SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PILGRIM VARIABLE PRODUCTS TRUST
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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 VARIABLE PRODUCTS TRUST
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
July 24, 2000
Dear Shareholder:
ReliaStar Financial Corp., the indirect parent company of Pilgrim
Investments, Inc., the investment adviser to Pilgrim VP Growth Opportunities,
Growth + Value, High Yield Bond, International Value, MagnaCap, MidCap
Opportunities, Research Enhanced Index and SmallCap Opportunities Portfolios
(collectively, the "Portfolios") of Pilgrim Variable Products Trust (the
"Trust"), 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 Portfolios following the transaction. Except for the
dates, 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 Portfolio can continue uninterrupted after the transaction, because the
current agreements may terminate automatically as a result of the transaction.
At the shareholder meeting, you also will be asked to ratify the independent
auditors and to elect new Trustees.
After careful consideration, the Board of Trustees of the Trust
unanimously approved each of the proposals and recommends that shareholders vote
"FOR" each proposal.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
AVOID THE ADDED COST OF FOLLOW-UP SOLICITATIONS AND POSSIBLE ADJOURNMENTS,
PLEASE TAKE A FEW MINUTES TO READ THE PROXY STATEMENT AND CAST YOUR VOTE. IT IS
IMPORTANT THAT YOUR VOTE BE RECEIVED BY NO LATER THAN AUGUST 17, 2000.
We appreciate your participation and prompt response in this matter and
thank you for your continued support.
Sincerely,
/s/ Robert W. Stallings
ROBERT W. STALLINGS
Chief Executive Officer and President
<PAGE>
PILGRIM VARIABLE PRODUCTS TRUST
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 18, 2000
To the Shareholders:
A Special Meeting (the "Meeting") of Shareholders of Pilgrim VP Growth
Opportunities, Growth + Value, High Yield Bond, International Value, MagnaCap,
MidCap Opportunities, Research Enhanced Index and SmallCap Opportunities
Portfolios (collectively, the "Portfolios") of Pilgrim Variable Products Trust
(the "Trust") will be held on August 18, 2000 at 9:30 a.m., local time, at 40
North Central Avenue, Suite 1200, Phoenix, Arizona 85004 for the following
purposes:
1. To elect eleven Trustees to serve until their successors are elected
and qualified;
2. To approve a new Investment Management Agreement between the Trust and
Pilgrim Investments, Inc. ("Pilgrim Investments") to reflect the
acquisition of Pilgrim Investments by ING Groep N.V. ("ING"), with no
change in the advisory fees payable to Pilgrim Investments;
3. (a) For shareholders of Pilgrim VP International Value Portfolio, 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 fee payable to Brandes;
(b) For shareholders of Pilgrim VP Research Enhanced Index Portfolio,
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; and
(c) For shareholders of Pilgrim VP Growth + Value Portfolio, 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 paid to Navellier;
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the Portfolios for the fiscal year ending December 31,
2000; and
5. To transact such other business as may properly come before the
Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on June 28, 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 Trustees,
/s/ James M. Hennessy
JAMES M. HENNESSY, Secretary
Dated: July 24, 2000
<PAGE>
PILGRIM VARIABLE PRODUCTS TRUST
40 North Central Avenue, Suite 1200
Phoenix, Arizona 85004
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 18, 2000
A Special Meeting (the "Meeting") of Shareholders of Pilgrim VP Growth
Opportunities, Growth + Value, High Yield Bond, International Value, MagnaCap,
MidCap Opportunities, Research Enhanced Index and SmallCap Opportunities
Portfolios (collectively, the "Portfolios") of Pilgrim Variable Products Trust
(the "Trust") will be held on August 18, 2000 at 9:30 a.m., local time, at 40
North Central Avenue, Suite 1200, Phoenix, Arizona 85004 for the following
purposes:
1. To elect eleven Trustees to serve until their successors are elected
and qualified;
2. To approve a new Investment Management Agreement between the Trust and
Pilgrim Investments, Inc. ("Pilgrim Investments") to reflect the
acquisition of Pilgrim Investments by ING Groep N.V. ("ING"), with no
change in the advisory fees payable to Pilgrim Investments;
3. (a) For shareholders of Pilgrim VP International Value Portfolio, 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 fee payable to Brandes;
(b) For shareholders of Pilgrim VP Research Enhanced Index Portfolio,
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; and
(c) For shareholders of Pilgrim VP Growth + Value Portfolio, 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 changes in the
sub-advisory fee payable to Navellier;
4. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the Portfolios for the fiscal year ending December 31,
2000; and
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 July 24, 2000.
<PAGE>
The Board of Trustees is soliciting votes from shareholders of each
Portfolio only with respect to the particular Proposals that affect that
Portfolio. The following table identifies the Portfolios entitled to vote on
each Proposal.
<TABLE>
<CAPTION>
PORTFOLIO PROPOSAL 1 PROPOSAL 2 PROPOSAL 3(A) PROPOSAL 3(B) PROPOSAL 3(C) PROPOSAL 4
--------- ---------- ---------- ------------- ------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Growth Opportunities X X X
Growth + Value X X X X
High Yield Bond X X X
International Value X X X X
MagnaCap X X X
MidCap Opportunities X X X
Research Enhanced Index X X X X
SmallCap Opportunities X X X
</TABLE>
SOLICITATION OF PROXIES
Solicitation of proxies is being made primarily by the mailing of this
Notice and Proxy Statement with its enclosures on or about July 24, 2000.
The owners of the variable annuity and variable life products
("Variable Contract Owners") who have "Voting Rights" as described later in this
proxy may revoke the accompanying proxy at any time prior to its use by filing
with the Trust a written revocation or duly executed proxy bearing a later date.
In addition, any Variable Contract Owner 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 Trust that may
be presented at the Meeting.
REPORTS TO SHAREHOLDERS
The Trust will furnish, without charge, a copy of the Annual Report and
the most recent Semi-Annual Report regarding the Trust on request. Requests for
such reports should be directed to Pilgrim Investments at 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004 or at (800) 992-0180.
GENERAL OVERVIEW
On April 30, 2000, ReliaStar Financial Corp. ("ReliaStar") entered into
an agreement (the "Transaction") to be acquired by ING Groep N.V. ("ING"). ING
is a global financial institution active in the fields of insurance, banking,
and asset management. Headquartered in Amsterdam, it conducts business in more
than 60 countries, and has almost 90,000 employees. ING seeks to provide a full
range of integrated financial services to private, corporate, and institutional
clients through a variety of distribution channels. As of December 31, 1999, ING
had total assets of approximately $471.8 billion and assets under management of
approximately $330.3 billion. ING includes, among its numerous direct and
indirect subsidiaries, Baring Asset Management, Inc. in Boston, Mass., ING
Investment Management Advisors B.V. in The Hague, the Netherlands, Furman Selz
Capital Management LLC in New York, N.Y., ING Investment Management LLC in
Atlanta, Georgia, Baring International Investment Limited in London, England and
Baring Asset Management (Asia) Limited in Hong Kong. Completion of the
Transaction is contingent upon, among other things, approval by the
Directors/Trustees of the Pilgrim Funds, and certain Pilgrim Fund shareholder
and regulatory approvals. The closing of the Transaction is expected to occur
during the third quarter of 2000.
In the Transaction, ING will issue to stockholders of ReliaStar $54.00
in cash for each share of ReliaStar common stock held by them, subject to
possible adjustments. On April 30, 2000, the total number of shares of ReliaStar
outstanding was 89,502,477.
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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 Portfolios 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
The Board of Trustees of the Trust has nominated eleven individuals
(the "Nominees") for election to the Board. 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.
All of the Nominees except for Al Burton, Jock Patton and Robert W.
Stallings are currently Trustees of the Trust. Messrs. Burton, Patton and
Stallings currently serve as Advisory Board Members of the Trust. As Advisory
Board Members, Messrs. Burton, Patton and Stallings participate in board
meetings for the Trust, but do not vote on matters pertaining to the Trust. Mr.
Lipson, a current Trustee of the Trust, is not standing for election as a
Trustee of the Trust.
The Nominees are being nominated to provide uniformity across the
Boards of Directors/Trustees of all of the Pilgrim Funds. In evaluating the
Nominees, the Trustees took into account their background and experience,
including their familiarity with the issues relating to these types of funds and
investments as well as their careers in business, finance, marketing and other
areas. The Trustees also considered the experience of each of the Nominees as
trustees or directors of certain of the funds in the Pilgrim group of funds.
INFORMATION REGARDING NOMINEES
Below are the names, ages, business experience during the past five
years and other directorships of the Nominees. An asterisk (*) has been placed
next to the name of each Nominee who would constitute an "interested person," as
defined in the Investment Company Act of 1940, as amended, (the "1940 Act") by
virtue of that person's affiliation with the Trust or Pilgrim Investments or any
of its affiliates. The address of each Nominee is 40 North Central Avenue, Suite
1200, Phoenix, Arizona 85004.
<TABLE>
<CAPTION>
POSITION(S) TO BE
NAME AND AGE HELD WITH THE TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------ ------------------- ----------------------------------------
<S> <C> <C>
Al Burton Trustee President of Al Burton Productions for more than the last
(Age 72) five years. Mr. Burton is also a Director, Trustee or
Advisory Board Member of each of the funds managed by
Pilgrim Investments.
Paul S. Doherty Trustee President of Doherty, Wallace, Pillsbury and Murphy, P.C.,
(Age 66) Attorneys. Formerly a Director of Tambrands, Inc.
(1993-1998). Mr. Doherty is also a Director or Trustee of
each of the funds managed by Pilgrim Investments.
Robert B. Goode Trustee Retired. Mr. Goode was formerly Chairman, American Direct
(Age 69) Business Insurance Agency, Inc. (1996-2000). Mr. Goode is
also a Director or Trustee of each of the funds managed by
</TABLE> Pilgrim Investments.
3
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<TABLE>
<CAPTION>
POSITION(S) TO BE
NAME AND AGE HELD WITH THE TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------ ------------------- ----------------------------------------
<S> <C> <C>
Alan L. Gosule Trustee Partner and Chairman of the Tax Department of Clifford
(Age 59) Chance, Rogers & Wells (since 1991). Mr. Gosule is a
Director of F.L. Putnam Investment Management Co., Inc.,
Simpson Housing Limited Partnership, Home Properties of New
York, Inc., CORE Cap, Inc. and Colonnade Partners. Mr.
Gosule is also a Director or Trustee of each of the funds
managed by Pilgrim Investments.
Walter H. May Trustee Retired. Mr. May was formerly Managing Director and Director
(Age 63) of Marketing for Piper Jaffray, Inc. Mr. May is also a
Director or Trustee of each of the funds managed by Pilgrim
Investments.
Jock Patton Trustee Private Investor. Director of Hypercom Corporation (since
(Age 54) 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 Investments.
David W.C. Putnam Trustee President, Clerk and Director of F.L. Putnam Securities
(Age 60) Company, Inc. and its affiliates (since 1978). Mr. Putnam is
Director of Anchor Investment Management Corporation and
President and Trustee of Anchor Capital Accumulation Trust,
Anchor International Bond Trust, Anchor Gold and Currency
Trust, Anchor Resources and Commodities Trust and Anchor
Strategic Assets Trust. Mr. Putnam was formerly Director of
Trust Realty Corp. and Bow Ridge Mining Co. Mr. Putnam is
also a Director or Trustee of each of the funds managed by
Pilgrim Investments.
John R. Smith Trustee President of New England Fiduciary Company (since 1991). Mr.
(Age 76) Smith is Chairman of Massachusetts Educational Financing
Authority (since 1987), Vice Chairman of Massachusetts
Health and Education Authority (since 1979) and
Vice-Chairman of MHI, Inc. (Massachusetts Non-Profit Energy
Purchasers Consortium) (since 1996). Mr. Smith is also a
Director or Trustee of each of the funds managed by Pilgrim
Investments.
*Robert W. Stallings Trustee Chairman, Chief Executive Officer and President of Pilgrim
(Age 51) Group, Inc. ("Pilgrim Group") (since December 1994);
Chairman, Pilgrim Investments and Pilgrim Securities, Inc.
("Pilgrim Securities") (since December 1994); President and
Chief Executive Officer of Pilgrim Funding, Inc. (since
November 1999); and President and Chief Executive Officer of
Pilgrim Capital Corporation (since October 1999) and its
predecessors (since August 1991). Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of each
of the Pilgrim Funds.
</TABLE>
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<TABLE>
<CAPTION>
POSITION(S) TO BE
NAME AND AGE HELD WITH THE TRUST PRINCIPAL OCCUPATION DURING PAST 5 YEARS
------------ ------------------- ----------------------------------------
<S> <C> <C>
*John G. Turner Trustee/ Chairman and Chief Executive Officer of ReliaStar Financial
(Age 60) Chairman Corp. and 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 -
1999) and President of ReliaStar Financial Corp. and
ReliaStar Life Insurance Co. (1989-1991). Mr. Turner is also
Chairman of each of the funds managed by Pilgrim
Investments.
David W. Wallace Trustee Chairman of FECO Engineered Systems, Inc. Mr. Wallace is
(Age 76) President and Trustee of the Robert R. Young Foundation,
Governor of the New York Hospital, Trustee of Greenwit
Hospital and Director of UMC Electronics and Zurn
Industries, Inc. Mr. Wallace was formerly Chairman of Lone
Star Industries and Putnam Trust Company, and Chairman and
Chief Executive Officer of Todd Shipyards, Bangor Punta
Corporation, and National Securities & Research Corporation.
Mr. Wallace is also a Director or Trustee of each of the
funds managed by Pilgrim Investments.
</TABLE>
----------
* An "interested person" as defined in section 2(a)(19) of the 1940 Act.
During the most recent fiscal year, the Board of Trustees of the Trust
held five meetings. Each Trustee attended more than 75% of such meetings during
the period the Trustee served as a Trustee.
