PILGRIM INVESTMENT FUNDS, INC.
00 X. XXXXXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXXXX 00000
September 1, 2000
Pilgrim Securities, Inc.
00 X. Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Re: Underwriting Agreement
Pilgrim Investment Funds, Inc. is a Maryland corporation operating as an
open-end management investment company (hereinafter referred to as the
"Company"). The Company is registered as such under the Investment Company Act
of 1940, as amended (the "1940 Act"), and its shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"). The Company consists of two
separate series: Pilgrim MagnaCap Fund and Pilgrim High Yield Fund (the
"Funds"). The Company on behalf of the Funds desires to offer and sell the
authorized but unissued shares of the Funds to the public in accordance with
applicable federal and state securities laws.
You have informed us that Pilgrim Securities, Inc. is registered as a
broker-dealer under the provisions of the Securities Exchange Act of 1934 and is
a member in good standing of the National Association of Securities Dealers,
Inc. You have indicated your desire to act as the exclusive selling agent and
principal underwriter for the shares of the Funds. We have been authorized by
the Company to execute and deliver this Agreement to you by a resolution of our
Board of Directors (the "Directors") adopted at a meeting of the Directors, at
which a majority of Directors, including a majority of our Directors who are not
otherwise interested persons of our investment manager or its related
organizations, were present and voted in favor of the said resolution approving
this Underwriting Agreement. This Agreement is intended to apply to all Shares
of the Funds issued before or after this Agreement.
1. APPOINTMENT OF UNDERWRITER. Upon the execution of this Agreement and in
consideration of the agreements on your part herein expressed and upon the terms
and conditions set forth herein, we hereby appoint you as the exclusive sales
agent for distribution of the shares (other than sales made directly by the
Company without sales charge) and agree that we will deliver to you such shares
as you may sell. You agree to use your best efforts to promote the sale of the
shares, but you are not obligated to sell any specific number of the shares.
2. INDEPENDENT CONTRACTOR. You will undertake and discharge your
obligations hereunder as an independent contractor and shall have no authority
or power to obligate or bind the Company or the Funds by your actions, conduct
or contracts, except that you are authorized to accept orders for the purchase
or repurchase of the shares as our agent. You may appoint sub-agents or
distribute the shares through dealers (or otherwise) as you may determine
necessary or desirable from time to time. This Agreement shall not, however, be
construed as authorizing any dealer or other person to accept orders for sale or
repurchase on our behalf or to otherwise act as our agent for any purpose.
3. OFFERING PRICE. Shares of the Funds shall be offered at a price
equivalent to their net asset value plus, as appropriate, a variable percentage
of the public offering price as a sales load, as set forth in the Funds'
Prospectus. On each business day on which the New York Stock Exchange is open
for business, we will furnish you with the net asset value of the shares, which
shall be determined and become effective as of the close of business of the New
York Stock Exchange on that day. The net asset value so determined shall apply
to all orders for the purchase of the shares received by dealers prior to such
determination, and you are authorized in your capacity as our agent to accept
orders and confirm sales at such net asset value; PROVIDED THAT, such dealers
notify you of the time when they received the particular order and that the
order is placed with you prior to your close of business on the day on which the
applicable net asset value is determined. To the extent that our Shareholder
Servicing and Transfer Agent (collectively, "Agent") and the Custodian(s) for
any pension, profit-sharing, employer or self-employed plan receive payments on
behalf of the investors, such Agent and Custodian(s) shall be required to record
the time of such receipt with respect to each payment, and the applicable net
asset value shall be that which is next determined and effective after the time
of receipt by them. In all events, you shall forthwith notify all of the dealers
comprising your selling group and the Agent and Custodian(s) of the effective
net asset value as received from us. Should we at any time calculate our net
asset value more frequently than once each business day, you and we will follow
procedures with respect to such additional price or prices comparable to those
set forth above in this Section 3.
