EX-99.77.B

                                                                   Exhibit 77(b)

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Pilgrim Advisory Funds, Inc.


In planning and performing our audit of the financial statements of Pilgrim
Asia-Pacific Equity Fund, the sole fund comprising Pilgrim Advisory Funds, Inc.
(the "Fund") for the year ended October 31, 2001, we considered its internal
control, including control activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of expressing our opinion on
the financial statements and to comply with the requirements of Form N-SAR, not
to provide assurance on internal control.

The management of the Fund is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls. Generally, controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements for external purposes that
are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.

Because of inherent limitations in internal control, errors or fraud may occur
and not be detected. Also, projection of any evaluation of internal control to
future periods is subject to the risk that controls may become inadequate
because of changes in conditions or that the effectiveness of their design and
operation may deteriorate.

Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or more
of the internal control components does not reduce to a relatively low level the
risk that misstatements caused by error or fraud in amounts that would be
material in relation to the financial statements being audited may occur and not
be detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted no matters involving
internal control and its operation, including controls for safeguarding
securities, that we consider to be material weaknesses as defined above as of
October 31, 2001.

This report is intended solely for the information and use of the Board of
Directors, management and the Securities and Exchange Commission and is not
intended to be and should not be used by anyone other than these specified
parties.


Denver, Colorado
December 14, 2001

EX-99.77.I

                                                                   Exhibit 77(i)

TERMS OF NEW OR AMENDED SECURITIES

On May 9, 2001, the Board of Directors of the Registrant approved the issuance
of new classes of securities designated "Class C" and "Class Q," respectively.
Class C and Q Shares (1) will be sold at the then-current net asset value with
the imposition of a front-end sales charge as described in the Fund's
then-current prospectus(es); (2) are subject to a fee for distribution or
service activities at 1.00% and 0.25% of the average daily net assets of the
shares of Class C and Q, respectively; and (3) will be subject to a contingent
deferred sales charge in such amount as is described in the Fund's then-current
prospectus(es).

Class C and Q Shares will be identical to all other Classes of the Fund in all
respects except for Class designation, allocation of certain expenses
attributable to Class C and Q Shares, respectively, and voting rights. Class C
and Q Shares shareholders will vote separately with respect to issues affecting
only Class C and Q, respectively. Class C and Q Shares will represent interests
in the same investment fund as all other Classes and, therefore, be subject to
the same investment objectives, policies and limitations as all other Classes of
the Fund.

Further description of Class C and Q Shares appears in the Registrant's Amended
and Restated Rule 18f-3 Plan, attached hereto.

EX-99.77.Q.1

                                                                Exhibit 77(q)(1)

EXHIBITS

(a) Form of Articles Supplementary to the Registrant's Articles of Incorporation
is attached hereto.

(d) Form of Amended and Restated Multiple Class Plan pursuant to Rule 18f-3 of
the Investment Company Act of 1940, as amended, is attached hereto.

EX-99.77.Q.1.A

                                                             Exhibit 77(q)(1)(a)

                             ARTICLES SUPPLEMENTARY

                          PILGRIM ADVISORY FUNDS, INC.


     Pilgrim Advisory Funds, Inc., a Maryland corporation (hereinafter called
the "Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:

