SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] 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
Pilgrim Advisory Funds, Inc.
Pilgrim Bank and Thrift Fund, Inc.
Pilgrim Equity Trust
Pilgrim Government Securities Income Fund, Inc.
Pilgrim Investment Funds, Inc.
Pilgrim Mayflower Trust
Pilgrim Mutual Funds
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PILGRIM FUNDS
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 992-1080
June __, 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 the Funds
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. IN ORDER
TO AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT AND CAST YOUR VOTE. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED 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,
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) 992-1080
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 _____ a.m. local time, at 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004 for the following purposes:
1. For shareholders of the Pilgrim MidCap Opportunities Fund (a series of
Pilgrim Equity Trust) and shareholders of the 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 the 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;
<PAGE>
(b) For shareholders of the 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 the 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;
(d) For shareholders of the 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 the 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 the Pilgrim Emerging Markets Value, Pilgrim Growth +
Value, Pilgrim High Total Return, Pilgrim High Total Return II, Pilgrim
International Value, Pilgrim Research Enhanced Index Funds (series of
Pilgrim Mayflower Trust) and shareholders of the 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.
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,
JAMES M. HENNESSY, Secretary
Dated: June __, 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 ___ a.m., local time, at 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004 for the following purposes:
1. For shareholders of the Pilgrim MidCap Opportunities Fund (a series of
Pilgrim Equity Trust) and shareholders of the 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 the 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;
<PAGE>
(b) For shareholders of the 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 the 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;
(d) For shareholders of the 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 the 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 the Pilgrim Emerging Markets Value, Pilgrim Growth +
Value, Pilgrim High Total Return, Pilgrim High Total Return II, Pilgrim
International Value, Pilgrim Research Enhanced Index Funds (series of
Pilgrim Mayflower Trust) and shareholders of the 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.
5. To transact such other business as may properly come before the Meeting of
Shareholders or any adjournments thereof.
The date of the first mailing of this Proxy Statement is expected to be on
or about June ___, 2000. 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:
2
<PAGE>
<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>
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.
<TABLE>
<CAPTION>
Fund Proposal
---- -----------------------------------------------------
1 2 3 3(b) 3(c) 3(d) 3(e) 4
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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]
</TABLE>
3
<PAGE>
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 __________, 2000, the total number of shares of
ReliaStar outstanding was ___.
Pilgrim is expected to remain intact after the Transaction. Pilgrim
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.
4
<PAGE>
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.
INFORMATION REGARDING NOMINEES
Below are the names, ages, business experience during the past five
years and other directorships of the Nominees (as furnished to the Companies).
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 by virtue of that person's affiliation with any of the Funds or Pilgrim
Investments or any of its affiliates.
The following tables summarize information about the Nominees, the
positions they will hold with each Fund, and their principal occupations. The
address of each Nominee is 40 North Central Avenue, Suite 1200, Phoenix, Arizona
85004.
<TABLE>
<CAPTION>
Position(s) to be
Name, Age and Address Held With the Fund** Principal Occupation During Past 5 Years
--------------------- -------------------- ----------------------------------------
<S> <C> <C>
Al Burton (Age 72) Director/Trustee President of Al Burton Productions for more than the last five
years. Mr. Burton is also a Director, Trustee or Advisory board
member of each of the funds managed by Pilgrim.
Paul S. Doherty Director/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.
Robert B. Goode Director/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.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Position(s) to be
Name, Age and Address Held With the Fund** Principal Occupation During Past 5 Years
--------------------- -------------------- ----------------------------------------
<S> <C> <C>
Alan L. Gosule Director/Trustee Partner and Chairman of the Tax Department of Clifford Chance, Rogers
(Age 59) & 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.
Walter H. May Director/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.
Jock Patton (Age 54) Director/Trustee Private Investor. Director of Hypercom Corporation (since January
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.
David W.C. Putnam Director/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.
John R. Smith Director/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.
*Robert W. Stallings Director/Trustee Chairman, Chief Executive Officer and President of Pilgrim Group,
(Age 51) Inc. ("Pilgrim Group") (since December 1994); Chairman, Pilgrim
Investments, Inc. (since December 1994); Chairman, 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 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 Director/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.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Position(s) to be
Name, Age and Address Held With the Fund** Principal Occupation During Past 5 Years
--------------------- -------------------- ----------------------------------------
<S> <C> <C>
David Wallace Director/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, 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.
</TABLE>
----------
* An "interested person" as defined in section 2(a)(19) of the 1940 Act.
** None of the Directors/Trustees own beneficial shares of the Funds as of
April 18, 2000.
During the most recent fiscal year, the Board of Pilgrim Mayflower
Trust and Pilgrim Equity Trust held ___ meetings. Each Trustee attended more
than 75% of such meetings during which period the 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 in order 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 Committee for the Pilgrim Equity Trust
currently consists of David W. Wallace, Paul S. Doherty, Robert B. Goode and
7
<PAGE>
John R. Smith. Prior to November 1, 1999, the Committee consisted of David W.
Wallace, Paul S. Doherty, Alan Gosule, Walter H. May and John R. Smith. The
Committee for the Pilgrim Mayflower Trust currently consists of David. W.
Wallace, Paul S. Doherty, Robert B. Goode and John R. Smith. Prior to November
1, 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 [ ] % of such 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 the
Pilgrim Equity Trust currently consists of Jock Patton, Al Burton, Alan L.
Gosule, Walter H. May and David W.C. Putnam. Prior to November 1, 1999, the
Committee consisted of ________________. The Committee for the 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. Prior to November 1, 1999, the Committee consisted of _____________.
During the year ended December 31, 1999, each Valuation Committee met _____
times. Each member of each Valuation Committee attended [ ] % of such meetings
during the period in which he was a member of the Committee.
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 the Pilgrim Equity Trust
and the Pilgrim Mayflower Trust currently consists of the following Trustees:
Robert W. Stallings, John G. Turner, Walter H. May and Jock Patton. The
Executive Committee was created on January 27, 2000, and therefore did not meet
during the fiscal year ended December 31, 1999.
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. Prior to
November 1, 1999, the Committee consisted of _______________. The Nominating
Committee of Pilgrim Mayflower Trust currently consists of Walter H. May, Paul
S. Doherty and Robert B. Goode. Al Burton currently serves as an Advisory Board
Member of this Committee. Prior to November 1, 1999, the Committee consisted of
_______________. Neither Company currently has a policy regarding whether the
F`Nominating Committee will consider nominees recommended by shareholders of the
Company. Each Nominating Committee met [ ] during the year ended December 31,
1999. Each member of each Nominating Committee attended the meeting(s).
REMUNERATION OF TRUSTEES AND OFFICERS
Each Fund currently pays each Trustee or Advisory Board Member who is
not an "interested person" a pro rata share, as described below, of (i) an
annual retainer of $20,000; (ii) $5,000 per quarterly Board meeting; (iii) $500
8
<PAGE>
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 Trustees during
portions of 1999.
The following table sets forth the compensation paid to each of the
Trustees (or, in the case of Al Burton, Jock Patton and Robert W. Stallings,
Advisory Board Member) 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 not receive any compensation from the Companies. In the column
headed "Total Compensation From 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.
Total Compensation
From Companies in
Pilgrim Pilgrim Fund Complex
Name of Person, Position Equity Trust Mayflower Trust Paid to Trustees
------------------------ ------------ --------------- ----------------
Mary A. Baldwin (1) $ 385 $_____ $19,241
Advisory Board Member (15 companies)
or Former Trustee
Al Burton (1) $ 385 $_____ $20,717
Trustee (15 companies)
Paul S. Doherty $1,375 $8,086 $12,445
Trustee (15 companies)
Robert B. Goode $1,337 $7,817 $12,062
Trustee (15 companies)
Alan L. Gosule $1,346 $6,731 $______
Trustee (15 companies)
Mark L. Lipson (2) $ 0 $ 0 $ 0
Trustee (15 companies)
Walter H. May $1,375 $8,087 $12,446
Trustee (15 companies)
Jock Patton (1) $ 385 $_____ $20,415
Trustee (15 companies)
David W.C. Putnam $1,062 $7,466 $11,202
Trustee (15 companies)
John R. Smith $1,375 $8,086 $12,445
Trustee (15 companies)
Robert W. Stallings(1)(2) $ 0 $ 0 $ 0
Trustee (15 companies)
John G. Turner (2) $ 0 $ 0 $ 0
Trustee (15 companies)
David W. Wallace $1,100 $7,735 $11,586
Trustee (15 companies)
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----------
(1) Ms. Baldwin and Messrs. Burton, Patton and Stallings were elected Trustees
of Pilgrim Equity Trust on November 1, 1999 and were elected as Advisory Board
Members of Pilgrim Mayflower Trust on November 1, 1999. They are compensated by
Pilgrim Mayflower Trust for their services as Advisory Board Members at the same
rate at which Trustees of the Company are compensated. Ms. Baldwin resigned as a
Trustee of Pilgrim Equity Trust effective June __, 2000.
(2) "Interested person," as defined in the Investment Company Act of 1940,
because of affiliation with Pilgrim Investments.
VOTE REQUIRED
Shareholders of each Company must separately approve the election of
Nominees for that Company. For each Company, the affirmative vote of a plurality
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 ADVISORY 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 of 1940 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 H to this
proxy statement.
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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 __________. The
shareholders of each Fund comprising the Pilgrim Mayflower Trust last approved
the Current Agreement with respect to those Funds on ______________.
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
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<PAGE>
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 AGREEMENT
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 are listed in
Appendix O 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.
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.
12
<PAGE>
Pilgrim's principal address is 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004.
See Appendix P to this proxy statement for a list of the Directors and
principal executive officers of Pilgrim Investments and a list of other
investment companies for which Pilgrim Investments acts as investment adviser.
Appendix Q to this proxy statement identifies fees that have been paid by the
Funds to Pilgrim Investments and certain of its affiliates during each Fund's
most recent fiscal year.
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 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
_______.
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 considered a report provided at the meeting
by representatives 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 compensation to be
received by Pilgrim Investments under the New Agreements is the same as the
13
<PAGE>
compensation paid under the Current Agreements; (3) 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; (4) 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; (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 (7) Pilgrim's 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.
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 Advisory 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 shares 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.
14
<PAGE>
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 I through N.
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.
15
<PAGE>
Fund(s) Sub-Adviser
------- -----------
PROPOSAL 3(A):
Asia-Pacific Equity Fund HSBC Asset Management (Americas) Inc. and
HSBC Asset Management (Hong Kong) Limited
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.
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.
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<PAGE>
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 R
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). See Appendix _____ for a list of the principal executive officers
and the directors or general partners of each Sub-Adviser.
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 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.
17
<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 Portfolio Management 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 and by shareholders of the Funds on
_________. 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
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<PAGE>
shareholders of the Fund on ____________. 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 institutions, pension funds and high net worth
individuals.
Navellier has managed the Growth + Value Fund pursuant to a Portfolio
Management Agreement dated July 1, 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 ____________. 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.
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 -- $104,238; International Core Growth Fund -- $19,830;
International SmallCap Growth Fund -- $58,033; 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 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
<PAGE>
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 the New
Sub-Advisory Agreements 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 shares 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.
