SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Pilgrim America Investment Funds, Inc.
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(Name of Registrant as Specified In Its Charter)
Pilgrim America Investment Funds, Inc.
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
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<PAGE>
Pilgrim America High Yield Fund
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 331-1080
February 19, 1998
Dear Shareholder:
A Special Meeting of Shareholders of the Pilgrim America High Yield Fund
(the "Fund") will be held at 10:00 a.m., local time, on April 16, 1998 at the
offices of Pilgrim America Investment Funds, Inc. (the "Company"). Formal
notice of the Meeting appears on the next page, followed by the proxy
statement. We hope that you can attend the Meeting in person; however, we urge
you in any event to vote your shares by completing and returning the enclosed
proxy in the envelope provided at your earliest convenience.
At the Meeting, you will be asked to consider approving a proposed
amendment to your Fund's investment management agreement with the Company, on
behalf of the Fund, and Pilgrim America Investments, Inc. ("PAII" or the
"Investment Manager"). After carefully considering the proposal, the Fund's
Board of Directors recommends that you vote "FOR" the proposal.
Your vote is important regardless of the number of shares you own. In
order to avoid the added cost of follow-up solicitations and possible
adjournments, please take a few minutes to read the proxy statement and cast
your vote. It is important that your vote be received no later than April 15,
1998.
The Company is using Shareholder Communications Corporation ("SCC"), a
professional proxy solicitation firm, to assist shareholders in the voting
process. As the date of the meeting approaches, if we have not already heard
from you, you may receive a telephone call from SCC reminding you to exercise
your right to vote.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ Robert W. Stallings
ROBERT W. STALLINGS,
President and Chairman of the Board
<PAGE>
Pilgrim America High Yield Fund
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 331-1080
Notice of Special Meeting of Shareholders to be Held on April 16, 1998
To the Shareholders:
A Special Meeting of Shareholders of the Pilgrim America High Yield Fund
(the "Fund") a series of Pilgrim America Investment Funds, Inc. (the "Company")
will be held on Thursday, April 16, 1998 at 10:00 a.m., local time, at the
offices of the Company, 40 North Central Avenue, Suite 1200, Phoenix, Arizona
85004 for the following purposes:
1. To approve an Amendment to the Investment Management Agreement
between the Company, on behalf of the Fund, and Pilgrim America
Investments, Inc. that changes the investment management fee paid by the
Fund;
2. To transact such other business as may properly come before the
Special Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on February 18, 1998 are
entitled to notice of, and to vote at, the meeting. Your attention is called to
the accompanying Proxy Statement. Regardless of whether you plan to attend the
meeting, PLEASE COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY CARD so
that a quorum will be present and a maximum number of shares may be voted. If
you are present at the meeting, you may change your vote, if desired, at that
time.
By Order of the Board of Directors
/s/ James M. Hennessy
JAMES M. HENNESSY, Secretary
February 19, 1998
<PAGE>
Pilgrim America High Yield Fund
PROXY STATEMENT
Special Meeting of Shareholders to be held on April 16, 1998
This Proxy Statement is furnished by the Board of Directors of Pilgrim
America Investment Funds, Inc. (the "Company") in connection with the
solicitation of voting instructions for use at the Special Meeting of
Shareholders (the "Meeting") of the Pilgrim America High Yield Fund (the
"Fund") to be held on April 16, 1998, at 10:00 a.m., local time, at the offices
of the Company, 40 North Central Avenue, Suite 1200, Phoenix, Arizona 85004 for
the purposes set forth below and in the accompanying Notice of Special Meeting.
At the Meeting, the shareholders of the Fund will be asked:
1. To approve an Amendment to the Investment Management Agreement
between the Company, on behalf of the Fund, and Pilgrim America
Investments, Inc. ("PAII" or the "Investment Manager") that changes the
investment management fee paid by the Fund;
2. To transact such other business as may properly come before the
Special Meeting of Shareholders or any adjournments thereof.
Solicitation of Proxies
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about February 24, 1998.
Shareholders of the Fund whose shares of Common Stock are held by nominees,
such as brokers, can vote their proxies by contacting their respective nominee.
In addition to the solicitation of proxies by mail, officers of the Company and
employees of the Investment Manager and its affiliates, without additional
compensation, may solicit proxies in person or by telephone, telegraph,
facsimile, or oral communication. The Company has retained Shareholder
Communications Corporation, a professional proxy solicitation firm, to assist
with any necessary solicitation of proxies. As the meeting date approaches,
certain shareholders of the Fund may receive a telephone call from the
professional proxy solicitation firm asking the shareholder to vote. The costs
associated with such solicitation will be paid by the Fund.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with the Company a written revocation or duly executed proxy
bearing a later date. In addition, any shareholder who attends the Meeting in
person may vote by ballot at the Meeting, thereby canceling any proxy
previously given. The persons named in the accompanying proxy will vote as
directed by the proxy, but in the absence of voting directions in any proxy
that is signed and returned, they intend to vote FOR each of the proposals and
may vote at their discretion with respect to other matters not now known to the
Board of the Company that may be presented at the Meeting.
