EX-99.H5(IV) 12 ex99-h5iv.txt Exhibit 99.(h)(5)(iv) PBHG FUNDS Advisor Class PBHG Disciplined Equity Fund PBHG IRA Capital Preservation Fund PBHG New Perspective Fund PBHG REIT Fund EXPENSE LIMITATION AGREEMENT (15(f) Period) EXPENSE LIMITATION AGREEMENT, effective as of October 23, 2001, by and between PBHG Funds (the "Trust"), on behalf of each portfolio of the Trust set forth in Schedule A (each a "Portfolio", and collectively, the "Portfolios"), with respect to its Advisor Class of shares, and Pilgrim Baxter & Associates, Ltd. (the "Adviser"). WHEREAS, the Trust is a Delaware Business Trust organized pursuant to an Agreement and Declaration of Trust dated November 13, 2000 (the "Declaration"), and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company of the series type, and each Portfolio has been added as a series of the Trust pursuant to an Amendment to the Declaration dated June 5, 2001; and WHEREAS, the Trust 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 Portfolios have been created as shells into which certain UAM funds (the "UAM Funds") may be merged subject to approval by the Board and the shareholders of each UAM Fund; and WHEREAS, in order to take advantage of the provisions of section 15(f) of the 1940 Act, Old Mutual plc and the investment advisers (the "UAM Advisers") of each of the UAM Funds agreed to maintain the maximum expense ratio disclosed in the then-current prospectus of each UAM Fund for the period up to and including September 25, 2002 (the "15(f) Period"); and WHEREAS, following the merger of the UAM Funds into the respective Portfolios, the Adviser and its affiliates wish to continue to take advantage of the provisions of section 15(f) of the 1940 Act, and will therefore adhere to the aforementioned expense limitations for the remainder of the 15(f) Period. NOW, THEREFORE, the parties hereto agree as follows: 1. EXPENSE LIMITATION. 1.1 APPLICABLE EXPENSE LIMIT. To the extent that the aggregate expenses incurred by a Portfolio in any fiscal year or portion thereof covered by this Agreement, including but not limited to investment advisory fees of the Adviser (but excluding: (i) fees and expenses incurred under the Fund's Service Plan, interest, taxes, brokerage commissions, and other expenditures which are capitalized in accordance with generally accepted accounting principles; and (ii) 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 as set forth in Schedule A as to 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. TERM AND TERMINATION OF AGREEMENT. This Agreement shall continue in effect until and including September 25, 2002. Nevertheless, this Agreement may be terminated as to any one or all Portfolios 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 Trust, such action shall be authorized by (A) resolution of a majority of the Trustees of the Trust who (i) are not "interested persons" of the Trust or any other party to this Agreement, as defined in the 1940 Act, and (ii) have no direct or indirect financial interest in the operation of this Agreement, or (B) by a vote of a majority of the outstanding voting securities of the Trust. 3. MISCELLANEOUS. 3.1 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. 3.2 INTERPRETATION. This Agreement shall be construed in accordance with the 1940 Act (including, but not limited to, section 15(f) thereof) and the laws of the Commonwealth of Pennsylvania without reference to conflicts of law rules. Nothing herein contained shall be deemed to require the Trust or any Portfolio to take any action contrary to the Trust's Declaration 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 Trust's Board of Trustees of its responsibility for and control of the conduct of the affairs of the Trust or the Portfolios. 3.3 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 as of the day and year first above written. ATTEST: PBHG FUNDS on behalf of each of the Portfolios listed on Schedule A __/s/ John M. Zerr By: /s/ Lee T. Cummings ------------------- Secretary ATTEST: PILGRIM BAXTER & ASSOCIATES, LTD. /s/ John M. Zerr By: /s/ Eric C. Schneider --------------------- Secretary SCHEDULE A TO EXPENSE LIMITATION AGREEMENT
Operating This Agreement relates to the following Expense Portfolios of the Trust Predecessor UAM Fund Limit ----------------------- -------------------- ----- PBHG Disciplined Equity Fund Analytic Enhanced Equity Fund 0.99% PBHG IRA Capital Preservation Fund IRA Capital Preservation Portfolio 1.00% PBHG New Perspective Fund NWQ Special Equity Portfolio 1.25% PBHG REIT Fund Heitman Real Estate Portfolio 1.40%
DATED: October 23, 2001