EXPENSE LIMITATION AGREEMENT
PITCAIRN FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of _______, 2000 by and between
Pitcairn Trust Company (the "Adviser") and Pitcairn Funds (the "Trust"), on
behalf of each series of the Trust set forth in SCHEDULE A attached hereto
(each a "Fund," and collectively, the "Funds").
WHEREAS, the Trust is a Delaware business trust registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management company of the series type, and each Fund is a series of the Trust;
and
WHEREAS, the Trust and the Adviser have entered into an Investment Advisory
Agreement dated ______________, 2000 ("Advisory Agreement"), pursuant to which
the Adviser provides investment advisory services to each Fund listed in
SCHEDULE A, which may be amended from time to time, for compensation based on
the value of the average daily net assets of each such Fund; and
WHEREAS, the Trust and the Adviser have determined that it is appropriate
and in the best interests of each Fund and its shareholders to maintain the
expenses of each Fund, and, therefore, have entered into this Expense Limitation
Agreement, in order to maintain each Fund's expense ratios at the levels
specified SCHEDULE A attached hereto; and
NOW THEREFORE, the parties hereto agree that the Expense Limitation
Agreement provides as follows:
1. EXPENSE LIMITATION.
1.1. APPLICABLE EXPENSE LIMIT. To the extent that the aggregate expenses
of every character incurred by a Fund in any fiscal year, including but not
limited to investment advisory fees of the Adviser (but excluding interest,
taxes, brokerage fees and commissions, other expenditures which are capitalized
in accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of such Fund's
business), offset by the amount of revenue to the Fund from securities lending
activities of the Fund (the net amount referred to as "Fund 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 maximum Operating Expense Limit in any
year with respect to each Fund shall be the amount specified in SCHEDULE A based
on a percentage of the average daily net assets of each Fund.
1.3. METHOD OF COMPUTATION. To determine the Adviser's liability with
respect to the Excess Amount, each month the Fund Operating Expenses for each
Fund shall be annualized as of the last day of the month. If the annualized Fund
Operating Expenses for any month of a Fund
exceed the Operating Expense Limit of such Fund, the Adviser shall first waive
or reduce its investment advisory fee for such month by an amount sufficient to
reduce the annualized Fund 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 Fund or Funds an amount that, together
with the waived or reduced investment 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 investment advisory fees
waived or reduced and other payments remitted by the Adviser to the Fund or
Funds 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 Fund
are greater than $10 million and in which the Advisory Agreement is still in
effect, the estimated aggregate Fund Operating Expenses of such Fund for the
fiscal year are less than the Operating Expense Limit for that year, subject to
quarterly approval by the Trust's Board of Trustees as provided in Section 2.2
below, the Adviser shall be entitled to reimbursement by such Fund, in whole or
in part as provided below, of the investment advisory fees waived or reduced and
other payments remitted by the Adviser to such Fund 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 Fund, pursuant to Section 1 hereof, during any of
the previous two (2) fiscal years, less any reimbursement previously paid by
such Fund 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 with
respect to any Fund pursuant to this provision in any fiscal quarter, unless the
Trust's Board of Trustees has determined that the payment of such reimbursement
is in the best interests of such Fund and its shareholders. The Trust's Board of
Trustees shall determine quarterly in advance whether any reimbursement may be
paid to the Adviser with respect to any Fund in such quarter.
2.3. METHOD OF COMPUTATION. To determine each Fund's payments, if any, to
reimburse the Adviser for the Reimbursement Amount, each month the Fund
Operating Expenses of each Fund shall be annualized as of the last day of the
month. If the annualized Fund Operating Expenses of a Fund for any month are
less than the Operating Expense Limit of such Fund, such Fund, only with the
prior approval of the Trust's Board of Trustees, shall pay to the Adviser an
amount sufficient to increase the annualized Fund Operating Expenses of that
Fund to an amount no greater than the Operating Expense Limit of that Fund,
provided that such amount paid to the Adviser will in no event exceed the total
Reimbursement Amount.
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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 Fund Operating Expenses of a Fund 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 with respect to the Funds shall have an initial term until
October 31, 2003, and from year to year thereafter provided each such
continuance is specifically approved by 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 ("Non-Interested
Trustees"). Nevertheless, this Agreement may be terminated by either party
hereto, without payment of any penalty, upon the provision of a written notice
of not less than ninety (90) days prior to October 31, 2003 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 resolution of a majority of the
Non-Interested Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust. Any termination pursuant to this
paragraph 3 shall become effective, unless otherwise agreed upon, on the last
day of the then-current term of the Agreement.
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 Trust or the Funds to take any action contrary to the Trust's Declaration of
Trust 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 Funds.
4.3. DEFINITIONS. Any question 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.
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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.
PITCAIRN FUNDS
ON BEHALF OF EACH OF ITS SERIES
LISTED BELOW IN SCHEDULE A
By:-------------------------
PITCAIRN TRUST COMPANY
By:-------------------------
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SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
MAXIMUM FUND OPERATING
NAME OF FUND EXPENSE* LIMIT
Diversified Value Fund 1.00%
Diversified Growth Fund 1.00%
Select Value Fund 1.00%
Select Growth Fund 1.15%
Small Cap Value Fund 1.00%
Small Cap Growth Fund 1.25%
Family Heritage Fund 1.20%
International Equity Fund 1.25%
Government/Corporate Bond Fund 0.70%
Tax-Exempt Bond Fund 0.60%
* As defined in Section 1.1 of the Expense Limitation Agreement
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