Exhibit (h)(12)
EXPENSE LIMITATION AGREEMENT
PILGRIM EQUITY TRUST
(For Funds Sub-Advised by Xxxxxxx Investment Partners, L.P.)
EXPENSE LIMITATION AGREEMENT, effective as of November 2, 2001, by and
between ING Pilgrim Investments, LLC (the "Investment Manager") and Pilgrim
Equity Trust (the "Trust"), on behalf of each series of the Trust 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 Trust 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 September 1, 2000, as amended from time to
time (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 Trust 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 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 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.
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. Any such amounts remitted to a Fund shall be allocated among the classes
of the Fund in accordance with the terms of the Fund's Amended and Restated
Multiple Class Plan Pursuant to Rule 18f-3 under the 1940 Act. 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. Any such amounts
recouped from a class of a Fund shall be recouped in accordance with the
principles of the Fund's Amended and Restated Multiple Class Plan Pursuant to
Rule 18f-3 under the 1940 Act.
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.
-2-
3. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall have an initial term with respect to each Fund ending
on the date indicated on Schedule B. Thereafter, this Agreement shall
automatically renew for one-year terms with respect to a Fund unless the
Investment Manager provides written notice to the Trust of the termination of
this Agreement at least thirty (30) days prior to the end of the then-current
term for that Fund. In addition, this Agreement shall terminate with respect to
a Fund upon termination of the Management Agreement with respect to the Fund, or
it may be terminated by the Trust, without payment of any penalty, upon ninety
(90) days' prior written notice to the Investment Manager 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.
4.2. INTERPRETATION. Nothing herein contained shall be deemed to require
the Funds 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 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.
4.4. AMENDMENTS. This Agreement may be amended only by a written agreement
signed by each of the parties hereto.
-3-
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:
------------------------------------
Xxxxxx X. Naka
Senior Vice President
ING PILGRIM INVESTMENTS, LLC
By:
------------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
-4-
SCHEDULE A
to the
EXPENSE LIMITATION AGREEMENT
by and between
ING PILGRIM INVESTMENTS, LLC
and
PILGRIM EQUITY TRUST
OPERATING EXPENSE LIMITS
Effective November 2, 2001
This Agreement relates to the following Funds:
Maximum Operating Expense Limit
Name of Fund (as a percentage of average net assets)
------------ ---------------------------------------------------
Class A Class B Class C Class I Class Q
------- ------- ------- ------- -------
ING MidCap Value Fund* 1.75% 2.50% 2.50% 1.50% 1.75%
ING SmallCap Value Fund* 1.75% 2.50% 2.50% 1.50% 1.75%
------
HE
----------
* This Schedule A to the Expense Limitation Agreement will be effective with
respect to each of these Funds upon the effective date of the initial
Registration Statement with respect to each respective Fund: For ING MidCap
Value Fund and ING SmallCap Value Fund, January 28, 2002.
-5-
SCHEDULE B
to the
EXPENSE LIMITATION AGREEMENT
by and between
ING PILGRIM INVESTMENTS, LLC
and
PILGRIM EQUITY TRUST
INITIAL TERM
Effective November 2, 2001
The initial term of this Agreement with respect to each Fund is as follows:
Name of Fund Expiration Date of Initial Term
------------ -------------------------------
ING MidCap Value Fund May 31, 2002*
ING SmallCap Value Fund May 31, 2002*
----------
* The expiration of the initial term of this Expense Limitation Agreement has
been set to align with the respective fiscal year end date of each of the
Funds on this Schedule B.
-6-
