Exhibit 77Q(e)(2)
USLICO SERIES FUND STOCK PORTFOLIO AND
USLICO SERIES FUND ASSET ALLOCATION PORTFOLIO
SUB-ADVISORY AGREEMENT
AGREEMENT made this ___ day of September, 2000 by and between ReliaStar
Investment Research, Inc., a Minnesota Corporation (hereinafter the "Adviser"),
investment adviser for the USLICO Series Fund Stock Portfolio and the USLICO
Series Fund Asset Allocation Portfolio (collectively, the "Portfolios"), each
being a series of the USLICO Series Fund (the "Trust") and Pilgrim Investments,
Inc., a Delaware corporation (hereinafter the "Sub-Adviser").
WHEREAS, the Adviser has been retained by the Trust, an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), to provide investment advisory
services to the Portfolios pursuant to an Investment Management Agreement dated
September ___, 2000 (the "Investment Management Agreement"); and
WHEREAS, the Trustees of the Trust, including a majority of the Trustees
who are not "interested persons," as defined in the 1940 Act, and the
Portfolios' shareholders have approved the appointment of the Sub-Adviser to
perform certain investment advisory services for the Portfolios pursuant to this
Subadvisory Agreement with the Adviser and the Sub-Adviser is willing to perform
such services for the Portfolios;
WHEREAS, the Sub-Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Adviser and the Sub-Adviser as follows:
1. Appointment. The Adviser hereby appoints the Sub-Adviser to perform
advisory services to the Portfolios for the periods and on the terms set forth
in this Subadvisory Agreement. The Sub-Adviser accepts such appointment and
agrees to furnish the services herein set forth, for the compensation herein
provided.
2. Duties of Sub-Adviser. The Adviser hereby authorizes Sub-Adviser to
manage the investment and reinvestment of cash and investments comprising the
assets of the USLICO Series Fund Stock Portfolio and those assets of the USLICO
Series Fund Asset Allocation Portfolio which are designated by the Adviser for
management by the Sub-Adviser (collectively, the "Assets"), with power on behalf
of an in the name of the Portfolios at Sub-Adviser's discretion; subject at all
times to the supervision of the Adviser and the Trustees of the Trust:
(a) to direct the purchase, subscription or other acquisition, and the
sale, redemption, and exchange of the Assets, subject to the duty to render to
the Trustees of the Trust and the Adviser such written reports regarding the
Assets as often as the Trustees of the Trust or the Adviser shall reasonably
require;
(b) to make all decisions relating to the manner, method and timing of
investment transactions relating to the Assets, to select brokers, dealers and
other intermediaries by or through whom such transactions will be effected, and
to engage such consultants, analysts and experts in connection therewith as may
be considered necessary or appropriate;
(c) to direct banks, brokers or custodians to disburse funds or assets
solely in order to execute investment transactions for the Assets, provided that
the Sub-Adviser shall have no other authority to direct the transfer of the
Assets to itself or other persons and shall have no other authority over the
disbursement (as opposed to investment decisions) of funds or assets nor any
custody of any of the Assets; and
(d) to take all such other actions as may be considered necessary or
appropriate to discharge its duties hereunder; PROVIDED THAT any specific or
general directions which the Trustees of the Trust, or the Adviser may give to
the Sub-Adviser with regard to any of the foregoing powers shall, unless the
contrary is expressly stated therein, override the general authority given by
this provision to the extent that the Trustees of the Trust may at any time and
from time to time, direct, either generally or to a limited extent and either
alone or in concert with the Adviser or the Sub-Adviser (provided that such
directions would not cause the Sub-Adviser to violate any fiduciary duties or
any laws with regard to the Sub-Adviser's duties and responsibilities), all or
any of the same as they shall think fit and, in particular; the Adviser shall
have the right to request the Sub-Adviser to place trades through brokers and
other agents of the Adviser's choice, subject to the Sub-Adviser's judgment that
such brokers or agents will execute such trades on the best overall terms
available, taking into consideration factors the Sub-Adviser deems relevant
including, without limitation, the price of the security, research or other
services which render that broker's services the most appropriate for the
Sub-Adviser's needs, the financial condition and dealing and execution
capability of the broker or dealer and the reasonableness of the commission, if
any, for the specific transaction and on a continuing basis; and PROVIDED
further that nothing herein shall be construed as giving the Sub-Adviser power
to manage further the aforesaid cash and investments, in such a manner as would
cause either of the Portfolios to be considered a "dealer" in stocks, securities
or commodities for US. federal income tax purposes.
