SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant X Filed by a party other than the registrant Check the
appropriate box:
X Preliminary proxy statement
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Pilgrim America Investment Funds, Inc.
(Name of Registrant as Specified in Its Charter)
Pilgrim America Investment Funds, Inc.
(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
__ 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 identifying 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:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<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,
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 of
Pilgrim America High Yield Fund
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
JAMES M. HENNESSY, Secretary
February 19, 1998
<PAGE>
Pilgrim America High Yield Fund
PROXY STATEMENT
Special Meeting of Shareholders of
Pilgrim America High Yield Fund
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, $.001 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.
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. If the assets of the Fund continue to grow, 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 the 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.
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. If the assets of the Fund grow, 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:
<PAGE>
<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. At 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. Under the
proposed fee structure, however, the investment management fees would begin to
increase over those under the current fee structure when the net assets of the
Fund exceed $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 Y ear Current Proposed Current Proposed % Increase
Average Fee Rate Fee Rate Fee Rate Fee Rate /Decrease
Net Assets -------- -------- -------- -------- ---------
----------
<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%
<FN>
* Unless otherwise indicated, with expense cap
** Without expense cap
</FN>
</TABLE>
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) to
maintain 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.
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. 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.
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, Chief Chairman, Chief Executive Officer and President of
(Age 48) Executive Officer and Pilgrim America Group, Inc. ("PAGI") (since December
President (since April 1995) 1994); Chairman, PAII (since December 1994); Director
(since December 1994) and Chairman (since November
1995), Pilgrim America Securities, Inc. ("PASI");
Chairman, Chief Executive 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 and Chief Executive Officer of Pilgrim
America Capital Corporation (formerly, Express
America Holdings Corporation) ("PACC") (since August
1990).
James R. Reis Executive Vice President Director, Vice Chairman (since December 1994),
(Age 40) (since April 1995), Executive Vice President (since April 1995), and
Treasurer, Assistant Treasurer (since September 1996), PAGI and PAII;
Secretary, Principal Director (since December 1994), Vice Chairman (since
Accounting Officer (since May November 1995) and Assistant Secretary (since January
1997) 1995) of PASI; Executive Vice President, Treasurer,
Assistant Secretary and Principal 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 President Executive Vice President (since August 1996), PAGI;
(Age 47) (since August 1996) President and Chief Executive Officer (since August
1996), PAII; Executive Vice President (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.
James M. Hennessy Senior Vice President and Senior Vice President and Secretary (since April
(Age 48) Secretary (since April 1995) 1995), PACC, PAGI, PASI and PAII. Senior Vice
President and Secretary of each of the funds in
the Pilgrim America Group of Funds. Formerly
Senior Vice President, Express America Mortgage Corporation (June
1992 - August 1994) and President, Beverly Hills Securities Corp.
(January 1990 - June 1992).
Robert S. Naka Vice President (since May Vice President, PAII (since April 1997) and PAGI
(Age 34) 1997) and Asst. Secretary (since February 1997). Vice President and Assistant
(since July 1996) Secretary of each of the funds in the Pilgrim 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.
JAMES M. HENNESSY, Secretary
February 19, 1998
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
<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
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:
.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 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: ________________________________
<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: ________________________________
<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 Securities, 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)
("Pilgrim America").
James R. Reis Director, Vice Chairman, Executive Vice President, and
Vice Chairman of the Board of Directors Treasurer, Pilgrim America Group, Inc.; Director, Vice Chairman
and Assistant Secretary of PASI; Executive Vice President, Treasurer,
Assistant Secretary and Principal Accounting 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.; Executive
President and Chief Executive Officer Vice President of most of the funds in the Pilgrim America Group
of Funds.
</TABLE>
<PAGE>
PILGRIM AMERICA FUNDS
PILGRIM AMERICA HIGH YIELD FUND
P.O. BOX 419368
KANSAS CITY, MO 64141
PILGRIM AMERICA HIGH YIELD FUND,
a series of
PILGRIM AMERICA INVESTMENT FUNDS, INC.
The undersigned owner of Common Stock, par value $.001 per share (the "Common
Stock") of the Pilgrim America High Yield Fund (the "Fund") hereby instructs
Robert W. Stallings or James M. Hennessy (Proxies) to vote the shares of the
Common Stock 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.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: /X/
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, INC.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
Vote On Proposals
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
For Against Abstain
/ / / / / /
2. To transact such other business as may properly
come before the Special Meeting of Shareholders or any
adjournments thereof
For Against Abstain
/ / / / / /
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 as
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