COMMITTEES
The Board of Trustees of the Trust has an Audit Committee whose
function is to meet with the independent auditors for the Trust to review the
scope of the Trust's audit, the Trust's financial statements and interim
accounting controls, and to meet with management concerning these matters, among
other things. The Committee currently consists of David W. Wallace, Paul S.
Doherty, Robert B. Goode and John R. Smith. Mary A. Baldwin serves as an
Advisory Board member of the Committee. Prior to November 16, 1999, the
Committee consisted of David W. Wallace, Paul S. Doherty, Alan L. Gosule, Walker
H. May, and John R. Smith. During the year ended December 31, 1999, the Audit
Committee met one time. Each member of the Audit Committee attended that
meeting.
The Board of Trustees of the Trust has a Valuation Committee whose
function is to review the determination of the value of securities held by the
Portfolios for which market quotations are not available. The Committee
currently consists of David W.C. Putnam, Alan L. Gosule and Walter H. May. Al
Burton and Jock Patton currently serve as Advisory Board Members of this
Committee. Prior to November 16, 1999, the Committee consisted of Paul S.
Doherty and Robert B. Goode. During the year ended December 31, 1999, the
Valuation Committee did not meet.
The Board of Trustees of the Trust 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 currently consists of John G.
Turner and Walter H. May. The Executive Committee was created on January 27,
2000, and therefore did not meet during the fiscal year ended December 31, 1999.
The Board of Trustees of the Trust has a Nominating Committee for the
purpose of considering candidates to fill Independent Trustee vacancies on the
Board. The Nominating Committee currently consists of Walter H. May, Paul S.
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Doherty and Robert B. Goode. Mary Baldwin and Al Burton serve as Advisory Board
Members of this Committee. The Nominating Committee was created on November 16,
1999, and did not meet during the fiscal year ended December 31, 1999. The Trust
currently does not have a policy regarding whether the Nominating Committee will
consider nominees recommended by shareholders of the Trust.
The Board of Trustees of the Trust does not have a Compensation
Committee.
REMUNERATION OF TRUSTEES AND OFFICERS
The Trust currently pays each Trustee or Advisory Board Member who is
not an "interested person" of Pilgrim Investments a pro rata share, as described
below, of (i) an annual retainer of $20,000; (ii) $5,000 per quarterly Board
meeting; (iii) $500 per committee meeting; (iv) $500 per special or telephonic
meeting; and (v) out-of-pocket expenses. The pro rata share paid by the Trust is
based on the Trust'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 Pilgrim 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 of the Trust for the fiscal year ended December 31, 1999. Trustees who
are interested persons of the Trust do not receive any compensation from the
Trust. 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/trustees in the Pilgrim Fund complex on which the
Trustee served during that year.
AGGREGATE COMPENSATION TOTAL COMPENSATION FROM
PAID BY COMPANIES IN FUND COMPLEX
NAME OF PERSON, POSITION TRUST TO TRUSTEES PAID TO TRUSTEES
------------------------ ----------------- ----------------
Paul S. Doherty $ 1,592.33 $ 27,125
Trustee (15 companies)
Robert B. Goode $ 1,592.33 $ 26,625
Trustee (15 companies)
Alan L. Gosule $ 1,500 $ 25,125
Trustee (15 companies)
Mark L. Lipson (2) $ 0 $ 0
Trustee (15 companies)
Walter H. May $ 1,592.33 $ 27,125
Trustee (15 companies)
David W. C. Putnam $ 702 $ 24,375
Trustee (15 companies)
John R. Smith $ 1,592.33 $ 27,125
Trustee (15 companies)
John G. Turner (2) $ 0 $ 0
Trustee (15 companies)
David W. Wallace $ 702 $ 24,875
Trustee (15 companies)
----------
(1) Resigned as a Trustee effective November 16, 1999.
(2) "Interested person," as defined in the 1940 Act, because of affiliation
with Pilgrim Investments.
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<PAGE>
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Trust voting at
the Meeting is required to approve the election of each Nominee for the Trust.
THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE NOMINEES UNDER
PROPOSAL NO. 1.
PROPOSAL NO. 2
APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
Shareholders of the Trust are being asked to approve a new Investment
Management Agreement (the "New Agreement") between the Trust and Pilgrim
Investments. APPROVAL OF THE NEW AGREEMENT IS SOUGHT SO THAT THE MANAGEMENT OF
EACH PORTFOLIO CAN CONTINUE UNINTERRUPTED AFTER THE TRANSACTION, BECAUSE THE
CURRENT INVESTMENT MANAGEMENT AGREEMENT (THE "CURRENT AGREEMENT") 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 1940 Act to be an assignment of the Current Agreement. The
Current Agreement provides for its automatic termination upon an assignment.
Accordingly, the New Agreement between Pilgrim Investments and the Trust is
proposed for approval by shareholders of each Portfolio. The New Agreement is
attached as Appendix A to this proxy statement.
Pilgrim Investments and representatives of ING have advised the Trust
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 Portfolios under
the Current Agreement will continue to be responsible under the New Agreement.
Pilgrim Investments does not anticipate that the Transaction will cause any
reduction in the quality of services now provided to the Portfolios or have any
adverse effect on Pilgrim Investments' ability to fulfill its obligations to the
Portfolios.
The terms of the New Agreement are the same in all respects as the
terms of the Current Agreement, except for the dates. The Current Agreement was
last approved by the Trust's Board of Trustees, including a majority of the
Trustees who were not parties to the Current Agreement or interested persons of
such parties, at a Meeting of the Board of Trustees held on April 27, 2000.
Shareholders of each Portfolio last approved the Current Agreement on the
following dates: for the Growth + Value, High Yield Bond, Research Enhanced
Index and SmallCap Opportunities Portfolios on April 15, 1994; for the
International Value Portfolio on April 30, 1997; and for the Growth
Opportunities, MagnaCap, and MidCap Opportunities Portfolios on April 28, 2000.
At the June 13, 2000 meeting of the Board of Trustees, the New
Agreement was approved unanimously by the Board of Trustees, including all of
the Trustees who are not interested parties to the New Agreement or interested
persons of such parties. The New Agreement as approved by the Board of Trustees
is submitted for approval by the shareholders of the Portfolios. The New
Agreement must be voted upon separately by each Portfolio.
If the New Agreement is approved by shareholders, it will take effect
immediately after the closing of the Transaction. The New Agreement will remain
in effect for two years from the date it takes effect, and, unless earlier
terminated, will continue from year to year thereafter, provided that such
continuance is approved annually (i) by the Trust's Board of Trustees or by the
vote of a majority of the outstanding voting securities of the Portfolios, and,
in either case, (ii) by a majority of the Trust's Trustees who are not parties
to the New Agreement or "interested persons" of any such party (other than as
Trustees of the Trust).
If the shareholders of any Portfolio should fail to approve the New
Agreement with respect to that Portfolio, the Transaction may not be
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consummated. If the Transaction is not consummated, Pilgrim Investments will
continue to serve as adviser for all of the Portfolios under the Current
Agreement.
THE TERMS OF THE NEW AGREEMENT
The terms of the New Agreement will be the same in all respects as that
of the respective Current Agreement, except for the dates. The New Agreement
requires Pilgrim Investments to provide, subject to the supervision of the Board
of Trustees, investment advice and investment services to the Portfolios and to
furnish advice and recommendations with respect to investment of the Portfolios'
assets and the purchase or sale of portfolio securities. Pilgrim Investments
also provides investment research and analysis.
There will be no increase in advisory fees for any of the Portfolios.
The annual advisory fees under the New Agreement for each Portfolio are listed
below:
PORTFOLIO ADVISORY FEE
--------- ------------
Growth + Value Portfolio, High 0.75% of the first $250 million of
Yield Bond Portfolio, Research aggregate average daily net assets of
Enhanced Index Portfolio, and the Portfolio; 0.70% of the next $250
SmallCap Opportunities Portfolio million of such assets; 0.65% of the
next $250 million of such assets; 0.60%
of the next $250 million of such assets;
and 0.55% of the aggregate average daily
net assets in excess of $1 billion.
International Value Portfolio 1.00% of aggregate average daily net
assets.
MagnaCap Portfolio, Growth 0.75% of aggregate average daily net
Opportunities Portfolio and assets of the Portfolio.
MidCap Opportunities Portfolio
Like the Current Agreement, the New Agreement provides that Pilgrim
Investments is not subject to liability to the Trust 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.
The New Agreement may be terminated by a Portfolio without penalty upon
not less than 60 days' notice by the Board of Trustees, by a vote of the holders
of a majority of the Portfolio's outstanding shares voting as a single class, or
by Pilgrim Investments. The New Agreement will terminate automatically in the
event of its "assignment" (as defined in the 1940 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 Portfolios. On April 30, 2000,
Pilgrim Advisors, also an indirect wholly-owned subsidiary of ReliaStar, merged
with Pilgrim Investments, and Pilgrim Investments is the surviving corporation
from that merger.
Pilgrim Investments' principal address is 40 North Central Avenue,
Suite 1200, Phoenix, Arizona 85004.
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See Appendix B to this proxy statement for a list of the directors and
principal executive officers of Pilgrim Investments and a list of other
investment companies with similar investment objectives for which Pilgrim
Investments acts as investment adviser. Appendix B to this proxy statement also
identifies fees that have been paid by the Portfolios to certain affiliates of
Pilgrim Investments during each Portfolio's most recent fiscal year.
AGGREGATE ADVISORY FEES PAID TO
PORTFOLIO PILGRIM INVESTMENTS
--------- -------------------
SmallCap Opportunities Portfolio (1) $ 269,393
Growth + Value Portfolio (2) $ 406,374
International Value Portfolio (3) $ 180,408
Research Enhanced Index Portfolio (4) $ 150,965
High Yield Bond Portfolio (5) $ 148,822
MagnaCap Portfolio (6) N/A
MidCap Opportunities Portfolio (6) N/A
Growth Opportunities Portfolio (6) N/A
----------
(1) Does not reflect expense reimbursement of $68,278.
(2) Does not reflect expense reimbursement of $89,668.
(3) Does not reflect expense reimbursement of $93,862.
(4) Does not reflect expense reimbursement of $77,764.
(5) Does not reflect expense reimbursement of $61,195; formerly, the Emerging
Growth Portfolio.
(6) Commenced operations on April 30, 2000.
From time to time, Pilgrim Investments receives brokerage and research
services from brokers that execute securities transactions for certain of the
Portfolios. The commission paid by a Portfolio to a broker that provides such
services to Pilgrim Investments may be greater than the commission would be if
the Portfolio used a broker that does not provide the same level of brokerage
and research services. Additionally, Pilgrim Investments may use such services
for clients other than the specific Portfolio or Portfolios from which the
related commissions are derived.
EVALUATION BY THE BOARD OF TRUSTEES
In determining whether or not it was appropriate to approve the New
Agreement and to recommend approval to shareholders, the Board of Trustees,
including the Trustees who are not interested persons of Pilgrim Investments,
considered various materials and representations provided by Pilgrim Investments
and met with a representative of ING. The Independent Trustees were advised by
independent legal counsel with respect to these matters.
Information considered by the 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 Portfolios are expected to continue to manage
the Portfolios after the Transaction closes; (2) that the senior management
personnel responsible for the management of Pilgrim Investments are expected to
continue to be responsible for the management of Pilgrim Investments; (3) that
the compensation to be received by Pilgrim Investments under the New Agreement
is the same as the compensation paid under the Current Agreement; (4) ING
America Insurance Holdings, Inc.'s representation that it will use reasonable
best efforts to assure that an "unfair burden" (as defined in the 1940 Act) is
not imposed on the Portfolios as a result of the Transaction; (5) the
commonality of the terms and provisions of the New Agreement and Current
Agreement; (6) ING's financial strength and commitment to the advisory business;
and (7) Pilgrim Investments' representation that it will keep any expense
limitation agreements in effect until at least October 31, 2001.
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<PAGE>
Further, the Board of Trustees reviewed its determinations reached at
the meeting of the Board of Trustees on April 27, 2000 respecting the Current
Agreement and, with respect to the Current Agreement, (1) the nature and quality
of the services rendered by Pilgrim Investments under the Agreement; (2) the
fairness of the compensation payable to Pilgrim Investments under the Agreement;
(3) the results achieved by Pilgrim Investments for the Portfolios; 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 Portfolios and the fees received by Pilgrim Group, Inc. for such services.
Based upon its review, the Board determined that, by approving the New
Agreement, the Portfolios can best be assured that services from Pilgrim
Investments will be provided without interruption. The Board also determined
that the New Agreement is in the best interests of each Portfolio and its
shareholders. Accordingly, after consideration of the above factors, and such
other factors and information it considered relevant, the Board of Trustees
unanimously approved the New Agreement and voted to recommend its approval by
each Portfolio'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 Portfolios
pursuant to the Current Agreement.
VOTE REQUIRED
Shareholders of each Portfolio must separately approve the New
Agreement with respect to that Portfolio. Approval of this Proposal No. 2 by a
Portfolio requires an affirmative vote of the lesser of (i) 67% or more of the
Portfolio's shares present at the Meeting if more than 50% of the outstanding
shares of the Portfolio are present or represented by proxy, or (ii) more than
50% of the outstanding shares of the Portfolio.
THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING A MAJORITY OF THE INDEPENDENT
TRUSTEES, RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 2.
PROPOSAL NO. 3
APPROVAL OF SUB-ADVISORY AGREEMENTS
(INTERNATIONAL VALUE, RESEARCH ENHANCED INDEX
AND GROWTH + VALUE PORTFOLIOS ONLY)
Shareholders of each Portfolio that is sub-advised by another
investment advisory firm (each a "Sub-Advised Portfolio") are being asked to
approve a new Sub-Advisory Agreement with the sub-adviser (each a "Sub-Adviser")
for that Portfolio. SHAREHOLDER APPROVAL OF NEW SUB-ADVISORY AGREEMENTS (EACH A
"NEW SUB-ADVISORY AGREEMENT") IS BEING SOUGHT SO THAT THE MANAGEMENT OF EACH
SUB-ADVISED PORTFOLIO 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 PORTFOLIOS. The
New Sub-Advisory Agreements are included as Appendices C, D, and E to this proxy
statement.
