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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
<TABLE>
<S> <C>
Pilgrim Asia-Pacific Equity Fund Pilgrim International SmallCap Growth Fund
Pilgrim Balanced Fund Pilgrim International Value Fund
Pilgrim Bank and Thrift Fund Pilgrim LargeCap Growth Fund
Pilgrim Convertible Fund Pilgrim LargeCap Leaders Fund
Pilgrim Emerging Countries Fund Pilgrim MagnaCap Fund
Pilgrim Emerging Markets Value Fund Pilgrim MidCap Growth Fund
Pilgrim Government Securities Income Fund Pilgrim MidCap Opportunities Fund
Pilgrim Growth + Value Fund Pilgrim MidCap Value Fund
Pilgrim High Total Return Fund Pilgrim Money Market Fund
Pilgrim High Total Return Fund II Pilgrim Research Enhanced Index Fund
Pilgrim High Yield Fund Pilgrim SmallCap Growth Fund
Pilgrim High Yield Fund II Pilgrim Strategic Income Fund
Pilgrim International Core Growth Fund Pilgrim Worldwide Growth Fund
</TABLE>
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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 (set forth the amount on which the filing fee is
calculated and state how it was determined):
--------------------------------------------------------------------------------
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 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PILGRIM FUNDS
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
July 21, 2000
Dear Shareholder:
ReliaStar Financial Corp., the indirect parent company of Pilgrim
Investments, Inc., the investment adviser to the Funds, is being acquired by the
financial services firm ING Groep N.V. Headquartered in Amsterdam, ING is a
global financial institution active in the fields of insurance, banking, and
asset management.
At the shareholder meeting on August 18, 2000, you will be asked to approve
new advisory contracts and, as applicable, sub-advisory contracts to take effect
after the acquisition. If approved, Pilgrim Investments will continue to manage
the Funds following the transaction. Except for the dates and the Sub-Advisory
Agreement for Pilgrim Asia-Pacific Equity Fund, these new contracts are the same
as those currently in effect. Approval of the new advisory and sub-advisory
contracts is sought so that management of each Fund can continue uninterrupted
after the transaction, because the current agreements may terminate
automatically as a result of the transaction. At the shareholder meeting, some
of you also will be asked to ratify the independent auditors and to elect new
Trustees for certain Funds.
After careful consideration, the Board of Directors/Trustees of each Fund
unanimously approved each of the proposals and recommends that shareholders vote
"FOR" each proposal.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. 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 BY NO LATER THAN AUGUST 17, 2000.
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
Chief Executive Officer and President
<PAGE>
PILGRIM FUNDS
<TABLE>
<S> <C>
Pilgrim Asia-Pacific Equity Fund Pilgrim International SmallCap Growth Fund
Pilgrim Balanced Fund Pilgrim International Value Fund
Pilgrim Bank and Thrift Fund Pilgrim LargeCap Growth Fund
Pilgrim Convertible Fund Pilgrim LargeCap Leaders Fund
Pilgrim Emerging Countries Fund Pilgrim MagnaCap Fund
Pilgrim Emerging Markets Value Fund Pilgrim MidCap Growth Fund
Pilgrim Government Securities Income Fund Pilgrim MidCap Opportunities Fund
Pilgrim Growth + Value Fund Pilgrim MidCap Value Fund
Pilgrim High Total Return Fund Pilgrim Money Market Fund
Pilgrim High Total Return Fund II Pilgrim Research Enhanced Index Fund
Pilgrim High Yield Fund Pilgrim SmallCap Growth Fund
Pilgrim High Yield Fund II Pilgrim Strategic Income Fund
Pilgrim International Core Growth Fund Pilgrim Worldwide Growth Fund
</TABLE>
(each a "Fund" and collectively, the "Funds")
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 18, 2000
To the Shareholders:
A Special Meeting (the "Meeting") of Shareholders of the Funds will be held
on August 18, 2000 at 9:00 a.m., local time, at 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004 for the following purposes:
1. For shareholders of Pilgrim MidCap Opportunities Fund (a series of
Pilgrim Equity Trust) and shareholders of Pilgrim Emerging Markets
Value, Pilgrim Growth + Value, Pilgrim High Total Return, Pilgrim High
Total Return II, Pilgrim International Value, and Pilgrim Research
Enhanced Index Funds (series of Pilgrim Mayflower Trust), to elect
eleven Trustees to serve until their successors are elected and
qualified;
2. For shareholders of all the Funds, to approve new Investment
Management Agreements between the Funds and Pilgrim Investments, Inc.
("Pilgrim Investments") to reflect the acquisition of Pilgrim
Investments by ING Groep N.V. ("ING"), with no change in the advisory
fees payable to Pilgrim Investments;
3. (a) For shareholders of Pilgrim Asia-Pacific Equity Fund, to approve
a new Sub-Advisory Agreement among HSBC Asset Management
(Americas) Inc., HSBC Asset Management (Hong Kong) Limited and
HSBC Asset Management (Europe) Limited (collectively, "HSBC") and
Pilgrim Investments to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fee
payable to HSBC;
(b) For shareholders of Pilgrim Convertible, Pilgrim Emerging
Countries, Pilgrim International Core Growth, Pilgrim
International SmallCap Growth, Pilgrim LargeCap Growth and
Pilgrim Worldwide Growth Funds, to approve a new Sub-Advisory
Agreement between Pilgrim Investments and Nicholas-Applegate
Capital Management ("NACM") to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fees
payable to NACM;
(c) For shareholders of Pilgrim Emerging Markets Value and Pilgrim
International Value Funds, to approve a new Sub-Advisory
Agreement between Pilgrim Investments and Brandes Investment
Partners, L.P. ("Brandes") to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fees
payable to Brandes;
<PAGE>
(d) For shareholders of Pilgrim Growth +Value Fund, to approve a new
Sub-Advisory Agreement between Pilgrim Investments and Navellier
Fund Management, Inc. ("Navellier"), to reflect the acquisition
of Pilgrim Investments by ING, with no change in the sub-advisory
fee payable to Navellier; and
(e) For shareholders of Pilgrim Research Enhanced Index Fund, to
approve a new Sub-Advisory Agreement between Pilgrim Investments
and J.P. Morgan Investment Management Inc. ("J.P. Morgan") to
reflect the acquisition of Pilgrim Investments by ING, with no
change in the sub-advisory fee payable to J.P. Morgan;
4. For shareholders of Pilgrim Emerging Markets Value, Pilgrim Growth +
Value, Pilgrim High Total Return, Pilgrim High Total Return II,
Pilgrim International Value and Pilgrim Research Enhanced Index Funds
(series of Pilgrim Mayflower Trust) and shareholders of Pilgrim MidCap
Opportunities Fund (a series of Pilgrim Equity Trust), to ratify the
appointment of PricewaterhouseCoopers LLP as independent auditors for
the Funds for the fiscal years ending October 31, 2000 or December 31,
2000; and
5. To transact such other business as may properly come before the
Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on June 19, 2000 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/Trustees,
/s/ James M. Hennessy
JAMES M. HENNESSY, Secretary
Dated: July 21, 2000
<PAGE>
PILGRIM FUNDS
<TABLE>
<S> <C>
Pilgrim Asia-Pacific Equity Fund Pilgrim International SmallCap Growth Fund
Pilgrim Balanced Fund Pilgrim International Value Fund
Pilgrim Bank and Thrift Fund Pilgrim LargeCap Growth Fund
Pilgrim Convertible Fund Pilgrim LargeCap Leaders Fund
Pilgrim Emerging Countries Fund Pilgrim MagnaCap Fund
Pilgrim Emerging Markets Value Fund Pilgrim MidCap Growth Fund
Pilgrim Government Securities Income Fund Pilgrim MidCap Opportunities Fund
Pilgrim Growth + Value Fund Pilgrim MidCap Value Fund
Pilgrim High Total Return Fund Pilgrim Money Market Fund
Pilgrim High Total Return Fund II Pilgrim Research Enhanced Index Fund
Pilgrim High Yield Fund Pilgrim SmallCap Growth Fund
Pilgrim High Yield Fund II Pilgrim Strategic Income Fund
Pilgrim International Core Growth Fund Pilgrim Worldwide Growth Fund
</TABLE>
(each a "Fund" and collectively, the "Funds")
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 18, 2000
A Special Meeting (the "Meeting") of Shareholders of the Funds will be held
on August 18, 2000 at 9:00 a.m., local time, at 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004 for the following purposes:
1. For shareholders of Pilgrim MidCap Opportunities Fund (a series of
Pilgrim Equity Trust) and shareholders of Pilgrim Emerging Markets
Value, Pilgrim Growth + Value, Pilgrim High Total Return, Pilgrim High
Total Return II, Pilgrim International Value, and Pilgrim Research
Enhanced Index Funds (series of Pilgrim Mayflower Trust), to elect
eleven Trustees to serve until their successors are elected and
qualified;
2. For shareholders of all the Funds, to approve new Investment
Management Agreements between the Funds and Pilgrim Investments, Inc.
("Pilgrim Investments") to reflect the acquisition of Pilgrim
Investments by ING Groep N.V. ("ING"), with no change in the advisory
fees payable to Pilgrim Investments;
3. (a) For shareholders of Pilgrim Asia-Pacific Equity Fund, to approve
a new Sub-Advisory Agreement among HSBC Asset Management
(Americas) Inc., HSBC Asset Management (Hong Kong) Limited and
HSBC Asset Management (Europe) Limited (collectively, "HSBC") and
Pilgrim Investments to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fee
payable to HSBC;
(b) For shareholders of Pilgrim Convertible, Pilgrim Emerging
Countries, Pilgrim International Core Growth, Pilgrim
International SmallCap Growth, Pilgrim LargeCap Growth and
Pilgrim Worldwide Growth Funds, to approve a new Sub-Advisory
Agreement between Pilgrim Investments and Nicholas-Applegate
Capital Management ("NACM") to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fees
payable to NACM;
(c) For shareholders of Pilgrim Emerging Markets Value and Pilgrim
International Value Funds, to approve a new Sub-Advisory
Agreement between Pilgrim Investments and Brandes Investment
Partners, L.P. ("Brandes") to reflect the acquisition of Pilgrim
Investments by ING, with no change in the sub-advisory fees
payable to Brandes;
<PAGE>
(d) For shareholders of Pilgrim Growth + Value Fund, to approve a new
Sub-Advisory Agreement between Pilgrim Investments and Navellier
Fund Management, Inc. ("Navellier") to reflect the acquisition of
Pilgrim Investments by ING, with no change in the sub-advisory
fee payable to Navellier; and
(e) For shareholders of Pilgrim Research Enhanced Index Fund, to
approve a new Sub-Advisory Agreement between Pilgrim Investments
and J.P. Morgan Investment Management Inc. ("J.P. Morgan") to
reflect the acquisition of Pilgrim Investments by ING, with no
change in the sub-advisory fee payable to J.P. Morgan.
4. For shareholders of Pilgrim Emerging Markets Value, Pilgrim Growth +
Value, Pilgrim High Total Return, Pilgrim High Total Return II,
Pilgrim International Value and Pilgrim Research Enhanced Index Funds
(series of Pilgrim Mayflower Trust) and shareholders of Pilgrim MidCap
Opportunities Fund (a series of Pilgrim Equity Trust), to ratify the
appointment of PricewaterhouseCoopers LLP as independent auditors for
the Funds for the fiscal years ending October 31, 2000 or December 31,
2000; and
5. To transact such other business as may properly come before the
Meeting of Shareholders or any adjournments thereof.
This is a combined proxy statement for all of the Funds. Each Fund is a
registered investment company or a series thereof (each investment company is
referred to in this proxy as a "Company"). The following table identifies the
Companies to which this proxy relates and the Funds that are series thereof:
<TABLE>
<S> <C>
PILGRIM ADVISORY FUNDS, INC. PILGRIM MAYFLOWER TRUST
Asia-Pacific Equity Fund Emerging Markets Value Fund
LargeCap Leaders Fund Growth + Value Fund
MidCap Value Fund High Total Return Fund
High Total Return Fund II
PILGRIM BANK AND THRIFT FUND, INC. International Value Fund
Bank and Thrift Fund Research Enhanced Index Fund
PILGRIM EQUITY TRUST PILGRIM MUTUAL FUNDS
MidCap Opportunities Fund Balanced Fund
Convertible Fund
PILGRIM GOVERNMENT SECURITIES INCOME FUND, INC. Emerging Countries Fund
Government Securities Income Fund High Yield Fund II
International Core Growth Fund
PILGRIM INVESTMENT FUNDS, INC. International SmallCap Growth Fund
High Yield Fund LargeCap Growth Fund
MagnaCap Fund MidCap Growth Fund
Money Market Fund
SmallCap Growth Fund
Strategic Income Fund
Worldwide Growth Fund
</TABLE>
2
<PAGE>
The Board of Directors/Trustees is soliciting votes from shareholders of a
Fund only with respect to the particular Proposals that affect that Fund. The
following table identifies the Funds entitled to vote on each Proposal.
FUND PROPOSAL
------------------------------------------------
1 2 3(A) 3(B) 3(C) 3(D) 3(E) 4
--- --- ---- ---- ---- ---- ---- ---
Asia-Pacific Equity [X] [X]
Balanced [X]
Bank and Thrift [X]
Convertible [X] [X]
Emerging Countries [X] [X]
Emerging Markets Value [X] [X] [X] [X]
Government Securities Income [X]
Growth + Value [X] [X] [X] [X]
High Total Return [X] [X] [X]
High Total Return II [X] [X] [X]
High Yield [X]
High Yield II [X]
International Core Growth [X] [X]
International SmallCap Growth [X] [X]
International Value [X] [X] [X] [X]
LargeCap Growth [X] [X]
LargeCap Leaders [X]
MagnaCap [X]
MidCap Opportunities [X] [X] [X]
MidCap Growth [X]
MidCap Value [X]
Money Market [X]
Research Enhanced Index [X] [X] [X] [X]
SmallCap Growth [X]
Strategic Income [X]
Worldwide Growth [X] [X]
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 July 21, 2000.
Shareholders of the Funds whose shares 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 Companies and employees of
Pilgrim Investments and its affiliates, without additional compensation, may
solicit proxies in person or by telephone, telegraph, facsimile, or oral
communication.
A shareholder may revoke the accompanying proxy at any time prior to its
use by filing with his/her respective 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 in their discretion with respect to other matters not now known to the
Board of the Companies that may be presented at the Meeting.
3
<PAGE>
SHAREHOLDER REPORTS
Each Company will furnish, without charge, a copy of the Annual Report and
the most recent Semi-Annual Report regarding that Company on request. Requests
for such reports should be directed to Pilgrim Investments at 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004 or at (800) 992-0180.
GENERAL OVERVIEW
On April 30, 2000, ReliaStar Financial Corp. ("ReliaStar") entered into an
agreement (the "Transaction") to be acquired by ING Groep N.V. ("ING"). ING is a
global financial institution active in the fields of insurance, banking and
asset management. Headquartered in Amsterdam, it conducts business in more than
60 countries, and has almost 90,000 employees. ING seeks to provide a full range
of integrated financial services to private, corporate, and institutional
clients through a variety of distribution channels. As of December 31, 1999, ING
had total assets of approximately $471.8 billion and assets under management of
approximately $330.3 billion. ING includes, among its numerous direct and
indirect subsidiaries, Baring Asset Management, Inc. in Boston, Mass., ING
Investment Management Advisors B.V. in the Hague, the Netherlands, Furman Selz
Capital Management LLC in New York, N.Y., ING Investment Management LLC in
Atlanta, Georgia, Baring International Investment Limited in London, England and
Baring Asset Management (Asia) Limited in Hong Kong. Completion of the
Transaction is contingent upon, among other things, approval by the
Directors/Trustees of the Pilgrim Funds, and certain Pilgrim Fund shareholder
and regulatory approvals. The closing of the Transaction is expected to occur
during the third quarter of 2000.
In the Transaction, ING will issue to stockholders of ReliaStar $54.00 in
cash for each share of ReliaStar common stock held by them, subject to possible
adjustments. On April 30, 2000, the total number of shares of ReliaStar
outstanding was 89,502,477.
Pilgrim Investments is expected to remain intact after the Transaction.
Pilgrim Investments does not currently anticipate that there will be any changes
in the investment personnel primarily responsible for the management of the
Funds as a result of the Transaction. ING's principal executive offices are
located at Strawinskylaan 2631, 1077 ZZ Amsterdam, P.O. Box 810, 1000 AV
Amsterdam, the Netherlands.
PROPOSAL NO. 1
ELECTION OF TRUSTEES
(EMERGING MARKETS VALUE, GROWTH + VALUE, HIGH TOTAL RETURN, HIGH TOTAL
RETURN II, INTERNATIONAL VALUE, MIDCAP OPPORTUNITIES AND RESEARCH ENHANCED
INDEX FUNDS ONLY)
The Board of Trustees of Pilgrim Mayflower Trust and Pilgrim Equity Trust
has nominated eleven individuals (the "Nominees") for election to the Board of
each Company. Shareholders are being asked to elect the Nominees to serve as
Trustees, each to serve until his or her successor is duly elected and
qualified. Pertinent information about each Nominee is set forth below. Each
Nominee has consented to serve as a Trustee if elected.
For Pilgrim Equity Trust (which has one series, Pilgrim MidCap
Opportunities Fund), all of the Nominees are currently Trustees of the Company.
For Pilgrim Mayflower Trust (which is comprised of Pilgrim Emerging Markets
Value, Pilgrim Growth + Value, Pilgrim High Total Return, Pilgrim High Total
Return II, Pilgrim International Value, and Pilgrim Research Enhanced Index
Funds), all of the Nominees except for Al Burton, Jock Patton and Robert W.
Stallings are currently Trustees of the Company. Messrs. Burton, Patton and
Stallings currently serve as Advisory Board Members of Pilgrim Mayflower Trust.
As Advisory Board Members, Messrs. Burton, Patton and Stallings participate in
board meetings for the Company, but do not vote on matters pertaining to the
Company. Mark L. Lipson, a Trustee of both Companies, is not standing for
election as a Trustee of the Companies.
The Nominees are being nominated to provide uniformity across the Boards of
Directors/Trustees of all of the Pilgrim Funds. In evaluating the Nominees, the
Trustees took into account their background and experience, including their
familiarity with the issues relating to these types of funds and investments as
well as their careers in business, finance, marketing and other areas. The
Trustees also considered the experience of the Nominees as trustees or directors
of certain of the funds in the Pilgrim group of funds.
4
<PAGE>
INFORMATION REGARDING NOMINEES
Below are the names, ages, business experience during the past five years
and other directorships of the Nominees. An asterisk (*) has been placed next to
the name of each Nominee who would constitute an "interested person," as defined
in the Investment Company Act of 1940, as amended, (the "Investment Company
Act") by virtue of that person's affiliation with any of the Funds or Pilgrim
Investments or any of its affiliates. The address of each Nominee is 40 North
Central Avenue, Suite 1200, Phoenix, Arizona.
<TABLE>
<CAPTION>
POSITION(S) TO BE HELD
NAME AND AGE WITH THE COMPANIES PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------ ------------------ ----------------------------------------
<S> <C> <C>
Al Burton Trustee President of Al Burton Productions for more than the last five
(Age 72) years. Mr. Burton is also a Director, Trustee or Advisory Board
Member of each of the funds managed by Pilgrim Investments.
Paul S. Doherty Trustee President of Doherty, Wallace, Pillsbury and Murphy, P.C.,
(Age 66) Attorneys. Formerly a Director of Tambrands, Inc. (1993-1998).
Mr. Doherty is also a Director or Trustee of each of the funds
managed by Pilgrim Investments.
Robert B. Goode Trustee Retired. Mr. Goode was formerly Chairman, American Direct Business
(Age 69) Insurance Agency, Inc. (1996 - 2000). Mr. Goode is also a Director
or Trustee of each of the funds managed by Pilgrim Investments.
Alan L. Gosule Partner and Chairman of the Tax Department of Clifford Chance, Rogers
(Age 59) Trustee & Wells (since 1991). Mr. Gosule is a Director of F.L. Putnam
Investment Management Co., Inc., Simpson Housing Limited Partnership,
Home Properties of New York, Inc., CORE Cap, Inc. and Colonnade
Partners. Mr. Gosule is also a Director or Trustee of each of the
funds managed by Pilgrim Investments.
Walter H. May Trustee Retired. Mr. May was formerly Managing Director and Director of
(Age 63) Marketing for Piper Jaffray, Inc. Mr. May is also a Director or
Trustee of each of the funds managed by Pilgrim Investments.
Jock Patton Trustee Private Investor. Director of Hypercom Corporation (since January
(Age 54) 1999) and JDA Software Group, Inc. (since January 1999). Mr. Patton
is also a Director of Buick of Scottsdale, Inc., National Airlines,
Inc., BG Associates, Inc., BK Entertainment, Inc., Arizona
Rotorcraft, Inc. and Director and Chief Executive Officer of Rainbow
Multimedia Group, Inc. Mr. Patton was formerly Director of Stuart
Entertainment, Inc., Director of Artisoft, Inc. (August 1994-July
1998), and a President and Co-owner of StockVal, Inc. (April 1993 -
June 1997). Mr. Patton is also a Director, Trustee, or a member of
the Advisory Board of each of the funds managed by Pilgrim
Investments.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) TO BE HELD
NAME AND AGE WITH THE COMPANIES PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------ ------------------ ----------------------------------------
<S> <C> <C>
David W.C. Putnam Trustee President, Clerk and Director of F.L. Putnam Securities Company, Inc.
(Age 60) and its affiliates (since 1978). Mr. Putnam is Director of Anchor
Investment Management Corporation and President and Director/Trustee
of Anchor Capital Accumulation Trust, Anchor International Bond
Trust, Anchor Gold and Currency Trust, Anchor Resources and
Commodities Trust and Anchor Strategic Assets Trust. Mr. Putnam was
formerly Director of Trust Realty Corp. and Bow Ridge Mining Co. Mr.
Putnam is also a Director or Trustee of each of the funds managed by
Pilgrim Investments.
John R. Smith Trustee President of New England Fiduciary Company (since 1991). Mr. Smith
(Age 76) is Chairman of Massachusetts Educational Financing Authority (since
1987), Vice Chairman of Massachusetts Health and Education Authority
(since 1979) and Vice-Chairman of MHI, Inc. (Massachusetts Non-Profit
Energy Purchasers Consortium) (since 1996). Mr. Smith is also a
Director or Trustee of each of the funds managed by Pilgrim
Investments.
*Robert W. Stallings Trustee Chairman, Chief Executive Officer and President of Pilgrim Group,
(Age 51) Inc. ("Pilgrim Group") (since December 1994); Chairman, Pilgrim
Investments and Pilgrim Securities, Inc. ("Pilgrim Securities")
(since December 1994); President and Chief Executive Officer of
Pilgrim Funding, Inc. (since November 1999); and President and Chief
Executive Officer of Pilgrim Capital Corporation (since October 1999)
and its predecessors (since August 1991). Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of each of the
Pilgrim Funds.
*John G. Turner Trustee/ Chairman and Chief Executive Officer of ReliaStar Financial Corp. and
(Age 60) Chairman ReliaStar Life Insurance Co. (since 1993); Chairman of ReliaStar Life
Insurance Company of New York (since 1995); Chairman of Northern Life
Insurance Company (since 1992). Mr. Turner was formerly Director of
Northstar Investment Management Corporation and affiliates (1993 to
1999) and President of ReliaStar Financial Corp. and ReliaStar Life
Insurance Co. (1989-1991). Mr. Turner is also Chairman of each of
the funds managed by Pilgrim Investments.
David Wallace Trustee Chairman of FECO Engineered Systems, Inc. Mr. Wallace is President
(Age 76) and Trustee of the Robert R. Young Foundation, Governor of the New
York Hospital, Trustee of Greenwit Hospital and Director of UMC
Electronics and Zurn Industries, Inc. Mr. Wallace was formerly
Chairman of Lone Star Industries and Putnam Trust Company and
Chairman and Chief Executive Officer of Todd Shipyards, Bangor Punta
Corporation, and National Securities & Research Corporation. Mr.
Wallace is also a Director or Trustee of each of the funds managed by
Pilgrim Investments.
</TABLE>
----------
* An "interested person" as defined in Section 2(a)(19) of the Investment
Company Act.
6
<PAGE>
During the most recent fiscal year, the Board of Trustees of Pilgrim
Mayflower Trust and Pilgrim Equity Trust held five meetings. Each Trustee
attended at least 75% of such meetings during the period in which such Trustee
served as a Trustee.
COMMITTEES
The Board of Trustees of each Company has an Audit Committee whose function
is to meet with the independent auditors for the Company to review the scope of
the Company's audit, the Company's financial statements and interim accounting
controls, and to meet with management concerning these matters, among other
things. The Committees for Pilgrim Equity Trust and Pilgrim Mayflower Trust
currently consist of David W. Wallace, Paul S. Doherty, Robert B. Goode and John
R. Smith. Mary Baldwin currently serves as an Advisory Board Member of this
Committee for Pilgrim Mayflower Trust. Prior to November 16, 1999, the Committee
consisted of David W. Wallace, Paul S. Doherty, Alan Gosule, Walter H. May and
John R. Smith. During the year ended December 31, 1999, each Audit Committee met
one time. Each member of each Audit Committee attended 100% of the meetings
during the period in which he was a member of the Committee.
The Board of Trustees of each Company has a Valuation Committee whose
function is to review the determination of the value of securities held by the
Funds for which market quotations are not available. The Committee for Pilgrim
Equity Trust currently consists of Jock Patton, Al Burton, Alan L. Gosule,
Walter H. May and David W.C. Putnam. Prior to November 16, 1999, the Committee
consisted of Paul Doherty and Robert Goode. The Committee for Pilgrim Mayflower
Trust currently consists of David W.C. Putnam, Alan Gosule and Walter H. May. Al
Burton and Jock Patton currently serve as Advisory Board Members of this
Committee for Pilgrim Mayflower Trust. Prior to November 16, 1999, the Committee
consisted of Paul Doherty and Robert Goode. During the year ended December 31,
1999, the Valuation Committee did not meet.
The Board of Trustees of each Company has an Executive Committee to act for
the full Board if necessary in the event that Board action is needed between
regularly scheduled Board meetings. The Committee for Pilgrim Equity Trust
currently consists of the following Trustees: Robert W. Stallings, John G.
Turner, Walter H. May and Jock Patton. The Committee for Pilgrim Mayflower Trust
currently consists of John G. Turner and Walter H. May. The Executive Committee
was created on January 27, 2000, and therefore did not meet during each
Company's last fiscal year.
The Board of Trustees of each Company has a Nominating Committee for the
purpose of considering candidates to fill Independent Trustee vacancies on the
Board. The Nominating Committee of Pilgrim Equity Trust currently consists of
Walter H. May, Al Burton, Paul S. Doherty and Robert B. Goode. The Nominating
Committee of Pilgrim Mayflower Trust currently consists of Walter H. May, Paul
S. Doherty and Robert B. Goode. Al Burton and Mary Baldwin currently serve as
Advisory Board Members of this Committee for Pilgrim Mayflower Trust. Neither
Company currently has a policy regarding whether the Nominating Committee will
consider nominees recommended by shareholders of the Company. The Nominating
Committee was created on November 16, 1999, and did not meet during each
Company's last fiscal year.
The Board of Trustees of each Company currently does not have a
Compensation Committee.
REMUNERATION OF TRUSTEES AND OFFICERS
Each Fund currently pays each Trustee or Advisory Board Member who is not
an "interested person" of Pilgrim Investments a pro rata share, as described
below, of (i) an annual retainer of $20,000; (ii) $5,000 per quarterly Board
meeting; (iii) $500 per committee meeting; (iv) $500 per special or telephonic
meeting; and (v) out-of-pocket expenses. The pro rata share paid by each Fund is
based on the Fund's average net assets as a percentage of the average net assets
of all the funds managed by Pilgrim Investments for which the Trustees serve in
common as Directors or Trustees or as Advisory Board Members, if applicable.
Certain of the Funds had different compensation schedules in place for the
Directors/Trustees during portions of 1999.
The following table sets forth the compensation paid to each of the
Trustees of each Company for the fiscal year ended October 31, 1999 or December
31, 1999, as applicable. Trustees who are interested persons of the Companies do
7
<PAGE>
not receive any compensation from the Companies. In the column headed "Total
Compensation From Companies in Fund Complex Paid to Trustees," the number in
parentheses indicates the total number of investment company boards of directors
in the Pilgrim Fund complex on which the Trustee or Advisory Board Member served
during that year.
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL COMPENSATION FROM
COMPENSATION FROM COMPENSATION FROM COMPANIES IN FUND COMPLEX
NAME OF PERSON, POSITION PILGRIM EQUITY TRUST PILGRIM MAYFLOWER TRUST PAID TO TRUSTEES
------------------------ -------------------- ----------------------- -------------------------
<S> <C> <C> <C>
Mary A. Baldwin (1) $ 385 N/A $ 40,875
Former Trustee (15 companies)
Al Burton (1) $ 385 N/A $ 45,875
Trustee (15 companies)
Paul S. Doherty $1,375 $8,086 $ 27,125
Trustee (15 companies)
Robert B. Goode $1,337 $7,817 $ 26,625
Trustee (15 companies)
Alan L. Gosule $1,346 $6,731 $ 25,125
Trustee (15 companies)
Mark S. Jordahl (2)(3) $ 0 N/A $ 0
Former Trustee (6 companies)
Mark L. Lipson (3) $ 0 $ 0 $ 0
Trustee (15 companies)
Walter H. May $1,375 $8,087 $ 27,125
Trustee (15 companies)
Jock Patton(1) $ 385 N/A $ 45,875
Trustee (15 companies)
David W.C. Putnam $1,062 $7,466 $ 24,375
Trustee (15 companies)
John R. Smith $ 1375 $8,086 $ 27,125
Trustee (15 companies)
Robert W. Stallings(1)(3) $ 0 N/A $ 0
Trustee (15 companies)
John G. Turner (3) $ 0 $ 0 $ 0
Trustee (15 companies)
David W. Wallace $1,100 $7,735 $ 24,875
Trustee (15 companies)
</TABLE>
----------
(1) Ms. Baldwin and Messrs. Burton, Patton and Stallings were elected Trustees
of Pilgrim Equity Trust on November 16, 1999. Ms. Baldwin resigned as a
Trustee of Pilgrim Equity Trust effective June 15, 2000.
(2) Resigned as Trustee effective November 16, 1999.
(3) "Interested person," as defined in the Investment Company Act, because of
affiliation with Pilgrim Investments.
8
<PAGE>
VOTE REQUIRED
Shareholders of each Company must separately approve the election of
Nominees for that Company. For each Company, the affirmative vote of a majority
of the shares of that Company voting at the Meeting is required to approve the
election of each Nominee for that Company.
THE BOARD OF TRUSTEES OF THE FUNDS, INCLUDING THE INDEPENDENT
TRUSTEES, RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES
UNDER PROPOSAL NO. 1.
PROPOSAL NO. 2
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENTS
Shareholders of each of the Funds are being asked to approve new Investment
Management Agreements (the "New Agreements") between the Funds and Pilgrim
Investments. APPROVAL OF THE NEW AGREEMENTS IS SOUGHT SO THAT THE MANAGEMENT OF
EACH FUND CAN CONTINUE UNINTERRUPTED AFTER THE TRANSACTION, BECAUSE THE CURRENT
INVESTMENT MANAGEMENT AGREEMENTS (THE "CURRENT AGREEMENTS") MAY TERMINATE
AUTOMATICALLY AS A RESULT OF THE TRANSACTION, WHICH IS DESCRIBED IN "GENERAL
OVERVIEW" ABOVE.
