Exhibit 10.1





                            ASSET PURCHASE AGREEMENT

                                  by and among

                      PILGRIM AMERICA CAPITAL CORPORATION,

                           PILGRIM INVESTMENTS, INC.,

                            PILGRIM SECURITIES, INC.,

                      NICHOLAS-APPLEGATE CAPITAL MANAGEMENT

                                       and

                          NICHOLAS-APPLEGATE SECURITIES






                             Dated January 28, 1999
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                                TABLE OF CONTENTS
                                                                            PAGE

ARTICLE I THE SALE          ..................................................3

          1.1      Sale of Assets.............................................3
          1.2      No Liabilities Assumed.....................................4
          1.3      The Closing................................................5
          1.4      Purchase Price.............................................5
          1.5      Deferred Purchase Price....................................8
          1.6      Material Adverse Effect....................................9
          1.7      Allocation of Purchase Price..............................10
          1.8      Calculation of The Purchase Price.........................10



ARTICLE II


REPRESENTATIONS AND WARRANTIES OF PURCHASER, PILGRIM INVESTMENTS, INC.
AND PILGRIM SECURITIES, INC. ................................................11

          2.1      Organization and Authority................................11
          2.2      Authorization.............................................12
          2.3      Accuracy of Representations and Documents.................13
          2.4      Brokers and Finders.......................................13
          2.5      Litigation and Other Proceedings..........................13
          2.6      Certain Information Provided by Purchaser.................13
          2.7      Registration of PII under the Advisers Act................14
          2.8      Registration of PSI as a Broker-Dealer....................14
          2.9      Code of Ethics............................................14
          2.10    Disqualifications..........................................14
          2.11    Financial Statements.......................................15
          2.12    Absence of Changes.........................................16

ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND DISTRIBUTOR.........16

          3.1      Organization and Authority................................16
          3.2      Authorization.............................................16
          3.3      Title to Assets...........................................17
          3.4      Accuracy of Representations and Documents.................18
          3.5      Certain Information provided by Seller, Distributor and
                   the Trust.................................................18
          3.6      Brokers and Finders.......................................18
          3.7      Contracts.................................................18
          3.8      No Defaults under Contracts or Agreements.................19
          3.9      Additional Representations and Warranties relating to
                   Seller, Distributor and the Trust.........................20
          3.10    Absence of Certain Changes.................................26
          3.11    Insurance..................................................27

                                      -i-
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          3.12    Trust Records; Copies of Documents.........................28

ARTICLE IV CONDUCT OF BUSINESS PRIOR TO THE CLOSING..........................28

          4.1      Conduct Prior to Closing..................................28
          4.2      Redemption of Institutional Assets of Nicholas-Applegate
                   Funds.....................................................30
          4.3      Consents and Approvals....................................31

ARTICLE V COMPLIANCE WITH FEDERAL SECURITIES LAWS............................32

          5.1      Cooperation in Obtaining Necessary Approvals to
                   Consummate Intentions of Parties..........................32
          5.2      Required Fund Actions.....................................35
          5.3      Section 15(f).............................................35

ARTICLE VI ADDITIONAL AGREEMENTS.............................................37

          6.1      Current Information.......................................37
          6.2      Access.  .................................................38
          6.3      Information...............................................39
          6.4      Qualification of the Nicholas-Applegate Funds.............39
          6.5      Press Releases, Etc.......................................40
          6.6      Administrative Fees and Other Expenses of the Nicholas-
                   Applegate Funds...........................................40
          6.7      Rule 12b-1 Fees...........................................41
          6.8      Performance Records of Sub-Advised Series.................43
          6.9      Resale Penalty............................................44
          6.10     Employees.................................................44
          6.11     Road Shows................................................44
          6.12     Transferred Series........................................45


ARTICLE VII CONDITIONS ......................................................45

          7.1      Conditions to Each Party's Obligations to Consummate......45
          7.2      Conditions to Obligation of Purchaser to Consummate.......46
          7.3      Conditions to Obligation of Seller and Distributor to
                   Consummate................................................49

ARTICLE VIII INDEMNIFICATION.................................................51

          8.1      Indemnification...........................................51
          8.2      Claims Procedures.........................................53
          8.3      Indemnification Limits....................................56


ARTICLE IX TERMINATION ......................................................56

          9.1      Termination...............................................56
          9.2      Effect of Termination and Abandonment.....................57

ARTICLE X GENERAL PROVISIONS.................................................57

          10.1    Notices.  .................................................57
          10.2    Counterparts...............................................58

                                      -ii-
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          10.3    Governing Law..............................................59
          10.4    Expenses. 59
          10.5    Waiver, Amendment..........................................59
          10.6    Entire Agreement; No Third-Party Beneficiaries.............60
          10.7    Assignment.................................................60
          10.8    Captions and Gender........................................60
          10.9    Consent to Jurisdiction....................................60
          10.10    Waiver of Jury Trial......................................60

ARTICLE XI
          11.1    Certain Defined Terms......................................60

                                     -iii-
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                         LIST OF EXHIBITS AND SCHEDULES


Schedule A                    -     Sub-Advised Series
Schedule B                    -     Transferred Series
Schedule C                    -     Stand-Alone Series
Schedule 1.4                  -     Example of Purchase Price
Schedule 3.7                  -     Contracts
Schedule 3.9(l)               -     Affiliated Brokerage Transactions
Schedule 3.9(m)               -     Code of Ethics
Schedule 3.11                       Insurance
Schedule 6.6(c)               -     Expense Limits
Schedule 6.7                  -     12b-1 Fees
Schedule 6.10                 -     Non-Competition



Exhibit 5.1(a)(i)             -     Form of New Advisory Agreement
Exhibit 5.1(a)(ii)            -     Form of Sub-Advisory Agreement
Exhibit 5.1(a)(v)             -     Form of Expense Limitation Agreement
Exhibit 5.2(a)                -     Form of Interim Distribution Agreement
Exhibit 5.2(b)                      Form of New Distribution Agreement
Exhibit 7.2(c)                -     Form of Opinion of Counsel to Seller and
                                    Distributor
Exhibit 7.2(d)                -     Form of Opinion of Counsel to Trust and
                                    Nicholas-Applegate Funds
Exhibit 7.3(d)                -     Form of Opinion of Counsel to Purchaser,
                                    PII and PSI

                                      -iv-
<PAGE>
                            ASSET PURCHASE AGREEMENT

         THIS AGREEMENT, made this __ day of January, 1999, by and among Pilgrim
America Capital  Corporation,  a Delaware  corporation  ("Purchaser" or "PACC"),
Pilgrim Investments,  Inc., a Delaware corporation ("PII"),  Pilgrim Securities,
Inc., a Delaware corporation ("PSI"),  Nicholas-Applegate  Capital Management, a
California  limited  partnership  ("Seller"  or "NACM")  and  Nicholas-Applegate
Securities, a California limited partnership (the "Distributor").