3. The Adviser shall monitor and review the performance of the Sub-Adviser
under this Agreement, including but not limited to the Sub-Adviser's performance
of the duties delineated in subparagraphs (a)-(d) of this provision.
4. The Sub-Adviser farther agrees that, in performing its duties hereunder,
it will
(i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, the current Prospectus
and Statement of Additional Information for the Portfolios supplied to the
Sub-Adviser by the Adviser; and with any applicable procedures adopted by the
Trustees in writing supplied to the Sub-Adviser by the Adviser; (ii) manage the
Portfolios in accordance with the investment requirements for regulated
investment companies under Subchapter M of the Code and regulations issued
thereunder; (iii) direct the placement of orders pursuant to its investment
determinations for the Assets directly with the issuer, or with any broker or
dealer, in accordance with applicable policies expressed in the Portfolios'
Prospectus and/or Statement of Additional Information and in accordance with
applicable legal requirements.
(a) furnish to the Portfolios whatever non-proprietary reports the
Portfolios may reasonably request with respect to the Assets or contemplated
strategies. In addition, the Sub-Adviser will keep the Portfolios and the
Trustees informed of developments materially affecting the Assets and shall, on
the Sub-Adviser's own initiative, furnish to the Portfolios from time to time
whatever information the Sub-Adviser believes appropriate for this purpose;
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(b) make available to the Portfolios' administrator, ReliaStar Life
Insurance Company (the "Administrator"), the Adviser, and the Portfolios,
promptly upon their request, such copies of its investment records and ledgers
with respect to the Portfolios as may be required to assist the Adviser, the
Administrator and the Portfolios in their compliance with applicable laws and
regulations. The Sub-Adviser will furnish the Trustees with such periodic and
special reports regarding the Portfolios as they may reasonably request;
(c) immediately notify the Adviser and the Portfolios in the event
that the Sub-Adviser or any of its affiliates: (i) becomes aware that it is
subject to a statutory disqualification that prevents the Sub-Adviser from
serving as an investment adviser pursuant to this Subadvisory Agreement; or (ii)
becomes aware that it is the subject of an administrative proceeding or
enforcement action by the Securities and Exchange Commission ("SEC") or other
regulatory authority. The Sub-Adviser further agrees to notify the Portfolios
and the Adviser immediately of any material fact known to the Sub-Adviser
respecting or relating to the Sub-Adviser that is not contained in the Trust's
Registration Statement, or any amendment or supplement them to, but that is
required to be disclosed therein, and of any statement contained therein that
becomes untrue in any material respect. The Portfolios, Adviser, Administrator,
and their Affiliates shall likewise immediately notify the Sub-Adviser if any of
them becomes aware of any regulatory action of the type described in this
subparagraph 2(d).
