EXHIBIT (d)(3)
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 9th day of May, 2001 between Pilgrim Equity Trust
(the "Fund"), a Massachusetts business trust, and ING Pilgrim Investments, LLC
(the "Manager"), a Delaware limited liability company (the "Agreement").
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Fund is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund may offer shares of additional series in the future;
WHEREAS, the Fund desires to avail itself of the services of the
Manager for the provision of advisory and management services for the Fund; and
WHEREAS, the Manager is willing to render such services to the Fund;
NOW, THEREFORE, in consideration of the premises, the promises and
mutual covenants herein contained, it is agreed between the parties as follows:
1. Appointment. The Fund hereby appoints the Manager, subject to
the direction of the Board of Trustees, for the period and on the terms set
forth in this Agreement, to provide advisory, management, and other services, as
described herein, with respect to each series of the Fund set forth on Schedule
A hereto (individually and collectively referred to herein as "Series"). The
Manager accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
In the event the Fund establishes and designates additional series
(other than the Series) with respect to which it desires to retain the Manager
to render advisory services hereunder, it shall notify the Manager in writing.
If the Manager is willing to render such services, it shall notify the Fund in
writing, whereupon such additional series shall become a Series hereunder, and
be subject to this Agreement.
2. Services of the Manager. The Manager represents and warrants
that it is registered as an investment adviser under the Investment Advisers Act
of 1940 and will maintain such registration for so long as required by
applicable law. Subject to the general supervision of the Board of Trustees of
the Fund, the Manager shall provide the following advisory, management, and
other services with respect to the Series:
(a) Provide general, investment advice and guidance with
respect to the Series and provide advice and guidance to the Fund's Trustees,
and oversee the management of the investments of the Series and the composition
of each Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition thereof, in accordance with each Series'
investment objective or objectives and policies as stated in the Fund's current
registration statement, which management may be provided by others selected by
the Manager and approved by the Board of Trustees as provided below or directly
by the Manager as provided in Section 3 of this Agreement;
(b) In the event that the Manager wishes to select others
to render investment management services, the Manager shall analyze, select and
recommend for consideration and approval
by the Fund's Board of Trustees investment advisory firms (however organized) to
provide investment advice to one or more of the Series, and, at the expense of
the Manager, engage (which engagement may also be by the Fund) such investment
advisory firms to render investment advice and manage the investments of such
Series and the composition of each such Series' portfolio of securities and
investments, including cash, and the purchase, retention and disposition
thereof, in accordance with the Series' investment objective or objectives and
policies as stated in the Fund's current registration statement (any such firms
approved by the Board of Trustees and engaged by the Fund and/or the Manager are
referred to herein as "Sub-Advisers");
(c) Periodically monitor and evaluate the performance of
the Sub-Advisers with respect to the investment objectives and policies of the
Series;
(d) Monitor the Sub-Advisers for compliance with the
investment objective or objectives, policies and restrictions of each Series,
the 1940 Act, Subchapter M of the Internal Revenue Code, and if applicable,
regulations under such provisions, and other applicable law;
(e) If appropriate, analyze and recommend for
consideration by the Fund's Board of Trustees termination of a contract with a
Sub-Adviser under which the Sub-Adviser provides investment advisory services to
one or more of the Series;
(f) Supervise Sub-Advisers with respect to the services
that such Sub-Advisers provide under respective portfolio management agreements
("Sub-Adviser Agreements");
(g) Render to the Board of Trustees of the Fund such
periodic and special reports as the Board may reasonably request; and
(h) Make available its officers and employees to the
Board of Trustees and officers of the Fund for consultation and discussions
regarding the administration and management of the Series and services provided
to the Fund under this Agreement.
