EXHIBIT 5(d)(3)
THE PBHG FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
PBHG STRATEGIC SMALL COMPANY FUND
AGREEMENT made as of this ___ day of December, 1996, 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 December __, 1996 between the Adviser and the Company, the
Adviser will act as investment adviser to the PBHG Strategic Small Company 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 applicable federal and
state laws and regulations, as each is amended from time to time.
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(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.
(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.
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(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 th date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(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.
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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 0.50% 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.
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
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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:
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.
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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:______________________________ By:________________________________
Title: Title:
XXXXXXX'X ASSET MANAGEMENT, INC.
By:______________________________
Title:
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