4. SALES COMMISSION.
(a) In respect of each Class of Shares other than Class B Shares:
(i) You shall be entitled to receive a sales commission on the sale of
shares of the Funds in the amounts and according to the procedures set
forth in the Funds' Prospectus then in effect under the 1933 Act (including
any supplements or amendments thereto).
(ii) In addition to the payments of the sales commissions to you
provided for in paragraph 4(a), you may also receive reimbursement for
expenses or a maintenance or trail fee as may be required by and described
in the distribution plans adopted by the Funds pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plans").
(b) In respect of the Class B Shares of each Fund, the following provisions
(i) In consideration of your services as principal underwriter of the
Funds' Class B Shares pursuant to this Underwriting Agreement and our
distribution plan pursuant to Rule 12b-1 under the 1940 Act in respect of
such shares (the "Class B Distribution Plan"), we agree: (I) to pay to you
monthly in arrears your "Allocable Portion" (as hereinafter defined) of a
fee (the "Distribution Fee") which shall accrue daily in an amount equal to
the product of (A) the daily equivalent of 0.75% per annum multiplied by
(B) the net asset value of the Class B Shares of each Fund outstanding on
such day, and (II) to withhold from redemption proceeds your Allocable
Portion of the Contingent Deferred Sales Charges ("CDSCs") and to pay the
same over to you or at your direction.
(ii) The Allocation Schedule attached hereto as Schedule A and each of
the provisions set forth in clauses (I) through (V) of the second sentence
of Section 1(A) of the Class B Distribution Plan as in effect on the date
hereof, together with the related definitions, are hereby incorporated
herein by reference with the same force and effect as if set forth herein
in their entirety.
(iii) In addition to the payments of amounts provided for in Section
4(b)(i) and (ii), you may also receive reimbursement for expenses or a
maintenance or trail fee as may be required by and described in the Class B
(c) You may allow appointed sub-agents or dealers such commissions or
discounts (not exceeding the total sales commission) as you shall deem
advisable, so long as any such commissions or discounts are set forth in the
Funds' then current Prospectus, to the extent required by the applicable federal
and state securities laws.
5. PAYMENT OF SHARES. At or prior to the time of delivery of any of our
shares you will pay or cause to be paid to the Custodian, for our account, an
amount in cash equal to the net asset value of such shares. In the event that
you pay for shares sold by you prior to your receipt of payment from purchasers,
you are authorized to reimburse yourself for the net asset value of such shares
from the offering price of such shares when received by you.
6. REGISTRATION OF SHARES. No shares shall be registered on our books until
(i) receipt by us of your written request therefor; (ii) receipt by the
Custodian and Agent of a certificate signed by an officer of the Company stating
the amount to be received therefor; and (iii) receipt of payment of that amount
by the Custodian. We will provide for the recording of all shares purchased in
unissued form in "book accounts", unless a request in writing for certificates
is received by the Agent, in which case certificates for shares in such names
and amounts as is specified in such writing will be delivered by the Agent, as
soon as practicable after registration thereof on the books.
7. PURCHASES FOR YOUR OWN ACCOUNT. You shall not purchase shares for your
own account for purposes of resale to the public, but you may purchase shares
for your own investment account upon your written assurance that the purchase is
for investment purposes only and that the shares will not be resold except
through redemption by us.
8. SALE OF SHARES TO AFFILIATES. You may sell the Class A and Class M
shares at net asset value, without a sales charge as appropriate, pursuant to a
uniform offer described in the Funds' current Prospectus (i) to our Directors
and officers, our investment manager or your company or affiliated companies
thereof, (ii) to the bona fide, full time employees or sales representatives of
any of the foregoing who have acted as such for at least ninety (90) days, (iii)
to any trust, pension, profit-sharing, or other benefit plan for such persons,
or (iv) to any other person set forth in the Funds' then current Prospectus;
PROVIDED that such sales are made in accordance with the rules and regulations
under the 1940 Act and that such sales are made upon the written assurance of
the purchaser that the purchases are made for investment purposes only, not for
the purpose of resale to the public and that the shares will not be resold
except through redemption by us.