19
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PROPOSAL NO. 4
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC AUDITORS
(EMERGING MARKETS VALUE, GROWTH + VALUE, HIGH TOTAL RETURN,
HIGH TOTAL RETURN II, INTERNATIONAL VALUE, RESEARCH ENHANCED INDEX,
AND MIDCAP OPPORTUNITIES FUNDS ONLY)
For 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 PricewaterhouseCooper 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 of 1040, as amended, 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 has further informed
the Boards 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. 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.
20
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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
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:
21
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Fund Shares Outstanding
---- ------------------
Pilgrim Asia-Pacific Fund [ ]
Pilgrim Balanced Fund [ ]
Pilgrim Bank and Thrift Fund [ ]
Pilgrim Convertible Fund [ ]
Pilgrim Emerging Countries Fund [ ]
Pilgrim Emerging Markets Value Fund [ ]
Pilgrim Government Securities Income Fund [ ]
Pilgrim Growth + Value Fund [ ]
Pilgrim High Total Return Fund [ ]
Pilgrim High Total Return Fund II [ ]
Pilgrim High Yield Fund [ ]
Pilgrim High Yield Fund II [ ]
Pilgrim International Core Growth Fund [ ]
Pilgrim International SmallCap Growth Fund [ ]
Pilgrim International Value Fund [ ]
Pilgrim LargeCap Growth Fund [ ]
Pilgrim LargeCap Leaders Fund [ ]
Pilgrim MagnaCap Fund [ ]
Pilgrim MidCap Growth Fund [ ]
Pilgrim MidCap Opportunities Fund [ ]
Pilgrim MidCap Value Fund [ ]
Pilgrim Money Market Fund [ ]
Pilgrim Research Enhanced Index Fund [ ]
Pilgrim SmallCap Growth Fund [ ]
Pilgrim Strategic Income Fund [ ]
Pilgrim Worldwide Growth Fund [ ]
For Pilgrim Advisory Funds, Inc. and Pilgrim Mutual Funds, one-third of
the outstanding shares of the Company or Fund 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, represented in person or 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.
22
<PAGE>
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 ______, 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 own, as a group, less
than 1% of the shares of each Fund.
BENEFICIAL OWNERS
Appendix S 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 ________, 2000.
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 _________,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.
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.
23
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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.
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 T
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 of 1940, as amended. 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.
REPORTS TO SHAREHOLDERS
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) 992-1080.
24
<PAGE>
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE ASSURED,
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
JAMES M. HENNESSY, Secretary
June 28, 2000
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
25
<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)
Appendix F Form of Investment Management Agreement for Pilgrim
Investment Funds, Inc. (Pilgrim MagnaCap Fund)
Appendix G 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 H 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 I Sub-Advisory Agreement with Brandes Investment Partners,
L.P. (Pilgrim Emerging Markets Value Fund)
Appendix J Sub-Advisory Agreement with Brandes Investment Partners,
L.P. (Pilgrim International Value Fund)
Appendix K Sub-Advisory Agreement with HSBC Asset Management
(Americans), Inc., HSBC Asset Management (Hong Kong),
Limited (Pilgrim Asia-Pacific Fund) and HSBC Asset
Management (Europe) Limited
Appendix L Sub-Advisory Agreement with J. P. Morgan Investment
Management Inc. (Pilgrim Research Enhanced Index Fund)
Appendix M Sub-Advisory Agreement with Navellier Fund Management, Inc.
(Pilgrim Growth + Value Fund)
Appendix N Sub-Advisory Agreement with Nicholas-Applegate Capital
Management (Pilgrim Convertible, Emerging Countries,
International Core Growth, International SmallCap Growth,
LargeCap Growth and Worldwide Growth Funds)
26
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APPENDICES
Appendix O Advisory Fees
Appendix P Directors and Principal Executive Officers of Pilgrim
Investments, Inc.
Appendix Q Fees Paid to Pilgrim Investments, Inc., Pilgrim Group, Inc
and Pilgrim Securities, Inc.
Appendix R Annual Sub-Advisory Fees for the Sub-Advised Funds.
Appendix S Beneficial Ownership.
Appendix T Principal Executive Officers of Each of the Companies.
27
<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").
WITNESSETH
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.
<PAGE>
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
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 "Portfolio Managers");
(c) Periodically monitor and evaluate the performance of the Portfolio
Managers with respect to the investment objectives and policies of the Series;
(d) Monitor the Portfolio Managers 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 Portfolio Manager
under which the Portfolio Manager provided investment advisory services to one
or more of the Series;
(f) Supervise Portfolio Managers with respect to the services that such
Portfolio Managers provide under respective sub-advisory agreements ("I
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;
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(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 Portfolio Managers, including, but not
limited to, (i) coordinating all matters relating to the operation of the
Series, including any necessary coordination among the Portfolio Managers,
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
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-3
<PAGE>
(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
A-4
<PAGE>
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
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.
A-5
<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 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 Portfolio Managers,
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
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
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<PAGE>
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 Portfolio Manager, 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 Portfolio Manager or any of the Portfolio Manager'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.
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<PAGE>
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
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.
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<PAGE>
14. APPLICABLE LAW.
(a) This Agreement shall be governed by the laws of the State of
Arizona, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PILGRIM ADVISORY FUNDS, INC.
By:
-------------------------------------
----------------------------------------
Title
PILGRIM INVESTMENTS, INC.
By:
-------------------------------------
----------------------------------------
Title
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<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;
<PAGE>
(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;
(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
B-2
<PAGE>
of its having caused the Fund to pay a broker or dealer that provides brokerage
and research services to the Manager an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Manager determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
Manager's overall responsibilities with respect to the Fund.
The Manager is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Manager. Such
allocations shall be in such amounts and proportions as the Manager shall
determine and the Manager will report on said allocations regularly to the Board
of Directors of the Fund indicating the brokers to whom such allocations have
been made and the basis therefor.
4. CONTROL BY BOARD OF DIRECTORS. Any management or supervisory activities
undertaken by the Manager pursuant to this Agreement, as well as other
activities undertaken by the Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund.
5. COMPLIANCE WITH APPLICABLE REQUIREMENTS. In carrying out is obligations
under this Agreement, the Manager shall at all times conform to:
(a) all applicable provisions of the Investment Company Act of 1940 and
any rules and regulations adopted thereunder, as amended; and
(b) the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and the Investment Company Act of 1940, as amended; and
(c) the provisions of the Articles of Incorporation of the Fund, as
amended; and
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and Federal law.
6. EXPENSES. The expenses connected with the Fund shall be allocable
between the Fund and the Manager as follows:
(a) The Manager shall furnish at its expense and without cost to the
Fund, the services of a President, Secretary and one or more Vice Presidents of
the Fund, to the extent that such additional officers may be required by the
Fund for the proper conduct of its affairs;
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<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.
B-4
<PAGE>
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.
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
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<PAGE>
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Fund directors), by votes cast in person at a meeting
specifically called for such purpose.
11. TERMINATION. This Agreement may be terminated at any time, without the
payment of any penalty, by vote of the Fund's Board of Directors or by vote of a
majority of the Fund's outstanding securities (as defined in Section 2(a)(42) of
the Investment Company Act of 1940, as amended), or by the Manager, on sixty
(60) days' written notice to the other party. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" having the
meaning defined in Section 2(a)(4) of the Investment Company Act of 1940, as
amended.
12. LIABILITY OF THE MANAGER. In the absence of willful misfeasance, bad
faith or gross negligence on the part of the Manager or any of its officers,
directors or employees or reckless disregard by the Manager of its duties under
this Agreement, the Manager shall not be liable to the Fund or to any
shareholder of the Fund for any act or omission in the course, or connected
with, rendering services hereunder or for any losses that may be sustained in
the purchase, holding or sale of any security.
13. NOTICES. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice to the other party, it is agreed that the address of the Manager
and that of the Fund for this purpose shall be 40 N. Central Avenue, Suite 1200,
Phoenix, Arizona 85004.
14. QUESTIONS OF INTERPRETATION. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act of 1940, as amended, shall be
resolved by reference to such term or provision of the Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Investment Company Act of
1940, as amended, reflected in any provision of this Agreement is revised by
rule, regulation or order of the Securities and Exchange Commissions, such
provisions shall be deemed to incorporate the effect of such rule, regulation or
order.
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<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:
------------------------------ --------------------------------
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<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 "Adviser").
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 Adviser to render investment advisory
services to the Fund, and the Adviser is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust and the Fund for the period and on the terms set forth in this
Agreement. The Adviser 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 Adviser 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 Adviser 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 Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, 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
<PAGE>
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 Adviser 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 Adviser will give primary consideration to
securing the most favorable price and efficient execution. The Adviser 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 Adviser may be a party. The Fund recognize that the
services and research related products provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
(ii) When the Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Adviser, 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
incurred in the transactions, will be made by the Adviser 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 Adviser 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 Adviser shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Adviser 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 Adviser to the Trust and
to the Fund under this Agreement are not to be deemed exclusive, and the Adviser
shall be free to render similar services to others.
3. The Trust has delivered to the Adviser 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");
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<PAGE>
(c) Certified resolutions of the Trustees authorizing the appointment
of the Adviser 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 Adviser 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 Adviser under this Agreement may be furnished through such
directors, officers or employees of the Adviser.
5. The Adviser agrees that all records which it maintains for the Trust
and/or the Fund are property of the Trust and/or the Fund. The Adviser will
surrender promptly to the Trust and/or the Fund any such records upon either the
Trust's or the Fund's request. The Adviser 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 Adviser under this
Agreement, the Adviser will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Fund
and the Adviser 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
Adviser, and
(b) all expenses incurred by the Adviser, the Trust or by the Fund in
connection the performance of the Adviser's responsibilities hereunder, other
than brokers' commissions and any issue or transfer taxes chargeable to Fund in
connection with its securities transactions.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Fund will pay to the Adviser 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 Adviser may rely on information reasonably believed by it to be
accurate and reliable. Neither the Adviser nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
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<PAGE>
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 Adviser 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 Adviser 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 Adviser'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 Adviser 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 Adviser 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 Adviser 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 Adviser, prior to use thereof and not to use such material if the Adviser
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 Adviser
such other information relating to the business affairs of the Trust and/or the
Fund as the Adviser at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
C-4
<PAGE>
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 Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
14. The Adviser, the Trust and the Fund each agree that the name "Pilgrim"
is proprietary to, and a property right of, the Adviser. 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 Adviser, 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 Adviser may
request to effect the foregoing.
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 Adviser 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.
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<PAGE>
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:
------------------------------------
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<PAGE>
SCHEDULE 1
Annual Fee as a
Percentage of Avg. Last Continued/
Name of Fund Daily Net Assets Approved by Board Re-approval Day
------------ ---------------- ----------------- ---------------
PILGRIM MIDCAP 1.00% June 13, 2000 _________, 2002
OPPORTUNITIES
FUND
C-7
<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 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.
<PAGE>
2. The Manager shall use its best judgment and efforts in rendering the
advice and services to the Fund as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent for the Fund. It is expressly understood and agreed
that the services to be rendered by the Manager to the Fund under the provisions
of this Agreement are not to be deemed exclusive, and the Manager shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
4. The Manager agrees to use its best efforts in the furnishing of such
advice and recommendations to the Fund, in the preparation of reports and
information, and in the management of the Fund's assets, all pursuant to this
Agreement, and for this purpose the Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical, research, and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the Manager
may desire and request.