Voting Rights
The proposals in this proxy statement affect only the Fund, which is one
of two series of the Company. As a result, the Board of Directors of the
Company is soliciting votes only from shareholders of the Fund.
Each share of each class of the Common Stock, $0.10 par value, of the Fund
(the "Common Stock") is entitled to one vote. Shareholders of the Fund at the
close of business on February 18, 1998 (the "Record Date") will be entitled to
be present and give voting instructions for the Fund at the Meeting with
respect to their shares of Common Stock owned as of such Record Date. As of
January 31, 1998, there were 23,767,626 shares of Common Stock outstanding and
entitled to vote as of such record date, representing total net assets of
$167,928,200.
A majority of the outstanding shares of the Fund on the Record Date,
represented in person or by proxy, must be present to constitute a quorum for
the transaction of the Fund's business at the Meeting.
1
<PAGE>
Approval of Proposal 1 requires a "Majority Vote." For purposes of this
requirement, a "Majority Vote" shall mean a "majority of the outstanding voting
securities" of the Fund as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), i.e., (i) 67% or more of the shares of the Fund
present at the Meeting, if more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (ii) more than 50% of the outstanding
shares of the Fund, whichever is less.
If a quorum is not present at the Meeting, or if a quorum is present but
sufficient votes to approve any or all of the Proposals are not received, the
persons named as proxies may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. In determining whether to adjourn the
Meeting, the following factors may be considered: the nature of the Proposals
that are the subject of the Meeting, the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any adjournment will require the affirmative
vote of a majority of those shares represented at the Meeting in person or by
proxy. A shareholder vote may be taken on one or more of the Proposals in this
proxy statement prior to any adjournment if sufficient votes have been received
with respect to a Proposal.
If a shareholder abstains from voting as to any matter, or if a broker
returns a "non-vote" proxy, indicating a lack of authority to vote on a matter,
the shares represented by the abstention or non-vote will be deemed present at
the Special Meeting for purposes of determining a quorum. However, abstentions
and broker non-votes will not be deemed represented at the Special Meeting for
purposes of calculating the vote on any matter. As a result, with respect only
to matters requiring the affirmative vote of a majority of the total
outstanding shares, an abstention or broker non-vote will have the same effect
as a vote against such matters.
To the knowledge of the Fund, as of January 31, 1998, no current Director
of the Fund owns 1% or more of outstanding shares of the Fund and the officers
and Directors of the Fund own, as a group, less than 1% of the shares of the
Fund. As of January 31, 1998, Merrill Lynch, Pierce, Fenner and Smith for the
Sole Benefit of its Customers, 4800 Deer Lake Dr. E 3rd Floor, Jacksonville,
Florida, 32246-6484, held 735,126 shares representing 8.4% of Class A shares
and 3,165,695 shares representing 26% of Class B shares. To the knowledge of
the Fund, no person owned beneficially more than 5% of the outstanding shares
of the Fund.
Expenses
The Fund will pay the expenses incurred by the Fund in connection with
this Notice and Proxy Statement and the Meeting, including the printing,
mailing, solicitation and vote tabulation expenses, legal fees, and out of
pocket expenses.
PROPOSAL NO. 1
APPROVAL OF AN AMENDMENT TO THE INVESTMENT MANAGEMENT AGREEMENT
PAII serves as Investment Manager to the Fund pursuant to an Investment
Management Agreement between the Company, on behalf of the Fund, and PAII. The
Investment Management Agreement was approved by the shareholders of the Fund on
April 4, 1995, and was last approved by the Company's Board of Directors,
including a majority of the Directors who were not parties to the Investment
Management Agreement or interested persons of such parties ("Independent
Directors"), at a meeting held on February 2, 1998.
On February 2, 1998, a majority of the Board of Directors, including a
majority of the Independent Directors, approved an Amendment to the Investment
Management Agreement that changes the investment management fee paid by the
Fund to PAII. The effect of this change will be to increase the investment
management fee paid by the Fund.
Shareholders of the Fund are being asked to approve the Amendment to the
Investment Management Agreement. Set forth below is a description of the
changes in the fee schedule that would result if the Amendment is approved, as
well as a description of certain other provisions of the Investment Management
Agreement, which would not change as a result of the Amendment. The Investment
Management Agreement and Amendment are attached hereto as Appendix A.
2
<PAGE>
If the Amendment to the Investment Management Agreement is approved by the
Fund's shareholders, the Investment Management Agreement with the Amendment
will continue from year to year, unless earlier terminated, provided that such
continuance is specifically approved at least annually (i) by the Company's
Board of Directors or by the vote of a majority of the outstanding voting
securities of the Fund, and, in either case, (ii) by a majority of the
Company's Independent Directors. In the event that shareholders of the Fund do
not approve the Amendment, PAII would continue to serve as Investment Manager
to the Fund under the current Investment Management Agreement, and the
Directors of the Fund may consider other possible courses of action to
accomplish the purposes for which the Proposal has been made, subject, as
required, to approval by the shareholders of the Fund.