The Transaction between ReliaStar and ING is scheduled to close in
September 2000. As a result of this transaction, ReliaStar will become a
wholly-owned subsidiary of ING America Insurance Holdings, Inc., a subsidiary of
ING. Pilgrim Investments will remain a wholly-owned subsidiary of ReliaStar. The
change in ownership of Pilgrim Investments resulting from this Transaction may
be deemed under the Investment Company Act to be an assignment of the Current
Agreements. The Current Agreements provide for their automatic termination upon
an assignment. Accordingly, the New Agreements between Pilgrim Investments and
the Funds are proposed for approval by shareholders of each Fund. Forms of the
New Agreements are attached as Appendices A through G to this proxy statement
Pilgrim Investments and representatives of ING have advised the Funds that
currently no change is expected in the investment advisory and other personnel
in connection with the Transaction and that it is currently anticipated the same
persons responsible for management of the Funds under the Current Agreements
will continue to be responsible under the New Agreements. Pilgrim Investments
does not anticipate that the Transaction will cause any reduction in the quality
of services now provided to the Funds or have any adverse effect on Pilgrim
Investments' ability to fulfill its obligations to the Funds.
The terms of the New Agreements are the same in all respects as the terms
of the Current Agreements, except for the dates. The Current Agreements were
last approved by each Company's Board of Directors/Trustees, including a
majority of the Directors/Trustees who were not parties to the Current
Agreements or interested persons of such parties, at a Joint Meeting of the
Board of Directors/Trustees held on August 2, 1999 (with respect to Pilgrim
Advisory Funds, Inc., Pilgrim Bank and Thrift Fund, Inc., Pilgrim Government
Securities Income Fund, Inc., Pilgrim Investment Funds, Inc., and Pilgrim Mutual
Funds) and April 27, 2000 (with respect to Pilgrim Equity Trust and Pilgrim
Mayflower Trust). Even though the Board of Directors/Trustees of Pilgrim
Advisory Funds, Inc., Pilgrim Bank and Thrift, Inc., Pilgrim Government
Securities Income Fund, Inc., Pilgrim Investments Funds, Inc. and Pilgrim Mutual
Funds was not required to reapprove the Current Agreements at the April 27, 2000
meeting, the Boards reviewed at that meeting such information necessary to
evaluate the terms of the Current Agreements.
The shareholders for each Fund comprising the Pilgrim Advisory Funds, Inc.,
Pilgrim Bank and Thrift Fund, Inc., Pilgrim Investment Funds, Inc., Pilgrim
Government Securities Income Fund, Inc. and Pilgrim Mutual Funds last approved
the Current Agreements with respect to those Funds on October 26, 1999. The
shareholders for Pilgrim MidCap Opportunities Fund (Pilgrim Equity Trust) last
approved the Current Agreement for that Fund on July 31, 1998. The shareholders
of Emerging Markets Value Fund, High Total Return Fund and Research Enhanced
Index Fund last approved the Current Agreement for that Fund on November 8,
1997, November 8, 1993 and December 16, 1998, respectively.
9
<PAGE>
At the June 13, 2000 meeting of the Board of Directors/Trustees, each New
Agreement was approved unanimously by the Board of Directors/Trustees, including
all of the Directors/Trustees who are not interested parties to the New
Agreements or interested persons of such parties. Each New Agreement as approved
by the Board of Directors/Trustees is submitted for approval by the shareholders
of the Fund to which the New Agreement applies. Each New Agreement must be voted
upon separately by each Fund to which it pertains.
If the New Agreements are approved by shareholders, they will take effect
immediately after the closing of the Transaction. The New Agreements will remain
in effect for two years from the date they take effect, and, unless earlier
terminated, will continue from year to year thereafter, provided that each such
continuance is approved annually with respect to each Fund (i) by the applicable
Company's Board of Directors/Trustees or by the vote of a majority of the
outstanding voting securities of the particular Fund, and, in either case, (ii)
by a majority of the Company's Directors/Trustees who are not parties to the New
Agreement or "interested persons" of any such party (other than as
Directors/Trustees of the Company).
If the shareholders of any Fund should fail to approve the New Agreement
pertaining to that Fund, the Transaction may not be consummated. If the
Transaction is not consummated, Pilgrim Investments will continue to serve as
adviser for all of the Funds under the Current Agreements.
THE TERMS OF THE NEW AGREEMENTS
The terms of each New Agreement will be the same in all respects as that of
its respective Current Agreement, except for the dates. Each New Agreement
requires Pilgrim Investments to provide, subject to the supervision of the Board
of Directors/Trustees, 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. Pilgrim Investments
also provides investment research and analysis.
There will be no increase in advisory fees for any of the Funds. The annual
advisory fees under the New Agreements for each Fund and advisory fees paid by
other investment companies for which Pilgrim Investments acts as investment
adviser are contained in Appendix H to this proxy statement.
Like the Current Agreements, each New Agreement provides that Pilgrim
Investments is not subject to liability to the Fund for any act or omission in
the course of, or connected with, rendering services under the Agreement, except
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties under the Agreement. For Pilgrim
Advisory Funds, Inc. and Pilgrim Mutual Funds, the Agreement provides that the
Company will indemnify Pilgrim Investments from and against any liability for
damages, expenses, or losses incurred in connection with any act or omission
connected with or arising out of any services rendered under the Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of reckless disregard of obligations and
duties under the Agreement.
Each New Agreement may be terminated by a Fund without penalty upon not
less than 60 days' notice by the Board of Directors/Trustees, by a vote of the
holders of a majority of the Fund's outstanding shares voting as a single class,
or by Pilgrim Investments. Each New Agreement will terminate automatically in
the event of its "assignment" (as defined in the Investment Company Act).
INFORMATION ABOUT PILGRIM INVESTMENTS
Organized in December 1994, Pilgrim Investments is registered as an
investment adviser with the Securities and Exchange Commission. As of May 31,
2000, Pilgrim Investments managed over $15.9 billion in assets. Pilgrim
Investments is an indirect wholly-owned subsidiary of ReliaStar. Through its
subsidiaries, ReliaStar offers individuals and institutions life insurance and
annuities, employee benefits products and services, life and health reinsurance,
retirement plans, mutual funds, bank products, and personal finance education.
Prior to April 30, 2000, Pilgrim Advisors, Inc. ("Pilgrim Advisors") served
as investment adviser to certain of the Funds. On April 30, 2000, Pilgrim
Advisors, also an indirect wholly-owned subsidiary of ReliaStar, merged with
Pilgrim Investments, and Pilgrim Investments is the surviving corporation from
that merger. Pilgrim's Investments' principal address is 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004.
10
<PAGE>
See Appendix I to this proxy statement for a list of the directors and
principal executive officers of Pilgrim Investments. The following table
identifies fees that have been paid by the Funds to Pilgrim Investments during
each Fund's most recent fiscal year. Appendix J to this proxy statement
identifies fees that have been paid by the Funds to certain affiliates of
Pilgrim Investments during each Fund's most recent fiscal year.
AGGREGATE ADVISORY FEES PAID TO
FUND PILGRIM INVESTMENTS
---- -------------------
Asia-Pacific Equity (2) $ 303,920
Balanced (2) $ 66,601 (1)
Bank and Thrift (2) $5,893,806
Convertible (2) $ 438,229 (1)
Emerging Countries (2) $ 716,000 (1)
Emerging Markets Value (3) $ 145,031
Government Securities Income. (2) $ 189,816
Growth + Value (3) $2,711,399
High Total Return (3) $4,228,374
High Total Return II (3) $1,877,964
High Yield (2) $2,176,246
High Yield II (2) $ 132,246 (1)
International Core Growth (2) $ 253,063 (1)
International SmallCap Growth (2) $ 327,972 (1)
International Value (3) $7,164,823
LargeCap Growth (2) $ 115,161 (1)
LargeCap Leaders (2) $ 300,494
MagnaCap (2) $3,200,909
MidCap Opportunities (4) $ 483,746
MidCap Growth (2) $ 549,879 (1)
MidCap Value (2) $ 670,780
Money Market (2) $ 0 (5)
Research Enhanced Index (3) $ 690,257
SmallCap Growth (2) $ 811,208 (1)
Strategic Income (2) $ 23,699 (1)
Worldwide Growth (2) $ 589,768 (1)
----------
(1) For the period from May 24, 1999 through June 30, 1999. Pilgrim Investments
became investment adviser to each Fund that is a series of Pilgrim Mutual
Funds on May 24, 1999. For the period prior to May 23, 1999, fees were paid
to Nicholas-Applegate Capital Management.
(2) For the fiscal year ended June 30, 1999.
(3) For the fiscal year ended October 31, 1999.
(4) For the fiscal year ended December 31, 1999.
(5) Money Market Fund commenced operations on July 12, 1999.
11
<PAGE>
From time to time, Pilgrim Investments receives brokerage and research
services from brokers that execute securities transactions for certain of the
Funds. The commission paid by a Fund to a broker that provides such services to
Pilgrim Investments may be greater than the commission would be if the Fund used
a broker that does not provide the same level of brokerage and research
services. Additionally, Pilgrim Investments may use such services for clients
other than the specific Fund or Funds from which the related commissions are
derived.
EXPENSE LIMITATION AGREEMENTS
Pilgrim Investments has entered into expense limitation agreements with
respect to certain of the Funds. The terms of the expense limitation agreements,
as disclosed in the May 1, 2000 prospectuses for the Pilgrim Funds, will not be
affected by the Transaction. Each such expense limitation agreement will
continue in effect after the Transaction until at least October 31, 2001.
Thereafter, each agreement will automatically renew for one-year terms unless
Pilgrim Investments provides written notice of the termination of the agreement
to the Fund at least 30 days prior to the end of the then-current term. The
expense limits for the Funds that have such agreements are shown in Appendix H.
EVALUATION BY THE BOARD OF DIRECTORS/TRUSTEES
In determining whether or not it was appropriate to approve the New
Agreements and to recommend approval to shareholders, the Board of
Directors/Trustees, including the Directors/Trustees who are not interested
persons of Pilgrim Investments, considered various materials and representations
provided by Pilgrim Investments and met with a representative of ING. The
Independent Directors/Trustees were advised by independent legal counsel with
respect to these matters.
Information considered by the Directors/Trustees included, among other
things, the following: (1) Pilgrim Investments' representation that it is
expected to remain intact after the Transaction, and that the same persons
currently responsible for management of the Funds are expected to continue to
manage the Funds after the Transaction closes; (2) that the senior management
personnel responsible for the management of Pilgrim Investments are expected to
continue to be responsible for the management of Pilgrim Investments; (3) that
the compensation to be received by Pilgrim Investments under the New Agreements
is the same as the compensation paid under the Current Agreements; (4) ING
America Insurance Holdings, Inc.'s representation that it will use reasonable
best efforts to assure that an "unfair burden"(as defined in the Investment
Company Act) is not imposed on the Funds as a result of the Transaction; (5) the
commonality of the terms and provisions of the New Agreements and Current
Agreements; (6) ING's financial strength and commitment to the advisory
business; and Pilgrim Investments representation that it will keep any expense
limitation agreements in effect until at least October 31, 2001.
Further, the Board of Directors/Trustees reviewed its determinations
reached at the meetings of the Board of Directors/Trustees of the Funds on
August 2, 1999 and April 27, 2000 respecting the Current Agreements and, with
respect to the Current Agreements, (1) the nature and quality of the services
rendered by Pilgrim Investments under the Agreements; (2) the fairness of the
compensation payable to Pilgrim Investments under the Agreements; (3) the
results achieved by Pilgrim Investments for the Funds; and (4) the personnel,
operations and financial condition, and investment management capabilities,
methodologies, and performance of Pilgrim Investments. The Board also considered
the services provided by Pilgrim Group, Inc. as administrator to the Funds and
the fees received by Pilgrim Group, Inc. for such services.
Based upon its review, the Board determined that, by approving the New
Agreements, the Funds can best be assured that services from Pilgrim Investments
will be provided without interruption. The Board also determined that the New
Agreements are in the best interests of each Fund and its shareholders.
Accordingly, after consideration of the above factors, and such other factors
and information it considered relevant, each Board of Directors/Trustees
unanimously approved the New Agreements and voted to recommend its approval by
each Fund's shareholders.
12
<PAGE>
The effectiveness of this Proposal No. 2 is conditioned on the consummation
of the Transaction. Accordingly, in the event that the Transaction is not
consummated, Pilgrim Investments will continue to manage the Funds pursuant to
the Current Agreements.
VOTE REQUIRED
Shareholders of each Fund must separately approve the applicable New
Investment Management Agreement with respect to that Fund. Approval of this
Proposal No. 2 by a Fund requires an affirmative vote of the lesser of (i) 67%
or more of the Fund's shares 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.
THE BOARD OF DIRECTORS/TRUSTEES OF THE FUNDS, INCLUDING A MAJORITY
OF THE INDEPENDENT DIRECTORS/TRUSTEES, RECOMMENDS THAT YOU
VOTE "FOR" THIS PROPOSAL NO. 2.
PROPOSAL NO. 3
APPROVAL OF SUB-ADVISORY AGREEMENTS
(ASIA-PACIFIC EQUITY, CONVERTIBLE, EMERGING COUNTRIES, EMERGING MARKETS VALUE,
GROWTH + VALUE, INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALLCAP GROWTH,
INTERNATIONAL VALUE, LARGECAP GROWTH, RESEARCH ENHANCED INDEX AND
WORLDWIDE GROWTH FUNDS ONLY)
Shareholders of each Fund that is sub-advised by another investment
advisory firm (each a "Sub-Advised Fund") are being asked to approve a new
Sub-Advisory Agreement with the sub-adviser (each a "Sub-Adviser") for that
Fund. SHAREHOLDER APPROVAL OF NEW SUB-ADVISORY AGREEMENTS (EACH A "NEW
SUB-ADVISORY AGREEMENT") IS BEING SOUGHT SO THAT THE MANAGEMENT OF EACH
SUB-ADVISED FUND CAN CONTINUE UNINTERRUPTED AFTER THE TRANSACTION, BECAUSE THE
TRANSACTION MAY TERMINATE AUTOMATICALLY THE CURRENT SUB-ADVISORY AGREEMENTS
(EACH A "CURRENT SUB-ADVISORY AGREEMENT") FOR THE SUB-ADVISED FUNDS. The New
Sub-Advisory Agreements are included as Appendices K through O.
The following table lists the Funds for which approval is being sought and
identifies the Sub-Adviser for that Fund. While the Board is seeking shareholder
approval of the New Sub-Advisory Agreements, these Agreements do not restrict
the Board's ability to terminate or replace the Sub-Adviser for a Fund at any
time in the future, subject to any shareholder approval that may be required.
FUND(S) SUB-ADVISER
------- -----------
PROPOSAL 3(a):
Asia-Pacific Equity Fund HSBC Asset Management (Americas) Inc.,
HSBC Asset Management (Hong Kong) Limited
and HSBC Asset Management (Europe) Limited
PROPOSAL 3(b):
Convertible, Emerging Countries, Nicholas-Applegate Capital Management
International Core Growth,
International SmallCap Growth,
LargeCap Growth and Worldwide
Growth Funds
PROPOSAL 3(c)
Emerging Markets Value and Brandes Investment Partners, L.P.
International Value Funds
PROPOSAL 3(d)
Growth +Value Fund Navellier Fund Management Inc.
PROPOSAL 3(e)
Research Enhanced Index Fund J.P. Morgan Investment Management Inc.
13
<PAGE>
The New Sub-Advisory Agreements must be voted upon separately by each
Sub-Advised Fund to which a New Sub-Advisory Agreement pertains. If a New
Sub-Advisory Agreement is approved by shareholders of a Sub-Advised Fund, it
will take effect immediately after the closing on the Transaction. It will
remain in effect for two years from the date it takes effect, and, unless
earlier terminated, will continue in effect from year to year thereafter,
provided that each such continuance is approved at least annually (i) by the
applicable Company's Board of Directors/Trustees or by the vote of a majority of
the outstanding voting securities of the particular Fund, and, in either case,
(ii) by a majority of the Company's Directors/Trustees who are not parties to
the New Sub-Advisory Agreement or "interested persons" of any such party (other
than as Directors/Trustees of the Company).
At the June 13, 2000 meeting of the Board of Directors/Trustees, each New
Sub-Advisory Agreement was approved unanimously by the Board of
Directors/Trustees, including all of the Directors/Trustees who are not
interested parties to the New Sub-Advisory Agreements or interested persons of
such parties.
If the shareholders of a Fund should fail to approve the New Sub-Advisory
Agreement that pertains to that Fund, the Sub-Adviser may continue to serve in
that capacity with respect to any other Sub-Advised Funds whose shareholders
approve the New Sub-Advisory Agreement. In such an event, the Board of
Directors/Trustees shall meet to consider appropriate action.
TERMS OF THE NEW SUB-ADVISORY AGREEMENTS
With the exception of the Sub-Advisory Agreement for the Pilgrim
Asia-Pacific Equity Fund, the terms of the Sub-Advisory Agreements are the same
as those currently in effect. Each New Sub-Advisory Agreement, like the Current
Sub-Advisory Agreements, requires the Sub-Adviser to provide, subject to
supervision by the Board of Directors/Trustees and Pilgrim Investments, a
continuous investment program for the Fund and to determine the composition of
the assets of the Fund, including determination of the purchase, retention, or
sale of the securities, cash and other investments for the Fund, in accordance
with the Fund's investment objectives, policies and restrictions.
The fees payable to the Sub-Advisers, which are paid by Pilgrim Investments
and not by the Sub-Advised Funds, will remain the same under the New
Sub-Advisory Agreements. The sub-advisory fees are set forth on Appendix P
hereto.
Like the Current Sub-Advisory Agreements, each New Sub-Advisory Agreement
provides that the Sub-Adviser is not subject to liability for any damages,
expenses, or losses to the Sub-Advised Fund connected with or arising out of any
investment advisory services rendered under the agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties under
the agreement.
The termination provisions of the New Sub-Advisory Agreements are the same
as those of the Current Sub-Advisory Agreements. Each such agreement may be
terminated by Pilgrim Investments upon 60 days' written notice to the
Sub-Adviser and the Fund, by a Fund upon the vote of a majority of the Board of
Directors/Trustees of the Company or a majority of the outstanding shares of the
applicable Fund, upon 60 days' written notice to Pilgrim Investments and the
respective Sub-Adviser, and by the Sub-Adviser upon three months' written notice
with respect to Asia-Pacific Equity, Convertible, Emerging Countries,
International Core Growth, International SmallCap Growth, Large Cap Growth and
Worldwide Growth Funds, and upon 60 days' written notice with respect to
Emerging Markets Value, Growth + Value, International Value and Research
Enhanced Index Funds. Each New Sub-Advisory Agreement will terminate
automatically in the event of its "assignment" (as defined in the Investment
Company Act).
NEW SUB-ADVISORY AGREEMENT FOR ASIA-PACIFIC EQUITY FUND. The New Sub-Advisory
Agreement for the Asia-Pacific Equity Fund is identical to the Current
Sub-Advisory Agreement except for the addition of a new party to the agreement.
The Fund's Sub-Advisers, HSBC Asset Management (Americas) Inc. and HSBC Asset
Management (Hong Kong) Limited, have informed Pilgrim Investments that they wish
to transfer responsibility for certain back office functions to an affiliate,
HSBC Asset Management (Europe) Limited, and therefore have requested that this
affiliate be made a party to the Sub-Advisory Agreement. With the exception of
this addition, all other terms of the Sub-Advisory Agreement remain the same.
Information about HSBC is set forth below.
14
<PAGE>
INFORMATION ABOUT BRANDES INVESTMENT PARTNERS, L.P.
Brandes Investment Partners, L.P. ("Brandes") serves as Sub-Adviser to the
Emerging Markets Value and International Value Funds. Brandes was formed in May
1996 as the successor to its general partner, Brandes Investment Partners, which
has been providing investment advisory services (through various predecessor
entities) since 1974. Brandes currently manages over $33 billion in
international portfolios.
Brandes has managed the International Value and Emerging Markets Value
Funds pursuant to Sub-Advisory Agreements dated January 23, 1997 and November 8,
1997, respectively. The Sub-Advisory Agreements were last approved by the Board
of Trustees on April 27, 2000. For the fiscal year ended October 31, 1999,
Brandes was paid sub-advisory fees of $56,232 and $3,582,411 with respect to the
Emerging Markets Value and International Value Funds, respectively.
INFORMATION ABOUT HSBC
HSBC Asset Management (Americas) Inc., HSBC Asset Management (Hong Kong)
Limited and HSBC Asset Management (Europe) Limited (collectively, "HSBC") serve
as Sub-Adviser to Asia-Pacific Equity Fund. The firms are part of HSBC Asset
Management, the global investment advisory and fund management business unit of
HSBC Holdings plc. HSBC Asset Management manages over approximately $75 billion
of assets worldwide for a wide variety of institutional, retail and private
clients. HSBC Asset Management has advisory operations in Hong Kong and
Singapore, among other locations. Its parent company has over a century of
operations in local economies throughout the Asia-Pacific region.
HSBC Asset Management (Americas) Inc. and HSBC Asset Management (Hong Kong)
Limited have managed Asia-Pacific Equity Fund since its inception pursuant to a
Portfolio Management Agreement dated April 27, 1995. The Portfolio Management
Agreement was last approved by the Board of Directors on August 2, 1999 and was
approved by shareholders of the Fund on October 26, 1999. For the fiscal year
ended June 30, 1999, HSBC Asset Management (Americas) Inc. and HSBC Asset
Management (Hong Kong) Limited were paid sub-advisory fees of $121,638 with
respect to the Asia-Pacific Equity Fund.
INFORMATION ABOUT J.P. MORGAN INVESTMENT MANAGEMENT INC.
J.P. Morgan Investment Management Inc. ("J.P. Morgan") serves as
Sub-Adviser to the Research Enhanced Index Fund. J.P. Morgan was formed in May
1984 and evolved from the Trust and Investment Division of Morgan Guaranty Trust
Company which acquired its first tax-exempt client in 1913 and its first pension
account in 1940. J.P. Morgan currently manages approximately $349 billion for
institutions and pension funds.
J.P. Morgan has managed the Research Enhanced Index Fund pursuant to a
Sub-Advisory Agreement dated December 21, 1998. The Sub-Advisory Agreement was
last approved by the Board of Trustees on April 27, 2000 and was approved by
shareholders of the Fund on December 16, 1998. For the fiscal year ended October
31, 1999, J.P. Morgan was paid sub-advisory fees of $199,666 with respect to the
Research Enhanced Index Fund.
INFORMATION ABOUT NAVELLIER FUND MANAGEMENT, INC.
Navellier Fund Management, Inc. ("Navellier") serves as Sub-Adviser to the
Growth + Value Fund. Navellier and its affiliate, Navellier & Associates, Inc.,
manage over $5 billion in assets for institutions, pension funds and high net
worth individuals.
Navellier has managed the Growth + Value Fund pursuant to a Sub-Advisory
Agreement dated July 1, 1998. The Sub-Advisory Agreement was last approved by
the Board of Trustees on April 27, 2000. For the fiscal year ended October 31,
1999, Navellier was paid sub-advisory fees of $1,355,700 with respect to the
Growth + Value Fund.
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INFORMATION ABOUT NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
Nicholas-Applegate Capital Management ("NACM") serves as Sub-Adviser to the
Convertible, Emerging Countries, International Core Growth, International
SmallCap Growth, LargeCap Growth and Worldwide Growth Funds. Founded in 1984,
NACM manages over $40 billion of discretionary assets for numerous clients,
including employee benefit plans of corporations, public retirement systems and
unions, university endowments, foundations, and other institutional investors
and individuals. Sub-Advised Funds managed by NACM are managed by a team of
portfolio managers and analysts employed by NACM.
NACM manages the assets of the Funds listed above as Sub-Adviser pursuant
to a Portfolio Management Agreement dated May 24, 1999. Prior to May 24, 1999,
NACM served as adviser, rather than sub-adviser, to those Funds. The Portfolio
Management Agreement with NACM was last approved by the Board of Trustees on
August 2, 1999 and by the shareholders of each Fund at a meeting held on October
26, 1999. For the period from May 24, 1999 through June 30, 1999, Pilgrim
Investments paid sub-advisory fees to NACM in the following amounts with respect
to the following Funds: Convertible Fund -- $101,904; Emerging Countries Fund --
$116,945; International Core Growth Fund -- $24,509; International SmallCap
Growth Fund -- $58,349; LargeCap Growth Fund -- $33,219; and Worldwide Growth
Fund -- $110,816.
RECOMMENDATION OF DIRECTORS/TRUSTEES
In determining whether or not it was appropriate to approve the New
Sub-Advisory Agreement for each Fund and to recommend approval to shareholders,
the Board of Directors/Trustees considered, among other things, the fact that
the Sub-Advised Funds will continue to be managed by the same Sub-Advisers, that
the compensation to be received by the Sub-Advisers under the New Sub-Advisory
Agreements is the same as the compensation paid under the Current Sub-Advisory
Agreements, and that the Transaction is not expected to have any effect on
services rendered by the Sub-Advisers. Further, the Board of Directors/Trustees
reviewed its determinations reached at the meetings of the Board of
Directors/Trustees held on August 2, 1999 and April 27, 2000 respecting the
Current Sub-Advisory Agreements and, with respect to the Current Sub-Advisory
Agreements, (1) the nature and quality of the services rendered by the
Sub-Advisers under the Agreements; (2) the fairness of the compensation payable
to the Sub-Advisers under the Agreements; (3) the results achieved by the
Sub-Advisers for the Funds; and (4) the personnel, operations and financial
condition, and investment management capabilities, methodologies, and
performance of the Sub-Advisers.
Based upon its review, the Board has determined that, by approving the New
Sub-Advisory Agreements, the Sub-Advised Funds can best be assured that services
from the Sub-Advisers will be provided without interruption. The Board believes
that retaining the Sub-Advisers is in the best interests of the Sub-Advised
Funds and their shareholders. Accordingly, after consideration of the above
factors, and such other factors and information it considered relevant, the
Board of Directors/Trustees unanimously approved each Fund's New Sub-Advisory
Agreement and voted to recommend its approval by each Fund's shareholders.
The effectiveness of this Proposal No. 3 is conditioned on the consummation
of the Transaction. Accordingly, in the event that the Transaction is not
consummated, each Sub-Adviser will continue to manage the respective Sub-Advised
Funds pursuant to the Current Sub-Advisory Agreements.
VOTE REQUIRED
Shareholders of each Sub-Advised Fund must separately approve the
respective New Sub-Advisory Agreement with respect to that Fund. Approval of
this Proposal No. 3 by a Fund requires an affirmative vote of the lesser of (i)
67% or more of the Fund's shares 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.
THE BOARD OF DIRECTORS/TRUSTEES OF THE SUB-ADVISED FUNDS,
INCLUDING A MAJORITY OF THE INDEPENDENT DIRECTORS/TRUSTEES,
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.
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PROPOSAL NO. 4
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC AUDITORS
(EMERGING MARKETS VALUE, GROWTH + VALUE, HIGH TOTAL RETURN,
HIGH TOTAL RETURN II, INTERNATIONAL VALUE, RESEARCH ENHANCED INDEX,
AND MIDCAP OPPORTUNITIES FUNDS ONLY)
Shareholders of Pilgrim Emerging Markets Value, Growth + Value, High Total
Return, High Total Return II, International Value, and Research Enhanced Index
Funds (series of Pilgrim Mayflower Trust) and MidCap Opportunities Funds (a
series of Pilgrim Equity Trust) are being asked to ratify the selection of the
accounting firm of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") to act
as the independent auditors for the Companies for the fiscal years ending
October 31, 2000 or December 31, 2000, as applicable.
At a meeting of the Board held on January 27, 2000, the Board of Trustees
of Pilgrim Mayflower Trust and Pilgrim Equity Trust, including a majority of
Trustees who are not "interested persons" as defined in the Investment Company
Act, as well as the Trustees who were members of the Audit Committee, selected
PricewaterhouseCoopers to act as the independent auditors for the fiscal year
ending October 31, 2000 and December 31, 2000, as applicable.
PricewaterhouseCoopers has served as independent auditors for Pilgrim
Mayflower Trust with respect to its financial statements for the fiscal years
ending October 31, 1997 through October 31, 1999. For Pilgrim Equity Trust,
PricewaterhouseCoopers has served as independent auditors with respect to its
financial statements for the fiscal years ended December 31, 1998 through
December 31, 1999.
PricewaterhouseCoopers has advised the Companies that it is an independent
auditing firm and has no direct financial or material indirect financial
interest in the Companies. PricewaterhouseCoopers reported to the Boards in
October 1999 that certain PricewaterhouseCoopers professionals had investments
in certain Pilgrim Funds during a period in which PricewaterhouseCoopers was
performing audit services for the funds and during the period of the firm's
engagement to conduct the audit, but that none of those professionals performed
services for the Pilgrim Funds. PricewaterhouseCoopers also informed the Boards
that the circumstances that caused the violations no longer existed.
Representatives of PricewaterhouseCoopers are not expected to be at the Meeting
but have been given the opportunity to make a statement if they wish, and will
be available telephonically should any matter arise requiring their
participation.
VOTE REQUIRED
Shareholders of each Company must separately ratify the independent
auditors for that Company. For each Company, the affirmative vote of a majority
of the shares of that Company voted at the Meeting is required to approve this
Proposal No. 4.
THE BOARD OF DIRECTOR/TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT
DIRECTORS/TRUSTEES, RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.
GENERAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
Management of the Funds 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 proxy holders will vote thereon in
accordance with their best judgment.
SECTION 15(F) OF THE INVESTMENT COMPANY ACT
ING America Insurance Holdings, Inc. and ReliaStar, the indirect parent
company of Pilgrim Investments, have agreed to use their reasonable best efforts
to assure compliance with the conditions of Section 15(f) of the Investment
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Company Act of 1940, as amended. Section 15(f) provides a non-exclusive safe
harbor for an investment adviser or any affiliated persons thereof to receive
any amount or benefit in connection with a transaction that results in a change
in control of or identity of the investment adviser to an investment company as
long as two conditions are met. First, no "unfair burden" may be imposed on the
investment company as a result of the transaction relating to the change of
control, or any express or implied terms, conditions or understandings
applicable thereto. As defined in the Investment Company Act of 1940, the term
"unfair burden" includes any arrangement during the two-year period after the
change in control whereby the investment adviser (or predecessor or successor
adviser), or any interested person of any such adviser, receives or is entitled
to receive any compensation, directly or indirectly, from the investment company
or its security holders (other than fees for bona fide investment advisory or
other services), or from any person in connection with the purchase or sale of
securities or other property to, from, or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter of the
investment company). Second, during the three year period immediately following
the change of control, at least 75% of an investment company's board of
directors/trustees must not be "interested persons" of the investment adviser or
the predecessor investment adviser within the meaning of the Investment Company
Act of 1940, as amended.