     FIRST: The Corporation is authorized to issue one billion (1,000,000,000)
shares of Common Stock, $0.01 par value per share, with an aggregate par value
of ten million dollars ($10,000,000), which have been previously classified as
follows: one hundred twenty-six million (126,000,000) shares of authorized but
unissued Pilgrim MidCap Value Fund series Common Stock, twenty-eight million
(28,000,000) of which are allocated as Pilgrim MidCap Value Fund series Class A
Common Stock, twenty-eight million (28,000,000) of which are allocated as
Pilgrim MidCap Value Fund series Class B Common Stock, twenty-eight million
(28,000,000) of which are allocated as Pilgrim MidCap Value Fund series Class C
Common Stock, fourteen million (14,000,000) of which are allocated as Pilgrim
MidCap Value Fund series Class M Common Stock and twenty-eight million
(28,000,000) of which are allocated as Pilgrim MidCap Value Fund series Class Q
Common Stock; one hundred twenty-six million (126,000,000) shares of authorized
but unissued Pilgrim LargeCap Leaders Fund series Common Stock, twenty-eight
million (28,000,000) of which are allocated as Pilgrim LargeCap Leaders Fund
series Class A Common Stock, twenty-eight million (28,000,000) of which are
allocated as Pilgrim LargeCap Leaders Fund series Class B Common Stock,
twenty-eight million (28,000,000) of which are allocated as Pilgrim LargeCap
Leaders Fund series Class C Common Stock, fourteen million (14,000,000) of which
are allocated as Pilgrim LargeCap Leaders Fund series Class M Common Stock and
twenty-eight million (28,000,000) of which are allocated as Pilgrim LargeCap
Leaders Fund series Class Q Common Stock; sixty million (60,000,000) shares of
authorized but unissued Pilgrim Asia-Pacific Equity Fund series Common Stock,
twenty-four million (24,000,000) of which are allocated as Pilgrim Asia-Pacific
Equity Fund series Class A Common Stock, twenty-four million (24,000,000) of
which are allocated as Pilgrim Asia-Pacific Equity Fund series Class B Common
Stock, and twelve million (12,000,000) of which are allocated as Pilgrim
Asia-Pacific Equity Fund series Class M Common Stock; seventy million
(70,000,000) shares of authorized but unissued Pilgrim Strategic Income Fund
series Common Stock, thirty-five million (35,000,000) shares of which are
allocated as Pilgrim Strategic Income Fund series Class A Common Stock, and
thirty-five million (35,000,000) shares of which are allocated as Pilgrim
Strategic Income Fund series Class B Common Stock; and six hundred eighteen
million (618,000,000) shares of Common Stock without further classification or
designation. These Articles Supplementary do not increase the total authorized
capital stock of the Corporation or the aggregate par value thereof.

     SECOND: The Board of Directors hereby classifies and designates forty-eight
million (48,000,000) shares of Common Stock previously unclassified as follows:
twenty-four million (24,000,000) shares of Common Stock as authorized but
unissued Pilgrim Asia-Pacific Equity Fund series Class C Common Stock and

twenty-four million (24,000,000) shares of Common Stock as authorized but
unissued Pilgrim Asia-Pacific Equity Fund series Class Q Common Stock. The Board
of Directors hereby reclassifies and redesignates one hundred twenty-six million
(126,000,000) shares of authorized but unissued Pilgrim MidCap Value Fund series
Common Stock as unclassified Common Stock. The Board of Directors hereby
reclassifies and redesignates one hundred twenty-six million (126,000,000)
shares of authorized but unissued Pilgrim LargeCap Leaders Fund series Common
Stock as unclassified Common Stock.

     THIRD: The shares of Pilgrim Asia-Pacific Equity Fund Class C Common Stock
and Pilgrim Asia-Pacific Equity Fund Class Q Common Stock classified hereby
shall have the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as currently set forth in Article FIFTH of the charter
of the Corporation and those set forth as follows:

          (a) At such times as may be determined by the Board of Directors (or
with the authorization of the Board of Directors, the officers of the
Corporation) in accordance with the Investment Company Act of 1940, as amended,
and applicable rules and regulations of the National Association of Securities
Dealers, Inc. and reflected in the registration statement of the respective
Fund, current as of the time such shares are issued, shares of Pilgrim
Asia-Pacific Equity Fund Class C and Pilgrim Asia-Pacific Equity Fund Class Q
Common Stock of such Fund may be automatically converted into shares of another
class of capital stock of the respective Fund based on the relative net asset
value of such classes at the time of conversion, subject, however, to any
conditions of conversion that may be imposed by the Board of Directors (or with
the authorization of the Board of Directors, the officers of the Corporation)
and reflected in such current registration statement relating to the respective
Fund as aforesaid.

     FOURTH: The Board of Directors of the Corporation has classified and
designated the shares described above pursuant to authority contained in the
Corporation's charter.

     The undersigned Executive Vice President of the Corporation acknowledges
these Articles Supplementary to be the corporate act of the Corporation and
states that to the best of his knowledge, information and belief, the matters
and facts set forth in these Articles with respect to authorization and approval
are true in all material respects and that this statement is made under
penalties of perjury.

     IN WITNESS WHEREOF, Pilgrim Advisory Funds, Inc. has caused these Articles
Supplementary to be signed and filed in its name and on its behalf by its Senior
Vice President, and witnessed by its Secretary on ________.


