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EXHIBIT (h)(6)
FORM OF
EXPENSE LIMITATION AGREEMENT
PILGRIM EQUITY TRUST
EXPENSE LIMITATION AGREEMENT, effective as of ________ ___, 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 set forth on Schedule A herto
(herein referred to as, the "Fund") as it may be amended from time to time.
WHEREAS, the Trust is a Massachusetts business trust, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management company; and
WHEREAS, the Trust and the Investment Manager have entered into an
Investment Management Agreement dated ________ ___, 2001 ("Management
Agreement"), pursuant to which the Investment Manager provides investment
management services to the Fund for compensation based on the value of the
average daily net assets of the Fund; and
WHEREAS, the Investment Manager and the Sub-Adviser have entered into a
Sub-Adviser Agreement dated ________ ___, 2001 ("Sub-Adviser Agreement")
pursuant to which the Sub-Adviser provides investment advisory services to the
Fund for compensation based on the value of the average daily net assets of the
Fund; and
WHEREAS, the Trust, the Investment Manager and the Sub-Adviser 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 below the level to
which the 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 the Fund in any fiscal year, including
but not limited to investment management fees payable to the Investment Manager,
but excluding interest, taxes, brokerage commissions, other investment-related
costs, 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 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.
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1.2. Operating Expense Limit. The Operating Expense Limit in any
fiscal year with respect to each class of the Fund shall be the amount specified
in Schedule A based on a percentage of the average daily net assets of such
class of the 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 the Fund shall be annualized. If the annualized Fund
Operating Expenses for any day of a class of the Fund exceed the Operating
Expense Limit for that class of the Fund, the Investment Manager shall remit to
the appropriate class of the Fund an amount that, together with the waived or
reduced investment management fee, is sufficient to pay that day's Excess
Amount. The Fund may offset amounts owed to the 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 the 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 the Fund for that day are less than the Operating Expense Limit, the
Investment Manager shall be entitled to recoup from the Fund the investment
management fees waived or reduced and other payments remitted by the Investment
Manager to such class of the 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 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.
3. Allocation between Investment Manager and Sub-Adviser with Respect to
the 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
the 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-Adviser 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
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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 the 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 the
Sub-Advised Fund's average daily net assets paid under Section 3.1 above.
3.3. Accounting. The Fund 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 through October 3, 2006 (the
"Guarantee Maturity Date"). Thereafter, this Agreement shall automatically renew
for one-year terms unless the Investment Manager provides written notice to the
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
the 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, or it
may be terminated by the 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-Adviser Agreement. The Operating Expense Limit specified in Schedule A is
effective through to the Guarantee Maturity Date, 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.
5.2. Interpretation. Nothing herein contained shall be deemed to
require the 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
the 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
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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:
-------------------------------------
Name:
Title:
ING PILGRIM INVESTMENTS, LLC
By:
-------------------------------------
Name:
Title:
AELTUS INVESTMENT MANAGEMENT, INC.
By:
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Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Fund:
Maximum Operating Expense Limit
Name of Fund (as a percentage of average net assets)*
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Class A Class B Class C Class Q
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Pilgrim Principal Protection Fund 1.75% 2.50% 2.50% 1.75%
Approved by the Board of Trustees on May 9, 2001.
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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.
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