EX-99.6(h)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 25th day of January, 2001 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");
WHEREAS, pursuant to the Investment Advisory Agreement dated January 25,
2001 and Schedule A dated January 25, 2001 (as such Schedule may be amended from
time to time to add or delete new portfolios) between the Adviser and the
Company, the Adviser will act as investment adviser to the separate portfolios
of the Company (the "Portfolios") specified in Schedule A; 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 Portfolios, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
(a) Subject to supervision by the Adviser and the Company's Board of Directors,
the Sub-Adviser shall manage the investment operations of the Portfolios and the
composition of the Portfolios' investment portfolios, including the purchase,
retention and disposition thereof, in accordance with the Portfolios' investment
objectives, policies and restrictions as stated in such Portfolios' 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:
The Sub-Adviser shall provide supervision of the Portfolios' investments and
determine from time to time what investments and securities will be purchased,
retained or sold by the Portfolios, and what portion of the assets will be
invested or held uninvested in cash.
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
applicable federal and state laws and regulations, as each is amended from time
to time.
The Sub-Adviser shall determine the securities to be purchased or sold by the
Portfolios and will place orders with or through such persons, brokers or
dealers to carry out the policy with respect to brokerage set forth in such
Portfolios' 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 Portfolios
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 Portfolios 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 Portfolios 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 Portfolios 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 a 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 in question and to such other clients.
The Sub-Adviser shall maintain all books and records with respect to the
Portfolios' 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.
The Sub-Adviser shall provide the Portfolios' Custodian on each business day
with information relating to all transactions concerning the Portfolios' assets
and shall provide the Adviser with such information upon request of the Adviser.
(a) 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.
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.
The Sub-Adviser shall keep the Portfolios' 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 Portfolios required by Rule 31a-1 under
the 1940 Act. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolios are property of the
Portfolios and the Sub-Adviser will surrender promptly to a
Portfolio any of such records upon that 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.
The Adviser shall continue to have responsibility for all services to be
provided to the Portfolios pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
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:
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");
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");
Certified resolutions of the Company's Board of Directors authorizing the
appointment of the Sub-Adviser and approving the form of this Agreement;
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 Portfolios
and shares of the Portfolios' beneficial shares, and all amendments thereto;
Notification of Registration of the Portfolios under the 1940 Act on Form N-8A
as filed with the Commission, and all amendments thereto; and
Prospectus of the Portfolios.
For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolios, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate specified in Schedule A. This fee will be paid
to the Sub-Adviser from the Adviser's advisory fee for such Portfolios.
The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a 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.
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 a 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 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.
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.
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 Portfolios, 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 upon) 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.
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 a Portfolio.
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.
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.
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.
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 a Portfolio at:
000 Xxxxxxxxx Xxxx
Xxxxx, XX 00000
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/ Xxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
Title: Chief Financial Officer Title: Chief Financial Officer
PILGRIM XXXXXX VALUE INVESTORS, INC.
By: /s/ Xxxx X. Xxxxxxx
Title: President
SCHEDULE A
SUB-ADVISED PORTFOLIOS
The PBHG Funds, Inc. Fee
PBHG Large Cap Value Fund 0.50%
PBHG Mid-Cap Value Fund 0.50%
PBHG Strategic Small Company Fund 0.50%
PBHG Small Cap Value Fund 0.50%
PBHG Focused Value Fund 0.40%
Dated: January 25, 2001