                                        PILGRIM ADVISORY FUNDS, INC.



                                        By:
                                           -------------------------------------
                                           Michael J. Roland
                                           Senior Vice President


ATTEST:


- -------------------------------------
Kimberly A. Anderson
Vice President & Secretary

EX-99.77.Q.1.D

                                                             Exhibit 77(q)(1)(d)

                              AMENDED AND RESTATED
                   MULTIPLE CLASS PLAN PURSUANT TO RULE 18F-3

                                       FOR

                          PILGRIM ADVISORY FUNDS, INC.

                        PILGRIM ASIA-PACIFIC EQUITY FUND


     WHEREAS, Pilgrim Advisory Funds, Inc. (the "Company") engages in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act");

     WHEREAS, shares of common stock of the Company currently consist of one
series the Pilgrim Asia-Pacific Equity Fund (the "Fund");

     WHEREAS, the Company has adopted, on behalf of the Fund, a Multiple Class
Plan pursuant to Rule 18f-3 under the Act (the "Plan") with respect to the Fund;
and

     WHEREAS, the Company desires to amend the Plan to add new classes of
shares, Class C and Class Q, to the Pilgrim Asia-Pacific Equity Fund; and

     WHEREAS, pursuant to an Underwriting Agreement dated September 1, 2000, the
Company on behalf of each Fund employs ING Pilgrim Securities, Inc. ("PSI") as
distributor of the securities of which it is the issuer.

     NOW, THEREFORE, the Company hereby adopts, on behalf of the Funds, the
Plan, in accordance with Rule 18f-3 under the Act on the following terms and
conditions:

     1.  FEATURES OF THE CLASSES.  The Fund issues its shares of common stock in
five classes:  "Class A Shares,"  "Class B Shares,"  "Class C Shares,"  "Class M
Shares" and "Class Q Shares."  Shares of each class of the Fund shall  represent
an equal pro rata  interest  in the Fund and,  generally,  shall have  identical
voting,  dividend,   liquidation,   and  other  rights,   preferences,   powers,
restrictions, limitations, qualifications and terms and conditions, except that:
(a) each class  shall  have a  different  designation;  (b) each class of shares
shall bear any Class Expenses, as defined in Section 5 below; and (c) each class
shall have exclusive voting rights on any matter submitted to shareholders  that
relates  solely  to its  distribution  arrangement  and each  class  shall  have
separate  voting  rights on any matter  submitted to  shareholders  in which the
interests  of one  class  differ  from the  interests  of any  other  class.  In
addition,  Class A, Class B, Class C, Class M and Class Q shares  shall have the
features described in Sections 2, 5 and 6 below.

     2. SALES CHARGE STRUCTURE.

          (a) Class A Shares. Class A shares of the Fund shall be offered at the
then-current net asset value plus a front-end sales charge. The front-end sales
charge shall be in such amount as is disclosed in the Fund's current prospectus
or prospectus supplement and shall be subject to reductions for larger purchases
and such waivers or reductions as are determined or approved by the Board of
Directors. There is no initial front-end sales charge on purchases of an amount
as disclosed in the prospectus. Class A shares generally shall not be subject to
a contingent deferred sales charge provided, however, that such a charge may be
imposed when shares are redeemed within one or two years of purchase and/or in
such other cases as is disclosed in the Fund's current prospectus or supplement
thereto subject to the supervision of the Board of Directors.

          (b) Class B Shares. Class B shares of the Fund shall be offered at the
then-current net asset value without the imposition of a front-end sales charge.
A contingent deferred sales charge in such amount as is described in a Fund's
current prospectus or prospectus supplement shall be imposed on Class B shares,
subject to such waivers or reductions as are described in the Fund's prospectus
or supplement thereto, subject to the supervision of the Fund's Board of
Directors.

          (c) Class C Shares. Class C shares of the Fund shall be offered at the
then-current net asset value without the imposition of a front-end sales charge.
A contingent deferred sales charge in such amount as is described in the Fund's
current prospectus or prospectus supplement shall be imposed on Class C shares,
subject to such waivers or reductions as are described in the Fund's prospectus
or supplement thereto, subject to the supervision of the Fund's Board of
Directors.