9. ALLOCATION OF EXPENSES.
(a) We will pay the following expenses in connection with the sales and
distribution of shares of the Funds:
(i) expenses pertaining to the preparation of our audited and
certified financial statements to be included in any amendments
("Amendments") to our Registration Statement under the 1933 Act, including
the Prospectuses and Statements of Additional Information included therein;
(ii) expenses pertaining to the preparation (including legal fees) and
printing of all Amendments or supplements filed with the Securities and
Exchange Commission, including the copies of the Prospectuses and
Statements of Additional Information included in such Amendments and the
first ten (10) copies of the definitive Prospectuses and Statements of
Additional Information or supplements thereto, other than those
necessitated by or related to your (including your "Parents") activities
where such amendments or supplements result in expenses which we would not
otherwise have incurred;
(iii) expenses pertaining to the preparation, printing, and
distribution of any reports or communications, including Prospectuses and
Statements of Additional Information, which are sent to our existing
(iv) filing and other fees to federal and state securities regulatory
authorities necessary to register and maintain registration of the shares;
(v) expenses of the Agent, including all costs and expenses in
connection with the issuance, transfer and registration of the shares,
including but not limited to any taxes and other governmental charges in
(b) Except to the extent that you are entitled to reimbursement under the
provisions of any of the Distribution Plans for the Funds, you will pay the
(i) expenses of printing additional copies of the Prospectus and
Statement of Additional Information and any amendments or supplements
thereto which are necessary to continue to offer our shares to the public;
(ii) expenses pertaining to the preparation (excluding legal fees) and
printing of all amendments and supplements to our Registration Statement if
the Amendment or supplement arises from or is necessitated by or related to
your (including your "Parent") activities where those expenses would not
otherwise have been incurred by us; and
(iii) expenses pertaining to the printing of additional copies, for
use by you as sales literature, of reports or other communications which
have been prepared for distribution to our existing shareholders or
incurred by you in advertising, promoting and selling our shares to the
10. FURNISHING OF INFORMATION. We will furnish to you such information with
respect to our company and its shares, in such form and signed by such of our
officers as you may reasonably request, and we warrant that the statements
therein contained when so signed will be true and correct. We will also furnish
you with such information and will take such action as you may reasonably
request in order to qualify our shares for sale to the public under the Blue Sky
Laws or in jurisdictions in which you may wish to offer them. We will furnish
you at least annually with audited financial statements of our books and
accounts certified by independent public accountants, and with such additional
information regarding our financial condition, as you may reasonably request
from time to time.
11. CONDUCT OF BUSINESS. Other than the currently effective Prospectus and
Statement of Additional Information, you will not issue any sales material or
statements except literature or advertising which conforms to the requirements
of federal and state securities laws and regulations and which have been filed,
where necessary, with the appropriate regulatory authorities. You will furnish
us with copies of all such material prior to their use and no such material
shall be published if we shall reasonably and promptly object.
You shall comply with the applicable federal and state laws and regulations
where our shares are offered for sale and conduct your affairs with us and with
dealers, brokers or investors in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
12. REDEMPTION OR REPURCHASE WITHIN SEVEN DAYS. If shares are tendered to
us for redemption or are repurchased by us within seven (7) business days after
your acceptance of the original purchase order for such shares, you will
immediately refund to us the full amount of any sales commission (net of
allowances to dealers or brokers) allowed to you on the original sale, and will
promptly, upon receipt thereof, pay to us any refunds from dealers or brokers of
the balance of sales commissions reallowed by you. We shall notify you of such
tender for redemption within ten (10) days of the day on which notice of such
tender for redemption is received by us.
13. OTHER ACTIVITIES. Your services pursuant to this Agreement shall not be
deemed to be exclusive, and you may render similar services and act as an
underwriter, distributor or dealer for other investment companies in the
offering of their shares.