Rate of Compensation Under the Amendment to the Investment Management Agreement
The proposed Amendment changes the investment management fee paid to PAII
by the Fund from a tiered fee with breakpoints at specific asset levels to a
flat fee rate. The investment management fee paid by the Fund under the
Amendment would be greater than would be paid under the present fee structure.
The Fund pays PAII for its services a fee based on an annual percentage of
the average daily net assets of each Series. The investment management fee is
computed and accrued daily and paid monthly. The following table compares the
current fee structure for the Fund with the proposed fee structure:
<TABLE>
<CAPTION>
Current Fee Proposed Fee
----------- ------------
Rate Net Assets to Which Rate Applies Rate Net Assets to Which Rate Applies
---- -------------------------------- ---- --------------------------------
<S> <C> <C> <C>
0.75% first $25 million 0.60% all net assets of the Fund
0.625% over $25 million to $100 million
0.50% over $100 million to $500 million
0.40% $500 million and over
</TABLE>
As of January 31, 1998, the net assets of the Fund were $167.9 million. At
that net asset level, the effective investment management fee under the current
fee structure is .59% of the Fund's average daily net assets. For the fiscal
year ended June 30, 1997, PAII received $332,032 in investment management fees
from the Fund. Under the proposed fee, the investment management fees paid to
PAII for the fiscal year ended June 30, 1997 would have been $288,751,
representing a decrease of 13% below the fees that were actually paid. The fees
would have been lower because the current fee structure has higher fees at
lower asset levels. However, the effective investment management fee increases
over that under the current fee structure at net asset levels greater than
approximately $150 million. The following table illustrates the difference
between the advisory fees that would be paid under the current fee structure
compared to the fees that would be paid under the proposed fee structure at
different asset levels:
<TABLE>
<CAPTION>
Management Fee as a
% of Net Assets Management Fee*
--------------- ---------------
Fiscal Year %
Average Current Proposed Current Proposed Increase
Net Assets Fee Rate Fee Rate Fee Rate Fee Rate /Decrease
---------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
$100,000,000 0.66% 0.60% $ 480,000 $ 480,000 0.0%
$100,000,000 0.66% 0.60% 656,250** 600,000** (8.6)%
$125,000,000 0.63% 0.60% 684,375 684,375 0.0%
$125,000,000 0.63% 0.60% 781,250** 750,000** (4.0)%
$150,000,000 0.60% 0.60% 897,188 897,188 0.0%
$150,000,000 0.60% 0.60% 906,250** 900,000** (0.7)%
$200,000,000 0.58% 0.60% 1,156,250 1,200,000 3.8%
$250,000,000 0.56% 0.60% 1,406,250 1,500,000 6.7%
$300,000,000 0.55% 0.60% 1,656,250 1,800,000 8.7%
$350,000,000 0.54% 0.60% 1,906,250 2,100,000 10.2%
$400,000,000 0.54% 0.60% 2,156,250 2,400,000 11.3%
$450,000,000 0.53% 0.60% 2,406,250 2,700,000 12.2%
$500,000,000 0.53% 0.60% 2,656,250 3,000,000 12.9%
</TABLE>
* Unless otherwise indicated, with expense cap
** Without expense cap
3
<PAGE>
PAII has agreed, until at least June 30, 1998, to waive its fees or
otherwise reimburse operating expenses of the Fund to the extent that such
expenses, exclusive of distribution fees, interest, taxes, brokerage and
extraordinary expenses, exceed 1.00% for Class A, 1.75% for Class B and 1.50%
for Class M shares of the Fund. It is expected that through June 30, 1998, the
fee waiver will offset any effect that the change in the investment management
fee would have on the overall operating expenses of the Fund. There is no
assurance that the fee waiver will be continued beyond June 30, 1998.
In determining whether or not it was appropriate to approve the Amendment
to the Investment Management Agreement and to recommend approval to
shareholders, the Board of Directors, including the Independent Directors,
considered various matters and materials provided by PAII. The Independent
Directors examined the nature, quality and scope of the services provided to
the Fund by PAII. They reviewed the basis for an increase in the investment
management fee and analyzed the fee proposed by PAII in terms of the services
provided by PAII, PAII's costs to render the services, and the investment
management fee charged by other investment advisers that manage comparable
funds. In addition, the Independent Directors examined mutual fund-related
revenues and expenses of PAII.
In PAII's request for a fee increase, it referred to, among other things,
the increased competition for high quality investment management, compliance,
and other personnel, the costs and complexity of managing high yield bond
funds, and the amount of research needed to keep abreast of potential
investment opportunities and to monitor developments in the high yield bond
market. The Independent Directors were provided with data as to the
qualifications of PAII's personnel and the quality and extent of the services
rendered, as well as an analysis of the performance and expenses of the Fund
and comparative advisory fee information regarding other high yield bond funds.
The Independent Directors also considered data presented by PAII showing the
extent to which it plans to expand its personnel who render services to the
Fund.