          (d) Class M Shares. Class M shares of the Fund shall be offered at the
then-current net asset value plus a front-end sales charge that is lower than
the sales charge applicable to Class A. The front-end sales charge shall be in
such amount as is disclosed in a Fund's current prospectus or prospectus
supplement and shall be subject to reductions for larger purchases and such
waivers or reductions as are described in the Fund's prospectus or supplement
thereto, subject to the supervision of the Fund's Board of Directors. Orders for
Class M shares in excess of an amount as disclosed in the prospectus will be
accepted as an order for Class A shares or declined.

          (e) Class Q Shares. Class Q shares of a Fund shall be offered at the
then-current net asset value without the imposition of a front-end sales charge.
Class Q shares shall not be subject to a contingent deferred sales charge.

                                      -2-

         3. SERVICE AND DISTRIBUTION PLANS. Each class of shares of each Fund
has adopted a Rule 12b-1 plan (except that plans have not been adopted with
respect to Class C shares and Class Q shares of Pilgrim MidCap Value Fund and
Pilgrim LargeCap Leaders Fund) each with the following terms:

                  (a) CLASS A SHARES. Class A shares of each Fund may pay PSI
monthly a fee at an annual rate of 0.35% of the average daily net assets of the
Fund's Class A shares for distribution or service activities (each as defined in
paragraph (f), below), as designated by PSI. PSI, on behalf of Class A shares of
each Fund, may pay Authorized Dealers quarterly a fee at the annual rate of
0.25% of the average daily net assets of the Fund's Class A shares for
distribution and service activities (as defined in paragraph (f), below)
rendered to Class A Shareholders.

                  (b) CLASS B SHARES. Class B shares of each Fund may pay PSI
monthly a fee at the annual rate of 1.00% of the average daily net assets of the
Fund's Class B shares for distribution or service activities (as defined in
paragraph (f), below), as designated by PSI. PSI, on behalf of Class B shares of
each Fund, may pay Authorized Dealers quarterly a fee at the annual rate of
0.25% of the average daily net assets of the Fund's Class B shares for
distribution and service activities (as defined in paragraph (f), below)
rendered to Class B shareholders.

                  (c) CLASS C SHARES. Class C shares of each Fund may pay
Distributor monthly a fee at the annual rate of 1.00% of the average daily net
assets of the Fund's Class C shares for distribution or service activities (as
defined in paragraph (f), below), as designated by Distributor. Distributor, on
behalf of Class C shares of each Fund, may pay Authorized Dealers quarterly a
fee at the annual rate of 0.25% of the average daily net assets of the Fund's
Class C shares for distribution and service activities (as defined in paragraph
(f), below) rendered to Class C shareholders.

                  (d) CLASS M SHARES. Class M shares of each Fund may pay PSI
monthly a fee at the annual rate of 1.00% of the average daily net assets of the
Fund's Class M shares for distribution or service activities (as defined in
paragraph (f), below) as designated by PSI. PSI, on behalf of Class M shares,
may pay Authorized Dealers quarterly a fee at the annual rate of 0.65% of the
average daily net assets of the Fund's Class M shares for distribution and
service activities (as defined in paragraph (f), below) rendered to Class M
shareholders.

                  (e) CLASS Q SHARES. Class Q shares of each Fund may pay
Distributor monthly a fee at the annual rate of 0.25% of the average daily net
assets of the Fund's Class Q shares for service activities (as defined in
paragraph (f)(ii), below) as designated by Distributor. Distributor, on behalf
of Class Q shares, may pay Authorized Dealers quarterly a fee at the annual rate
of 0.25% of the average daily net assets of the Fund's Class Q shares for
service activities (as defined in paragraph (f)(ii), below) rendered to Class Q
shareholders.

          (f) DISTRIBUTION AND SERVICE ACTIVITIES.

                                      -3-

               (i) As used herein, the term "distribution services" shall
include services rendered by PSI as distributor of the shares of a Fund in
connection with any activities or expenses primarily intended to result in the
sale of shares of a Fund, including, but not limited to, compensation to
registered representatives or other employees of PSI to other broker-dealers
that have entered into an Authorized Dealer Agreement with PSI, compensation to
and expenses of employees of PSI who engage in or support distribution of the
Funds' shares; telephone expenses; interest expense; printing of prospectuses
and reports for other than existing shareholders; preparation, printing and
distribution of sales literature and advertising materials; and profit and
overhead on the foregoing.