                                    RECITALS:

         WHEREAS,  Nicholas-Applegate Small Cap Growth Fund,  Nicholas-Applegate
Mid-Cap   Growth   Fund,    Nicholas-Applegate    Emerging    Countries    Fund,
Nicholas-Applegate Worldwide Growth Fund, Nicholas-Applegate International Small
Cap  Growth   Fund,   Nicholas-Applegate   International   Core   Growth   Fund,
Nicholas-Applegate  High Yield Fund,  Nicholas-Applegate  Large Cap Growth Fund,
Nicholas-Applegate  Convertible Fund, Nicholas-Applegate High Quality Bond Fund,
and  Nicholas-Applegate  Balanced Growth Fund (each a "Series" and collectively,
the  "Nicholas-Applegate  Funds")  are series of the  Nicholas-Applegate  Mutual
Funds,  a business  trust  organized  under the laws of Delaware and  registered
under the Investment  Company Act of 1940, as amended (the  "Investment  Company
Act"), as an open-end management investment company (the "Trust"); and

         WHEREAS,    Seller   serves   as   an   investment   adviser   to   the
Nicholas-Applegate  Funds  pursuant to an investment  advisory  agreement  dated
September 7, 1997, as amended from time to time, between Seller and the Trust on
behalf of each Series (the "Advisory Agreement"); and

         WHEREAS,   Distributor   serves  as   principal   underwriter   to  the
Nicholas-Applegate   Funds   pursuant  to  a  distribution   agreement   between
Distributor and the Trust, on behalf
<PAGE>
of each  Series,  dated  April  19,  1993,  as  amended  from  time to time (the
"Distribution Agreement"); and

         WHEREAS, PII, an indirect subsidiary of Purchaser,  is registered as an
investment  adviser under the  Investment  Advisers Act of 1940, as amended (the
"Investment  Advisers  Act"),  and  serves  as  investment  adviser  to  certain
investment companies registered under the Investment Company Act; and

         WHEREAS,  PSI, an indirect subsidiary of Purchaser,  is registered as a
broker-dealer  under  the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange  Act"),  and serves as  distributor  to certain  investment  companies
registered under the Investment Company Act; and

         WHEREAS, Seller desires, in accordance with the terms and conditions of
this  Agreement,  to sell certain assets as hereinafter  set forth and Purchaser
desires,  in  accordance  with the terms and  conditions of this  Agreement,  to
purchase such assets; and

         WHEREAS, Purchaser and Seller desire that PII act as investment adviser
to the Nicholas-Applegate Funds; and

         WHEREAS,  Purchaser and Seller desire that Seller act as sub-adviser to
certain of the Series of the Nicholas-Applegate Funds as set forth on Schedule A
hereto (the "Sub-Advised Series"); and

         WHEREAS,  Purchaser and Seller desire that the Nicholas-Applegate  High
Yield Fund, as set forth on Schedule B (the "Transferred Series"),  transfer all
of its assets (held immediately  before the transfer) and liabilities to another
investment  company or series thereof for which PII serves as investment adviser
solely in exchange for voting stock of such  acquiring  company or a series (the
"Transfer"); and

         WHEREAS,  Purchaser  and Seller  desire that all Series  other than the
Transferred  Series  and  Sub-Advised  Series  as set forth on  Schedule  C will
receive  all  their  investment  advisory  services  from PII (the  "Stand-Alone
Series"); and

                                      -2-
<PAGE>
         WHEREAS,  Seller and Distributor intend that the Advisory Agreement and
Distribution  Agreement will be terminated on or about the Closing Date (as that
term is defined herein) of this Agreement,  and Purchaser and Seller intend that
on or about the Closing Date (as that term is defined herein) of this Agreement,
PII will,  subject to approval by the Trustees of the Trust and the shareholders
of each Series,  enter into a new advisory agreement relating to each Series and
that PSI will,  subject to approval by the Board of Trustees of the Trust, enter
into a new distribution agreement relating to each Series; and

         WHEREAS,  Purchaser and Seller intend that on or about the Closing Date
(as defined herein) of this Agreement,  Seller will,  subject to approval by the
Trustees of the Trust and the  shareholders of each of the  Sub-Advised  Series,
enter into a sub-advisory agreement with PII relating to each of the Sub-Advised
Series;

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  hereinafter set forth and intending to be legally bound,  the receipt
and  adequacy  of which are hereby  acknowledged,  the parties  hereby  agree as
follows:


                                    ARTICLE I
                                    THE SALE

         1.1 Sale of Assets.  Subject to the terms and  conditions  set forth in
this Agreement, at the closing of the transaction contemplated by this Agreement
(the  "Closing"),  Seller  agrees to sell and  deliver to  Purchaser  all of the
right, title and interest in and to that portion of its business relating to the
management by Seller of the Retail Assets of the Nicholas-Applegate Funds, which
shall include, but shall not be limited to:

         (a) duly  certified  copies of all books and  records  relating  to the
investment  advisory  services  provided  by  Seller  to the  Trust  that are in
Seller's  possession  (including,  but not  limited  to,  all sales  literature,
promotional literature, catalogs and

                                      -3-
<PAGE>
similar  materials,  investment  advisory  materials  and  prospectuses,  annual
reports and any other  information  base  pertaining  to the  Nicholas-Applegate
Funds); and

         (b) duly  certified  copies of all books and  records  relating  to the
distribution  services provided by Distributor to the  Nicholas-Applegate  Funds
with respect to the Retail  Assets that are in Seller's  possession  as the same
may  exist on the  Closing  Date (as  defined  herein)  (collectively  the items
referred to in this Section 1.1, the "Assets").  Such sale and transfer shall be
made  to  Purchaser  free  and  clear  of  any  liens,   charges,   liabilities,
obligations,  claims, licenses, security interests,  encumbrances,  restrictions
and rights of others of any kind  ("Encumbrances")  in  existence  or arising in
connection  with events  occurring  prior to the  Closing  Date,  provided  that
Purchaser  shall have the right to assign any part or all of such Assets to PII,
PSI or any direct or indirect subsidiary of Purchaser.

