INVESTMENT MANAGEMENT AGREEMENT
THIS INVESTMENT MANAGEMENT AGREEMENT made as of the 7th day of April, 1995 by
and between PILGRIM GOVERNMENT SECURITIES INCOME FUND, INC., a corporation
organized and existing under the laws of the State of California (hereinafter
called the "Company") and PILGRIM AMERICA INVESTMENTS, INC., a corporation
organized and existing under the laws of the State of Delaware (hereinafter
called the "Manager").
W I T N E S S E T H:
WHEREAS, the Company is an open-end management investment company,
registered as such under the Investment Company Act of 1940; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, and is engaged in the business of supplying
investment advice, investment management and administrative services, as an
independent contractor; and
WHEREAS, the Company desires to retain the Manager to render advice and
services to the Company pursuant to the terms and provisions of this Agreement,
and the Manager is interested in furnishing said advice and services.
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
mutually agree as follows:
1. The Company hereby employs the Manager and the Manager hereby
accepts such employment, to render investment advice and investment
services with respect to the assets of the Company, subject to the
supervision and direction of the Company's Board of Directors. The Manager
shall, except as otherwise provided for herein, render or make available
all administrative services needed for the management and operation of the
Company, and shall, as part of its duties hereunder, (i) furnish the
Company with advice and recommendations with respect to the investment of
the Company's assets and the purchase and sale of its portfolio securities,
including the taking of such other steps a may be necessary to implement
such advice and recommendations, (ii) furnish the Company with reports,
statements and other data on securities, economic conditions and other
pertinent subjects which the Board of Directors may request, (iii) furnish
such office space and personnel as is needed by the Company, and (iv) in
general superintend and manage the investments of the Company, subject to
the ultimate supervision and direction of the Board of Directors.
2. The Manager shall use its best judgment and efforts in rendering
the advice and services to the Company as contemplated by this Agreement.
3. The Manager shall, for all purposes herein, be deemed to be an
independent contractor, and shall, unless otherwise expressly provided and
authorized, have no authority to act for or represent the Company in any
way, or in any way be deemed an agent for the Company. It is expressly
understood and agreed that the services to be rendered by the Manager to
the Company under the provisions of this Agreement are not to be deemed
exclusive, and the Manager shall be free to render similar or different
services to others so long as its ability to render the services provided
for in this Agreement shall not be impaired thereby.
4. The Manager agrees to use its best efforts in the furnishing of
such advice and recommendations to the Company, in the preparation of
reports and information, and in the management of the Company's assets, all
pursuant to this Agreement, and for this purpose the Manager shall, at its
own expense, maintain such staff and employ or retain such personnel and
consult with such other persons as it shall from time to time determine to
be necessary to the performance of its obligations under this Agreement.
Without limiting the generality of the foregoing, the staff and personnel
of the Manager shall be deemed to include persons employed or retained by
the Manager to furnish statistical, research, and other factual
information, advice regarding economic factors and trends, information with
respect to technical and scientific developments, and such other
information, advice and assistance as the Manager may desire and request.
5. The Company will from time to time furnish to the Manager detailed
statements of the investments and assets of the Company and information as
to its investment objectives and needs, and will make available to the
Manager such financial reports, proxy statements, legal and other
information relating to its investments as may be in the possession of the
Company or available to it and such other information as the Manager may
reasonably request.