               (ii) As used herein, the term "service activities" shall mean
activities in connection with the provision of personal, continuing services to
investors in each Fund, excluding transfer agent and subtransfer agent services
for beneficial owners of shares of a Fund, aggregating and processing purchase
and redemption orders, providing beneficial owners with account statements,
processing dividend payments, providing subaccounting services for Fund shares
held beneficially, forwarding shareholder communications to beneficial owners
and receiving, tabulating and transmitting proxies executed by beneficial
owners; provided, however, that if the National Association of Securities
Dealers Inc. ("NASD") adopts a definition of "service fee" for purposes of
Section 26(d) of the Rules of Fair Practice of the NASD that differs from the
definition of "service activities" hereunder, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service
activities" in this Paragraph shall be automatically amended, without further
action of the Board of Directors, to conform to such NASD definition. Overhead
and other expenses of PSI related to its "service activities," including
telephone and other communications expenses, may be included in the information
regarding amounts expended for such activities.

     4. COMPLIANCE STANDARDS. Company desires that investors in the Funds select
the Fund that best suits his or her investment objective, and also the sales
financing method that best suits his or her particular financial situation. In
this connection, PSI has established standards which govern sales of shares of
the Funds in order to assist investors in making investment decisions and to
help ensure proper supervision of purchase recommendations. PSI is requested to
share these standards with authorized dealers wherever possible and practicable.

     5. ALLOCATION OF INCOME AND EXPENSES. (a) The gross income of each Fund
shall, generally, be allocated to each class on the basis of net assets. To the
extent practicable, certain expenses (other than Class Expenses as defined below
which shall be allocated more specifically) shall be subtracted from the gross
income on the basis of the net assets of each class of the Fund. These expenses
include:

          (1) Expenses incurred by the Company (for example, fees of Directors,
auditors and legal counsel) not attributable to a particular Fund or to a
particular class of shares of a Fund ("Corporate Level Expenses"); and

                                      -4-

          (2) Expenses incurred by a Fund not attributable to any particular
class of the Fund's shares (for example, advisory fees, custodial fees, or other
expenses relating to the management of the Fund's assets) ("Fund Expenses").

     (b) Expenses attributable to a particular class ("Class Expenses") shall be
limited to: (i) payments made pursuant to a 12b-1 plan; (ii) transfer agent fees
attributable to a specific class; (iii) printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders of a specific class; (iv) Blue Sky
registration fees incurred by a class; (v) SEC registration fees incurred by a
class; (vi) the expense of administrative personnel and services to support the
shareholders of a specific class; (vii) litigation or other legal expenses
relating solely to one class; and (viii) directors' fees incurred as a result of
issues relating to one class. Expenses in category (i) above must be allocated
to the class for which such expenses are incurred. All other "Class Expenses"
listed in categories (ii)-(viii) above may be allocated to a class but only if
the President and Chief Financial Officer have determined, subject to Board
approval or ratification, which of such categories of expenses will be treated
as Class Expenses, consistent with applicable legal principles under the Act and
the Internal Revenue Code of 1986, as amended.

     Therefore, expenses of a Fund shall be apportioned to each class of shares
depending on the nature of the expense item. Corporate Level Expenses and Fund
Expenses will be allocated among the classes of shares based on their relative
net asset values. Approved Class Expenses shall be allocated to the particular
class to which they are attributable. In addition, certain expenses may be
allocated differently if their method of imposition changes. Thus, if a Class
Expense can no longer be attributed to a class, it shall be charged to a Fund
for allocation among classes, as determined by the Board of Directors. Any
additional Class Expenses not specifically identified above which are
subsequently identified and determined to be properly allocated to one class of
shares shall not be so allocated until approved by the Board of Directors of the
Company in light of the requirements of the Act and the Internal Revenue Code of
1986, as amended.