VOTING RIGHTS
Each share of each class of a Fund is entitled to one vote. Shareholders of
each Fund at the close of business on June 19, 2000 (the "Record Date") will be
entitled to be present and to give voting instructions for the Funds at the
Meeting and any adjournments thereof with respect to their shares owned as of
the Record Date. As of the Record Date, the Funds had the following shares
outstanding:
FUND SHARES OUTSTANDING
---- ------------------
Pilgrim Asia-Pacific Fund 4,259,221
Pilgrim Balanced Fund 9,300,199
Pilgrim Bank and Thrift Fund 25,687,007
Pilgrim Convertible Fund 1,662,551
Pilgrim Emerging Countries Fund 12,602,773
Pilgrim Emerging Markets Value Fund 1,371,260
Pilgrim Government Securities Income Fund 9,153,580
Pilgrim Growth + Value Fund 32,554,692
Pilgrim High Total Return Fund 77,980,557
Pilgrim High Total Return Fund II 24,906,067
Pilgrim High Yield Fund 60,613,157
Pilgrim High Yield Fund II 18,265,527
Pilgrim International Core Growth Fund 3,758,139
Pilgrim International SmallCap Growth Fund 17,246,476
Pilgrim International Value Fund 105,230,113
Pilgrim LargeCap Growth Fund 15,925,234
Pilgrim LargeCap Leaders Fund 2,446,301
Pilgrim MagnaCap Fund 26,892,293
Pilgrim MidCap Growth Fund 19,324,162
Pilgrim MidCap Opportunities Fund 6,343,730
Pilgrim MidCap Value Fund 2,315,526
Pilgrim Money Market Fund 71,657,358
Pilgrim Research Enhanced Index Fund 21,883,593
Pilgrim SmallCap Growth Fund 26,853,383
Pilgrim Strategic Income Fund 983,919
Pilgrim Worldwide Growth Fund 21,260,341
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For Pilgrim Mutual Funds, one-third of the outstanding shares of the
Company on the Record Date, represented in person or by proxy, must be present
to constitute a quorum. For Pilgrim Advisory Funds, one-third of the outstanding
shares of each Fund comprising Advisory Funds on the Record Date, represented in
person or by proxy, must be present to constitute a quorum. For each remaining
Company, a majority of the outstanding shares of the Company or Fund on the
Record Date, present in person or represented by proxy, must be present to
constitute a quorum.
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. 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. Any adjournment
will require the affirmative vote of a majority of those shares represented at
the Meeting in person or by proxy. The persons named in the enclosed proxies
will vote in favor of such adjournment those proxies which they are entitled to
vote in favor of any Proposal that has not been adopted, will vote against any
adjournments those proxies required to be voted against any Proposal that has
not been adopted, and will not vote any proxies that direct them to abstain from
voting on such Proposals.
The Funds expect that, before the Meeting, broker-dealer firms holding
shares of the Funds in "street name" for their customers will request voting
instructions from their customers and beneficial owners. If these instructions
are not received by the date specified in the broker-dealer firms' proxy
solicitation materials, the Funds understand that the broker-dealers that are
members of the New York Stock Exchange may vote on the items to be considered at
the Meeting on behalf of their customers and beneficial owners under rules of
the New York Stock Exchange.
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,
then the shares represented by such abstention or non-vote will be considered to
be present at the Meeting for purposes of determining the existence of a quorum.
However, abstentions and broker non-votes will be disregarded in determining the
"votes cast" on an issue. For this reason, with respect to matters requiring the
affirmative vote of a majority of the total shares outstanding, an abstention or
broker non-vote will have the effect of a vote against such matters.
To the knowledge of the Funds, as of May 31, 2000, no current
Director/Trustee of the Funds owned 1% or more of the outstanding shares of any
Fund and the officers and Directors/Trustees of the Funds owned, as a group,
less than 1% of the shares of each Fund.
BENEFICIAL OWNERS
Appendix Q to this proxy statement lists the persons that, to the knowledge
of the Funds, owned beneficially 5% or more of the outstanding shares of any
class of a Fund as of May 31, 2000.
EXPENSES
Pilgrim Investments or an affiliate, or ING, will pay the expenses of the
Funds 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. The Funds will not bear the expenses of
the Proxy Statement.
ADVISER AND PRINCIPAL UNDERWRITER
Pilgrim Investments is located at 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004, and serves as the investment adviser to each of the
Funds. Pilgrim Securities, Inc., whose address is 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004, is the Distributor for each of the Funds.
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EXECUTIVE OFFICERS OF THE COMPANY
Officers of the Funds are elected by the Board and hold office until they
resign, are removed or are otherwise disqualified to serve. The principal
executive officers of each Fund, together with such person's position with the
Funds and principal occupation for the last five years, are listed on Appendix R
attached hereto.
SHAREHOLDER PROPOSALS
The Funds are not required to hold annual meetings of shareholders and
currently do not intend to hold such meetings unless shareholder action is
required in accordance with the Investment Company Act. A shareholder proposal
to be considered for inclusion in the proxy statement at any subsequent meeting
of shareholders must be submitted a reasonable time before the proxy statement
for that meeting is mailed. Whether a proposal is submitted in the proxy
statement will be determined in accordance with applicable federal and state
laws.
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
/s/ James M. Hennessy
JAMES M. HENNESSY, Secretary
July 21, 2000
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
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APPENDICES
Appendix A Form of Investment Management Agreement for Pilgrim Advisory
Funds, Inc. (Pilgrim Asia-Pacific Equity, LargeCap Leaders and
MidCap Value Funds)
Appendix B Form of Investment Management Agreement for Pilgrim Bank and
Thrift Fund, Inc.
Appendix C Form of Investment Management Agreement for Pilgrim Equity Trust
(Pilgrim MidCap Opportunities Fund)
Appendix D Form of Investment Management Agreement for Pilgrim Government
Securities Income Fund, Inc.
Appendix E Form of Investment Management Agreement for Pilgrim Investment
Funds, Inc. (Pilgrim High Yield Fund and Pilgrim MagnaCap Fund)
Appendix F Form of Investment Management Agreement for Pilgrim Mayflower
Trust (Pilgrim Emerging Markets Value, Growth + Value, High Total
Return, HighTotal Return II, International Value and Research
Enhanced Index Funds)
Appendix G Form of Investment Management Agreement for Pilgrim Mutual Funds
(Pilgrim Balanced, Convertible, Emerging Countries, High Yield
II, International Core Growth, International SmallCap Growth,
LargeCap Growth, MidCap Growth, Money Market, SmallCap Growth,
Strategic Income and Worldwide Growth Funds)
Appendix H Advisory Fees
Appendix I Directors and Principal Executive Officers of Pilgrim
Investments, Inc.
Appendix J Fees Earned by Pilgrim Group, Inc and Pilgrim Securities, Inc.
Appendix K Form of Sub-Advisory Agreement with Brandes Investment Partners,
L.P. (Pilgrim Emerging Markets Value Fund and Pilgrim
International Value Fund)
Appendix L Form of Sub-Advisory Agreement with HSBC Asset Management
(Americas), Inc., HSBC Asset Management (Hong Kong) Limited
(Pilgrim Asia-Pacific Fund) and HSBC Asset Management (Europe)
Limited
Appendix M Form of Sub-Advisory Agreement with J. P. Morgan Investment
Management Inc. (Pilgrim Research Enhanced Index Fund)
Appendix N Form of Sub-Advisory Agreement with Navellier Fund Management,
Inc. (Pilgrim Growth + Value Fund)
Appendix O Form of Sub-Advisory Agreement with Nicholas-Applegate Capital
Management (Pilgrim Convertible, Emerging Countries,
International Core Growth, International SmallCap Growth,
LargeCap Growth and Worldwide Growth Funds)
Appendix P Annual Sub-Advisory Fees for the Sub-Advised Funds
Appendix Q Beneficial Ownership
Appendix R Principal Executive Officers of each of the Companies
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APPENDIX A
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM ADVISORY FUNDS, INC.
(PILGRIM ASIA-PACIFIC EQUITY, LARGECAP LEADERS AND MIDCAP VALUE FUNDS)
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the ___ day of _______,
2000, between Pilgrim Advisory Funds, Inc., a Maryland corporation, (hereinafter
called the "Fund"), and Pilgrim Investments, Inc. a Delaware corporation
(hereinafter called the "Manager").
W I T N E S S E T H
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund currently proposes to offer shares in three series, may
offer shares of additional series in the future, and currently intends to offer
shares of additional series in the future;
WHEREAS, the Fund desires to avail itself of the services of the Manager
for the provision of advisory, management, administrative, and other services
for the Fund; and
WHEREAS, the Manager is willing to render such services to the Fund;
NOW, THEREFORE, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. APPOINTMENT. The Fund hereby appoints the Manager, subject to the
direction of the Board of Directors, for the period and on the terms set forth
in this Agreement, to provide advisory, management, administrative, and other
services, as described herein, with respect to each series of the Fund
(individually and collectively referred to herein as "Series"). The Manager
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
In the event the Fund establishes and designates additional series with respect
to which it desires to retain the Manager to render advisory services hereunder,
it shall notify the Manager in writing. If the Manager is willing to render such
services, it shall notify the Fund in writing, whereupon such additional series
shall become a Series hereunder.
2. SERVICES OF THE MANAGER. The Manager represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
and will maintain such registration for so long as required by applicable law.
Subject to the general supervision of the Board of Directors of the Fund, the
Manager shall provide the following advisory, management, administrative, and
other services with respect to the Series:
(a) Provide general, overall advice and guidance with respect to the
Series and provide advice and guidance to the Fund's Directors, and oversee the
management of the investments of the Series and the composition of each Series'
portfolio of securities and investments, including cash, and the purchase,
retention and disposition thereof, in accordance with each Series' investment
objective or objectives and policies as stated in the Fund's current
registration statement, which management shall be provided by others selected by
the Manager and approved by the Board of Directors as provided below or directly
by the Manager as provided in Section 3 of this Agreement;
(b) In the event that the Manager wishes to select others to render
investment management services, the Manager shall analyze, select and recommend
for consideration by the Fund's Board of Directors investment advisory firms
(however organized) to provide investment advice to one or more of the Series,
and, at the expense of the Manager, engage (which engagement may also be by the
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Fund) such investment advisory firms to render investment advice and manage the
investments of such Series and the composition of each such Series' portfolio of
securities and investments, including cash, and the purchase, retention and
disposition thereof, in accordance with the Series' investment objective or
objectives and policies as stated in the Fund's current registration statement
(any such firms approved by the Board of Directors and engaged by the Fund
and/or the Manager are referred to herein as "Sub-Advisers");
(c) Periodically monitor and evaluate the performance of the
Sub-Advisers with respect to the investment objectives and policies of the
Series;
(d) Monitor the Sub-Advisers for compliance with the investment
objective or objectives, policies and restrictions of each Series, the 1940 Act,
Subchapter M of the Internal Revenue Code, and if applicable, regulations under
such provisions, and other applicable law;
(e) If appropriate, analyze and recommend for consideration by the
Fund's Board of Directors termination of a contract with a Sub-Adviser under
which the Sub-Adviser provided investment advisory services to one or more of
the Series;
(f) Supervise Sub-Advisers with respect to the services that such
Sub-Advisers provide under respective sub-advisory agreements ("Sub-Advisory
Agreements"), although the Manager is not authorized, except as provided in
Section 3 of the Agreement, directly to make determinations with respect to the
investment of a Series' assets or the purchase or sale of portfolio securities
or other investments for a Series;
(g) Provide all supervisory, management, and administrative services
reasonably necessary for the operation of the Series other than the investment
advisory services performed by the Sub-Advisers, including, but not limited to,
(i) coordinating all matters relating to the operation of the Series, including
any necessary coordination among the Sub-Advisers, custodian, transfer agent,
dividend disbursing agent, and portfolio accounting agent (including pricing and
valuation of the Series' portfolios), accountants, attorneys, and other parties
performing services or operational functions for the Fund; (ii) maintaining or
supervising the maintenance by third parties selected by the Manager of such
books and records of the Fund and the Series as may be required by applicable
federal or state law; (iii) preparing or supervising the preparation by third
parties selected by the Manager of all federal, state, and local tax returns and
reports relating to the Series required by applicable law; (iv) preparing and
filing and arranging for the distribution of proxy materials and periodic
reports to shareholders of the Series as required by applicable law; (v)
preparing and arranging for the filing of registration statements and other
documents with the Securities and Exchange Commission (the "SEC") and other
federal and state regulatory authorities as may be required by applicable law;
(vi) taking such other action with respect to the Fund as may be required by
applicable law in connection with the Series, including without limitation the
rules and regulations of the SEC and other regulatory agencies; and (vii)
providing the Fund, at the Manager's expense, with adequate personnel, office
space, communications facilities, and other facilities necessary for operation
of the Series as contemplated in this Agreement.
(h) Render to the Board of Directors of the Fund such periodic and
special reports as the Board may reasonably request; and
(i) Make available its officers and employees to the Board of
Directors and officers of the Fund for consultation and discussions regarding
the administration and management of the Series and services provided to the
Fund under this Agreement.
3. INVESTMENT MANAGEMENT AUTHORITY. In the event the Manager wishes to
render investment management services directly to a Series, then with respect to
any such Series, the Manager, subject to the supervision of the Fund's Board of
Directors, will provide a continuous investment program for the Series'
portfolio and determine the composition of the assets of the Series' portfolio,
including determination of the purchase, retention, or sale of the securities,
cash, and other investments contained in the portfolio. The Manager will provide
investment research and conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Series' assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, or
exchanged for the Series, when these transactions should be executed, and what
portion of the assets of the Series should be held in the various securities and
other investments in which it may invest, and the Manager is hereby authorized
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to execute and perform such services on behalf of the Series. To the extent
permitted by the investment policies of the Series, the Manager shall make
decisions for the Series as to foreign currency matters and make determinations
as to, and execute and perform, foreign currency exchange contracts on behalf of
the Series. The Manager will provide the services under this Agreement in
accordance with the Series' investment objective or objectives, policies, and
restrictions as stated in the Fund's Registration Statement filed with the SEC,
as amended. Furthermore:
(a) The Manager will manage the Series so that each will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. In
managing the Series in accordance with these requirements, the Manager shall be
entitled to receive and act upon advice of counsel to the Fund or counsel to the
Manager.
(b) The Manager will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Directors, and the provisions of the Registration Statement of the Fund under
the Securities Act of 1933 and the 1940 Act, as supplemented or amended.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the Registration
Statement. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Manager in
a manner that is fair and equitable in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities of the
Series, the Manager will arrange for the transmission to the custodian for the
Fund on a daily basis, of such confirmation, trade tickets, and other documents
and information, including, but not limited to, Cusip, Cedel, or other numbers
that identify securities to be purchased or sold on behalf of the Series, as may
be reasonably necessary to enable the custodian to perform its administrative
and recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian.
(e) The Manager will assist the custodian or portfolio accounting
agent for the Fund in determining, consistent with the procedures and policies
stated in the Registration Statement for the Fund, the value of any portfolio
securities or other assets of the Series for which the custodian or portfolio
accounting agent seeks assistance or review from the Manager. The Manager will
monitor on a daily basis the determination by the custodian or portfolio
accounting agent for the Fund of the value of portfolio securities and other
assets of the Series and the determination of net asset value of the Series;
provided, however, that the Manager shall, in the absence of bad faith, have no
liability whatsoever for any mistakes or errors of judgment in providing the
foregoing valuation-related services.
(f) The Manager will make available to the Fund, promptly upon
request, all of the Series' investment records and ledgers as are necessary to
assist the Fund to comply with requirements of the 1940 Act and the Investment
Advisers Act of 1940, as well as other applicable laws. The Manager will furnish
to regulatory authorities having the requisite authority any information or
reports in connection with such services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(g) The Manager will regularly report to the Fund's Board of Directors
on the investment program for the Series and the issuers and securities
represented in the Series' portfolio, and will furnish the Fund's Board of
Directors with respect to the Series such periodic and special reports as the
Directors may reasonably request.
(h) In connection with its responsibilities under this Section 3, the
Manager is responsible for decisions to buy and sell securities and other
investments for the Series' portfolio, broker-dealer selection, and negotiation
of brokerage commission rates. The Manager's primary consideration in effecting
a security transaction will be to obtain the best execution for the Series,
taking into account the factors specified in the Prospectus and/or Statement of
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Additional Information for the Fund, which include price (including the
applicable brokerage commission or dollar spread), the size of the order, the
nature of the market for the security, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer involved,
the quality of the service, the difficulty of execution, execution capabilities
and operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. Accordingly, the price to the Series in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified, in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund, by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Directors may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, the Manager shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Series to pay a broker-dealer for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Manager's overall responsibilities with respect to the Series and to its other
clients as to which it exercises investment discretion. To the extent consistent
with these standards and in accordance with Section 11(a) of the Securities and
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, the Manager is further
authorized to allocate the orders placed by it on behalf of the Series to the
Manager if it is registered as a broker-dealer with the SEC, to an affiliated
broker-dealer, or to such brokers and dealers who also provide research or
statistical material or other services to the Series, the Manager or an
affiliate of the Manager. Such allocation shall be in such amounts and
proportions as the Manager shall determine consistent with the above standards,
and the Manager will report on said allocation regularly to the Board of
Directors of the Fund indicating the broker-dealers to which such allocations
have been made and the basis therefor.
4. CONFORMITY WITH APPLICABLE LAW. The Manager, in the performance of its
duties and obligations under this Agreement, shall act in conformity with the
Registration Statement of the Fund and with the instructions and directions of
the Board of Directors of the Fund and will conform to, and comply with, the
requirements of the 1940 Act and all other applicable federal and state laws and
regulations.
5. EXCLUSIVITY. The services of the Manager to the Fund under this
Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of any of the Series) and to engage in other activities, so
long as its services hereunder are not impaired thereby.
6. DOCUMENTS. The Fund has delivered properly certified or authenticated
copies of each of the following documents to the Manager and will deliver to it
all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Directors of the Fund
authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) the Registration Statement as filed with the SEC and any
amendments thereto; and
(c) exhibits, powers of attorney, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
7. RECORDS. The Manager agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Manager with respect to the Series by the 1940 Act. The Manager further
agrees that all records which it maintains for the Series are the property of
the Fund and it will promptly surrender any of such records upon request.
8. EXPENSES. During the term of this Agreement, the Manager will pay all
expenses incurred by it in connection with its activities under this Agreement,
except such expenses as are assumed by the Fund under this Agreement and such
expenses as are assumed by a Sub-Adviser under its Sub-Advisory Agreement. The
Manager further agrees to pay all fees payable to the Sub-Advisers, executive
salaries and expenses of the Directors and officers of the Fund who are
employees of the Manager or its affiliates, and office rent of the Fund. The
Fund shall be responsible for all of the other expenses of its operations,
including, without limitation, the management fee payable hereunder; brokerage
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commissions; interest; legal fees and expenses of attorneys; fees of auditors,
transfer agents and dividend disbursing agents, and custodians; the expense of
obtaining quotations for calculating each Fund's net asset value; taxes, if any,
and the preparation of the Fund's tax returns; cost of stock certificates and
any other expenses (including clerical expenses) of issue, sale, repurchase or
redemption of shares; expenses of registering and qualifying shares of the Fund
under federal and state laws and regulations (including the salary of employees
of the Manager engaged in the registering and qualifying of shares of the Fund
under federal and state laws and regulations or a pro-rata portion of the salary
of employees to the extent so engaged); expenses of printing and distributing
reports, notices and proxy materials to existing shareholders; expenses of
printing and filing reports and other documents filed with governmental
agencies; expenses of annual and special shareholder meetings; expenses of
printing and distributing prospectuses and statements of additional information
to existing shareholders; fees and expenses of Directors of the Fund who are not
employees of the Manager or any Sub-Adviser, or their affiliates; membership
dues in the Investment Company Institute; insurance premiums; and extraordinary
expenses such as litigation expenses. 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.
9. COMPENSATION. For the services provided by the Manager pursuant to this
Agreement, the Fund will pay to the Manager a monthly fee, in arrears, equal to
1/12th of the corresponding percentage of the average daily net assets of each
Series during the month. For purposes of the immediately preceding sentence, the
corresponding percentages are as follows:
Pilgrim MidCap Value Fund 1.00%
Pilgrim LargeCap Leaders Fund 1.00%
Pilgrim Asia-Pacific Equity Fund 1.25%
Payment of the fee will be due by the 10th day of the following month. Payment
of the above fees shall be in addition to any amount paid to the Manager for the
salary of its employees engaged in registering and qualifying shares of the Fund
under federal and state law as provided in Section 8. The fee will be
appropriately pro-rated to reflect any portion of a calendar month that this
Agreement is not in effect between us.
10. LIABILITY OF THE MANAGER. The Manager may rely on information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to, and
the Fund will indemnify such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Manager's duties, or by reason of reckless disregard of the
Manager's obligations and duties under this Agreement. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to, and
the Fund will indemnify such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with, any act or omission by
a Sub-Adviser or any of the Sub-Advisers' stockholders or partners, officers,
directors, employees, or agents connected with or arising out of any services
rendered under a Sub-Advisory Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the Manager's
duties under this Agreement, or by reason of reckless disregard of the Manager's
obligations and duties under this Agreement.
11. CONTINUATION AND TERMINATION. This Agreement shall become effective on
the date first written above, subject to the condition that the Fund's Board of
Directors, including a majority of those Directors who are not interested
persons (as such term is defined in the 1940 Act) of the Manager, and the
shareholders of each Series, shall have approved this Agreement. Unless
terminated as provided herein, the Agreement shall continue in full force and
effect for two (2) years from the effective date of this Agreement, and shall
continue from year to year thereafter with respect to each Series so long as
such continuance is specifically approved at least annually (i) by the vote of a
majority of the Board of Directors of the Fund, or (ii) by vote of a majority of
the outstanding voting shares of the Fund (as defined in the 1940 Act), and
provided continuance is also approved by the vote of a majority of the Board of
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Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of the Fund or the Manager, cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
may not be amended in any material respect without a majority vote of the
outstanding voting shares (as defined in the 1940 Act).
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a Series shall be effective
to continue this Agreement with respect to such Series notwithstanding (i) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Fund, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement may be terminated by the Fund at any time, without the payment of any
penalty, by vote of a majority of the entire Board of Directors of the Fund or
by a vote of a majority of the outstanding voting shares of the Fund, or with
respect to a Series, by vote of a majority of the outstanding voting shares of
such Series, on sixty (60) days' written notice to the Manager, or by the
Manager at any time, without the payment of any penalty, on sixty (60) days'
written notice to the Fund. This Agreement will automatically and immediately
terminate in the event of its "assignment" (as described in the 1940 Act).
12. USE OF NAME. It is understood that the name "Pilgrim Investments, Inc."
or any derivative thereof (including the name "Pilgrim") or logo associated with
that name is the valuable property of the Manager and its affiliates, and that
the Fund and/or the Series have the right to use such name (or derivative or
logo) only so long as this Agreement shall continue with respect to such Fund
and/or Series. Upon termination of this Agreement, the Fund (or Series) shall
forthwith cease to use such name (or derivative or logo) and, in the case of the
Fund, shall promptly amend its Articles of Incorporation to change its name (if
such name is included therein).
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. APPLICABLE LAW.
(a) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PILGRIM ADVISORY FUNDS, INC.
By:
-------------------------------------
Title
-----------------------------------
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
Title
-----------------------------------
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APPENDIX B
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM BANK AND THRIFT FUND, INC.
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT is made as of the __th day of _______,
2000, by and between PILGRIM BANK AND THRIFT FUND, INC., a Maryland corporation
(the "Fund"), and PILGRIM INVESTMENTS, INC., a Delaware corporation (the
"Manager"), with respect to the following recital of fact.
W I T N E S S E T H:
WHEREAS, the Fund is registered as a open-end, diversified, management
investment company, under the Investment Company Act of 1940, as amended; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended and is engaged in the business of
supplying investment advice, investment management and administrative services,
as an independent contractor; and
WHEREAS, 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. Investment Management. The Manager shall manage the Fund's affairs and
shall supervise all aspects of the Fund's operations, including the investment
and reinvestment of the cash, securities or other properties comprising the
Fund's assets, subject at all times to the policies and control of the Fund's
Board of Directors. The Manager shall give the Fund the benefit of its best
judgment, efforts and facilities in rendering its services as Manager.
2. Duties of the Investment Manager. In carrying out its obligation under
paragraph 1 hereof, the Manager shall:
(a) supervise and manage all aspects of the Fund's operations;
(b) provide the Fund with such executive, administrative and clerical
services as are deemed advisable by the Fund's Board of Directors;
(c) arrange, but not pay for, the periodic updating and filing of
prospectuses and supplements thereto, proxy material, tax returns, reports to
the Fund's shareholders and reports to and filings with the Securities and
Exchange Commission and state Blue Sky authorities;
(d) provide the Fund with, or obtain for it, adequate office space and
all necessary office equipment and service, including telephone service, heat,
utilities, stationery supplies and similar items for the Fund's principal
office;
(e) provide the Board of Directors of the Fund on a regular basis with
financial reports and analyses on the Fund's operations and the operations of
comparable investment companies;
(f) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign and
otherwise, whether affecting the economy generally or the portfolio of the Fund,
and whether concerning the individual issuers whose securities are included in
the Fund's portfolio or the activities in which they engage, or with respect to
securities which the Manager considers desirable for inclusion in the Fund's
portfolio;
(g) determine what issuers and securities shall be represented in the
Fund's portfolio and regularly report them to the Fund's Board of Directors;
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(h) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Fund's Board of Directors; and
(i) take, on behalf of the Fund, all actions which appear necessary to
carry into effect such purchase and sale programs and supervisory functions as
aforesaid, including the placing of orders for the purchase and sale of
portfolio securities, it being understood that the Fund shall reimburse the
Manager for the costs of such actions upon proper accounting.
3. BROKER-DEALER RELATIONSHIPS. The Manager is responsible for decisions to
buy and sell securities for the Fund, broker-dealer selection, and negotiation
of its brokerage commission rates. The Manager's primary consideration in
effecting a security transaction will be execution at the most favorable price.
In selecting a broker-dealer to execute each particular transaction, the
Manager will take the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker-dealer; the size of and difficulty in executing the order; the value of
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis; and other factors such as the broker-dealer's
ability to engage in transactions in shares of issuers which are typically not
listed on an organized stock exchange. Accordingly, the price to the Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Directors
may determine, the Manager shall not be deemed to have acted unlawfully or to
have breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Fund to pay a broker or dealer that provides brokerage
and research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Manager determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Manager's overall responsibilities with respect to the Fund.
The Manager is further authorized to allocate the orders placed by it on
behalf of the Fund to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Manager. Such
allocations shall be in such amounts and proportions as the Manager shall
determine and the Manager will report on said allocations regularly to the Board
of Directors of the Fund indicating the brokers to whom such allocations have
been made and the basis therefor.
4. CONTROL BY BOARD OF DIRECTORS. Any management or supervisory activities
undertaken by the Manager pursuant to this Agreement, as well as other
activities undertaken by the Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund.
5. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out is obligations
under this Agreement, the Manager shall at all times conform to:
(a) all applicable provisions of the Investment Company Act of 1940
and any rules and regulations adopted thereunder, as amended; and
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and the Investment Company Act of 1940, as amended; and
(c) the provisions of the Articles of Incorporation of the Fund, as
amended; and
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and Federal law.
6. EXPENSES. The expenses connected with the Fund shall be allocable
between the Fund and the Manager as follows:
(a) The Manager shall furnish at its expense and without cost to the
Fund, the services of a President, Secretary and one or more Vice Presidents of
the Fund, to the extent that such additional officers may be required by the
Fund for the proper conduct of its affairs;
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(b) Nothing in Subparagraph (a) hereof shall be construed to require
the Manager to bear the portion allocable to the Fund of the salary of the
Manager's portfolio trader and the compensation paid to personnel working under
his or her direction to the extent such salary and compensation does not exceed
$15,000 per annum. Notwithstanding the obligation of the Fund to bear the
expense of the items referred to above, the Manager may pay the salaries,
including any applicable employment or payroll taxes and other salary costs, of
the personnel carrying out such functions and the Fund shall reimburse the
Manager therefor upon proper accounting;
(c) The Manager shall bear the cost of the portion allocable to the
Fund of the salary of the Manager's portfolio trader and the compensation paid
to personnel working under his or her direction to the extent such salary and
compensation exceeds $15,000 per annum;
(d) The Fund shall pay or cause to be paid all expenses of the stock
transfer or dividend agent or agents appointed by the Fund;
(e) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the charges and expenses of
the registrar, any custodian or depository appointed by the Fund for the
safekeeping of its cash, portfolio securities and other property, and any
accounting agent appointed by the Fund; broker's commissions chargeable to the
Fund in connection with portfolio securities transactions to which the Fund is a
party; all taxes, including securities issuance and transfer taxes, and
corporate fees payable by the Fund to Federal, state or other governmental
agencies; the cost and expense of engraving or printing of stock certificates
representing shares of the Fund; all costs and expenses in connection with the
registration and maintenance of registration of the Fund and its shares with the
Securities and Exchange Commission and various states and other jurisdictions
(including filing fees and legal fees and disbursements of counsel); the costs
and expenses in connection with the listing, and maintenance of such listing, of
the Fund's shares on any securities exchange; the costs and expenses of
preparing (including typesetting) prospectuses (including supplements thereto)
of the Fund, proxy statements and reports to shareholders; and of printing and
distributing such items to the Fund's shareholders, all expenses of
shareholders' and directors' meetings; fees and travel expenses of directors or
members of any advisory board or committee; all expenses incident to the payment
of any dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the Fund's
shares; charges and expenses of legal counsel, including counsel to the
directors of the Fund who are not interested persons (as defined in the
Investment Company Act of 1940, as amended) of the Fund, and of independent
accountants, in connection with any matter relating to the Fund; membership dues
of industry associations; interest payable on Fund borrowings; postage;
insurance premiums on property or personnel (including officers and directors)
of the Fund which inure to its benefit; extraordinary expenses (including, but
not limited to, legal claims and liabilities and litigation costs and any
indemnification related thereto); and all other charges and costs of the Fund's
operation unless otherwise explicitly provided therein.
7. DELEGATION OF RESPONSIBILITIES. The Manager may, but should be under no
duty to, perform services on behalf of the Fund which are not required by this
Agreement upon the request of the Fund's Board of Directors. Such services will
be performed on behalf of the Fund and the Manager's charge in rendering such
services may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Manager of any Fund
expense that the Manager is not required to pay or assume under this Agreement
shall not relieve the Manager of any of its obligations to the Fund nor obligate
the Manager to pay or assume any similar Fund expense on any subsequent
occasions.
8. COMPENSATION. For the services to be rendered and the expenses assumed
by the Manager, the Fund shall pay to the Manager monthly compensation of the
sum of the amounts determined by applying the following annual rates to the
Fund's average daily net assets: 1.0% of the first $30 million of the Fund's
average daily net assets, .75% of the Fund's average daily net assets of the
next $95 million of average daily net assets, and .70% of the average daily net
assets in excess of $125 million. Except as hereinafter set forth, compensation
under this Agreement shall be calculated and accrued daily and the amounts of
daily accruals shall be paid monthly. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month, compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculation of fees set forth
above. Payment of the Manager's compensation for the preceding month shall be
made as promptly as possible after completion of the computations contemplated
above.
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9. NON-EXCLUSIVITY. The services of the Manager to the Fund are not to be
deemed to be exclusive, and the Manager shall be free to render investment
management and corporate administrative or other services to others (including
other investment companies) and to engage in other activities, so long as its
services under this Agreement are not impaired thereby. It is understood and
agreed that officers and directors of the Manager may serve as officers or
directors of the Manager to the extent permitted by law; and that the officers
and directors of the Manager are not prohibited from engaging in any other
business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.