In approving the Amendment and recommending its approval by shareholders,
the Directors of the Fund, including the Independent Directors, considered
several factors. The factors considered by the Directors included (1) the
nature, quality and extent of the services furnished by the Investment Manager
to the Fund and in particular the performance that PAII has achieved for the
Fund; (2) the necessity of the Investment Manager maintaining and enhancing its
ability to retain and attract capable personnel to serve the Fund; (3) the
complexity of research and investment activities in the high yield bond market;
(4) the performance of the Investment Manager in managing the Fund with respect
to its advisory, oversight, management, administrative, and compliance
monitoring services; (5) the effect of the proposed investment management fee
increase on the expense ratio of the Fund; (6) comparative data to other funds
as to investment performance, investment management fees, and as to expense
ratios; (7) current and developing conditions in the financial services
industry, including competition for and the trend toward escalating
compensation for investment personnel; (8) the financial resources of the
Investment Manager and the continuance of appropriate incentives to assure that
the Investment Manager will continue to furnish high quality services to the
Fund; and (9) the profitability of the Investment Manager derived from its
relationship to the Fund under the current Investment Management Agreement and
the reasonableness of maintaining approximately the same profitability under
the increased investment management fees.
After reviewing and analyzing the materials provided by PAII, the Board of
Directors concluded that the compensation to be paid to PAII under the proposed
Amendment is fair and reasonable. The Board believes that approving the
Amendment to the Investment Management Agreement is in the best interests of
the Fund and its shareholders. Accordingly, after consideration of the above
factors, and such other factors and information it considered relevant, the
Board of Directors unanimously approved the Amendment to the Investment
Management Agreement and voted to recommend its approval by the Fund's
shareholders.
The Other Terms of the Investment Management Agreement
The terms of the Investment Management Agreement other than those related
to the amount of the fee will not be changed by the Amendment.
4
<PAGE>
The Investment Management Agreement requires PAII to provide, subject to
the supervision of the Board of Directors, investment advice and investment
services to the Fund and to furnish advice and recommendations with respect to
investment of the Fund's assets and the purchase or sale of its portfolio
securities. PAII also provides investment research and analysis.
Liability of the Investment Manager. The Investment Management Agreement
provides that PAII is not subject to liability to the Fund, or to any
shareholder of the Fund, for any act or omission in the course of, or connected
with, rendering services under the Investment Management Agreement or for any
losses that may be sustained in the purchase, holding or sale of any security
by the Fund, except by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under the
Investment Management Agreement.
Termination. The Investment Management Agreement will terminate
automatically in the event of its assignment. In addition, it may be terminated
by PAII upon sixty days' written notice to the Fund, and by the Fund upon the
vote of a majority of the Fund's Board of Directors or a majority of the
outstanding voting shares of the Fund, upon sixty days' written notice to PAII.
Information Concerning PAII
PAII, which was organized in December 1994, is registered as an investment
adviser with the Securities and Exchange Commission. PAII serves as investment
adviser to six other registered investment companies (or series thereof) as
well as privately managed accounts. As of January 31, 1998, PAII had total
assets under management of approximately $3.2 billion.
PAII is a wholly-owned subsidiary of Pilgrim America Group, Inc., which
itself is a wholly-owned subsidiary of Pilgrim America Capital Corporation
("PACC") (NASDAQ: PACC) (formerly, Express America Holdings Corporation). PACC
is a holding company that through its subsidiaries engages in the financial
services business, focusing on providing investment advisory, administrative
and distribution services to open-end and closed-end investment companies and
other institutional investors.
PAII does not act as investment adviser to any other registered investment
companies with investment objectives and policies similar to those of the Fund.
See Appendix B to this proxy statement for a list of the directors and
principal executive officers of PAII.
For the fiscal year ended June 30, 1997, the Fund paid $8,644 in
shareholder servicing fees to Pilgrim America Group, Inc., which is an
affiliate of PAII. In addition, for the fiscal year ended June 30, 1997, the
Fund paid 12b-1 fees for Class A, Class B and Class M shares of $67,333,
$167,712 and $33,155, respectively, to Pilgrim America Securities, Inc., which
also is an affiliate of PAII.
Vote Required
The proposal to approve the Amendment to the Investment Management
Agreement requires approval by a Majority Vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 1.
5
<PAGE>
GENERAL INFORMATION
Other Matters to Come Before the Meeting
The Company's management does not know of any matters to be presented at
the Meeting other than those described in this Proxy Statement. If other
business should properly come before the Meeting, the proxyholders will vote
thereon in accordance with their best judgment.
Investment Manager and Principal Underwriter
PAII, whose address is 40 North Central Avenue, Suite 1200, Phoenix,
Arizona 85004, is the Investment Manager of the Fund. Pilgrim America
Securities, Inc., whose address is 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004, is the Distributor for the Fund.
Executive Officers of the Company
The following persons currently are principal executive officers of the
Company:
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Company for the Last Five Years
---- ----------- -----------------------
<S> <C> <C>
Robert W. Stallings Chairman of the Board, Chairman, Chief Executive Officer and President
(Age 48) Chief Executive Officer of Pilgrim America Group, Inc. ("PAGI") (since
and President (since December 1994); Chairman, PAII (since December
April 1995) 1994); Director (since December 1994) and Chair-
man (since November 1995), Pilgrim America
Securities, Inc. ("PASI"); Chairman, Chief Execu-
tive Officer and President of Pilgrim Government
Securities Income Fund, Inc., Pilgrim America
Masters Series, Inc. and Pilgrim America Bank and
Thrift Fund, Inc. (since April 1995). Chairman and
Chief Executive Officer of Pilgrim America Prime
Rate Trust (since April 1995). Chairman, Chief
Executive Officer and President of Pilgrim
America Capital Corporation (formerly, Express
America Holdings Corporation) ("PACC") (since
August 1990).