5. Allocation of Charges and Expenses. The Sub-Adviser shall pay expenses
associated with the management of its business operations in performing its
responses hereunder, including the cost of its own overhead, research,
compensation and expenses of its directors, officers and employees, and other
internal operating costs, provided, however, that the Sub-Adviser shall be
entitled to reimbursement on a monthly basis by the Adviser of all reasonable
out-of-pocket expenses properly incurred by it in connection with serving as
Sub-Adviser to the Assets. For the avoidance of doubt, each Portfolio shall bear
its own overhead and other internal operating costs (whether incurred directly
or by the Adviser or the Sub-Adviser) including, without limitation:
(a) the costs incurred by the Portfolio in the preparation and
printing of the Prospectus or any offering literature (including any form of
advertisement or other solicitation materials calculated to lead to investors
subscribing for shares);
(b) all fees and expenses on behalf of the Portfolio to the Transfer
Agent and the Custodian;
(c) the reasonable fees and expenses of accountants, auditors, lawyers
and other professional advisors to the Portfolio;
(d) any interest, fee or charge payable on or on account of any
borrowing by the Portfolio,
(e) fiscal and governmental charges and duties relating to the
purchase, sale, issue or redemption of shares and increases in authorized share
capital of the Portfolio;
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(f) the fees of any stock exchange or over-the-counter market on which
shares of the Portfolio may from time to time be listed, quoted or dealt in and
the expenses of obtaining any such listing, quotation or permission to deal;
(g) the fees and expenses (if any) payable to Trustees;
(h) brokerage, fiscal or governmental charges or duties in respect of
or in connection with the acquisition, holding or disposal of any of the assets
of the Portfolio or otherwise in connection with its business;
(i) the expenses of publishing details and prices of shares of the
Portfolio in newspapers and other publications,
(j) all expenses incurred in the convening of meetings of shareholders
or in the preparation of agreements or other documents relating to the Portfolio
or in relation to the safe custody of the documents of title of any investments;
(k) all Trustees communication costs; and
(l) all premiums and costs for Portfolio insurance and blanket
fidelity bonds.
6. Compensation. As compensation for the services provided by the
Sub-Adviser under this Agreement, the Adviser will pay the Sub-Adviser at the
end of each calendar month an advisory fee computed daily at an annual rate
equal to 0.45 of 1% of the average daily net asset value of the Assets. The
"average daily asset value" of the Assets shall mean the value placed on the
Assets as of 4:00 p.m. (New York time) an each day on which the net asset value
of the Portfolios is determined consistent with the provisions of Rule 22c-1
under the 1940 Act or, if the Portfolios lawfully determine the value of their
net assets as of some other time on each business day, as of such other time.
The value of the Assets shall always be determined pursuant to the applicable
provisions of the Trust's Declaration of Trust and the Registration Statement.
If pursuant to such provisions, the determination of net asset value is
suspended for any particular business day, then for the purposes of this Section
4, the value of the Assets as last determined shall be deemed to be the value of
the Assets as of the close of regular trading on the New York Stock Exchange, or
as of such other time as the value of the Assets may lawfully be determined, on
that day. If the determination of the net asset value of the shares of the
Portfolio has been so suspended for a period including any month end when the
Sub-Adviser's compensation is payable pursuant to this Section, the
Sub-Adviser's compensation payable at the end of such month shall be computed on
the basis of the value of the Assets as last determined (whether during or prior
to such month). If the Portfolios determine the value of the Assets more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
Section 4.
7. Books and Records. The Sub-Adviser agrees to maintain such books and
records with respect to its services to the Portfolios as are required by
Section 31 under the 1940 Act, and rules adopted thereunder, and by, other
applicable legal provisions, and to preserve such records for the periods and in
the manner required by applicable laws or regulations, The Sub-Adviser also
agrees that records it maintains and preserves pursuant to Rules 91a-2 under the
1940 Act (excluding trade secrets or intellectual property rights) in connection
with its services hereunder are the property of the Portfolios and will be
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surrendered promptly to the Portfolios upon its request and the Sub-Adviser
further agrees that it will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
hereunder which may be requested in order to determine whether the operations of
the Portfolios are being conducted in accordance with applicable laws and
regulations.
8. Standard of Care and Limitation of Liability. The Sub-Adviser shall
exercise its best judgment in rendering the services provided by it under this
Subadvisory Agreement. The Sub-Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Portfolios or the
holders of the Portfolios shares or by the Adviser in connection with the
matters to which this Subadvisory Agreement relates, provided that nothing in
this Subadvisory Agreement shall be deemed to protect or purport to protect the
Sub-Adviser against liability to the Portfolios or to holders of the Portfolios'
shares or to the Adviser to which the Sub-Adviser would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Subadvisory Agreement. As used in this
Section 6, the term "Sub-Adviser" shall include any officers, directors,
employees or other affiliates of the Sub-Adviser performing services for the
Portfolios.
