THE PBHG FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this _____ day of ______, 199_, by and among Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser"), Pilgrim Xxxxxx Value Investors, Inc.
(the "Sub-Adviser") and The PBHG Funds, Inc., a Maryland corporation (the
"Company").
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, pursuant to the Investment Advisory Agreement dated April 18, 1995
and Schedule A dated _________, 199_ between the Adviser and the Company, the
Adviser will act as investment adviser to PBHG Focused Value Fund (the
"Portfolio"); and
WHEREAS, the Adviser and the Company each desire to retain the Sub-Adviser
to provide investment advisory services to the Company in connection with the
management of the Portfolio, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the
Portfolio and the composition of the Portfolio's investment portfolio, including
the purchase, retention and disposition thereof, in accordance with the
Portfolio's investment objectives, policies and restrictions as stated in the
Portfolio's Prospectus (such Prospectus and Statement of Additional Information,
as currently in effect and as amended or supplemented from time to time, being
herein called the "Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of the Portfolio's
investments and determine from time to time what investments and securities will
be purchased, retained or sold by the Portfolio, and what portion of the assets
will be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Company's Charter
and the Prospectus and with the instructions and directions of the Adviser and
of the Board of Directors and will conform and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other
applicable federal and state laws and regulations, as each is amended from time
to time.
(3) The Sub-Adviser shall determine the securities to be purchased or
sold by the Portfolio and will place orders with or through such persons,
brokers or dealers to carry out the policy with respect to brokerage set forth
in the Portfolio's Registration Statement and Prospectus or as the Board of
Directors or the Adviser may direct from time to time, in conformity with
federal securities laws. In providing the Portfolio with investment supervision,
the Sub-Adviser will give
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primary consideration to securing the most favorable price and efficient
execution. Within the framework of this policy, the Sub-Adviser may consider the
financial responsibility, research and investment information and other services
provided by brokers or dealers who may effect or be a party to any such
transaction or other transactions to which the Sub-Adviser's other clients may
be a party. It is understood that it is desirable for the Portfolio that the
Sub-Advisor have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Portfolio than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for the Portfolio with brokers, subject
to review by the Company's Board of Directors from time to time with respect to
the extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Portfolio and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to the Portfolio's portfolio transactions required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and
shall render to the Company's Board of Directors such periodic and special
reports as the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Portfolio's Custodian on each
business day with information relating to all transactions concerning the
Portfolio's assets and shall provide the Adviser with such information upon
request of the Adviser.
(6) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as long as such services do not
impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's officers or employees.
It is understood that the Sub-Adviser may obtain certain administrative
services, including, without limitation, services relating to trade
reconciliation and the production of client reports, from its parent company in
carrying out its obligations under this Agreement.
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(c) The Sub-Adviser shall keep the Portfolio's books and records required to
be maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement
and shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Portfolio required by Rule 31a-1 under the 1940
Act. The Sub-Adviser agrees that all records that it maintains on behalf of the
Portfolio are property of the Portfolio and the Sub-Adviser will surrender
promptly to the Portfolio any of such records upon the Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolio pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Statement Department of
Assessments and Taxation of the State of Maryland (such Articles of
Incorporation as in effect on the date of this Agreement, and as amended or
supplemented from time to time, are herein called the "Charter");
(b) Bylaws of the Company (such Bylaws, as in effect on the date of this
Agreement, and as amended from time to time, are herein called the "Bylaws");
(c) A copy of the resolutions of the Company's Board of Directors authorizing
the appointment of the Adviser and the Sub-Adviser and approving the form of
this Agreement; and
(d) Registration Statement under the 1940 Act and the Securities Act of 1933,
as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Portfolio
and shares of common stock of the Portfolio, and all amendments thereto.
4. For the services to be provided by the Sub-Adviser pursuant, to this
Agreement, the Adviser will pay to the Sub-Adviser as full compensation therefor
a fee at an annual rate of 0.40% of the Portfolio's average daily net assets.
The fee will be paid to the Sub-Adviser from the Adviser's advisory fee for such
Fund.
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Fund or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross
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negligence on the Sub-Adviser's part in the performance of its duties or from
reckless disregard of its obligations and duties under this Agreement, except as
may otherwise be provided under provisions of applicable state law which cannot
be waived or modified hereby.
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated (a) by the Portfolio at any time, without the
payment of any penalty, by the vote of a majority of Directors of the Company or
by the vote of a majority of the outstanding voting securities of a Fund, (b) by
the Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolio, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the portions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the Sub-Adviser or its clients in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of the Portfolio.
10. This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
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11. This Agreement embodies the entire agreement and understanding among he
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Sub-Adviser at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
To the Company or the Portfolio at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM XXXXXX & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: ____________________________ By: __________________________
Title: Title:
PILGRIM XXXXXX VALUE INVESTORS, INC.
By: ________________________________
Title:
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