The following table lists the Portfolios for which approval is being
sought and identifies the Sub-Adviser for that Portfolio. 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 Portfolio at any time in the future, subject to any
shareholder approval that may be required.
PORTFOLIO SUB-ADVISER
--------- -----------
Proposal 3(a):
International Value Portfolio Brandes Investment Partners, L.P.
Proposal 3(b):
Research Enhanced Index Portfolio J.P. Morgan Investment Management Inc.
Proposal 3(c):
Growth + Value Portfolio Navellier Fund Management, Inc.
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<PAGE>
The New Sub-Advisory Agreements must be voted upon separately by each
Sub-Advised Portfolio to which a New Sub-Advisory Agreement pertains. If a New
Sub-Advisory Agreement is approved by shareholders of a Sub-Advised Portfolio,
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
Trust's Board of Trustees or by the vote of a majority of the outstanding voting
securities of the particular Portfolio, and, in either case, (ii) by a majority
of the Trust's Trustees who are not parties to the New Sub-Advisory Agreement or
"interested persons" of any such party (other than as Trustees of the Trust).
At the June 13, 2000 meeting of the Board of Trustees, each New
Sub-Advisory Agreement was approved unanimously by the Board of Trustees,
including all of the Trustees who are not interested parties to the New
Sub-Advisory Agreements or interested persons of such parties.
If the shareholders of a Portfolio should fail to approve the New
Sub-Advisory Agreement that pertains to that Portfolio, the Board of Trustees
shall meet to consider appropriate action.
TERMS OF THE NEW SUB-ADVISORY AGREEMENTS
Each New Sub-Advisory Agreement, like the Current Sub-Advisory
Agreement, requires the Sub-Adviser to provide, subject to supervision by the
Board of Trustees and Pilgrim Investments, a continuous investment program for
the Portfolio and to determine the composition of the assets of the Portfolio,
including determination of the purchase, retention, or sale of the securities,
cash and other investments for the Portfolio, in accordance with the Portfolio'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 Portfolios, will remain the same under
the New Sub-Advisory Agreements. The sub-advisory fees are set forth below:
<TABLE>
<CAPTION>
FUND SUB-ADVISORY FEE
---- ----------------
<S> <C>
Research Enhanced Index Portfolio 0.20% of the Portfolio's average daily net assets.
Growth + Value Portfolio 0.35% of the Portfolio's average daily net assets.
International Value Portfolio 0.50% of the Portfolio's average daily net assets.
</TABLE>
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 Portfolio 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 or a Portfolio upon the vote of a majority of
the Board of Trustees of the Trust or a majority of the outstanding shares of
the applicable Portfolio, upon 60 days' written notice and by the Sub-Adviser
upon 60 days' written notice. With respect to the New Sub-Advisory Agreement for
the Research Enhanced Index Portfolio, the Agreement may be terminated by
Pilgrim Investments upon 60 days' written notice and also terminates
automatically five business days after the Sub-Adviser receives notice of the
termination of the Investment Management Agreement between the Trust and Pilgrim
Investments. Each New Sub-Advisory Agreement will terminate automatically in the
event of its "assignment" (as defined in the 1940 Act).
INFORMATION ABOUT BRANDES INVESTMENT PARTNERS, L.P.
Brandes Investment Partners, L.P. ("Brandes") serves as Sub-Adviser to
the International Value Portfolio. Brandes was formed in May 1996 as the
successor to its general partner, Brandes Investment Partners, Inc., which has
been providing investment advisory services (through various predecessor
entities) since 1974. Brandes currently manages over $33 billion in
11
<PAGE>
international portfolios. Brandes' principal address is 12750 High Bluff Drive,
San Diego, California 92130.
Brandes has managed the International Value Portfolio pursuant to a
Sub-Advisory Agreement dated July 24, 1997. The Sub-Advisory Agreement was last
approved by the Board of Trustees on April 27, 2000. For the fiscal year ended
December 31, 1999, Brandes was paid sub-advisory fees of $0. Brandes has agreed
to waive all compensation until the Portfolio's assets exceed $50 million.
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 Portfolio. 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. The company is a wholly-owned
subsidiary of J.P. Morgan & Co. J.P. Morgan's principal address is 522 Fifth
Avenue, New York, New York 10036.
J.P. Morgan has managed the Research Enhanced Index Portfolio pursuant
to a Sub-Advisory Agreement dated April 30, 1999. The Sub-Advisory Agreement was
last approved by the Board of Trustees on April 27, 2000 and was approved by
shareholders of the Portfolio on April 8, 1999. For the fiscal year ended
December 31, 1999, J.P. Morgan was paid sub-advisory fees of $32,985. For a list
of other investment companies managed by J.P. Morgan with an investment
objective similar to that of the Research Enhanced Index Portfolio, see Appendix
F.
INFORMATION ABOUT NAVELLIER FUND MANAGEMENT, INC.
Navellier Fund Management, Inc. ("Navellier") serves as Sub-Adviser to
the Growth + Value Portfolio. Navellier and its affiliate, Navellier &
Associates, Inc., manages over $5 billion for institutions, pension funds, and
high net worth individuals. Navellier's principal address is 1 East Liberty,
Third Floor, Reno, Nevada 89501.
Navellier has managed the Growth + Value Portfolio pursuant to a
Sub-Advisory Agreement dated February 1, 1996. The Sub-Advisory Agreement was
last approved by the Board of Trustees on April 27, 2000, and by shareholders of
the Portfolio on January 31, 1996. For the fiscal year ended December 31, 1999,
Navellier was paid sub-advisory fees of $177,138.
RECOMMENDATION OF TRUSTEES
In determining whether or not it was appropriate to approve the New
Sub-Advisory Agreement for each Portfolio and to recommend approval to
shareholders, the Board of Trustees considered, among other things, the fact
that the Sub-Advised Portfolios 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
Trustees reviewed its determinations reached at the meetings of the Board of
Trustees held on 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 Portfolios; and
(4) the personnel, operations and financial condition, and investment management
capabilities, methodologies, and performance of the Sub-Advisers.
12
<PAGE>
Based upon its review, the Board has determined that, by approving the
New Sub-Advisory Agreements, the Sub-Advised Portfolios 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 Portfolios and their shareholders. Accordingly, after consideration
of the above factors, and such other factors and information it considered
relevant, the Board of Trustees unanimously approved the New Sub-Advisory
Agreements and voted to recommend its approval by each Portfolio'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 Portfolio pursuant to the Current Sub-Advisory Agreements.
VOTE REQUIRED
Shareholders of each Sub-Advised Portfolio must separately approve the
respective New Sub-Advisory Agreement with respect to that Portfolio. Approval
of this Proposal No. 3 by a Portfolio requires an affirmative vote of the lesser
of (i) 67% or more of the Portfolio's shares present at the Meeting if more than
50% of the outstanding shares of the Portfolio are present or represented by
proxy, or (ii) more than 50% of the outstanding shares of the Portfolio.
THE BOARD OF TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 3.
PROPOSAL NO. 4
RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC AUDITORS
Shareholders are being asked to ratify the selection of the accounting
firm of PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") to act as the
independent auditors for the Trust for the fiscal year ending December 31, 2000.
At a meeting of the Board held on January 27, 2000, the Board of
Trustees of the Trust, including a majority of Trustees who are not "interested
persons" as defined in the 1940 Act, as well as the Trustees who were members of
the Audit Committee, selected PricewaterhouseCoopers to act as the independent
auditors for the fiscal year ending December 31, 2000.
PricewaterhouseCoopers has served as independent auditors for the Trust
with respect to its financial statements for the fiscal years ended December 31,
1994 through December 31, 1999.
PricewaterhouseCoopers has advised the Trust that it is an independent
auditing firm and has no direct financial or material indirect financial
interest in the Trust. PricewaterhouseCoopers has further informed the Board
that certain PricewaterhouseCoopers professionals had investments in certain
Pilgrim Funds during a period in which PricewaterhouseCoopers was performing
audit services for the Pilgrim Funds and during the period of the firm's
engagement to conduct the audit, but that none of those professionals performed
services for the Pilgrim Funds. PricewaterhouseCoopers also informed the Board
that the circumstances that caused the violations no longer existed.
Representatives of PricewaterhouseCoopers are not expected to be at the Meeting
but have been given the opportunity to make a statement if they wish, and will
be available telephonically should any matter arise requiring their
participation.
VOTE REQUIRED
The affirmative vote of a majority of the shares of the Trust voted at
the Meeting is required to approve this Proposal No. 4.
THE BOARD OF TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL NO. 4.
13
<PAGE>
GENERAL INFORMATION
OTHER MATTERS TO COME BEFORE THE MEETING
Management of the Portfolios 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. 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.
VOTING RIGHTS
Shares of the Portfolios of the Trust are currently offered to separate
accounts ("Separate Accounts") of insurance companies that are affiliated with
each other: ReliaStar Life Insurance Company (formerly "Northwestern National
Life Insurance Company"), Northern Life Insurance Company and ReliaStar Life
Insurance Company of New York (the "Affiliated Insurance Companies"). The
Portfolios serve as investment vehicles for variable annuity and variable life
products ("Variable Contracts") issued by the Affiliated Insurance Companies.
In accordance with current law, the Affiliated Insurance Companies will
request voting instructions from Variable Contract Owners and will vote shares
or other voting interests in each Separate Account in proportion to the voting
instructions received. Each Affiliated Insurance Company is required to vote
shares of the Portfolio held by its Separate Accounts in accordance with
instructions received from Variable Contract Owners. Each Affiliated Insurance
Company is also required to vote shares of the Portfolio held in each of their
respective Separate Accounts for which no voting instructions have been received
in the same proportion as it votes shares held by that Separate Account for
which it has received instructions. Shares held by an Affiliated Insurance
Company in its general account, if any, must be voted in the same proportion as
the votes cast with respect to shares held in all of such Company's Separate
Accounts in the aggregate. Variable Contract Owners permitted to give
instructions to the Portfolio and the number of shares for which such
instructions may be given for purposes of voting at the Meeting, and any
adjournment thereof will be determined as of the record date. In connection with
the solicitation of such instructions from Variable Contract Owners, it is
expected that the Affiliated Insurance Companies will furnish a copy of this
Proxy Statement to Variable Contract Owners.
14
<PAGE>
Each share of each Portfolio is entitled to one vote. Variable Contract
Owners of each Portfolio at the close of business on June 28, 2000 (the "Record
Date") will be entitled to be present and to give voting instructions for the
Portfolio at the Meeting and any adjournments thereof with respect to their
shares owned as of the Record Date. As of the Record Date, the Portfolios had
the following shares outstanding:
PORTFOLIO SHARES OUTSTANDING
--------- ------------------
Growth Opportunities Portfolio 121,276.575
Growth + Value Portfolio 3,808,292.277
High Yield Bond Portfolio 3,312,300.039
International Value Portfolio 1,875,493.974
MagnaCap Portfolio 14,250.471
MidCap Opportunities Portfolio 31,735.739
Research Enhanced Index Portfolio 5,747,073.897
SmallCap Opportunities Portfolio 3,872,073.428
To the knowledge of the Portfolios, as of May 31, 2000, no current
Trustee of the Portfolios owned 1% or more of the outstanding shares of any
Portfolio and the officers and Trustees of the Portfolios own, as a group, less
than 1% of the shares of each Portfolio. As of June 28, 2000, there were persons
that, to the knowledge of the Portfolios, owned Variable Contracts or Contracts
that entitled the person to give voting instructions with respect to 5% or more
of the outstanding shares of any Portfolio.
A majority of the outstanding shares of the Trust on the Record Date,
present in person or represented by proxy (including the Affiliated Insurance
Companies), 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.
EXPENSES
Pilgrim Investments or an affiliate, or ING, will pay the expenses of
the Trust 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 Portfolios will not bear the
expenses of the proxy statement.
ADVISER AND DISTRIBUTOR
Pilgrim Investments is located at 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004, and serves as the investment adviser to each of the
Portfolios. Pilgrim Securities, Inc., whose address is 40 North Central Avenue,
Suite 1200, Phoenix, Arizona 85004, is the Distributor for each of the
Portfolios.
15
<PAGE>
EXECUTIVE OFFICERS OF THE TRUST
Officers of the Trust are elected by the Board and hold office until
they resign, are removed or are otherwise disqualified to serve. The principal
executive officers of the Trust, together with such person's position with the
Trust and principal occupation for the last five years, are listed on Appendix G
attached hereto.
SHAREHOLDER PROPOSALS
The Portfolios 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 1940 Act. A shareholder proposal to be
considered for inclusion in the proxy statement at any subsequent meeting of
shareholders must be submitted a reasonable time before the proxy statement for
that meeting is mailed. Whether a proposal is submitted in the proxy statement
will be determined in accordance with applicable federal and state laws.
PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
/s/ James Hennessy
JAMES M. HENNESSY, Secretary
July 24, 2000
40 North Central Avenue
Suite 1200
Phoenix, Arizona 85004
(800) 992-0180
16
<PAGE>
EXHIBIT LIST
APPENDIX DESCRIPTION
-------- -----------
A Investment Management Agreement between the Trust and Pilgrim
Investments, Inc.
B Information regarding Pilgrim Investments, Inc.
C Sub-Advisory Agreement for the Pilgrim VP International Value
Portfolio
D Sub-Advisory Agreement for the Pilgrim VP Research Enhanced Index
Portfolio
E Sub-Advisory Agreement for the Pilgrim VP Growth + Value Portfolio
F Information regarding Brandes Investment Partners, LP. and J.P.
Morgan Investment Management Inc.
