EXPENSE LIMITATION AGREEMENT
PILGRIM MONEY MARKET FUND
EXPENSE LIMITATION AGREEMENT, effective as of ___________, 1999 by and
between Pilgrim Investments, Inc. (the "Investment Manager") and Pilgrim Mutual
Funds (the "Trust"), on behalf of Pilgrim Money Market Fund, a series of the
Company (the "Fund").
WHEREAS, the Trust is a Delaware business trust, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management company of the series type, and the Fund is a series of the
Trust; and
WHEREAS, the Trust and the Investment Manager have entered into an
Investment Management Agreement dated May 21, 1999, as amended May 24, 1999
("Management Agreement"), pursuant to which the Investment Manager provides
investment management services to the Fund for compensation ("management fees")
that is based on a percentage of the average daily net assets of the Fund; and
WHEREAS, the Trust and the Investment Manager have entered into an
Administration Agreement dated May 21, 1999, as amended May 24, 1999
("Administration Agreement"), pursuant to which the Investment Manager provides
administrative services to the Fund for compensation ("administrative fees")
that is based on a percentage of the average daily net assets of the Fund; and
WHEREAS, the Trust and the Investment Manager have determined that it
is appropriate and in the best interests of the Fund and its shareholders to
maintain the expenses of the Fund at a level, as specified herein, agreed upon
by the Trust and the Investment Manager;
NOW THEREFORE, the parties hereto agree as follows:
1. APPLICABLE EXPENSE LIMIT. To the extent that the ordinary operating
expenses incurred by a class of shares of the Fund at any time, including but
not limited to investment management and administrative fees payable to the
Investment Manager, but excluding interest, taxes, brokerage commissions,
extraordinary expenses such as litigation, other expenses not incurred in the
ordinary course of the Fund's business, and expenses of any counsel or other
persons or services retained by the Company'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 or Voluntary
Operating Expense Limit (as applicable), as defined in Section 2 below
(collectively, "Expense Limits"), the Investment Manager shall waive the
management and/or administrative fees otherwise payable to it, or, to the extent
necessary, assume the expenses in excess of the amount of the management and
administrative fees so waived. The amounts so waived or assumed shall be
referred to herein as the "Excess Amount."
2. OPERATING EXPENSE LIMIT; Voluntary Operating Expense Limit. The
Operating Expense Limit shall be the amount specified in Schedule A. The
Voluntary Operating Expense Limit shall be such lower amount as Pilgrim
Investments, Inc. may determine from time to time in its sole discretion. To the
extent that the Fund invests substantially all of its assets in a separate
underlying investment company, the expenses of the Fund shall be deemed to
include the Fund's allocable portion of the expenses of the underlying fund.
3. METHOD OF COMPUTATION. To determine the Investment Manager's
obligation or right with respect to the Expense Limits and the Recoupment
Amount, as specified below, each day the Fund Operating Expenses for each class
of the Fund shall be annualized. If the annualized Fund Operating Expenses for
that day of a class exceed the Operating Expense Limit or Voluntary Expense
Limit (as applicable at the time), the Investment Manager shall waive fees
payable to it or assume expenses, both as specified in Sections 1 and 2, in an
amount equal to the Excess Amount.
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 management and/or
administrative fees waived or reduced and other payments remitted by the
Investment Manager to a class of the Fund with respect to the previous fiscal
year shall equal the total Excess Amount for that period.
5. RECOUPMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
(a) RECOUPMENT. If on any day during which the Management
Agreement is in effect, the estimated annualized Fund Operating Expenses of a
class of the Fund shown in Schedule A for that day are less than the Operating
Expense Limit, the Investment Manager shall be entitled to recoup from the class
of the Fund the Excess Amount of fees waived and other payments remitted by the
Investment Manager to that class of the Fund pursuant to Sections 1 and 2 hereof
(the "Recoupment Amount") during the period 36 months previous to such day. Any
amounts paid to the Investment Manager under this provision will in no event
exceed the total Excess Amount and will not include any amounts previously
recouped.
(b) 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 a
class of the Fund for the prior fiscal year (including any recoupment payments
hereunder with respect to such fiscal year) do not exceed the Operating Expense
Limit.
6. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall have an initial term through May 31, 2000, or if
it becomes the end of the Fund's fiscal year, June 30, 2000. Thereafter, this
Agreement shall automatically renew for one-year terms unless the Investment
Manager provides written notice of the termination of this Agreement to the
Trust at least 30 days prior to the end of the then-current term. In addition,
this Agreement shall terminate upon termination of the Management Agreement, or
it may be terminated by the Trust, without payment of any penalty, upon ninety
(30) days' prior written notice to the Investment Manager at its principal place
of business.
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7. MISCELLANEOUS.
(a) 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.
(b) INTERPRETATION. Nothing herein contained shall be deemed
to require the Trust or the Funds to take any action contrary to the Trust's
Certificate of Trust, Declaration of Trust or By-Laws, 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 the Trust or the
Fund.
(c) DEFINITIONS. Any question of interpretation of any term or
provision of this Agreement, including but not limited to the investment
management fee, administration 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, Administration Agreement
or the 1940 Act, shall have the same meaning as and be resolved by reference to
such Management Agreement, Administration Agreement or the 1940 Act.
(d) NOT BINDING ON TRUSTEES. The obligations under this
agreement are binding upon the Trust with respect to the Fund. No trustee,
officer, employee, or agent of the Trust shall be subject to any personal
liability whatsoever, in his or her individual capacity, in connection with the
obligations of the Trust under this agreement. The Investment Manager may look
only to the property of the Trust held for the Fund for satisfaction of any
claim against a trustee, officer, employee, or agent of the Trust.
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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 MUTUAL FUNDS ON BEHALF OF
PILGRIM MONEY MARKET FUND
By:
--------------------------------
Name:
Title:
PILGRIM INVESTMENTS, INC.
By:
--------------------------------
Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMITS
The Operating Expense Limit specified in Section 2 of this Agreement is the
following annual rate of expenses to average daily net assets for the following
classes:
Pilgrim Money Market Fund
Class B: 2.25%
Class C: 2.25%
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