14. TERM OF AGREEMENT. This Agreement shall become effective on the date
first written above or on such later date approved by the Company's Board of
Directors, including a majority of those Directors who are not parties to this
Agreement or interested persons (as such term is defined in the Investment
Company Act of 1940) thereof. 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 in effect from year to year
thereafter for successive one (1) year periods if approved at least annually (i)
by a vote of a majority of the outstanding voting securities of the Funds or by
a vote of the Directors of the Company, and (ii) by a vote of a majority of the
Directors of the Company who are not interested persons or parties to this
Agreement (other than as Directors of the Company), cast in person at a meeting
called for the purpose of voting on this Agreement.
15. TERMINATION. This Agreement: (i) may be terminated at any time without
the payment of any penalty, either by vote of the Directors of the Company or by
a vote of a majority of the outstanding voting securities of each Fund, on sixty
(60) days' written notice to you; (ii) shall terminate immediately in the event
of its assignment; and (iii) may be terminated by you on sixty (60) days'
written notice to us.
16. SUSPENSION OF SALES. We reserve the right at all times to suspend or
limit the public offering of the shares upon written notice to you, and to
reject any order in whole or in part.
17. MISCELLANEOUS. This Agreement shall be subject to the laws of the State
of Maryland and shall be interpreted and construed to further and promote the
operation of the Company as an open-end investment company. As used herein, the
terms "Net Asset Value," "Offering Price," "Investment Company," "Open-End
Investment Company," "Assignment," "Principal Underwriter," "Interested Person,"
"Parents," and "Majority of the Outstanding Voting Securities," shall have the
meanings set forth in the 1933 Act and the 1940 Act, as applicable, and the
rules and regulations promulgated thereunder.
18. LIABILITY. Nothing contained herein shall be deemed to protect you
against any liability to us or to our shareholders to which you would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of your duties hereunder, or by reason of your reckless
disregard of your obligations and duties hereunder.
If the foregoing meets with your approval, please acknowledge your
acceptance by signing each of the enclosed counterparts hereof and returning
such counterparts to us, whereupon this shall constitute a binding agreement as
of the date first above written.
Very truly yours,
PILGRIM INVESTMENT FUNDS, INC.
(on behalf of its Pilgrim MagnaCap Fund series
and Pilgrim High Yield Fund series)
Agreed to and Accepted:
PILGRIM SECURITIES, INC.
to the Underwriting Agreement
UNDERWRITING AGREEMENT ALLOCATION PROCEDURES
CDSCs and Distribution Fees related to Shares of each separate series of
Pilgrim Investment Funds, Inc. (each a "Fund") shall be allocated by such Fund
among Pilgrim Securities, Inc. ("PSI") and any replacement principal underwriter
for Shares of such Fund (the "Successor Distributor") in accordance with this
Defined terms used in this Schedule A and not otherwise defined herein
shall have the meaning assigned to them in the Underwriting Agreement for Shares
of each Fund to which this Schedule A is attached. As used herein the following
terms shall have the meanings indicated.
"COMMISSION SHARE" means, in respect of any Fund, each Share of such Fund
which is issued under circumstances which would normally give rise to an
obligation of the holder of such Share to pay a CDSC upon redemption of such
Share (including, without limitation, any Share of such Fund issued in
connection with a Free Exchange) and any such Share shall continue to be a
Commission Share of such Fund prior to the redemption (including a redemption in
connection with a Free Exchange) or conversion of such Share, even though the
obligation to pay the CDSC may have expired or conditions for waivers thereof
"DATE OF ORIGINAL ISSUANCE" means in respect of any Commission Share, the
date with reference to which the amount of the CDSC payable on redemption
thereof, if any, is computed.
"FREE EXCHANGE" means an exchange of a Commission Share of one Fund for a
Commission Share of another Fund under circumstances where the CDSC which would
have been payable in respect of a redemption of the exchanged Commission Share
on the date of such exchange is waived and the Commission Share issued in such
exchange is treated as a continuation of the investment in the Commission Share
exchanged for purposes of determining the CDSC payable if such Commission Share
issued in the exchange is thereafter redeemed.
