EXHIBIT 5(d)(4)
THE PBHG FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
PBHG SMALL CAP VALUE FUND
AGREEMENT made as of this 23rd day of April, 1997, by and among Pilgrim
Xxxxxx & Associates, Ltd. (the "Adviser"), Xxxxxxx'x Asset Management, 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 28,
1995 and Schedule A dated April 1, 1997 between the Adviser and the Company, the
Adviser will act as investment adviser to the PBHG Small Cap 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 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 Articles of Incorporation 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
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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 (as defined herein) 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 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-Adviser 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 such 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.
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(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.
(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 furnished 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 Secretary of
State of Maryland (such Articles of Incorporation as in effect
on the date of this Agreement and as amended from time to
time, are herein called the "Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date
of this Agreement and as amended from time to time, are herein
called the "By-Laws");
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(c) Certified 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;
(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 the Portfolio's beneficial shares, and all
amendments thereto;
(e) Notification of Registration of the Portfolio under the 1940
Act on form N-8A as filed with the Commission, and all
amendments thereto; and
(f) Prospectus of the Portfolio.
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 0.65% of the Portfolio's average
daily net assets, less 50% of any fee waivers borne by the Adviser.
This fee will be paid to the Sub-Adviser from the Adviser's advisory
fee.
5. The Sub-Adviser shall not be liable for any error of judgment or for
any loss suffered by the Portfolio 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 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 the Portfolio, (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.
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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 state of Maryland;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among
the 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:
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To the Adviser at:
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxx, XX 00000
To the Sub-Adviser at:
000 Xxxxxxxxx Xxxx
Xxxx Xxxx, XX 00000
To the Company or the Portfolio at:
000 Xxxx Xxxxxxxxxx Xxxx
Xxxxx, XX 00000
Attention: General Counsel
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: /s/ By: /s/
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Title: Title:
XXXXXXX'X ASSET MANAGEMENT, INC.
By: /s/
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Title:
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