James R. Reis Executive Vice Director, Vice Chairman (since December 1994),
(Age 40) President (since April Executive Vice President (since April 1995), and
1995), Treasurer, Assis- Treasurer (since September 1996), PAGI and PAII;
tant Secretary, Principal Director (since December 1994), Vice Chairman
Accounting Officer (since November 1995) and Assistant Secretary
(since May 1997) (since January 1995) of PASI; Executive Vice
President, Treasurer, Assistant Secretary and Prin-
cipal Accounting Officer of most of the other
funds in the Pilgrim America Group of Funds;
Chief Financial Officer (since December 1993),
Vice Chairman and Assistant Secretary (since
April 1993) and former President (May 1991-
December 1993), PACC; Vice Chairman (since
April 1993) and former President (May 1991-
December 1993), Express America Mortgage
Corporation.
Stanley D. Vyner Executive Vice Executive Vice President (since August 1996),
(Age 47) President (since PAGI; President and Chief Executive Officer
August 1996) (since August 1996), PAII; Executive Vice Presi-
dent (since July 1996) of most of the funds in the
Pilgrim America Group of Funds. Formerly Chief
Executive Officer (November 1993-December
1995), HSBC Asset Management Americas, Inc.,
and Chief Executive Officer, and Actuary (May
1986-October 1993), HSBC Life.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Company for the Last Five Years
---- ----------- -----------------------
<S> <C> <C>
James M. Hennessy Senior Vice President Senior Vice President and Secretary (since April
(Age 48) and Secretary (since 1995), PACC, PAGI, PASI and PAII. Senior Vice
April 1995) President and Secretary of each of the funds in the
Pilgrim America Group of Funds. Formerly Senior
Vice President, Express America Mortgage Corpo-
ration (June 1992-August 1994) and President,
Beverly Hills Securities Corp. (January 1990-June
1992).
Robert S. Naka Vice President (since Vice President, PAII (since April 1997) and PAGI
(Age 34) May 1997) and Asst. (since February 1997). Vice President and Assis-
Secretary (since July tant Secretary of each of the funds in the Pilgrim
1996) America Group of Funds. Formerly Assistant Vice
President, PAGI (August 1995-February 1997).
Formerly Operations Manager, Pilgrim Group, Inc.
(April 1992-April 1995).
</TABLE>
Shareholder Proposals
Proposals of shareholders must be received by the Company a reasonable
time prior to the mailing of the proxy materials for a meeting of shareholders.
The submission by a shareholder of a proposal for inclusion in the proxy
statement does not guarantee that it will be included. Shareholder proposals
are subject to certain regulations under the federal securities laws.
Reports to Shareholders
The Company will furnish, without charge, a copy of the most recent Annual
Report regarding the Company and the most recent Semi-Annual Report succeeding
the Annual Report, if any, on request. Requests for such reports should be
directed to Pilgrim America at 40 North Central Avenue, Suite 1200, Phoenix,
Arizona 85004 or to the Company at (800) 331-1080.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
/s/ James Hennessy
JAMES M. HENNESSY, Secretary
February 19, 1998
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
7
<PAGE>
APPENDIX A
RESTATED
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the 7th day of April,
1995, and restated on the 7th day of April, 1997, by and between PILGRIM
AMERICA INVESTMENT FUNDS, INC., (formerly Pilgrim Investment Funds, Inc.) a
corporation organized and existing under the laws of the State of Maryland
(hereinafter called the "Company") on behalf of its PILGRIM AMERICA HIGH YIELD
FUND series (formerly Pilgrim High Yield Fund) (the "Fund"), and PILGRIM
AMERICA INVESTMENTS, INC., a corporation organized and existing under the laws
of the State of Delaware (hereinafter called the "Manager").
W I T N E S S E T H:
WHEREAS, the Fund is a series of the Company, an open-end management
investment company, registered as such under the Investment Company Act of
1940; and
WHEREAS, the Company's name was changed to Pilgrim America Investment
Funds, Inc. on July 13, 1995; and the Fund's name was changed to Pilgrim
America High Yield Fund on July 13, 1995; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of supplying
investment advice, investment management and administrative services, as an
independent contractor; and
WHEREAS, the Company on behalf of the Fund desires to retain the Manager
to render advice and services to the Fund pursuant to the terms and provisions
of this Agreement, and the Manager is interested in furnishing said advice and
services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound
hereby, mutually agree as follows:
1. The Company on behalf of the Fund hereby employs the Manager and
the Manager hereby accepts such employment, to render investment advice and
investment services with respect to the assets of the Fund, subject to the
supervision and direction of the Board of Directors of the Company. The
Manager shall, except as otherwise provided for herein, render or make
available all administrative services needed for the management and
operation of the Fund, and shall, as part of its duties hereunder, (i)
furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of its portfolio
securities, including the taking of such other steps a may be necessary to
implement such advice and recommendations, (ii) furnish the Fund with
reports, statements and other data on securities, economic conditions and
other pertinent subjects which the Board of Directors may request, (iii)
furnish such office space and personnel as is needed by the Fund, and (iv)
in general superintend and manage the investments of the Fund, subject to
the ultimate supervision and direction of the Board of Directors.
