Exhibit (h)(3)
FORM OF AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
PILGRIM INVESTMENT FUNDS, INC.
EXPENSE LIMITATION AGREEMENT, effective as of August 3, 1998 and
amended and restated as of November 16, 1999, by and between Pilgrim
Investments, Inc. (the "Investment Manager") and Pilgrim Investment Funds, Inc.
(the "Company"), on behalf of Pilgrim High Yield Fund, a series of the Company
(the "Fund").
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 the Fund is a series of the Company;
and
WHEREAS, the Company and the Investment Manager have entered into an
Investment Management Agreement dated April 7, 1995, as amended ("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 Company and the Investment Manager 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 shares of the 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 the Fund's business, and 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 ("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 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, as shown on Schedule A for the period described in
Section 1.3.
1.3. Duration of Operating Expense Limit. The Operating Expense Limit
with respect to each class of the Fund shall remain in effect for the dates
specified for the Fund on Schedule B.
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 class of the Fund shall be annualized. If the annualized Fund
Operating Expenses for any month 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.
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 a
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 for such class of
the Fund (the "Recoupment Date") provided on Schedule B for the applicable
period, the Investment Manager shall be entitled to recoup from the class of the
Fund the investment management fees waived or reduced and other payments
remitted by the Investment Manager to that class of the Fund pursuant to Section
1 hereof (the "Recoupment Amount") during the period 36 months previous to the
Recoupment Date, to the extent that the Fund's annualized Operating Expenses
plus the amount so recouped equals, for such day, the Operating Expense Limit
provided in Schedule A for the Recoupment Date; provided, however, that fees
waived or reduced and other payments remitted by the Investment Manager during
Period A of Schedule B may only be recouped if and to the extent the Fund's
annualized Operating Expenses are less than the Operating Expense Limit that was
in effect during Period A. Any amounts paid to the Investment Manager under this
provision 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 a class of
the Fund for the prior fiscal year (including any reimbursement payments
hereunder with respect to such fiscal year) do not exceed the Operating Expense
Limit for such class of the Fund.
3. Term and Termination of Agreement.
This Agreement shall have an initial term through October 31, 2001.
Unless the Investment Manager provides written notice of the termination of this
Agreement to the Company at least 30 days prior to the second anniversary of the
effective date of the Reorganization, the Agreement shall automatically renew
for a term through the end of the then-current fiscal year. Thereafter, this
Agreement shall automatically renew for one-year terms unless the Investment
Manager provides written notice of the termination of this Agreement to the
Company 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 Company,
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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 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 Fund.
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 INVESTMENT FUNDS, INC.
ON BEHALF OF
PILGRIM HIGH YIELD FUND
By: ____________________________________
Name:
Title:
PILGRIM INVESTMENTS, INC.
By: _____________________________________
Name:
Title:
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SCHEDULE A
OPERATING EXPENSE LIMITS
Maximum Operating Expense Limit
(as a percentage of average net assets)
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Class A Class B Class C Class M Class Q
------- ------- ------- ------- -------
Period A 1.00% 1.75% 1.75% 1.50% 1.00%
Period B 1.10% 1.85% 1.85% 1.60% 1.10%
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SCHEDULE B
DURATION OF OPERATING EXPENSE LIMITS
The duration of each Operating Expense Limit shall be as follows:
Name of Fund Date on Which Operating Expense Limit Operates
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Period A Through 12/31/1999.
Period B From 1/1/2000 through termination of Agreement
pursuant to Section 3.
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