G Officers of the Trust
17
<PAGE>
APPENDIX A
INVESTMENT MANAGEMENT AGREEMENT FOR PILGRIM VARIABLE PRODUCTS TRUST
(GROWTH OPPORTUNITIES, GROWTH + VALUE, HIGH YIELD BOND, INTERNATIONAL VALUE,
MAGNACAP, MIDCAP OPPORTUNITIES, RESEARCH ENHANCED INDEX AND
SMALLCAP OPPORTUNITIES PORTFOLIOS)
PILGRIM VARIABLE PRODUCTS TRUST
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT, dated this __ day of September 2000, by and between PILGRIM
VARIABLE PRODUCTS TRUST, a Massachusetts business trust, (the "Trust") and
PILGRIM INVESTMENTS, INC., a Delaware business corporation (the "Manager").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and assets; 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 Trust has retained the Manager to render investment
advisory services to certain series of the Trust identified in Schedule A (each
a "Fund" and collectively the "Funds").
NOW, THEREFORE, the parties agree as follows:
1. The Trust hereby appoints the Manager to act as investment adviser to
the Trust and the Funds for the period and on the terms set forth in this
Agreement. The Manager accepts such appointment and agrees to render the
services described, for the compensation provided, in this Agreement.
2. Subject to the supervision of the Trustees, the Manager shall manage the
investment operations of the Funds and the composition of each Fund's portfolio,
including the purchase and retention and disposition of portfolio securities, in
accordance with each Fund's investment objectives, policies and restrictions as
stated in the Trust's Prospectus and Statement of Additional Information (as
defined below) subject to the following understandings:
(a) The Manager shall provide supervision of each Fund's investments
and determine from time to time what investments will be made, held or disposed
of or what securities will be purchased and retained, sold or loaned by each
Fund, and what portion of the assets will be invested or held uninvested as
cash.
(b) The Manager shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Manager, in the performance of its duties and obligations under
this Agreement, shall (i) act in conformity with the Declaration of Trust,
By-Laws, Prospectus and Statement of Additional Information of the Trust, with
the instructions and directions of the Trustees and (ii) conform to and comply
with the requirements of the Investment Company Act and all other applicable
federal and state laws and regulations.
(d) (i) The Manager shall determine the securities to be purchased or
sold by each Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers to carry out the policy with respect to
brokerage as set forth in the Trust's Prospectus and Statement of Additional
Information or as the Trustees may direct from time to time. In providing each
Fund with investment supervision, the Manager will give primary consideration to
securing the most favorable price and efficient execution. The Manager may also
consider the financial responsibility, research and investment information and
other services and research related products provided by brokers or dealers who
may effect or be a party to any such transactions or other transactions to which
other clients of the Manager may be a party. The Funds recognize that the
services and research related products provided by such brokers may be useful to
the Manager in connection with its services to other clients.
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<PAGE>
(ii) When the Manager deems the purchase or sale of a security to
be in the best interest of a Fund as well as other clients, the Manager, to the
extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased in order to obtain the most favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transactions, will be made by the Manager in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to each Fund and to such other clients.
(e) The Manager shall maintain, or cause to be maintained, all books
and records required under the Investment Company Act to the extent not
maintained by the custodian of the Trust. The Manager shall render to the
Trustees such periodic and special reports as the Trustees may reasonably
request.
(f) The Manager shall provide the Trust's custodian on each business
day information relating to all transactions concerning each Fund's assets.
(g) The investment management services of the Manager to the Trust and
to each Fund under this Agreement are not to be deemed exclusive, and the
Manager shall be free to render similar services to others.
3. The Trust has delivered to the Manager copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Declaration of Trust, as amended, as filed with the Secretary of
the Commonwealth of Massachusetts (such Declaration of Trust, as in effect on
the date hereof and as further amended from time to time, is herein called the
"Declaration of Trust");
(b) By-Laws of the Trust (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Trustees authorizing the appointment
of the Manager and approving this Agreement on behalf of the Trust and each
Fund;
(d) Registration Statement on Form N-lA under the Investment Company
Act and the Securities Act of 1933, as amended from time to time (the
"Registration Statement"), as filed with the Securities and Exchange Commission
(the "Commission"), relating to the Trust and shares of beneficial interest of
each Fund and all amendments thereto.
(e) Notification of Registration of the Trust under the Investment
Company Act on Form N-8A as filed with the Commission and all amendments
thereto;
(f) Prospectus and Statement of Additional Information included in the
Registration Statement, as amended from time to time. All references to this
Agreement, the Prospectus and the Statement of Additional Information shall be
to such documents as most recently amended or supplemented and in effect.
4. The Manager shall authorize and permit any of its directors, officers
and employees who may be elected as trustees or officers of the Trust and/or the
Funds to serve in the capacities in which they are elected. All services to be
furnished by the Manager under this Agreement may be furnished through such
directors, officers or employees of the Manager.
5. The Manager agrees that all records which it maintains for the Trust
and/or the Funds are property of the Trust and/or the Funds. The Manager will
surrender promptly to the Trust and/or the Funds any such records upon either
the Trust's or a Fund's request. The Manager further agrees to preserve such
records for the periods prescribed in Rule 3la-2 of the Commission under the
Investment Company Act.
6. In connection with the services rendered by the Manager under this
Agreement, the Manager will pay all of the following expenses:
(a) the salaries and expenses of all personnel of the Trust, the Funds
and the Manager required to perform the services to be provided pursuant to this
Agreement, except the fees of the trustees who are not affiliated persons of the
Manager, and
A-2
<PAGE>
(b) all expenses incurred by the Manager, the Trust or by the Funds in
connection with the performance of the Manager's responsibilities hereunder,
other than brokers' commissions and any issue or transfer taxes chargeable to
each respective Fund in connection with its securities transactions.
7. For the services provided and the expenses assumed pursuant to this
Agreement, the Pilgrim VP SmallCap Opportunities Portfolio, the Pilgrim VP
Growth + Value Portfolio, the Pilgrim VP Research Enhanced Index Portfolio, and
the Pilgrim VP High Yield Bond Portfolio will pay to the Manager as compensation
a fee accrued daily and paid monthly at the annual rate of 0.75% of the first
$250,000,000 of aggregate average daily net assets of the Fund; 0.70% of the
next $250,000,000 of such assets; 0.65% of the next $250,000,000 of such assets;
0.60% of the next $250,000,000 of such assets and 0.55% of the remaining
aggregate average daily net assets of the Fund in excess of $1,000,000,000. The
Pilgrim VP International Value Portfolio will pay to the Manager as compensation
a fee accrued daily and paid monthly at the annual rate of 1.00% of aggregate
average daily net assets of the Fund. The Pilgrim VP MagnaCap Portfolio, the
Pilgrim VP Growth Opportunities Portfolio and the Pilgrim VP MidCap
Opportunities Portfolio will each pay to the Manager as compensation a fee
accrued daily and paid monthly at the annual rate of 0.75% of aggregate average
daily net assets of the Fund.
8. The Manager may rely on information reasonably believed by it to be
accurate and reliable. Neither the Manager nor its officers, directors,
employees or agents or controlling persons shall be liable for any error or
judgment or mistake of law, or for any loss suffered by the Trust and/or a Fund
in connection with or arising out of the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Manager in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
9. Generally, this Agreement shall continue in effect for an initial period
of two years from the date of adoption by the Trust on behalf of a particular
Fund and shall continue in effect thereafter for so long as such continuance is
specifically approved at least annually by the affirmative vote of (i) a
majority of the Trustees of the Trust acting separately on behalf of each Fund,
who are not interested persons of the Trust, cast in person at a meeting called
for the purpose of voting on such approval, and (ii) a majority of the Trustees
of the Trust or the holders of a majority of the outstanding voting securities
of each respective Fund; provided however, that this Agreement may be terminated
by the Trust, on behalf of a Fund at any time, without the payment of any
penalty, by the Trustees acting on behalf of a Fund or by vote of a majority of
the outstanding voting securities (as defined in the Investment Company Act) of
a Fund, or by the Manager at any time, without the payment of any penalty, on
not more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment
provided that a transaction which does not, under the Investment Company Act,
result in a change of actual control or management of the Manager's business
shall not be deemed to be an assignment for the purposes of this Agreement.
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.
11. Nothing in this Agreement shall limit or restrict the right of any
director, officer or employee of the Manager who may also be a trustee, officer
or employee of the Trust and/or the Funds to engage in any other business or to
devote his time and attention in part to the management or other aspect of any
business, whether of a similar or dissimilar nature, nor limit or restrict the
right of the Manager to engage in any other business or to render services of
any kind to any other person or entity.
12. During the term of this Agreement, the Trust and each Fund agrees to
furnish the Manager at its principal office all prospectuses, proxy statements,
reports to shareholders, sales literature, or other material prepared for
distribution to shareholders of each Fund or the public, which refer in any way
to the Manager, prior to use thereof and not to use such material if the Manager
reasonably objects in writing within five business days (or such other time as
may be mutually agreed) after receipt. In the event of termination of the
Agreement, the Trust and/or each Fund will continue to furnish to the Manager
such other information relating to the business affairs of the Trust and/or each
Fund as the Manager at any time, or from time to time, reasonably requests in
order to discharge its obligations hereunder.
A-3
<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 each Fund and (ii) a
majority of the members of the Trustees who are not interested persons of the
Trust or the Manager, cast in person at a meeting called for the purpose of
voting on such approval.
14. The Manager, the Trust and the Funds each agree that the name "Pilgrim"
is proprietary to, and a property right of, the Manager. The Trust and the Funds
agree and consent that (i) each will only use the name "Pilgrim" as part of its
name and for no other purpose, (ii) each will not purport to grant any third
party the right to use the name "Pilgrim" and (iii) upon the termination of this
Agreement, the Trust and the Funds shall, upon the request of the Manager, cease
to use the name "Pilgrim," and shall use its best efforts to cause its officers,
trustees and shareholders to take any and all actions which the Manager may
request to effect the foregoing.
15. Any notice or other communications required to be given pursuant to
this Agreement shall be deemed to be given if delivered or mailed by registered
mail, postage paid, (1) to the Manager at 40 North Central Avenue, Suite 1200,
Phoenix, Arizona 85004; or (2) to the Trust and/or the Funds at 40 North Central
Avenue, Suite 1200, Phoenix, Arizona 85004.
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 December 17,
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 Variable Products Trust" refers to the Trustees
under the Declaration collectively as trustees, but not individually or
personally; and no Trustee, shareholder, officer, employee or agent of the Trust
and/or the Funds may be held to any personal liability, nor may resort be had to
their private property for the satisfaction of any obligation or claim or
otherwise in connection with the affairs of the Trust, but the Trust property
only shall be liable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year written
above.
PILGRIM VARIABLE PRODUCTS TRUST
By:
--------------------------------------
PILGRIM INVESTMENTS, INC.
By:
--------------------------------------
A-4
<PAGE>
SCHEDULE A
TO THE
INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
PILGRIM VARIABLE PRODUCTS TRUST
AND
PILGRIM INVESTMENTS, INC.
FUNDS
Pilgrim VP MagnaCap Portfolio
Pilgrim VP Research Enhanced Index Portfolio
Pilgrim VP Growth Opportunities Portfolio
Pilgrim VP MidCap Opportunities Portfolio
Pilgrim VP Growth + Value Portfolio
Pilgrim VP SmallCap Opportunities Portfolio
Pilgrim VP International Value Portfolio
Pilgrim VP High Yield Bond Portfolio
<PAGE>
APPENDIX B
INFORMATION REGARDING PILGRIM INVESTMENTS, INC.
1. DIRECTOR 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
NAME AND AGE PILGRIM INVESTMENTS PRINCIPAL OCCUPATION DURING THE LAST FIVE YEARS
------------ ------------------- -----------------------------------------------
<S> <C> <C>
Robert W. Stallings (51) Chairman of the Board Chairman, Chief Executive Officer and President of Pilgrim
of Directors Group, Inc. ("Pilgrim Group") (since December 1994); Chairman,
Pilgrim Investments, Inc. ("Pilgrim Investments") and Pilgrim
Securities, Inc. ("Pilgrim Securities") (since December 1994);
President and Chief Executive Officer of Pilgrim Funding, Inc.
(since November 1999); and President and Chief Executive
Officer of Pilgrim Capital Corporation (since October 1999) and
its predecessors (since August 1991). Mr. Stallings is also a
Director, Trustee, or a member of the Advisory Board of each of
the Pilgrim Funds.
James R. Reis (42) Director, Vice Director, Vice Chairman (since December 1994), Executive Vice
Chairman, Executive President (since April 1995), and Director of Senior Lending and
Vice President and Structured Finance (since April 1998), Pilgrim Group and Pilgrim
Director of Senior Investments; Director (since December 1994) and Vice Chairman
Lending and (since November 1995), Pilgrim Securities; Executive Vice
Structured President, Assistant Secretary and Chief Credit Officer of
Finance Pilgrim Prime Rate Trust; Executive Vice President and Assistant
Secretary of each of the other Pilgrim Funds. Presently serves
or has served as an officer or director of other affiliates of
Pilgrim Capital Corporation.
Stanley D. Vyner (49) President and Chief President and Chief Executive Officer (since August 1996),
Executive Officer Pilgrim Investments; Executive Vice President of most of the
Pilgrim Funds (since July 1996). Formerly Chief Executive
Officer (November 1993 - December 1995), HSBC Asset Management
Americas, Inc.
</TABLE>
B-1
<PAGE>
B. FEES PAID TO PILGRIM GROUP, INC. (1)
ADMINISTRATIVE
FEES PAID TO
FUND PILGRIM GROUP, INC.(2)
---- -------------------
Growth Opportunities (2) N/A
Growth + Value $406,374
High Yield Bond $148,822
International Value $180,408
MagnaCap (2) N/A
MidCap Opportunities (2) N/A
Research Enhanced Index $150,965
SmallCap Opportunities (3) $269,393
----------
(1) For the fiscal year ended December 31, 1999.
(2) The inception date for Growth Opportunities, MagnaCap and MidCap
Opportunities Portfolios was April 30, 2000.