3. Investment Management Authority. In the event the Manager
wishes to render investment management services directly to a Series, then with
respect to any such Series, the Manager, subject to the supervision of the
Fund's Board of Trustees, will provide a continuous investment program for the
Series' portfolio and determine the composition of the assets of the Series'
portfolio, including determination of the purchase, retention, or sale of the
securities, cash, and other investments contained in the portfolio. The Manager
will provide investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, offered to the public, or exchanged for the Series, when these
transactions should be executed, and what portion of the assets of the Series
should be held in the various securities and other investments in which it may
invest, and the Manager is hereby authorized to execute and perform such
services on behalf of the Series. To the extent permitted by the investment
policies of the Series, the Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to, and execute and perform,
foreign currency exchange contracts on behalf of the Series. The Manager will
provide the services under this Agreement in accordance with the Series'
investment objective or objectives, policies, and restrictions as stated in the
Fund's Registration Statement filed with the Securities and Exchange Commission
(the "SEC"), as amended. Furthermore:
(a) The Manager will manage the Series so that each will
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. In managing the Series in
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accordance with these requirements, the Manager shall be entitled to receive and
act upon advice of counsel to the Fund or counsel to the Manager.
(b) The Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Fund's Board of
Trustees, and the provisions of the Registration Statement of the Fund under the
Securities Act of 1933 and the 1940 Act, as supplemented or amended.
(c) On occasions when the Manager deems the purchase or
sale of a security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations and any applicable procedures adopted by the
Fund's Board of Trustees, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the Registration
Statement. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Manager in
a manner that is fair and equitable in the judgment of the Manager in the
exercise of its fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of
securities of the Series, the Manager will arrange for the transmission to the
custodian for the Fund on a daily basis, of such confirmation, trade tickets,
and other documents and information, including, but not limited to, Cusip,
Cedel, or other numbers that identify securities to be purchased or sold on
behalf of the Series, as may be reasonably necessary to enable the custodian to
perform its administrative and recordkeeping responsibilities with respect to
the Series. With respect to portfolio securities to be purchased or sold through
the Depository Trust Company, the Manager will arrange for the prompt
transmission of the confirmation of such trades to the Fund's custodian.
(e) The Manager will assist the custodian or portfolio
accounting agent for the Fund in determining, consistent with the procedures and
policies stated in the Registration Statement for the Fund and any applicable
procedures adopted by the Fund's Board of Trustees, the value of any portfolio
securities or other assets of the Series for which the custodian or portfolio
accounting agent seeks assistance or review from the Manager.
(f) The Manager will make available to the Fund, promptly
upon request, any of the Series' or the Managers' investment records and ledgers
as are necessary to assist the Fund to comply with requirements of the 1940 Act,
as well as other applicable laws. The Manager will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(g) The Manager will regularly report to the Fund's Board
of Trustees on the investment program for the Series and the issuers and
securities represented in the Series' portfolio, and will furnish the Fund's
Board of Trustees with respect to the Series such periodic and special reports
as the Trustees may reasonably request.
(h) In connection with its responsibilities under this
Section 3, the Manager is responsible for decisions to buy and sell securities
and other investments for the Series' portfolio, broker-dealer selection, and
negotiation of brokerage commission rates. The Manager's primary consideration
in effecting a security transaction will be to obtain the best execution for the
Series, taking into account the factors specified in the Prospectus and/or
Statement of Additional Information for the Fund, which
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include price (including the applicable brokerage commission or dollar spread),
the size of the order, the nature of the market for the security, the timing of
the transaction, the reputation, experience and financial stability of the
broker-dealer involved, the quality of the service, the difficulty of execution,
execution capabilities and operational facilities of the firms involved, and the
firm's risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified, in the judgment of the
Manager in the exercise of its fiduciary obligations to the Fund, by other
aspects of the portfolio execution services offered. Subject to such policies as
the Board of Trustees may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, as amended, the Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Series to pay a
broker-dealer for effecting a portfolio investment transaction in excess of the
amount of commission another broker-dealer would have charged for effecting that
transaction, if the Manager determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker-dealer, viewed in terms of either that
particular transaction or the Manager's overall responsibilities with respect to
the Series and to its other clients as to which it exercises investment
discretion. To the extent consistent with these standards and in accordance with
Section 11(a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T)
thereunder, the Manager is further authorized to allocate the orders placed by
it on behalf of the Series to the Manager if it is registered as a broker-dealer
with the SEC, to an affiliated broker-dealer, or to such brokers and dealers who
also provide research or statistical material or other services to the Series,
the Manager or an affiliate of the Manager. Such allocation shall be in such
amounts and proportions as the Manager shall determine consistent with the above
standards, and the Manager will report on said allocation regularly to the Board
of Trustees of the Fund indicating the broker-dealers to which such allocations
have been made and the basis therefor.
