Exhibit d(1)
INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the ___ day of September 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 HIGH YIELD FUND series (the "Fund"), and
PILGRIM INVESTMENTS, INC., a corporation organized and existing under the laws
of the State of Delaware (hereinafter called the "Manager").
WITNESSETH:
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 a may be necessary to
implement such advice and recommendations, (ii) furnish the Fund with
reports, statements and other data on securities, economic conditions and
other pertinent subjects which the Board of Directors may request, (iii)
furnish such office space and personnel as is needed by the Fund, and (iv)
in general superintend and manage the investments of the Fund, subject to
the ultimate supervision and direction of the Board of Directors.
2. The Manager shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way,
or in any way be deemed an agent for the Fund. It is expressly understood
and agreed that the services to be rendered by the Manager to the Fund
under the provisions of this Agreement are not to be deemed exclusive, and
the Manager shall be free to render similar or different services to others
so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the furnishing of
such advice and recommendations to the Fund, in the preparation of reports
and information, and in the management of the Fund's assets, all pursuant
to this Agreement, and for this purpose the Manager shall, at its own
expense, maintain such staff and employ or retain such personnel and
<PAGE>
consult with such other persons as it shall from time to time determine to
be necessary to the performance of its obligations under this Agreement.
Without limiting the generality of the foregoing, the staff and personnel
of the Manager shall be deemed to include persons employed or retained by
the Manager to furnish statistical, research, and other factual
information, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Manager may desire and request.
5. The Fund will from time to time furnish to the Manager detailed
statements of the investments and assets of the Fund and information as to
its investment objectives and needs, and will make available to the Manager
such financial reports, proxy statements, legal and other information
relating to its investments as may be in the possession of the Fund or
available to it and such other information as the Manager may reasonably
request.
6. Whenever the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and
rules thereunder and the rules of any securities exchange or association of
which such affiliate may be a member. Such affiliated dealer shall not be
obligated to make any additional commitments of capital, expense or
personnel beyond that already committed (other than normal periodic fees or
payments necessary to maintain its corporate existence and membership in
the National Association of Securities Dealers, Inc.) as of the date of
this Agreement. This Agreement shall not obligate the Manager or such
affiliate (i) to act pursuant to the foregoing requirement under any
circumstances in which they might reasonably believe that liability might
be imposed upon them as a result of so acting, or (ii) to institute legal
or other proceedings to collect fees which may be considered to be due from
others to it as a result of such a tender, unless the Fund shall enter into
an agreement with such affiliate to reimburse it for all expenses connected
with attempting to collect such fees, including legal fees and expenses and
that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
7. The Manager shall bear and pay the costs of rendering the services
to be performed by it under this Agreement. The Fund shall bear and pay for
all other expenses of its operation, including, but not limited to,
expenses incurred in connection with the issuance, registration and
transfer of its shares; fees of its custodian, transfer and shareholder
servicing agent; costs and expenses of pricing and calculating its daily
net asset value and of maintaining its books of account required by the
Investment Company Act of 1940; expenditures in connection with meetings of
the shareholders and directors, except those called solely to accommodate
the Manager; salaries of officers and fees and expenses of directors or
members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Manager; salaries of personnel
involved in placing orders for the execution of the Fund's portfolio
transactions or in maintaining registration of its shares under state
securities laws; insurance premiums on property or personnel of the Fund
which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Fund or other communications for
distribution to its shareholders; legal, auditing and accounting fees;
trade association dues; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise
prescribed. To the extent the Manager incurs any costs or performs any
services which are an obligation of the Fund, as set forth herein, the Fund
shall promptly reimburse the Manager for such costs and expenses. To the
extent the services for which the Fund is obligated to pay are performed by
the Manager, the Manager shall be entitled to recover from the Fund only to
the extent of its costs for such services.
2
<PAGE>
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.
(b) The management fees shall be accrued daily by the Fund and paid to
the Manager at the end of each calendar month.
(c) To the extent that the gross operating costs and expenses of the
Fund (excluding any interest taxes, brokerage commissions, and, with the
prior written approval of any state securities commission requiring same,
any extraordinary expenses, such as litigation) exceed the allowable
expense limitations of the state in which shares of the Fund are registered
for sale having the most stringent expense reimbursement provisions, the
Manager shall reimburse the Fund for the amount of such excess.
(d) The management fee payable by the Fund hereunder shall be reduced
to the extent that an affiliate of the Manager has actually received cash
payments of tender offer solicitation fees less certain costs and expenses
incurred in connection therewith, as referred to in Paragraph 6 herein.
9. The Manager agrees that neither it nor any of its officers or
employees shall take any short position in the capital stock of the Fund.
This prohibition shall not prevent the purchase of such shares by any of
the officers and directors or bona fide employees of the Manager or any
trust, pension, profit-sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof at
the time of purchase, as allowed pursuant to rules promulgated under the
Investment Company Act of 1940, as amended
10. Nothing herein contained shall be deemed to require the Fund to
take any action contrary to the Articles of Incorporation or By-Laws of the
Company, or any applicable statute or regulation, or to relieve or deprive
the Board of Directors of the Company of its responsibility for and control
of the conduct of the affairs of the Fund.
11.(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Fund, or to any shareholder of the Fund, for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(b) Notwithstanding the foregoing, the Manager agrees to reimburse the
Fund for any and all costs, expenses, and counsel and Directors' fees
reasonably incurred by the Company in the preparation, printing and
distribution of proxy statements, amendments to its Registration Statement,
the holding of meetings of its shareholders or Directors, the conduct of
factual investigations, any legal or administrative proceedings (including
any applications for exemptions or determinations by the Securities and
Exchange Commission) which the Fund incurs as a result of action or
inaction of the Manager or any of its shareholders where the action or
inaction necessitating such expenditures (i) is directly or indirectly
related to any transactions or proposed transaction in the shares or
control of the Manager or its affiliates (or litigation related to any
pending or proposed future transaction in such shares or control) which
shall have been undertaken without the prior, express approval of the
Company's Board of Directors; or (ii) is within the sole control of the
Manager or any of its affiliates or any of their officers, directors,
employees or shareholders. The Manager shall not be obligated pursuant to
the provisions of this Subparagraph 11(b), to reimburse the Fund for any
expenditures related to the institution of an administrative proceeding or
civil litigation by the Fund or by a Fund shareholder seeking to recover
all or a portion of the proceeds derived by any shareholder of the Manager
3
<PAGE>
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 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".
4
<PAGE>
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 INVESTMENT FUNDS, INC.
(on behalf of its Pilgrim High Yield
Fund series)
Attest: By:
--------------------------- -------------------------------------
Title: Title:
----------------------------- ----------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
--------------------------- -------------------------------------
Title: Title:
----------------------------- ----------------------------------
5