(3) Formerly Emerging Growth Portfolio.
(4) Amounts include fees paid to the Trust's former administrator, which was
affiliated with the Trust's former investment adviser.
C. THE FOLLOWING IS A LIST OF INVESTMENT COMPANIES ADVISED BY PILGRIM
INVESTMENTS WITH INVESTMENT OBJECTIVES THAT ARE SUBSTANTIALLY SIMILAR TO
THE INVESTMENT OBJECTIVES OF THE PORTFOLIOS:
<TABLE>
<CAPTION>
AMOUNT OF ASSETS
FUND AS OF 06/30/00 ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- -------------- ------------------------------ -------------
<S> <C> <C> <C>
Pilgrim Growth $ 778,954,103 0.75% of the Fund's average daily net assets. N/A
Opportunities Fund
Pilgrim Growth + $ 829,374,774 1.00% of the Fund's average daily net assets. N/A
Value Fund
Pilgrim High Yield Fund $ 304,377,864 0.60% of the Fund's average daily net assets. Class A-- 1.10%
Class B-- 1.85%
Class C-- 1.85%
Class M-- 1.60%
Class Q-- 1.10%
Class T-- N/A
Pilgrim High Yield Fund II $ 199,176,601 0.60% of the Fund's average net assets Class A-- 1.10%
Class B-- 1.75%
Class C-- 1.75%
Class M-- N/A
Class Q-- 1.00%
Class T-- 1.40%
Pilgrim International $ 87,888,882 1.00% of the first $500 million of the Class A-- 1.95%
Core Growth Fund Fund's average net assets, 0.90% of the Class B-- 2.60%
next $500 million of average net assets, Class C -- 2.60%
and 0.85% of the average net assets in Class M -- N/A
excess of $1 billion Class Q-- 1.65%
Class T-- N/A
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF ASSETS
FUND AS OF 06/30/00 ANNUAL INVESTMENT ADVISORY FEE EXPENSE LIMIT
---- -------------- ------------------------------ -------------
<S> <C> <C> <C>
Pilgrim International $1,829,423,426 1.00% of the Fund's average daily net assets. N/A
Value Fund
Pilgrim MagnaCap Fund $ 417,874,912 1.00% of the Fund's average daily net assets N/A
on the first $30 million of net assets. The
annual rate is reduced to 0.75% on net assets
from $30 million to $250 million; to 0.625% on
net assets from $250 million to $500 million;
and to 0.50% on net assets over $500 million
Pilgrim MidCap Growth Fund $ 541,536,373 0.75% of the first $500 million of the Fund's Class A-- 1.60%
average net assets, 0.675% of the next $500 Class B-- 2.25%
million of average net assets, and 0.65% of Class C-- 2.25%
the average net assets in excess of $1 billion Class M-- N/A
Class Q-- 1.25%
Class T-- N/A
Pilgrim Mid-Cap $ 149,364,427 1.00% of the Fund's average daily net assets N/A
Opportunities Fund
Pilgrim Research Enhanced $ 249,818,841 0.70% of the Fund's average daily net assets N/A
Index Fund
Pilgrim SmallCap Growth $ 506,545,132 1.00% of the Fund's average net assets Class A-- 1.95%
Fund Class B-- 2.60%
Class C-- 2.60%
Class M-- N/A
Class Q-- 1.50%
Class T-- N/A
Pilgrim SmallCap $ 700,093,745 0.75% of the Fund's average daily net assets N/A
Opportunities Fund
</TABLE>
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<PAGE>
APPENDIX C
SUB-ADVISORY AGREEMENT WITH BRANDES INVESTMENT PARTNERS, L.P.
(PILGRIM VP INTERNATIONAL VALUE PORTFOLIO)
SUB-ADVISORY AGREEMENT
PILGRIM VP INTERNATIONAL VALUE PORTFOLIO
AGREEMENT made this ___th day of September 2000, by and between Pilgrim
Investments, Inc., Delaware Corporation (hereinafter the "Manager"), investment
adviser for the Pilgrim VP International Value Portfolio (the "Fund"), a series
of the Pilgrim Variable Products Trust (the "Trust"), and Brandes Investment
Partners, L.P., a California limited partnership (hereinafter the
"Sub-Adviser").
WHEREAS, the Manager has been retained by the Trust on behalf of the Fund
to provide investment advisory services to the Fund pursuant to an Investment
Management Agreement made on this ___th day of September 2000 (the "Investment
Management Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund's shareholders have approved the
appointment of the Sub-Adviser to perform certain investment advisory services
for the Fund pursuant to this Sub-Advisory Agreement with the Manager and the
Sub-Adviser is willing to perform such services for the Fund;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Manager and the Sub-Adviser as follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided
2. DUTIES OF SUB-ADVISER. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising those
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion, subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition, and the
sale, redemption, and exchange of investments, subject to the duty to render to
the Trustees of the Fund and the Manager written reports of the composition of
the portfolio of the Fund as often as the Manager or the Trustees of the Fund
shall reasonably require;
(b) to make all decisions relating to the manner, method, and timing
of investment transactions, to select brokers, dealers and other intermediaries
by or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided the
Sub-Adviser shall have no authority to direct the transfer of the Fund's funds
or assets to itself or other affiliated persons and shall have no authority over
the disbursement (as opposed to investment decisions) of funds or assets nor any
custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund or the Manager may give in
writing to the Sub-Adviser with regard to any of the foregoing powers shall,
unless the contrary is expressly stated herein, override the general authority
given by this provision to the extent that the Trustees of the Fund may, at any
time and from time to time, direct, either generally or to a limited extent and
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<PAGE>
either alone or in concert with the Manager or the Sub-Adviser (provided that
such directions would not cause the Sub-Adviser to violate any fiduciary duties
or any laws with regard to the Sub-Adviser's duties and responsibilities), all
or any of the same as they shall think fit and, in particular, the Manager shall
have the right to direct the Sub-Adviser to place trades through brokers and
other agents of the Manager's choice, subject to such brokers or agents
executing such trades on a "best execution basis", i.e. at the best price and/or
with research or other services which render that broker's services the most
appropriate for the Sub-Adviser's needs, and further that the Sub-Adviser is
satisfied that the dealing and execution quality of such brokers are
satisfactory to the Sub-Adviser; and PROVIDED FURTHER that nothing herein shall
be construed as giving the Sub-Adviser power to manage the aforesaid cash and
investments in such a manner as would cause the Fund to be considered a "dealer"
in stocks, securities or commodities for U.S. federal income tax purposes.
The Manager shall monitor and review the performance of the
Sub-Adviser under this Agreement, including but not limited to the Sub-Adviser's
performance of the duties delineated in subparagraphs (a)-(d) above.
The Sub-Adviser further agrees that, in performing its duties
hereunder, it will:
(a) (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 Sub-Adviser; (ii) manage the Fund in accordance with the investment
requirements for regulated investment companies under Subchapter M of the Code
and regulations issued thereunder, and (iii) direct the placement of orders
pursuant to its investment determinations for the Fund directly with the issuer,
or with any broker or dealer, in accordance with applicable policies expressed
in the Fund's Prospectus and/or Statement of Additional Information and in
accordance with applicable legal requirements;
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Sub-Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Pilgrim Group, Inc.
(the "Administrator"), the Manager, and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Manager, the Administrator and the Fund in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request;
(d) immediately notify the Manager and the Fund in the event that the
Sub-Adviser or any of its affiliates (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the 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
Sub-Adviser that becomes untrue in any material respect. The Manager shall
likewise immediately notify the Sub-Adviser if it becomes aware of any
regulatory action of the type described in this subparagraph 2(d) respecting or
relating to the Fund, the Manager, or any Affiliates of the Manager.
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its partners, officers and employees, and
other internal operating costs. The Fund shall bear its own overhead and other
internal operating costs (whether incurred directly or by the Manager or the
Sub-Adviser) including, without limitation:
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<PAGE>
(a) the costs incurred by the Fund in the preparation and printing of
its Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
the shares may from time to time be listed, quoted or dealt in and the expenses
of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares in
newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. COMPENSATION. The Sub-Adviser agrees to waive all compensation until the
Fund's net assets exceed $50 million. After the Fund's net assets exceed $50
million, the Manager will pay the Sub-Adviser at the end of each calendar month
an advisory fee computed daily at an annual rate equal to fifty (50) percent of
the management fee that the Fund pays the Manager.
5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best business judgment and reasonable care in rendering the
services provided by it under this Sub-Advisory Agreement. The Sub-Adviser shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund or the holders of the Fund's shares or by the Manager in
connection with the matters to which this Sub-Advisory Agreement relates,
provided that nothing in this Sub-Advisory Agreement shall be deemed to protect
or purport to protect the Sub-Adviser against liability to the Fund or to
holders of the Fund's shares or to the Manager to which the Sub-Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
on its part in the performance of its duties or by reason of the Sub-Adviser's
reckless disregard of its obligations and duties under this Sub-Advisory
Agreement. As used in this Section 6, the term "Sub-Adviser" shall include any
officers, directors, employees or other affiliates of the Sub-Adviser performing
services for the Fund.
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7. SERVICES NOT EXCLUSIVE. It is understood that, except as may otherwise
be agreed by the Manager and the Sub-Adviser, the services of the Sub-Adviser
are not exclusive. The Sub-Adviser is not required to recommend to the Fund the
same investments it recommends to its other clients. In connection with
purchases or sales of portfolio securities for the account of the Fund, neither
the Sub-Adviser nor any of its partners officers or employees shall act as
principal or agent or receive any commission. If the Sub-Adviser provides any
advice to its clients concerning the shares of the Fund, the Sub-Adviser shall
act solely as investment counsel for such clients and not in any way on behalf
of the Fund.
8. DURATION AND TERMINATION. This Sub-Advisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein and
shall continue automatically for successive annual periods provided that such
continuance is specifically approved at least annually by the affirmative vote
of (i) a majority of the Trustees of the Trust who are not interested persons of
the Trust (as defined in the 1940 Act), cast in person at a meeting called for
the purpose of voting on such approval, and (ii) a majority of the Trustees of
the Trust or the holders of a majority of the outstanding voting securities of
the Fund (as defined in the 1940 Act). Notwithstanding the foregoing, this
Sub-Advisory Agreement may be terminated: (a) at any time without penalty by the
Fund or Manager upon the vote of a majority of the Trustees or by vote of the
majority of the Fund's outstanding voting securities (as defined in the 1940
Act), upon sixty (60) days' written notice to the Sub-Adviser, or (b) by the
Sub-Adviser at any time without penalty, upon (60) days' written notice to the
Fund or Manager. This Sub-Advisory Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act) or the assignment or
termination of the Investment Management Agreement.
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Sub-Advisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Sub-Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
10. INDEMNIFICATION. (a) The Manager hereby agrees to indemnify the
Sub-Adviser from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs or damages (other than liabilities, losses, expenses,
attorneys fees and costs or damages arising from the Sub-Adviser failing to meet
the standard of care required hereunder in the performance by the Sub-Adviser
of, or its failure to perform, the services required hereunder), arising from:
(i) the Manager's (or its affiliates' and their respective agents' and
employees') failure to perform its duties or assume its obligations hereunder,
or from its wrongful actions or omissions, including, but not limited to claims
asserted or threatened by any shareholder of the Fund, governmental or
regulatory agency, or any other person; (ii) claims arising from any wrongful
act by the Fund or any of the Fund's trustees, officers, employees, or
representatives, or by the Manager, its officers, employees or representatives,
or from any actions by the Funds distributors or any representative of the Fund;
(iii) any action or claim against the Sub-Adviser based on any alleged untrue
statement or misstatement of material fact in any registration statement,
prospectus, shareholder report or other information or materials relating to the
Fund or shares issued by the Fund or any amendment thereof or supplement
thereto, or the failure or alleged failure to state therein a material fact
required to be stated in order that the statements therein are not misleading,
provided that such claim is not based upon information provided to the Manager
by the Sub-Adviser or which facts or information the Sub-Adviser failed to
provide or disclose. With respect to any claim for which the Sub-Adviser shall
be entitled to indemnity hereunder, the Manager shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Sub-Adviser of investigating and/or defending any claim asserted or threatened
by any party, subject always to the Manager first receiving a written
undertaking from the Sub-Adviser to repay any amounts paid on its behalf in the
event and to the extent of any subsequent final determination by a court that
the Sub-Adviser was not entitled to indemnification hereunder in respect of such
claim.
(b) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs or damages (other than liabilities, losses,
expenses, attorneys fees and costs or damages arising from the Manager's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Sub-Adviser's or its
agents' and employees' failure to perform its duties and assume its obligations
hereunder, or from any failure of Sub-Adviser to meet the standard of care set
forth in Section 6 of this Agreement, including any action or claim against the
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Manager based on any alleged untrue statement or misstatement of a material fact
made or provided by the Sub-Adviser contained in any registration statement,
prospectus, shareholder report or other information or materials relating to the
Fund or shares issued by the Fund, or the failure or alleged failure to state a
material fact therein required to be stated in order that the statements therein
are not misleading, which fact should have been made or provided by the
Sub-Adviser to the Manager. With respect to any claim for which the Manager is
entitled to indemnity hereunder, the Sub-Adviser shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Manager of investigating and/or defending any claim asserted or threatened by
any party, subject always to the Sub-Adviser first receiving a written
undertaking from the Manager to repay any amounts paid on its behalf in the
event and to the extent of any subsequent final determination by a court that
the Manager was not entitled to indemnification hereunder in respect of such
claim.