4. Conformity with Applicable Law. The Manager, in the
performance of its duties and obligations under this Agreement, shall act in
conformity with the Registration Statement of the Fund and with the instructions
and directions of the Board of Trustees of the Fund and will conform to, and
comply with, the requirements of the 1940 Act and all other applicable federal
and state laws and regulations.
5. Exclusivity. The services of the Manager to the Fund under
this Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment objectives and policies are
similar to those of any of the Series) and to engage in other activities, so
long as its services hereunder are not impaired thereby.
6. Documents. The Fund has delivered properly certified or
authenticated copies of each of the following documents to the Manager and will
deliver to it all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Trustees of the
Fund authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) the Registration Statement as filed with the SEC and
any amendments thereto; and
(c) exhibits, powers of attorney, certificates and any
and all other documents relating to or filed in connection with the Registration
Statement described above.
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7. Records. The Fund agrees to maintain and to preserve for the
periods prescribed under the 1940 Act any such records as are required to be
maintained by the Fund with respect to the Series by the 1940 Act. The Manager
further agrees that all records of the Series are the property of the Fund and,
to the extent held by the Manager, it will promptly surrender any of such
records upon request.
8. Expenses. During the term of this Agreement, the Manager will
pay all expenses incurred by it in connection with its activities under this
Agreement, except such expenses as are assumed by the Fund under this Agreement
and such expenses as are assumed by a Sub-Adviser under its Sub-Adviser
Agreement. The Manager further agrees to pay all fees payable to the
Sub-Advisers, executive salaries and expenses of the Directors of the Fund who
are employees of the Manager or its affiliates, and office rent of the Fund. The
Fund shall be responsible for all of the other expenses of its operations,
including, without limitation, the management fee payable hereunder; brokerage
commissions; interest; legal fees and expenses of attorneys; fees of auditors,
transfer agents and dividend disbursing agents, custodians and shareholder
servicing agents; the expense of obtaining quotations for calculating the Fund's
net asset value; taxes, if any, and the preparation of the Fund's tax returns;
cost of stock certificates and any other expenses (including clerical expenses)
of issue, sale, repurchase or redemption of shares; expenses of registering and
qualifying shares of the Fund under federal and state laws and regulations
(including the salary of employees of the Manager engaged in the registering and
qualifying of shares of the Fund under federal and state laws and regulations or
a pro-rata portion of the salary of employees to the extent so engaged);
salaries of personnel involved in placing orders for the execution of the Fund's
portfolio transactions; expenses of disposition or offering any of the portfolio
securities held by a Series; expenses of printing and distributing reports,
notices and proxy materials to existing shareholders; expenses of printing and
filing reports and other documents filed with governmental agencies; expenses in
connection with shareholder and director meetings; expenses of printing and
distributing prospectuses and statements of additional information to existing
shareholders; fees and expenses of Trustees of the Fund who are not employees of
the Manager or any Sub-Adviser, or their affiliates; trade association dues;
insurance premiums; and extraordinary expenses such as litigation expenses. To
the extent the Manager incurs any costs or performs any services which are an
obligation of the Fund, as set forth herein, the Fund shall promptly reimburse
the Manager for such costs and expenses. To the extent the services for which
the Fund is obligated to pay are performed by the Manager, the Manager shall be
entitled to recover from the Fund only to the extent of its costs for such
services.
9. Compensation. For the services provided by the Manager to each
Series pursuant to this Agreement, the Fund will pay to the Manager an annual
fee equal to the amount specified for such Series in Schedule A hereto, payable
monthly in arrears. Payment of the above fees shall be in addition to any amount
paid to the Manager for the salary of its employees for performing services
which are an obligation of the Fund as provided in Section 8. The fee will be
appropriately pro-rated to reflect any portion of a calendar month that this
Agreement is not in effect between the Manager and the Fund.