2. The Manager shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way,
or in any way be deemed an agent for the Fund. It is expressly understood
and agreed that the services to be rendered by the Manager to the Fund
under the provisions of this Agreement are not to be deemed exclusive, and
the Manager shall be free to render similar or different services to others
so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the furnishing of
such advice and recommendations to the Fund, in the preparation of reports
and information, and in the management of the
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<PAGE>
Fund's assets, all pursuant to this Agreement, and for this purpose the
Manager shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to
time determine to be necessary to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff
and personnel of the Manager shall be deemed to include persons employed or
retained by the Manager to furnish statistical, research, and other factual
information, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Manager may desire and request.
5. The Fund will from time to time furnish to the Manager detailed
statements of the investments and assets of the Fund and information as to
its investment objectives and needs, and will make available to the Manager
such financial reports, proxy statements, legal and other information
relating to its investments as may be in the possession of the Fund or
available to it and such other information as the Manager may reasonably
request.
6. Whenever the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and
rules thereunder and the rules of any securities exchange or association of
which such affiliate may be a member. Such affiliated dealer shall not be
obligated to make any additional commitments of capital, expense or
personnel beyond that already committed (other than normal periodic fees or
payments necessary to maintain its corporate existence and membership in
the National Association of Securities Dealers, Inc.) as of the date of
this Agreement. This Agreement shall not obligate the Manager or such
affiliate (i) to act pursuant to the foregoing requirement under any
circumstances in which they might reasonably believe that liability might
be imposed upon them as a result of so acting, or (ii) to institute legal
or other proceedings to collect fees which may be considered to be due from
others to it as a result of such a tender, unless the Fund shall enter into
an agreement with such affiliate to reimburse it for all expenses connected
with attempting to collect such fees, including legal fees and expenses and
that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
7. The Manager shall bear and pay the costs of rendering the services
to be performed by it under this Agreement. The Fund shall bear and pay for
all other expenses of its operation, including, but not limited to,
expenses incurred in connection with the issuance, registration and
transfer of its shares; fees of its custodian, transfer and shareholder
servicing agent; costs and expenses of pricing and calculating its daily
net asset value and of maintaining its books of account required by the
Investment Company Act of 1940; expenditures in connection with meetings of
the shareholders and directors, except those called solely to accommodate
the Manager; salaries of officers and fees and expenses of directors or
members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Manager; salaries of personnel
involved in placing orders for the execution of the Fund's portfolio
transactions or in maintaining registration of its shares under state
securities laws; insurance premiums on property or personnel of the Fund
which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Fund or other communications for
distribution to its shareholders; legal, auditing and accounting fees;
trade association dues; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise
prescribed. To the extent the Manager incurs any costs or performs any
services which are an obligation of the Fund, as set forth herein, the Fund
shall promptly reimburse the Manager for such costs and expenses. To the
extent the services for which the Fund is obligated to pay are performed by
the Manager, the Manager shall be entitled to recover from the Fund only to
the extent of its costs for such services.
8. (a) The Fund agrees to pay to the Manager, and the Manager agrees
to accept, as full compensation for all administrative and investment
management services furnished or provided to the Fund and as full
reimbursement for all expenses assumed by the Manager, a management fee
computed at the following annual percentage of the average daily net assets
of the Fund:
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<PAGE>
.75% on the first $25 million of net assets; plus
.625% on the net assets from $25 million to $100 million; plus
.50% on net assets from $100 million to $500 million; plus
.40% on net assets in excess of $500 million
(b) The management fees shall be accrued daily by the Fund and
paid to the Manager at the end of each calendar month.
(c) To the extent that the gross operating costs and expenses of
the Fund (excluding any interest taxes, brokerage commissions, and,
with the prior written approval of any state securities commission
requiring same, any extraordinary expenses, such as litigation) exceed
the allowable expense limitations of the state in which shares of the
Fund are registered for sale having the most stringent expense
reimbursement provisions, the Manager shall reimburse the Fund for the
amount of such excess.
(d) The management fee payable by the Fund hereunder shall be
reduced to the extent that an affiliate of the Manager has actually
received cash payments of tender offer solicitation fees less certain
costs and expenses incurred in connection therewith, as referred to in
Paragraph 6 herein.
9. The Manager agrees that neither it nor any of its officers or
employees shall take any short position in the capital stock of the Fund.
This prohibition shall not prevent the purchase of such shares by any of
the officers and directors or bona fide employees of the Manager or any
trust, pension, profit-sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof at
the time of purchase, as allowed pursuant to rules promulgated under the
Investment Company Act of 1940, as amended
10. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to the Articles of Incorporation or By-Laws of the
Company, or any applicable statute or regulation, or to relieve or deprive
the Board of Directors of the Company of its responsibility for and control
of the conduct of the affairs of the Fund.
