PILGRIM INVESTMENT FUNDS INC/MD
DEFS14A, 2000-07-14
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                            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>
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                (Name of Registrant as Specified In Its Charter)

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    (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:

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2)   Aggregate number of securities to which transaction applies:

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3)   Per unit price or other underlying value of transaction  computed  pursuant
     to Exchange  Act Rule 0-11 (set forth the amount on which the filing fee is
     calculated and state how it was determined):

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4)   Proposed maximum aggregate value of transaction:

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5)   Total fee paid:

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[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided  by  Exchange  Act
    Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee was
    paid  previously.  Identify the previous filing by  registration  statement
    number, or the form or schedule and the date of its filing.

    1)   Amount previously paid:
    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.

                                       15
<PAGE>
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.

                                       16
<PAGE>
                                 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

                                       17
<PAGE>
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

                                       18
<PAGE>
     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.

                                       19
<PAGE>
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

                                       20
<PAGE>
                                   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

                                       21
<PAGE>
                                                                      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

                                       A-1
<PAGE>
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

                                       A-2
<PAGE>
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

                                       A-3
<PAGE>
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

                                       A-4
<PAGE>
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

                                       A-5
<PAGE>
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
                                             -----------------------------------

                                       A-6
<PAGE>
                                                                      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;

                                       B-1
<PAGE>
          (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;

                                       B-2
<PAGE>
          (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.

                                       B-3
<PAGE>
     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.

                                       B-4
<PAGE>
     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:
      -------------------------------         ----------------------------------

                                       B-5
<PAGE>
                                                                      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,

                                       C-1
<PAGE>
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.

                                       E-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 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

                                       E-3
<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:
      -------------------------------         ----------------------------------

                                       E-4
<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

                                       G-1
<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

                                       G-2
<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.

                                       J-1
<PAGE>
                                                                      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

                                       K-1
<PAGE>
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:

                                       K-2
<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.

                                       K-3
<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

                                       K-4
<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.

                                       K-5
<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:
                                           -------------------------------------

                                       K-6
<PAGE>
                                                                      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:

                                       L-1
<PAGE>
          (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.

                                       L-2
<PAGE>
     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.

                                       L-3
<PAGE>
     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

                                       L-4
<PAGE>
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

                                       L-5
<PAGE>
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).

                                       L-6
<PAGE>
     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.

                                       L-7
<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:
                                             -----------------------------------


                                       HSBC ASSET MANAGEMENT (AMERICAS) INC.


                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------


                                       HSBC ASSET MANAGEMENT (HONG KONG) LIMITED


                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------


                                       HSBC ASSET MANAGEMENT (EUROPE) LIMITED


                                       By:
                                          --------------------------------------

                                       Title:
                                             -----------------------------------

                                       L-8
<PAGE>
                                                                      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

                                       M-1
<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

                                       M-2
<PAGE>
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.

                                       M-3
<PAGE>
     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.

                                       M-4
<PAGE>
     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.

                                       M-5
<PAGE>
     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.

                                       M-6
<PAGE>
     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:
                                           -------------------------------------

                                       M-7
<PAGE>
                                                                      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

                                       N-1
<PAGE>
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:

                                       N-2
<PAGE>
          (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

                                       N-3
<PAGE>
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

                                       N-4
<PAGE>
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

                                       N-5
<PAGE>
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.

                                       N-6
<PAGE>
     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:
                                           -------------------------------------

                                       N-7
<PAGE>
                                                                      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:

                                       O-1
<PAGE>
          (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

                                       O-2
<PAGE>
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

                                       O-3
<PAGE>
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

                                       O-4
<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

                                       O-5
<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.

                                       O-6
<PAGE>
          (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.

                                       O-7
<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:
                                              ----------------------------------

                                       O-8
<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

                                      O-9
<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:
   ----------------------------------

                                      O-10
<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.

                                      O-11
<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


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Signature (if held jointly)                                  Date


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