         1.2 No Liabilities Assumed.  Seller represents,  warrants and covenants
with and to  Purchaser,  PSI,  and PII that  Purchaser,  PSI,  and PII shall not
assume any debts, obligations or liabilities,  direct or indirect, contingent or
otherwise, known or unknown, of any nature whatsoever of Seller or in connection
with  any  of the  Assets  or the  business  of  Seller  or the  management  and
distribution  of the  Nicholas-Applegate  Funds  which  exist or may  arise as a
result of events  occurring or  circumstances in existence prior to the Closing,
except as otherwise  provided in Section 6.7,  Section 7.3(g),  Article VIII and
Section 10.4. Without limiting the generality of the foregoing,  Purchaser,  PSI
and PII shall not be  responsible  for any  business,  occupation,  withholding,
income or similar tax, or any other taxes of any kind, of Seller. Purchaser, PSI
and PII represent,  warrant and covenant with and to Seller and Distributor that
Seller and Distributor  shall not assume any debts,  obligations or liabilities,
direct or indirect,  contingent  or otherwise,  known or unknown,  of any nature
whatsoever  relating to or in connection with the Transfer;  except as otherwise
provided in Section 5.1(c).  Seller represents,  warrants and covenants with and
to  Purchaser,  PSI and PII that  Purchaser,  PSI and PII shall not  assume  any
debts, obligations or liabilities,  direct or indirect, contingent or otherwise,
known or  unknown,  of any nature  whatsoever  in  connection  with the class of
shares designated as

                                      -4-
<PAGE>
"Institutional  Shares" or with the transactions  contemplated by Section 4.2 of
this Agreement.

         1.3      The Closing.

         (a) Subject to and upon the terms and conditions of this Agreement,  at
the Closing (i) Seller shall sell and deliver the Assets to Purchaser, including
such bills of sale,  endorsements,  assignments,  documents of title,  and other
instruments  of transfer  and  conveyance  necessary  to transfer  the Assets to
Purchaser,  free  and  clear  of all  Encumbrances  and  sufficient  to  vest in
Purchaser all right, title and interest of Seller in the Assets;  (ii) Purchaser
shall  deliver to Seller the  Purchase  Price,  as set forth in Section 1.8, and
(iii) the documents to be executed and delivered  pursuant to Article VII hereof
shall be so executed and delivered.

         (b) The  Closing  shall  take place at the  offices of Dechert  Price &
Rhoads,  1775 Eye Street,  NW,  Washington,  DC at 10:00 a.m.,  Eastern time, on
April 30, 1999, or as soon as practicable thereafter on such other date and time
as Purchaser and Seller may agree (the "Closing  Date").  The obligations of the
parties to consummate the  transactions  contemplated by this Agreement shall be
subject  to the  fulfillment  or  waiver of the  other  conditions  set forth in
Article VII hereof.

         1.4      Purchase Price.

         (a) Subject to the terms and conditions of this  Agreement,  as payment
for the Assets,  Purchaser  hereby agrees to pay to Seller a purchase price (the
"Purchase Price"), which shall be calculated as follows:

                  (i)  for  the  Sub-Advised  Series,  200%  of the  Net  Annual
Management Fee (as described below) of each Sub-Advised Series as of the date of
this Agreement (the "Measurement Date"); plus

                                      -5-
<PAGE>
                  (ii) for each  Transferred  Series,  400% of the Gross  Annual
Management  Fee (as  described  below)  of  each  Transferred  Series  as of the
Measurement Date; plus

                  (iii) for each  Stand  Alone  Series,  400% of the Net  Annual
Management Fee of each Stand Alone Series as of the Measurement Date; less

                  (iv) $240,000.

         The "Gross  Annual  Management  Fee" is equal to the product of (1) the
net assets of the pertinent Series as of the close of business on the applicable
date,  and (2) the effective  annual  advisory fee rate payable to Seller by the
Series under the Advisory Agreement. The "Net Annual Management Fee" is equal to
the  product  of (1) the net assets of the  pertinent  Series as of the close of
business on the  applicable  date,  and (2) the  effective  annual  advisory fee
payable  to  Seller  by the  Series  under  the  Advisory  Agreement,  less  the
annualized expense  reimbursements and fee waivers accruing to the Retail Assets
of the related Series for the three months ending December 31, 1998,  calculated
in the manner illustrated on Schedule 1.4.

         (b)  For the  following  transactions  involving  Series'  shares,  the
Purchase Price will be adjusted as follows:

                  (i) for  redemptions of shares,  exchanges out of a Series and
dividends and distributions made to shareholders whether reinvested in shares of
the Series or not, after the  Measurement  Date through the Closing Date,  which
shares existed at the Measurement Date ("Redeemed  Shares"),  the Purchase Price
will be reduced by the portion of the Purchase Price as calculated under Section
1.4(a)(i), (ii), or (iii) allocable to such Redeemed Shares;

                                      -6-
<PAGE>
                  (ii) for  purchases  of shares,  exchanges  into a Series from
another Series and reinvested dividends,  after the Measurement Date through the
Closing  Date,  which shares  remain  outstanding  at Closing  Date  ("Purchased
Shares"), the Purchase Price will be increased by the value attributable to such
shares calculated in accordance with Section 1.4(a)(i), (ii), or (iii) above, as
applicable,  except that the net asset value of the  Purchased  Shares  shall be
based on the actual net asset value paid for such shares  (without regard to any
sales load thereon) on that date such shares were issued ("Purchase  Date"). For
purposes of this Section 1.4(b)(ii)  annualized  expense  reimbursements and fee
waivers  calculated  pursuant to Section 1.4(a) shall be applied pro rata to the
net assets of the Purchased Shares for the Sub-Advised Series.

         (c) For all shares that were  outstanding at the  Measurement  Date and
remain  outstanding at the Closing Date ("Continuing  Shares") and for Purchased
Shares that remain  outstanding  at the Closing Date, the Purchase Price will be
further increased or decreased as follows:

                  (i)  A  hypothetical   purchase  price   attributable  to  the
Continuing  Shares shall be determined as provided in Section  1.4(a)(i),  (ii),
(iii), and (iv) above,  and a hypothetical  adjustment to the purchase price for
the  Purchased  Shares shall be  determined  as provided in Section  1.4(b)(ii),
above,  based on the net asset values of such Continuing and Purchased Shares as
of the dates and times provided in those subsections.

                  (ii)  A  hypothetical   purchase  price  attributable  to  the
Continuing  Shares shall be determined as provided in Section  1.4(a)(i),  (ii),
(iii), and (iv) above, and a

                                      -7-
<PAGE>
hypothetical adjustment for the Purchased Shares shall be determined as provided
in Section  1.4(b)(ii),  above, except that such price shall be based on the net
asset values of such Continuing and Purchased Shares as of the close of business
on the Closing Date.

                  (iii) The Purchase Price will be increased or decreased by 50%
of the amount that the total value calculated in Section  1.4(c)(ii)  exceeds or
is less than, respectively, the total value calculated in Section 1.4(c)(i).