6. Whenever the Manager has determined that the Company should tender
securities pursuant to a "tender offer solicitation", the Manager shall
designate an affiliate as the "tendering dealer" so long as it is legally
permitted to act in such capacity under the Federal securities laws and
rules thereunder and the rules of any securities exchange or association of
which such affiliate may be a member. Such affiliated dealer shall not be
obligated to make any additional commitments of capital, expense or
personnel beyond that already committed (other than normal periodic fees or
payments necessary to maintain its corporate existence and membership in
the National Association of Securities Dealers, Inc.) as of the date of
this Agreement. This Agreement shall not obligate the Manager or such
affiliate (i) to act pursuant to the foregoing requirement under any
circumstances in which they might reasonably believe that liability might
be imposed upon them as a result of so acting, or (ii) to institute legal
or other proceedings to collect fees which may be considered to be due from
others to it as a result of such a tender, unless the Company shall enter
into an agreement with such affiliate to reimburse it for all expenses
connected with attempting to collect such fees, including legal fees and
expenses and that portion of the compensation due to their employees which
is attributable to the time involved in attempting to collect such fees.
7. The Manager shall bear and pay the costs of rendering the services
to be performed by it under this Agreement. The Company shall bear and pay
for all other expenses of its operation, including, but not limited to,
expenses incurred in connection with the issuance, registration and
transfer of its shares; fees of its custodian, transfer and shareholder
servicing agent; costs and expenses of pricing and calculating its daily
net asset value and of maintaining its books of account required by the
Investment Company Act of 1940; expenditures in connection with meetings of
the shareholders and directors, except those called solely to accommodate
the Manager; salaries of officers and fees and expenses of directors or
members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Manager; salaries of personnel
involved in placing orders for the execution of the Company's portfolio
transactions or in maintaining registration of its shares under state
securities laws; insurance premiums on property or personnel of the Company
which inure to its benefit; the cost of preparing and printing reports,
proxy statements and prospectuses of the Company or other communications
for distribution to its shareholders; legal, auditing and accounting fees;
trade association dues; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws; and all other charges and costs of its operation plus any
extraordinary and non-recurring expenses, except as herein otherwise
prescribed. To the extent the Manager incurs any costs or performs any
services which are an obligation of the Company, as set forth herein, the
Company shall promptly reimburse the Manager for such costs and expenses.
To the extent the services for which the
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Company is obligated to pay are performed by the Manager, the Manager shall
be entitled to recover from the Company only to the extent of its costs for
such services.
8. (a) The Company agrees to pay to the Manager, and the Manager
agrees to accept, as full compensation for all administrative and
investment management services furnished or provided to the Company and as
a full reimbursement for all expenses assumed by the Manager, a management
fee computed at the following annual percentage of the average daily net
assets of the Company:
.50% on the first $500 million of net assets; plus
.45% on the net assets from $500 million to $1 billion; plus
.40% on net assets in excess of $1 billion
(b) The management fees shall be accrued daily by the Company and
paid to the Manager at the end of each calendar month.
(c) To the extent that the gross operating costs and expenses of
the Company (excluding any interest taxes, brokerage commissions,
amortization of organization expenses, and, with the prior written
approval of any state securities commission requiring same, any
extraordinary expenses, such as litigation) exceed one and one-half
percent (1.5%) of the Company's average net asset value on the first
$40 million of net assets and one percent (1%) on average net assets
in excess of $40 million for any one fiscal year, the Manager shall
reimburse the Company for the amount of such excess expenses.
(d) The management fee payable by the Company hereunder shall be
reduced to the extent that an affiliate of the Manager has actually
received cash payments of tender offer solicitation fees less certain
costs and expenses incurred in connection therewith, as referred to in
Paragraph 6 herein.
9. The Manager agrees that neither it nor any of its officers or
employees shall take any short position in the capital stock of the
Company. This prohibition shall not prevent the purchase of such shares by
any of the officers and directors or bona fide employees of the Manager or
any trust, pension, profit-sharing or other benefit plan for such persons
or affiliates thereof, at a price not less than the net asset value thereof
at the time of purchase, as allowed pursuant to rules promulgated under the
Investment Company Act of 1940, as amended
10. Nothing herein contained shall be deemed to require the Company to
take any action contrary to its Articles of Incorporation or any applicable
statute or regulation, or to relieve or deprive the Board of Directors of
the Company of its responsibility for and control of the conduct of the
affairs of the Company.
