EXHIBIT 9(d)(5)
THE PBHG FUNDS, INC.
FORM OF EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT, effective as of December, 1996, by and
between Xxxxxxx'x Asset Management, Inc. (the "Sub-Adviser") and The PBHG Funds,
Inc. (the "Fund"), on behalf of the PBHG Mid-Cap Value Fund (the "Portfolio").
WHEREAS, the Fund is a Maryland corporation organized under Articles of
Incorporation dated July 31, 1992 (the "Articles"), and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open
end-diversified management company of the series type, and the Portfolio is one
of the series of the Fund; and
WHEREAS, the Fund and the Sub-Adviser have entered into an Investment
Sub-Advisory Agreement (the "Sub-Advisory Agreement"), pursuant to which the
Sub-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 Fund and the Sub-Adviser have determined that it is
appropriate and in the best interests of the Portfolio and its shareholders to
maintain the expenses of the Portfolio at a level below the level to which the
Portfolio would normally be subject during its start-up period.
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation
1.1 Applicable Expense Limit. To the extent that the aggregate expenses of
every character incurred by the Portfolio in any fiscal year, including but not
limited to investment advisory fees of the Sub-Adviser (but excluding interest,
taxes, brokerage commissions, and other expenditures which are capitalized in
accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of the Portfolio's
business) ("Portfolio Operating Expenses"), exceed the Operating Expense Limit,
as defined in Section 1.2 below, such excess amount (the "Excess Amount") shall
be the liability of the Sub-Adviser.
1.2 Operating Expense Limit. The Operating Expense Limit in any year shall
be 1.50% of the average daily net assets of the Portfolio, or such other rate as
may be agreed to in writing by the parties.
1.3 Method of Computation. To determine the Sub-Adviser's liability with
respect to the Excess Amount, each month the Portfolio Operating Expenses for
the Portfolio shall be annualized as of the last day of the month. If the
annualized Portfolio Operating Expenses for any month exceed the Operating
Expense Limit, the Sub-Adviser shall first waive or reduce its investment
management fee for such month by an amount sufficient to reduce the annualized
Portfolio Operating Expenses to an amount no higher than the Operating Expense
Limit. If the amount of the waived or reduced investment advisory fee for any
such month is insufficient to pay the Excess Amount, the Sub-Adviser may also
remit to the Portfolio an amount that, together with the waived or reduced
advisory fee, is sufficient to pay such Excess Amount.
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 Sub-Adviser to the Portfolio with
respect to the previous fiscal year shall equal the Excess Amount.
2. Reimbursement of Fee Waivers and Expense Reimbursements.
2.1 Reimbursement. If in any year during which total Portfolio assets are
greater than $75 million and in which the Sub-Advisory Agreement is still in
effect, the estimated aggregate Portfolio Operating Expenses for the fiscal year
are less than the Operating Expense Limit for that year, subject to quarterly
approval by the Fund's Board of Directors as provided in Section 2.2 below, the
Sub-Adviser shall be entitled to reimbursement by the Portfolio, in whole or in
part as provided below, of the advisory fees waived or reduced and other
payments remitted by the Sub-Adviser to the Portfolio pursuant to Section 1
hereof. The total amount of reimbursement to which the Sub-Adviser may be
entitled (the "Reimbursement Amount") shall equal, at any time, the sum of all
investment advisory fees previously waived or reduced by the Sub-Adviser and all
other payments remitted by the Sub-Adviser to the Portfolio, pursuant to Section
1 hereof, during any of the previous two (2) fiscal years, less any
reimbursement previously paid by the Portfolio to the Sub-Adviser, pursuant to
Sections 2.2 or 2.3 hereof, with respect to such waivers, reductions, and
payments. The Reimbursement Amount shall not include any additional charges or
fees whatsoever, including, e.g., interest accruable on the Reimbursement
Amount.
2.2 Board Approval. No reimbursement shall be paid to the Sub-Adviser
pursuant to this provision in any fiscal quarter, unless the Fund's Board of
Directors has determined that the payment of such reimbursement is in the best
interests of the Portfolio and its shareholders. The Fund's Board of Directors
shall determine quarterly in advance whether any reimbursement may be paid to
the Sub-Adviser in such quarter.
2.3 Method of Computation. To determine the Portfolio's payments, if any,
to reimburse the Sub-Adviser for the Reimbursement Amount, each month the
Portfolio Operating Expenses shall be annualized as of the last day of the
month. If the annualized Portfolio Operating Expenses for any month are less
than the Operating Expense Limit, the Portfolio, only with the prior approval of
the Board, shall pay to the Sub-Adviser an amount sufficient to increase the
annualized Portfolio Operating Expenses to an amount no greater than the
Operating Expense Limit, provided that such amount paid to the Sub-Adviser will
in no event exceed the total Reimbursement Amount.
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2.4 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 actual Portfolio Operating Expenses for the
prior fiscal year (including any reimbursement payments hereunder with respect
to such fiscal year) do not exceed the Operating Expense Limit.
3. Term and Termination of Agreement.
This Agreement shall continue in effect for a period of one year from the
date of its execution and from year to year thereafter provided such continuance
is specifically approved by a majority of the Directors of the Fund who (i) are
not "interested persons" of the Fund or any other party to this Agreement, as
defined in the Act, and (ii) have no direct or indirect financial interest in
the operation of this Agreement ("Non-Interested Directors"). Nevertheless, this
Agreement may be terminated by either party hereto, without payment of any
penalty, upon 90 days' prior written notice to the other party at its principal
place of business; provided that, in the case of termination by the Fund, such
action shall be authorized by resolution of a majority of the Non-Interested
Directors of the Fund or by a vote of a majority of the outstanding voting
securities of the Fund.
4. Miscellaneous.
4.1 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.
4.2 Interpretation. Nothing herein contained shall be deemed to require the
Fund or the Portfolio to take any action contrary to the Fund's 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
Fund's Board of Directors of its responsibility for and control of the conduct
of the affairs of the Fund or the Portfolio.
4.3 Definitions. Any question 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
Sub-Advisory Agreement or the 1940 Act, shall have the same meaning as and be
resolved by reference to such Sub-Advisory Agreement or the 1940 Act.
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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: THE PBHG FUNDS, INC. ON BEHALF OF
PBHG MID-CAP VALUE FUND
_________________________________ By:________________________________
Secretary
ATTEST: XXXXXXX'X ASSET MANAGEMENT, INC.
_________________________________ By:________________________________
Secretary
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