5. The Fund will from time to time furnish to the Manager detailed
statements of the investments and assets of the Fund and information as to its
investment objectives and needs, and will make available to the Manager such
financial reports, proxy statements, legal and other information relating to its
investments as may be in the possession of the Fund or available to it and such
other information as the Manager may reasonably request.
6. Whenever the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and rules
thereunder and the rules of any securities exchange or association of which such
affiliate may be a member. Such affiliated dealer shall not be obligated to make
any additional commitments of capital, expense or personnel beyond that already
committed (other than normal periodic fees or payments necessary to maintain its
corporate existence and membership in the National Association of Securities
Dealers, Inc.) as of the date of this Agreement. This Agreement shall not
obligate the Manager or such affiliate (i) to act pursuant to the foregoing
requirement under any circumstances in which they might reasonably believe that
liability might be imposed upon them as a result of so acting, or (ii) to
institute legal or other proceedings to collect fees which may be considered to
be due from others to it as a result of such a tender, unless the Fund shall
enter into an agreement with such affiliate to reimburse it for all expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
D-2
<PAGE>
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
(a) The management fees shall be accrued daily by the Fund and paid to
the Manager at the end of each calendar month.
(b) 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-3
<PAGE>
(c) 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.
(a) 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
D-4
<PAGE>
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.
(b) 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.
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".
D-5
<PAGE>
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-6
<PAGE>
APPENDIX E
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM INVESTMENT FUNDS, INC.
(PILGRIM HIGH YIELD 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 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").
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 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.
<PAGE>
2. The Manager shall use its best judgment and efforts in rendering the
advice and services to the Fund as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent for the Fund. It is expressly understood and agreed
that the services to be rendered by the Manager to the Fund under the provisions
of this Agreement are not to be deemed exclusive, and the Manager shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
4. The Manager agrees to use its best efforts in the furnishing of such
advice and recommendations to the Fund, in the preparation of reports and
information, and in the management of the Fund's assets, all pursuant to this
Agreement, and for this purpose the Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical, research, and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the Manager
may desire and request.
5. The Fund will from time to time furnish to the Manager detailed
statements of the investments and assets of the Fund and information as to its
investment objectives and needs, and will make available to the Manager such
financial reports, proxy statements, legal and other information relating to its
investments as may be in the possession of the Fund or available to it and such
other information as the Manager may reasonably request.
6. Whenever the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and rules
thereunder and the rules of any securities exchange or association of which such
affiliate may be a member. Such affiliated dealer shall not be obligated to make
any additional commitments of capital, expense or personnel beyond that already
committed (other than normal periodic fees or payments necessary to maintain its
corporate existence and membership in the National Association of Securities
Dealers, Inc.) as of the date of this Agreement. This Agreement shall not
obligate the Manager or such affiliate (i) to act pursuant to the foregoing
requirement under any circumstances in which they might reasonably believe that
liability might be imposed upon them as a result of so acting, or (ii) to
institute legal or other proceedings to collect fees which may be considered to
be due from others to it as a result of such a tender, unless the Fund shall
enter into an agreement with such affiliate to reimburse it for all expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
E-2
<PAGE>
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.
(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.
E-3
<PAGE>
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.
E-4
<PAGE>
(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".
E-5
<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 INVESTMENTS FUNDS, INC.
(on behalf of its Pilgrim High Yield
Fund Series)
Attest: By:
----------------------------- -----------------------------------
Title: Title:
------------------------------ --------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
----------------------------- -----------------------------------
Title: Title:
------------------------------ --------------------------------
E-6
<PAGE>
APPENDIX F
FORM OF INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM INVESTMENT FUNDS, INC.
(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 MAGNACAP 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").
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 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.
<PAGE>
2. The Manager shall use its best judgment and efforts in rendering the
advice and services to the Fund as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Fund in any way, or in
any way be deemed an agent for the Fund. It is expressly understood and agreed
that the services to be rendered by the Manager to the Fund under the provisions
of this Agreement are not to be deemed exclusive, and the Manager shall be free
to render similar or different services to others so long as its ability to
render the services provided for in this Agreement shall not be impaired
thereby.
4. The Manager agrees to use its best efforts in the furnishing of such
advice and recommendations to the Fund, in the preparation of reports and
information, and in the management of the Fund's assets, all pursuant to this
Agreement, and for this purpose the Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Manager shall be
deemed to include persons employed or retained by the Manager to furnish
statistical, research, and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments, and such other information, advice and assistance as the Manager
may desire and request.
5. The Fund will from time to time furnish to the Manager detailed
statements of the investments and assets of the Fund and information as to its
investment objectives and needs, and will make available to the Manager such
financial reports, proxy statements, legal and other information relating to its
investments as may be in the possession of the Fund or available to it and such
other information as the Manager may reasonably request.
6. Whenever the Manager has determined that the Fund should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and rules
thereunder and the rules of any securities exchange or association of which such
affiliate may be a member. Such affiliated dealer shall not be obligated to make
any additional commitments of capital, expense or personnel beyond that already
committed (other than normal periodic fees or payments necessary to maintain its
corporate existence and membership in the National Association of Securities
Dealers, Inc.) as of the date of this Agreement. This Agreement shall not
obligate the Manager or such affiliate (i) to act pursuant to the foregoing
requirement under any circumstances in which they might reasonably believe that
liability might be imposed upon them as a result of so acting, or (ii) to
institute legal or other proceedings to collect fees which may be considered to
be due from others to it as a result of such a tender, unless the Fund shall
enter into an agreement with such affiliate to reimburse it for all expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which is
attributable to the time involved in attempting to collect such fees.
F-2
<PAGE>
7. The Manager shall bear and pay the costs of rendering the services to be
performed by it under this Agreement. The Fund shall bear and pay for all other
expenses of its operation, including, but not limited to, expenses incurred in
connection with the issuance, registration and transfer of its shares; fees of
its custodian, transfer and shareholder servicing agent; costs and expenses of
pricing and calculating its daily net asset value and of maintaining its books
of account required by the Investment Company Act of 1940; expenditures in
connection with meetings of the shareholders and directors, except those called
solely to accommodate the Manager; salaries of officers and fees and expenses of
directors or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Manager; salaries of personnel
involved in placing orders for the execution of the Fund's portfolio
transactions or in maintaining registration of its shares under state securities
laws; insurance premiums on property or personnel of the Fund which inure to its
benefit; the cost of preparing and printing reports, proxy statements and
prospectuses of the Fund or other communications for distribution to its
shareholders; legal, auditing and accounting fees; trade association dues; fees
and expenses of registering and maintaining registration of its shares for sale
under Federal and applicable state securities laws; and all other charges and
costs of its operation plus any extraordinary and non-recurring expenses, except
as herein otherwise prescribed. To the extent the Manager incurs any costs or
performs any services which are an obligation of the Fund, as set forth herein,
the Fund shall promptly reimburse the Manager for such costs and expenses. To
the extent the services for which the Fund is obligated to pay are performed by
the Manager, the Manager shall be entitled to recover from the Fund only to the
extent of its costs for such services.
8. (a) The Fund agrees to pay to the Manager, and the Manager agrees to
accept, as full compensation for all administrative and investment management
services furnished or provided to the Fund and as full reimbursement for all
expenses assumed by the Manager, a management fee computed at the following
annual percentage of the average daily net assets of the Fund:
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
(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.
F-3
<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
F-4
<PAGE>
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".
F-5
<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 MagnaCap
Fund Series)
Attest: By:
----------------------------- -----------------------------------
Title: Title:
------------------------------ --------------------------------
PILGRIM INVESTMENTS, INC.
Attest: By:
----------------------------- -----------------------------------
Title: Title:
------------------------------ --------------------------------
F-6
<PAGE>
APPENDIX G
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 (the "Adviser").
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 Adviser to render investment advisory
services to the Funds, and the Adviser is willing to render such investment
advisory on the terms set forth below.
The parties agree as follows:
1. The Trust hereby appoints the Adviser to act as investment adviser to
the Trust and the Funds for the period and on the terms set forth in this
Agreement. The Adviser 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 Adviser 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 Adviser 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 Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, 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.
<PAGE>
(d) (i) The Adviser 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 Adviser will give primary consideration to
securing the most favorable price and efficient execution. The Adviser 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 Adviser may be a party. The Funds recognize that the
services and research related products provided by such brokers may be useful to
the Adviser in connection with its services to other clients.
(ii) When the Adviser deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients, the Adviser, 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
incurred in the transactions, will be made by the Adviser 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 Adviser 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 Adviser shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Adviser 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 Adviser to the Trust and
to each Fund under this Agreement are not to be deemed exclusive, and the
Adviser shall be free to render similar services to others.
3. The Trust has delivered to the Adviser 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");
G-2
<PAGE>
(c) Certified resolutions of the Trustees authorizing the appointment
of the Adviser 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 Adviser 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 Adviser under this Agreement may be furnished through such
directors, officers or employees of the Adviser.
5. The Adviser agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Adviser will
surrender promptly to the Trust and/or the Funds any such records upon either
the Trust's or the Fund's request. The Adviser 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 Adviser under this
Agreement, the Adviser will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Funds
and the Adviser 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
Adviser, and
(b) all expenses incurred by the Adviser, the Trust or by the Funds in
connection the performance of the Adviser'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 Adviser 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 Adviser will be reduced by the amount of such excess, or, if such reduction
G-3
<PAGE>
exceeds the compensation payable to the Adviser, the Adviser 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 Adviser 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 Adviser may rely on information reasonably believed by it to be
accurate and reliable. Neither the Adviser 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 Adviser 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 Adviser 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 Adviser'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 Adviser 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 Adviser to engage in any other business or to render services of
any kind to any other person or entity.
G-4
<PAGE>
13. During the term of this Agreement, the Trust and each Fund agrees to
furnish the Adviser 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 Adviser, prior to use thereof and not to use such material if the Adviser
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 Adviser
such other information relating to the business affairs of the Trust and/or each
Fund as the Adviser at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
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 Adviser, cast in person at a meeting called for the purpose of
voting on such approval.
15. The Adviser, the Trust and the Funds each agree that the name "Pilgrim"
is proprietary to, and a property right of, the Adviser. 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 Adviser, 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 Adviser 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 Adviser 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..
G-5
<PAGE>
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:
-------------------------------------
G-6
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
Annual Fee as a
Percentage of Avg. Last Approved/
Name of Fund Daily Net Assets Continued by Board Re-approval Day
------------ ---------------- ------------------ ---------------
<S> <C> <C> <C>
Pilgrim High Total 0.75 of 1% on first $250 June 13, 2000 ________, 2002
Return Fund million; 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>
G-7
<PAGE>
APPENDIX H
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 ____, 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.
<PAGE>
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
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 "Portfolio
Managers");
(c) Periodically monitor and evaluate the performance of the Portfolio
Managers with respect to the investment objectives and policies of the Series;
(d) Monitor the Portfolio Managers 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 Portfolio Manager
under which the Portfolio Manager provides investment advisory services to one
or more of the Series;
(f) Supervise Portfolio Managers with respect to the services that such
Portfolio Managers 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-2
<PAGE>
(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
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.
H-3
<PAGE>
(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
H-4
<PAGE>
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.
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.
H-5
<PAGE>
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 Portfolio Manager under its Sub-Advisory Agreement.
The Manager further agrees to pay all fees payable to the Portfolio Managers,
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 Portfolio Manager, 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.
