EXHIBIT (h)(12)
FORM OF AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
PILGRIM MUTUAL FUNDS
EXPENSE LIMITATION AGREEMENT, effective as of May 21, 1999, amended and
restated as of November 16, 1999, and further amended and restated as of March
1, 2002, by and between ING Investments, LLC (formerly ING Pilgrim Investments,
LLC) (the "Investment Manager"), Xxxxxxxx-Xxxxxxxxx Capital Management (the
"Portfolio Manager") and ING Mutual Funds (formerly Pilgrim Mutual Funds) (the
"Trust"), on behalf of each series of the Trust set forth on Schedule A hereto
(each a "Fund," and collectively, the "Funds") as such schedule may be amended
from time to time to add additional series.
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 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 and restated
May 9, 2001 ("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 Sub-Advisory Agreement dated August 7, 2001, pursuant to which the
Portfolio Manager provides investment advisory services to each Fund identified
in Schedule B (each a "Sub-Advised Fund") 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 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 the 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 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 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 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 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.
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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.
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 with respect to each Fund ending
on the date indicated on Schedule C. 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 thirty
(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
thirty (30) days prior to the end of the then-current term. 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. 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.
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5.2. 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.
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.
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.
ING MUTUAL FUNDS
ON BEHALF OF
EACH OF ITS SERIES
By:
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Name: Xxxxxx X. Naka
Title: Senior Vice President
ING INVESTMENTS, LLC
By:
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
XXXXXXXX-XXXXXXXXX CAPITAL MANAGEMENT L.P.
By:
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Name:
Title:
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SCHEDULE A
TO THE
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
BY AND BETWEEN
ING INVESTMENTS, LLC
AND
ING MUTUAL FUNDS
OPERATING EXPENSE LIMITS
EFFECTIVE MARCH 1, 2002
This Agreement relates to the following Funds of the Trust:
MAXIMUM OPERATING EXPENSE LIMIT
NAME OF FUND (AS A PERCENTAGE OF AVERAGE NET ASSETS)
---- -----------------------------------------------
Class A Class B Class C Class M Class Q Class T
------- ------- ------- ------- ------- -------
ING SmallCap Growth Fund 1.95% 2.60% 2.60% N/A 1.85% N/A
ING MidCap Growth Fund 1.60% 2.25% 2.25% N/A 1.50% N/A
ING LargeCap Growth Fund 1.60% 2.25% 2.25% N/A 1.50% N/A
ING Convertible Fund 1.60% 2.25% 2.25% N/A 1.50% N/A
ING Equity and Income Fund 1.60% 2.25% 2.25% N/A 1.50% 2.00%
ING Strategic Income Fund 0.95% 1.35% 1.35% N/A 0.85% N/A
ING Emerging Countries Fund 2.25% 2.90% 2.90% 2.65% 2.15% N/A
ING Worldwide Growth Fund 1.85% 2.50% 2.50% N/A 1.75% N/A
ING International SmallCap Growth Fund 1.95% 2.60% 2.60% N/A 1.85% N/A
ING International Core Growth Fund 1.95% 2.60% 2.60% N/A 1.85% N/A
ING High Yield Opportunity Fund 1.10% 1.75% 1.75% 1.50% 1.00% 1.40%
ING Money Market Fund 1.50% 2.25% 2.25% N/A N/A N/A
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HE
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SCHEDULE B
TO THE
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
BY AND BETWEEN
ING PILGRIM INVESTMENTS, LLC
AND
PILGRIM MUTUAL FUNDS
SUB-ADVISED FUNDS
EFFECTIVE FEBRUARY 26, 2002
ING International SmallCap Growth Fund
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SCHEDULE C
TO THE
AMENDED AND RESTATED
EXPENSE LIMITATION AGREEMENT
BY AND BETWEEN
ING INVESTMENTS, LLC
AND
ING MUTUAL FUNDS
INITIAL TERM
EFFECTIVE MARCH 1, 2002
The initial term of this Agreement with respect to each Fund is as follows:
NAME OF FUND EXPIRATION DATE OF INITIAL TERM
------------ -------------------------------
ING SmallCap Growth Fund May 31, 2003*
ING MidCap Growth Fund May 31, 2003*
ING LargeCap Growth Fund May 31, 2003*
ING Convertible Fund May 31, 2003*
ING Equity and Income Fund May 31, 2003*
ING Strategic Income Fund March 31, 2003*
ING Emerging Countries Fund October 31, 2002*
ING Worldwide Growth Fund October 31, 2002*
ING International SmallCap Growth Fund October 31, 2002*
ING International Core Growth Fund October 31, 2002*
ING High Yield Opportunity Fund March 31, 2003*
ING Money Market Fund March 31, 2003*
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* 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 C.
