EXHIBIT (h)(12)
FORM OF
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
PILGRIM EQUITY TRUST - PILGRIM PRINCIPAL PROTECTION FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of the 9th day of May, 2001,
as amended and restated this 2nd day of November, 2001, by and between ING
Pilgrim Investments, LLC (the "Investment Manager"), Aeltus Investment
Management, Inc. (the "Sub-Adviser") and Pilgrim Equity Trust (the "Trust"), on
behalf of each series of the Trust which is a Pilgrim Principal Protection Fund
set forth on Schedule A hereto (each a "Fund," collectively, the "Funds") as
such schedule may be amended from time to time to add additional series.
WHEREAS, the Trust is a Massachusetts business trust authorized to issue
shares in series, and is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and each
Fund is a series of the Trust; and
[WHEREAS, the Funds and the Investment Manager desire that the
provisions of this Agreement do not adversely affect a Fund's status as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), do not interfere with a Fund's ability to
compute its taxable income under Code Section 852, do not adversely affect the
status of the distributions a Fund makes as deductible dividends under Code
Section 562, and do comply with the requirements of Revenue Procedure 99-40 (or
any successor pronouncement of the Internal Revenue Service); and]
WHEREAS, the Trust and the Investment Manager have entered into an
Investment Management Agreement dated May 9, 2001 (the "Management Agreement"),
pursuant to which the Investment Manager provides investment management services
to the Funds for compensation based on the value of the average daily net assets
of the Funds; and
WHEREAS, the Investment Manager and the Sub-Adviser have entered into a
Sub-Advisory Agreement dated May 9, 2001 (the "Sub-Advisory Agreement") pursuant
to which the Sub-Adviser provides investment advisory services to the Funds for
compensation based on the value of the average daily net assets of the Funds;
and
WHEREAS, the Trust, the Investment Manager and the Sub-Adviser have
determined that it is appropriate and in the best interests of each Fund and its
shareholders to maintain the expenses of each Fund at a level below the level to
which each Fund may normally be subject.
NOW THEREFORE, the parties hereto agree as follows:
1. Expense Limitation.
1.1. Applicable Expense Limit. To the extent that the ordinary operating
expenses incurred by a class of a Fund in any fiscal year, including but not
limited to investment management fees payable to the Investment Manager, but
excluding interest, taxes, brokerage
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commissions, other investment-related costs, extraordinary expenses such as
litigation, other expenses not incurred in the ordinary course of such Fund's
business, and expenses of any counsel or other persons or services retained by
such Fund's Trustees who are not "interested persons," as that term is defined
in the 1940 Act, of the Investment Manager ("Fund Operating Expenses"), exceed
the Operating Expense Limit, as defined in Section 1.2 below, such excess amount
(the "Excess Amount") shall be the liability of the Investment Manager, subject
to the allocation provisions set forth in Section 3 below.
1.2. Operating Expense Limit. The Operating Expense Limit in any fiscal
year with respect to each class of a Fund shall be the amount specified in
Schedule A based on a percentage of the average daily net assets of such class
of such Fund.
1.3. Method of Computation. To determine the Investment Manager's
obligation with respect to the Excess Amount, each day the Fund Operating
Expenses for each class of each Fund shall be annualized. If the annualized Fund
Operating Expenses for any day of a class of a Fund exceed the Operating Expense
Limit for that class of such Fund, the Investment Manager shall remit to the
appropriate class of such Fund an amount that, together with the waived or
reduced investment management fee, is sufficient to pay that day's Excess
Amount. A Fund may offset amounts owed to such Fund pursuant to this Agreement
against the advisory fee payable to the Investment Manager.
1.4. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the investment management fees
waived or reduced and other payments remitted by the Investment Manager to each
class of a Fund with respect to the previous fiscal year shall equal the Excess
Amount.
2. Recoupment of Fee Waivers and Expense Reimbursements.
2.1. Recoupment. If on any day during which the Management Agreement is
in effect, the estimated annualized Fund Operating Expenses of a class of a Fund
for that day are less than the Operating Expense Limit, the Investment Manager
shall be entitled to recoup from such Fund the investment management fees waived
or reduced and other payments remitted by the Investment Manager to such class
of such Fund pursuant to Section 1 hereof (the "Recoupment Amount") during any
of the previous thirty-six (36) months, to the extent that such class'
annualized Operating Expenses plus the amount so recouped equals, for such day,
the Operating Expense Limit provided in Schedule A, provided that such amount
paid to the Investment Manager will in no event exceed the total Recoupment
Amount and will not include any amounts previously recouped.
2.2. Year-End Adjustment. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the actual Fund Operating Expenses of each class
of a Fund for the prior fiscal year (including any recoupment payments hereunder
with respect to such fiscal year) do not exceed the Operating Expense Limit.
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3. Allocation between Investment Manager and Sub-Adviser with Respect to Each
Fund.