11. (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Fund, or to any shareholder of the Fund, for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(b) Notwithstanding the foregoing, the Manager agrees to reimburse the
Fund for any and all costs, expenses, and counsel and Directors' fees
reasonably incurred by the Company in the preparation, printing and
distribution of proxy statements, amendments to its Registration Statement,
the holding of meetings of its shareholders or Directors, the conduct of
factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Fund incurs as a result of action or
inaction of the Manager or any of its shareholders where the action or
inaction necessitating such expenditures (i) is directly or indirectly
related to any transactions or proposed transaction in the shares or
control of the Manager or its affiliates (or litigation related to any
pending or proposed future transaction in such shares or control) which
shall have been undertaken without the prior, express approval of the
Company's Board of Directors; or (ii) is within the sole control of the
Manager or any of its affiliates or any of their officers, directors,
employees or shareholders. The Manager shall not be obligated pursuant to
the provisions of this Subparagraph 11(b), to reimburse the Fund for any
expenditures related to the institution of an administrative proceeding or
civil litigation by the Fund or by a Fund shareholder seeking to recover
all or a portion of the proceeds derived by any shareholder of the Manager
or any of its affiliates from the sale of his shares of the Manager, or
similar matters. So long as this Agreement is in effect, the Manager shall
pay to the Fund the amount due for expenses subject to this Subparagraph
11(b) within thirty (30) days after a bill or statement has been received
by the Fund therefor. This provision shall not be deemed to be a waiver of
any
A-3
<PAGE>
claim the Fund may have or may assert against the Manager or others or
costs, expenses, or damages heretofore incurred by the Fund for costs,
expenses, or damages the Fund may hereafter incur which are not
reimbursable to it hereunder.
(c) No provision of this Agreement shall be construed to protect any
director or officer of the Fund, or of the Manager, from liability in
violation of Section 17(h) and (i) of the Investment Company Act of 1940,
as amended.
12. This Agreement shall remain in effect until April 7, 1998, unless
sooner terminated as hereinafter provided, and shall continue in effect
from year to year thereafter so long as such continuation is approved at
least annually by (i) the Board of Directors of the Company or by the vote
of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of the directors of the Company who are not parties
to this Agreement or interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.
13. This Agreement may be terminated at any time, without payment of
any penalty, by the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of the Company, upon sixty
(60) days written notice to the Manager, and by the Manager upon sixty (60)
days written notice to the Fund.
14. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act of
1940, as amended.
15. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged without the affirmative vote or written
consent of the holders of a majority of the outstanding voting securities
of the Fund.
16. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.
17. The term "majority of the outstanding voting securities" of the
Fund shall have the meaning as set forth in the Investment Company Act of
1940, as amended.
18. In consideration of the execution of this Agreement, the Manager
hereby grants to the Company and the Fund the right to use the name
"Pilgrim" as part of their corporate names. The Company and Fund agree that
in the event this Agreement is terminated, the Company and the Fund shall
immediately take such steps as are necessary to amend their corporate names
to remove the reference to "Pilgrim".
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, on the day and
year first above written.
PILGRIM AMERICA INVESTMENT FUNDS, INC.
(on behalf of its Pilgrim America High
Yield Fund series)
Attest: ---------------------------- By: ----------------------------------
Title: ----------------------------- Title: -------------------------------
PILGRIM AMERICA INVESTMENTS, INC.
Attest: ---------------------------- By: ----------------------------------
Title: ----------------------------- Title: -------------------------------
A-4
<PAGE>
AMENDMENT TO RESTATED
INVESTMENT MANAGEMENT AGREEMENT
The INVESTMENT MANAGEMENT AGREEMENT made as of the 7th day of April, 1995,
and restated on the 7th day of April, 1997, by and between PILGRIM AMERICA
INVESTMENT FUNDS, INC., (formerly Pilgrim Investment Funds, Inc.) a corporation
organized and existing under the laws of the State of Maryland (hereinafter
called the "Company") on behalf of its PILGRIM AMERICA HIGH YIELD FUND series
(formerly Pilgrim High Yield Fund) (the "Fund"), and PILGRIM AMERICA
INVESTMENTS, INC., a corporation organized and existing under the laws of the
State of Delaware (hereinafter called the "Manager"), is hereby amended as set
forth in this Amendment to the Investment Management Agreement, which is made
as of the day of , 1998.
W I T N E S S E T H:
WHEREAS, the Fund is a series of the Company, an open-end management
investment company, registered as such under the Investment Company Act of
1940; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of supplying
investment advice, investment management and administrative services, as an
independent contractor; and
WHEREAS, the Company, on behalf of the Fund, and the Manager wish to amend
the Investment Management Agreement as provided below; and
NOW, THEREFORE, in consideration of the covenants and the mutual promises
in the Investment Management Agreement, the parties hereto, intending to be
legally bound hereby, mutually agree as follows:
1. Section 8(a) of the Investment Management Agreement is amended by
replacing the language thereof with the following paragraph:
8. (a) The Fund agrees to pay to the Manager, and the Manager
agrees to accept, as full compensation for all administrative and
investment management services furnished or provided to the Fund and
as full reimbursement for all expenses assumed by the Manager, a
management fee computed at an annual percentage rate of .60% of the
average daily net assets of the Fund.