         (d) All  calculations  of the net asset  value of a Series or  Redeemed
Shares,  Purchased  Shares,  and Continuing  Shares shall be based on the shares
outstanding  in the classes of each Series  designated as classes "A," "B," "C,"
and "Advisory Shares" (or "Q")  (collectively,  "Retail Assets"),  and shall not
take  into  account  any  shares   outstanding   in  the  class   designated  as
"Institutional  Shares" (or "I"). An example of the  calculation of the Purchase
Price based upon several assumptions as stated therein is in Schedule 1.4.

         (e) The  Purchase  Price shall be paid in full on the  Closing  Date by
wire transfer of immediately  available  federal funds to an account or accounts
designated by Seller.

         1.5      Deferred Purchase Price.

         With respect to each  Sub-Advised  Series for so long as a Sub-Advisory
Agreement (as defined herein) with Seller is in effect, Purchaser shall also pay
to Seller a deferred  purchase price  ("Deferred  Purchase  Price") in the event
that:

         (a) the Sub-Advisory  Agreement is terminated  (which shall not include
an assignment of a Sub-Advisory Agreement that does not terminate such agreement
pursuant to Rule 2a-6 under the Investment  Company Act) for any reason, so that
neither Seller nor an Affiliate of Seller serves as sub-adviser to a Sub-Advised
Series, or

                                      -8-
<PAGE>
         (b)  upon  the  organization  or the  entering  into  of an  investment
advisory  agreement  by  Purchaser  or  an  Affiliate  respecting  a  registered
investment  company or series thereof with  investment  objective(s),  policies,
restrictions,  and  strategies  that  are  substantially  the same as those of a
Sub-Advised Series and that is intended to be offered in the retail market.

         The Deferred  Purchase Price shall equal 400% of the product of (A) the
effective  annual  sub-advisory fee rate payable to Seller by PII based upon the
net assets  existing at the close of business on the  business  day  immediately
prior to the Effective  Date, as adjusted to take into account any waiver of its
fees by Seller or absorption of the Series'  operating  expenses by Seller as of
the   Effective   Date  (which  shall  be  based  on  the   annualized   expense
reimbursements  and fee waivers  accruing  to the Series for the three  complete
calendar months prior to the Effective Date); and (B) the net asset value of the
Sub-Advised  Series as of the close of the business day immediately prior to the
Effective  Date.  The  Effective  Date shall,  in the case of (a) above,  be the
earlier of the effective date of the termination of the  Sub-Advisory  Agreement
or 60 days after notice of termination of the Sub-Advisory Agreement is received
by any party to that Agreement,  and, in the case of (b) above, be the date that
the newly organized investment company or series thereof commences operations or
the date the Purchaser or its  Affiliate  begins  serving  under the  investment
advisory  agreement  referred to therein.  The Deferred  Purchase Price shall be
paid to Seller in  immediately  available  funds no later than 45 days after the
Effective Date.

         1.6  Material  Adverse  Effect.  When used in this  Agreement  the term
"Material  Adverse Effect" (i) with respect to Seller,  Distributor or the Trust
(a "Seller  Material  Adverse  Effect") shall mean (A) a material adverse effect
(whether  taken  individually  or in the aggregate  with all other such effects)
other than as provided in (C) below,  on the  financial  condition,  business or
results of  operations  as they relate to the Retail  Assets,  of (i) Seller and
Distributor,  taken  as a whole or (ii) the  Nicholas-Applegate  Funds;  (B) any
event,  circumstance or condition  affecting any such entity which would prevent
or materially delay the  consummation of the  transactions  contemplated by this
Agreement;

                                      -9-
<PAGE>
or (C) an adjustment in the Preliminary Purchase Price as calculated pursuant to
Section  1.4(b) and 1.4(c) that would result in a reduction that is greater than
twenty-five  percent (25%) of the Purchase Price calculated  pursuant to Section
1.4(a)  as of the  Measurement  Date;  and (ii) with  respect  to  Purchaser  (a
"Purchaser  Material  Adverse  Effect")  shall mean any event,  circumstance  or
condition  affecting  Purchaser which (A) would prevent or materially  delay the
consummation of the  transactions  contemplated by this Agreement;  (B) an event
that would materially  affect the ability to pay the Purchase Price and Deferred
Purchase Price; or (C) a material adverse effect (whether taken  individually or
in the  aggregate  with all other  such  effects)  on the  financial  condition,
business, or results of operations of (i) Purchaser,  or (ii) PII and PSI, taken
as a whole.

         1.7  Allocation  of Purchase  Price.  The parties  shall  cooperate  in
determining the allocation of the Purchase Price for all purposes (including tax
and  financial  accounting)  amongst the Assets prior to Closing.  The Purchaser
will cooperate (at no additional out of pocket expense to Purchaser) with Seller
to structure  the Deferred  Purchase  Price in a manner that will cause it to be
characterized as capital gain rather than ordinary income for federal income tax
and financial accounting purposes to the extent permissible.

         1.8 Calculation of the Purchase Price.

                  (a) At least two business  days prior to the  Closing,  Seller
shall deliver to Purchaser a reasonably detailed  calculation of the Preliminary
Purchase   Price  (as  defined   below)  based  on  the  Retail  Assets  in  the
Nicholas-Applegate  Funds as of the close of business on a business day not more
than  seven  business  days  prior to the  Closing  (the  "Preliminary  Purchase
Price"). At the Closing, Purchaser shall pay such amount to Seller in accordance
with Section  1.4(e).  Within five business days  following the Closing,  Seller
shall  deliver to  Purchaser a  reasonably  detailed  calculation  of the actual
Purchase Price based on the Retail Assets in the Nicholas-Applegate  Funds as of
the close of business on the business day immediately prior to the Closing Date.
Unless  Purchaser  objects to the  calculation of such actual  Purchase Price in
accordance  with Section  1.8(b),  Purchaser shall pay to Seller or Seller shall
reimburse Purchaser, as appropriate,

                                      -10-
<PAGE>
the difference (without interest) between the Preliminary Purchase Price paid at
Closing  and the  actual  Purchase  Price so  calculated.  Any such  payment  or
reimbursement  shall be paid by wire  transfer of  immediately  available  funds
within  three  business  days of the delivery of the  calculation  of the actual
Purchase Price by Seller to Purchaser.

                  (b) In the event that Purchaser disagrees with the calculation
of the actual Purchase Price provided in accordance with Section 1.8(a) it shall
so notify  Seller in writing  within two  business  days of the  receipt of such
calculation  from Seller.  Following  such  notification  the parties shall work
together in good faith to come to an agreement on the  calculation of the actual
Purchase  Price over the next ten business  days. To the extent that the parties
cannot reach an agreement on the actual  Purchase Price within such time period,
the   parties   agree  to  use  their   collective   best   efforts   to  retain
PricewaterhouseCoopers  LLP for the purpose of conducting an  independent  third
party review of the actual  Purchase Price  determination.  All costs related to
retention of PricewaterhouseCoopers  LLP shall be borne equally by Purchaser and
Seller.