10. TERM AND APPROVAL. This Agreement shall become effective on the date
first written above, subject to the condition that the Fund's Board of
Directors, including a majority of those Directors who are not interested
persons (as such term is defined in the 1940 Act) of the Manager, and the
shareholders of the Fund, shall have approved this Agreement. Unless terminated
as provided herein, the Agreement shall continue in full force and effect for
two (2) years from the effective date of this Agreement, and shall continue from
year to year thereafter, provided that such continuance is specifically approved
at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote of a
majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the Investment Company Act of 1940, as amended), and
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Fund directors), by votes cast in person at a meeting
specifically called for such purpose.
11. TERMINATION. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of a
majority of the Fund's outstanding securities (as defined in Section 2(a)(42) of
the Investment Company Act of 1940, as amended), or by the Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the Investment Company Act of 1940, as
amended.
12. LIABILITY OF THE MANAGER. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager or any of its officers,
directors or employees or reckless disregard by the Manager of its duties under
this Agreement, the Manager shall not be liable to the Fund or to any
shareholder of the Fund for any act or omission in the course, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security.
13. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Manager
and that of the Fund for this purpose shall be 40 N. Central Avenue, Suite 1200,
Phoenix, Arizona 85004.
14. QUESTIONS OF INTERPRETATION. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act of 1940, as amended, shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Investment Company Act of
1940, as amended, reflected in any provision of this Agreement is revised by
rule, regulation or order of the Securities and Exchange Commissions, such
provisions shall be deemed to incorporate the effect of such rule, regulation or
order.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers on the day and year first above written.
PILGRIM BANK AND THRIFT FUND, INC.
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
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APPENDIX C
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM EQUITY TRUST
(PILGRIM MIDCAP OPPORTUNITIES FUND)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made the _____ day of ___________, 2000, by and between PILGRIM
EQUITY TRUST, a Massachusetts business trust, (the "Trust") and PILGRIM
INVESTMENTS, INC., a Delaware business corporation (the "Manager").
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
consisting of the series named on schedule 1 hereto (the "Fund" ), as such
schedule may be revised from time to time.
The Trust desires to retain the Manager to render investment advisory
services to the Fund, and the Manager is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Manager to act as investment adviser to
the Trust and the Fund for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services described, for the compensation provided, in this Agreement.
2. Subject to the supervision of the Trustees, the Manager shall manage the
investment operations of the Fund and the composition of the Fund's portfolio,
including the purchase and retention and disposition of portfolio securities, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Trust's Prospectus and Statement of Additional Information (as
defined below) subject to the following understandings:
(a) The Manager shall provide supervision of the Fund's investments
and determine from time to time what investments will be made, held or disposed
of or what securities will be purchased and retained, sold or loaned by the
Fund, and what portion of the assets will be invested or held uninvested as
cash.
(b) The Manager shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Manager, in the performance of its duties and obligations
under this Agreement, shall (i) act in conformity with the Declaration of Trust,
By- Laws, Prospectus and Statement of Additional Information of the Trust, with
the instructions and directions of the Trustees and (ii) conform to and comply
with the requirements of the Investment Company Act and all other applicable
federal and state laws and regulations.
(d) (i) The Manager shall determine the securities to be purchased or
sold by the Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers to carry out the policy with respect to
brokerage as set forth in the Trust's Prospectus and Statement of Additional
Information or as the Trustees may direct from time to time. In providing the
Fund with investment supervision, the Manager will give primary consideration to
securing the most favorable price and efficient execution. The Manager may also
consider the financial responsibility, research and investment information and
other services and research related products provided by brokers or dealers who
may effect or be a party to any such transactions or other transactions to which
other clients of the Manager may be a party. The Fund recognizes that the
services and research related products provided by such brokers may be useful to
the Manager in connection with its services to other clients.
(ii) When the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In such event,
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allocation of the securities so purchased or sold, as well as the expenses
incurred in the transactions, will be made by the Manager in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
(e) The Manager shall maintain, or cause to be maintained, all books
and records required under the Investment Company Act to the extent not
maintained by the custodian of the Trust. The Manager shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Manager shall provide the Trust's custodian on each business
day information relating to all transactions concerning the Fund's assets.
(g) The investment management services of the Manager to the Trust and
to the Fund under this Agreement are not to be deemed exclusive, and the Manager
shall be free to render similar services to others.
3. The Trust has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of
the Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as further amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees authorizing the appointment
of the Manager and approving this Agreement on behalf of the Trust and the Fund;
(d) Registration Statement on Form N-lA under the Investment Company
Act and the Securities Act of 1933, as amended from time to time (the
"Registration Statement"), as filed with the Securities and Exchange Commission
(the "Commission"), relating to the Trust and shares of beneficial interest of
the Fund and all amendments thereto.
(e) Notification of Registration of the Trust under the Investment
Company Act on Form N-8A as filed with the Commission and all amendments
thereto;
(f) Prospectus and Statement of Additional Information included in the
Registration Statement, as amended from time to time. All references to this
Agreement, the Prospectus and the Statement of Additional Information shall be
to such documents as most recently amended or supplemented and in effect.
4. The Manager shall authorize and permit any of its directors, officers
and employees who may be elected as Trustees or officers of the Trust and/ or
the Fund to serve in the capacities in which they are elected. All services to
be furnished by the Manager under this Agreement may be furnished through such
directors, officers or employees of the Manager.
5. The Manager agrees that all records which it maintains for the Trust
and/or the Fund are property of the Trust and/or the Fund. The Manager will
surrender promptly to the Trust and/or the Fund any such records upon either the
Trust's or the Fund's request. The Manager further agrees to preserve such
records for the periods prescribed in Rule 3la-2 of the Commission under the
Investment Company Act.
6. In connection with the services rendered by the Manager under this
Agreement, the Manager will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Fund
and the Manager required to perform the services to be provided pursuant to this
Agreement, except the fees of the Trustees who are not affiliated persons of the
Manager, and
(b) all expenses incurred by the Manager, the Trust or by the Fund in
connection the performance of the Manager's responsibilities hereunder, other
than brokers' commissions and any issue or transfer taxes chargeable to Fund in
connection with its securities transactions.
C-2
<PAGE>
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Manager as compensation a at the rate set
forth opposite Fund's name on Schedule 1 hereto, such fee to be accrued daily
and paid monthly.
8. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
judgment or mistake of law, or for any loss suffered by the Trust and/or the
Fund in connection with or arising out of the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
9. As to the Fund, this Agreement shall continue until the date set forth
opposite such Fund's name on Schedule 1 hereto (the "Reapproval Date") and shall
continue automatically for successive annual periods ending on the day of each
year set forth opposite the Fund's name on Schedule 1 hereto (the "Reapproval
Day"), provided that such continuance is specifically approved at least annually
by the affirmative vote of (i) a majority of the Trustees of the Trust acting on
behalf of Fund, who are not interested persons of the Trust, cast in person at a
meeting called for the purpose of voting on such approval, and (ii) a majority
of the Trustees of the Trust or the holders of a majority of the outstanding
voting securities of the Fund; provided however, that this Agreement may be
terminated by the Trust, on behalf of the Fund at any time, without the payment
of any penalty, by the Trustees acting on behalf of the Fund or by vote of a
majority of the outstanding voting securities (as defined in the Investment
Company Act) of the Fund, or by the Manager at any time, without the payment of
any penalty, on not more than 60 days' nor less than 30 days' written notice to
the other party. This Agreement shall terminate automatically in the event of
its assignment provided that a transaction which does not, under the Investment
Company Act, result in a change of actual control or management of the Manager's
business shall not be deemed to be an assignment for the purposes of this
Agreement.
10. This agreement shall terminate automatically in the event of its
assignment; the term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
11. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a Trustee, officer
or employee of the Trust and/or the Fund to engage in any other business or to
devote his time and attention in part to the management or other aspect of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind to any other person or entity.
12. During the term of this Agreement, the Trust and the Fund agrees to
furnish the Manager at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of the Fund or the public, which refer in any way
to the Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt. In the event of termination of the
Agreement, the Trust and/or the Fund will continue to furnish to the Manager
such other information relating to the business affairs of the Trust and/or the
Fund as the Manager at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
13. This Agreement may be amended by mutual agreement, but only after
authorization of such amendments by the affirmative vote of (i) the holders of
the majority of the outstanding voting securities of the Fund and (ii) a
majority of the members of the Trustees who are not interested persons of the
Trust or the Manager, cast in person at a meeting called for the purpose of
voting on such approval.
14. The Manager, the Trust and the Fund each agree that the name "Pilgrim"
is proprietary to, and a property right of, the Manager. The Trust and the Fund
agree and consent that (i) each will only use the name "Pilgrim" as part of its
name and for no other purpose, (ii) each will not purport to grant any third
party the right to use the name "Pilgrim" and (iii) upon the termination of this
Agreement, the Trust and the Fund shall, upon the request of the Manager, cease
to use the name "Pilgrim", and shall use its best efforts to cause its officers,
Trustees and shareholders to take any and all actions which the Manager may
request to effect the foregoing.
C-3
<PAGE>
15. Any notice or other communications required to be given pursuant to
this Agreement shall be deemed to be given if delivered or mailed by registered
mail, postage paid, (1) to the Manager at 40 N. Central Avenue, Suite 1200,
Phoenix, Arizona 85004, Attention: Secretary; or (2) to the Trust and/or the
Fund, 40 N. Central Avenue, Suite 1200, Phoenix, Arizona 85004, Attention:
Secretary.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of Arizona. The terms "interested person", "assignment",
and "vote of the majority of the outstanding securities" shall have the meaning
set forth in the Investment Company Act.
17. The Declaration of Trust, establishing the Trust, dated June 12, 1998,
a copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Pilgrim Equity Trust" refers to the Trustees under the
Declaration collectively as trustees, but not individually or personally; and no
Trustee, shareholder, officer, employee or agent of the Trust and/or the Fund
may be held to any personal liability, nor may resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the Trust property only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM EQUITY TRUST
By:
-------------------------------------
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
C-4
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE LAST CONTINUED/
NAME OF FUND OF AVG. DAILY NET ASSETS APPROVED BY BOARD RE-APPROVAL DATE
------------ ------------------------ ----------------- ----------------
<S> <C> <C> <C>
PILGRIM MIDCAP OPPORTUNITIES FUND 1.00% June 13, 2000 _________, 2002
</TABLE>
C-5
<PAGE>
APPENDIX D
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM GOVERNMENT SECURITIES
INCOME FUND, INC.
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the __th day of __________,
2000, by and between PILGRIM GOVERNMENT SECURITIES INCOME FUND, INC., a
corporation organized and existing under the laws of the State of California
(hereinafter called the "Fund") and PILGRIM 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 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 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 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 Fund's
Board of Directors. 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 as 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.
D-1
<PAGE>
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 a 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:
.50% on the first $500 million of net assets; plus
.45% on the net assets from $500 million to $1 billion; plus
.40% on net assets in excess of $1 billion
(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, amortization of
organization expenses, and, with the prior written approval of any state
securities commission requiring same, any extraordinary expenses, such as
litigation) exceed one and one-half percent (1.5%) of the Fund's average net
asset value on the first $40 million of net assets and one percent (1%) on
average net assets in excess of $40 million for any one fiscal year, the Manager
shall reimburse the Fund for the amount of such excess expenses.
D-2
<PAGE>
(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 its Articles of Incorporation or any applicable statute
or regulation, or to relieve or deprive the Board of Directors of the Fund 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 Fund 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 Fund'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 become effective on the date first written above,
subject to the condition that the Fund's Board of Directors, including a
majority of those Directors who are not interested persons (as such term is
defined in the 1940 Act) of the Manager, and the shareholders of the Fund, shall
have approved this Agreement. Unless terminated as provided herein, the
Agreement shall continue in full force and effect for two (2) years from the
effective date of this Agreement, and shall continue from year to year
thereafter so long as such continuation is approved at least annually by (i) the
Board of Directors of the Fund 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 Fund 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 Fund or by vote of a majority of the
outstanding voting securities of the Fund, upon sixty (60) days written notice
to the Manager, and by the Manager upon sixty (60) days written notice to the
Fund.
D-3
<PAGE>
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 Fund the right to use the name "Pilgrim" as part of its corporate
name. The Fund agrees that in the event this Agreement is terminated, the Fund
shall immediately take such steps as are necessary to amend its corporate name
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, all on the day and
year first above written.
PILGRIM GOVERNMENT SECURITIES
INCOME FUND, INC.
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
D-4
<PAGE>
APPENDIX E
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM INVESTMENT FUNDS, INC.
(PILGRIM HIGH YIELD FUND AND PILGRIM MAGNACAP FUND)
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the ___ day of _____, 2000,
by and between 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 [ ] series (the "Fund"), and PILGRIM
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 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 as 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
E-1
<PAGE>
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 an annual
percentage rate of [.60% of the average daily net assets of the Fund for Pilgrim
High Yield Fund] [1.00% on the first $30 million of net assets; plus .75% on the
net assets from $30 million to $250 million; plus .625% on net assets from $250
million to $500 million; plus .50% on net assets in excess of $500 million for
Pilgrim MagnaCap Fund.]
(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.
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(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 become effective on the date first written above,
subject to the condition that the Company's Board of Directors, including a
majority of those Directors who are not interested persons (as such term is
defined in the 1940 Act) of the Manager, and the shareholders of the Fund, shall
have approved this Agreement. Unless terminated as provided herein, the
Agreement shall continue in full force and effect for two (2) years from the
effective date of this Agreement, and shall continue from year to year
thereafter so long as such continuation is approved at least annually by (i) the
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<PAGE>
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 INVESTMENTS FUNDS, INC.
(on behalf of its Pilgrim [ ]
Fund Series)
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
------------------------------ -------------------------------------
Title: Title:
------------------------------- ----------------------------------
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<PAGE>
APPENDIX F
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM MAYFLOWER TRUST
(PILGRIM EMERGING MARKETS VALUE, GROWTH + VALUE, HIGH TOTAL RETURN,
HIGH TOTAL RETURN II, INTERNATIONAL VALUE AND RESEARCH ENHANCED INDEX FUNDS)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made the ______ day of _________, 2000, by and between PILGRIM
MAYFLOWER TRUST, a Massachusetts business trust, (the "Trust") and PILGRIM
INVESTMENTS, INC., a Delaware business corporation organized and existing under
the laws of the State of Delaware (hereafter called the "Manager").
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act"),
consisting of the series named on schedule 1 hereto (each "Fund" and
collectively the "Funds"), as such schedule may be revised from time to time.
The Trust desires to retain the Manager to render investment advisory
services to the Funds, and the Manager is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Manager to act as investment adviser to
the Trust and the Funds for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services described, for the compensation provided, in this Agreement.
2. Subject to the supervision of the Trustees, the Manager shall manage the
investment operations of the Funds and the composition of each Fund's portfolio,
including the purchase and retention and disposition of portfolio securities, in
accordance with each Fund's investment objectives, policies and restrictions as
stated in the Trust's Prospectus and Statement of Additional Information (as
defined below) subject to the following understandings:
(a) The Manager shall provide supervision of each Fund's investments
and determine from time to time what investments will be made, held or disposed
of or what securities will be purchased and retained, sold or loaned by each
Fund, and what portion of the assets will be invested or held uninvested as
cash.
(b) The Manager shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Manager, in the performance of its duties and obligations
under this Agreement, shall (i) act in conformity with the Declaration of Trust,
By-Laws, Prospectus and Statement of Additional Information of the Trust, with
the instructions and directions of the Trustees and (ii) conform to and comply
with the requirements of the Investment Company Act and all other applicable
federal and state laws and regulations.
(d) (i) The Manager shall determine the securities to be purchased or
sold by each Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers to carry out the policy with respect to
brokerage as set forth in the Trust's Prospectus and Statement of Additional
Information or as the Trustees may direct from time to time. In providing each
Fund with investment supervision, the Manager will give primary consideration to
securing the most favorable price and efficient execution. The Manager may also
consider the financial responsibility, research and investment information and
other services and research related products provided by brokers or dealers who
may effect or be a party to any such transactions or other transactions to which
other clients of the Manager may be a party. The Funds recognize that the
services and research related products provided by such brokers may be useful to
the Manager in connection with its services to other clients.
(ii) When the Manager deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients, the Manager, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
F-1
<PAGE>
incurred in the transactions, will be made by the Manager in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to each Fund and to such other clients.
(e) The Manager shall maintain, or cause to be maintained, all books
and records required under the Investment Company Act to the extent not
maintained by the custodian of the Trust. The Manager shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Manager shall provide the Trust's custodian on each business
day information relating to all transactions concerning each Fund's assets.
(g) The investment management services of the Manager to the Trust and
to each Fund under this Agreement are not to be deemed exclusive, and the
Manager shall be free to render similar services to others.
3. The Trust has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of
the Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as further amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date
hereof and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees authorizing the appointment
of the Manager and approving this Agreement on behalf of the Trust and each
Fund;
(d) Registration Statement on Form N-lA under the Investment Company
Act and the Securities Act of 1933, as amended from time to time (the
"Registration Statement"), as filed with the Securities and Exchange Commission
(the "Commission"), relating to the Trust and shares of beneficial interest of
each Fund and all amendments thereto.
(e) Notification of Registration of the Trust under the Investment
Company Act on Form N-8A as filed with the Commission and all amendments
thereto;
(f) Prospectus and Statement of Additional Information included in the
Registration Statement, as amended from time to time. All references to this
Agreement, the Prospectus and the Statement of Additional Information shall be
to such documents as most recently amended or supplemented and in effect.
4. The Manager shall authorize and permit any of its directors, officers
and employees who may be elected as Trustees or officers of the Trust and/ or
the Funds to serve in the capacities in which they are elected. All services to
be furnished by the Manager under this Agreement may be furnished through such
directors, officers or employees of the Manager.
5. The Manager agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Manager will
surrender promptly to the Trust and/or the Funds any such records upon either
the Trust's or the Fund's request. The Manager further agrees to preserve such
records for the periods prescribed in Rule 3la-2 of the Commission under the
Investment Company Act.
6. (i) In connection with the services rendered by the Manager under this
Agreement, the Manager will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Funds
and the Manager required to perform the services to be provided pursuant to this
Agreement, except the fees of the Trustees who are not affiliated persons of the
Manager, and
F-2
<PAGE>
(b) all expenses incurred by the Manager, the Trust or by the Funds in
connection the performance of the Manager's responsibilities hereunder, other
than brokers' commissions and any issue or transfer taxes chargeable to each
respective Fund in connection with its securities transactions.
7. In the event the expenses of each Fund for any fiscal year (including
the fees payable to the Manager but excluding interest, taxes, brokerage
commissions, distribution fees and litigation and indemnification expenses and
other extraordinary expenses not incurred in the ordinary course of the Fund's
business) exceed the lowest applicable annual expense limitation established
pursuant to the statutes or regulations of any jurisdictions in which shares of
each respective Fund are then qualified for offer and sale, the compensation due
the Manager will be reduced by the amount of such excess, or, if such reduction
exceeds the compensation payable to the Manager, the Manager will pay each Fund,
whose expenses exceed such expense limitation, the amount of such reduction
which exceeds the amount of such compensation.
8. For the services provided and the expenses assumed pursuant to this
Agreement, each Fund will pay to the Manager as compensation a at the rate set
forth opposite each Funds' name on Schedule 1 hereto, such fee to be accrued
daily and paid monthly.
9. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
judgment or mistake of law, or for any loss suffered by the Trust and/or a Fund
in connection with or arising out of the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
10. As to each Fund, this Agreement shall continue until the date set forth
opposite such Fund's name on Schedule 1 hereto (the "Reapproval Date") and shall
continue automatically for successive annual periods ending on the day of each
year set forth opposite the Fund's name on Schedule 1 hereto (the "Reapproval
Day"), provided that such continuance is specifically approved at least annually
by the affirmative vote of (i) a majority of the Trustees of the Trust acting
separately on behalf of each Fund, who are not interested persons of the Trust,
cast in person at a meeting called for the purpose of voting on such approval,
and (ii) a majority of the Trustees of the Trust or the holders of a majority of
the outstanding voting securities of each respective Fund; provided however,
that this Agreement may be terminated by the Trust, on behalf of a Fund at any
time, without the payment of any penalty, by the Trustees acting on behalf of a
Fund or by vote of a majority of the outstanding voting securities (as defined
in the Investment Company Act) of a Fund, or by the Manager at any time, without
the payment of any penalty, on not more than 60 days' nor less than 30 days'
written notice to the other party. This Agreement shall terminate automatically
in the event of its assignment provided that a transaction which does not, under
the Investment Company Act, result in a change of actual control or management
of the Manager's business shall not be deemed to be an assignment for the
purposes of this Agreement.
11. This agreement shall terminate automatically in the event of its
assignment; the term "assignment" for this purpose shall have the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940.
12. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a Trustee, officer
or employee of the Trust and/or the Funds to engage in any other business or to
devote his time and attention in part to the management or other aspect of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind to any other person or entity.
13. During the term of this Agreement, the Trust and each Fund agrees to
furnish the Manager at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of each Fund or the public, which refer in any way
to the Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt. In the event of termination of the
Agreement, the Trust and/or each Fund will continue to furnish to the Manager
such other information relating to the business affairs of the Trust and/or each
Fund as the Manager at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
F-3
<PAGE>
14. This Agreement may be amended by mutual agreement, but only after
authorization of such amendments by the affirmative vote of (i) the holders of
the majority of the outstanding voting securities of each Fund and ( ii) a
majority of the members of the Trustees who are not interested persons of the
Trust or the Manager, cast in person at a meeting called for the purpose of
voting on such approval.
15. The Manager, the Trust and the Funds each agree that the name "Pilgrim"
is proprietary to, and a property right of, the Manager. The Trust and the Funds
agree and consent that (i) each will only use the name "Pilgrim" as part of its
name and for no other purpose, (ii) each will not purport to grant any third
party the right to use the name "Pilgrim" and (iii) upon the termination of this
Agreement, the Trust and the Funds shall, upon the request of the Manager, cease
to use the name "Pilgrim", and shall use its best efforts to cause its officers,
trustees and shareholders to take any and all actions which the Manager may
request to effect the foregoing.
16. Any notice or other communications required to be given pursuant to
this Agreement shall be deemed to be given if delivered or mailed by registered
mail, postage paid, (1) to the Manager at 40 N. Central Avenue, Suite 1200,
Phoenix, Arizona 85004, Attention: Secretary; or (2) to the Trust and/or the
Funds, 40 N. Central Avenue, Suite 1200, Phoenix, Arizona 85004, Attention:
Secretary.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of Arizona. The terms "interested person", "assignment",
and "vote of the majority of the outstanding securities" shall have the meaning
set forth in the Investment Company Act.
The Declaration of Trust, establishing the Trust, dated August 18, 1993, a
copy of which, together with all amendments thereto (the "Declaration"), is on
file in the office of the Secretary of the Commonwealth of Massachusetts,
provides that the name "Pilgrim Mayflower Trust" refers to the Trustees under
the Declaration collectively as trustees, but not individually or personally;
and no Trustee, shareholder, officer, employee or agent of the Trust and/or the
Funds may be held to any personal liability, nor may resort be had to their
private property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of the Trust, but the Trust property only shall be
liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM MAYFLOWER TRUST
By:
-------------------------------------
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
F-4
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
ANNUAL FEE AS A PERCENTAGE OF LAST APPROVED/
NAME OF FUND AVG. DAILY NET ASSETS CONTINUED BY BOARD RE-APPROVAL DATE
------------ --------------------- ------------------ ----------------
<S> <C> <C> <C>
Pilgrim High Total Return Fund 0.75 of 1% on first $250 million; June 13, 2000 ________, 2002
0.70% on the next $250 million;
0.65% on the next $250 million;
0.60% on the next $250 million;
and 0.55% on assets in excess of
$1 billion.
Pilgrim Growth + Value Fund 1.00% June 13, 2000 ________, 2002
Pilgrim High Total Return Fund II 0.75% June 13, 2000 ________, 2002
Pilgrim International Value Fund 1.00% June 13, 2000 ________, 2002
Pilgrim Emerging Markets Value Fund 1.00% June 13, 2000 ________, 2002
Pilgrim Research Enhanced Index Fund 0.70% June 13, 2000 ________, 2002
</TABLE>
F-5
<PAGE>
APPENDIX G
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM MUTUAL FUNDS
(PILGRIM BALANCED, CONVERTIBLE, EMERGING COUNTRIES, HIGH YIELD II,
INTERNATIONAL CORE GROWTH, INTERNATIONAL SMALLCAP GROWTH, LARGECAP GROWTH,
MIDCAP GROWTH, MONEY MARKET, SMALLCAP GROWTH, STRATEGIC INCOME
AND WORLDWIDE GROWTH FUNDS)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of September 2000 between Pilgrim Mutual Funds
(the "Fund"), a Delaware business trust and Pilgrim Investments, Inc. (the
"Manager"), a Delaware corporation (the "Agreement").
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund may offer shares of additional series in the future, and
currently intends to offer shares of additional series in the future;
WHEREAS, the Fund desires to avail itself of the services of the Manager
for the provision of advisory and management services for the Fund; and
WHEREAS, the Manager is willing to render such services to the Fund;
NOW, THEREFORE, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. APPOINTMENT. The Fund hereby appoints the Manager, subject to the
direction of the Board of Trustees, for the period and on the terms set forth in
this Agreement, to provide advisory, management, and other services, as
described herein, with respect to each series of the Fund (individually and
collectively referred to herein as "Series"). The Manager accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
In the event the Fund establishes and designates additional series with
respect to which it desires to retain the Manager to render advisory services
hereunder, it shall notify the Manager in writing. If the Manager is willing to
render such services, it shall notify the Fund in writing, whereupon such
additional series shall become a Series hereunder.
2. SERVICES OF THE MANAGER. The Manager represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
and will maintain such registration for so long as required by applicable law.
Subject to the general supervision of the Board of Trustees of the Fund, the
Manager shall provide the following advisory, management, and other services
with respect to the Series:
(a) Provide general, overall advice and guidance with respect to the
Series and provide advice and guidance to the Fund's Trustees, and oversee the
management of the investments of the Series and the composition of each Series'
portfolio of securities and investments, including cash, and the purchase,
retention and disposition thereof, in accordance with each Series' investment
objective or objectives and policies as stated in the Fund's current
registration statement, which management may be provided by others selected by
the Manager and approved by the Board of Trustees as provided below or directly
by the Manager as provided in Section 3 of this Agreement;
(b) In the event that the Manager wishes to select others to render
investment management services, the Manager shall analyze, select and recommend
for consideration and approval by the Fund's Board of Trustees investment
advisory firms (however organized) to provide investment advice to one or more
of the Series, and, at the expense of the Manager, engage (which engagement may
also be by the Fund) such investment advisory firms to render investment advice
and manage the investments of such Series and the composition of each such
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<PAGE>
Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition thereof, in accordance with the Series'
investment objective or objectives and policies as stated in the Fund's current
registration statement (any such firms approved by the Board of Trustees and
engaged by the Fund and/or the Manager are referred to herein as
"Sub-Advisers");
(c) Periodically monitor and evaluate the performance of the
Sub-Advisers with respect to the investment objectives and policies of the
Series;
(d) Monitor the Sub-Advisers for compliance with the investment
objective or objectives, policies and restrictions of each Series, the 1940 Act,
Subchapter M of the Internal Revenue Code, and if applicable, regulations under
such provisions, and other applicable law;
(e) If appropriate, analyze and recommend for consideration by the
Fund's Board of Trustees termination of a contract with a Sub-Adviser under
which the Sub-Adviser provides investment advisory services to one or more of
the Series;
(f) Supervise Sub-Advisers with respect to the services that such
Sub-Advisers provide under respective sub-advisory agreements ("Sub-Advisory
Agreements");
(g) Render to the Board of Trustees of the Fund such periodic and
special reports as the Board may reasonably request; and
(h) Make available its officers and employees to the Board of Trustees
and officers of the Fund for consultation and discussions regarding the
administration and management of the Series and services provided to the Fund
under this Agreement.
3. INVESTMENT MANAGEMENT AUTHORITY. In the event the Manager wishes to
render investment management services directly to a Series, then with respect to
any such Series, the Manager, subject to the supervision of the Fund's Board of
Trustees, will provide a continuous investment program for the Series' portfolio
and determine the composition of the assets of the Series' portfolio, including
determination of the purchase, retention, or sale of the securities, cash, and
other investments contained in the portfolio. The Manager will provide
investment research and conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Series' assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, or
exchanged for the Series, when these transactions should be executed, and what
portion of the assets of the Series should be held in the various securities and
other investments in which it may invest, and the Manager is hereby authorized
to execute and perform such services on behalf of the Series. To the extent
permitted by the investment policies of the Series, the Manager shall make
decisions for the Series as to foreign currency matters and make determinations
as to, and execute and perform, foreign currency exchange contracts on behalf of
the Series. The Manager will provide the services under this Agreement in
accordance with the Series' investment objective or objectives, policies, and
restrictions as stated in the Fund's Registration Statement filed with the
Securities and Exchange Commission (the "SEC"), as amended. Furthermore:
(a) The Manager will manage the Series so that each will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. In
managing the Series in accordance with these requirements, the Manager shall be
entitled to receive and act upon advice of counsel to the Fund or counsel to the
Manager.
(b) The Manager will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Trustees, and the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and the 1940 Act, as supplemented or amended.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the Registration
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<PAGE>
Statement. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Manager in
a manner that is fair and equitable in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities of the
Series, the Manager will arrange for the transmission to the custodian for the
Fund on a daily basis, of such confirmation, trade tickets, and other documents
and information, including, but not limited to, Cusip, Cedel, or other numbers
that identify securities to be purchased or sold on behalf of the Series, as may
be reasonably necessary to enable the custodian to perform its administrative
and recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian.
(e) The Manager will assist the custodian or portfolio accounting
agent for the Fund in determining, consistent with the procedures and policies
stated in the Registration Statement for the Fund, the value of any portfolio
securities or other assets of the Series for which the custodian or portfolio
accounting agent seeks assistance or review from the Manager.
(f) The Manager will make available to the Fund, promptly upon
request, any of the Series' investment records and ledgers as are necessary to
assist the Fund to comply with requirements of the 1940 Act, as well as other
applicable laws. The Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
(g) The Manager will regularly report to the Fund's Board of Trustees
on the investment program for the Series and the issuers and securities
represented in the Series' portfolio, and will furnish the Fund's Board of
Trustees with respect to the Series such periodic and special reports as the
Trustees may reasonably request.
(h) In connection with its responsibilities under this Section 3, the
Manager is responsible for decisions to buy and sell securities and other
investments for the Series' portfolio, broker-dealer selection, and negotiation
of brokerage commission rates. The Manager's primary consideration in effecting
a security transaction will be to obtain the best execution for the Series,
taking into account the factors specified in the Prospectus and/or Statement of
Additional Information for the Fund, which include price (including the
applicable brokerage commission or dollar spread), the size of the order, the
nature of the market for the security, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer involved,
the quality of the service, the difficulty of execution, execution capabilities
and operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. Accordingly, the price to the Series in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified, in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund, by other aspects of the
portfolio execution services offered. Subject to such policies as the Board of
Trustees may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934, as amended, the Manager shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Series to pay a broker-dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Series and to its other clients as to which it exercises investment
discretion. To the extent consistent with these standards and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, the Manager is further authorized to allocate the orders placed by
it on behalf of the Series to the Manager if it is registered as a broker-dealer
with the SEC, to an affiliated broker-dealer, or to such brokers and dealers who
also provide research or statistical material or other services to the Series,
the Manager or an affiliate of the Manager. Such allocation shall be in such
amounts and proportions as the Manager shall determine consistent with the above
standards, and the Manager will report on said allocation regularly to the Board
of Trustees of the Fund indicating the broker-dealers to which such allocations
have been made and the basis therefor.