11.(a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability to the
Company, or to any shareholder of the Company, for any act or omission in
the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security by the Company.
(b) Notwithstanding the foregoing, the Manager agrees to
reimburse the Company for any and all costs, expenses, and counsel and
Directors' fees reasonably incurred by the Company in the preparation,
printing and distribution of proxy statements, amendments to its
Registration Statement, the holding of meetings of its shareholders or
Directors, the conduct of factual investigations, any legal or
administrative proceedings (including any applications for exemptions
or determinations by the Securities and Exchange Commission) which the
Company incurs as a result of action or inaction of the Manager or any
of its shareholders where the action or inaction necessitating such
expenditures (i) is directly or indirectly related to any transactions
or proposed transaction in the shares or control of the Manager or its
affiliates (or litigation related to any pending or proposed future
transaction in such shares or control) which shall have been
undertaken without the prior, express approval of the Company's Board
of Directors; or (ii) is
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within the sole control of the Manager or any of its affiliates or any
of their officers, directors, employees or shareholders. The Manager
shall not be obligated pursuant to the provisions of this Subparagraph
11(b), to reimburse the Company for any expenditures related to the
institution of an administrative proceeding or civil litigation by the
Company or by a Company shareholder seeking to recover all or a
portion of the proceeds derived by any shareholder of the Manager or
any of its affiliates from the sale of his shares of the Manager, or
similar matters. So long as this Agreement is in effect, the Manager
shall pay to the Company the amount due for expenses subject to this
Subparagraph 11(b) within thirty (30) days after a xxxx or statement
has been received by the Company therefor. This provision shall not be
deemed to be a waiver of any claim the Company may have or may assert
against the Manager or others or costs, expenses, or damages
heretofore incurred by the Company for costs, expenses, or damages the
Company may hereafter incur which are not reimbursable to it
hereunder.
(c) No provision of this Agreement shall be construed to protect
any director or officer of the Company, or of the Manager, from
liability in violation of Section 17(h) and (i) of the Investment
Company Act of 1940, as amended.
12. This Agreement shall remain in effect until April 7, 1997 unless
sooner terminated as hereinafter provided, and shall continue in effect
from year to year thereafter so long as such continuation is approved at
least annually by (i) the Board of Directors of the Company or by the vote
of a majority of the outstanding voting securities of the Company, and (ii)
the vote of a majority of the directors of the Company who are not parties
to this Agreement or interested persons thereof, cast in person at a
meeting called for the purpose of voting on such approval.
13. This Agreement may be terminated at any time, without payment of
any penalty, by the Board of Directors of the Company or by vote of a
majority of the outstanding voting securities of the Company, upon sixty
(60) days written notice to the Manager, and by the Manager upon sixty (60)
days written notice to the Company.
14. This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act of
1940, as amended.
15. This Agreement may not be transferred, assigned, sold or in any
manner hypothecated or pledged without the affirmative vote or written
consent of the holders of a majority of the outstanding voting securities
of the Company.
16. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule, or otherwise, the remainder of this
Agreement shall not be affected thereby.
17. The term "majority of the outstanding voting securities" of the
Company shall have the meaning as set forth in the Investment Company Act
of 1940, as amended.
18. In consideration of the execution of this Agreement, the Manager
hereby grants to the Company the right to use the name "Pilgrim" as part of
its corporate name. The Company agrees that in the event this Agreement is
terminated, the Company shall immediately take such steps as are necessary
to amend its corporate name to remove the reference to "Pilgrim".
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers,all on the day and
year first above written.
PILGRIM GOVERNMENT SECURITIES
INCOME FUND, INC.
Attest:_______________________________ By:________________________________
Title: _______________________________ Title: ____________________________
PILGRIM AMERICA INVESTMENTS, INC.
Attest:_______________________________ By:________________________________
Title: _______________________________ Title: ____________________________
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