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
H-6
<PAGE>
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 Portfolio Manager or any of the Portfolio Manager'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 Portfolio Manager, 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
H-7
<PAGE>
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).
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.
H-8
<PAGE>
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
H-9
<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, 0.67% of the next $500 million
of average net assets, and 0.65% of the average
net assets in excess of $1 billion
Pilgrim Large Cap 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 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 High Quality 0.45% of the first $500 million of the Series'
Bond 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 $500 million of the 1.00% of the first Series'
Small Cap 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
H-10
<PAGE>
APPENDIX I
SUB-ADVISORY AGREEMENT WITH BRANDES INVESTMENT PARTNERS, L.P.
(PILGRIM EMERGING MARKETS VALUE FUND)
SUB-ADVISORY AGREEMENT
AGREEMENT made this _____ day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Adviser"),
investment adviser for the Pilgrim Emerging Markets Value Fund (hereinafter the
"Fund"), a series of the Pilgrim Mayflower Trust (the "Trust"), and Brandes
Investment Partners, L.P., a California limited partnership (hereinafter the
"Subadviser").
WHEREAS, the Adviser 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 Subadviser to perform certain investment advisory services
for the Fund pursuant to this Subadvisory Agreement with the Adviser and the
Subadviser is willing to perform such services for the Fund;
WHEREAS, the Subadviser 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 Adviser and the Subadviser as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUBADVISER. The Adviser hereby authorizes Subadviser 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 Subadviser's
discretion, subject at all times to the supervision of the Adviser 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 Adviser written reports of the composition of
the portfolio of the Fund as often as the Adviser or the Trustees of the Fund
shall reasonably require;
<PAGE>
(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
Subadviser 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 Adviser may give in
writing to the Subadviser 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
either alone or in concert with the Adviser or the Subadviser (provided that
such directions would not cause the Subadviser to violate any fiduciary duties
or any laws with regard to the Subadviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular, the Adviser shall
have the right to direct the Subadviser to place trades through brokers and
other agents of the Adviser'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 Subadviser's needs, and further that the Subadviser is
satisfied that the dealing and execution quality of such brokers are
satisfactory to the Subadviser; and PROVIDED FURTHER that nothing herein shall
be construed as giving the Subadviser 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 Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) above.
The Subadviser 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 Subadviser;
(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;
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(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 Subadviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Subadviser's own initiative, furnish to the Fund from time to time whatever
information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar Administrators
Corporation (the "Administrator"), the Adviser, 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 Adviser, the Administrator and the
Fund in their compliance with applicable laws and regulations. The Subadviser
will furnish the Trustees with such periodic and special reports regarding the
Fund as they may reasonably request;
(d) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates (i) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory 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 Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser 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 Subadviser
that becomes untrue in any material respect. The Adviser shall likewise
immediately notify the Subadviser if it becomes aware of any regulatory action
of the type described in this subparagraph 2(d) respecting or relating to the
Fund, the Adviser, or any Affiliates of the Adviser.
3. ALLOCATION OF CHARGES AND EXPENSES. The Subadviser 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 Adviser or the
Subadviser) including, without limitation:
(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;
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(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 Adviser will pay the Subadviser 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 Adviser.
5. BOOKS AND RECORDS. The Subadviser 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 Subadviser 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 Subadviser 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 Subadviser shall
exercise its best business judgment and reasonable care in rendering the
services provided by it under this Subadvisory Agreement. The Subadviser shall
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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 Adviser in
connection with the matters to which this Subadvisory Agreement relates,
provided that nothing in this Subadvisory Agreement shall be deemed to protect
or purport to protect the Subadviser against liability to the Fund or to holders
of the Fund's shares or to the Adviser to which the Subadviser 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 Subadviser's reckless
disregard of its obligations and duties under this Subadvisory Agreement. As
used in this Section 6, the term "Subadviser" shall include any officers,
directors, employees or other affiliates of the Subadviser performing services
for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that, except as may otherwise
be agreed by the Adviser and the Subadviser, the services of the Subadviser are
not exclusive. The Subadviser 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
Subadviser nor any of its partners officers or employees shall act as principal
or agent or receive any commission. If the Subadviser provides any advice to its
clients concerning the shares of the Fund, the Subadviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Fund.
8. DURATION AND TERMINATION. This Subadvisory 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
Subadvisory Agreement may be terminated: (a) at any time without penalty by the
Fund or Adviser 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 Subadviser, or (b) by the
Subadviser at any time without penalty, upon (60) days' written notice to the
Fund or Adviser. This Subadvisory 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 Subadvisory 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 Subadvisory 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 Subadvisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
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10. INDEMNIFICATION. (a) The Adviser hereby agrees to indemnify the
Subadviser 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 Subadviser failing to meet
the standard of care required hereunder in the performance by the Subadviser of,
or its failure to perform, the services required hereunder), arising from: (i)
the Advisees (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
Adviser, 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 Subadviser 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 Adviser by the Subadviser or which facts or
information the Subadviser failed to provide or disclose. With respect to any
claim for which the Subadviser shall be entitled to indemnity hereunder, the
Adviser shall assume the reasonable expenses and costs (including any reasonable
attorneys' fees and costs) of the Subadviser of investigating and/or defending
any claim asserted or threatened by any party, subject always to the Adviser
first receiving a written undertaking from the Subadviser 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 Subadviser was not entitled to indemnification
hereunder in respect of such claim.
(a) The Subadviser hereby agrees to indemnify the Adviser, 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 Adviser's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Subadviser's or its
agents' and employees' failure to perform its duties and assume its obligations
hereunder, or from any failure of Subadviser to meet the standard of care set
forth in Section 6 of this Agreement, including any action or claim against the
Adviser based on any alleged untrue statement or misstatement of a material fact
made or provided by the Subadviser 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
Subadviser to the Adviser. With respect to any claim for which the Adviser is
entitled to indemnity hereunder, the Subadviser shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Adviser of investigating and/or defending any claim asserted or threatened by
any party, subject always to the Subadviser first receiving a written
undertaking from the Adviser to repay any amounts paid on its behalf in the
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<PAGE>
event and to the extent of any subsequent final determination by a court that
the Adviser was not entitled to indemnification hereunder in respect of such
claim.
(b) In the event that the Subadviser or Adviser 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. Subadviser 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 Adviser and their respective affiliates, agents and employees
shall not be deemed agents of the Subadviser and shall have no authority to bind
Subadviser.
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 Subadvisory
Agreement (or any extension, renewal or amendment thereof) continues in force,
unless the Subadviser 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 Subadviser or any of its principals, or any derivative
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<PAGE>
thereof, shall in no way prevent the Subadviser 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
Subadvisory Agreement or in the event of any termination of this Subadvisory
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.
(a) The Adviser and its affiliates on one hand, and the Subadviser on
the other, shall not publish or distribute, and the Adviser 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 Subadviser or its affiliates on one hand and
the Adviser 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 Subadviser shall notify the Adviser of any
change in the identity or control of its general or limited partners promptly
after such change occurs.
14. MISCELLANEOUS.
(a) This Subadvisory 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 Subadvisory 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.
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<PAGE>
16. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year set forth
above.
Pilgrim Investments, Inc.
By:
-------------------------------------
Brandes Investment Partners, L.P.
By:
-------------------------------------
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APPENDIX J
SUB-ADVISORY AGREEMENT WITH BRANDES INVESTMENT PARTNERS, L.P.
(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 "Adviser"),
investment adviser for the Pilgrim International Value Fund (hereinafter the
"Fund"), a series of Pilgrim Mayflower Trust (the "Trust") and Brandes
Investment Partners, L.P., a California limited partnership (hereinafter the
"Subadviser").
WHEREAS, the Adviser has been retained by the Trust on behalf of the
Fund to provide investment advisory services to the Fund pursuant to an
Investment Advisory 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 Subadviser to perform certain investment advisory services
for the Fund pursuant to this Subadvisory Agreement with the Adviser and the
Subadviser is willing to perform such services for the Fund;
WHEREAS, the Subadviser 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 covenants
herein contained, it is agreed between the Adviser and the Subadviser as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. 'Me Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided
2. DUTIES OF SUBADVISER. The Adviser hereby authorizes Subadviser 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 Subadviser's
discretion, subject at all times to the supervision of the Adviser 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 Adviser written reports of the composition of
the portfolio of the Fund as often as the Adviser or the Trustees of the Fund
shall reasonably require;
<PAGE>
(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
Subadviser 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 Adviser may give in
writing to the Subadviser 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
either alone or in concert with the Adviser or the Subadviser (provided that
such directions would not cause the Subadviser to violate any fiduciary duties
or any laws with regard to the Subadviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular, the Adviser shall
have the right to direct the Subadviser to place trades through brokers and
other agents of the Adviser'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 Subadviser's needs, and further that the Subadviser is
satisfied that the dealing and execution quality of such brokers are
satisfactory to the Subadviser; and PROVIDED FURTHER that nothing herein shall
be construed as giving the Subadviser 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 Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) above.
The Subadviser 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 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 Subadviser; (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;
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(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 Subadviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Subadviser's own initiative, furnish to the Fund from time to time whatever
information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar
Administrators Corporation (the "Administrator"), the Adviser, 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 Adviser, the
Administrator and the Fund in their compliance with applicable laws and
regulations. The Subadviser will furnish the Trustees with such periodic and
special reports regarding the Fund as they may reasonably request;
(d) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates (i) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory 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 Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser 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 respecting or relating to the Subadviser
that becomes untrue in any material respect. The Adviser shall likewise
immediately notify the Subadviser if it becomes aware of any regulatory action
of the type described in this subparagraph 2(d) respecting or relating to the
Fund, the Adviser, or any Affiliates of the Adviser.
3. ALLOCATION OF CHARGES AND EXPENSES. The Subadviser 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 Adviser or the
Subadviser) including, without limitation:
(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;
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<PAGE>
(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 Subadviser agrees to waive all compensation until the
Fund's net assets exceed $50 million. After the Fund's net assets exceed $50
million, the Adviser will pay the Subadviser 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 Adviser.
5. BOOKS AND RECORDS. The Subadviser 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 Subadviser also agrees that
records it maintains and preserves pursuant to Rules 3 1 a-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 Subadviser 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.
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6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Subadviser shall
exercise its best business judgment and reasonable care in rendering the
services provided by it under this Subadvisory Agreement. The Subadviser 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 Adviser in
connection with the matters to which this Subadvisory Agreement relates,
provided that nothing in this Subadvisory Agreement shall be deemed to protect
or purport to protect the Subadviser against liability to the Fund or to holders
of the Fund's shares or to the Adviser to which the Subadviser 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 Subadviser's reckless
disregard of its obligations and duties under this Subadvisory Agreement. As
used in this Section 6, the term "Subadviser" shall include any officers,
directors, employees or other affiliates of the Subadviser performing services
for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that, except as may otherwise
be agreed by the Adviser and the Subadviser, the services of the Subadviser are
not exclusive. The Subadviser 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
Subadviser nor any of its partners officers or employees shall act as principal
or agent or receive any commission. If the Subadviser provides any advice to its
clients concerning the shares of the Fund, the Subadviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Fund.
8. DURATION AND TERMINATION. This Subadvisory 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
Subadvisory Agreement may be terminated: (a) at any time without penalty by the.