9. Services Not Exclusive. The Advisor understands that the Sub-Adviser now
acts, will continue to act and may act in the future as investment advisor to
fiduciary and other managed accounts and as investment advisor to other
investment companies, and, except as may be separately agreed to from time to
time between the Adviser and the Sub-Adviser, the Trust has no objection to the
Sub-Adviser so acting, provided that whenever the Portfolios and one or more
other accounts or investment companies advised by the Sub-Adviser have available
funds for investment, investments suitable and appropriate for each will be
allocated in accordance with a methodology believed to be equitable to each
entity. The Sub-Adviser agrees to allocate similar opportunities to sell
securities. The Adviser recognizes that, in some cases, this procedure may limit
the size of the position that may be acquired or sold for the Portfolios. In
addition, the Adviser understands that the persons employed by the Sub-Adviser
to assist in the performance of the Shareholders duties hereunder will not
devote their full time to such service and nothing contained herein shall be
deemed to limit or restrict the right of the Sub-Adviser or any affiliate of the
Sub-Adviser to engage in and devote time and attention to other business or to
render services of whatever kind or nature.
10. Duration and Termination. This Subadvisory Agreement shall become
effective as of the date of its execution and shall continue in effect for a
period of two years from the date of execution. Thereafter, this Subadvisory
Agreement shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Trust's
Trustees or (ii) a vote of a "majority" (as defined in the 0000 Xxx) of each
Portfolio's outstanding voting securities, provided that in either event the
continuance also is approved by a majority of the Trust's Trustees who are not
"interested persons" (as defined in the 0000 Xxx) of any party to this
Subadvisory Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Subadvisory Agreement may be terminated: (a) at any time without penalty by
either Portfolio or the Adviser upon the vote of a majority of the Trustees or
by vote of a majority of the Portfolio's outstanding voting securities, upon
sixty (60) days written notice to the Sub-Adviser, or (b) by the Sub-Adviser
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without cause at any time without penalty, upon sixty (60) days written notice
to the Trust or the Adviser. This Subadvisory Agreement will terminate
automatically five business days after the Sub-Adviser receives written notice
of the termination of the Investment Management Agreement. This Sub-Advisory
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
11. Amendments. No provision of this Sub-Advisory Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by both parties, and no material amendment of this Subadvisory Agreement
shall be effective until approved by an affirmative vote of (i) a majority of
the outstanding voting securities of each Portfolio, and (ii) a majority of the
Trustees of the Trust, including a majority of Trustees who are not interested
persons of any party to this Subadvisory Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is required
by applicable law.
12. Indemnification by the Fund. (a) The Adviser hereby agrees to indemnify
the Sub-Adviser and its affiliates from and against all liabilities, losses,
expenses, reasonable attorneys' fees and costs (other than attorneys' fees and
costs in relation to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other than
liabilities, losses, expenses, attorneys' fees and costs or damages arising from
the Sub-Adviser failing to meet the standard of care required in Section 6 of
this Subadvisory Agreement in the performance by the Sub-Adviser of, or its
failure to perform, the services required hereunder), arising from the Adviser's
(its affiliates and their respective agents and employees) failure to perform
its duties or assume its obligations hereunder or from its wrongful actions or
omissions, including, but not limited to, any claims for non-payment of advisory
fees; claims asserted or threatened by any shareholder of the Portfolios,
governmental or regulatory agency; or any other person; claims arising from any
wrongful act by the Portfolios or any of the Trust's trustees, officers,
employees, or representatives, or by the Adviser, its officers, employees or
representatives, or from any actions by the Portfolios' distributors or any
representative of the Portfolios; any action or claim against the Sub-Adviser
based on any alleged untrue statement or misstatement of material fact in any
registration statement, prospectus, shareholder report or other information or
materials covering shares filed or made public by the Portfolios or any
amendment thereof or supplement thereto, or the failure or alleged failure to
state therein a material fact required to be stated in order that the statements
therein are not misleading, provided that such claim is not based upon
information provided to the Adviser by the Sub-Adviser or approved by the
Sub-Adviser in the manner provided in paragraph 12(b) of this Agreement, or
which facts or information the Sub-Adviser failed to provide or disclose. With
respect to any claim for which the Sub-Adviser shall be entitled to indemnity
hereunder; the Adviser shall assume the reasonable expenses and costs (including
any reasonable attorneys' fees and costs) of the Sub-Adviser of investigating
and/or defending any claim asserted or threatened by any party, subject always
to the Adviser first receiving a written undertaking from the Sub-Adviser to
repay any amounts paid on its behalf in the event and to the extent of any
subsequent determination that the Sub-Adviser was not entitled to
indemnification hereunder in respect of such claim.
