission (Investment Company Release Nos. 33824 and 33897), which provides relief from the in-person voting requirement in connection with the approval of advisory, sub-advisory and certain other service provider agreements, to consider and approve the Agreements discussed below at meetings of the Board held via video conference on February 24, 2021 and May 20, 2021.
Board Approval of New Investment Sub-Advisory Agreements
Eaton Vance Management – Large Core Value Fund
On March 1, 2021, Morgan Stanley completed its acquisition of Eaton Vance Corp. (“EVC”), the parent company of Eaton Vance Management (the “Eaton Vance Acquisition”). The Eaton Vance Acquisition did not affect the Large Core Value Fund’s existing portfolio management team or its management of the Large Core Value Fund. However, as a result of the Eaton Vance Acquisition, Eaton Vance became an indirect, wholly-owned subsidiary of Morgan Stanley. The Eaton Vance Acquisition constituted a change of control of Eaton Vance, which, in turn, caused the assignment and, pursuant to Section 15 of the 1940 Act, the automatic termination of the investment sub-advisory agreement between PMAM and Eaton Vance (the “Prior Eaton Vance Sub-Advisory Agreement”). In anticipation of the Eaton Vance Acquisition and the automatic termination of the Prior Eaton Vance Sub-Advisory Agreement, the Board approved, at its meeting held on February 24, 2021, a new sub-advisory agreement between PMAM and Eaton Vance with respect to the Large Core Value Fund, effective March 1, 2021 (the “Eaton Vance Sub-Advisory Agreement”). With the exception of its term and effective date, the material terms of the Eaton Vance Sub-Advisory Agreement are identical to the material terms of the Prior Eaton Vance Sub-Advisory Agreement.
Board Considerations. Prior to the approval of the Eaton Vance Sub-Advisory Agreement, the Board received written and oral information from PMAM and Eaton Vance. PMAM reviewed with the Board the bases for its recommendation, including Eaton Vance’s performance with respect to its management of the Large Core Value Fund to date. The Board also reviewed and considered, among other information, information about Eaton Vance’s portfolio managers, research, and investment and risk