Fund or Adviser 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 Subadviser, or (b) by the
Subadviser at any time without penalty, upon (60) days' written notice to the
Fund or Adviser. This Subadvisory 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 Subadvisory 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 Subadvisory 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
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interested persons of any party to this Subadvisory 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 Adviser hereby agrees to indemnify the
Subadviser 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 Subadviser failing to meet
the standard of care required hereunder in the performance by the Subadviser of,
or its failure to perform, the services required hereunder), arising from: (i)
the Adviser'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
Adviser, its officers, employees or representatives, or from any actions by the
Funds distributors or any representative of the Fund; (iii) any action or claim
against the Subadviser 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 Adviser by the Subadviser or which facts or
information the Subadviser failed to provide or disclose. With respect to any
claim for which the Subadviser shall be entitled to indemnity hereunder, the
Adviser shall assume the reasonable expenses and costs (including any reasonable
attorneys' fees and costs) of the Subadviser of investigating and/or defending
any claim asserted or threatened by any party, subject always to the Adviser
first receiving a written undertaking from the Subadviser 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 Subadviser was not entitled to indemnification
hereunder in respect of such claim.
(b) The Subadviser hereby agrees to indemnify the Adviser, 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 Adviser's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Subadviser's or its
agents' and employees' failure to perform its duties and assume its obligations
hereunder, or from any failure of Subadviser to meet the standard of care set
forth in Section 6 of this Agreement, including any action or claim against the
Adviser based on any alleged untrue statement or misstatement of a material fact
made or provided by the Subadviser 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
Subadviser to the Adviser. With respect to any claim for which the Adviser is
entitled to indemnity hereunder, the Subadviser shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Adviser of investigating and/or defending any claim asserted or threatened by
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any party, subject always to the Subadviser first receiving a written
undertaking from the 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 Adviser was not entitled to indemnification hereunder in respect of such
claim.
(c) In the event that the Subadviser or Adviser 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. Subadviser 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 Adviser and their respective affiliates, agents and employees
shall not be deemed agents of the Subadviser and shall have no authority to bind
Subadviser.
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 Subadvisory
Agreement (or any extension, renewal or amendment thereof) continues in force,
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unless the Subadviser 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 Subadviser or any of its principals, or any derivative
thereof, shall in no way prevent the Subadviser 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
Subadvisory Agreement or in the event of any termination of this Subadvisory
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.
(b) The Adviser and its affiliates on one hand, and the Subadviser on
the other, shall not publish or distribute, and the Adviser 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 Subadviser or its affiliates on one hand and
the Adviser 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 Subadviser shall notify the Adviser of any
change in the identity or control of its general or limited partners promptly
after such change occurs.
14. MISCELLANEOUS.
(c) This Subadvisory 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.
(d) The captions of this Subadvisory 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.
(e) 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
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other instrument was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
16. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year set forth
above.
Pilgrim Investments, Inc.
By:
-------------------------------------
Brandes Investment Partners, L.P.
By:
-------------------------------------
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APPENDIX K
SUB-ADVISORY AGREEMENT WITH HSBC ASSET MANAGEMENT AMERICAS, INC. AND HSBC ASSET
MANAGEMENT HONG KONG, 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 a Management Agreement, dated the date hereof (the
"Management Agreement"), a copy of which has been provided to the Portfolio
Manager, 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 Management
Agreement, the Manager wishes to retain the Portfolio Manager to furnish
investment advisory services to one or more of the series of the Fund, and the
Portfolio Manager 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
Portfolio Manager as follows:
1. APPOINTMENT. The Manager hereby appoints the Portfolio Manager 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 Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
<PAGE>
In the event the Fund designates one or more series (other than the Series)
with respect to which the Manager wishes to retain the Portfolio Manager to
render investment advisory services hereunder, it shall notify the Portfolio
Manager in writing. If the Portfolio Manager 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 Portfolio Manager 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 Portfolio 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. To the extent permitted by the investment
policies of the Series, the Portfolio 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
Portfolio 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 ("SEC"), as amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
(a) The Portfolio Manager 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 Portfolio 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 of which the Portfolio Manager 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 Portfolio Manager has received a copy.
(c) The Portfolio Manager will vote all proxies solicited by or with
respect to the issuers of securities in which assets of the Series are invested.
The Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager or any of its affiliates,
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the Portfolio 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 Portfolio Manager in a
manner that is fair and equitable in the judgment of the Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian and portfolio accounting
agent.
(f) The Portfolio Manager 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 Portfolio Manager. The parties acknowledge that the Portfolio
Manager is not a custodian of Series' assets and will not take possession or
custody of such assets.
(g) The Portfolio Manager will make available to the Fund and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (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 Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager will provide the Manager, no later
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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.
3. BROKER-DEALER SELECTION. The Portfolio Manager 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 Portfolio 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, 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 Portfolio 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 Fund's Board of Directors may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Portfolio 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 Portfolio 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 Portfolio Manager'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
Portfolio Manager 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 Portfolio Manager is further authorized to
allocate the orders placed by it on behalf of the Series to the Portfolio
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 Portfolio Manager, or
an affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager 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 PORTFOLIO MANAGER. The Portfolio Manager has reviewed
the Registration Statement for the Fund filed with the SEC that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration
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<PAGE>
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 and HSBC Hong Kong 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 and HSBC Hong
Kong, 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 Portfolio Manager 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
Portfolio Manager 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 Management
Agreement, the Manager is solely responsible for the payment of fees to the
Portfolio Manager, and the Portfolio Manager 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 Management Agreement
when due, and the amount that was paid is insufficient to cover the Portfolio
Manager's fee under this Agreement for the period in question, then the
Portfolio Manager may enforce against the Fund any rights it may have as a
third-party beneficiary under the Management Agreement and the Manager will (i)
not be obligated to pay to the Portfolio Manager 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.
7. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Fund (1) in the event that the SEC has censured the Portfolio
Manager; 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 Portfolio Manager further agrees to notify
the Manager and the Fund immediately of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager 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 Portfolio
Manager (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
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<PAGE>
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 Portfolio Manager 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 Portfolio Manager may, at its own expense, make
and retain a copy of such records. The Portfolio Manager 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 Portfolio Manager shall treat as
confidential all information pertaining to the Fund and actions of the Fund, the
Manager and the Portfolio Manager, 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 Portfolio Manager, 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 Portfolio
Manager or the Manager, or if available from a source other than the Manager,
Portfolio Manager or this Fund.
10. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. 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 Portfolio Manager 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 Portfolio Manager, except with the prior
permission of the Portfolio Manager. 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 Portfolio Manager for its approval and the
Portfolio Manager 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 PORTFOLIO MANAGER.
(a) During the first year following the effectiveness of the Fund's
initial registration statement, the Portfolio Manager will make available
Fredric Lutcher III or Ian Burden to accompany representatives of the Fund's
distributor on six (6) days of "road show" marketing/due diligence presentations
to dealers and potential dealers in the Fund's shares, the timing and location
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(within the United States) of such six presentations to be chosen by the Manager
following consultation with the Portfolio Manager. The Portfolio Manager may
substitute a senior member of its firm for Mr. Lutcher or Mr. Burden, if such
individual is reasonably acceptable to the Manager. The Manager will reimburse
the Portfolio Manager, or cause the Fund's distributor to reimburse the
Portfolio Manager, for the reasonable out-of-pocket expenses incurred by the
Portfolio Manager in assisting in such presentations.
(b) During the term of this Agreement and during the six-month period
beginning the date that this Agreement terminates, neither the Portfolio Manager
nor any of the Portfolio Manager'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 Portfolio Manager shall not be bound by this covenant
in the event that the termination is not voluntarily effected by the Portfolio
Manager, and shall not be bound by this covenant for any period in the event
that the Portfolio Manager does not receive compensation for its services from
the Manager or the Fund as required by the terms of this agreement. Furthermore,
the Portfolio Manager shall not be bound by this covenant with respect to any
SEC registered open-end investment company or series thereof to which the
Portfolio Manager is appointed as investment adviser or subadviser 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 Portfolio Manager.
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 Portfolio Manager, any
affiliated person of the Portfolio Manager, and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls the Portfolio Manager (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 Portfolio
Manager's duties, or by reason of reckless disregard of the Portfolio Manager'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
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<PAGE>
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 Portfolio Manager 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 Portfolio
Manager, or (c) by the Portfolio Manager 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 Portfolio Manager, in which case the Portfolio Manager 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 Portfolio Manager may terminate this Agreement at any
time without penalty, effective upon written notice to the Manager and the Fund,
in the event either the Portfolio Manager (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 Portfolio Manager 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 Portfolio Manager, although the Portfolio Manager 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(b), 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 Portfolio Manager as compensation for
services rendered while the agreement was in effect, Section 6.
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<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 Advisory Funds, Inc.
40 North Central Avenue
Phoenix, AZ 85004-4424
Attention: James M. Hennessy
If to the Portfolio Manager:
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 Portfolio Manager 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 Management
Agreement between the Fund and the Manager, the Portfolio Manager 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
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<PAGE>
that name is the valuable property of the Portfolio Manager 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
Portfolio Manager and for so long as the Portfolio Manager is a portfolio
manager 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).
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 Portfolio Manager acknowledge that the Fund
enjoys the rights of a third-party beneficiary under this Agreement, and the
Manager acknowledges that the Portfolio Manager 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 Portfolio
Manager 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 Portfolio Manager are made for convenience only.
(g) This agreement may be executed in counterparts.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
PILGRIM INVESTMENTS, INC.
By:
--------------------------------------
-----------------------------------------
Title
HSBC ASSET MANAGEMENT (AMERICAS) INC.
By:
--------------------------------------
-----------------------------------------
Title
HSBC ASSET MANAGEMENT (HONG KONG) LIMITED
By:
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-----------------------------------------
Title
HSBC ASSET MANAGEMENT (EUROPE) LIMITED
By:
--------------------------------------
-----------------------------------------
Title
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<PAGE>
APPENDIX L
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 "Adviser"),
investment adviser for the Pilgrim Research Enhanced Index Fund (hereinafter the
"Fund"), and J.P. Morgan Investment Management Inc., a Delaware corporation
(hereinafter the "Subadviser").
WHEREAS, the Adviser 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 Advisory 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 Subadviser to perform certain
investment advisory services for the Fund pursuant to this Subadvisory Agreement
with the Adviser and the Subadviser is willing to perform such services for the
Fund;
WHEREAS, the Subadviser 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 Adviser and the Subadviser as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUBADVISER. The Adviser hereby authorizes Subadviser 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 Subadviser's
discretion; subject at all times to the supervision of the Adviser 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 Adviser 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;
<PAGE>
(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 Subadviser 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 Adviser may give to
the Subadviser 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 Adviser or the Subadviser (provided that such
directions would not cause the Subadviser to violate any fiduciary duties or any
laws with regard to the Subadviser's duties and responsibilities), all or any of
the same as they shall think fit and, in particular, the Adviser shall have the
right to request the Subadviser to place trades through brokers and other agents
of the Adviser's choice, subject to the Subadviser's judgment that such brokers
or agents will execute such trades on the best overall terms available, taking
into consideration factors the Subadviser 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 Subadviser'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 Subadviser 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 Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Subadviser 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 Subadviser
by the Adviser, and with any applicable procedures adopted by the Trustees in
writing supplied to the Subadviser by the 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.