3.1. Allocation of Excess Amount. The Investment Manager shall be solely
responsible for payment of the Excess Amount in an amount up to 0.05% of a
sub-advised Fund's average daily net assets in excess of the Operating Expense
Limit. With respect to any remaining Excess Amount, for so long as the fee
payable to the Sub-Adviser under the Sub-Advisory Agreement is equal to 50% of
the advisory fee payable to the Investment Manager by the sub-advised Fund, the
Sub-Adviser shall waive or reduce its portfolio management fee and/or promptly
remit to the Investment Manager an amount that is sufficient to pay 50% of any
remaining Excess Amount paid to the sub-advised Fund by the Investment Manager
pursuant to Section 1 of this Agreement. The Investment Manager may offset
amounts owed to the Investment Manager pursuant to this Section 3.1 against the
portfolio management fee paid to the Sub-Adviser.
3.2. Allocation of Recoupments. The Investment Manager shall promptly
remit to the Sub-Adviser 50% of any amount recouped by the Investment Manager
from a sub-advised Fund pursuant to Section 2 of this Agreement, provided that
the Investment Manager shall not remit amounts recouped to the Sub-Adviser until
the Investment Manager has recouped the 0.05% of such sub-advised Fund's average
daily net assets paid under Section 3.1 above.
3.3. Accounting. The Funds and the Investment Manager will provide to
the Sub-Adviser reasonable access to the books and records of each for purposes
of confirming the amounts contributed and recouped under this Agreement.
4. Term and Termination of Agreement.
This Agreement shall have an initial term with respect to each Fund as
set forth on Schedule A hereto (the "Guarantee Maturity Date"). Thereafter, this
Agreement shall automatically renew for one-year terms unless the Investment
Manager provides written notice to a Fund of the termination of this Agreement
at least 30 days prior to the end of the then-current term; provided, however,
that the Sub-Adviser may also terminate this Agreement with respect to itself by
providing written notice to a Fund and the Investment Manager of the termination
of this Agreement at least 40 days prior to the end of the then-current term. In
addition, this Agreement shall terminate upon termination of the Management
Agreement with respect to a Fund. Finally, this Agreement may be terminated by a
Fund, without payment of any penalty, upon ninety (90) days' prior written
notice to the Investment Manager at its principal place of business. The
obligations of the Investment Manager and the Sub-Adviser pursuant to Section 3
of this Agreement shall terminate upon termination of the Sub-Advisory
Agreement. The Operating Expense Limit specified in Schedule A is effective
through to the Guarantee Maturity Date applicable to a Fund, thereafter the
maximum Operating Expense Limit may be changed upon the extension of this
Agreement as contemplated by this paragraph and paragraph 5.4.
5. Miscellaneous.
5.1. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
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5.2. Interpretation. Nothing herein contained shall be deemed to require
a Fund or Trust to take any action contrary to the Trust's Declaration of Trust,
or any applicable statutory or regulatory requirement to which it is subject or
by which it is bound, or to relieve or deprive the Trust's Board of Trustees of
its responsibility for and control of the conduct of the affairs of a Fund.
5.3. Definitions. Any question of interpretation of any term or
provision of this Agreement, including but not limited to the investment
management fee, the computations of net asset values, and the allocation of
expenses, having a counterpart in or otherwise derived from the terms and
provisions of the Management Agreement or the 1940 Act, shall have the same
meaning as and be resolved by reference to such Management Agreement or the 1940
Act.
5.4. Amendments. This Agreement may be amended only by a written
agreement signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
PILGRIM EQUITY TRUST
By:
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Xxxxxx X. Naka
Senior Vice President
ING PILGRIM INVESTMENTS, LLC
By:
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Xxxxxxx X. Xxxxxx
Senior Vice President
AELTUS INVESTMENT MANAGEMENT, INC.
By:
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Name:
Title:
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SCHEDULE A
WITH RESPECT TO THE
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
BY AND BETWEEN
ING PILGRIM INVESTMENTS, LLC,
AELTUS INVESTMENT MANAGEMENT
AND
PILGRIM EQUITY TRUST
OPERATING EXPENSE LIMITS
EFFECTIVE AS OF NOVEMBER 2, 2001
This Agreement relates to the following Funds:
GUARANTY MAXIMUM OPERATING EXPENSE LIMIT
NAME OF FUND MATURITY DATE (AS A PERCENTAGE OF AVERAGE NET ASSETS)*
------------ ------------- ----------------------------------------
Class A Class B Class C Class Q
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Pilgrim Principal Protection Fund October 11, 2006 1.75% 2.50% 2.50% 1.75%
Pilgrim Principal Protection Fund II** January 31, 2007 1.75% 2.50% 2.50% 1.75%
Approved by the Board of Trustees on May 9, 2001 for Pilgrim Principal
Protection Fund and on November 2, 2001 for Pilgrim Principal Protection Fund
II.
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* Effective through to the Guarantee Maturity Date, thereafter this limit
is subject to change if the Agreement is extended as contemplated in
paragraph 4 and 5.4.
** This Amended and Restated Expense Limitation Agreement will be effective
with respect to this Fund upon the effective date of the initial
Registration Statement with respect to the Fund.
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