PBHG FUNDS
ADVISORY FEE EXPENSE LIMITATION AGREEMENT
This ADVISORY FEE EXPENSE LIMITATION AGREEMENT, effective as of
______________, 2004, by and between PBHG Funds (the "Trust"), on behalf of the
Xxxxxx Xxxxx-Term Fixed Income Fund, formerly known as the PBHG XXX Capital
Preservation Fund (the "Portfolio"), and Pilgrim Xxxxxx & Associates, Ltd. (the
"Adviser").
WHEREAS, the Trust is a Delaware Business Trust organized under
Articles of Incorporation dated November 13, 2000 (the "Articles"), and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company of the series type and the
Portfolio is one of the series of the Trust; and
WHEREAS, the Trust and the Adviser have entered into an Investment
Advisory Agreement (the "Advisory Agreement"), pursuant to which the Adviser
will render investment advisory services to the Portfolio for compensation based
on the value of the average daily net assets of the Portfolio; and
WHEREAS, the Trust and the Adviser have determined that it is
appropriate and in the best interests of the Portfolio and its shareholders to
maintain advisory fees of the Portfolio at a level below the level to which the
Portfolio would normally be subject.
NOW, THEREFORE, the parties hereto agree as follows:
1. EXPENSE LIMITATION.
1.1 APPLICABLE EXPENSE LIMIT. To the extent that the investment
advisory fees incurred by the Portfolio in a fiscal year, exceed the Expense
Limit, as defined in Section 1.2 below, such excess amount (the "Excess Amount")
shall be the liability of the Adviser.
1.2 EXPENSE LIMIT. The Expense Limit for the PBHG Class, Advisor Class,
Class A and Class C shares of the Portfolio shall be as set forth in Schedule A.
1.3 METHOD OF COMPUTATION. To determine the Adviser's liability with
respect to the Excess Amount, each month the investment advisory fee for each
Class of the Portfolio ("Advisory Fee") shall be annualized as of the last day
of the month. If the annualized Advisory Fee for any month of a Class of a
Portfolio exceed the Expense Limit of such Class, the Adviser shall first waive
or reduce its investment advisory fee for such month for the Portfolio by an
amount sufficient to reduce the annualized Class Expenses to an amount no higher
than the Expense Limit.
1.4 YEAR-END ADJUSTMENT. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the advisory fees waived or
reduced and other payments remitted by the Adviser to the Portfolio with respect
to the previous fiscal year shall equal the Excess Amount.
2. TERMINATION AND AMENDMENT.
2.1 TERMINATION. This Agreement shall continue in effect for a period
of one year from the date of its execution and from year to year thereafter,
unless (i) the Agreement is terminated by the vote of a majority of the of the
outstanding voting securities of the Portfolio; (ii) the Portfolio is merged,
consolidated, or substantially all of its assets are sold; (iii) the Portfolio
is liquidated; or (iv) Pilgrim Xxxxxx or the Portfolio are required by
applicable law, rule, regulation, judgment or order to terminate this Agreement.
2.2 AMENDMENT. This Agreement may be amended only upon the vote of (i)
a majority of the Trustees of the Trust who (A) are not "interested persons" of
the Trust or any other party to this Agreement, as defined in the 1940 Act, and
(B) have no direct or indirect financial interest in the operation of this
Agreement ("Non-Interested Trustees"); and (ii), if the amendment involves an
increase in the Expense Limit, a majority of the of the outstanding voting
securities of Portfolio.
3. MISCELLANEOUS.
3.1 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
3.2 INTERPRETATION. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Pennsylvania without reference to conflicts
of law rules. Nothing herein contained shall be deemed to require the Trust or
the Portfolio to take any action contrary to the Trust's Articles 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 Trust's Board of Trustees of its
responsibility for and control of the conduct of the affairs of the Trust or the
Portfolio.
3.3 DEFINITIONS. Any questions of interpretation of any term or
provision of this Agreement, including but not limited to the investment
advisory fee, the computations of net asset values, and the allocation of
expenses, having a counterpart in or otherwise derived from the terms and
provisions of the Advisory Agreement or the 1940 Act, shall have the same
meaning as and be resolved by reference to such Advisory Agreement or the 1940
Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
ATTEST: PBHG FUNDS
on behalf of the PBHG XXX Capital
Preservation Fund
By:
-----------------------------
Secretary
ATTEST: PILGRIM XXXXXX & ASSOCIATES, LTD.
By:
-----------------------------
Secretary
SCHEDULE A
TO
ADVISORY FEE EXPENSE LIMITATION AGREEMENT
by and between
PBHG Funds, on behalf of PBHG XXX Capital Preservation Fund
and
Pilgrim Xxxxxx & Associates, Ltd.
(PBHG Class, Advisor Class, Class A and Class C Shares)
Advisory Fee
Expense Limit
-------------
Xxxxxx Xxxxx-Term Fixed Income 0.40%
DATED: ________________, 2004