G-3
<PAGE>
4. CONFORMITY WITH APPLICABLE LAW. The Manager, in the performance of its
duties and obligations under this Agreement, shall act in conformity with the
Registration Statement of the Fund and with the instructions and directions of
the Board of Trustees of the Fund and will conform to, and comply with, the
requirements of the 1940 Act and all other applicable federal and state laws and
regulations.
5. EXCLUSIVITY. The services of the Manager to the Fund under this
Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of any of the Series) and to engage in other activities, so
long as its services hereunder are not impaired thereby.
6. DOCUMENTS. The Fund has delivered properly certified or authenticated
copies of each of the following documents to the Manager and will deliver to it
all future amendments and supplements thereto, if any:
(a) Certified resolution of the Board of Trustees of the Fund
authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) The Registration Statement as filed with the SEC and any
amendments thereto; and
(c) Exhibits, powers of attorney, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
7. RECORDS. The Manager agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Manager with respect to the Series by the 1940 Act. The Manager further
agrees that all records which it maintains for each Series are the property of
the Fund and it will promptly surrender any of such records upon request.
8. EXPENSES. During the term of this Agreement, the Manager will pay all
expenses incurred by it in connection with its activities under this Agreement,
except such expenses as are assumed by the Fund under this Agreement and such
expenses as are assumed by a Sub-Adviser under its Sub-Advisory Agreement. The
Manager further agrees to pay all fees payable to the Sub-Advisers, executive
salaries and expenses of the Trustees of the Fund who are employees of the
Manager or its affiliates, and office rent of the Fund. The Fund shall be
responsible for all of the other expenses of its operations, including, without
limitation, the management fee payable hereunder; brokerage commissions;
interest; legal fees and expenses of attorneys; fees of auditors, transfer
agents and dividend disbursing agents, custodians and shareholder servicing
agents; the expense of obtaining quotations for calculating each Fund's net
asset value; taxes, if any, and the preparation of the Fund's tax returns; cost
of stock certificates and any other expenses (including clerical expenses) of
issue, sale, repurchase or redemption of shares; expenses of registering and
qualifying shares of the Fund under federal and state laws and regulations
(including the salary of employees of the Manager engaged in the registering and
qualifying of shares of the Fund under federal and state laws and regulations or
a pro-rata portion of the salary of employees to the extent so engaged);
salaries of personnel involved in placing orders for the execution of the Fund's
portfolio transactions; expenses of printing and distributing reports, notices
and proxy materials to existing shareholders; expenses of printing and filing
reports and other documents filed with governmental agencies; expenses in
connection with shareholder and trustee meetings; expenses of printing and
distributing prospectuses and statements of additional information to existing
shareholders; fees and expenses of Trustees of the Fund who are not employees of
the Manager or any Sub-Adviser, or their affiliates; trade association dues;
insurance premiums; extraordinary expenses such as litigation expenses. 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.
9. COMPENSATION. For the services provided by the Manager to each Series
pursuant to this Agreement, the Fund will pay to the Manager an annual fee equal
to the amount specified for such Series in Schedule A hereto, payable monthly in
arrears. Payment of the above fees shall be in addition to any amount paid to
the Manager for the salary of its employees for performing services which are an
obligation of the Fund as provided in Section 8. The fee will be appropriately
pro-rated to reflect any portion of a calendar month that this Agreement is not
in effect between us.
G-4
<PAGE>
10. LIABILITY OF THE MANAGER. The Manager may rely on information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to, and
the Fund will indemnify such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Manager's duties, or by reason of reckless disregard of the
Manager's obligations and duties under this Agreement. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to, and
the Fund will indemnify such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with, any act or omission by
a Sub-Adviser or any of the Sub-Adviser's stockholders or partners, officers,
directors, employees, or agents connected with or arising out of any services
rendered under a Sub-Advisory Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the Manager's
duties under this Agreement, or by reason of reckless disregard of the Manager's
obligations and duties under this Agreement. No trustee, officer, employee or
agent of the Fund shall be subject to any personal liability whatsoever, in his
or her official capacity, to any person, including the Sub-Adviser, other than
to the Fund or its shareholders, in connection with Fund property or the affairs
of the Fund, save only that arising from his or her bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duty to such
person; and all such persons shall look solely to the Fund property for
satisfaction of claims of any nature against a trustee, officer, employee or
agent of the Fund arising in connection with the affairs of the Fund. Moreover,
the debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a Series shall be enforceable against the
assets and property of that Series only, and not against the assets or property
of any other series of the Fund.
11. CONTINUATION AND TERMINATION. This Agreement shall become effective on
the date first written above, subject to the condition that the Fund's Board of
Trustees, including a majority of those Trustees who are not interested persons
(as such term is defined in the 1940 Act) of the Manager, and the shareholders
of each Series, shall have approved this Agreement. Unless terminated as
provided herein, the Agreement shall continue in full force and effect for two
(2) years from the effective date of this Agreement, and shall continue from
year to year thereafter with respect to each Series so long as such continuance
is specifically approved at least annually (i) by the vote of a majority of the
Board of Trustees of the Fund, or (ii) by vote of a majority of the outstanding
voting shares of the Series (as defined in the 1940 Act), and provided
continuance is also approved by the vote of a majority of the Board of Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, cast in person at a meeting
called for the purpose of voting on such approval. This Agreement may not be
amended in any material respect without a majority vote of the outstanding
voting shares (as defined in the 1940 Act).
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a Series shall be effective
to continue this Agreement with respect to such Series notwithstanding (i) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Fund, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement may be terminated by the Fund at any time, without the payment of any
penalty, by vote of a majority of the Board of Trustees of the Fund or by a vote
of a majority of the outstanding voting shares of the Fund, or with respect to a
Series, by vote of a majority of the outstanding voting shares of such Series,
on sixty (60) days' written notice to the Manager, or by the Manager at any
time, without the payment of any penalty, on sixty (60) days' written notice to
the Fund. This Agreement will automatically and immediately terminate in the
event of its "assignment" (as described in the 1940 Act).
12. USE OF NAME. It is understood that the name "Pilgrim Investments, Inc."
or any derivative thereof (including the name "Pilgrim") or logo associated with
that name is the valuable property of the Manager and its affiliates, and that
the Fund and/or the Series have the right to use such name (or derivative or
logo) only so long as this Agreement shall continue with respect to such Fund
and/or Series. Upon termination of this Agreement, the Fund (or Series) shall
forthwith cease to use such name (or derivative or logo) and, in the case of the
Fund, shall promptly amend its Declaration of Trust to change its name (if such
name is included therein).
G-5
<PAGE>
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
14. APPLICABLE LAW.
(a) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) 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 and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
PILGRIM MUTUAL FUNDS
By:
-------------------------------------
Title:
----------------------------------
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
Title:
----------------------------------
G-6
<PAGE>
Schedule A
SERIES ANNUAL INVESTMENT MANAGEMENT FEE
------ --------------------------------
Pilgrim SmallCap 1.00% of the Series' average net assets
Growth Fund
Pilgrim MidCap 0.75% of the first $500 million of the Series'
Growth Fund average net assets, 0.675% of the next $500
million of average net assets, and 0.65% of the
average net assets in excess of $1 billion
Pilgrim LargeCap 0.75% of the first $500 million of the Series'
Growth Fund average net assets, 0.675% of the next $500
million of average net assets, and 0.65% of the
average net assets in excess of $1 billion
Pilgrim Convertible Fund 0.75% of the first $500 million of the Series'
average net assets, 0.675% of the next $500
million of average net assets, and 0.65% of the
average net assets in excess of $1 billion
Pilgrim Balanced Fund 0.75% of the first $500 million of the Series'
average net assets, 0.675% of the next $500
million of average net assets, and 0.65% of the
average net assets in excess of $1 billion
Pilgrim Strategic 0.45% of the first $500 million of the Series'
Income Fund average net assets, 0.40% of the next $250 million
of average net assets, and 0.35% of the average
net assets in excess of $750 million
Pilgrim Emerging 1.25% of the Series' average net assets
Countries Fund
Pilgrim Worldwide 1.00% of the first $500 million of the Series'
Growth Fund average net assets, 0.90% of the next $500 million
of average net assets, and 0.85% of the average
net assets in excess of $1 billion
Pilgrim International 1.00% of the first $500 million of the Series'
SmallCap Growth Fund average net assets, 0.90% of the next $500 million
of average net assets, and 0.85% of the average
net assets in excess of $1 billion
Pilgrim International 1.00% of the first $500 million of the Series'
Core Growth Fund average net assets, 0.90% of the next $500 million
of average net assets, and 0.85% of the average
net assets in excess of $1 billion
Pilgrim High Yield Fund II 0.60% of the Series' average net assets
Pilgrim Money Market Fund 0.50% if the Series has not invested substantially
all of its assets in another investment company,
0.15% if substantially all of its assets are
invested in another investment company
G-7
<PAGE>
APPENDIX H
ADVISORY FEES
The annual advisory fees for each fund advised by Pilgrim Investments, Inc., and
each fund's corresponding Expense Limit, if applicable, expressed as a
percentage of the fund's average daily net assets, are as follows:
FUND ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- ------------------------------ -------------
Pilgrim Asia-Pacific 1/12 of 1.25% of the Fund's average Class A -- 2.00%
Equity Fund daily net assets during the month Class B -- 2.75%
(approximately 1.25% on an annual Class C -- N/A
basis) Class M -- 2.50%
Class Q -- N/A
Class T -- N/A
Pilgrim Balanced Fund 0.75% of the first $500 million of Class A -- 1.60%
the Fund's average net assets, Class B -- 2.25%
0.675% of the next $500 million of Class C -- 2.25%
average net assets, and 0.65% of Class M -- N/A
the average net assets in excess Class Q -- 1.25%
of $1 billion Class T -- 1.75%
Pilgrim Bank and 1.00% of the first $30 million of N/A
Thrift Fund average daily net assets, 0.75% of
the next $95 million of average
daily net assets and 0.70% of
average daily net assets in excess
of $125 million
Pilgrim Convertible 0.75% of the first $500 million of Class A -- 1.60%
Fund the Fund's average net assets, Class B -- 2.25%
0.675% of the next $500 million of Class C -- 2.25%
average net assets, and 0.65% of Class M -- N/A
the average net assets in excess Class Q -- 1.25%
of $1 billion Class T -- N/A
Pilgrim Emerging 1.25% of the Fund's average net Class A -- 2.25%
Countries Fund assets Class B -- 2.90%
Class C -- 2.90%
Class M -- N/A
Class Q -- 1.90%
Class T -- N/A
Pilgrim Emerging 1.00% of the Fund's average daily N/A
Markets Value Fund net assets.
Pilgrim Government 0.50% of the Fund's average daily Not applicable
Securities Income Fund net assets on the first $500 million at current asset
of net assets; 0.45% on net assets levels.
from $500 million to $1 billion and
to 0.40% on net assets in excess
of $1 billion
Pilgrim Growth 0.75% of the Fund's average daily N/A
Opportunities Fund net assets.
Pilgrim Growth + 1.00% of the Fund's average daily N/A
Value Fund net assets.
H-1
<PAGE>
FUND ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- ------------------------------ -------------
Pilgrim High Total 0.75% on the first $250 million of N/A
Return Fund aggregate average daily net assets,
0.70% on the next $250 million of
such assets, 0.65% on the next $250
million of such assets; 0.60% on the
next $250 million of such assets,
and 0.55% on the remaining aggregate
daily net assets in excess of $1
billion.
Pilgrim High Total 0.75% of the Fund's average daily N/A
Return Fund II net assets.
Pilgrim High Yield Fund 0.60% of the Fund's average daily Class A -- 1.10%
net assets. Class B -- 1.85%
Class C -- 1.85%
Class M -- 1.60%
Class Q -- 1.10%
Class T -- N/A
Pilgrim High Yield 0.60% of the Fund's average net Class A -- 1.10%
Fund II assets Class B -- 1.75%
Class C -- 1.75%
Class M -- N/A
Class Q -- 1.00%
Class T -- 1.40%
Pilgrim International 1.00% of the first $500 million of Class A -- 1.95%
Core Growth Fund the Fund's average net assets, 0.90% Class B -- 2.60%
of the next $500 million of average Class C -- 2.60%
net assets, and 0.85% of the average Class M -- N/A
net assets in excess of $1 billion Class Q -- 1.65%
Class T -- N/A
Pilgrim International 1.00% of the first $500 million of Class A -- 1.95%
SmallCap Growth Fund the Fund's average net assets, 0.90% Class B -- 2.60%
of the next $500 million of average Class C -- 2.60%
net assets, and 0.85% of the average Class M -- N/A
net assets in excess of $1 billion Class Q -- 1.65%
Class T -- N/A
Pilgrim International 1.00% of the Fund's average daily N/A
Value Fund net assets.
Pilgrim LargeCap 0.75% of the first $500 million of Class A -- 1.60%
Growth Fund the Fund's average net assets, Class B -- 2.25%
0.675% of the next $500 million of Class C -- 2.25%
average net assets, and 0.65% of Class M -- N/A
the average net assets in excess of Class Q -- 1.25%
$1 billion Class T -- N/A
Pilgrim LargeCap 1/12 of 1.00% of the Fund's average Class A -- 1.75%
Leaders Fund daily net assets during the month Class B -- 2.50%
(approximately 1.00% on an annual Class C -- 2.50%
basis) Class M -- 2.25%
Class Q -- 1.75%
Class T -- N/A
H-2
<PAGE>
FUND ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- ------------------------------ -------------
Pilgrim MagnaCap Fund 1.00% of the Fund's average daily N/A
net assets on the first $30 million
of net assets. The annual rate is
reduced to 0.75% on net assets from
$30 million to $250 million; to
0.625% on net assets from $250
million to $500 million; and to
0.50% on net assets over $500
million
Pilgrim MidCap 0.75% of the first $500 million of Class A -- 1.60%
Growth Fund the Fund's average net assets, Class B -- 2.25%
0.675% of the next $500 million of Class C -- 2.25%
average net assets, and 0.65% of Class M -- N/A
the average net assets in excess of Class Q -- 1.25%
$1 billion Class T -- N/A
Pilgrim Mid-Cap 1.00% of the Fund's average daily N/A
Opportunities Fund net assets
Pilgrim MidCap 1/12 of 1.00% of the Fund's average Class A -- 1.75%
Value Fund daily net assets during the month Class B -- 2.50%
(approximately 1.00% on an annual Class C -- 2.50%
basis) Class M -- 2.25%
Class Q -- 1.75%
Class T -- N/A
Pilgrim Money 0.50% of average net assets if the Class A -- 1.50%
Market Fund * Fund has not invested substantially Class B -- 2.25%
all of its assets in another Class C -- 2.25%
investment company, 0.15% if Class M -- N/A
substantially all of its assets are Class Q -- N/A
invested in another investment Class T -- N/A
company
Pilgrim Research 0.70% of the Fund's average daily N/A
Enhanced Index Fund net assets
Pilgrim SmallCap 1.00% of the Fund's average net Class A -- 1.95%
Growth Fund assets Class B -- 2.60%
Class C -- 2.60%
Class M -- N/A
Class Q -- 1.50%
Class T -- N/A
Pilgrim SmallCap 0.75% of the Fund's average daily N/A
Opportunities Fund net assets
Pilgrim Strategic 0.45% of the first $500 million of Class A -- 0.95%
Income Fund the Fund's average net assets, 0.40% Class B -- 1.35%
of the next $250 million of average Class C -- 1.35%
net assets, and 0.35% of the average Class M -- N/A
net assets in excess of $750 million Class Q -- 0.85%
Pilgrim Worldwide 1.00% of the first $500 million of Class A -- 1.85%
Growth Fund the Fund's average net assets, 0.90% Class B -- 2.50%
of the next $500 million of average Class C -- 2.50%
net assets, and 0.85% of the average Class M -- N/A
net assets in excess of $1 billion Class Q -- 1.60%
----------
* The Money Market Fund will also pay advisory fees to Reserve Management
Company, Inc., the investment adviser of Primary Institutional Fund, a
series of Reserve Institutional Trust, the investment company in which the
Money Market Fund invests substantially all of its assets.
H-3
<PAGE>
FUND ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- ------------------------------ -------------
Pilgrim SmallCap 0.75% of the first $250 million of Voluntary expense
Opportunities Portfolio aggregate average daily net assets cap of 0.90%.
of Pilgrim Variable of the Portfolio; 0.70% of the next
Products Trust $250 million; 0.65% of the next $250
million; 0.60% of the next $250
million and 0.55% of the aggregate
average daily net assets in excess
of $1 billion
Pilgrim Growth + Value 0.75% of the first $250 million of Voluntary expense
Portfolio of Pilgrim aggregate average daily net assets cap of 0.80%.
Variable Products Trust of the Portfolio; 0.70% of the next
$250 million; 0.65% of the next $250
million; 0.60% of the next $250
million and 0.55% of the aggregate
average daily net assets in excess
of $1 billion
Pilgrim Research 0.75% of the first $250 million of Voluntary expense
Enhanced Index aggregate average daily net assets cap of 0.90%.
Portfolio of Pilgrim of the Portfolio; 0.70% of the next
Variable Products Trust $250 million; 0.65% of the next $250
million; 0.60% of the next $250
million and 0.55% of the aggregate
average daily net assets in excess
of $1 billion
Pilgrim High Yield Bond 0.75% of the first $250 million of Voluntary expense
Portfolio of Pilgrim aggregate average daily net assets cap of 0.80%.
Variable Products Trust of the Portfolio; 0.70% of the next
$250 million; 0.65% of the next $250
million; 0.60% of the next $250
million and 0.55% of the aggregate
average daily net assets in excess
of $1 billion
Pilgrim International 1.00% of aggregate average daily Voluntary expense
Value Portfolio of net assets cap of 1.00%.
Pilgrim Variable
Products Trust
Pilgrim Growth 0.75% of aggregate average daily Voluntary expense
Opportunities Portfolio net assets cap of 0.90%.
of Pilgrim Variable
Products Trust
Pilgrim MagnaCap 0.75% of aggregate average daily Voluntary expense
Portfolio of Pilgrim net assets cap of 0.90%.
Variable Products Trust
Pilgrim MidCap 0.75% of aggregate average daily Voluntary expense
Opportunities Portfolio net assets cap of 0.90%.
of Pilgrim Variable
Products Trust
Common Stock Portfolio 0.45 of 1.00% of average daily net
of USLICO Series Fund asset value of the Portfolio assets
Asset Allocation 0.45 of 1.00% of average daily net
Portfolio (equity asset value of equity portion
portion) of USLICO
Series Fund
H-4
<PAGE>
APPENDIX I
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF PILGRIM INVESTMENTS, INC.
Set forth below is the name and principal occupation of the principal
executive officer and each director of Pilgrim Investments, Inc. The business
address of each such person is 40 North Central Avenue, Suite 1200, Phoenix,
Arizona 85004.
<TABLE>
<CAPTION>
POSITION WITH PILGRIM
NAME AND AGE INVESTMENTS PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
------------ ----------- -----------------------------------------------
<S> <C> <C>
Robert W. Stallings (51) Chairman of the Board Chairman, Chief Executive Officer and President of Pilgrim
of Directors Group, Inc. ("Pilgrim Group") (since December 1994); Chairman,
Pilgrim Investments and Pilgrim Securities, Inc. ("Pilgrim
Securities") (since December 1994); President and Chief
Executive Officer of Pilgrim Funding, Inc. (since November
1999); and President and Chief Executive Officer of Pilgrim
Capital Corporation (since October 1999) and its predecessors
since August 1991. Mr. Stallings is also a Director, Trustee,
or a member of the Advisory Board of each of the Pilgrim Funds.
James R. Reis (42) Director, Vice Director, Vice Chairman (since December 1994), Executive Vice
Chairman, Executive President (since April 1995), and Director of Structured
Vice President and Finance and Senior Lending (since April 1998), Pilgrim Group,
Director of Senior Inc. and Pilgrim Investments; Director (since December 1994)
Lending and Structured and Vice Chairman (since November 1995) of Pilgrim Securities;
Finance Executive Vice President, Assistant Secretary and Chief Credit
Officer of Pilgrim Prime Rate Trust; Executive Vice President
and Assistant Secretary of each of the other Pilgrim Funds.
Presently serves or has served as an officer or director of
other affiliates of Pilgrim Capital Corporation.
Stanley D. Vyner (49) President and Chief President and Chief Executive Officer (since August 1996),
Executive Officer Pilgrim Investments; Executive Vice President of most of the
Pilgrim Funds (since July 1996). Formerly Chief Executive
Officer (November 1993 - December 1995) HSBC Asset Management
Americas, Inc.
</TABLE>
I-1
<PAGE>
APPENDIX J
FEES EARNED BY PILGRIM GROUP, INC. AND PILGRIM SECURITIES, INC.
<TABLE>
<CAPTION>
SHAREHOLDER SERVICING FEES DISTRIBUTION FEES PAID TO
FUND PAID TO PILGRIM GROUP, INC. (1) PILGRIM SECURITIES, INC. (1)
---- ------------------------------- ----------------------------
<S> <C> <C>
Asia-Pacific Equity (2) $ 11,834 $ 150,016
Balanced (2) $ 300 $ 77,941
Bank and Thrift (2) $ 110,083 $4,768,559
Convertible (2) $ 564 $ 465,121
Emerging Countries (2) $ 1353 $ 193,139
Emerging Markets Value (3) $ 20,184 $ 96,919
Government Securities Income (2) $ 3,991 $ 185,172
Growth + Value (3) $ 358,875 $2,331,017
High Total Return (3) $ 726,605 $4,972,433
High Total Return II (3) $ 308,067 $2,258,886
High Yield (2) $ 30,409 $2,670,572
High Yield II (2) $ 130 $ 177,661
International Core Growth (2) $ 414 $ 76,659
International SmallCap Growth (2) $ 378 $ 177,661
International Value (3) $ 931,067 $5,002,073
LargeCap Growth (2) $ 761 $ 124,911
LargeCap Leaders (2) $ 6,755 $ 232,891
MagnaCap (2) $ 55,048 $2,076,209
MidCap Opportunities (4) $ 48,903 $ 26,510
MidCap Growth (2) $ 814 $ 536,357
MidCap Value (2) $ 12,029 $ 482,600
Money Market (2) $ 0 (5) $ 0 (5)
Research Enhanced Index (3) $ 122,493 $ 687,439
SmallCap Growth (2) $ 608 $ 562,935
Strategic Income (2) $ 253 $ 29,595
Worldwide Growth (2) $ 1,590 $ 371,306
</TABLE>
----------
(1) Amounts include fees paid to the Funds' former distributor and
administrator, which were affiliated with the Funds' former investment
adviser.
(2) For the fiscal year ended June 30, 1999.
(3) For the fiscal year ended October 31, 1999.
(4) For the fiscal year ended December 31, 1999.
(5) Money Market Fund commenced operations on July 12, 1999.
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APPENDIX K
FORM OF SUB-ADVISORY AGREEMENT WITH BRANDES INVESTMENT PARTNERS, L.P.
(PILGRIM EMERGING MARKETS VALUE FUND AND PILGRIM INTERNATIONAL VALUE FUND)
SUB-ADVISORY AGREEMENT
AGREEMENT made this _____ day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Manager"),
investment adviser for the Pilgrim [ ] (hereinafter the "Fund"), a series of the
Pilgrim Mayflower Trust (the "Trust"), and Brandes Investment Partners, L.P., a
California limited partnership (hereinafter the "Sub-Adviser").
WHEREAS, the Manager has been retained by the Trust on behalf of the Fund
to provide investment advisory services to the Fund pursuant to an Investment
Management Agreement made on ___________, 2000 (the "Investment Management
Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund's shareholders have approved the
appointment of the Sub-Adviser to perform certain investment advisory services
for the Fund pursuant to this Sub-Advisory Agreement with the Manager and the
Sub-Adviser is willing to perform such services for the Fund;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the Manager and the Sub-Adviser as
follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUB-ADVISER. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising those
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion, subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition, and the
sale, redemption, and exchange of investments, subject to the duty to render to
the Trustees of the Fund and the Manager written reports of the composition of
the portfolio of the Fund as often as the Manager or the Trustees of the Fund
shall reasonably require;
(b) to make all decisions relating to the manner, method, and timing
of investment transactions, to select brokers, dealers and other intermediaries
by or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided the
Sub-Adviser shall have no authority to direct the transfer of the Fund's funds
or assets to itself or other affiliated persons and shall have no authority over
the disbursement (as opposed to investment decisions) of funds or assets nor any
custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund or the Manager may give in
writing to the Sub-Adviser with regard to any of the foregoing powers shall,
unless the contrary is expressly stated herein, override the general authority
given by this provision to the extent that the Trustees of the Fund may, at any
time and from time to time, direct, either generally or to a limited extent and
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either alone or in concert with the Manager or the Sub-Adviser (provided that
such directions would not cause the Sub-Adviser to violate any fiduciary duties
or any laws with regard to the Sub-Adviser's duties and responsibilities), all
or any of the same as they shall think fit and, in particular, the Manager shall
have the right to direct the Sub-Adviser to place trades through brokers and
other agents of the Manager's choice, subject to such brokers or agents
executing such trades on a "best execution basis", i.e. at the best price and/or
with research or other services which render that broker's services the most
appropriate for the Sub-Adviser's needs, and further that the Sub-Adviser is
satisfied that the dealing and execution quality of such brokers are
satisfactory to the Sub-Adviser; and PROVIDED FURTHER that nothing herein shall
be construed as giving the Sub-Adviser power to manage the aforesaid cash and
investments in such a manner as would cause the Fund to be considered a "dealer"
in stocks, securities or commodities for U.S. federal income tax purposes.
The Manager shall monitor and review the performance of the Sub-Adviser
under this Agreement, including but not limited to the Sub-Adviser's performance
of the duties delineated in subparagraphs (a)-(d) above.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code of 1986, as amended, (the "Code")
and all other applicable federal and state laws and regulations, the Prospectus
and Statement of Additional Information for the Fund, and with any applicable
procedures adopted by the Trustees in writing and made available to Sub-Adviser;
(ii) manage the Fund in accordance with the investment requirements for
regulated investment companies under Subchapter M of the Code and regulations
issued thereunder, and (iii) direct the placement of orders pursuant to its
investment determinations for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements;
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Sub-Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Pilgrim Group, Inc.
(the "Administrator"), the Manager, and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Manager, the Administrator and the Fund in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request;
(d) immediately notify the Manager and the Fund in the event that the
Sub-Adviser or any of its affiliates (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Funds Registration Statement, or
any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein respecting or relating to the
Sub-Adviser that becomes untrue in any material respect. The Manager shall
likewise immediately notify the Sub-Adviser if it becomes aware of any
regulatory action of the type described in this subparagraph 2(d) respecting or
relating to the Fund, the Manager, or any Affiliates of the Manager.
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its partners, officers and employees, and
other internal operating costs. The Fund shall bear its own overhead and other
internal operating costs (whether incurred directly or by the Manager or the
Sub-Adviser) including, without limitation:
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<PAGE>
(a) the costs incurred by the Fund in the preparation and printing of
its Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
the shares may from time to time be listed, quoted or dealt in and the expenses
of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares in
newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees' communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. COMPENSATION. The Manager will pay the Sub-Adviser at the end of each
calendar month an advisory fee computed daily at an annual rate equal to fifty
(50) percent of the management fee that the Fund pays the Manager.
5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best business judgment and reasonable care in rendering the
services provided by it under this Sub-Advisory Agreement. The Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the holders of the Fund's shares or by the Manager in
connection with the matters to which this Sub-Advisory Agreement relates,
provided that nothing in this Sub-Advisory Agreement shall be deemed to protect
or purport to protect the Sub-Adviser against liability to the Fund or to
holders of the Fund's shares or to the Manager to which the Sub-Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
on its part in the performance of its duties or by reason of the Sub-Adviser's
reckless disregard of its obligations and duties under this Sub-Advisory
Agreement. As used in this Section 6, the term "Sub-Adviser" shall include any
officers, directors, employees or other affiliates of the Sub-Adviser performing
services for the Fund.
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<PAGE>
7. SERVICES NOT EXCLUSIVE. It is understood that, except as may otherwise
be agreed by the Manager and the Sub-Adviser, the services of the Sub-Adviser
are not exclusive. The Sub-Adviser is not required to recommend to the Fund the
same investments it recommends to its other clients. In connection with
purchases or sales of portfolio securities for the account of the Fund, neither
the Sub-Adviser nor any of its partners officers or employees shall act as
principal or agent or receive any commission. If the Sub-Adviser provides any
advice to its clients concerning the shares of the Fund, the Sub-Adviser shall
act solely as investment counsel for such clients and not in any way on behalf
of the Fund.
8. DURATION AND TERMINATION. This Sub-Advisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein and
shall continue automatically for successive annual periods provided that such
continuance is specifically approved at least annually by the affirmative vote
of (i) a majority of the Trustees of the Trust who are not interested persons of
the Trust (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such approval, and (ii) a majority of the Trustees of
the Trust or the holders of a majority of the outstanding voting securities of
the Fund (as defined in the 1940 Act). Notwithstanding the foregoing, this
Sub-Advisory Agreement may be terminated: (a) at any time without penalty by the
Fund or Manager upon the vote of a majority of the Trustees or by vote of the
majority of the Fund's outstanding voting securities (as defined in the 1940
Act), upon sixty (60) days' written notice to the Sub-Adviser, or (b) by the
Sub-Adviser at any time without penalty, upon sixty days' written notice to the
Fund or Manager. This Sub-Advisory Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act) or the assignment or
termination of the Investment Management Agreement.
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Sub-Advisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Sub-Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
10. INDEMNIFICATION. (a) The Manager hereby agrees to indemnify the
Sub-Adviser from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs or damages (other than liabilities, losses, expenses,
attorneys' fees and costs or damages arising from the Sub-Adviser failing to
meet the standard of care required hereunder in the performance by the
Sub-Adviser of, or its failure to perform, the services required hereunder),
arising from: (i) the Manager's (or its affiliates' and their respective agents'
and employees') failure to perform its duties or assume its obligations
hereunder, or from its wrongful actions or omissions, including, but not limited
to claims asserted or threatened by any shareholder of the Fund, governmental or
regulatory agency, or any other person; (ii) claims arising from any wrongful
act by the Fund or any of the Fund's trustees, officers, employees, or
representatives, or by the Manager, its officers, employees or representatives,
or from any actions by the Fund's distributors or any representative of the
Fund; (iii) any action or claim against the Sub-Adviser based on any alleged
untrue statement or misstatement of material fact in any registration statement,
prospectus, shareholder report or other information or materials relating to the
Fund or shares issued by the Fund or any amendment thereof or supplement
thereto, or the failure or alleged failure to state therein a material fact
required to be stated in order that the statements therein are not misleading,
provided that such claim is not based upon information provided to the Manager
by the Sub-Adviser or which facts or information the Sub-Adviser failed to
provide or disclose. With respect to any claim for which the Sub-Adviser shall
be entitled to indemnity hereunder, the Manager shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Sub-Adviser of investigating and/or defending any claim asserted or threatened
by any party, subject always to the Manager first receiving a written
undertaking from the Sub-Adviser to repay any amounts paid on its behalf in the
event and to the extent of any subsequent final determination by a court that
the Sub-Adviser was not entitled to indemnification hereunder in respect of such
claim.