                                   ARTICLE II
                  REPRESENTATIONS AND WARRANTIES OF PURCHASER,
             PILGRIM SECURITIES, INC., AND PILGRIM INVESTMENTS, INC.

         Purchaser,  PSI and PII represent and warrant to Seller and Distributor
as follows:

         2.1 Organization and Authority.

         Each of Purchaser,  PII and PSI are duly organized and in good standing
in the  jurisdiction of its  incorporation,  and have (i) full corporate  power,
right and  authority to enter into and carry out each of its  obligations  under
this Agreement,  to own each of its properties and assets,  and to carry on each
of its business as it is now being and is proposed to be conducted; and (ii) all
necessary governmental authorizations to own or lease each of its properties and
assets and to conduct each of its business.

                                      -11-
<PAGE>
         2.2 Authorization.

         (a) This  Agreement and each  document,  agreement and instrument to be
executed by it pursuant to or as contemplated  by this Agreement,  has been duly
authorized,  executed and  delivered by  Purchaser,  PII and PSI, and no further
proceedings on the part of Purchaser, PII or PSI are necessary to authorize this
Agreement and the  transactions  contemplated  hereby.  This  Agreement and each
document,  agreement and instrument to be executed by Purchaser, PII and PSI (as
the case may be) is the legal valid and binding obligation of Purchaser, PSI and
PII (as the case may be),  enforceable in accordance with its terms,  subject to
bankruptcy,  insolvency,  moratorium,  reorganization  and  other  similar  laws
affecting creditor's rights generally and to general equity principles.

         (b) Neither the execution,  delivery and  performance of this Agreement
and each document,  agreement and instrument to be executed by Purchaser, PII or
PSI (as the case may be) pursuant to or as  contemplated  by this  Agreement nor
the  consummation  by  Purchaser,  PSI or PII of the  transactions  contemplated
hereby and thereby,  will (i) violate,  conflict  with, or result in a breach of
any  provisions  of, or constitute a default (or an event which,  with notice or
lapse of time or both,  would  constitute  a  default)  under,  or result in the
termination of, or accelerate the performance  required by, or result in a right
of termination or acceleration  under,  or the creation of any Encumbrance  upon
any of the properties or assets of Purchaser, PII or PSI under any of the terms,
conditions  or  provisions  of (x) the  organizational  documents  or  Bylaws of
Purchaser, PII or PSI or (y) any note, bond, mortgage, indenture, deed of trust,
license,  lease, agreement or other instrument or obligation to which Purchaser,
PII or PSI may be bound, or to which Purchaser,  PII or PSI or the properties or
assets of  Purchaser,  PII or PSI may be subject,  or (ii) violate any judgment,
ruling, order, writ, injunction,  decree, statute, rule or regulation applicable
to Purchaser, PSI or PII or to any of the properties or assets of Purchaser, PSI
or PII.

         (c) Except as  provided  in Article V, no  material  notice to,  filing
with,  authorization of, exemption by, or consent or approval of, any regulatory
authority is

                                      -12-
<PAGE>
necessary  for the  consummation  by Purchaser,  PII or PSI of the  transactions
contemplated by this Agreement.

         2.3  Accuracy of  Representations  and  Documents.  No  representation,
warranty or certification  made by Purchaser,  PII or PSI or any officer thereof
in this Agreement, schedules (if any) or any certificate provided for under this
Agreement  is false or  misleading  in any  material  respect  or  contains  any
material misstatement of fact.

         2.4 Brokers and Finders. None of Purchaser, PII or PSI nor any of their
officers,  directors or employees  has employed any broker or finder or incurred
any liability for any financial  advisory fees,  brokerage fees,  commissions or
finder's  fees, and no broker or finder has acted,  directly or indirectly,  for
Purchaser,  PII or PSI (or any of its  officers,  directors  or  employees),  in
connection with this Agreement or the transactions contemplated hereby.

         2.5 Litigation and Other  Proceedings.  There is no litigation or legal
(or other) action, suit, proceeding,  investigation or audit, pending, or to the
best  knowledge of Purchaser,  PII and PSI,  threatened at law or in equity,  or
before  any  federal,   state,  municipal  or  other  governmental   department,
commission,  bureau,  board, agency or instrumentality,  domestic or foreign, or
before  any  arbitrator,  by or  against  Purchaser,  PII or PSI or any of their
respective  officers of  directors  relating to their  activities,  or any event
which  would (i) have a Purchaser  Material  Adverse  Effect or (ii)  prevent or
prohibit  PII  or  PSI  from  acting  as  investment  adviser  or  as  principal
underwriter,  respectively,  to  the  Nicholas-Applegate  Funds.  There  are  no
judgments,  injunctions,  orders or other  judicial or  administrative  mandates
outstanding against or affecting Purchaser, PII or PSI.

         2.6 Certain Information Provided by Purchaser. The information supplied
by Purchaser, PII or PSI that is included in the materials provided to the Trust
in connection  with any filings  required under the federal  securities  laws to
obtain the approvals  described in Article V hereof, is complete in all material
respects  and  does  not at  the  time  provided  contain  (at  the  time  it is
distributed,  filed or provided, as the case may be) any statement which, at the
time and in light of the circumstances under which it is made, is

                                      -13-
<PAGE>
false or  misleading  with  respect to any material  fact,  and will not omit to
state any material fact  necessary in order to make the  statements  therein not
false or misleading or (with respect to information  supplied by Purchaser,  PII
or PSI and included in proxy  statements)  necessary to correct any statement or
any earlier  communication  with respect to the  solicitation of a proxy for the
same meeting or subject matter which has become false or misleading.

         2.7  Registration  of PII under the Advisers  Act. On the Closing Date,
PII will be duly registered under the Advisers Act as an investment adviser with
the SEC and will be in compliance in all material respects with the Advisers Act
and the rules and regulations thereunder.

         2.8  Registration of PSI as a  Broker-Dealer.  On the Closing Date, PSI
will be duly registered  under the Exchange Act as a broker-dealer  with the SEC
and will be in compliance in all material respects with the Exchange Act and the
rules and regulations thereunder, including, but not limited to, the net capital
requirements thereof. On the Closing Date, PSI will be a member in good standing
of the  NASD  and  will be in  compliance  in all  material  respects  with  all
applicable rules and regulations of the NASD, including, without limitation, the
Conduct Rules. PSI is registered as a broker-dealer in each state in which it is
required  to be  registered  in  connection  with the  offering of shares of the
Nicholas-Applegate  Funds and, to the  knowledge of PSI, is in compliance in all
material respects with all applicable state securities laws.