(c) In the event that the Sub-Adviser or Manager is or becomes a
party to any action or proceedings in respect of which indemnification may be
sought hereunder, the party seeking indemnification (the "Indemnitee") shall
promptly notify the other party thereof. After becoming notified of the same,
the party from whom indemnification is sought (the "Indemnitor") shall be
entitled to participate in any such action or proceeding and shall assume any
payment for the full defense of the Indemnitee therein with counsel reasonably
satisfactory to the party seeking indemnification. The Indemnitor shall not in
connection with any action or proceeding or separate but similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegation or circumstances, be liable for the fees or expenses of more than one
separate firm of attorneys at any time for Indemnitees. After properly assuming
the defense thereof, the Indemnitor shall not be liable hereunder to the
Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with the defense thereof, other than damages, if any,
by way of judgment, settlement, or otherwise pursuant to this provision. The
Indemnitor shall not be liable hereunder for any settlement of any action or
claim effected without its written consent, which consent shall not be
unreasonably withheld. The Indemnitee shall fully cooperate with the Indemnitor
in the defense of any claim and any litigation or other legal proceedings
resulting from the claim. The Indemnitee may participate in the defense of the
claim and any litigation or other legal proceedings resulting from the claim.
The Indemnitee may employ separate counsel to participate in such defense, and
the fees and expenses of such counsel shall not be at the expense of the
Indemnitee, but only if the employment thereof (a) has been specifically
authorized in writing by the Indemnitor, which authorization shall not be
unreasonably withheld and (b) relates to the defense of any claim or any
litigation or other legal proceedings resulting from the claim to the extent the
claim or any litigation or other legal proceedings resulting from the claim
seeks injunctive, specific performance or other nonmonetary relief involving or
affecting the business, operations or assets of the Indemnitee (or an Affiliate
of the Indemnitee). The provisions of this Section 10 shall survive the
termination of this Agreement.
11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have no authority to
bind Sub-Adviser.
12. USE OF NAMES. (a) The Fund may, subject to sub-clause (b) below, use
the name, "Brandes Investment Partners, L.P." ("Brandes") or the name of any
principal of Brandes, or any component, abbreviation or other name derived
therefrom for promotional purposes only for so long as this Sub-Advisory
Agreement (or any extension, renewal or amendment thereof) continues in force,
unless the Sub-Adviser or such principal shall specifically consent in writing
to such continued use thereafter. Any permitted use by the Fund during the term
hereof of the name of the Sub-Adviser or any of its principals, or any
derivative thereof, shall in no way prevent the Sub-Adviser or any of it
shareholders or any of their successors, from using or permitting the use of
such name (whether singly or in any combination with any other words) for, by or
in connection with an entity or enterprise other than the Fund. At the
conclusion of this Sub-Advisory Agreement or in the event of any termination of
this Sub-Advisory Agreement for any reason, each of the authorized parties and
their respective employees, representatives, affiliates, and associates agree
that they shall immediately cease using each such name and any derivatives of
said names for any purpose whatsoever.
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(b) The Manager and its affiliates on one hand, and the Sub-Adviser on
the other, shall not publish or distribute, and the Manager shall cause the Fund
not to publish or distribute to Fund shareholders, prospective investors, sales
agents or members of the public, any disclosure document, offering literature
(including any form of advertisement or other solicitation materials calculated
to lead investors to subscribe for and purchase shares of the Fund) or other
document referring by name to the Sub-Adviser or its affiliates on one hand and
the Manager or its affiliates on the other, unless the other party shall have
consented in writing to such references in the form and context in which they
appear.
13. CHANGE IN IDENTITY. The Sub-Adviser shall notify the Manager of any
change in the identity or control of its general or limited partners promptly
after such change occurs.
14. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of Massachusetts (without regard to principles of conflicts of law),
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
15. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time addressed to its President. Such notice, instruction or other instrument
shall be deemed to have been served, in the case of a registered letter at the
expiration of seventy-two (72) hours after posting; in the case of express mail,
within twenty-four (24) hours after dispatch; and in the case of facsimile,
immediately on dispatch; and if delivered outside normal business hours it shall
be deemed to have been received at the next time after delivery or transmission
when normal business hours commence. Evidence that the notice, instruction or
other instrument was properly addressed, stamped and put into the post shall be
conclusive evidence of posting.
16. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year set forth
above.
PILGRIM INVESTMENTS, INC.
By:
--------------------------------------
Title:
BRANDES INVESTMENT PARTNERS, L.P.
By:
--------------------------------------
Title:
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APPENDIX D
SUB-ADVISORY AGREEMENT WITH J.P. MORGAN INVESTMENT MANAGEMENT INC.
(PILGRIM VP RESEARCH ENHANCED INDEX PORTFOLIO)
SUB-ADVISORY AGREEMENT
PILGRIM VP RESEARCH ENHANCED INDEX PORTFOLIO
AGREEMENT made this __th day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Manager"),
investment adviser for the Pilgrim VP Research Enhanced Index Portfolio (the
"Fund"), a series of Pilgrim Variable Products Trust (the "Trust"), and J.P.
Morgan Investment Management Inc., a Delaware corporation (hereinafter the
"Sub-Adviser").
WHEREAS, the Manager has been retained by the Trust, an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), to provide investment advisory
services to the Fund pursuant to an Investment Management Agreement dated this
___th day of September 2000 (the "Investment Management Agreement"); and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the 1940 Act, and the Fund's
shareholders have approved the appointment of the Sub-Adviser to perform certain
investment advisory services for the Fund pursuant to this Sub-Advisory
Agreement with the Manager and the Sub-Adviser is willing to perform such
services for the Fund;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the Manager and the Sub-Adviser as
follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUB-ADVISER. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion; subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Fund, the Manager and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees of the Fund shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries by
or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided that
the Sub-Adviser shall have no other authority to direct the transfer of the
Fund's funds or assets to itself or other persons and shall have no other
authority over the disbursement (as opposed to investment decisions) of funds or
assets nor any custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund, or the Manager may give to
the Sub-Adviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Fund may, at any time and
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from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Manager or the Sub-Adviser (provided that such
directions would not cause the Sub-Adviser to violate any fiduciary duties or
any laws with regard to the Sub-Adviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular, the Manager shall
have the right to request the Sub-Adviser to place trades through brokers and
other agents of the Manager's choice, subject to the Sub-Adviser's judgment that
such brokers or agents will execute such trades on the best overall terms
available, taking into consideration factors the Sub-Adviser deems relevant
including, without limitation, the price of the security, research or other
services which render that broker's services the most appropriate for the
Sub-Adviser's needs, the financial condition and dealing and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis; and provided
further that nothing herein shall be construed as giving the Sub-Adviser power
to manage the aforesaid cash and investments in such a manner as would cause the
Fund to be considered a "dealer" in stocks, securities or commodities for U.S.
federal income tax purposes.
The Manager shall monitor and review the performance of the
Sub-Adviser under this Agreement, including but not limited to the Sub-Adviser's
performance of the duties delineated in subparagraphs (a)-(d) of this provision.
The Sub-Adviser further agrees that, in performing its duties
hereunder, it will
(i) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code") and all other
applicable federal and state laws and regulations, the current Prospectus and
Statement of Additional Information for the Fund supplied to the Sub-Adviser by
the Manager, and with any applicable procedures adopted by the Trustees in
writing supplied to the Sub-Adviser by the Manager; (ii) manage the Fund in
accordance with the investment requirements for regulated investment companies
under Subchapter M of the Code and regulations issued thereunder; (iii) direct
the placement of orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements.
(a) furnish to the Fund whatever non-proprietary reports the Fund
may reasonably request with respect to the Fund's assets or contemplated
strategies. In addition, the Sub-Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(b) make available to the Fund's administrator, Pilgrim Group,
Inc. (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 Manager, the Administrator and the Fund in
their compliance with applicable laws and regulations. The Sub-Adviser will
furnish the Trustees with such periodic and special reports regarding the Fund
as they may reasonably request;
(c) immediately notify the Manager and the Fund in the event that
the Sub-Adviser or any of its affiliates: (i) becomes aware that it is subject
to a statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Fund's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein that becomes untrue in any
material respect. The Fund, Manager, Administrator, and their Affiliates shall
likewise immediately notify the Sub-Adviser if any of them becomes aware of any
regulatory action of the type described in this subparagraph 2(d).
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its directors, officers and employees,
and other internal operating costs; provided, however, that the Sub-Adviser
shall be entitled to reimbursement on a monthly basis by the Manager of all
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reasonable out-of-pocket expenses properly incurred by it in connection with
serving as sub-adviser to the Fund. For the avoidance of doubt, the Fund shall
bear its own overhead and other internal operating costs (whether incurred
directly or by the Adviser or the Sub-Adviser) including, without limitation:
(a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue 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
Sub-Adviser under this Agreement, the Manager will pay the Sub-Adviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.20 of 1% of the Fund's average daily net assets. The "average daily
net assets" of the Fund shall mean the average of the values placed on the
Fund's net assets as of 4:00 p.m. (New York time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Funds Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Sub-Adviser's
compensation is payable pursuant to this Section, the Sub-Adviser's compensation
payable at the end of such month shall be computed on the basis of the value of
the net assets of the Fund as last determined (whether during or prior to such
month). If the Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this Section 4.
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<PAGE>
5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Sub-Advisory Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holders
of the Fund's shares or by the Manager in connection with the matters to which
this Sub-Advisory Agreement relates, provided that nothing in this Sub-Advisory
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against liability to the Fund or to holders of the Fund's shares or to the
Manager to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement. As used in this Section 6, the
term "Sub-Adviser" shall include any officers, directors, employees or other
affiliates of the Sub-Adviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. The Manager understands that the Sub-Adviser now
acts, will continue to act and may act in the future as investment advisor to
fiduciary and other managed accounts and as investment advisor to other
investment companies, and, except as may be separately agreed to from time to
time between the Manager and the Sub-Adviser, the Trust has no objection to the
Sub-Adviser so acting, provided that whenever the Fund and one or more other
accounts or investment companies advised by the Sub-Adviser have available funds
for investment, investments suitable and appropriate for each will be allocated
in accordance with a methodology believed to be equitable to each entity. The
Sub-Adviser agrees to allocate similar opportunities to sell securities. The
Manager recognizes that, in some cases, this procedure may limit the size of the
position that may be acquired or sold for the Fund. In addition, the Manager
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties hereunder will not devote their full
time to such service and nothing contained herein shall be deemed to limit or
restrict the right of the Sub-Adviser or any affiliate of the Sub-Adviser to
engage in and devote time and attention to other business or to render services
of whatever kind or nature.
8. DURATION AND TERMINATION. This Agreement shall become effective as of
the date of its execution and shall continue in effect for a period of two years
from the date of execution. Thereafter, this Agreement shall continue
automatically for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Fund's Trustees or (ii) a
vote of a "majority" (as defined in the 1940 Act) of the Fund's outstanding
voting securities, provided that in either event the continuance also is
approved by a majority of the Fund's Trustees who are not "interested persons"
(as defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, on 60 days written notice, by the
Manager, by the Fund's Trustees, or by vote of holders of a majority of the
Fund's shares. Until October 31, 2000, the Sub-Adviser may terminate this
Agreement, without penalty, on six months written notice. Thereafter, the
Sub-Adviser may terminate this Agreement, without penalty, on 60 days written
notice. This Agreement will terminate automatically five business days after the
Sub-Adviser receives written notice of the termination of the advisory agreement
between the Fund and the Manager. This Agreement also will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Sub-Advisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Sub-Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
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10. INDEMNIFICATION.
(a) The Manager hereby agrees to indemnify the Sub-Adviser and its
affiliates from and against all liabilities, losses, expenses, reasonable
attorneys' fees and costs (other than attorneys' fees and costs in relation to
the preparation of this Agreement; each party bearing responsibility for its own
such costs and fees) or damages (other than liabilities, losses, expenses,
attorneys fees and costs or damages arising from the Sub-Adviser failing to meet
the standard of care required in Section 6 of this Sub-Advisory Agreement in the
performance by the Sub-Adviser of, or its failure to perform, the services
required hereunder), arising from the Manager's (its affiliates and their
respective agents and employees) failure to perform its duties or assume its
obligations hereunder, or from its wrongful actions or omissions, including, but
not limited to, any claims for non-payment of advisory fees; claims asserted or
threatened by any shareholder of the Fund, governmental or regulatory agency, or
any other person; claims arising from any wrongful act by the Fund or any of the
Fund's trustees, officers, employees, or representatives, or by the Manager, its
officers, employees or representatives, or from any actions by the Fund's
distributors or any representative of the Fund; any action or claim against the
Sub-Adviser based on any alleged untrue statement or misstatement of material
fact in any registration statement, prospectus, shareholder report or other
information or materials covering shares filed or made public by the Fund or any
amendment thereof or supplement thereto, or the failure or alleged failure to
state therein a material fact required to be stated in order that the statements
therein are not misleading, provided that such claim is not based upon
information provided to the Manager by the Sub-Adviser or approved by the
Sub-Adviser in the manner provided in paragraph 12(b) of this Agreement, or
which facts or information the Sub-Adviser failed to provide or disclose. With
respect to any claim for which the Sub-Adviser shall be entitled to indemnity
hereunder, the Manager shall assume the reasonable expenses and costs (including
any reasonable attorneys' fees and costs) of the Sub-Adviser of investigating
and/or defending any claim asserted or threatened by any party, subject always
to the Manager first receiving a written under-taking from the Sub-Adviser to
repay any amounts paid on its behalf in the event and to the extent of any
subsequent determination that the Sub-Adviser was not entitled to
indemnification hereunder in respect of such claim.
(b) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation, to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other than
liabilities, losses, expenses, attorneys fees and costs or damages arising from
the Manager's failure to perform its responsibilities hereunder or claims
arising from its acts or failure to act in performing this Agreement) arising
from Sub-Adviser's (its affiliates and their respective agents and employees)
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement, or arising from failure to act in
any action or claim against the Manager based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Sub-Adviser contained in any registration statement, prospectus, shareholder
report or other information or materials relating to the Fund and shares issued
by the Fund, or the failure or alleged failure to state a material fact therein
required to be stated in order that the statements therein are not misleading,
which fact should have been made or provided by the Sub-Adviser to the Manager.
