PBHG INSURANCE SERIES FUND
EXPENSE LIMITATION AGREEMENT
EXPENSE LIMITATION AGREEMENT, effective as of ______________, 2000, by and
between PBHG Insurance Series Fund (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 PBHG Class of Shares, and Pilgrim ▇▇▇▇▇▇ &
Associates, Ltd. (the "Adviser").
WHEREAS, the Trust is a Delaware Business Trust organized under Articles of
Incorporation dated __________, 2000 (the "Articles"), 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 is one of
the series of the Trust; 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 Trust and the Adviser have determined that it is appropriate
and in the best interests of each Portfolio and its shareholders to maintain
certain expenses of each Portfolio at a level below the level to which each such
Portfolio would normally be subject 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 incurred by a Portfolio in any fiscal year, including but not
limited to investment advisory fees of the Adviser (but excluding: (i)
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. 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 Trust's Board of
Trustees 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 Trust's Board
of Trustees has determined that the payment of such reimbursement is in the
best interests of the Portfolio or Portfolios and their shareholders. The
Trust's Board of Trustees 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.
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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 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 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 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 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.
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. This Agreement shall be construed in accordance
with 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
Articles 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.
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.
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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.
ATTEST: PBHG FUNDS
on behalf of each of the
Portfolios listed on Schedule A
By:______________________________
Secretary
ATTEST: PILGRIM ▇▇▇▇▇▇ & ASSOCIATES, LTD.
By:______________________________
Secretary
SCHEDULE A
TO
EXPENSE LIMITATION AGREEMENT
Operating
Expense
Limit
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This Agreement relates to the following
Portfolios of the Trust:
PBHG Growth II Portfolio 1.20%
PBHG Large Cap Growth Portfolio 1.10%
PBHG Small Cap Growth Porfolio 1.20%
PBHG Small Cap Value Portfolio 1.20%
PBHG Select Value Portfolio 1.00%
PBHG Technology & Communications Portfolio 1.20%
PBHG Select 20 Portfolio 1.20%
PBHG Mid-Cap Value Portfolio 1.20%
DATED: ____________________, 2000
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