         2.9 Code of  Ethics.  PII has  adopted a formal  code of  ethics  and a
written policy regarding  personal  trading.  Such code and policy comply in all
materials  respects with Section 17(j) of the Investment Company Act, Rule 17j-1
thereunder and Section 204A of the Advisers Act, respectively.  To the knowledge
of PII,  there has been no violation of its code of ethics and personal  trading
policy which would constitute a fraud upon the investment  companies  managed by
PII.

         2.10  Disqualifications.  To the  knowledge  of PII and PSI,  no person
"associated"  (as  defined  under  the  Advisers  Act) with PII or PSI has for a
period of five

                                      -14-
<PAGE>
years  prior to the date hereof  been  convicted  of any crime or is or has been
subject to any disqualification that would be a basis for denial,  suspension or
revocation of registration of an investment  adviser under Section 203(e) of the
Advisers Act or Rule 206(4)-4(b)  thereunder or of a broker-dealer under Section
15 of the  Exchange  Act,  and no  "affiliated  person"  (as  defined  under the
Investment Company Act) of PII or PSI has during a period of five years prior to
the date hereof  been  convicted  of any crime or is or has been  subject to any
disqualification  that would be a basis for  disqualification  as an  investment
adviser for any  investment  company  pursuant to Section 9(a) of the Investment
Company Act; and to PII's  knowledge,  there is no basis for, or  proceeding  or
investigation  that is  reasonably  likely to become  the  basis  for,  any such
disqualification, denial, suspension or revocation.

         2.11  Financial  Statements.  The  Purchaser  has  made  or  will  make
available to the Seller  copies of (a) the  consolidated  balance  sheets of the
Purchaser  and its  subsidiaries  as of  September  30,  1998,  and the  related
consolidated  statements  of income,  changes in  stockholders'  equity and cash
flows for the year ended  September 30, 1998, all as reported in the Purchaser's
Annual  Reports on Form 10-K for September 30, 1998 filed with the SEC under the
Exchange  Act,  in each  case  accompanied  by the  audit  report  of KPMG  LLP,
independent  auditors  for the  Purchaser,  and (b) the  unaudited  consolidated
balance  sheets of the Purchaser and its  subsidiaries  as of December 31, 1998,
all as reported in Purchaser's  Quarterly Report on Form 10-Q filed with the SEC
under the Exchange Act. The financial statements fairly present the consolidated
financial  position and results of  consolidated  operations  and cash flows and
changes in  stockholders'  equity of the Purchaser and its  subsidiaries for the
respective  fiscal periods or as of the respective dates set forth therein,  and
each of such statements  (including the related notes, when applicable) has been
prepared  in  accordance  with GAAP  consistently  applied  during  the  periods
involved,  except as otherwise set forth in the notes thereto  (subject,  in the
case of unaudited interim statements, to normal year-end adjustments).

                                      -15-
<PAGE>

         2.12  Absence  of  Changes.  Since  September  30,  1998,  no  event or
development  has occurred  that has had or could  reasonably be expected to have
any Purchaser Material Adverse Effect.

                                   ARTICLE III
            REPRESENTATIONS AND WARRANTIES OF SELLER AND DISTRIBUTOR

         Seller and Distributor represent and warrant to Purchaser,  PII and PSI
as follows:

         3.1      Organization and Authority.

         Each  of  Seller  and  Distributor  is  duly  organized  as  a  limited
partnership  in good standing under the laws of its state of  organization,  and
has (i) full  power,  right  and  authority  to enter  into  and  carry  out its
obligations  under  this  Agreement,  to own its  properties  and  assets and to
conduct its business; and (ii) all necessary governmental  authorizations to own
or lease its properties and assets.  Neither Seller nor  Distributor is required
to qualify to do business in any state or foreign jurisdiction where not already
so qualified  and where failure to qualify  would  constitute a Seller  Material
Adverse Effect.

         3.2      Authorization.

         (a) This  Agreement and each  document,  agreement and instrument to be
executed  by Seller  and  Distributor  pursuant  to or as  contemplated  by this
Agreement,  has been duly  authorized,  executed  and  delivered  by Seller  and
Distributor, and no further proceedings on the part of Seller or Distributor are
necessary to authorize this Agreement and the transactions  contemplated hereby.
This  Agreement and each  document,  agreement and  instrument to be executed by
Seller  and  Distributor  (as the case may be) is the legal,  valid and  binding
obligation of Seller or  Distributor,  enforceable in accordance with its terms,
subject to bankruptcy, insolvency, moratorium,  reorganization and other similar
laws affecting creditors' rights generally and to general equity principles.

                                      -16-
<PAGE>
         (b) Neither the execution,  delivery and  performance of this Agreement
and each  document,  agreement  and  instrument  to be  executed  by Seller  and
Distributor   pursuant  to  or  as   contemplated  by  this  Agreement  nor  the
consummation by Seller and Distributor of the transactions  contemplated  hereby
and  thereby,  will (i)  violate,  conflict  with,  or result in a breach of any
provisions of, or constitute a default (or an event which,  with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of,  or  accelerate  the  performance  required  by,  or  result  in a right  of
termination or acceleration  under, or the creation of any Encumbrance  upon any
of the properties or assets of Seller, Distributor or the Trust under any of the
terms, conditions or provisions of (X) the organizational documents or Bylaws of
Seller,  Distributor or the Trust, or (Y) any note, bond,  mortgage,  indenture,
deed of trust,  license,  lease,  agreement or other instrument or obligation to
which  Seller,  Distributor  or  the  Trust  are a  party  or by  which  Seller,
Distributor  or the Trust may be bound,  or to which Seller,  Distributor or the
Trust, or the properties or assets of Seller,  Distributor or the Trust,  may be
subject; or (ii) violate any judgment, ruling, order, writ, injunction,  decree,
statute,  rule or regulation of any governmental,  regulatory or self-regulatory
authority  applicable  to  Seller,  Distributor  or the  Trust  or to any of the
properties or assets of Seller, Distributor or the Trust.

         (c) Except as  contemplated  by Article V, no notice to,  filing  with,
authorization  of,  exemption  by, or consent  or  approval  of, any  regulatory
authority  or  other  person  is  necessary  for  the  consummation  by  Seller,
Distributor or the Trust of the transactions contemplated by this Agreement.

         (d)  Except as  contemplated  by  Article  V  hereof,  no action of the
partners  of the  Seller  or  the  shareholders  of the  Trust  is  required  in
connection with the transactions contemplated by this Agreement.

         3.3 Title to Assets.  Seller or its Affiliates  own, and on the Closing
Date Purchaser will acquire,  good and marketable title to the Assets,  free and
clear of all Encumbrances.