(b) The Sub-Adviser hereby agrees to indemnify the Adviser, its
affiliates and the Portfolios from and against all liabilities, losses,
expenses, reasonable attorneys' fees and costs (other than attorneys' fees and
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costs in relation to the preparation of this Agreement; each party bearing
responsibility for its own such costs and fees) or damages (other than
liabilities, losses, expenses, attorneys fees and costs or damages arising from
the Adviser's failure to perform its responsibilities hereunder or claims
arising from its acts or failure to act in performing this Agreement) arising
from Sub-Adviser's (its affiliates and their respective agents and employees)
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of the Sub-Adviser's reckless disregard of its obligations
and duties under this Subadvisory Agreement, or arising from failure to act in
any action or claim against the Adviser based on any alleged untrue statement or
misstatement of a material fact made or provided by or with the consent of
Sub-Adviser contained in any registration statement, prospectus, shareholder
report or other information or materials relating to the Portfolios and shares
issued by the Portfolios, or the failure or alleged failure to state a material
fact therein required to be stated in order that the statements therein are not
misleading which fact should have been made or provided by the Sub-Adviser to
the Adviser. With respect to any claim for which the Adviser is entitled to
indemnity hereunder, the Sub-Adviser shall assume the reasonable expenses and
costs (including any reasonable attorneys' fees and costs) of the Adviser of
investigating and/or defending any claim asserted or threatened by any party,
subject always to the Sub-Adviser first receiving a written undertaking from the
Adviser to repay any amounts paid on its behalf in the event and to the extent
of any subsequent determination that the Adviser was not entitled to
indemnification hereunder in respect of such claim.
(c) In the event that the Sub-Adviser or Adviser is or becomes a party
to any action or proceedings in respect of which indemnification may be sought
hereunder, the party seeking indemnification shall promptly notify, the other
party thereof. After becoming notified of the same, the party from whom
indemnification is sought shall be entitled to participate in any such action or
proceeding and shall assume any payment for the full defense thereof with
counsel reasonably satisfactory to the party seeking indemnification. After
properly assuming the defense thereof, the party from whom indemnification is
sought shall not be liable hereunder to the other party for any legal or other
expenses subsequently incurred by such party in connection with the defense
thereof, other than damages, if any, by way of judgment, settlement, or
otherwise pursuant to this provisions. The party from whom indemnification is
sought shall not be liable hereunder for any settlement of any action or claim
effected without its written consent, which comment shall not be unreasonably
withheld.
13. Independent Contractor. Sub-Adviser shall for all purposes of this
Agreement be deemed to be an independent contractor and, except as otherwise
expressly provided herein, shall have no authority to act for, bind or represent
the Portfolios in any way or otherwise be deemed to be an agent of the
Portfolios. Likewise, the Portfolios, the Adviser and their respective
affiliates, agents and employees shall not be deemed agents of the Sub-Adviser
and shall have not authority to bind Sub-Adviser.