With respect to any claim for which the Manager is entitled to indemnity
hereunder, the Sub-Adviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Sub-Adviser first receiving a written undertaking from the
Manager to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Manager was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Sub-Adviser or Manager is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
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sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have not authority to
bind Sub-Adviser.
12. USE OF NAME.
(a) The Fund may, subject to sub-clause (b) below, use the name, "J.P.
Morgan Investment Management Inc. or "J.P. Morgan" for promotional purposes only
for so long as this Agreement (or any extension, renewal or amendment thereof)
continues in force, unless the Sub-Adviser shall specifically consent in writing
to such continued use thereafter. Any permitted use by the Fund during the term
hereof of the name of the Sub-Adviser or J.P. Morgan shall in no way prevent the
Sub-Adviser or any of it shareholders or any of their successors, from using or
permitting the use of such name (whether singly or in any combination with any
other words) for, by or in connection with an entity or enterprise other than
the Fund. The name and right to the name J.P. Morgan Investment Management Inc.
or any derivation of the name J.P. Morgan shall at all times be owned and be the
sole and exclusive property of J.P. Morgan and its affiliated entities. J.P.
Morgan Investment Management Inc., by entering into this Agreement, is allowing
the Fund to use the name J.P. Morgan Investment Management Inc. and/or J.P.
Morgan solely by or on behalf of the Fund. At the conclusion of this Agreement
or in the event of any termination of this Agreement or if the Sub-Adviser's
services are terminated for any reason, each of the authorized parties and their
respective employees, representatives, affiliates, and associates agree that
they shall immediately cease using the name J.P. Morgan Investment Management
Inc. and/or J.P. Morgan of said name for any purpose whatsoever.
(b) The Manager and its affiliates shall not publish or distribute,
and shall cause the Fund not to publish or distribute to Fund shareholders,
prospective investors, sales agents or members of the public any disclosure
document, offering literature (including any form of advertisement or other
solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Fund) or other document referring by name to the
Sub-Adviser or any of its affiliates, unless the Sub-Adviser shall have
consented in writing to such references in the form and context in which they
appear; provided however, that where the Fund timely seeks to obtain approval of
disclosure contained in any documents required to be filed by the Fund, and such
approval is not forthcoming on or before the date on which such documents are
required by law to be filed, the Sub-Adviser shall be deemed to have consented
to such disclosure.
13. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. In the event of any litigation in which the Manager and the
Sub-Adviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of New York, located in New York, New York.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
14. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting; in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
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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. Manager, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund any persons or entities who are
clients of or investors in any fund or investment vehicle managed by any entity
owned or affiliated with J.P. Morgan Investment Management Inc.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year set forth
above.
PILGRIM INVESTMENTS, INC.
By:
----------------------------------------
Title:
J.P. MORGAN INVESTMENT MANAGEMENT INC.
By:
---------------------------------------
Title:
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APPENDIX E
SUB-ADVISORY AGREEMENT WITH NAVELLIER FUND MANAGEMENT, INC.
(PILGRIM VP GROWTH + VALUE PORTFOLIO)
SUB-ADVISORY AGREEMENT
PILGRIM VP GROWTH + VALUE PORTFOLIO
AGREEMENT made this ___th day of September, 2000 by and between Pilgrim
Investments, Inc., a Delaware Corporation (hereinafter the "Manager"),
investment adviser for the Pilgrim VP Growth + Value Portfolio (the "Fund"), a
series of the Pilgrim Variable Products Trust (the "Trust"), and Navellier Fund
Management, Inc., a Delaware corporation (hereinafter the "Sub-Adviser").
WHEREAS, the Manager has been retained by the Trust, an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), to provide investment advisory
services to the Fund pursuant to an amended Investment Management Agreement
dated this ___th day of September, 2000 (the "Investment Management Agreement");
and
WHEREAS, the Fund's Trustees, including a majority of the Trustees who are
not "interested persons," as defined in the 1940 Act, and the Fund's
shareholders have approved the appointment of the Sub-Adviser to perform certain
investment advisory services for the Fund pursuant to this Sub-Adviser Agreement
with the Manager and the Sub-Adviser is willing to perform such services for the
Fund;
WHEREAS, the Sub-Adviser is 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 Manager and the Sub-Adviser as follows:
1. APPOINTMENT. The Manager hereby appoints the Sub-Adviser to perform
advisory services to the Fund for the periods and on the terms set forth in this
Sub-Advisory Agreement. The Sub-Adviser accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein provided.
2. DUTIES OF SUB-ADVISER. The Manager hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the Fund with power on behalf of and in the name of the Fund at
Sub-Adviser's discretion; subject at all times to the supervision of the Manager
and the Trustees of the Fund:
(a) to direct the purchase, subscription or other acquisition of
investments and to direct the sale, redemption, and exchange of investments,
subject to the duty to render to the Trustees of the Fund, the Manager and the
Custodian written reports of the composition of the portfolio of the Fund as
often as the Trustees of the Fund shall reasonably require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions, to select brokers, dealers and other intermediaries by
or through whom such transactions will be effected, and to engage such
consultants, analysts and experts in connection therewith as may be considered
necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Fund, provided that
the Sub-Adviser shall have no authority to direct the transfer of the Fund's
funds or assets to itself or other persons and shall have no authority over the
disbursement (as opposed to investment decisions) of funds or assets nor any
custody of any of the Fund's funds or assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Fund, or the Manager may give to
the Sub-Adviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Fund may, at any time and
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from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Manager or the Sub-Adviser (provided that such
directions would not cause the Sub-Adviser to violate any fiduciary duties or
any laws with regard to the Sub-Adviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular the Manager shall
have the right to direct the Sub-Adviser to place trades through brokers other
agents of the Manager's choice, subject to such brokers or agents executing such
trades on a "best execution basis", i.e. at the best price and/or with research
or other services which render that broker's services the most appropriate for
the Sub-Adviser's needs, and further that the Sub-Adviser is satisfied that the
dealing and execution quality of such brokers are satisfactory to the
Sub-Adviser, and PROVIDED FURTHER that nothing herein shall be construed as
giving the Sub-Adviser power to manage the aforesaid cash and investments in
such a manner as would cause the Fund to be considered a "dealer" in stocks,
securities or commodities for U.S. federal income tax purposes.
The Manager shall monitor and review the performance of the
Sub-Adviser under this Agreement, including but not limited to the Sub-Adviser's
performance of the duties delineated in subparagraphs (a)-(d) of this provision.
The Sub-Adviser further agrees that, in performing its duties
hereunder, it will:
(a) (i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, the Prospectus and
Statement of Additional Information for the Fund, and with any applicable
procedures adopted by the Trustees in writing and made available to Sub-Adviser,
(ii) manage the Fund in accordance with the investment requirements for
regulated investment companies under Subchapter M of the Code and regulations
issued thereunder; (iii) direct the placement of orders pursuant to its
investment determinations for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies expressed in the Fund's
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements.
(b) furnish to the Fund whatever non-proprietary reports the Fund may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Sub-Adviser will keep the Fund and the Trustees
informed of developments materially affecting the Fund's portfolio and shall, on
the Sub-Adviser's own initiative, furnish to the Fund from time to time whatever
information the Sub-Adviser believes appropriate for this purpose;
(c) make available to the Fund's administrator, Pilgrim Group, Inc.
(the "Administrator"), the Manager, and the Fund, promptly upon their request,
such copies of its investment records and ledgers with respect to the Fund as
may be required to assist the Manager, the Administrator and the Fund in their
compliance with applicable laws and regulations. The Sub-Adviser will furnish
the Trustees with such periodic and special reports regarding the Fund as they
may reasonably request;
(d) immediately notify the Manager and the Fund in the event that the
Sub-Adviser or any of its affiliates: (i) becomes aware that it is subject to a
statutory disqualification that prevents the Sub-Adviser from serving as an
investment adviser pursuant to this Sub-Advisory Agreement; or (ii) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the Securities and Exchange Commission ("SEC") or other regulatory
authority. The Sub-Adviser further agrees to notify the Fund and the Manager
immediately of any material fact known to the Sub-Adviser respecting or relating
to the Sub-Adviser that is not contained in the Fund's Registration Statement,
or any amendment or supplement thereto, but that is required to be disclosed
therein, and of any statement contained therein that becomes untrue in any
material respect. The Fund, Manager, Administrator, and their Affiliates shall
likewise immediately notify the Sub-Adviser if any of them becomes aware of any
regulatory action of the type described in this subparagraph 2(d).
3. ALLOCATION OF CHARGES AND EXPENSES. The Sub-Adviser shall pay all
expenses associated with the management of its business operations in performing
its responsibilities hereunder, including the cost of its own overhead,
research, compensation and expenses of its directors, officers and employees,
and other internal operating costs; provided, however, that the Sub-Adviser
shall be entitled to reimbursement on a monthly basis by the Manager of all
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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 Manager or the Sub-Adviser) including, without limitation:
(a) the costs incurred by the Fund in the preparation and printing of
the Prospectus or any offering literature (including any form of advertisement
or other solicitation materials calculated to lead to investors subscribing for
shares);
(b) all fees and expenses on behalf of the Fund to the Transfer Agent
and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional any interest, fee or charge payable on or on account of
any borrowing by the Fund;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Fund;
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Fund;
(f) the fees of any stock exchange or over-the-counter market on which
the shares may from time to time be listed, quoted or dealt in and the expenses
of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Fund or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares in
newspapers and other publications;
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Fund or
in relation to the safe custody of the documents of title of any investments;
(k) all Trustees communication costs; and
(l) all premiums and costs for Fund insurance and blanket fidelity
bonds.
4. COMPENSATION. As compensation for the services provided by the
Sub-Adviser under this Agreement, the Manager will pay the Sub-Adviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.35 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 Trust's Declaration of Trust and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Sub-Adviser's
compensation is payable pursuant to this Section, the Sub-Adviser's compensation
payable at the end of such month shall be computed on the basis of the value of
the net assets of the Fund as last determined (whether during or prior to such
month). If the Fund determines the value of the net assets of its portfolio more
than once on any day, then the last such determination thereof on that day shall
be deemed to be the sole determination thereof on that day for the purposes of
this Section 4.
5. BOOKS AND RECORDS. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Fund as are required by Section 31
under the 1940 Act, and rules adopted thereunder, and by other applicable legal
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provisions, and to preserve such records for the periods and in the manner
required by applicable laws or regulations. The Sub-Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-2 under the 1940 Act
(excluding trade secrets or intellectual property rights) in connection with its
services hereunder are the property of the Fund and will be surrendered promptly
to the Fund upon its request and the Sub-Adviser further agrees that it will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with its services hereunder which may be requested in
order to determine whether the operations of the Fund are being conducted in
accordance with applicable laws and regulations.
6. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Sub-Advisory Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund or the holder's
of the Fund's shares or by the Manager in connection with the matters to which
this Sub-Advisory Agreement relates, provided that nothing in this Sub-Advisory
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against liability to the Fund or to holders of the Fund's shares or to the
Manager to which the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Sub-Advisory Agreement. As used in this Section 6, the
term "Sub-Adviser" shall include any officers, directors, employees or other
affiliates of the Sub-Adviser performing services for the Fund.
7. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Sub-Adviser are not exclusive, and that nothing in this Sub-Advisory Agreement
shall prevent the Sub-Adviser, its affiliates or its or their officers,
directors and employees from providing similar services to other investment
companies (whether or not their investment objectives and policies are similar
to those of the Fund) or from engaging in other investment advisory activities.
When the Sub-Adviser recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Sub-Adviser
recommends the purchase or sale of the same security for the Fund, it is
understood that in light of its fiduciary duty to the Fund, such transactions
will be executed on a basis that is fair and equitable to the Fund; provided,
however, that the Sub-Adviser is not required to recommend to the Fund the same
investments it recommends to its other clients. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the
Sub-Adviser nor any of its directors, officers or employees shall act as a
principal or agent or receive any commission. If the Sub-Adviser provides any
advice to its clients concerning the shares of the Fund, the Sub-Adviser shall
act solely as investment counsel for such clients and not in any way on behalf
of the Fund.
8. DURATION AND TERMINATION. This Sub-Advisory Agreement shall continue in
effect for a period of two years unless sooner terminated as provided herein.
Notwithstanding the foregoing, this Sub-Advisory Agreement may be terminated:
(a) at any time without penalty by the Fund or Manager upon the vote of a
majority of the Trustees or by vote of the majority of the Fund's outstanding
voting securities, upon sixty (60) days' written notice to the Sub-Adviser, or
(b) by the Sub-Adviser without cause at any time without penalty, upon (60)
days' written notice to the Fund or Manager. This Sub-Advisory Agreement will
also terminate automatically in the event of its assignment (as defined in the
1940 Act) or the assignment or termination of the Investment Management
Agreement.
9. AMENDMENTS. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Sub-Advisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of the Fund, and (ii) a majority of the
Trustees of the Fund, including a majority of Trustees who are not interested
persons of any party to this Sub-Advisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
10. INDEMNIFICATION.
(a) The Manager hereby agrees to indemnify the Sub-Adviser from and
against all liabilities, losses, expenses, reasonable attorneys' fees and costs
(other than attorneys' fees and costs in relation to the preparation of this
Agreement; each party bearing responsibility for its own such costs and fees) or
damages (other than liabilities, losses, expenses, attorneys fees and costs or
damages arising from the Sub-Adviser failing to meet the standard of care
required hereunder in the performance by the Sub-Adviser of, or its failure to
perform, the services required hereunder), arising from the Manager's (its
affiliates and their respective agents and employees) failure to perform its
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duties or assume its obligations hereunder, or from its wrongful actions or
omissions, including, but not limited to, any claims for non-payment of advisory
fees; claims asserted or threatened by any shareholder of the Fund, governmental
or regulatory agency, or any other person; claims arising from any wrongful act
by the Fund or any of the Fund's trustees, officers, employees, or
representatives, or by the Manager, its officers, employees or representatives,
or from any actions by the Fund's distributors or any representative of the
Fund; any action or claim against the Sub-Adviser based on any alleged untrue
statement or misstatement of material fact in any registration statement,
prospectus, shareholder report or other information or materials covering shares
filed or made public by the Fund or any amendment thereof or supplement thereto,
or the failure or alleged failure to state therein a material fact required to
be stated in order that the statements therein are not misleading, provided that
such claim is not based upon information provided to the Manager by the
Sub-Adviser or approved by the Sub-Adviser in the manner provided in paragraph
12(b) of this Agreement, or which facts or information the Sub-Adviser failed to
provide or disclose. With respect to any claim for which the Sub-Adviser shall
be entitled to indemnity hereunder, the Manager shall assume the reasonable
expenses and costs (including any reasonable attorneys' fees and costs) of the
Sub-Adviser of investigating and/or defending any claim asserted or threatened
by any party, subject always to the Manager first receiving a written
undertaking from the Sub-Adviser to repay any amounts paid on its behalf in the
event and to the extent of any subsequent determination that the Sub-Adviser was
not entitled to indemnification hereunder in respect of such claim.
