EXPENSE LIMITATION AGREEMENT
PILGRIM AMERICA MASTERS SERIES, INC.
EXPENSE LIMITATION AGREEMENT, effective as of ___________, 1998 by and
between Pilgrim America Investments, Inc. (the "Investment Manager") and Pilgrim
America Masters Series, Inc. (the "Company"), on behalf of each series of the
Company set forth in SCHEDULE A (each a "Fund," and collectively, the "Funds").
WHEREAS, the Company is a Maryland corporation, 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 each Fund is a series of the Company;
and
WHEREAS, the Company and the Investment Manager have entered into an
Investment Management Agreement dated June 8, 1995 ("Management Agreement"),
pursuant to which the Investment Manager provides investment management services
to each Fund for compensation based on the value of the average daily net assets
of each such Fund; and
WHEREAS, the Company and the Investment Manager 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 such
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 Fund in any fiscal year, including but not
limited to investment management fees of the Investment Manager, but excluding
interest, taxes, brokerage commissions, extraordinary expenses such as
litigation, other expenses not incurred in the ordinary course of such Fund's
business, expenses of any counsel or other persons or services retained by the
Company's directors who are not "interested persons," as that term is defined in
the 1940 Act, of the Investment Manager, and amounts payable pursuant to a plan
adopted in accordance with Rule 12b-1 under the 1940 Act ("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.
1.2. OPERATING EXPENSE LIMIT. The maximum Operating Expense Limit in
any year with respect to each Fund shall be the amount specified in SCHEDULE A
based on a percentage of the average daily net assets of each Fund.
1.3. DURATION OF OPERATING EXPENSE LIMIT. The Operating Expense Limit
with respect to each Fund shall remain in effect until the date specified for
that Fund on SCHEDULE B. The Investment Manager may extend, but may not during
the term of this Agreement shorten, the duration of the Operating Expense Limit
for any Fund without the consent of the Company by
delivering a revised SCHEDULE B to the Company reflecting such extension. Such
an extension must continue at the same Operating Expense Limit amount specified
on SCHEDULE A.
1.4. METHOD OF COMPUTATION. To determine the Investment Manager's
obligation with respect to the Excess Amount, each day the Fund Operating
Expenses for each Fund shall be annualized. If the annualized Fund Operating
Expenses for any day of a Fund exceed the Operating Expense Limit of such Fund,
the Investment Manager shall remit to the appropriate Fund or Funds an amount
that, together with the waived or reduced investment management fee, is
sufficient to pay that day's Excess Amount.
1.5. 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 the
Fund or Funds with respect to the previous fiscal year shall equal the Excess
Amount.
2. REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
2.1. REIMBURSEMENT. If on any day during which the Management Agreement
is in effect, the estimated annualized Fund Operating Expenses of such Fund for
that day are less than the Operating Expense Limit, the Investment Manager shall
be entitled to reimbursement by such Fund of the investment management fees
waived or reduced and other payments remitted by the Investment Manager to such
Fund pursuant to Section 1 hereof (the "Reimbursement Amount") during any of the
previous thirty-six (36) months, to the extent that the Fund's annualized
Operating Expenses plus the amount so reimbursed 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 Reimbursement Amount
and will not include any amounts previously reimbursed.
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 a Fund for
the prior fiscal year (including any reimbursement payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
3. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall terminate upon termination of the Investment
Management Agreement, or it may be terminated by either party hereto, without
payment of any penalty, upon ninety (90) days' prior written notice to the other
party at its principal place of business.
4. MISCELLANEOUS.
4.1. 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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4.2. INTERPRETATION. Nothing herein contained shall be deemed to
require the Company or the Funds to take any action contrary to the Company's
Articles of Incorporation 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 Company's Board of Directors of its responsibility for and control
of the conduct of the affairs of the Company or the Funds.
4.3. 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.
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 AMERICA MASTERS SERIES, INC.
ON BEHALF OF
EACH OF ITS SERIES
By: _________________________________
Name:
Title:
PILGRIM AMERICA INVESTMENTS, INC.
By: _________________________________
Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Company:
Maximum Operating
Expense Limit
(as a percentage of
Name of Fund average net assets)
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Asia-Pacific Equity Fund 1.75%
MidCap Value Fund 1.50%
LargeCap Value Fund 1.50%
Strategic Income Fund 0.75%
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SCHEDULE B
DURATION OF OPERATING EXPENSE LIMITS
The duration of each Operating Expense Limit shall be as follows:
Date on Which
Operating Expense
Name of Fund Limit Terminates
------------ -----------------
Asia-Pacific Equity Fund 12/31/98
MidCap Value Fund 12/31/98
LargeCap Value Fund 12/31/98
Strategic Income Fund 12/31/98
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