(a) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs or damages (other than liabilities, losses,
expenses, attorneys' fees and costs or damages arising from the Manager's
failure to perform its responsibilities hereunder or claims arising from its
acts or failure to act in performing this Agreement) arising from Sub-Adviser's
or its agents' and employees' failure to perform its duties and assume its
obligations hereunder, or from any failure of Sub-Adviser to meet the standard
of care set forth in Section 6 of this Agreement, including any action or claim
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<PAGE>
against the Manager based on any alleged untrue statement or misstatement of a
material fact made or provided by the Sub-Adviser contained in any registration
statement, prospectus, shareholder report or other information or materials
relating to the Fund or shares issued by the Fund, or the failure or alleged
failure to state a material fact therein required to be stated in order that the
statements therein are not misleading, which fact should have been made or
provided by the Sub-Adviser to the Manager. With respect to any claim for which
the Manager is entitled to indemnity hereunder, the Sub-Adviser shall assume the
reasonable expenses and costs (including any reasonable attorneys' fees and
costs) of the Manager of investigating and/or defending any claim asserted or
threatened by any party, subject always to the Sub-Adviser first receiving a
written undertaking from the Manager to repay any amounts paid on its behalf in
the event and to the extent of any subsequent final determination by a court
that the Manager was not entitled to indemnification hereunder in respect of
such claim.
(b) In the event that the Sub-Adviser or Manager is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification (the "Indemnitee") shall promptly
notify the other party thereof. After becoming notified of the same, the party
from whom indemnification is sought (the "Indemnitor") shall be entitled to
participate in any such action or proceeding and shall assume any payment for
the full defense of the Indemnitee therein with counsel reasonably satisfactory
to the party seeking indemnification. The Indemnitor shall not, in connection
with any action or proceeding or separate but similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegation
or circumstances, be liable for the fees or expenses of more than one separate
firm of attorneys at any time for Indemnitees. After properly assuming the
defense thereof, the Indemnitor shall not be liable hereunder to the Indemnitee
for any legal or other expenses subsequently incurred by the Indemnitee in
connection with the defense thereof, other than damages, if any, by way of
judgment, settlement, or otherwise pursuant to this provision. The Indemnitor
shall not be liable hereunder for any settlement of any action or claim effected
without its written consent, which consent shall not be unreasonably withheld.
The Indemnitee shall fully cooperate with the Indemnitor in the defense of any
claim and any litigation or other legal proceedings resulting from the claim.
The Indemnitee may participate in the defense of the claim and any litigation or
other legal proceedings resulting from the claim. The Indemnitee may employ
separate counsel to participate in such defense, and the fees and expenses of
such counsel shall not be at the expense of the Indemnitee, but only if the
employment thereof (a) has been specifically authorized in writing by the
Indemnitor, which authorization shall not be unreasonably withheld and (b)
relates to the defense of any claim or any litigation or other legal proceedings
resulting from the claim to the extent the claim or any litigation or other
legal proceedings resulting from the claim seeks injunctive, specific
performance or other nonmonetary relief involving or affecting the business,
operations or assets of the Indemnitee (or an Affiliate of the Indemnitee). The
provisions of this Section 10 shall survive the termination of this Agreement.
11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have no authority to
bind Sub-Adviser.
12. USE OF NAMES. (a) The Fund may, subject to sub-clause (b) below, use
the name, "Brandes Investment Partners, L.P." ("Brandes") or the name of any
principal of Brandes, or any component, abbreviation or other name derived
therefrom for promotional purposes only for so long as this Sub-Advisory
Agreement (or any extension, renewal or amendment thereof) continues in force,
unless the Sub-Adviser or such principal shall specifically consent in writing
to such continued use thereafter. Any permitted use by the Fund during the term
hereof of the name of the Sub-Adviser or any of its principals, or any
derivative thereof, shall in no way prevent the Sub-Adviser or any of it
shareholders or any of their successors, from using or permitting the use of
such name (whether singly or in any combination with any other words) for, by or
in connection with an entity or enterprise other than the Fund. At the
conclusion of this Sub-Advisory Agreement or in the event of any termination of
this Sub-Advisory Agreement for any reason, each of the authorized parties and
their respective employees, representatives, affiliates, and associates agree
that they shall immediately cease using each such name and any derivatives of
said names for any purpose whatsoever.
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<PAGE>
(a) The Manager and its affiliates on one hand, and the Sub-Adviser on
the other, shall not publish or distribute, and the Manager shall cause the Fund
not to publish or distribute to Fund shareholders, prospective investors, sales
agents or members of the public, any disclosure document, offering literature
(including any form of advertisement or other solicitation materials calculated
to lead investors to subscribe for and purchase shares of the Fund) or other
document referring by name to the Sub-Adviser or its affiliates on one hand and
the Manager or its affiliates on the other, unless the other party shall have
consented in writing to such references in the form and context in which they
appear.
13. CHANGE IN IDENTITY. The Sub-Adviser shall notify the Manager of any
change in the identity or control of its general or limited partners promptly
after such change occurs.
14. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of Massachusetts (without regard to principles of conflicts of law),
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
15. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time addressed to its President. Such notice, instruction or other instrument
shall be deemed to have been served, in the case of a registered letter at the
expiration of seventy-two (72) hours after posting; in the case of express mail,
within twenty-four (24) hours after dispatch; and in the case of facsimile,
immediately on dispatch; and if delivered outside normal business hours it shall
be deemed to have been received at the next time after delivery or transmission
when normal business hours commence. Evidence that the notice, instruction or
other instrument was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
16. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year set forth
above.
Pilgrim Investments, Inc.
By:
-------------------------------------
Brandes Investment Partners, L.P.
By:
-------------------------------------
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APPENDIX L
FORM OF SUB-ADVISORY AGREEMENT WITH HSBC ASSET MANAGEMENT (AMERICAS) INC.,
HSBC ASSET MANAGEMENT (HONG KONG) LIMITED AND HSBC ASSET MANAGEMENT
(EUROPE) LIMITED (PILGRIM ASIA-PACIFIC FUND)
SUB-ADVISORY AGREEMENT
AGREEMENT made this ___th day of ____, 2000 between Pilgrim Investments,
Inc., a Delaware corporation (the "Manager"), and HSBC Asset Management
(Americas) Inc., a New York corporation ("HSBC Americas"), HSBC Asset Management
(Hong Kong) Limited, a Hong Kong corporation ("HSBC Hong Kong") and HSBC Asset
Management (Europe) Limited (a ___________ corporation) ("HSBC Europe"), (HSBC
Americas, HSBC Hong Kong and HSBC Europe being collectively referred to herein
as the "Sub-Adviser").
WHEREAS, Pilgrim Advisory Funds, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, the Fund is authorized to issue separate series, each of which
will offer a separate class of shares of common stock, each series having its
own investment objective or objectives, policies, and limitations;
WHEREAS, the Fund may offer shares of additional series in the future;
WHEREAS, pursuant to an Investment Management Agreement, dated the date
hereof (the "Investment Management Agreement"), a copy of which has been
provided to the Sub-Adviser, the Fund has retained the Manager to render
advisory, management, and administrative services with respect to each of the
Fund's series; and
WHEREAS, pursuant to authority granted to the Manager in the Investment
Management Agreement, the Manager wishes to retain the Sub-Adviser to furnish
investment advisory services to one or more of the series of the Fund, and the
Sub-Adviser is willing to furnish such services to the Fund and the Manager;
NOW, THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Manager and the
Sub-Adviser as follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to act as the
investment adviser and Manager to the Pilgrim Asia-Pacific Equity Fund series of
the Fund (the "Series") for the periods and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided. In the event the
Fund designates one or more series (other than the Series) with respect to which
the Manager wishes to retain the Sub-Adviser to render investment advisory
services hereunder, it shall notify the Sub-Adviser in writing. If the
Sub-Adviser is willing to render such services, it shall notify the Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. SUB-ADVISER DUTIES. Subject to the supervision of the Fund's Board of
Directors and the Manager, the Sub-Adviser will provide a continuous investment
program for the Series' portfolio and determine in its discretion the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other investments
contained in the portfolio. The Sub-Adviser will provide investment research and
conduct a continuous program of evaluation, investment, sales, and reinvestment
of the Series' assets by determining the securities and other investments that
shall be purchased, entered into, sold, closed, or exchanged for the Series,
when these transactions should be executed, and what portion of the assets of
the Series should be held in the various securities and other investments in
which it may invest. To the extent permitted by the investment policies of the
Series, the Sub-Adviser shall make decisions for the Series as to foreign
currency matters and make determinations as to and execute and perform foreign
currency exchange contracts on behalf of the Series. The Sub-Adviser will
provide the services under this Agreement in accordance with the Series'
investment objective or objectives, policies, and restrictions as stated in the
Fund's Registration Statement filed with the Securities and Exchange Commission
("SEC"), as amended, copies of which shall be sent to the Sub-Adviser by the
Manager. The Sub-Adviser further agrees as follows:
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(a) The Sub-Adviser will not take any action that would cause the
Series to fail to qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code.
(b) The Sub-Adviser will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Directors of which the Sub-Adviser has been sent a copy, and the provisions of
the Registration Statement of the Fund filed under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended, of which the
Sub-Adviser has received a copy.
(c) The Sub-Adviser will vote all proxies solicited by or with respect
to the issuers of securities in which assets of the Series are invested. The
Sub-Adviser will maintain appropriate records detailing its voting of proxies on
behalf of the Fund and will provide to the Fund at least annually a report
setting forth the proposals voted on and how the Series' shares were voted since
the prior report, including the name of the corresponding issuers.
(d) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Series as well as of other investment
advisory clients of the Sub-Adviser or any of its affiliates, the Sub-Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in a manner that is fair and
equitable in the judgment of the Sub-Adviser in the exercise of its fiduciary
obligations to the Fund and to such other clients, subject to review by the
Manager and the Fund's Board of Directors.
(e) In connection with the purchase and sale of securities for the
Series, the Sub-Adviser will arrange for the transmission to the custodian and
portfolio accounting agent for the Series on a daily basis, such confirmation,
trade tickets, and other documents and information, including, but not limited
to, Cusip, Cedel, or other numbers that identify securities to be purchased or
sold on behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be settled through the Depository Trust Company, the
Sub-Adviser will arrange for the prompt transmission of the confirmation of such
trades to the Fund's custodian and portfolio accounting agent.
(f) The Sub-Adviser will assist the custodian and portfolio accounting
agent for the Fund in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Fund, the value of any
portfolio securities or other assets of the Series for which the custodian and
portfolio accounting agent seeks assistance from or identifies for review by the
Sub-Adviser. The parties acknowledge that the Sub-Adviser is not a custodian of
Series' assets and will not take possession or custody of such assets.
(g) The Sub-Adviser will make available to the Fund and the Manager,
promptly upon request, all of the Series' investment records and ledgers
maintained by the Sub-Adviser (which shall not include the records and ledgers
maintained by the custodian or portfolio accounting agent for the Fund) as are
necessary to assist the Fund and the Manager to comply with requirements of the
1940 Act and the Investment Advisers Act of 1940 (the "Advisers Act"), as well
as other applicable laws. The Sub-Adviser will furnish to regulatory authorities
having the requisite authority any information or reports in connection with
such services in respect to the Series which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(h) The Sub-Adviser will provide reports to the Fund's Board of
Directors for consideration at meetings of the Board on the investment program
for the Series and the issuers and securities represented in the Series'
portfolio, and will furnish the Fund's Board of Directors with respect to the
Series such periodic and special reports as the Directors and the Manager may
reasonably request. The Sub-Adviser will provide the Manager, no later than the
20th day following the end of each of the first three fiscal quarters of the
Series and the 45th day following the end of the Series' fiscal year, a letter
to shareholders (to be subject to review and editing by the Manager) containing
a discussion of those factors referred to in Item 5A(a) of 1940 Act Form N-1A in
respect of both the prior quarter and the fiscal year to date.
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3. BROKER-DEALER SELECTION. The Sub-Adviser is authorized to make decisions
to buy and sell securities and other investments for the Series' portfolio,
broker-dealer selection, and negotiation of brokerage commission rates. The
Sub-Adviser's primary consideration in effecting a security transaction will be
to obtain the best execution for the Series, taking into account the factors
specified in the prospectus and/or statement of additional information for the
Fund, and determined in consultation with the Manager, which include price
(including the applicable brokerage commission or dollar spread), the size of
the order, the nature of the market for the security, the timing of the
transaction, the reputation, the experience and financial stability of the
broker-dealer involved, the quality of the service, the difficulty of execution,
and the execution capabilities and operational facilities of the firm involved,
and the firm's risk in positioning a block of securities. Accordingly, the price
to the Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the judgment
of the Sub-Adviser in the exercise of its fiduciary obligations to the Fund, by
other aspects of the portfolio execution services offered. Subject to such
policies as the Fund's Board of Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Sub-Adviser shall not
be deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Series to pay a
broker-dealer for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's or the Manager's overall
responsibilities with respect to the Series and to their respective other
clients as to which they exercise investment discretion. The Sub-Adviser will
consult with the Manager to the end that portfolio transactions on behalf of the
Series are directed to broker-dealers on the basis of criteria reasonably
considered appropriate by the Manager. To the extent consistent with these
standards, the Sub-Adviser is further authorized to allocate the orders placed
by it on behalf of the Series to the Sub-Adviser if it is registered as a
broker-dealer with the SEC, to an affiliated broker-dealer, or to such brokers
and dealers who also provide research or statistical material, or other services
to the Series, the Sub-Adviser, or an affiliate of the Sub-Adviser. Such
allocation shall be in such amounts and proportions as the Sub-Adviser shall
determine consistent with the above standards, and the Sub-Adviser will report
on said allocation regularly to the Fund's Board of Directors indicating the
broker-dealers to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT SUB-ADVISER. The Sub-Adviser has reviewed the
Registration Statement for the Fund filed with the SEC that contains disclosure
about the Sub-Adviser, and represents and warrants that, with respect to the
disclosure about the Sub-Adviser or information relating, directly or
indirectly, to the Sub-Adviser, such Registration Statement contains, as of the
date hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. Each of HSBC
Americas, HSBC Hong Kong and HSBC Europe further represents and warrants that it
is a duly registered investment adviser under the Advisers Act. The Manager
acknowledges that it has received from HSBC Americas, HSBC Hong Kong and HSBC
Europe, not less than 48 hours prior to the execution and delivery of this
Agreement, a copy of each such party's Form ADV, Part II.
5. EXPENSES. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it and its staff and for their activities in connection
with its sub-advisory duties under this Agreement, except as provided in Section
11. The Manager or the Fund shall be responsible for all the expenses of the
Fund's operations.
6. COMPENSATION. For the services provided, the Manager will pay the
Sub-Adviser a monthly fee, in arrears, equal to 1/12 of .50% of the Series'
average daily net assets during the month. Payment of the fee will be due on the
10th day of the following month. The fee will be appropriately prorated to
reflect any portion of a calendar month that this Agreement is not in effect
among the parties. In accordance with the provisions of the Investment
Management Agreement, the Manager is solely responsible for the payment of fees
to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of its fees
solely from the Manager; provided, however, that if the Fund fails to pay the
Manager all or a portion of the management fee under said Investment Management
Agreement when due, and the amount that was paid is insufficient to cover the
Sub-Adviser's fee under this Agreement for the period in question, then the
Sub-Adviser may enforce against the Fund any rights it may have as a third-party
beneficiary under the Investment Management Agreement and the Manager will (i)
not be obligated to pay to the Sub-Adviser the deficiency until actually
collected from the Fund and (ii) take all steps appropriate under the
circumstances to collect the amount due from the Fund.
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7. COMPLIANCE.
(a) The Sub-Adviser agrees that it shall immediately notify the
Manager and the Fund (1) in the event that the SEC has censured the Sub-Adviser;
placed limitations upon its activities, functions or operations; suspended or
revoked its registration as an investment adviser; or has commenced proceedings
or an investigation that may result in any of these actions, or (2) upon having
a reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. The Sub-Adviser further agrees to notify the Manager and the Fund
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Registration Statement or
prospectus for the Fund (which describes the Series), or any amendment or
supplement thereto, or of any statement contained therein that becomes untrue in
any material respect.
(b) The Manager agrees that it shall immediately notify the
Sub-Adviser (1) in the event that the SEC has censured the Manager or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Manager's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, or (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code.
8. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Sub-Adviser hereby agrees that all records which it
maintains for the Series are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's or the
Manager's request, although the Sub-Adviser may, at its own expense, make and
retain a copy of such records. The Sub-Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required to
be maintained by Rule 31a-l under the 1940 Act and to preserve the records
required by Rule 204-2 under the Advisers Act for the period specified in the
Rule.
9. COOPERATION; CONFIDENTIALITY. Each party to this Agreement agrees to
cooperate with the other party and with all appropriate governmental authorities
having the requisite jurisdiction (including, but not limited to, the SEC) in
connection with any investigation or inquiry relating to this Agreement or the
Fund. Subject to the foregoing, the Sub-Adviser shall treat as confidential all
information pertaining to the Fund and actions of the Fund, the Manager and the
Sub-Adviser, and the Manager shall treat as confidential and use only in
connection with the Series all information furnished to the Fund or the Manager
by the Sub-Adviser, in connection with its duties under the agreement except
that the aforesaid information need not be treated as confidential if required
to be disclosed under applicable law, if generally available to the public
through means other than by disclosure by the Sub-Adviser or the Manager, or if
available from a source other than the Manager, Sub-Adviser or this Fund.
10. REPRESENTATIONS RESPECTING SUB-ADVISER. The Manager agrees that neither
the Manager, nor affiliated persons of the Manager, shall give any information
or make any representations or statements in connection with the sale of shares
of the Series concerning the Sub-Adviser or the Series other than the
information or representations contained in the Registration Statement,
prospectus, or statement of additional information for the Fund's shares, as
they may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved in advance by the Sub-Adviser, except with the prior permission of the
Sub-Adviser. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Sub-Adviser for its approval and the Sub-Adviser has not
commented within 10 days, the Manager and its affiliated persons may use and
distribute such sales literature or other promotional material.
11. ADDITIONAL COVENANTS OF THE SUB-ADVISER. During the term of this
Agreement and during the six-month period beginning the date that this Agreement
terminates, neither the Sub-Adviser nor any of the Sub-Adviser's affiliates will
serve or act as an investment adviser or sub-investment adviser to any other
SEC-registered open-end investment company or series thereof having investment
objectives similar to those of the Series. The Sub-Adviser shall not be bound by
this covenant in the event that the termination is not voluntarily effected by
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the Sub-Adviser, and shall not be bound by this covenant for any period in the
event that the Sub-Adviser does not receive compensation for its services from
the Manager or the Fund as required by the terms of this agreement. Furthermore,
the Sub-Adviser shall not be bound by this covenant with respect to any SEC
registered open-end investment company or series thereof to which the
Sub-Adviser is appointed as investment adviser or Sub-Adviser pursuant to any
merger, acquisition or any other corporate action to which HSBC Holdings p.l.c,
or any of its subsidiaries is a party and which involves the change in ownership
of an investment advisory business or company.
12. CONTROL. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and has reserved the right to reasonably direct any action hereunder
taken on its behalf by the Sub-Adviser.
13. LIABILITY. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, and subject to the applicable
provisions of Paragraph 2(f) of this Agreement (which deal with non-investment
advisory services), the Manager agrees that the Sub-Adviser, any affiliated
person of the Sub-Adviser, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls the Sub-Adviser (1) shall bear no
responsibility and shall not be subject to any liability for any act or omission
respecting any series of the Fund that is not a Series hereunder, and (2) shall
not be liable for, or subject to any damages, expenses, or losses in connection
with, any act or omission connected with or arising out of any services rendered
under this Agreement, except by reason of willful misfeasance, bad faith, or
gross negligence in the performance of the Sub-Adviser's duties, or by reason of
reckless disregard of the Sub-Adviser's obligations and duties under this
Agreement.
14. DURATION AND TERMINATION.
(a) This Agreement shall become effective on the date first written
above, subject to the condition that the Fund's Board of Directors, including a
majority of those Directors who are not interested persons (as such term is
defined in the 1940 Act) of the Manager, and the shareholders of the Series,
shall have approved this Agreement. Unless terminated as provided herein, the
Agreement shall continue in full force and effect for two (2) years from the
effective date of this Agreement, and shall continue from year to year
thereafter with respect to each Series covered by this Agreement; provided that
such annual continuance is specifically approved each year by (a) the Board of
Directors of the Fund, or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of each Series, and (b) the vote of a
majority of those Directors who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. However, any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of a Series shall be
effective to continue this Agreement with respect to such Series notwithstanding
(i) that this Agreement has not been approved by the holders of a majority of
the outstanding shares of any other Series or (ii) that this agreement has not
been approved by the vote of a majority of the outstanding shares of the Fund,
unless such approval shall be required by any other applicable law or otherwise.
Notwithstanding the foregoing, this Agreement may be terminated with respect to
any Series covered by this Agreement: (a) by the Manager at any time without
penalty, upon sixty (60) days' written notice to the Sub-Adviser and the Fund,
(b) at any time without payment of any penalty by the Fund, by the Fund's Board
of Directors or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Sub-Adviser, or (c)
by the Sub-Adviser upon requisite notice, as provided below, at any time after
two years from the date of this agreement; and requisite notice for these
purposes shall be three (3) months written notice unless the Fund or the Manager
requests additional time to find a replacement for the Sub-Adviser, in which
case the Sub-Advisor shall allow the additional time requested by the Fund or
Manager not to exceed three (3) additional months beyond the initial three-month
notice period; provided further, however, that the Sub-Adviser may terminate
this Agreement at any time without penalty, effective upon written notice to the
Manager and the Fund, in the event either the Sub-Adviser (acting in good faith)
or the Manager ceases to be registered as an investment adviser under the
Advisers Act or otherwise becomes legally incapable of providing investment
management services pursuant to its respective contract with the Fund, or in the
event the Manager becomes bankrupt or otherwise incapable of carrying out its
obligations under this Agreement, or in the event that the Sub-Adviser does not
receive compensation for its services from the Manager or the Fund as required
by the terms of this agreement. In the event of termination for any reason, all
records of each Series for which the Agreement is terminated shall promptly be
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returned to the Manager or the Fund, free from any claim or retention of rights
in such record by the Sub-Adviser, although the Sub-Adviser may, at its own
expense, make and retain a copy of such records. This Agreement shall
automatically terminate in the event of its assignment (as such term is
described in the 1940 Act). In the event this Agreement is terminated or is not
approved in the manner described above, the Sections or Paragraphs numbered
2(g), 8, 9, 10, 11, 12, 13 and 16 of this Agreement shall remain in effect, as
well as any applicable provision of this Section numbered 14 and, to the extent
that only amounts are owed to the Sub-Adviser as compensation for services
rendered while the agreement was in effect, Section 6.
(b) Notices.
Any notice must be in writing and shall be sufficiently given (1) when
delivered in person, (2) when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by postage prepaid first class air mail
simultaneously dispatched), (3) when sent by internationally recognized
overnight courier service (with receipt confirmed by such overnight courier
service), or (4) when sent by registered or certified mail, to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Fund:
Pilgrim Advisory Funds, Inc.
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
If to the Sub-Adviser:
HSBC Asset Management (Americas), Inc.
250 Park Avenue
New York, NY 10177-0012
Attention: Fredric M. Lutcher, III
15. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Directors of the Fund,
including a majority of the Directors of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law.
16. USE OF NAME.
(a) It is understood that the name "Pilgrim Investments, Inc." or any
derivative thereof (including the name or phrase "Pilgrim") or logo associated
with that name is the valuable property of the Manager and/or its affiliates,
and that the Sub-Adviser has the right to use such name (or derivative or logo)
only with the approval of the Manager and only so long as the Manager is Manager
to the Fund and/or the Series. Upon termination of the Investment Management
Agreement between the Fund and the Manager, the Sub-Adviser shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the names "HSBC Asset Management (Americas)
Inc.", "HSBC Asset Management (Hong Kong) Ltd." and "HSBC Asset Management
(Europe) Limited" or any derivative thereof or logo associated with that name is
the valuable property of the Sub-Adviser and its affiliates and that the Fund
and/or the Series have the right to use such name (or derivative or logo) in
offering materials of the Fund with the approval of the Sub-Adviser and for so
long as the Sub-Adviser is a Sub-Adviser to the Fund and/or the Series. Upon
termination of this Agreement, the Manager shall forthwith cause the Fund to
cease to use such name (or derivative or logo).
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17. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of New
York, provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act, the Advisers Act or rules or orders of the SEC thereunder,
and without regard for the conflicts of laws principle thereof. The term
"affiliate" or "affiliated person" as used in this Agreement shall mean
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The Manager and the Sub-Adviser acknowledge that the Fund enjoys
the rights of a third-party beneficiary under this Agreement, and the Manager
acknowledges that the Sub-Adviser enjoys the rights of a third party beneficiary
under the Management Agreement.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) To the extent permitted under Section 14 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent of
the other parties.
(e) 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, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent or co-partner of the Manager, or constituting the Manager as an
agent or co-partner of the Sub-Adviser. Nothing herein shall be construed as
constituting HSBC Americas, HSBC Hong Kong or HSBC Europe as an agent or
co-partner of one another, it being understood that references in this Agreement
to such parties as the Sub-Adviser are made for convenience only.
(g) This agreement may be executed in counterparts.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
PILGRIM INVESTMENTS, INC.
By:
--------------------------------------
Title:
-----------------------------------
HSBC ASSET MANAGEMENT (AMERICAS) INC.
By:
--------------------------------------
Title:
-----------------------------------
HSBC ASSET MANAGEMENT (HONG KONG) LIMITED
By:
--------------------------------------
Title:
-----------------------------------
HSBC ASSET MANAGEMENT (EUROPE) LIMITED
By:
--------------------------------------
Title:
-----------------------------------
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APPENDIX M
FORM OF SUB-ADVISORY AGREEMENT WITH J.P. MORGAN INVESTMENT MANAGEMENT INC.
(PILGRIM RESEARCH ENHANCED INDEX FUND)
SUB-ADVISORY AGREEMENT
AGREEMENT made this ____ day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Manager"),
investment adviser for the Pilgrim Research Enhanced Index Fund (hereinafter the
"Fund"), and J.P. Morgan Investment Management Inc., a Delaware corporation
(hereinafter the "Sub-Adviser").
WHEREAS, the Manager has been retained by the Fund, an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), to provide investment advisory services to
the Fund pursuant to an Investment Management Agreement dated ____________, 2000
(the "Investment Management Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the 1940 Act, and the Fund's
shareholders have approved the appointment of the Sub-Adviser to perform certain
investment advisory services for the Fund pursuant to this Sub-Advisory
Agreement with the Manager and the Sub-Adviser is willing to perform such
services for the Fund;
WHEREAS, the Sub-Adviser is or will be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act") prior to
performing its services for the Fund under this Agreement;
NOW THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the Manager and the Sub-Adviser as
follows:
1. Appointment. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. Duties of Sub-Adviser. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion; subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Fund, the Manager and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees of the Fund shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries by
or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided that
the Sub-Adviser shall have no other authority to direct the transfer of the
Fund's funds or assets to itself or other persons and shall have no other
authority over the disbursement (as opposed to investment decisions) of funds or
assets nor any custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund, or the Manager may give to
the Sub-Adviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Fund may, at any time and
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<PAGE>
from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Manager or the Sub-Adviser (provided that such
directions would not cause the Sub-Adviser to violate any fiduciary duties or
any laws with regard to the Sub-Adviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular, the Manager shall
have the right to request the Sub-Adviser to place trades through brokers and
other agents of the Manager's choice, subject to the Sub-Adviser's judgment that
such brokers or agents will execute such trades on the best overall terms
available, taking into consideration factors the Sub-Adviser deems relevant
including, without limitation, the price of the security, research or other
services which render that broker's services the most appropriate for the
Sub-Adviser's needs, the financial condition and dealing and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis; and provided
further that nothing herein shall be construed as giving the Sub-Adviser power
to manage the aforesaid cash and investments in such a manner as would cause the
Fund to be considered a "dealer" in stocks, securities or commodities for U.S.
federal income tax purposes.
The Manager shall monitor and review the performance of the Sub-Adviser
under this Agreement, including but not limited to the Sub-Adviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will
(a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, the current Prospectus
and Statement of Additional Information for the Fund supplied to the Sub-Adviser
by the Manager, and with any applicable procedures adopted by the Trustees in
writing supplied to the Sub-Adviser by the Manager; (ii) manage the Fund in
accordance with the investment requirements for regulated investment companies
under Subchapter M of the Code and regulations issued thereunder; (iii) direct
the placement of orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements.
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated strategies.
In addition, the Sub-Adviser will keep the Fund and the Trustees informed of
developments materially affecting the Fund's portfolio and shall, on the
Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Pilgrim Group, Inc.
(the "Administrator"), the Manager, and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Manager, the Administrator and the Fund in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request;
(d) immediately notify the Manager and the Fund in the event that the
Sub-Adviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Fund's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein that becomes untrue in any
material respect. The Fund, Manager, Administrator, and their Affiliates shall
likewise immediately notify the Sub-Adviser if any of them becomes aware of any
regulatory action of the type described in this subparagraph 2(d).
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its directors, officers and employees,
and other internal operating costs; provided, however, that the Sub-Adviser
shall be entitled to reimbursement on a monthly basis by the Manager of all
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reasonable out-of-pocket expenses properly incurred by it in connection with
serving as Sub-Adviser to the Fund. For the avoidance of doubt, the Fund shall
bear its own overhead and other internal operating costs (whether incurred
directly or by the Manager or the Sub-Adviser) including, without limitation:
(a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue orredemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
shares of the Fund may from time to time be listed, quoted or dealt in and the
expenses of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares of the
Fund in newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees' communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. COMPENSATION. As compensation for the services provided by the
Sub-Adviser under this Agreement, the Manager will pay the Sub-Adviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.20 of 1% of the Fund's average daily net assets. The "average daily
net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Funds Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Sub-Adviser's
compensation is payable pursuant to this Section, the Sub-Adviser's compensation
payable at the end of such month shall be computed on the basis of the value of
the net assets of the Fund as last determined (whether during or prior to such
month). If the Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this Section 4.