(b) The Sub-Adviser hereby agrees to indemnify the Manager, its
affiliates and the Fund from and against all liabilities, losses, expenses,
reasonable attorneys' fees and costs (other than attorneys' fees and costs in
relation to the preparation of this Agreement; each party bearing responsibility
for its own such costs and fees) or damages (other than liabilities, losses,
expenses, attorneys fees and costs or damages arising from the Manager's failure
to perform its responsibilities hereunder or claims arising from its acts or
failure to act in performing this Agreement) arising from Sub-Adviser's (its
affiliates and their respective agents and employees) failure to perform its
duties and assume its obligations hereunder, or from any wrongful act of
Sub-Adviser or its failure to act in performing this Agreement, including any
action or claim against the Manager based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Sub-Adviser contained in any registration statement, prospectus, shareholder
report or other information or materials relating to the Fund and shares issued
by the Fund, or the failure or alleged failure to state a material fact therein
required to be stated in order that the statements therein are not misleading,
which fact should have been made or provided by the Sub-Adviser to the Manager.
With respect to any claim for which the Manager is entitled to indemnity
hereunder, the Sub-Adviser shall assume the reasonable expenses and costs
(including any reasonable attorneys' fees and costs) of the Manager of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Sub-Adviser first receiving a written undertaking from the
Manager to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Manager was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Sub-Adviser or Manager is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provision. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which consent shall not be unreasonably
withheld.
11. INDEPENDENT CONTRACTOR. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Fund in any way or otherwise be deemed to be an agent of the Fund. Likewise,
the Fund, the Manager and their respective affiliates, agents and employees
shall not be deemed agents of the Sub-Adviser and shall have not authority to
bind Sub-Adviser.
E-5
<PAGE>
12. USE OF NAME.
(a) The Fund may, subject to sub-clause (b) below, use the name,
"Navellier Fund Management, Inc." or any component, abbreviation or other name
derived therefrom for promotional purposes only for so long as this Agreement
(or any extension, renewal or amendment thereof) continues in force, unless the
Sub-Adviser shall specifically consent in writing to such continued use
thereafter. Any permitted use by the Fund during the term hereof of the name of
the Sub-Adviser, Navellier, or any derivative thereof, shall in no way prevent
the Sub-Adviser or any of it shareholders or any of their successors, from using
or permitting the use of such name (whether singly or in any combination with
any other words) for, by or in connection with an entity or enterprise other
than the Fund. The name and right to the name Navellier Fund Management, Inc. or
any derivation of the name Navellier shall at all times be owned and be the sole
and exclusive property of Louis Navellier and his affiliated entities. Navellier
Fund Management, Inc., by entering into this Agreement, is allowing the Fund to
use the name Navellier and/or derivatives thereof solely by or on behalf of the
Fund. At the conclusion of this Agreement or in the event of any termination of
this Agreement or if the Sub-Adviser's services are terminated for any reason,
each of the authorized parties and their respective employees, representatives,
affiliates, and associates agree that they shall immediately cease using the
name Navellier and/or any derivatives of said name for any purpose whatsoever.
(b) The Manager and its affiliates shall not publish or distribute,
and shall cause the Fund not to publish or distribute to Fund shareholders,
prospective investors, sales agents or members of the public any disclosure
document, offering literature (including any form of advertisement or other
solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Fund) or other document referring by name to the
Sub-Adviser, unless the Sub-Adviser shall have consented in writing to such
references in the form and context in which they appear; provided however, that
where the Fund timely seeks to obtain approval of disclosure contained in any
documents required to be filed by the Fund, and such approval is not forthcoming
on or before the date on which such documents are required by law to be filed,
the Sub-Adviser shall be deemed to have consented to such disclosure.
13. MISCELLANEOUS.
(a) This Sub-Advisory Agreement shall be governed by the laws of the
State of Nevada, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder. In the event of any litigation in which the Manager and the
Sub-Adviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of Nevada, located in Reno, Nevada.
(b) The captions of this Sub-Advisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
14. NOTICES. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting; in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery or transmission when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
15. ATTORNEYS' FEES. In the event of a material breach of this Agreement by
any party hereto, the prevailing party, as determined by the trier of fact,
shall be entitled to reasonable attorneys' fees and costs as determined by the
court in such action, in addition to any other damages awarded.
E-6
<PAGE>
16. NON-SOLICITATION. Manager, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Fund), and
each of their employees and affiliates agree not to knowingly solicit to invest,
or accept or retain as investors, in the Fund any persons or entities who are
clients of or investors in any fund or investment vehicle managed by any entity
owned by Louis Navellier.
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.
PILGRIM INVESTMENTS, INC.
By:
-----------------------------------------
Title:
NAVALLIER FUND MANAGEMENT, INC.
By:
-----------------------------------------
Title:
E-7
<PAGE>
APPENDIX F
INFORMATION REGARDING
BRANDES INVESTMENT PARTNERS, L.P.
AND
J.P. MORGAN INVESTMENT MANAGEMENT INC.
The following is a list of investment companies advised by Brandes Investment
Partners, L.P. with investment objectives that are substantially similar to the
investment objective of the International Value Portfolio:
<TABLE>
<CAPTION>
ADVISORY FEE AS A %
OF AVERAGE DAILY
INVESTMENT COMPANY AMOUNT OF ASSETS NET ASSETS
------------------ ---------------- ----------
<S> <C> <C>
Nations International Equity Value Fund $ 1.1 billion 0.50%
The M-Fund - Brandes International Equity Value Fund $ 72 million 0.50%
Brandes Institutional International Equity Value Fund $356 million 0.90%
</TABLE>
The following is a list of investment companies advised by J.P. Morgan
Investment Management Inc. with investment objectives that are substantially
similar to the investment objective of the Research Enhanced Index Portfolio:
<TABLE>
<CAPTION>
ADVISORY FEE AS A %
OF AVERAGE DAILY
INVESTMENT COMPANY AMOUNT OF ASSETS NET ASSETS
------------------ ---------------- ----------
<S> <C> <C>
Phoenix Edge Series Fund - J.P. Morgan Research $125 million 0.25% on the first $100 million
Enhanced Index Fund 0.20% on the balance
Endeavor Series Trust - Enhanced Index Portfolio $170 million 0.35%
Pilgrim Mayflower Trust - Research Enhanced Index Fund $250 million 0.70%
</TABLE>
F-1
<PAGE>
APPENDIX G
OFFICERS OF THE TRUST
The following persons currently are principal executive officers of the
Trust (unless otherwise noted, the mailing address of the officers is 40 North
Central Avenue, Suite 1200, Phoenix, Arizona 85004):
Robert W. Stallings, Chief Executive Officer and President. (Age 51)
Chairman, Chief Executive Officer and President of Pilgrim Group, Inc.
("Pilgrim Group") (since December 1994); Chairman, Pilgrim Investments,
Inc. and Pilgrim Securities, Inc. ("Pilgrim Securities") (since December
1994); President and Chief Executive Officer of Pilgrim Funding, Inc.
(since November 1999); and President and Chief Executive Officer of Pilgrim
Capital Corporation (since October 1999) and its predecessors (since August
1991). Mr. Stallings is also a Director, Trustee, or a member of the
Advisory Board of each of the Pilgrim Funds.
James R. Reis, Executive Vice President and Assistant Secretary. (Age 42)
Director, Vice Chairman (since December 1994), Executive Vice President
(since April 1995), and Director of Senior Lending and Structured Finance
(since April 1998), Pilgrim Group, Inc. and Pilgrim Investments; Director
(since December 1994) and Vice Chairman (since November 1995) of Pilgrim
Securities; Executive Vice President, Assistant Secretary and Chief Credit
Officer of Pilgrim Prime Rate Trust; Executive Vice President and Assistant
Secretary of each of the other Pilgrim Funds. Presently serves or has
served as an officer or director of other affiliates of Pilgrim Capital
Corporation.
Stanley D. Vyner, Executive Vice President. (Age 49) President and Chief
Executive Officer (since August 1996), Pilgrim Investments; Executive Vice
President of most of the Pilgrim Funds (since July 1996). Formerly Chief
Executive Officer (November 1993 - December 1995) HSBC Asset Management
Americas, Inc.
James M. Hennessy, Executive Vice President and Secretary. (Age 51)
Executive Vice President and Secretary (since October 1999), Pilgrim
Capital Corporation and its predecessors (since April 1998). Executive Vice
President (since April 1998) and Secretary (since April 1995), Pilgrim
Group, Pilgrim Securities and Pilgrim Investments; Executive Vice President
and Secretary of each of the Pilgrim Funds. Formerly Senior Vice President,
Pilgrim Capital Corporation and its affiliates (April 1995 - April 1998).
Presently serves or has served as an officer or director of other
affiliates of Pilgrim Capital Corporation.
Michael J. Roland, Senior Vice President and Principal Financial Officer.
(Age 42) Senior Vice President and Chief Financial Officer, Pilgrim Group,
Pilgrim Investments and Pilgrim Securities (since June 1998); Senior Vice
President and Principal Financial Officer of each of the Pilgrim Funds. He
served in same capacity from January 1995 - April 1997. Formerly, Chief
Financial Officer of Endeavor Group (April 1997 to June 1998).
Robert S. Naka, Senior Vice President and Assistant Secretary. (Age 37)
Senior Vice President, Pilgrim Investments (since November 1999) and
Pilgrim Group, Inc. (since August 1999). Senior Vice President and
Assistant Secretary of each of the Pilgrim Funds. Formerly Vice President,
Pilgrim Investments (April 1997 - October 1999), Pilgrim Group,
Inc.(February 1997 - August 1999). Formerly Assistant Vice President,
Pilgrim Group, Inc. (August 1995 - February 1997).
Robyn L. Ichilov, Vice President and Treasurer. (Age 32) Vice President,
Pilgrim Investments (since August 1997), Accounting Adviser (since November
1995). Vice President and Treasurer of most of the Pilgrim Funds.
Kevin G. Mathews, Senior Vice President and Senior Portfolio Manager. (Age
41) Senior Vice President, Pilgrim Investments (since July 1998). Formerly
Vice President, Pilgrim Investments (August 1995 - July 1998).
Mary Lisanti, Executive Vice President and Portfolio Manager. (Age 43)
Executive Vice President and Chief Investment Adviser-Equities, Pilgrim
Investments (since November 1999). Formerly Executive Vice President and
Chief Investment Officer - Equities, Northstar Investment Management
Corporation (June 1998 - October 1999).
G-1
<PAGE>
PILGRIM VARIABLE PRODUCTS TRUST
GROWTH OPPORTUNITIES PORTFOLIO
GROWTH + VALUE PORTFOLIO
HIGH YIELD PORTFOLIO
INTERNATIONAL VALUE PORTFOLIO
MAGNACAP PORTFOLIO
MIDCAP OPPORTUNITIES PORTFOLIO
RESEARCH ENHANCED INDEX PORTFOLIO
SMALLCAP OPPORTUNITIES PORTFOLIO
(EACH A "PORTFOLIO" AND COLLECTIVELY, THE "PORTFOLIOS")
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 VP Growth Opportunities, Growth + Value, High Yield Bond,
International Value, MagnaCap, MidCap Opportunities, Research Enhanced Index and
SmallCap Opportunities Portfolios to be held at 9:30 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 TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
1. To elect eleven Trustees For All Against All For all Except Abstain
[ ] [ ] [ ] [ ]
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2. For shareholders of all the Portfolios, to approve a For Against Abstain
new Investment Management Agreement between Trust, on [ ] [ ] [ ]
behalf of the Portfolios and Pilgrim Investments, Inc.
("Pilgrim Investments").
3(a) For shareholders of the Pilgrim VP International Value For Against Abstain
Portfolio, to approve a new Sub-Advisory Agreement [ ] [ ] [ ]
between Pilgrim Investments and Brandes Investment
Partners, L.P.
3(b) For shareholders of the Pilgrim VP Research Enhanced For Against Abstain
Index Portfolio, to approve a new Sub-Advisory [ ] [ ] [ ]
Agreement between Pilgrim Investments and J.P. Morgan
Investment Management, Inc.
3(c) For shareholders of the Pilgrim VP Growth + Value For Against Abstain
Portfolio, to approve a new Sub-Advisory Agreement [ ] [ ] [ ]
between Pilgrim Investments and Navellier Fund
Management, Inc. For Against Abstain
4. To ratify the appointment of PricewaterhouseCoopers LLP For Against Abstain
as independent auditors for your Portfolio for the [ ] [ ] [ ]
fiscal year ending December 31, 2000.
5. To transact such other business as may properly come For Against Abstain
before the Meeting of Shareholders or any adjournments [ ] [ ] [ ]
thereof
</TABLE>
This proxy must be signed exactly as your name(s) appears hereon. If as an
attorney, executor, guardian or in some representative capacity or as an officer
of a corporation, please add titles as such. Joint owners must each sign.
------------------------------------------------------- --------------------
Signature Date
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Signature (if held jointly) Date