     6. EXCHANGE PRIVILEGES. Shares of one class of the Fund may be exchanged
for shares of that same class of any other Pilgrim Fund without payment of any
additional front-end sales charge, except as provided below, and except that an
contingent deferred sales charge ("CDSC") that was applicable to the original
Pilgrim Fund being held by the shareholder shall continue to apply to the
investment in the Pilgrim Fund into which the shareholder has exchanged. If a
shareholder exchanges into Pilgrim Senior Income Fund and subsequently offers
his common shares for repurchase by that Fund, the CDSC will apply from the
original Pilgrim Fund from which he or she exchanged. A sales charge, equal to
the excess, if any, of the sales charge rate applicable to the shares being
acquired over the sales charge rate previously paid, may be assessed on
exchanges from the Fund. If a shareholder exchanges and subsequently redeems his
or her shares, any applicable CDSC will be based on the full period of the share
ownership.

     7. CONVERSION FEATURES. A shareholder's Class B shares will automatically
convert to Class A shares in the Fund on the first business day of the month in
which the eighth anniversary of the issuance of the Class B shares occurs,

                                      -5-

together with a pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares. The conversion of
Class B shares into Class A shares is subject to the continuing application of
an Internal Revenue Service ruling to the effect that (1) such conversion will
not constitute taxable events for federal tax purposes; and (2) the payment of
different dividends on Class A and Class B shares does not result in the Fund's
dividends or distributions constituting "preferential dividends" under the
Internal Revenue Code of 1986. The Class B shares so converted will no longer be
subject to the higher expenses borne by Class B shares. The conversion will be
effected at the relative net asset values per share of the two Classes.

     8. QUARTERLY AND ANNUAL REPORTS. The Directors shall receive quarterly and
annual statements concerning all allocated Class Expenses and distribution and
servicing expenditures complying with paragraph (b)(3)(ii) of Rule 12b-1, as it
may be amended from time to time. In the statements, only expenditures properly
attributable to the sale or servicing of a particular class of shares will be
used to justify any distribution or servicing fee or other expenses charged to
that class. Expenditures not related to the sale or servicing of a particular
class shall not be presented to the Directors to justify any fee attributable to
that class. The statements, including the allocations upon which they are based,
shall be subject to the review and approval of the independent Directors in the
exercise of their fiduciary duties.

     9. ACCOUNTING METHODOLOGY. (a) The following procedures shall be
implemented in order to meet the objective of properly allocating income and
expenses among the Funds:

          (1) On a daily basis, a fund accountant shall calculate the Plan Fee
to be charged to each 12b-1 class of shares by calculating the average daily net
asset value of such shares outstanding and applying the applicable fee rate of
the respective class to the result of that calculation.

          (2) The fund accountant will allocate designated Class Expenses, if
any, to the respective classes.

          (3) The fund accountant shall allocate income and Corporate Level and
Fund Expenses among the respective classes of shares based on the net asset
value of each class in relation to the net asset value of the Fund for Fund
Expenses, and in relation to the net asset value of the Company for Corporate
Level Expenses. These calculations shall be based on net asset values at the
beginning of the day.

          (4) The fund accountant shall then complete a worksheet, developed for
purposes of complying with this Section of this Plan, using the allocated income
and expense calculations from Paragraph (3) above, and the additional fees
calculated from Paragraphs (1) and (2) above.

                                      -6-

          (5) The fund accountant shall develop and use appropriate internal
control procedures to assure the accuracy of its calculations and appropriate
allocation of income and expenses in accordance with this Plan.

     10. WAIVER OR REIMBURSEMENT OF EXPENSES. Expenses may be waived or
reimbursed by any adviser to the Company, by the Company's underwriter or any
other provider of services to the Company without the prior approval of the
Company's Board of Directors.

     11. EFFECTIVENESS OF PLAN. This Plan shall not take effect until it has
been approved by votes of a majority of both (a) the Directors of the Company
and (b) those Directors of the Company who are not "interested persons" of the
Company (as defined in the Act) and who have no direct or indirect financial
interest in the operation of this Plan, cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan.

     12. MATERIAL MODIFICATIONS. This Plan may not be amended to modify
materially its terms unless such amendment is approved in the manner provided
for initial approval in paragraph 11 hereof.

     13. LIMITATION OF LIABILITY. The Directors of the Company and the
shareholders of each Fund shall not be liable for any obligations of the Company
or any Fund under this Plan, and PSI or any other person, in asserting any
rights or claims under this Plan, shall look only to the assets and property of
the Company or such Funds in settlement of such right or claim, and not to such
Directors or shareholders.

Date: May 9, 2001

                                      -7-