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5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Sub-Advisory Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares or by the Manager in connection with the matters to which
this Sub-Advisory Agreement relates, provided that nothing in this Sub-Advisory
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against liability to the Fund or to holders of the Fund's shares or to the
Manager to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement. As used in this Section 6, the
term "Sub-Adviser" shall include any officers, directors, employees or other
affiliates of the Sub-Adviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. The Advisor understands that the Sub-Adviser now
acts, will continue to act and may act in the future as investment advisor to
fiduciary and other managed accounts and as investment advisor to other
investment companies, and, except as may be separately agreed to from time to
time between the Advisor and the Sub-Adviser, the Trust has no objection to the
Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a methodology believed to be equitable to each entity. The
Sub-Adviser agrees to allocate similar opportunities to sell securities. The
Advisor recognizes that, in some cases, this procedure may limit the size of the
position that may be acquired or sold for the Fund. In addition, the Manager
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Shareholder's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Adviser or any affiliate of the Sub-Adviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
8. DURATION AND TERMINATION. This Agreement shall become effective as of
the date of its execution and shall continue in effect for a period of two years
from the date of execution. Thereafter, this Agreement shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Trustees or (ii) a
vote of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Fund's Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days written notice, by the
Manager, by the Sub-Adviser, by the Fund's Trustees, or by vote of holders of a
majority of the Fund's shares. This Agreement will terminate automatically five
business days after the Sub-Adviser receives written notice of the termination
of the advisory agreement between the Fund and the Manager. This Agreement also
will terminate automatically in the event of its assignment (as defined in the
1940 Act).
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Sub-Advisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Sub-Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
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10. INDEMNIFICATION. (a) The Manager hereby agrees to indemnify the
Sub-Adviser and its affiliates from and against all liabilities, losses,
expenses, reasonable attorneys' fees and costs (other than attorneys' fees and
costs in relation to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other than
liabilities, losses, expenses, attorneys fees and costs or damages arising from
the Sub-Adviser failing to meet the standard of care required in Section 6 of
this Sub-Advisory Agreement in the performance by the Sub-Adviser of, or its
failure to perform, the services required hereunder), arising from the Manager's
(its affiliates and their respective agents and employees) failure to perform
its duties or assume its obligations hereunder, or from its wrongful actions or
omissions, including, but not limited to, any claims for non-payment of advisory
fees; claims asserted or threatened by any shareholder of the Fund, governmental
or regulatory agency, or any other person; claims arising from any wrongful act
by the Fund or any of the Fund's trustees, officers, employees, or
representatives, or by the Manager, its officers, employees or representatives,
or from any actions by the Fund's distributors or any representative of the
Fund; any action or claim against the Sub-Adviser based on any alleged untrue
statement or misstatement of material fact in any registration statement,
prospectus, shareholder report or other information or materials covering shares
filed or made public by the Fund or any amendment thereof or supplement thereto,
or the failure or alleged failure to state therein a material fact required to
be stated in order that the statements therein are not misleading, provided that
such claim is not based upon information provided to the Manager by the
Sub-Adviser or approved by the Sub-Adviser in the manner provided in paragraph
12(b) of this Agreement, or which facts or information the Sub-Adviser failed to
provide or disclose. With respect to any claim for which the Sub-Adviser shall
be entitled to indemnity hereunder, the Manager shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Sub-Adviser of investigating and/or defending any claim asserted or threatened
by any party, subject always to the Manager first receiving a written
under-taking from the Sub-Adviser to repay any amounts paid on its behalf in the
event and to the extent of any subsequent determination that the Sub-Adviser was
not entitled to indemnification hereunder in respect of such claim.
(b) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation, to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other than
liabilities, losses, expenses, attorneys fees and costs or damages arising from
the Manager's failure to perform its responsibilities hereunder or claims
arising from its acts or failure to act in performing this Agreement) arising
from Sub-Adviser's (its affiliates and their respective agents and employees)
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement, or arising from failure to act in
any action or claim against the Manager based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Sub-Adviser contained in any registration statement, prospectus, shareholder
report or other information or materials relating to the Fund and shares issued
by the Fund, or the failure or alleged failure to state a material fact therein
required to be stated in order that the statements therein are not misleading,
which fact should have been made or provided by the Sub-Adviser to the Manager.
With respect to any claim for which the Manager is entitled to indemnity
hereunder, the Sub-Adviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Manager of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Sub-Adviser first receiving a written undertaking from the
Manager to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Manager was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Sub-Adviser or Manager is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
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11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have not authority to
bind Sub-Adviser.
12. USE OF NAME. (a) The Fund may, subject to sub-clause (b) below, use the
name, "J.P. Morgan Investment Management Inc. or "J.P. Morgan" for promotional
purposes only for so long as this Agreement (or any extension, renewal or
amendment thereof) continues in force, unless the Sub-Adviser shall specifically
consent in writing to such continued use thereafter. Any permitted use by the
Fund during the term hereof of the name of the Sub-Adviser or J.P. Morgan shall
in no way prevent the Sub-Adviser or any of it shareholders or any of their
successors, from using or permitting the use of such name (whether singly or in
any combination with any other words) for, by or in connection with an entity or
enterprise other than the Fund. The name and right to the name J.P. Morgan
Investment Management Inc. or any derivation of the name J.P. Morgan shall at
all times be owned and be the sole and exclusive property of J.P. Morgan and its
affiliated entities. J.P. Morgan Investment Management Inc., by entering into
this Agreement, is allowing the Fund to use the name J.P. Morgan Investment
Management Inc. and/or J.P. Morgan solely by or on behalf of the Fund. At the
conclusion of this Agreement or in the event of any termination of this
Agreement or if the Sub-Adviser's services are terminated for any reason, each
of the authorized parties and their respective employees, representatives,
affiliates, and associates agree that they shall immediately cease using the
name J.P. Morgan Investment Management Inc. and/or J.P. Morgan of said name for
any purpose whatsoever.
(b) The Manager and its affiliates shall not publish or distribute,
and shall cause the Fund not to publish or distribute to Fund shareholders,
prospective investors, sales agents or members of the public any disclosure
document, offering literature (including any form of advertisement or other
solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Fund) or other document referring by name to the
Sub-Adviser or any of its affiliates, unless the Sub-Adviser shall have
consented in writing to such references in the form and context in which they
appear; provided however, that where the Fund timely seeks to obtain approval of
disclosure contained in any documents required to be filed by the Fund, and such
approval is not forthcoming on or before the date on which such documents are
required by law to be filed, the Sub-Adviser shall be deemed to have consented
to such disclosure.
13. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. In the event of any litigation in which the Manager and the
Sub-Adviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of New York, located in New York, New York.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
14. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting; in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery or transmission when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
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15. NON-SOLICITATION. Manager, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund any persons or entities who are
clients of or investors in any fund or investment vehicle managed by any entity
owned or affiliated with J.P. Morgan Investment Management Inc.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of ____________, 2000.
Pilgrim Investments, Inc.
By:
-------------------------------------
J.P. Morgan Investment Management Inc.
By:
-------------------------------------
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APPENDIX N
FORM OF SUB-ADVISORY AGREEMENT WITH NAVELLIER FUND MANAGEMENT, INC.
(PILGRIM GROWTH + VALUE FUND)
SUB-ADVISORY AGREEMENT
AGREEMENT made this ___ day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Manager"),
investment adviser for the Pilgrim Growth +Value Fund (hereinafter the "Fund"),
and Navellier Fund Management, Inc., a Delaware corporation (hereinafter the
"Sub-Adviser").
WHEREAS, the Manager has been retained by the Fund, an open-end diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), to provide investment advisory services to
the Fund pursuant to an amended Investment Management Agreement dated
__________, 2000 (the "Investment Management Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the 1940 Act, and the Fund's
shareholders have approved the appointment of the Sub-Adviser to perform certain
investment advisory services for the Fund pursuant to this Sub-Adviser Agreement
with the Manager and the Sub-Adviser is willing to perform such services for the
Fund;
WHEREAS, the Sub-Adviser is or will be registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act") prior to
performing its services for the Fund under this Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Manager and the Sub-Adviser as follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUB-ADVISER. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion; subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Fund, the Manager and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees of the Fund shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries by
or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided that
the Sub-Adviser shall have no authority to direct the transfer of the Fund's
funds or assets to itself or other persons and shall have no authority over the
disbursement (as opposed to investment decisions) of funds or assets nor any
custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund, or the Manager may give to
the Sub-Adviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Fund may, at any time and
from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Manager or the Sub-Adviser (provided that such
directions would not cause the Sub-Adviser to violate any fiduciary duties or
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any laws with regard to the Sub-Adviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular the Manager shall
have the right to direct the Sub-Adviser to place trades through brokers \and
other agents of the Manager's choice, subject to such brokers or agents
executing such trades on a "best execution basis", i.e. at the best price and/or
with research or other services which render that broker's services the most
appropriate for the Sub-Adviser's needs, and further that the Sub-Adviser is
satisfied that the dealing and execution quality of such brokers are
satisfactory to the Sub-Adviser, and PROVIDED FURTHER that nothing herein shall
be construed as giving the Sub-Adviser power to manage the aforesaid cash and
investments in such a manner as would cause the Fund to be considered a "dealer"
in stocks, securities or commodities for U.S. federal income tax purposes.
The Manager shall monitor and review the performance of the Sub-Adviser
under this Agreement, including but not limited to the Sub-Adviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Sub-Adviser further agrees that, in performing its duties hereunder, it
will:
(a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, the Prospectus and
Statement of Additional Information for the Fund, and with any applicable
procedures adopted by the Trustees in writing and made available to Sub-Adviser,
(ii) manage the Fund in accordance with the investment requirements for
regulated investment companies under Subchapter M of the Code and regulations
issued thereunder; (iii) direct the placement of orders pursuant to its
investment determinations for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements.
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Sub-Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Pilgrim Group, Inc.
(the "Administrator"), the Manager, and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Manager, the Administrator and the Fund in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request;
(d) immediately notify the Manager and the Fund in the event that the
Sub-Adviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Fund's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein that becomes untrue in any
material respect. The Fund, Manager, Administrator, and their Affiliates shall
likewise immediately notify the Sub-Adviser if any of them becomes aware of any
regulatory action of the type described in this subparagraph 2(d).
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its directors, officers and employees,
and other internal operating costs; provided, however, that the Sub-Adviser
shall be entitled to reimbursement on a monthly basis by the Manager of all
reasonable out-of-pocket expenses properly incurred by it in connection with
serving as Sub-Adviser to the Fund. For the avoidance of doubt, the Fund shall
bear its own overhead and other internal operating costs (whether incurred
directly or by the Manager or the Sub-Adviser) including, without limitation:
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(a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional any interest, fee or charge payable on or on account of
any borrowing by the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
the shares may from time to time be listed, quoted or dealt in and the expenses
of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares in
newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees' communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. COMPENSATION. As compensation for the services provided by the
Sub-Adviser under this Agreement, the Manager will pay the Sub-Adviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.50 of 1% of the Fund's average daily net assets. The "average daily
net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Fund's Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Sub-Adviser's
compensation is payable pursuant to this Section, the Sub-Adviser's compensation
payable at the end of such month shall be computed on the basis of the value of
the net assets of the Fund as last determined (whether during or prior to such
month). If the Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this Section 4.
5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
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furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Sub-Advisory Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holder's
of the Fund's shares or by the Manager in connection with the matters to which
this Sub-Advisory Agreement relates, provided that nothing in this Sub-Advisory
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against liability to the Fund or to holders of the Fund's shares or to the
Manager to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement. As used in this Section 6, the
term "Sub-Adviser" shall include any officers, directors, employees or other
affiliates of the Sub-Adviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Sub-Adviser are not exclusive, and that nothing in this Sub-Advisory Agreement
shall prevent the Sub-Adviser, its affiliates or its or their officers,
directors and employees from providing similar services to other investment
companies (whether or not their investment objectives and policies are similar
to those of the Fund) or from engaging in other investment advisory activities.
When the Sub-Adviser recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Sub-Adviser
recommends the purchase or sale of the same security for the Fund, it is
understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund; provided,
however, that the Sub-Adviser is not required to recommend to the Fund the same
investments it recommends to its other clients. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the
Sub-Adviser nor any of its directors, officers or employees shall act as a
principal or agent or receive any commission. If the Sub-Adviser provides any
advice to its clients concerning the shares of the Fund, the Sub-Adviser shall
act solely as investment counsel for such clients and not in any way on behalf
of the Fund.
8. DURATION AND TERMINATION. This Sub-Advisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein.
Notwithstanding the foregoing, this Sub-Advisory Agreement may be terminated:
(a) at any time without penalty by the Fund or Manager upon the vote of a
majority of the Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the Sub-Adviser, or
(b) by the Sub-Adviser without cause at any time without penalty, upon sixty
(60) days' written notice to the Fund or Manager. This Sub-Advisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act) or the assignment or termination of the Investment Advisory
Agreement.
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both par-ties, and no material amendment of this Sub-Advisory
Agreement shall be effective until approved by an affirmative vote of (i) a
majority of the outstanding voting securities of the Fund, and (ii) a majority
of the Trustees of the Fund, including a majority of Trustees who are not
interested persons of any party to this Sub-Advisory Agreement, cast in person
at a meeting called for the purpose of voting on such approval, if such approval
is required by applicable law.
10. INDEMNIFICATION. (a) The Manager hereby agrees to indemnify the
Sub-Adviser from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs (other than attorneys' fees and costs in relation to
the preparation of this Agreement; each party bearing responsibility for its own
such costs and fees) or damages (other than liabilities, losses, expenses,
attorneys fees and costs or damages arising from the Sub-Adviser failing to meet
the standard of care required hereunder in the performance by the Sub-Adviser
of, or its failure to perform, the services required hereunder), arising from
the Manager's (its affiliates and their respective agents and employees) failure
to perform its duties or assume its obligations hereunder, or from its wrongful
actions or omissions, including, but not limited to, any claims for non-payment
of advisory fees; claims asserted or threatened by any shareholder of the Fund,
governmental or regulatory agency, or any other person; claims arising from any
wrongful act by the Fund or any of the Fund's trustees, officers, employees, or
representatives, or by the Manager, its officers, employees or representatives,
or from any actions by the Fund's distributors or any representative of the
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Fund; any action or claim against the Sub-Adviser based on any alleged untrue
statement or misstatement of material fact in any registration statement,
prospectus, shareholder report or other information or materials covering shares
filed or made public by the Fund or any amendment thereof or supplement thereto,
or the failure or alleged failure to state therein a material fact required to
be stated in order that the statements therein are not misleading, provided that
such claim is not based upon information provided to the Manager by the
Sub-Adviser or approved by the Sub-Adviser in the manner provided in paragraph
12(b) of this Agreement, or which facts or information the Sub-Adviser failed to
provide or disclose. With respect to any claim for which the Sub-Adviser shall
be entitled to indemnity hereunder, the Manager shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Sub-Adviser of investigating and/or defending any claim asserted or threatened
by any party, subject always to the Manager first receiving a written
undertaking from the Sub-Adviser to repay any amounts paid on its behalf in the
event and to the extent of any subsequent determination that the Sub-Adviser was
not entitled to indemnification hereunder in respect of such claim.
(b) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation to the preparation of this Agreement; each party bearing responsibility
for its own such costs and fees) or damages (other than liabilities, losses,
expenses, attorneys fees and costs or damages arising from the Manager's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Sub-Adviser's (its
affiliates and their respective agents and employees) failure to perform its
duties and assume its obligations hereunder, or from any wrongful act of
Sub-Adviser or its failure to act in performing this Agreement, including any
action or claim against the Manager based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Sub-Adviser contained in any registration statement, prospectus, shareholder
report or other information or materials relating to the Fund and shares issued
by the Fund, or the failure or alleged failure to state a material fact therein
required to be stated in order that the statements therein are not misleading,
which fact should have been made or provided by the Sub-Adviser to the Manager.
With respect to any claim for which the Manager is entitled to indemnity
hereunder, the Sub-Adviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Manager of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Sub-Adviser first receiving a written undertaking from the
Manager to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Manager was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Sub-Adviser or Manager is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have not authority to
bind Sub-Adviser.
12. USE OF NAME. (a) The Fund may, subject to sub-clause (b) below, use the
name, "Navellier Fund Management, Inc." or any component, abbreviation or other
name derived therefrom for promotional purposes only for so long as this
Agreement (or any extension, renewal or amendment thereof) continues in force,
unless the Sub-Adviser shall specifically consent in writing to such continued
use thereafter. Any permitted use by the Fund during the term hereof of the name
of the Sub-Adviser, Navellier, or any derivative thereof, shall in no way
prevent the Sub-Adviser or any of it shareholders or any of their successors,
from using or permitting the use of such name (whether singly or in any
combination with any other words) for, by or in connection with an entity or
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enterprise other than the Fund. The name and right to the name Navellier Fund
Management, Inc. or any derivation of the name Navellier shall at all times be
owned and be the sole and exclusive property of Louis Navellier and his
affiliated entities. Navellier Fund Management Inc., by entering into this
Agreement, is allowing the Fund to use the name Navellier and/or derivatives
thereof solely by or on behalf of the Fund. At the conclusion of this Agreement
or in the event of any termination of this Agreement or if the Sub-Adviser's
services are terminated for any reason, each of the authorized parties and their
respective employees, representatives, affiliates, and associates agree that
they shall immediately cease using the name Navellier and/or any derivatives of
said name for any purpose whatsoever.
(b) The Manager and its affiliates shall not publish or distribute,
and shall cause the Fund not to publish or distribute to Fund shareholders,
prospective investors, sales agents or members of the public any disclosure
document, offering literature (including any form of advertisement or other
solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Fund) or other document referring by name to the
Sub-Adviser, unless the Sub-Adviser shall have consented in writing to such
references in the form and context in which they appear; provided however, that
where the Fund timely seeks to obtain approval of disclosure contained in any
documents required to be filed by the Fund, and such approval is not forthcoming
on or before the date on which such documents are required by law to be filed,
the Sub-Adviser shall be deemed to have consented to such disclosure.
13. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of Nevada, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. In the event of any litigation in which the Manager and the
Sub-Adviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of Nevada, located in Reno, Nevada.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
14. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting; in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery or transmission when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
15. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
16. NON-SOLICITATION. Manager, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund any persons or entities who are
clients of or investors in any fund or investment vehicle managed by any entity
owned by Louis Navellier.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of ____________, 2000.
Pilgrim Investments, Inc.
By:
-------------------------------------
Navellier Fund Management, Inc.
By:
-------------------------------------
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APPENDIX O
FORM OF SUB-ADVISORY AGREEMENT WITH NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
(PILGRIM CONVERTIBLE, EMERGING COUNTRIES, INTERNATIONAL CORE GROWTH,
INTERNATIONAL SMALLCAP GROWTH, LARGECAP GROWTH AND WORLDWIDE GROWTH FUNDS)
SUB-ADVISORY AGREEMENT
AGREEMENT made this ____ day of ________, 2000 between Pilgrim Investments,
Inc., a Delaware corporation (the "Manager"), and Nicholas-Applegate Capital
Management, a California limited partnership (the "Sub-Adviser").
WHEREAS, Pilgrim Mutual Funds (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, the Fund is authorized to issue separate series, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Fund may offer shares of additional series in the future, and
currently intends to offer shares of additional series in the future;
WHEREAS, pursuant to an Investment Management Agreement, dated the date
hereof (the "Investment Management Agreement"), a copy of which has been
provided to the Sub-Adviser, the Fund has retained the Manager to render
advisory and management services with respect to each of the Fund's series; and
WHEREAS, pursuant to authority granted to the Manager in the Investment
Management Agreement, the Manager wishes to retain the Sub-Adviser to furnish
investment advisory services to one or more of the series of the Fund, and the
Sub-Adviser is willing to furnish such services to the Fund and the Manager;
NOW, THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Manager and the
Sub-Adviser as follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to act as the
investment adviser and Manager to the series of the Fund set forth on Schedule A
hereto (the "Series") for the periods and on the terms set forth in this
Agreement The Sub-Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Fund designates one or more series (other than the Series)
with respect to which the Manager wishes to retain the Sub-Adviser to render
investment advisory services hereunder, it shall notify the Sub-Adviser in
writing. If the Sub-Adviser is willing to render such services, it shall notify
the Manager in writing, whereupon such series shall become a Series hereunder,
and be subject to this Agreement.
2. SUB-ADVISER DUTIES. Subject to the supervision of the Fund's Board of
Trustees and the Manager, the Sub-Adviser will provide a continuous investment
program for each Series' portfolio and determine in its discretion the
composition of the assets of each Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other investments
contained in the portfolio. The Sub-Adviser will provide investment research and
conduct a continuous program of evaluation, investment, sales, and reinvestment
of each Series' assets by determining the securities and other investments that
shall be purchased, entered into, sold, closed, or exchanged for the Series,
when these transactions should be executed, and what portion of the assets of
the Series should be held in the various securities and other investments in
which it may invest. To the extent permitted by the investment policies of each
Series, the Sub-Adviser shall make decisions for the Series as to foreign
currency matters and make determinations as to and execute and perform foreign
currency exchange contracts on behalf of the Series. The Sub-Adviser will
provide the services under this Agreement in accordance with each Series'
investment objective or objectives, policies, and restrictions as stated in the
Fund's Registration Statement filed with the Securities and Exchange Commission
("SEC"), as amended, copies of which shall be sent to the Sub-Adviser by the
Manager prior to the commencement of this Agreement and promptly following any
such amendment. The Sub-Adviser further agrees as follows:
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(a) The Sub-Adviser will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Fund's Board of
Trustees of which the Sub-Adviser has been sent a copy, and the provisions of
the Registration Statement of the Fund filed under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended, of which the
Sub-Adviser has received a copy, and with the Manager's Sub-Adviser operating
policies and procedures as in effect on the date hereof, as such policies and
procedures may be revised or amended by the Manager and agreed to by the
Sub-Adviser.
(b) In connection with the purchase and sale of securities for each
Series, the Sub-Adviser will arrange for the transmission to the custodian and
portfolio accounting agent for the Series on a daily basis, such confirmation,
trade tickets, and other documents and information, including, but not limited
to, Cusip, Cedel, or other numbers that identify securities to be purchased or
sold on behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be settled through the Depository Trust Company, the
Sub-Adviser will arrange for the prompt transmission of the confirmation of such
trades to the Fund's custodian and portfolio accounting agent.
(c) The Sub-Adviser will make available to the Fund and the Manager,
promptly upon request, any of the Series' investment records and ledgers
maintained by the Sub-Adviser (which shall not include the records and ledgers
maintained by the custodian or portfolio accounting agent for the Fund) as are
necessary to assist the Fund and the Manager to comply with requirements of the
1940 Act and the Investment Advisers Act of 1940 (the "Advisers Act"), as well
as other applicable laws. The Sub-Adviser will furnish to regulatory authorities
having the requisite authority any information or reports in connection with
such services in respect to the Series which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(d) The Sub-Adviser will provide reports to the Fund's Board of
Trustees for consideration at meetings of the Board on the investment program
for each Series and the issuers and securities represented in each Series'
portfolio, and will furnish the Fund's Board of Trustees with respect to each
Series such periodic and special reports as the Trustees and the Manager may
reasonably request.
3. BROKER-DEALER SELECTION. The Sub-Adviser is authorized to make decisions
to buy and sell securities and other investments for each Series' portfolio,
broker-dealer selection, and negotiation of brokerage commission rates in
effecting a security transaction. The Sub-Adviser's primary consideration in
effecting a security transaction will be to obtain the best execution for the
Series, taking into account the factors specified in the prospectus and/or
statement of additional information for the Fund, and determined in consultation
with the Manager, which include price (including the applicable brokerage
commission or dollar spread), the size of the order, the nature of the market
for the security, the timing of the transaction, the reputation, the experience
and financial stability of the broker-dealer involved, the quality of the
service, the difficulty of execution, and the execution capabilities and
operational facilities of the firm involved, and the firm's risk in positioning
a block of securities. Accordingly, the price to a Series in any transaction may
be less favorable than that available from another broker-dealer if the
difference is reasonably justified, in the judgment of the Sub-Adviser in the
exercise of its fiduciary obligations to the Fund, by other aspects of the
portfolio execution services offered. Subject to such policies as the Fund's
Board of Trustees or Manager may determine and consistent with Section 28(e) of
the Securities Exchange Act of 1934, the Sub-Adviser shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused a Series to pay a broker-dealer
for effecting a portfolio investment transaction in excess of the amount of
commission another broker-dealer would have charged for effecting that
transaction, if the Sub-Adviser determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Sub-Adviser's or the Manager's overall
responsibilities with respect to the Series and to their respective other
clients as to which they exercise investment discretion. The Sub-Adviser will
consult with the Manager to the end that portfolio transactions on behalf of a
Series are directed to broker-dealers on the basis of criteria reasonably
considered appropriate by the Manager. To the extent consistent with these
standards, the Sub-Adviser is further authorized to allocate the orders placed
by it on behalf of a Series to the Sub-Adviser if it is registered as a
broker-dealer with the SEC, to an affiliated broker-dealer, or to such brokers
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and dealers who also provide research or statistical material, or other services
to the Series, the Sub-Adviser, or an affiliate of the Sub-Adviser. Such
allocation shall be in such amounts and proportions as the Sub-Adviser shall
determine consistent with the above standards, and the Sub-Adviser will report
on said allocation regularly to the Fund's Board of Trustees indicating the
broker-dealers to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT SUB-ADVISER. The Sub-Adviser has reviewed the
Registration Statement for the Fund filed with the SEC that contains disclosure
about the Sub-Adviser, and represents and warrants that, with respect to the
disclosure about the Sub-Adviser or information relating, directly or
indirectly, to the Sub-Adviser, such Registration Statement contains, as of the
date hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading. The Sub-Adviser
further represents and warrants that it is a duly registered investment adviser
under the Advisers Act and will maintain such registration so long as this
Agreement remains in effect. The Sub-Adviser will provide the Manager with a
copy of the Sub-Adviser's Form ADV, Part II at the time the Form ADV is filed
with the SEC.
5. EXPENSES. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it and its staff and for their activities in connection
with its sub-advisory duties under this Agreement. The Manager or the Fund shall
be responsible for all the expenses of the Fund's operations.
6. COMPENSATION. For the services provided to each Series, the Manager will
pay the Sub-Adviser an annual fee equal to the amount specified for such Series
in Schedule A hereto, payable monthly in arrears. The fee will be appropriately
prorated to reflect any portion of a calendar month that this Agreement is not
in effect among the parties. In accordance with the provisions of the Investment
Management Agreement, the Manager is solely responsible for the payment of fees
to the Sub-Adviser, and the Sub-Adviser agrees to seek payment of its fees
solely from the Manager; provided, however, that if the Fund fails to pay the
Manager all or a portion of the management fee under said Investment Management
Agreement when due, and the amount that was paid is insufficient to cover the
Sub-Adviser's fee under this Agreement for the period in question, then the
Sub-Adviser may enforce against the Fund any rights it may have as a third-party
beneficiary under the Investment Management Agreement and the Manager will take
all steps appropriate under the circumstances to collect the amount due from the
Fund.
7. COMPLIANCE.
(a) The Sub-Adviser agrees to use reasonable compliance techniques as
the Manager or the Board of Trustees may adopt, including any written compliance
procedures.
(b) The Sub-Adviser agrees that it shall promptly notify the Manager
and the Fund (1) in the event that the SEC has censured the Sub-Adviser; placed
limitations upon its activities, functions or operations; suspended or revoked
its registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, or (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. The Sub-Adviser further agrees to notify the Manager and the Fund
promptly of any material fact known to the Sub-Adviser respecting or relating to
the Sub-Adviser that is not contained in the Registration Statement or
prospectus for the Fund (which describes the Series), or any amendment or
supplement thereto, or if any statement contained therein that becomes untrue in
any material respect.
(c) The Manager agrees that it shall promptly notify the Sub-Adviser
(1) in the event that the SEC has censured the Manager or the Fund; placed
limitations upon either of their activities, functions, or operations; suspended
or revoked the Manager's registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, or (2)
upon having a reasonable basis for believing that the Series has ceased to
qualify or might not qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code.
8. BOOKS AND RECORDS. The Sub-Adviser hereby agrees that all records which
it maintains for the Series are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's or the
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Manager's request in compliance with the requirements of Rule 31a-3 under the
1940 Act, although the Sub-Adviser may, at its own expense, make and retain a
copy of such records. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-l under the 1940 Act.
9. COOPERATION; CONFIDENTIALITY. Each party to this Agreement agrees to
cooperate with the other party and with all appropriate governmental authorities
having the requisite jurisdiction (including, but not limited to, the SEC) in
connection with any investigation or inquiry relating to this Agreement or the
Fund. Subject to the foregoing, the Sub-Adviser shall treat as confidential all
information pertaining to the Fund and actions of the Fund, the Manager and the
Sub-Adviser, and the Manager shall treat as confidential and use only in
connection with the Series all information furnished to the Fund or the Manager
by the Sub-Adviser, in connection with its duties under the agreement except
that the aforesaid information need not be treated as confidential if required
to be disclosed under applicable law, if generally available to the public
through means other than by disclosure by the Sub-Adviser or the Manager, or if
available from a source other than the Manager, Sub-Adviser or this Fund.
10. REPRESENTATIONS RESPECTING SUB-ADVISER. The Manager agrees that neither
the Manager, nor affiliated persons of the Manager, shall give any information
or make any representations or statements in connection with the sale of shares
of the Series concerning the Sub-Adviser or the Series other than the
information or representations contained in the Registration Statement,
prospectus, or statement of additional information for the Fund's shares, as
they may be amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional material
approved in advance by the Sub-Adviser, except with the prior permission of the
Sub-Adviser.
11. [Intentionally Omitted]
12. CONTROL. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and has reserved the right to reasonably direct any action hereunder
taken on its behalf by the Sub-Adviser.
13. LIABILITY. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Manager agrees that the
Sub-Adviser, any affiliated person of the Sub-Adviser, and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls the Sub-Adviser
(1) shall bear no responsibility and shall not be subject to any liability for
any act or omission respecting any series of the Fund that is not a Series
hereunder, and (2) shall not be liable for, or subject to any damages, expenses,
or losses in connection with, any act or omission connected with or arising out
of any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Sub-Adviser's duties, or by reason of reckless disregard of the Sub-Adviser's
obligations and duties under this Agreement.
14. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Sub-Adviser,
any affiliated person of the Sub-Adviser, and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls ("controlling person") the
Sub-Adviser (all of such persons being referred to as "Sub-Adviser Indemnified
Persons") against any and all losses, claims, damages, liabilities, or
litigation (including legal and other expenses) to which a Sub-Adviser
Indemnified Person may become subject under the 1933 Act, the 1940 Act, the
Advisers Act, under any other statute, at common law or otherwise, arising out
of the Manager's responsibilities to the Trust which (1) may be based upon the
Manager's willful misfeasance, bad faith, or negligence in the performance of
its duties (which could include a negligent action or a negligent omission to
act), or by reason of the Manager's reckless disregard of its obligations and
duties under this Agreement or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering shares of the Trust or any Series, or any
amendment thereof or any supplement thereto, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such statement or omission
was made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager by a Sub-Adviser Indemnified Person;
provided however, that in no case shall the indemnity in favor of the
Sub-Adviser Indemnified Person be deemed to protect such person against any
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<PAGE>
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties, or by reason of its reckless disregard of obligations and duties under
this Agreement.