10. Liability of the Manager. The Manager may rely on information
reasonably believed by it to be accurate and reliable. Except as may otherwise
be required by the 1940 Act or the rules thereunder, neither the Manager nor its
members, officers, directors, employees, or agents shall be subject to any
liability for, or any damages, expenses, or losses incurred in connection with,
any act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Manager's duties, or by reason of reckless
disregard of the Manager's obligations and duties under this Agreement. Except
as may otherwise be required by the 1940 Act or the rules thereunder, neither
the Manager nor its members, officers, directors, employees, or agents shall be
subject to any liability for, or any damages, expenses, or losses incurred in
connection with, any act or omission by a Sub-Adviser or any of the
Sub-Adviser's
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stockholders or partners, officers, directors, employees, or agents connected
with or arising out of any services rendered under a Sub-Adviser Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Manager's duties under this Agreement, or by reason of
reckless disregard of the Manager's obligations and duties under this Agreement.
No Trustee, officer, employee or agent of the Fund shall be subject to any
personal liability whatsoever, in his or her official capacity, to any person,
including the Sub-Adviser, other than to the Fund or its shareholders, in
connection with Fund property or the affairs of the Fund, save only that arising
from his or her bad faith, willful misfeasance, gross negligence or reckless
disregard of his or her duty to such person; and all such persons shall look
solely to the Fund property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Fund arising in connection with the
affairs of the Fund. Moreover, the debts, liabilities, obligations and expenses
incurred, contracted for or otherwise existing with respect to a Series shall be
enforceable against the assets and property of that Series only, and not against
the assets or property of any other series of the Fund.
11. Continuation and Termination. This Agreement shall become
effective on the date first written above, subject to the condition that the
Fund's Board of Trustees, including a majority of those Trustees who are not
interested persons (as such term is defined in the 0000 Xxx) of the Manager, and
the shareholders of each Series, shall have approved this Agreement. Unless
terminated as provided herein, the Agreement shall continue in full force and
effect for two (2) years from the effective date of this Agreement, and shall
continue from year to year thereafter with respect to each Series so long as
such continuance is specifically approved at least annually (i) by the vote of a
majority of the Board of Trustees of the Fund, or (ii) by the vote of a majority
of the outstanding voting shares of the Series (as defined in the 1940 Act), and
provided continuance is also approved by the vote of a majority of the Board of
Trustees of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 0000 Xxx) of the Fund or the Manager, cast in person
at a meeting called for the purpose of voting on such approval.
However, any approval of this Agreement by the holders of a majority of
the outstanding shares (as defined in the 0000 Xxx) of a Series shall be
effective to continue this Agreement with respect to such Series notwithstanding
(i) that this Agreement has not been approved by the holders of a majority of
the outstanding shares of any other Series or (ii) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the Fund,
unless such approval shall be required by any other applicable law or otherwise.
This Agreement may be terminated by the Fund at any time, in its entirety or
with respect to a Series, without the payment of any penalty, by vote of a
majority of the Board of Trustees of the Fund or by a vote of a majority of the
outstanding voting shares of the Fund, or with respect to a Series, by vote of a
majority of the outstanding voting shares of such Series, on sixty (60) days'
written notice to the Manager, or by the Manager at any time, without the
payment of any penalty, on sixty (60) days' written notice to the Fund. This
Agreement will automatically and immediately terminate in the event of its
"assignment" as described in the 1940 Act.
12. Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought. If shareholder approval of an amendment is required
under the 1940 Act, no such amendment shall become effective until approved by a
vote of the majority of the outstanding shares of the Fund. Otherwise, a written
amendment of this Agreement is effective upon the approval of the Board of
Trustees and the Manager.
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13. Use of Name. It is understood that the name "ING Pilgrim
Investments, LLC," or any derivative thereof (including the name "ING Pilgrim")
or logo associated with that name is the valuable property of the Manager and
its affiliates, and that the Fund and/or the Series have the right to use such
name (or derivative or logo) only so long as this Agreement shall continue with
respect to such Fund and/or Series. Upon termination of this Agreement, the Fund
(or Series) shall forthwith cease to use such name (or derivative or logo) and,
in the case of the Fund, shall promptly amend its Declaration of Trust to change
its name (if such name is included therein).
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
15. Applicable Law.
(a) This Agreement shall be governed by the laws of the
State of Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
(c) The captions of this 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.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
PILGRIM EQUITY TRUST
By: -s- XXXXXX X. NAKA
--------------------------------
XXXXXX X. NAKA
Title SVP
ING PILGRIM INVESTMENTS, LLC
By: -s- XXXXXXX X. XXXXXX
--------------------------------
XXXXXXX X. XXXXXX
Title SVP CTO
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