"FREE SHARE" means, in respect of any Fund, each Share of such Fund, other
than a Commission Share, including, without limitation, any Share issued in
connection with the reinvestment of dividends or capital gains.
"INCEPTION DATE" means, in respect of any Fund, the first date on which
such Fund issued Shares.
"NET ASSET VALUE" means, (i) with respect to any Fund, as of the date any
determination thereof is made, the net asset value of such Fund computed in the
manner such value is required to be computed by such Fund in its reports to its
shareholders, and (ii) with respect to any Share of such Fund as of any date,
the quotient obtained by dividing: (A) the net asset value of such Fund (as
computed in accordance with clause (i) above) allocated to Shares of such Fund
(in accordance with the constituent documents for such Fund) as of such date, by
(B) the number of Shares of such Fund outstanding on such date.
"OMNIBUS SHARE" means, in respect of the Fund, a Commission Share or Free
Share sold by one of the Selling Agents listed on Exhibit I. If, subsequent to
closing of the Program, PSI and its Transferees reasonably determine that the
Transfer Agent is able to track all Commission Shares and Free Shares sold by
any of the Selling Agents listed on Exhibit I (taking into account all
information provided to the Transfer Agent by such Selling Agent on a schedule
sufficient to enable the Transfer Agent to Complete all required reports
involving such information in a timely manner), in the same manner as Commission
Shares and Free Shares are currently tracked in respect of Selling Agents not
listed on Exhibit I, then Exhibit I shall be amended to delete such Selling
Agent from Exhibit I so that Commission Shares and Free Shares sold by such
Selling Agent will no longer be treated as Omnibus Shares.
"SHARE" means, in respect of any Fund, each Class B share of such Fund.
PART I: ATTRIBUTION OF SHARES
Shares of each Fund, which are outstanding from time to time, shall be
attributed to PSI and any Successor Distributor in accordance with the following
(1) COMMISSION SHARES OTHER THAN OMNIBUS SHARES:
(a) Commission Shares which are not Omnibus Shares attributed to PSI shall
be Commission Shares which are not Omnibus Shares the Date of Original Issuance
of which occurred on or after the Inception Date of such Fund and on or prior to
the last day on which PSI acts as principal underwriter of Shares for such Fund.
(b) Commission Shares which are not Omnibus Shares attributable to the
Successor Distributor shall be Commission Shares which are not Omnibus Shares,
the Date of Original Issuance of which occurs on or after the first day on which
such Successor Distributor acts as principal underwriter of Shares for such Fund
and on or prior to the last day such Successor for Distributor acts as principal
underwriter of Shares for such Fund.
(c) A Commission Share which are not Omnibus Shares of a particular Fund
(the "ISSUING Fund") issued in consideration of the investment of proceeds of
the redemption of a Commission Share which are not Omnibus Shares of another
Fund (the "REDEEMING FUND") in connection with a Free Exchange, is deemed to
have a Date of Original Issuance identical to the Date of Original Issuance of
the Commission Share of the Redeeming Fund and any such Commission Share will be
attributed to PSI or the Successor Distributor based upon such Date of Original
Issuance in accordance with Part I(a) and (b) above.
(d) A Commission Share which are not Omnibus Shares redeemed (other than in
connection with a Free Exchange) or converted to a Class A share is attributable
to PSI or Successor Distributor based upon the Date of Original Issuance in
accordance with Part I(a), (b) and (c) above.
(2) FREE SHARES OTHER THAN OMNIBUS SHARES:
Free Shares which are not Omnibus Shares which are not Omnibus Shares of a
Fund outstanding on any date shall be attributed to PSI or Successor
Distributor, as the case may be, in the same proportion that the Commission
Shares of such Fund outstanding on such date are attributed to it on such date;
PROVIDED that if PSI reasonably determines that the Transfer Agent or the
Selling Agent is able to produce monthly reports which track the Date of
Original Issuance for the Commission Shares related to such Free Shares, then
the Free Shares shall be allocated pursuant to clause 1(a), (b) and (c) above.
