AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
PILGRIM MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of May 21, 1999 and amended and
restated as of November 16, 1999 by and between Pilgrim Investments, Inc. (the
"Investment Manager"), Xxxxxxxx-Xxxxxxxxx Capital Management (the "Portfolio
Manager") and Pilgrim Mutual Funds (the "Trust"), on behalf of each series of
the Trust set forth in SCHEDULE A (each a "Fund," and collectively, the
"Funds").
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 each 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 ("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 Investment Manager and the Portfolio Manager have entered into
a Portfolio Management Agreement dated May 21, 1999, pursuant to which the
Portfolio Manager provides investment advisory services to each Fund identified
in SCHEDULE B (the "Sub-Advised Funds") for compensation based on the value of
the average daily net assets of each such Sub-Advised Fund; and
WHEREAS, the Trust, the Investment Manager and the Portfolio 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 class of a Fund in any fiscal year, including but not
limited to investment management fees of 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 the Trust'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 each 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 a Fund shall be annualized. If the annualized Fund
Operating Expenses for any day of a class of a Fund exceed the Operating Expense
Limit of for that class of such 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 Trust may offset amounts owed to the Funds 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 each 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 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 each 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.
3. ALLOCATION BETWEEN INVESTMENT MANAGER AND PORTFOLIO MANAGER WITH RESPECT TO
SUB-ADVISED FUNDS.
3.1. ALLOCATION OF EXCESS AMOUNT. For so long as the fee payable to the
Portfolio Manager under the Portfolio Management Agreement is equal to 50% of
the advisory fee payable to the Investment Manager by a Sub-Advised Fund, the
Portfolio Manager 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 Excess Amount paid to that 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 Portfolio Manager.
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3.2. ALLOCATION OF RECOUPMENTS. The Investment Manager shall promptly remit
to the Portfolio Manager 50% of any amount recouped by the Investment Manager
from any Sub-Advised Fund pursuant to Section 2 of this Agreement.
3.3. ACCOUNTING. The Trust and the Investment Manager will provide to the
Portfolio Manager 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 31, 2001.
Thereafter, this Agreement shall automatically renew for one-year terms unless
the Investment Manager provides written notice to the Trust of the termination
of this Agreement at least 30 days prior to the end of the then-current term;
PROVIDED, HOWEVER, that the Portfolio Manager may terminate this Agreement with
respect to any Sub-Advised Fund by providing written notice to the Trust and the
Investment Manager of the termination of this Agreement with respect to such
Sub-Advised Fund at least 30 days prior to the end of the then-current term. In
addition, this Agreement shall terminate upon termination of the Investment
Management Agreement, 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. The obligations of the Investment
Manager and the Portfolio Manager pursuant to Section 3 of this Agreement shall
terminate upon termination of the Portfolio Management Agreement.
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 Trust or the Funds to take any action contrary to the Trust's 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 Funds.
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 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.
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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
EACH OF ITS SERIES
By:
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Name:
Title:
PILGRIM INVESTMENTS, INC.
By:
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Name:
Title:
XXXXXXXX-XXXXXXXXX CAPITAL MANAGEMENT L.P.
By:
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Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMITS
This Agreement relates to the following Funds of the Trust:
Maximum Operating Expense Limit
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
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NAME OF FUND CLASS A CLASS B CLASS C CLASS Q
------------ ------- ------- ------- -------
Pilgrim SmallCap Growth Fund 1.95% 2.60% 2.60% 1.50%
Pilgrim MidCap Growth Fund 1.60% 2.25% 2.25% 1.25%
Pilgrim LargeCap Growth Fund 1.60% 2.25% 2.25% 1.25%
Pilgrim Convertible Fund 1.60% 2.25% 2.25% 1.25%
Pilgrim Balanced Fund 1.60% 2.25% 2.25% 1.25%
Pilgrim Strategic Income Fund 0.95% 1.35% 1.35% 0.85%
Pilgrim Emerging Countries Fund 2.25% 2.90% 2.90% 1.90%
Pilgrim Worldwide Growth Fund 1.85% 2.50% 2.50% 1.60%
Pilgrim International SmallCap Growth Fund 1.95% 2.60% 2.60% 1.65%
Pilgrim International Core Growth Fund 1.95% 2.60% 2.60% 1.65%
Pilgrim High Yield Fund II 1.10% 1.75% 1.75% 1.00%
Pilgrim Money Market Fund 1.50% 2.25% 2.25% N/A
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SCHEDULE B
SUB-ADVISED FUNDS
Pilgrim SmallCap Growth Fund
Pilgrim MidCap Growth Fund
Pilgrim LargeCap Growth Fund
Pilgrim Convertible Fund
Pilgrim Emerging Countries Fund
Pilgrim Worldwide Growth Fund
Pilgrim International SmallCap Growth Fund
Pilgrim International Core Growth Fund
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