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<PAGE>
(e) 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 Subadviser will keep the Fund and the Trustees informed of
developments materially affecting the Fund's portfolio and shall, on the
Subadviser's own initiative, furnish to the Fund from time to time whatever
information the Subadviser believes appropriate for this purpose;
(f) make available to the Fund's administrator, Northstar
Administrators Corp. (the "Administrator"), the Adviser, 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 Adviser, the Administrator
and the Fund in their compliance with applicable laws and regulations. The
Subadviser will furnish the Trustees with such periodic and special reports
regarding the Fund as they may reasonably request;
(g) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory 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 Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser 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, Adviser, Administrator, and their Affiliates shall likewise
immediately notify the Subadviser 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 Subadviser 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 Subadviser shall
be entitled to reimbursement on a monthly basis by the Adviser of all reasonable
out-of-pocket expenses properly incurred by it in connection with serving as
subadviser 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
Adviser or the Subadviser) 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);
L-3
<PAGE>
(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
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
Subadviser under this Agreement, the Adviser will pay the Subadviser 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
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<PAGE>
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 Subadviser's
compensation is payable pursuant to this Section, the Subadviser'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 Subadviser 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 Subadviser 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 Subadviser 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 Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser 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 Adviser in connection with the matters to which
this Subadvisory Agreement relates, provided that nothing in this Subadvisory
Agreement shall be deemed to protect or purport to protect the Subadviser
against liability to the Fund or to holders of the Fund's shares or to the
Adviser to which the Subadviser 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 Subadviser's reckless disregard of its obligations
and duties under this Subadvisory Agreement. As used in this Section 6, the term
"Subadviser" shall include any officers, directors, employees or other
affiliates of the Subadviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. The Advisor understands that the Subadviser 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 Subadviser, the Trust has no objection to the
Subadviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Subadviser 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
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<PAGE>
Subadviser 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 Adviser
understands that the persons employed by the Subadviser 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 Subadviser or any affiliate of the Subadviser 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
Adviser, by the Fund's Trustees, or by vote of holders of a majority of the
Fund's shares. For a period of eighteen months from the date of execution of
this Agreement, the Subadviser may terminate this Agreement, without penalty, on
six months written notice. Thereafter, the Subadviser may terminate this
Agreement, without penalty, on 60 days written notice. This Agreement will
terminate automatically five business days after the Subadviser receives written
notice of the termination of the advisory agreement between the Fund and the
Adviser. This Agreement also will terminate automatically in the event of its
assignment (as defined in the 1940 Act).
9. AMENDMENTS. No provision of this Subadvisory 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 Subadvisory 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 Subadvisory 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 Adviser hereby agrees to indemnify the
Subadviser 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 Subadviser failing to meet the standard of care required in Section 6 of
this Subadvisory Agreement in the performance by the Subadviser of, or its
failure to perform, the services required hereunder), arising from the Adviser'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
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<PAGE>
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 Adviser, 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 Subadviser 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 Adviser by the
Subadviser or approved by the Subadviser in the manner provided in paragraph
12(b) of this Agreement, or which facts or information the Subadviser failed to
provide or disclose. With respect to any claim for which the Subadviser shall be
entitled to indemnity hereunder, the Adviser shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Subadviser of investigating and/or defending any claim asserted or threatened by
any party, subject always to the Adviser first receiving a written under-taking
from the Subadviser to repay any amounts paid on its behalf in the event and to
the extent of any subsequent determination that the Subadviser was not entitled
to indemnification hereunder in respect of such claim.
(b) The Subadviser hereby agrees to indemnify the Adviser, 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 Adviser's failure to perform its responsibilities hereunder or claims
arising from its acts or failure to act in performing this Agreement) arising
from Subadviser'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 Subadviser's reckless disregard of its obligations
and duties under this Subadvisory Agreement, or arising from failure to act in
any action or claim against the Adviser based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Subadviser 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 Subadviser to the Adviser.
With respect to any claim for which the Adviser is entitled to indemnity
hereunder, the Subadviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Subadviser first receiving a written undertaking from the
Adviser to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Adviser was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Subadviser or Adviser 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
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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. Subadviser 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 Adviser and their respective affiliates, agents and employees
shall not be deemed agents of the Subadviser and shall have not authority to
bind Subadviser.
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 Subadviser 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 Subadviser or J.P. Morgan shall
in no way prevent the Subadviser 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 Subadviser'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 Adviser 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
Subadviser or any of its affiliates, unless the Subadviser 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
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approval is not forthcoming on or before the date on which such documents are
required by law to be filed, the Subadviser shall be deemed to have consented to
such disclosure.
13. MISCELLANEOUS.
(a) This Subadvisory 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 Adviser and the
Subadviser 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 Subadvisory 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. NON-SOLICITATION. Adviser, 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.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of ____________, 2000.
Pilgrim Investments, Inc.
By:
-------------------------------------
J.P. Morgan Investment Management Inc.
By:
-------------------------------------
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APPENDIX M
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 "Adviser"),
investment adviser for the Pilgrim Growth +Value Fund (hereinafter the "Fund"),
and Navellier Fund Management, Inc., a Delaware corporation (hereinafter the
"Subadviser").
WHEREAS, the Adviser 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 Advisory 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 Subadviser to perform certain
investment advisory services for the Fund pursuant to this Subadviser Agreement
with the Adviser and the Subadviser is willing to perform such services for the
Fund;
WHEREAS, the Subadviser 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 Adviser and the Subadviser as
follows:
1. APPOINTMENT. The Adviser hereby appoints the Subadviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Subadvisory Agreement. The Subadviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUBADVISER. The Adviser hereby authorizes Subadviser 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 Subadviser's
discretion; subject at all times to the supervision of the Adviser 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 Adviser 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;
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(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 Subadviser 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 Adviser may give to
the Subadviser 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 Adviser or the Subadviser (provided that such
directions would not cause the Subadviser to violate any fiduciary duties or any
laws with regard to the Subadviser's duties and responsibilities), all or any of
the same as they shall think fit and, in particular the Adviser shall have the
right to direct the Subadviser to place trades through brokers \and other agents
of the Adviser'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
Subadviser's needs, and further that the Subadviser is satisfied that the
dealing and execution quality of such brokers are satisfactory to the
Subadviser, and PROVIDED FURTHER that nothing herein shall be construed as
giving the Subadviser 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 Adviser shall monitor and review the performance of the Subadviser
under this Agreement, including but not limited to the Subadviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
The Subadviser 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 Subadviser,
(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
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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 Subadviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Subadviser's own initiative, furnish to the Fund from time to time whatever
information the Subadviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Northstar
Administrators Corp. (the "Administrator"), the Adviser, 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 Adviser, the Administrator
and the Fund in their compliance with applicable laws and regulations. The
Subadviser will furnish the Trustees with such periodic and special reports
regarding the Fund as they may reasonably request;
(d) immediately notify the Adviser and the Fund in the event that the
Subadviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Subadviser from serving as an
investment adviser pursuant to this Subadvisory 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 Subadviser further agrees to notify the Fund and the Adviser immediately of
any material fact known to the Subadviser respecting or relating to the
Subadviser 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, Adviser, Administrator, and their Affiliates shall likewise
immediately notify the Subadviser 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 Subadviser 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 Subadviser shall
be entitled to reimbursement on a monthly basis by the Adviser of all reasonable
out-of-pocket expenses properly incurred by it in connection with serving as
subadviser 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
Adviser or the Subadviser) 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);
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(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
Subadviser under this Agreement, the Adviser will pay the Subadviser 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
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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 Subadviser's
compensation is payable pursuant to this Section, the Subadviser'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 Subadviser 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 Subadviser also agrees that
records it maintains and preserves pursuant to Rules 3 1a-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 Subadviser 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 Subadviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Subadviser 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 Adviser in connection with the matters to which
this Subadvisory Agreement relates, provided that nothing in this Subadvisory
Agreement shall be deemed to protect or purport to protect the Subadviser
against liability to the Fund or to holders of the Fund's shares or to the
Adviser to which the Subadviser 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 Subadviser's reckless disregard of its obligations
and duties under this Subadvisory Agreement. As used in this Section 6, the term
"Subadvisor" shall include any officers, directors, employees or other
affiliates of the Subadviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Subadviser are not exclusive, and that nothing in this Subadvisory Agreement
shall prevent the Subadviser, 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
Subadviser recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Subadviser 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
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basis that is fair and equitable to the Fund; provided, however, that the
Subadviser 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 Subadviser nor any
of its directors, officers or employees shall act as a principal or agent or
receive any commission. If the Subadviser provides any advice to its clients
concerning the shares of the Fund, the Subadviser shall act solely as investment
counsel for such clients and not in any way on behalf of the Fund.
8. DURATION AND TERMINATION. This Subadvisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein.
Notwithstanding the foregoing, this Subadvisory Agreement may be terminated: (a)
at any time without penalty by the Fund or Adviser 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 Subadviser, or (b) by
the Subadviser without cause at any time without penalty, upon (60) days'
written notice to the Fund or Adviser. This Subadvisory 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 Subadvisory 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 Subadvisory 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 Subadvisory 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 Adviser hereby agrees to indemnify the
Subadviser 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 Subadviser failing to meet
the standard of care required hereunder in the performance by the Subadviser of,
or its failure to perform, the services required hereunder), arising from the
Adviser'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 Adviser, 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 Subadviser 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
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such claim is not based upon information provided to the Adviser by the
Subadviser or approved by the Subadviser in the manner provided in paragraph
12(b) of this Agreement, or which facts or information the Subadviser failed to
provide or disclose. With respect to any claim for which the Subadviser shall be
entitled to indemnity hereunder, the Adviser shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Subadviser of investigating and/or defending any claim asserted or threatened by
any party, subject always to the Adviser first receiving a written undertaking
from the Subadviser to repay any amounts paid on its behalf in the event and to
the extent of any subsequent determination that the Subadviser was not entitled
to indemnification hereunder in respect of such claim.
(b) The Subadviser hereby agrees to indemnify the Adviser, 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 Adviser's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Subadviser'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
Subadviser or its failure to act in performing this Agreement, including any
action or claim against the Adviser based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Subadviser 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 Subadviser to the Adviser.
With respect to any claim for which the Adviser is entitled to indemnity
hereunder, the Subadviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Subadviser first receiving a written undertaking from the
Adviser to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Adviser was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Subadviser or Adviser is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
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11. INDEPENDENT CONTRACTOR. Subadviser 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 Adviser and their respective affiliates, agents and employees
shall not be deemed agents of the Subadviser and shall have not authority to
bind Subadviser.
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 Subadviser 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 Subadviser, Navellier, or any derivative thereof, shall in no way prevent
the Subadviser 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 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 Subadviser'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 Adviser 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
Subadviser, unless the Subadviser 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 Subadviser shall be deemed to have consented to such disclosure.
13. MISCELLANEOUS.
(a) This Subadvisory 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 Adviser and the
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Subadviser 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 Subadvisory 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. Adviser, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund any persons or entities who are
clients of or investors in any fund or investment vehicle managed by any entity
owned by Louis Navellier.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of ____________, 2000.
Pilgrim Investments, Inc.
By:
-------------------------------------
Navellier Fund Management, Inc.
By:
-------------------------------------
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APPENDIX N
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
"Portfolio Manager").
