FORM OF EXPENSE LIMITATION AGREEMENT
PBHG INSURANCE SERIES FUND, INC.
EXPENSE LIMITATION AGREEMENT, effective as of ______ __, 1997, by and
between Pilgrim Xxxxxx & Associates, Ltd. (the "Adviser") and PBHG Insurance
Series Fund, Inc. (the "Fund"), on behalf of each series of the Fund set forth
in Schedule A (each a "Portfolio", and collectively, the "Portfolios").
WHEREAS, the Fund is a Maryland corporation organized under Articles of
Incorporation dated _____ __, 1997 (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 each Portfolio is a
series of the Fund; and
WHEREAS, the Fund and the Adviser have entered into an Investment Advisory
Agreement (the "Advisory Agreement"), pursuant to which the Adviser will render
investment advisory services to each Portfolio for compensation based on the
value of the average daily net assets of each such Portfolio; and
WHEREAS, the Fund and the Adviser have determined that it is appropriate
and in the best interests of each Portfolio and its shareholders to maintain the
expenses of each Portfolio at a level below the level to which each such
Portfolio would normally be subject to 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 a Portfolio in any fiscal year, including but not
limited to investment advisory fees of the 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 such 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 Adviser.
1.2 OPERATING EXPENSE LIMIT. The Operating Expense Limit in any year shall
be 1.50% of the average daily net assets of each Portfolio, or such other rate
as may be agreed to in writing by the parties.
1.3 METHOD OF COMPUTATION. To determine the Adviser's liability with
respect to the Excess Amount, each month the Portfolio Operating Expenses for
each Portfolio shall be annualized as of the last day of the month. If the
annualized Portfolio Operating Expenses for any month of a Portfolio exceed the
Operating Expense Limit of such Portfolio, the 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
Adviser may also remit to the appropriate Portfolio or Portfolios 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 Adviser to the Portfolio or
Portfolios 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 the total assets of a
Portfolio are greater than $75 million and in which the Advisory Agreement is
still in effect, the estimated aggregate Portfolio Operating Expenses of such
Portfolio 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 Adviser shall be entitled to reimbursement by such
Portfolio, in whole or in part as provided below, of the advisory fees waived or
reduced and other payments remitted by the Adviser to such Portfolio pursuant to
Section 1 hereof. The total amount of reimbursement to which the 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 Adviser and all
other payments remitted by the Adviser to the Portfolio, pursuant to Section 1
hereof, during any of the previous two (2) fiscal years, less any reimbursement
previously paid by such Portfolio to the 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 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 or Portfolios and their shareholders. The Fund's Board of
Directors shall determine quarterly in advance whether any reimbursement may be
paid to the Adviser in such quarter.
2.3 METHOD OF COMPUTATION. To determine each Portfolio's payments, if any,
to reimburse the Adviser for the Reimbursement Amount, each month the Portfolio
Operating Expenses of each Portfolio shall be annualized as of the last day of
the month. If the annualized Portfolio Operating Expenses of a Portfolio for any
month are less than the Operating Expense Limit of such Portfolio, such
Portfolio, only with the prior approval of the Board, shall pay to the Adviser
an amount sufficient to increase the annualized Portfolio Operating Expenses of
that Portfolio to an amount no greater than the Operating Expense Limit of that
Portfolio, provided that such amount paid to the Adviser will in no event exceed
the total Reimbursement Amount.
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 of a
Portfolio 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 Portfolios.
4.3 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 INSURANCE SERIES FUND, INC.
ON BEHALF OF EACH OF ITS SERIES
By:
_____________________________ _____________________________
Secretary
ATTEST: PILGRIM XXXXXX & ASSOCIATES, LTD.
By:
_____________________________ ______________________________
Secretary
SCHEDULE A
This Agreement relates to the following Portfolios of the Fund:
PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio
PBHG Small Cap Value Portfolio
PBHG Large Cap Value Portfolio
PBHG Technology & Communications Portfolio
PBHG Select 20 Portfolio