(3) OMNIBUS SHARES:
Omnibus Shares of the Fund outstanding on any date shall be attributed to
PSI or a Successor Distributor, as the case may be, in the same proportion that
the Commission Shares which are not Omnibus Shares of the Fund outstanding on
such date are attributed to it on such date; PROVIDED that if PSI and its
transferees reasonably determine that the Transfer Agent is able to produce
monthly reports which track the Date of Original Issuance for the Omnibus
Shares, then the Omnibus Shares shall be allocated pursuant to clause 1(a), (b)
and (c) above.
PART II: ALLOCATION OF CDSCS
(1) CDSCS RELATED TO THE REDEMPTION OF COMMISSION SHARES OTHER THAN OMNIBUS
CDSCs in respect of the redemption of Commission Shares which are not
Omnibus Shares shall be allocated to PSI or Successor Distributor depending upon
whether the related redeemed Commission Share is attributable to PSI or
Successor Distributor, as the case may be, in accordance with Part I above.
(2) CDSCS RELATED TO THE REDEMPTION OF OMNIBUS SHARES:
CDSCs in respect of the redemption of Omnibus Shares shall be allocated to
PSI or a Successor Distributor in the same proportion that CDSCs related to the
redemption of Commission Shares are allocated to each thereof; PROVIDED, that if
PSI and its transferees reasonably determine that the Transfer Agent is able to
produce monthly reports which track the Date of Original Issuance for the
Omnibus Shares, then the CDSCs in respect of the redemption of Omnibus Shares
shall be allocated among PSI and any Successor Distributors depending on whether
the related redeemed Omnibus Share is attributable to PSI or a Successor
Distributor, as the case may be, in accordance with Part I above.
PART III: ALLOCATION OF DISTRIBUTION FEES
Assuming that the Distribution Fee remains constant over time and among
Funds so that Part IV hereof does not become operative:
(1) The portion of the aggregate Distribution Fees accrued in respect of
all Shares of all Funds during any calendar month allocable to PSI or a
Successor Distributor is determined by multiplying the total of such
Distribution Fees by the following fraction:
(A + C) /2
(B + D) /2
where: A = The aggregate net Asset Value of all Shares of all Funds attributed
to PSI or such Successor Distributor, as the case may be,
and outstanding at the beginning of such calendar month
B = the aggregate Net Asset Value of all Shares of all Funds at the
beginning of such calendar month
C = The aggregate Net Asset Value of all Shares of all Funds
attributed to PSI or such Successor Distributor, as the case may
be, and outstanding at the end of such calendar month
D = The aggregate Net Asset Value of all Shares of all Funds at the
end of such calendar month
(2) If PSI reasonably determines that the Fund or its transfer agent is
able to produce automated monthly reports which allocate the average Net Asset
Value of the Commission Shares (or all Shares if available) of all Funds among
PSI and each Successor Distributor in a manner consistent with the methodology
detailed in Part I and Part III(1) above, the portion of the Distribution Fees
accrued in respect of all such Shares of all Funds during a particular calendar
month will be allocated to PSI or each Successor Distributor by multiplying the
total of such Distribution Fees by the following fraction:
where: A = Average Net Asset Value of all such Shares of all Funds for
such calendar month attributed to PSI or such Successor
Distributor, as the case may be
B = Total average Net Asset Value of all such Shares of all Funds
for such calendar month
PART IV: ADJUSTMENT OF PSI'S SHARE AND SUCCESSOR DISTRIBUTORS' SHARES
If the terms of any Underwriting Agreement, any Plan, any Prospectus, the
Conduct Rules or any other applicable law change the rate at which Distribution
Fees or Service Fees are computed with reference to the Net Asset Value of
Shares of any Fund, these allocation procedures must be revised in light of such
changes in a manner which carries out the intent of these allocation procedures.