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 a Management Agreement, dated the date hereof (the
"Management Agreement"), a copy of which has been provided to the Portfolio
Manager, 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 Management
Agreement, the Manager wishes to retain the Portfolio Manager to furnish
investment advisory services to one or more of the series of the Fund, and the
Portfolio Manager 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
Portfolio Manager as follows:
1. APPOINTMENT. The Manager hereby appoints the Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager
to render investment advisory services hereunder, it shall notify the Portfolio
<PAGE>
Manager in writing. If the Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager 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 Portfolio 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 Portfolio Manager 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 Portfolio Manager by the Manager prior to the commencement of this
Agreement and promptly following any such amendment. The Portfolio Manager
further agrees as follows:
(a) The Portfolio 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 of which the Portfolio Manager 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
Portfolio Manager has received a copy, and with the Manager's portfolio manager
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 Portfolio Manager.
(b) In connection with the purchase and sale of securities for each
Series, the Portfolio Manager 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 Portfolio Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian and portfolio accounting
agent.
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(c) The Portfolio Manager will make available to the Fund and the
Manager, promptly upon request, any of the Series' investment records and
ledgers maintained by the Portfolio Manager (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 Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager 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 Portfolio 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, 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
Portfolio 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 Fund's Board of Trustees or Manager may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio 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 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 Portfolio 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 Portfolio Manager'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
Portfolio Manager 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 Portfolio Manager is further authorized to
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allocate the orders placed by it on behalf of a Series to the Portfolio 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 Portfolio Manager, or
an affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager 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 PORTFOLIO MANAGER. The Portfolio Manager has reviewed
Post-Effective Amendment No. [67] to the Registration Statement for the Fund
filed with the SEC that contains disclosure about the Portfolio Manager, and
represents and warrants that, with respect to the disclosure about the Portfolio
Manager or information relating, directly or indirectly, to the Portfolio
Manager, 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 Portfolio Manager 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 Portfolio Manager
will provide the Manager with a copy of the Portfolio Manager'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 Portfolio Manager 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 Portfolio Manager 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 Management Agreement, the Manager is solely responsible for the payment
of fees to the Portfolio Manager, and the Portfolio Manager 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
Management Agreement when due, and the amount that was paid is insufficient to
cover the Portfolio Manager's fee under this Agreement for the period in
question, then the Portfolio Manager may enforce against the Fund any rights it
may have as a third-party beneficiary under the 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 Portfolio Manager agrees to use reasonable compliance
techniques as the Manager or the Board of Trustees may adopt, including any
written compliance procedures.
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(b) The Portfolio Manager agrees that it shall promptly notify the
Manager and the Fund (1) in the event that the SEC has censured the Portfolio
Manager; 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 Portfolio Manager further agrees to notify
the Manager and the Fund promptly of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager 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 Portfolio
Manager (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 Portfolio Manager 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 in compliance with the requirements of Rule 31a-3 under
the 1940 Act, although the Portfolio Manager may, at its own expense, make and
retain a copy of such records. The Portfolio Manager 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 Portfolio Manager shall treat as
confidential all information pertaining to the Fund and actions of the Fund, the
Manager and the Portfolio Manager, 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 Portfolio Manager, 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 Portfolio
Manager or the Manager, or if available from a source other than the Manager,
Portfolio Manager or this Fund.
10. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. 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 Portfolio Manager or the Series
other than the information or representations contained in the Registration
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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 Portfolio Manager, except with the prior
permission of the Portfolio Manager.
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 Portfolio Manager.
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 Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls the
Portfolio Manager (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 Portfolio Manager's duties, or by reason of reckless disregard of the
Portfolio Manager's obligations and duties under this Agreement.
14. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being referred
to as "Portfolio Manager Indemnified Persons") against any and all losses,
claims, damages, liabilities, or litigation (including legal and other expenses)
to which a Portfolio Manager 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 Portfolio Manager Indemnified Person; provided however, that in no case
shall the indemnity in favor of the Portfolio 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, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of obligations and duties under this Agreement.
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(b) Notwithstanding Section 13 of this Agreement, the Portfolio Manager
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 a 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 Portfolio Manager's responsibilities as Portfolio Manager of
the Series which (1) may be based upon the Portfolio 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 Portfolio 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 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 Portfolio Manager 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 Portfolio Manager or any affiliated person of the
Portfolio Manager; provided, however, that in no case shall the indemnity in
favor of a 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 Portfolio Manager Indemnified Person
unless such Portfolio Manager 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 Portfolio Manager Indemnified Person (or after such Portfolio Manager
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 Portfolio Manager
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 Portfolio Manager Indemnified Person, the
Manager will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Portfolio Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Portfolio Manager
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
Portfolio Manager Indemnified Person would result in a conflict of interests and
therefore, would not, in the reasonable judgment of the Portfolio Manager
Indemnified Person, adequately represent the interests of the Portfolio Manager
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
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to the Portfolio Manager Indemnified Person, which counsel shall be satisfactory
to the Manager and to the Portfolio Manager Indemnified Person. The Portfolio
Manager Indemnified Person shall bear the fees and expenses of any additional
counsel retained by it, and the Manager shall not be liable to the Portfolio
Manager Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Portfolio Manager 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 Portfolio Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of
this Section 14 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the Portfolio
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 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 Portfolio Manager of any such claim shall not relieve the
Portfolio Manager from any liability which it may have to the Manager
Indemnified Person against whom such action is brought except to the extent the
Portfolio Manager is prejudiced by the failure or delay in giving such notice.
In case any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to 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 Portfolio Manager assumes the defense of any such action and the
selection of counsel by the Portfolio Manager to represent both the Portfolio
Manager 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 Portfolio Manager will, at its own expense, assume the
defense with counsel to the Portfolio Manager and, also at its own expense, with
separate counsel to the Manager Indemnified Person, which counsel shall be
satisfactory to the Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager 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
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defined in the 1940 Act) of the Manager or the Portfolio Manager, 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 Portfolio Manager 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 Portfolio Manager, or (c) by the
Portfolio Manager upon three (3) months written notice unless the Fund or the
Manager requests additional time to find a replacement for the Portfolio
Manager, in which case the Portfolio Manager 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
Portfolio Manager may terminate this Agreement at any time without penalty,
effective upon written notice to the Manager and the Fund, in the event either
the Portfolio Manager (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 Portfolio Manager 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
Portfolio Manager, although the Portfolio Manager 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
Portfolio Manager as compensation for services rendered while the agreement was
in effect, Section 6.
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(b) NOTICES.
Any notice must be in writing and shall be sufficiently given (1) when
delivered in person, (2) when dispatched by telegram or electronic facsimile
transfer (confirmed in writing by postage prepaid first class air mail
simultaneously dispatched), (3) when sent by internationally recognized
overnight courier service (with receipt confirmed by such overnight courier
service), or (4) when sent by registered or certified mail, to the other party
at the address of such party set forth below or at such other address as such
party may from time to time specify in writing to the other party.
If to the Fund:
Pilgrim Mutual Funds
40 North Central Avenue, Suite 1200
Phoenix, AZ 85004
Attention: James M. Hennessy
If to the Portfolio Manager:
Nicholas-Applegate Capital Management
600 West Broadway
San Diego, CA 92101
Attention: E. Blake Moore
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 Portfolio Manager acknowledge that the Fund
enjoys the rights of a third-party beneficiary under this Agreement, and the
Manager acknowledges that the Portfolio Manager enjoys the rights of a third
party beneficiary under the Management Agreement.
N-10
<PAGE>
(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 Portfolio
Manager as an agent or co-partner of the Manager, or constituting the Manager as
an agent or co-partner of the Portfolio Manager.
(g) This agreement may be executed in counterparts.
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
N-11
<PAGE>
Schedule A
Series Annual Sub-advisory Fee
------ -----------------------
Pilgrim Large Cap Growth 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 Emerging Countries Fund 0.625% of the Series' average net assets
Pilgrim Worldwide Growth Fund 0.50% of the first $500 million of the
Series' 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 Small 0.50% of the first $500 million of the
Cap Growth Fund Series' 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 Core 0.50% of the first $500 million of the
Growth Fund Series' 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
N-12
<PAGE>
PILGRIM INVESTMENTS, INC.
TWO RENAISSANCE SQUARE
PHOENIX, ARIZONA 85004-4424
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 May 21, 1999 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 portfolio manager 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:
----------------------------------
N-13
<PAGE>
Annex I
PORTFOLIO MANAGER OPERATING POLICIES AND PROCEDURES
In carrying its duties under the Sub-Advisory Agreement, the Portfolio
Manager 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 Portfolio Manager will manage each Series so that it meets the
income and asset diversification requirements of Section 851 of the Internal
Revenue Code.
(b) The Portfolio Manager 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 Portfolio Manager based upon the
best interests of the Series. The Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager will arrange for the prompt transmission of the
confirmation of such trades to the Fund's custodian and portfolio accounting
agent.
(d) The Portfolio Manager 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 Portfolio Manager. The
parties acknowledge that the Portfolio Manager is not a custodian of the Series'
assets and will not take possession or custody of such assets.
(e) The Portfolio Manager 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 Portfolio Manager 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 Portfolio Manager for its approval and the Portfolio Manager has
not commented within 10 days, the Manager and its affiliated persons may use and
distribute such sales literature or other promotional material.
N-14
<PAGE>
APPENDIX O
ADVISORY FEES
The annual advisory fees under the New Agreements for each Fund,
expressed as a percentage of the Fund's average daily net assets, are as
follows:
Fund Annual Investment Advisory Fee
---- ------------------------------
Asia-Pacific Equity Fund 1/12 of 1.25% of the Fund's average
daily net assets during the month
(approximately 1.25% on an annual basis)
Balanced Fund 0.75% of the first $500 million of the
Fund's 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
Bank and Thrift Fund 1.00% of the first $30 million of the
Fund's 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.
The fees are computed and accrued daily
and paid monthly.
Convertible Fund 0.75% of the first $500 million of the
Fund's 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
Emerging Countries Fund 1.25% of the Fund's average net assets
Emerging Markets Value Fund 1.00% of the Fund's average daily net
assets
Government Securities Income Fund 0.50% of the first $500 million of the
Fund's average daily net assets; 0.45%
of the next $500 million of average
daily net assets and 0.40% on net assets
in excess of $1 billion.
Growth + Value Fund 1.00% of the Fund's average daily net
assets
High Total Return Fund 0.75% on the first $250 million of
aggregate average daily net assets,
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 the remaining
aggregate daily net assets in excess of
$1 billion.
High Total Return Fund II 0.75% of the Fund's average daily net
assets
High Yield Fund 0.60% of the Fund's average daily net
assets
High Yield Fund II 0.60% of the Fund's average net assets
International Core Growth Fund 1.00% of the first $500 million of the
Fund's 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
<PAGE>
Fund Annual Investment Advisory Fee
---- ------------------------------
International SmallCap Growth 1.00% of the first $500 million of the
Fund's 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 Fund $1 billion
International Value Fund 1.00% of the Fund's average daily net
assets
LargeCap Growth Fund 0.75% of the first $500 million
of the Fund's 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
LargeCap Leaders Fund 1/12 of 1.00% of the Fund's average
daily net assets during the month
(approximately 1.00% on an annual basis)
MagnaCap Fund 1.00% of the first $30 million of the
Fund's average daily net assets; 0.75%
of the next $220 million of average
daily net assets; 0.625% of the next
$250 million of average daily net
assets; and 0.50% of the average daily
net assets over $500 million
MidCap Growth Fund 0.75% of the first $500 million of the
Fund's 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
MidCap Opportunities Fund 1.00% of the Fund's average daily net
assets
MidCap Value Fund 1/12 of 1.00% of the Fund's average
daily net assets during the month
(approximately 1.00% on an annual basis)
Money Market Fund 0.50% of average net assets if the Fund
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
Research Enhanced Index Fund 0.70% of the Fund's average daily net
asset
SmallCap Growth Fund 1.00% of the Fund's average net assets
Strategic Income Fund 0.45% of the first $500 million of the
Fund's 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
Worldwide Growth Fund 1.00% of the first $500 million of the
Fund's 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
O-2
<PAGE>
APPENDIX P (NEED TO UPDATE)
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. Chairman of the Board Chairman, Chief Executive Office and President of Pilgrim Group,
Stallings (50) of Directors Inc. (since December 1994); Director, Pilgrim Securities, Inc.