(b) Notwithstanding Section 13 of this Agreement, the Sub-Adviser
agrees to indemnify and hold harmless the Manager, any affiliated person of the
Manager, and any controlling person of the Manager (all of such persons being
referred to as "Manager Indemnified Persons") against any and all losses,
claims, damages, liabilities, or litigation (including legal and other expenses)
to which an Manager Indemnified Person may become subject under the 1933 Act,
1940 Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Sub-Adviser's responsibilities as Sub-Adviser of the Series
which (1) may be based upon the Sub-Adviser's willful misfeasance, bad faith, or
negligence in the performance of its duties (which could include a negligent
action or a negligent omission to act), or by reason of the Sub-Adviser's
reckless disregard of its obligations and duties under this Agreement, or (2)
may be based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or prospectus covering the shares
of the Trust or any Series, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact known or which
should have been known to the Sub-Adviser and was required to be stated therein
or necessary to make the statements therein not misleading, if such a statement
or omission was made in reliance upon information furnished to the Manager, the
Trust, or any affiliated person of the Manager or Trust by the Sub-Adviser or
any affiliated person of the Sub-Adviser; provided, however, that in no case
shall the indemnity in favor of an Manager Indemnified Person be deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 14 with respect to any claim made against a Sub-Adviser Indemnified
Person unless such Sub-Adviser Indemnified Person shall have notified the
Manager in writing within a reasonable time after the summons or other first
legal process giving information of the nature of the claim shall have been
served upon such Sub-Adviser Indemnified Person (or after such Sub-Adviser
Indemnified Person shall have received notice of such service on any designated
agent), but failure to notify the Manager of any such claim shall not relieve
the Manager from any liability which it may have to the Sub-Adviser Indemnified
Person against whom such action is brought except to the extent the Manager is
prejudiced by the failure or delay in giving such notice. In case any such
action is brought against the Sub-Adviser Indemnified Person, the Manager will
be entitled to participate, at its own expense, in the defense thereof or, after
notice to the Sub-Adviser Indemnified Person, to assume the defense thereof,
with counsel satisfactory to the Sub-Adviser Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent the Manager and the Sub-Adviser Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Sub-Adviser Indemnified Person, adequately represent the
interests of the Sub-Adviser Indemnified Person, the Manager will, at its own
expense, assume the defense with counsel to the Manager and, also at its own
expense, with separate counsel to the Sub-Adviser Indemnified Person, which
counsel shall be satisfactory to the Manager and to the Sub-Adviser Indemnified
Person. The Sub-Adviser Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Manager shall not be liable to
the Sub-Adviser Indemnified Person under this Agreement for any legal or other
expenses subsequently incurred by the Sub-Adviser Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Sub-Adviser
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Sub-Adviser Indemnified Person.
(d) The Sub-Adviser shall not be liable under Paragraph (b) of this
Section 14 with respect to any claim made against an Manager Indemnified Person
unless such Manager Indemnified Person shall have notified the Sub-Adviser in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Manager Indemnified Person (or after such Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to notify
the Sub-Adviser of any such claim shall not relieve the Sub-Adviser from any
liability which it may have to the Manager Indemnified Person against whom such
action is brought except to the extent the Sub-Adviser is prejudiced by the
failure or delay in giving such notice. In case any such action is brought
against the Manager Indemnified Person, the Sub-Adviser will be entitled to
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<PAGE>
participate, at its own expense, in the defense thereof or, after notice to the
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Sub-Adviser assumes the
defense of any such action and the selection of counsel by the Sub-Adviser to
represent both the Sub-Adviser and the Manager Indemnified Person would result
in a conflict of interests and therefore, would not, in the reasonable judgment
of the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Sub-Adviser will, at its own expense, assume the
defense with counsel to the Sub-Adviser and, also at its own expense, with
separate counsel to the Manager Indemnified Person, which counsel shall be
satisfactory to the Sub-Adviser and to the Manager Indemnified Person. The
Manager Indemnified Person shall bear the fees and expenses of any additional
counsel retained by it, and the Sub-Adviser shall not be liable to the Manager
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Sub-Adviser shall not have the right to compromise on or
settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
15. DURATION AND TERMINATION.
(a) This Agreement shall become effective on the date first indicated
above, subject to the condition that the Fund's Board of Trustees, including a
majority of those Trustees who are not interested persons (as such term is
defined in the 1940 Act) of the Manager or the Sub-Adviser, and the shareholders
of each Series, shall have approved this Agreement. Unless terminated as
provided herein, this Agreement shall remain in full force and effect for two
years from such date and continue on an annual basis thereafter with respect to
each Series covered by this Agreement; provided that such annual continuance is
specifically approved each year by (a) the Board of Trustees of the Fund, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is defined
in the 1940 Act) of any such party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval. However, any approval of this
Agreement by the holders of a majority of the outstanding shares (as defined in
the 1940 Act) of a Series shall be effective to continue this Agreement with
respect to such Series notwithstanding (i) that this Agreement has not been
approved by the holders of a majority of the outstanding shares of any other
Series or (ii) that this agreement has not been approved by the vote of a
majority of the outstanding shares of the Fund, unless such approval shall be
required by any other applicable law or otherwise. Notwithstanding the
foregoing, this Agreement may be terminated with respect to any Series covered
by this Agreement: (a) by the Manager at any time, upon sixty (60) days' written
notice to the Sub-Adviser and the Fund, (b) at any time without payment of any
penalty by the Fund, by the Fund's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) days' written
notice to the Manager and the Sub-Adviser, or (c) by the Sub-Adviser upon three
(3) months written notice unless the Fund or the Manager requests additional
time to find a replacement for the Sub-Adviser, in which case the Sub-Adviser
shall allow the additional time requested by the Fund or Manager not to exceed
three (3) additional months beyond the initial three-month notice period;
provided, however, that the Sub-Adviser may terminate this Agreement at any time
without penalty, effective upon written notice to the Manager and the Fund, in
the event either the Sub-Adviser (acting in good faith) or the Manager ceases to
be registered as an investment adviser under the Advisers Act or otherwise
becomes legally incapable of providing investment management services pursuant
to its respective contract with the Fund, or in the event the Manager becomes
bankrupt or otherwise incapable of carrying out its obligations under this
Agreement, or in the event that the Sub-Adviser does not receive compensation
for its services from the Manager or the Fund as required by the terms of this
agreement.
In the event of termination for any reason, all records of each Series for
which the Agreement is terminated shall promptly be returned to the Manager or
the Fund, free from any claim or retention of rights in such record by the
Sub-Adviser, although the Sub-Adviser may, at its own expense, make and retain a
copy of such records. This Agreement shall automatically terminate in the event
of its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(g), 8, 9, 10, 12, 13 and 14 of this Agreement
shall remain in effect, as well as any applicable provision of this Section
numbered 15 and, to the extent that only amounts are owed to the Sub-Adviser as
compensation for services rendered while the agreement was in effect, Section 6.
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(b) Notices.
Any notice must be in writing and shall be sufficiently given (1) when
delivered in person, (2) when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by postage prepaid first class air mail
simultaneously dispatched), (3) when sent by internationally recognized
overnight courier service (with receipt confirmed by such overnight courier
service), or (4) when sent by registered or certified mail, to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Fund:
Pilgrim Mutual Funds
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004
Attention: James M. Hennessy
If to the Sub-Adviser:
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, CA 92101
Attention: _______________
16. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the Fund,
including a majority of the Trustees of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law.
17. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder, and without regard for the conflicts of laws principle thereof. The
term "affiliate" or "affiliated person" as used in this Agreement shall mean
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The Manager and the Sub-Adviser acknowledge that the Fund enjoys
the rights of a third-party beneficiary under this Agreement, and the Manager
acknowledges that the Sub-Adviser enjoys the rights of a third party beneficiary
under the Management Agreement.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(d) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent of
the other parties.
(e) 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, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(f) Nothing herein shall be construed as constituting the Sub-Adviser
as an agent or co-partner of the Manager, or constituting the Manager as an
agent or co-partner of the Sub-Adviser.
(g) This agreement may be executed in counterparts.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
Title:
----------------------------------
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
By:
-------------------------------------
Title:
----------------------------------
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<PAGE>
SCHEDULE A
SERIES ANNUAL SUB-ADVISORY FEE
------ -----------------------
Pilgrim Large Cap 0.375% of the first $500 million of the Series'
Growth Fund average net assets, 0.3375% of the next $500
million of average net assets, and 0.325% of the
average net assets in excess of $1 billion
Pilgrim Emerging 0.625% of the Series' average net assets
Countries Fund
Pilgrim Worldwide 0.50% of the first $500 million of the Series'
Growth Fund average net assets, 0.45% of the next $500 million
of average net assets, and 0.425% of the average
net assets in excess of $1 billion
Pilgrim International 0.50% of the first $500 million of the Series'
Small Cap Growth Fund average net assets, 0.45% of the next $500 million
of average net assets, and 0.425% of the average
net assets in excess of $1 billion
Pilgrim Convertible Fund 0.375% of the first $500 million of the Series'
average net assets, 0.3375% of the next $500
million of average net assets, and 0.325% of the
average net assets in excess of $1 billion
Pilgrim International 0.50% of the first $500 million of the Series'
Core Growth Fund average net assets, 0.45% of the next $500 million
of average net assets, and 0.425% of the average
net assets in excess of $1 billion
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<PAGE>
PILGRIM INVESTMENTS, INC.
40 N. CENTRAL AVENUE
SUITE 1200
PHOENIX, ARIZONA 85004
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, California 92101
Ladies and Gentlemen:
Reference is hereby made to Section 2(a) of the Sub-Advisory Agreement
dated as of _________, 2000 between you and us in respect of Pilgrim Mutual
Funds which provides that in carrying out your duties under such Agreement you
will comply with our Sub-Adviser operating policies and procedures in effect on
the date of such Agreement. Attached hereto as Annex I is a list of such
policies and procedures. Please sign below to acknowledge your receipt and
acceptance of these policies and procedures.
Very truly yours,
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
Acknowledged and Agreed:
NICHOLAS-APPLEGATE CAPITAL MANAGEMENT
By:
----------------------------------
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<PAGE>
Annex I
SUB-ADVISER OPERATING POLICIES AND PROCEDURES
In carrying its duties under the Sub-Advisory Agreement, the Sub-Adviser
will comply with the following policies and procedures (capitalized terms used
herein shall have the meaning given such terms in the Sub-Advisory Agreement):
(a) The Sub-Adviser will manage each Series so that it meets the
income and asset diversification requirements of Section 851 of the Internal
Revenue Code.
(b) The Sub-Adviser will vote all proxies solicited by or with respect
to the issuers of securities which assets of the Series are invested consistent
with any procedures or guidelines promulgated by the Board or the Manager, or if
none, in the discretion of the Sub-Adviser based upon the best interests of the
Series. The Sub-Adviser will maintain appropriate records detailing its voting
of proxies on behalf of the Fund and will provide to the Fund at least quarterly
a report setting forth the proposals voted on and how the Series' shares were
voted since the prior report, including the name of the corresponding issuers.
(c) In connection with the purchase and sale of securities for each
Series, the Sub-Adviser will arrange for the transmission to the custodian and
portfolio accounting agent for the Series on a daily basis, such confirmation,
trade tickets, and other documents and information, including, but not limited
to, Cusip, Sedol, or other numbers that identify securities to be purchased or
sold on behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
recordkeeping responsibilities with respect to the Series. With respect to
portfolio securities to be settled through the Depository Trust Company, the
Sub-Adviser will arrange for the prompt transmission of the confirmation of such
trades to the Fund's custodian and portfolio accounting agent.
(d) The Sub-Adviser will assist the custodian and portfolio accounting
agent for the Fund in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Fund or adopted by the
Board of Trustees, the value of any portfolio securities or other assets of the
Series for which the custodian and portfolio accounting agent seeks assistance
from or identifies for review by the Sub-Adviser. The parties acknowledge that
the Sub-Adviser is not a custodian of the Series' assets and will not take
possession or custody of such assets.
(e) The Sub-Adviser will provide the Manager, no later than the 20th
day following the end of each of the first three fiscal quarters of each Series
and the 45th day following the end of each Series' fiscal year, a letter to
shareholders (to be subject to review and editing by the Manager) containing a
discussion of those factors referred to in Item 5(a) of 1940 Act Form N-1A in
respect of both the prior quarter and the fiscal year to date.
(f) The Sub-Adviser will complete and deliver to the Manager a written
compliance checklist in a form provided by the Manager for each month by the
10th day of the following month.
(g) The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Sub-Adviser for its approval and the Sub-Adviser has not
commented within 10 days, the Manager and its affiliated persons may use and
distribute such sales literature or other promotional material.
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<PAGE>
APPENDIX P
The annual sub-advisory fees for the Sub-Advised Funds, expressed as
percentages of the value of the average daily net assets of the Fund, are as
follows:
<TABLE>
<CAPTION>
SUB-ADVISER FUND RATE
----------- ---- ----
<S> <C> <C>
Brandes Investment Emerging Markets Value Fund 0.50% of the Fund's average daily net assets
Partners, L.P.
International Value Fund 0.50% of the Fund's average daily net assets
HSBC Asset Management Asia-Pacific Equity Fund 0.50% of the Fund's average daily net assets
(Americas) Inc., HSBC
Asset Management (Hong
Kong) Limited and HSBC
Asset Management
(Europe) Limited
J.P. Morgan Investment Research Enhanced Index Fund 0.20% of the Fund's average daily net assets
Management Inc.
Navellier Fund Growth + Value Fund 0.50% of the Fund's average daily net assets
Management, Inc.
Nicholas-Applegate LargeCap Growth Fund 0.375% of the first $500 million of the Fund's
Capital Management average net assets, 0.3375% of the next $500
million of average net assets, and 0.325% of
the average net assets in excess of $1 billion
Convertible Fund 0.375% of the first $500 million of the Fund's
average net assets, 0.3375% of the next $500
million of average net assets, and 0.325% of
the average net assets in excess of $1 billion
Emerging Countries Fund 0.625% of the Fund's average net assets
Worldwide Growth Fund 0.50% of the first $500 million of the Fund's
average net assets, 0.45% of the next $500
million of average net assets, and 0.425% of
the average net assets in excess of $1 billion
International SmallCap 0.50% of the first $500 million of the Fund's
Growth Fund average net assets, 0.45% of the next $500
million of average net assets, and 0.425% of
the average net assets in excess of $1 billion
International Core 0.50% of the first $500 million of the Fund's
Growth Fund average net assets, 0.45% of the next $500
million of average net assets, and 0.425% of
the average net assets in excess of $1 billion
</TABLE>
P-1
<PAGE>
APPENDIX Q
As of May 31, 2000, to the knowledge of management, no person owned
beneficially or of record more than 5% of the outstanding shares of any class of
the Funds, except as follows:
<TABLE>
<CAPTION>
CLASS AND TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
Pilgrim Asia-Pacific Conti Investments LLC Class A 8.60% 3.46229%
Equity Fund C/o Continental Grain Co Record Holder
Attn: Mary Greenebaum
277 Park Ave
New York, NY 10172
Pilgrim Convertible Fund Trust Company of America FBO TCA Class Q 10.03% 1.19228%
7103 S Revere Pkwy Record Holder
Englewood, CO 80112
Pilgrim Convertible Fund Knauss Family LLC Class Q 7.01% 0.83319%
PO Box 1108 Record Holder
Carefree, AZ 85377
Pilgrim Emerging PaineWebber FBO 1999 Margo Schwartz Class A 9.58% 3.73769%
Markets Fund Grantor Retained Anuity Tr Larry Schwartz Record Holder
TTEE
19 Rural Dr
Scarsdale, NY 10583
Pilgrim Emerging PaineWebber FBO Larry Schwartz Class A 5.77% 2.25075%
Markets Fund 125 Lorraine Ave Record Holder
Upper Montclair, NJ 07043
Pilgrim Emerging PaineWebber FBO Jack Schwartz Class A 5.87% 2.28951%
Markets Fund PO Box 3321 Record Holder
Weehawken, NJ 07087
Pilgrim Government First Clearing Corp A/C 1536-2048 Class C 7.72% 0.12417%
Securities Income Fund W Dean Bidgood Jr IRA Record Holder
C/o Bidgood & Associates
2605 Meridian Pkwy Ste 200
First Clearing Corp A/C 1323-3486 Class M 5.69% 0.02802%
Charles A Banks IRA Record Holder
Pilgrim Government 4723 E 138th Terrace
Securities Income Fund Grandview, MO 64030
Pilgrim Government George & Florence Leslie Tr Class M 8.23% 0.04054%
Securities Income Fund Leslie Family Trust Record Holder
PO Box 70400
Pasadena, CA 91117
Pilgrim Government Prudential Securities Inc FBO Class M 27.93% 0.13763%
Securities Income Fund Dr Antonio Aguirre Record Holder
Zeisselstr 8
60318 Frankfurt Germany
</TABLE>
Q-1
<PAGE>
<TABLE>
<CAPTION>
CLASS AND TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
Pilgrim Government Prudential Securities Inc FBO Class M 8.83% 0.04349%
Securities Income Fund Kathleen R Doyle Record Holder
PO Box 333
Laclede, ID 83841
Pilgrim Government PaineWebber FBO Class M 7.01% 0.06249%
Securities Income Fund Larry Randolph Record Holder
PO Box 3321
Weehawken, NJ 07087
Pilgrim High Total Prudential Securities Inc FBO Class A 7.15% 0.89259%
Return Fund II Richard Simon Ttee Record Holder
Richard Simon Trust
Aventura, FL 33180-2566
Pilgrim High New Life Corp of America FBO Class A 7.61% 2.17708%
Yield Fund Norvell L Olive, President Record Holder
PO Box 906
Hendersonville, TN 37077
Pilgrim High Olde Discount FBO 09005070 Class C 6.21% 0.10583%
Yield Fund 751 Griswold St Record Holder
Detroit, MI 48226
Pilgrim High Prudential Securities Inc FBO Class C 5.23% 0.08923%
Yield Fund Major III Limited Partnership A/C# 2 Record Holder
PMB#916
12555 Biscayne Blvd
North Miami, FL 33181
Pilgrim International PaineWebber FBO Class A 8.54% 2.20791%
Core Growth Fund Thomas R Sloan Record Holder
705 Sunset Dr
Greensboro, NC 27408
Pilgrim International PaineWebber FBO Class C 5.32% 1.65000%
Core Growth Fund Arnold I Richman, International Acct Record Holder
218 N Charles St, Suite 500
Baltimore, MD 21201
Pilgrim LargeCap IFTC Cust Class C 6.18% 0.44562%
Leaders Fund Albert Skarzynski Record Holder
136 Hawthorne Dr
Fairfield, CT 06432
Pilgrim MidCap Equitable Life for Separate Acct 65 on Class Q 5.87% 0.16995%
Growth Fund Behalf of Various Expediter 401K Plans Record Holder
200 Plaza Dr, HM-2
Attn: Ken Butka
Secaucus, NJ 07094
</TABLE>
Q-2
<PAGE>
<TABLE>
<CAPTION>
CLASS AND TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
Pilgrim MidCap Donald Pels Class Q 29.48% 0.85370%
Growth Fund 375 Park Ave, Suite 3305 Record Holder
New York, NY 10152
Pilgrim MidCap ReliaStar Pension Account Class I 100.00% 50.69341%
Opportunities Fund c/o ReliaStar Pension Committee Record Holder
20 Washington Avenue South
Minneapolis, MN 55401-1900
Pilgrim MidCap PaineWebber FBO Class C 28.69% 0.71439%
Value Fund Steve and Cindy Friedman JTWROS Record Holder
27655 Middlebelt
Farmington Hills, MI 48334
Pilgrim Money Dawn & Co Class A 6.00% 4.71407%
Market Fund C/o Webster Trust Co Record Holder
346 Main St
Kensington, CT 06037
Pilgrim Money FMCO Class A 5.71% 4.48446%
Market Fund C/o The Huntington National Bank Record Holder
1 Financial Plaza
Holland, MI 49423
Pilgrim Money PaineWebber FBO Class C 5.39% 0.44362%
Market Fund Carolyn L Mehew Record Holder
PO Box 3321
Weehawken, NJ 07087
Pilgrim Money Salomon Smith Barney FBO Class C 12.03% 0.99075%
Market Fund Acct# 00119616243 Record Holder
333 W 34th St - 3rd Floor
New York, NY 10001
Pilgrim Money PaineWebber FBO Class C 6.18% 0.50894%
Market Fund Ariel & Beth Fischer JTWROS Record Holder
9 Powderhorn Dr
Suffern, NY 10901
Pilgrim Money CIBC World Markets Corp Class C 18.89% 1.55622%
Market Fund FBO 076-12096-18 Record Holder
PO Box 3484 Church Street Station
New York, NY 10008
Pilgrim Money CIBC World Markets Corp Class C 6.05% 0.49817%
Market Fund FBO 076-11325-13 Record Holder
PO Box 3484 Church Street Station
New York, NY 10008
Pilgrim Research ReliaStar Pension Account Class I 100.00% 11.53423%
Enhanced Index Fund c/o ReliaStar Pension Committee Record Holder
20 Washington Avenue South
Minneapolis, MN 55401-1900
</TABLE>
Q-3
<PAGE>
<TABLE>
<CAPTION>
CLASS AND TYPE PERCENTAGE PERCENTAGE
FUND ADDRESS OF OWNERSHIP OF CLASS OF FUND
---- ------- ------------ -------- -------
<S> <C> <C> <C> <C>
Pilgrim SmallCap Suntrust Bank Ttee FBO Class Q 17.25% 0.40179%
Growth Fund Akerman Senterfitt & Edison PSP & Tr Record Holder
c/o FAS Corp Record Keeper
8515 E Orchard Rd, Suite 212
Englewood, CO 80111
Pilgrim SmallCap Suntrust Bank Ttee FBO Class Q 14.92% 0.34756%
Growth Fund Hubbard Construction PSP & 401K Record Holder
C/o FAS Corp Record Keeper
8515 E Orchard Rd, Suite 212
Englewood, CO 80111
Pilgrim SmallCap Susan Rand Class Q 9.28% 0.21622%
Growth Fund PO Box 452 Record Holder
Salisbury, CT 06068
Pilgrim Strategic Eastern Bank & Trust FBO Class A 10.47% 3.01856%
Income Fund Munksjo Paper 401K Record Holder
217 Essex St
Salem, MA 01970
Pilgrim Strategic Raymond James & Assoc FBO Class A 14.53% 4.18771%
Income Fund Acct# 50432600 FOA Pledged Acct Record Holder
880 Carillion Pkwy, PO Box 12749
St Petersburg, FL 33733
Pilgrim Strategic PaineWebber FBO Class A 8.75% 2.52119%
Income Fund JCM - MI1 Record Holder
440 S LaSalle St
Chicago, IL 60605
Pilgrim Strategic Wachovia Securities Inc FBO Class C 6.24% 1.99483%
Income Fund Acct# 288-00397-10 Record Holder
PO Box 1220
Charlotte, NC 28201
</TABLE>
Q-4
<PAGE>
APPENDIX R
The following persons currently are principal executive officers of each of
the Companies (unless otherwise noted, the mailing address of the officers is 40
North Central Avenue, Suite 1200, Phoenix, Arizona 85004):
Robert W. Stallings, President and Chief Executive Officer. (Age 51)
Chairman, Chief Executive Officer and President of Pilgrim Group, Inc.
("Pilgrim Group") (since December 1994); Chairman, Pilgrim Investments and
Pilgrim Securities, Inc. ("Pilgrim Securities") (since December 1994);
President and Chief Executive Officer of Pilgrim Funding, Inc. (since
November 1999); and President and Chief Executive Officer of Pilgrim
Capital Corporation (since October 1999) and its predecessors (since August
1991). Mr. Stallings is also a Director, Trustee, or a member of the
Advisory Board of each of the Pilgrim Funds.
James R. Reis, Executive Vice President and Assistant Secretary. (Age 42)
Director, Vice Chairman (since December 1994), Executive Vice President
(since April 1995), and Director of Structured Finance (since April 1998),
Pilgrim Group, Inc. and Pilgrim Investments; Director (since December 1994)
and Vice Chairman (since November 1995) of Pilgrim Securities; Executive
Vice President, Assistant Secretary and Chief Credit Officer of Pilgrim
Prime Rate Trust; Executive Vice President and Assistant Secretary of each
of the other Pilgrim Funds. Presently serves or has served as an officer or
director of other affiliates of Pilgrim Capital Corporation.
Stanley D. Vyner, Executive Vice President. (Age 49) President and Chief
Executive Officer (since August 1996), Pilgrim Investments; Executive Vice
President of most of the other Pilgrim Funds (since July 1996). Formerly
Chief Executive Officer (November 1993 - December 1995) HSBC Asset
Management Americas, Inc.
James M. Hennessy, Executive Vice President and Secretary. (Age 51)
Executive Vice President and Secretary (since October 1999), Pilgrim
Capital Corporation and its predecessors (since April 1998). Executive Vice
President (since April 1998) and Secretary (since April 1995), Pilgrim
Group, Pilgrim Securities and Pilgrim Investments; Executive Vice President
and Secretary of each of the Pilgrim Funds. Formerly Senior Vice President,
Pilgrim Capital Corporation and its affiliates (April 1995-April 1998).
Presently serves or has served as an officer or director of other
affiliates of Pilgrim Capital Corporation.
Michael J. Roland, Senior Vice President and Principal Financial Officer.
(Age 42) Senior Vice President and Chief Financial Officer, Pilgrim Group,
Pilgrim Investments and Pilgrim Securities (since June 1998); Senior Vice
President and Principal Financial Officer of each of the Pilgrim Funds. He
served in same capacity from January 1995 - April 1997. Formerly, Chief
Financial Officer of Endeavor Group (April 1997 to June 1998).
Robert S. Naka, Senior Vice President and Assistant Secretary. (Age 37)
Senior Vice President, Pilgrim Investments (since November 1999) and
Pilgrim Group, Inc. (since August 1999). Senior Vice President and
Assistant Secretary of each of the Pilgrim Funds. Formerly Vice President,
Pilgrim Investments (April 1997 - October 1999), Pilgrim Group, Inc.
(February 1997 - August 1999). Formerly Assistant Vice President, Pilgrim
Group, Inc. (August 1995 - February 1997).
Robyn L. Ichilov, Vice President and Treasurer. (Age 32) Vice President,
Pilgrim Investments (since August 1997), Accounting Adviser (since November
1995). Vice President and Treasurer of most of the Pilgrim Funds.
In addition to the above listed officers, the following individuals also
serve as officers for the indicated Fund:
R-1
<PAGE>
PILGRIM ADVISORY FUNDS
G. David Underwood, Vice President and Senior Portfolio Manager. (Age 50)
Vice President, Pilgrim Investments (since December 1996). Formerly
Director of Funds Management, First Interstate Capital Management (January
1995 - November 1996).
PILGRIM INVESTMENT FUNDS
Howard N. Kornblue, Senior Vice President and Senior Portfolio Manager.
(Age 58) Senior Vice President, Pilgrim Investments (since August 1995).
Kevin G. Mathews, Senior Vice President and Senior Portfolio Manager. (Age
41) Senior Vice President, Pilgrim Investments (since July 1998). Formerly
Vice President, Pilgrim Investments (August 1995 - July 1998).
PILGRIM MUTUAL FUNDS
Kevin G. Mathews, Senior Vice President and Senior Portfolio Manager. (Age
41) Background described above.
G. David Underwood, Senior Vice President and Senior Portfolio Manager.
(Age 50) Background described above.
Robert K. Kinsey, Vice President and Portfolio Manager. (Age 42) Vice
President, Pilgrim Investments (since March 1999). Formerly Vice President
and Fixed Income Sub-Adviser, Federated Investors (January 1995 - March
1999).
BANK AND THRIFT FUND
Carl Dorf, Senior Vice President and Senior Portfolio Manager. (Age 59)
Senior Vice President (since February 1997), Pilgrim Investments, Inc.
Formerly Vice President, Pilgrim Investments, Inc. (August 1995 - February
1997). Formerly Vice President, Pilgrim Bank and Thrift Fund, Inc. (January
1996 - May 1997).
GOVERNMENT SECURITIES INCOME FUND
Robert K. Kinsey, Vice President and Senior Portfolio Manager. (Age 42)
Background described above.
MAYFLOWER TRUST
Kevin G. Mathews, Senior Vice President and Senior Portfolio Manager. (Age
41) Background described above.
Mary Lisanti, Executive Vice President and Portfolio Manager. (Age 43)
Executive Vice President and Chief Investment Adviser-Equities, Pilgrim
Investments (since November 1999). Formerly Executive Vice President and
Chief Investment Officer - Equities, Northstar Investment Management
Corporation (June 1998 - October 1999).
EQUITY TRUST
Mary Lisanti, Executive Vice President and Portfolio Manager. (Age 43)
Background described above.
R-2
<PAGE>
PILGRIM FUNDS
The undersigned hereby instructs Robert W. Stallings or James M. Hennessy
(Proxies) to vote the shares held by him at the Special Meeting of Shareholders
of the Pilgrim Funds to be held at 9:00 a.m., local time, on August 18, 2000 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.
Please indicate your vote by an "x" in the appropriate box below.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
THE BOARD OF DIRECTORS/TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
Against For all
1. For shareholders of Pilgrim MidCap For All All Except Abstain
Opportunities, Emerging Markets [ ] [ ] [ ] [ ]
Value, Growth + Value, High Total
Return, High Total Return II,
International Value, and Research
Enhanced Index Funds) to elect
eleven Trustees.
Nominees: Al Burton Walter H. May John R. Smith
Paul S. Doherty Jock Patton Robert W. Stallings
Robert B. Goode David W. C. Putnam John G. Turner
Alan L. Gosule David W. Wallace
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR
ALL EXCEPT" BOX AND STRIKE THROUGH THAT NOMINEE'S NAME.
2. For shareholders of all Funds, to approve For Against Abstain
new Investment Management Agreements between [ ] [ ] [ ]
the Funds and Pilgrim Investments, Inc.
("Pilgrim Investments").
3(a). For shareholders of the Pilgrim Asia-Pacific For Against Abstain
Equity Fund, to approve a new Sub-Advisory [ ] [ ] [ ]
Agreement among HSBC Asset Management
(Americas) Inc., HSBC Asset Management (Hong
Kong) Limited and HSBC Asset Management
(Europe) Limited and Pilgrim Investments.
<PAGE>
3(b). For shareholders of the Pilgrim Convertible, For Against Abstain
Emerging Countries, International Core [ ] [ ] [ ]
Growth, International SmallCap Growth,
LargeCap Growth, and Worldwide Growth Funds,
to approve a new Sub-Advisory Agreement
between Nicholas-Applegate Capital Management
and Pilgrim Investments.
3(c) For shareholders of the Pilgrim Emerging For Against Abstain
Markets Value and International Value Funds, [ ] [ ] [ ]
to approve a new Sub-Advisory Agreement
between Brandes Investment Partners, L.P.
and Pilgrim Investments.
3(d). For shareholders of the Pilgrim Growth + Value For Against Abstain
Fund, to approve a new Sub-Advisory Agreement [ ] [ ] [ ]
between Navellier Fund Management, Inc. and
Pilgrim Investments.
3(e). For shareholders of the Pilgrim Research For Against Abstain
Enhanced Index Fund, to approve a new [ ] [ ] [ ]
Sub-Advisory Agreement between J.P. Morgan
Investment Management Inc. and Pilgrim
Investments
4. For shareholders of Pilgrim Emerging Markets For Against Abstain
Value, Growth + Value, High Total Return, [ ] [ ] [ ]
High Total Return II, International Value,
Research Enhanced Index and MidCap
Opportunities Funds, to ratify the appointment
of PricewaterhouseCoopers LLP as independent
auditors for the fiscal year ending October
31, 2000 or December 31, 2000.
5. To transact such other business as may For Against Abstain
properly come before the Meeting of [ ] [ ] [ ]
Shareholders or any adjournments thereof
This proxy must 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 Date
------------------------------- -------------------
Signature (if held jointly) Date