                                      -17-
<PAGE>
         3.4  Accuracy of  Representations  and  Documents.  No  representation,
warranty or certification made by Seller,  Distributor or any officer thereof in
this Agreement, the Schedules hereto, or any certificate provided for under this
Agreement is false or misleading or contains any material misstatement of fact.

         3.5 Certain Information provided by Seller,  Distributor and the Trust.
The information  supplied by Seller,  Distributor and the Trust that is included
in (i)  the  materials  provided  to the  Board  of  Trustees  of the  Trust  in
connection with the approvals  described in Article V hereof, and (ii) the proxy
solicitation   materials  to  be   distributed  to  the   shareholders   of  the
Nicholas-Applegate Funds in connection with the approvals described in Article V
hereof, is complete in all material aspects and does not contain (at the time it
is  distributed,  filed or provided as the case may be) any statement  which, at
the time and in the light of the circumstances  under which it is made, is false
or misleading  with respect to any material fact, and will not omit to state any
material  fact  necessary in order to make the  statements  therein not false or
misleading or (with respect to information provided by Seller,  Distributor,  or
the Trust  included in proxy  statements)  necessary to correct any statement or
any earlier  communication  with respect to the  solicitation of a proxy for the
same meeting or subject matter which has become false or misleading.

         3.6 Brokers and Finders.  Seller will pay any financial  advisory fees,
brokerage fees, commissions or finder's fees incurred with respect to the use of
any broker or finder which has acted, directly or indirectly, for Seller (or any
of Seller's officers, directors or employees), in connection with this Agreement
or the transactions contemplated hereby.

         3.7 Contracts.  Except as set forth on Schedule 3.7, or as set forth in
any other schedule hereto, none of the Trust or Series is a party or subject to:

         (a) any contract or agreement not fully  performed for the purchase for
its own account or sale of any asset, property, commodity, material, services or
equipment,  including without limitation fixed assets,  but excluding  portfolio
securities acquired in

                                      -18-
<PAGE>
the ordinary  course of business  consistent with past practice or which was not
entered into in the ordinary course of business consistent with past practice;

         (b) any contract containing covenants limiting the freedom of the Trust
or the  Nicholas-Applegate  Funds to compete  either in any line of  business or
with any person or entity;

         (c)  any license agreement (as licensor or licensee);

         (d) any indenture,  mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for the borrowing of money;

         (e) any contract or agreement not referred to in another clause of this
Section  3.7 (all of which are listed on  Schedule  3.7) which by its terms does
not terminate and is not terminable  without penalty by the Trust upon notice of
60 days or less;

         (f) any contract or agreement  relating to the  provision of investment
advisory, subadvisory, administrative,  distribution, brokerage, transfer agency
or custody services;

         (g)  any employment, consulting, retirement or severance agreement; or

         (h)  any  other  contract,  agreement,  arrangement  or  understanding,
whether  written or oral,  that was not entered into in the  ordinary  course of
business consistent with past practice.

         3.8      No Defaults under Contracts or Agreements.

         (a) None of the Series is in default in any material  respect under any
lease,  contract,  mortgage,  promissory note, deed of trust, loan,  guaranty or
other commitment or arrangement to which the Series is a party or by which it is
bound, and to the knowledge of Seller, no event has occurred or condition exists
that with notice or the passage of time would constitute such a default.

                                      -19-
<PAGE>
         (b)  Seller is not in  default  under any  material  contract  or other
agreement  relating to or affecting  its  management of the Retail Assets of the
Nicholas-Applegate  Funds nor, to the  knowledge of Seller,  does any  condition
exist  which  with  notice  or lapse  of time or both  would  constitute  such a
default, and each such contract or other agreement is in full force and effect.

         3.9  Additional  Representations  and  Warranties  relating  to Seller,
Distributor and the Trust.

         (a) Since inception,  the Trust (and any predecessor investment company
from which  assets  were  transferred  to the Trust) has been a duly  registered
investment  company in compliance in all material  respects with the  Investment
Company  Act and the  rules and  regulations  promulgated  thereunder,  and duly
registered or licensed and in good standing under the laws of each  jurisdiction
in which failure to be so registered or licensed  would have a material  adverse
effect on the Trust.  The Trust (and any  predecessor  investment  company  from
which assets were transferred to the Trust) is or was (as  applicable),  and has
been since  inception,  in material  compliance with all applicable  federal and
state laws, rules, regulations and orders. Since their initial offering,  shares
of each of the Series  have been duly  qualified  for sale under the  securities
laws of each  jurisdiction  in which they have been sold or offered  for sale at
such time or times during which such  qualification  was required.  The offering
and  sale of  shares  of each of the  Series  have  been  registered  under  the
Securities Act of 1933, as amended (the "Securities Act"), during such period or
periods for which such  registration  was  required,  the  related  registration
statement  has  become  effective  under  the  Securities  Act,  no  stop  order
suspending the effectiveness of such registration  statement has been issued and
no proceedings  for that purpose have been  instituted or, to the best knowledge
of  the  Seller,  are  contemplated.   Such  registration  statement  under  the
Investment  Company  Act and/or the  Securities  Act has, at all times when such
registration statement was effective, complied in all material respects with the
requirements of the Investment Company Act and the Securities Act then in effect
and neither such registration  statement nor any amendments thereto contained at
the time such registration statement became effective

                                      -20-
<PAGE>
and during  which time that the  registration  statement  was in use,  an untrue
statement of a material  fact or omitted to state a material fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances under which they were made, not misleading.  Copies of the current
registration  statement of the Trust under the Investment Company Act and/or the
Securities Act have been made available to Purchaser.  All shares of each of the
Series were sold pursuant to an effective  registration  statement and have been
duly  authorized  and are validly  issued,  fully-paid and  non-assessable.  The
Distributor  has sold the shares of the  Series in  accordance  with  applicable
federal  securities laws and any sales literature or advertisements  utilized by
Distributor  to  promote  each of the  Series  have been  prepared  in  material
compliance  with  federal  securities  laws;  and no such  sales  literature  or
advertisements have contained an untrue statement of material fact or omitted to
state a material  fact  required to be stated  therein or  necessary to make the
statements  therein,  in the light of the  circumstances  under  which they were
made,  not  misleading.  Each of the  Trust's  (and any  predecessor  investment
company from which assets were transferred to the Trust)  investments made since
inception  have  been  made in  accordance  in all  material  respects  with its
investment  objectives,  policies and restrictions set forth in the registration
statement in effect at the time the investments  were made and have been held in
accordance in all material respects with its respective  investment  objectives,
policies and  restrictions,  to the extent  applicable and in effect at the time
such investments were held.