14. Use of Name. (a) The Portfolios may, subject to sub-clause (b) below,
use the name, "Pilgrim Investments, Inc." or "Pilgrim" for promotional purposes
only for so long as this Agreement (or any extension, renewal or amendment
thereof) continues in force, unless the Sub-Adviser shall specifically consent
in writing to such continued use thereafter. Any permitted use by the Portfolios
during the term hereof of the name of the Sub-Adviser or Pilgrim shall in no way
prevent the Sub-Adviser or any of it shareholders or any of their successors,
from using or permitting the use of such name (whether singly or in any
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combination with any other words) for, by or in connection with an entity or
enterprise other than the Portfolios. The name and right to the name Pilgrim
Investments, Inc. or any derivation of the name Pilgrim shall at all times be
owned and be the sole and exclusive property of Pilgrim and its affiliated
entities. Pilgrim Investments, Inc., by entering into this Agreement, is
allowing the Portfolios to use the name Pilgrim Investments, Inc. and/or Pilgrim
solely by or on behalf of the Portfolios. At the conclusion of the Agreement or
in the event of any termination of this Agreement or if the Sub-Adviser's
services are terminated for any reason, each of the authorized parties and their
respective employees, representatives, affiliates, and associates agree that
they shall immediately cease using the name Pilgrim Investments, Inc. and/or
Pilgrim of said name for any purpose whatsoever.
(b) The Adviser and its affiliates shall not publish or distribute,
and shall cause the Portfolios not to publish or distribute to Portfolio
shareholders, prospective investors, sales agents or members of the public and
disclosure document, offering literature (including any form of advertisement or
other solicitation materials calculated to lead investors to subscribe for and
purchase shares of the Portfolios) or other document referring by name to the
Sub-Adviser or any of its affiliates, unless the Sub-Adviser shall have
consented in writing to such references in the form and context in which they
appear; provided however, that where the Portfolios timely seek to obtain
approval of disclosure contained in any documents required to be filed by the
Portfolios, and such approval is not forthcoming on or before the date on which
such documents are required by law to be filed, the Sub-Adviser shall be deemed
to have consented to such disclosure.
15. Miscellaneous.
(a) The Subadvisory Agreement shall be governed by the laws of the
State of Massachusetts, provided that nothing herein shall be construed in a
manner inconsistent with the 1940 Act, the Advisers Act, or rules or orders of
the SEC thereunder. In the event of any litigation in which the Adviser and the
Sub-Adviser are adverse parties and there are no other parties to such
litigation, such action shall be brought in the United States District Court for
the State of Massachusetts, located in Boston, Massachusetts.
(b) The captions of this Subadvisory Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) This Agreement may be executed in one or more counterparts, all of
which taken together shall be deemed to constitute one and the same instrument.
16. Notices. Any notice, instruction or other instrument required or
permitted to be given hereunder may be delivered in person to the offices of the
parties as set forth therein during normal business hours, or delivered or sent
by prepaid registered mail, express mail or by facsimile to the parties at such
offices or such other address as may be notified by either party from time to
time. Such notice, instruction or other instrument shall be deemed to have been
served, in the case of a registered letter at the expiration of seventy-two (72)
hours after posting, in the case of express mail, within twenty-four (24) hours
after dispatch; and in the case of facsimile, immediately on dispatch, and if
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delivered outside normal business hours it shall be deemed to have been received
at the next time after delivery or transmission when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
17. Non-Solicitation. Adviser, its affiliates and their respective agents
(including brokers engaged in marketing and selling shares of the Portfolios),
and each of their employees and affiliates agree not to knowingly solicit to
invest, or accept or retain as investors, in the Portfolios any persons or
entities who are clients of or investors in any portfolio or investment vehicle
managed by any entity owned or affiliated with Pilgrim Investments, Inc.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed by their officers designated below as of September ___, 2000.
Pilgrim Investments, Inc.
By:__________________________________
ReliaStar Investment Research, Inc.
By:__________________________________
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