(since December 1994); Chairman, Chief Executive Officer and
President of Pilgrim Bank and Thrift Fund, Inc., Pilgrim
Government Securities Income Fund, Inc., Pilgrim Advisory Funds,
Inc., and Pilgrim Investment Funds, Inc. (since April 1995) and
Pilgrim Mutual Funds (since May 1999). Chairman and Chief
Executive Officer of Pilgrim Prime Rate Trust (since April 1995)
Chairman and Chief Executive Officer of Pilgrim Capital
Corporation (since August 1990). Presently serves or has served
as an officer or director of other affiliates of Pilgrim Capital
Corporation.
James R. Reis Director, Vice Director, Vice Chairman (since December 1994); Executive Vice
(41) Chairman, Executive President (since April 1995) and Director of Structured Finance
Vice President and (since April 1998), Pilgrim Group, Inc.; Director (since December
Director of Structured 1994) and Vice Chairman (since November 1995) of Pilgrim
Finance 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. Chief Financial Officer (since December 1993), Vice
Chairman and Assistant Secretary (since April 1993) and former
President (May 1991 - December 1993), Pilgrim
Capital Corporation. Presently serves or has served as an officer
or director of other affiliates of Pilgrim Capital Corporation.
Stanley D. Vyner President and Chief Executive Vice President of most of the Pilgrim Funds (since July
(49) Executive Officer 1996). Formerly Chief Executive Officer (November 1993 - December
1995) HSBC Asset Management Americas, Inc., and Chief Executive
Officer, and Actuary (May 1986 - October 1993) HSBC Life
Assurance Co.
</TABLE>
P-1
<PAGE>
APPENDIX Q
FEES PAID TO PILGRIM INVESTMENTS, INC., PILGRIM GROUP, INC.
AND PILGRIM SECURITIES, INC.
<TABLE>
<CAPTION>
AGGREGATE SHAREHOLDER
ADVISORY SERVICING DISTRIBUTION
FEES PAID TO FEES PAID FEES PAID
PILGRIM TO PILGRIM TO PILGRIM
FUND INVESTMENTS, INC. GROUP, INC., SECURITIES, INC.
---- ----------------- ------------ ----------------
<S> <C> <C> <C>
Asia-Pacific Equity (2) $ 303,920
Balanced (2) $ 30,774 (1)
Bank and Thrift (2) $5,893,806
Convertible (2) $ 203,808 (1)
Emerging Countries (2) $ 233,889 (1)
Emerging Markets Value (4) $ 145,031 $ 20,184
Government Securities Income. (2) $ 189,816
Growth + Value (4) $2,711,399 $358,875
High Total Return (4) $4,228,374 $726,605
High Total Return II (4) $1,877,964 $308,067
High Yield (2) $2,176,246
High Yield II (2) $ 54,304 (1)
International Core Growth (2) $ 49,617 (1)
International SmallCap Growth (2) $ 116,699 (1)
International Value (4) $7,164,823 $931,067
LargeCap Growth (2) $ 66,437 (1)
LargeCap Leaders (2) $ 300,494
MagnaCap (2) $3,200,909
MidCap Opportunities (3) $ 483,746 $ 48,903
MidCap Growth (2) $ 216,282 (1)
MidCap Value (2) $ 670,780
Money Market (2) $ 0 (1)
Research Enhanced Index (4) $ 690,257 $122,493
SmallCap Growth (2) $ 317,266
Strategic Income (2) $ 9,028 (1)
Worldwide Growth (2) $ 221,635 (1)
</TABLE>
----------
(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.
(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.
Q-1
<PAGE>
APPENDIX R
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
Partners, L.P. International Value Fund assets
HSBC Asset Management Asia-Pacific Equity Fund 1/12 of 0.50% of the Fund's average
Americas, Inc., and HSBC daily net assets
Asset Management Hong
Kong, Limited
J.P. Morgan Investment Research Enhanced Index 0.20% of the Fund's average daily net
Management Inc. Fund assets
Navellier Fund Growth + Value Fund 0.50% of the Fund's average daily net
Management, Inc. assets
Nicholas-Applegate LargeCap Growth Fund 0.375% of the first $500 million of the
Capital Management 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
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
Growth Fund 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 Core 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
</TABLE>
R-1
<PAGE>
APPENDIX S
As of April 5, 2000, the Directors/Trustees and officers as a group
owned less than 1% of any class of each Fund's outstanding shares. As of that
date, 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:
[TO BE PROVIDED]
S-1
<PAGE>
APPENDIX T
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):
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. Chief Financial Officer (since December 1993),
Vice Chairman and Assistant Secretary (since April 1993) and former
President (May 1991 - December 1993), Pilgrim Capital (formerly Express
America Holdings Corporation). Presently serves or has served as an officer
or director of other affiliates of Pilgrim Capital.
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., and Chief Executive Officer, and Actuary (May
1986 - October 1993) HSBC Life Assurance Co.
James M. Hennessy, EXECUTIVE VICE PRESIDENT AND SECRETARY. (Age 50)
Executive Vice President and Secretary (since April 1998), Pilgrim Capital
(formerly Express America Holdings Corporation), Pilgrim Group, Pilgrim
Securities and Pilgrim Investments; Executive Vice President and Secretary
of each of the other Pilgrim Funds. Formerly Senior Vice President, Pilgrim
Capital (April 1995 - April 1998); Senior Vice President, Express America
Mortgage Corporation (June 1992 - August 1994) and President, Beverly Hills
Securities Corp. (January 1990 - June 1992).
Michael J. Roland, SENIOR VICE PRESIDENT AND PRINCIPAL FINANCIAL OFFICER.
(Age 41) 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 other Pilgrim
Funds. He served in same capacity from January, 1995 - April, 1997.
Formerly, Chief Financial Officer of Endeaver Group (April 1997 to June
1998).
Robert S. Naka, SENIOR VICE PRESIDENT AND ASSISTANT SECRETARY. (Age 36)
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 other 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). Formerly Operations
Manager, Pilgrim Group, Inc. (April 1992 - April 1995).
Robyn L. Ichilov, VICE PRESIDENT AND TREASURER. (Age 32) Vice President,
Pilgrim Investments (since August 1997), Accounting Manager (since November
<PAGE>
1995). Vice President and Treasurer of most of the other Pilgrim Funds.
Formerly Assistant Vice President and Accounting Supervisor for PaineWebber
(June 1993 - April 1995).
In addition to the above listed officers, the following individuals also
serve as officers for the indicated Fund:
PILGRIM ADVISORY FUNDS
G. David Underwood, VICE PRESIDENT AND SENIOR SUB-ADVISER. (Age 50) Vice
President, Pilgrim Investments (since December 1996). Formerly Director of
Funds Management, First Interstate Capital Management (January 1995 -
November 1996); Vice President, Director of Research and Manager of
Investment Products, Integra Trust Company (1993 - January 1995).
PILGRIM INVESTMENT FUNDS
Howard N. Kornblue, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER .
(Age 58) Senior Vice President, Pilgrim Investments (since August 1995).
Formerly Senior Vice President, Pilgrim Group, Inc. (November 1986 - April
1995).
Kevin G. Mathews, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER. (Age
40) Senior Vice President, Pilgrim Investments (since July 1998). Formerly
Vice President, Pilgrim Investments (August 1995 - July 1998); Vice
President, Van Kampen America Capital (May 1987 - April 1995).
PILGRIM MUTUAL FUNDS
Kevin G. Mathews, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER . (Age
40) Senior Vice President, Pilgrim Investments (since July 1998). Formerly
Vice President, Pilgrim Investments (August 1995 - July 1998); Vice
President, Van Kampen America Capital (May 1987 - April 1995).
G. David Underwood, Senior 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); Vice President, Director of Research and
Manager of Investment Products, Integra Trust Company (1993 - January
1995).
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); Principal and Sub-Adviser, Harris Investment Management (July 1992 -
January 1995).
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). Formerly Vice President, Pilgrim Management Corporation
(January 1991 - April 1995).
T-2
<PAGE>
GOVERNMENT SECURITIES INCOME FUND
Robert K. Kinsey, VICE PRESIDENT AND SENIOR 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); Principal and Sub-Adviser, Harris Investment Management (July
1992 - January 1995).
MAYFLOWER TRUST
Kevin G. Mathews, SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER. (Age
40) Senior Vice President, Pilgrim Investments (since July 1998). Formerly
Vice President, Pilgrim Investments (August 1995 - July 1998); Vice
President, Van Kampen America Capital (May 1987 - April 1995).
Mary Lisanti, EXECUTIVE VICE PRESIDENT AND PORTFOLIO MANAGER . (Age 43)
Executive Vice President and Chief Investment Adviser-Equities, Pilgrim
Investments (since November 1999). Formerly Sub-Adviser, Strong Capital
Management (September 1996 - May 1998); Managing Director and Sub-Adviser,
Banker Trust Corporation (March 1993 - August 1996).
EQUITY TRUST
Mary Lisanti, EXECUTIVE VICE PRESIDENT AND PORTFOLIO MANAGER . (Age 43)
Executive Vice President and Chief Investment Adviser-Equities, Pilgrim
Investments (since November 1999). Formerly Sub-Adviser, Strong Capital
Management (September 1996 - May 1998); Managing Director and Sub-Adviser,
Banker Trust Corporation (March 1993 - August 1996).
T-3
<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 ____ 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.
1. For shareholders of Pilgrim MidCap For All Against All
Opportunities, Emerging Markets Value, [ ] [ ]
Growth + Value, High Total Return, High
Total Return II, International Value, For all Except Abstain
and Research Enhanced Index Funds) to [ ] [ ]
elect eleven Trustees.
Nominees: Al Burton Walter H. May, Jr. John R. Smith
Paul S. Doherty Jock Patton Robert W. Stallings
Robert B. Goode, Jr. 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 For Against Abstain
approve new Investment Management [ ] [ ] [ ]
Agreements between the Funds and
Pilgrim Investments, Inc. ("Pilgrim
Investments").
<PAGE>
3(a). For shareholders of the Pilgrim For Against Abstain
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 and Pilgrim Investments.
3(b). For shareholders of the Pilgrim For Against Abstain
Convertible, 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 For Against Abstain
Emerging 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 For Against Abstain
+ Value Fund, to approve a new [ ] [ ] [ ]
Sub-Advisory Agreement between
Navellier Fund Management, Inc. and
Pilgrim Investments.
3(e). For shareholders of the Pilgrim For Against Abstain
Research 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 For Against Abstain
Markets 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.
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Signature Date
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Signature (if held jointly) Date