2. This Amendment shall become effective as of the date indicated
above provided that it has been approved by the shareholders of the Fund at
a meeting held for that purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and attested by their duly authorized officers, on the day and
year first above written.
PILGRIM AMERICA INVESTMENT FUNDS, INC.
(on behalf of its Pilgrim America High
Yield Fund series)
Attest: ---------------------------- By: ----------------------------------
Title: ----------------------------- Title: -------------------------------
PILGRIM AMERICA INVESTMENTS, INC.
Attest: ---------------------------- By: ----------------------------------
Title: ----------------------------- Title: -------------------------------
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<PAGE>
APPENDIX B
Set forth below is the name, address and principal occupation of the
principal executive officer and each director of Pilgrim America Investments,
Inc. The business address of each such person is 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004.
<TABLE>
<CAPTION>
Name and Position with
Investment Manager Principal Occupation
------------------ --------------------
<S> <C>
Robert W. Stallings Chairman, Chief Executive Officer and President of Pilgrim
Chairman of the Board of Directors America Group, Inc.; Director, Pilgrim America Securi-
ties, Inc.; Chairman, Chief Executive Officer and President
of Pilgrim America Bank and Thrift Fund, Inc., Pilgrim
Government Securities Income Fund, Inc., Pilgrim
America Investment Funds, Inc. and Pilgrim America
Masters Series, Inc. Chairman and Chief Executive Officer
of Pilgrim America Prime Rate Trust. Chairman and Chief
Executive Officer of Pilgrim America Capital Corporation
(formerly, Express America Holdings Corporation) ("Pil-
grim America").
James R. Reis Director, Vice Chairman, Executive Vice President, and
Vice Chairman of the Board of Treasurer, Pilgrim America Group, Inc.; Director, Vice
Directors Chairman and Assistant Secretary of PASI; Executive Vice
President, Treasurer, Assistant Secretary and Principal Ac-
counting Officer of most of the other funds in the Pilgrim
America Group of Funds; Chief Financial Officer, Vice
Chairman and Assistant Secretary, Pilgrim America; Vice
Chairman, Express America Mortgage Corporation.
Stanley D. Vyner Executive Vice President, Pilgrim America Group, Inc.;
President and Chief Executive Officer Executive Vice President of most of the funds in the Pil-
grim America Group of Funds.
</TABLE>
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<PAGE>
PILGRIM AMERICA HIGH YIELD FUND,
a series of
PILGRIM AMERICA INVESTMENT FUNDS, INC.
PILGRIM AMERICA The undersigned owner of Common Stock, par
FUNDS value $.001 per share (the "Common Stock")
of the Pilgrim America High Yield Fund
(the "Fund") hereby instructs Robert W.
PILGRIM AMERICA HIGH YIELD FUND Stallings or James M. Hennessy (Proxies)
P.O. BOX 419368 to vote the shares of the Common Stock
KANSAS CITY, MO 64141 held by him at the Special Meeting of
Shareholders of the Fund to be held at
10:00 a.m., local time, on April 16, 1998
at 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004 and at any
adjournment thereof, in the manner
directed below with respect to the matters
referred to in the Proxy Statement for the
meeting, receipt of which is hereby
acknowledged, and in the Proxies'
discretion, upon such other matters as may
properly come before the meeting or any
adjournment thereof.
Please vote, sign and date this voting
instruction and return it in the enclosed
envelope.
These voting instructions will be voted as
specified. If no specification is made,
this voting instruction will be voted FOR
all proposals.
- --------------------------------------
IN ORDER TO AVOID THE ADDITIONAL
EXPENSE OF FURTHER SOLICITATION, WE
STRONGLY URGE YOU TO REVIEW, COMPLETE
AND RETURN YOUR BALLOT AS SOON AS
POSSIBLE. YOUR VOTE IS IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES YOU
OWN.
- --------------------------------------
<TABLE>
<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS
- ---------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
_________________________________________________________________________________________________________
PILGRIM AMERICA HIGH YIELD FUND, a series of
PILGRIM AMERICA INVESTMENT FUNDS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
---
Vote On Proposals For Against Abstain
1. To approve an Amendment to the Investment Management Agreement between [ ] [ ] [ ]
the Fund and Pilgrim America Investments, Inc. that changes the
investment management fee paid by the Fund.
2. To transact such other business as may properly come before the Special [ ] [ ] [ ]
Meeting of Shareholders or any adjournments thereof
This voting instruction shall be signed exactly as your name(s) appears
hereon. If as an attorney, executor, guardian or in some representative
capacity or an an officer of a corporation, please add titles as such.
Joint owners must each sign.
_________________________________________ ______________________________
_________________________________________ ______________________________
Signature (PLEASE SIGN WITHIN BOX) DATE Signature (Joint Owners) Date
_________________________________________________________________________________________________________
</TABLE>