         (b)  Correct  and  complete  copies  of all of the  current  investment
advisory  agreements and distribution or underwriting  contracts,  plans adopted
pursuant to Rule 12b-1 under the Investment  Company Act or arrangements for the
payment  of  service  fees (as such  term is  defined  in Rule  2830 of the NASD
Conduct Rules), and all administrative  services and other services  agreements,
if any (collectively, the "Mutual Fund Agreements"), pertaining to the Trust and
in  effect  on the  date of this  Agreement  (i) have  been  made  available  to
Purchaser prior to the date hereof and (ii) are in full force and effect.  As to
the Trust  (and any  predecessor  investment  company  from  which  assets  were
transferred to the Trust), there has been in full force and effect an investment

                                      -21-
<PAGE>
advisory,  sub-advisory,  distribution or underwriting agreement (as applicable)
at all times since the  inception of the Trust (and any  predecessor  investment
company from which assets were  transferred to the Trust),  and each Mutual Fund
Agreement  pursuant to which Seller has  received  compensation  respecting  its
activities in connection with the Trust was duly approved in accordance with the
applicable provisions of the Investment Company Act.

         (c) There are no special restrictions,  consent judgments or Securities
and  Exchange  Commission  ("SEC") or  judicial  orders on or with regard to the
Trust currently in effect.

         (d) Each of the Series  has  qualified  and  elected to be treated as a
regulated investment company under Subchapter M of the Code and has so qualified
and  elected in each year since such  Series was  treated as a  corporation  for
federal income tax purposes,  including until the Closing occurs.  No Series has
received  assets  from  an  entity  treated  as  a  corporation  (other  than  a
corporation  treated as a  regulated  investment  company)  for federal or state
income tax purposes in a transaction  in which no gain or loss was recognized by
the corporation. Neither Seller, nor to the knowledge of Seller, any Series, has
received any notice of  communication  affecting the federal or state income tax
status of any Series or any  predecessor  investment  company  from which assets
were transferred to a Series.

         (e) The Trust (and any predecessor investment company from which assets
were transferred to the Trust),  as pertains to each Series,  has paid or caused
to be paid all federal,  state, local, foreign and other taxes,  government fees
or the  like,  including,  but not  limited  to,  income  taxes,  excise  taxes,
estimated  taxes,  alternative  minimum taxes,  franchise  taxes,  capital stock
taxes,  sales taxes, use taxes, ad valorem or value added taxes,  employment and
payroll-related  taxes,  withholding  taxes, and transfer taxes,  whether or not
measured  in  whole or in part by net  income,  and all  deficiencies,  or other
additions to tax,  interest,  fines and  penalties  owed by them  (collectively,
"Taxes" and, each  individually,  a "Tax"),  required to be paid by the Trust or
such Series, whether

                                      -22-
<PAGE>
disputed or not. The Trust, as pertains to each Series,  has, in accordance with
applicable law, timely filed all federal,  state,  local and foreign tax returns
(including  information  returns)  required  to be filed  by them,  and all such
returns  correctly and accurately set forth in all material  respects the amount
of any  Taxes  or  reportable  income,  as the  case  may  be,  relating  to the
applicable  period. For each taxable period of the Trust in the last five fiscal
years, the Trust has made available to Purchaser  correct and complete copies of
all the Trust's federal,  state, local and foreign income tax returns (including
information  returns),   examination  reports  and  statements  of  deficiencies
assessed against or agreed to by the Trust.

         (f) Neither the  Internal  Revenue  Service nor any other  governmental
authority  responsible  for the  imposition  or collection of any Tax (a "Taxing
Authority") is now asserting or, to the knowledge of the Seller,  threatening to
assert against the Trust any deficiency or claim for  additional  Taxes.  To the
knowledge  of  Seller,  no claim has ever been made by a Taxing  Authority  in a
jurisdiction where the Trust does not file reports and returns that the Trust is
or may be subject to taxation by, or may be liable to file  information  returns
in,  that  jurisdiction.  There are no security  interests  on any assets of the
Trust that arose in connection with any failure to pay any Taxes.  The Trust has
never  entered  into a closing  agreement  pursuant to Section 7121 of the Code.
There has not been any audit by any  Taxing  Authority  of any tax period of the
Trust,  and to the  knowledge of Seller,  no such audit is in progress,  and the
Trust has not been  notified  by any  Taxing  Authority  that any such  audit is
contemplated or pending.  No extension of time with respect to any date on which
a tax  return  was or is to be filed by the Trust is in force,  and no waiver or
agreement by the Trust is in force for the extension of time for the  assessment
or payment of any Taxes.

         (g)  Neither  Seller,  any person  who is an  "affiliated  person"  (as
defined in the  Investment  Company  Act) or any other  "interested  person" (as
defined in the Investment  Company Act),  receives or is entitled to receive any
compensation  directly or indirectly (i) from any person in connection  with the
purchase or sale of  securities  or other  property to, from or on behalf of the
Trust, other than the bona fide ordinary compensation as

                                      -23-
<PAGE>
principal underwriter for the Trust or as broker in connection with the purchase
or sale of securities in compliance with Section 17(e) of the Investment Company
Act,  or (ii) from the Trust or its  security  holders  for other than bona fide
investment advisory or administrative services. Accurate and complete disclosure
of all  such  compensation  arrangements  has  been  made  in  the  registration
statement of the Trust filed under the federal securities laws.

         (h) Seller has made available to Purchaser  correct and complete copies
of the audited  financial  statements,  prepared in accordance with GAAP, of the
Trust  for the past five  fiscal  years,  and  unaudited  financial  statements,
prepared in accordance  with GAAP, of the Trust for the six-month  period ending
September 30, 1998 and the  eight-month  period  ending  November 30, 1998 (each
hereinafter  referred to as a "Mutual Fund  Financial  Statement").  Each of the
Mutual Fund Financial  Statements  fairly  presents the  consolidated  financial
position and the results of operations and cash flows for the respective periods
indicated or as of the respective  dates set forth herein of the Trust, and each
of such  statements  (including the related  notes,  when  applicable)  has been
prepared  in  accordance  with GAAP  applied on a  consistent  basis  during the
periods  involved,  except as otherwise set forth in the notes thereto (subject,
in the case of unaudited interim statements, to normal year-end adjustments).

         (i) There is no litigation or legal (or other) action, suit, proceeding
or investigation at law or in equity pending or, to the best knowledge of Seller
and Distributor, threatened in any court or before or by any governmental agency
or instrumentality,  department,  commission, board, bureau or agency, or before
any arbitrator,  by or against the Trust, or any of the Nicholas-Applegate Funds
or, to Seller's and Distributor's  knowledge, any officer or director thereof or
Seller or  Distributor  relating  to the  activities  of the Trust or any of the
Nicholas-Applegate  Funds, any  disqualification of Seller under Section 9(a) of
the  Investment  Company Act, or any event which would require Seller to give an
affirmative response to any of the questions in Item 11 of Seller's Form ADV (or
any similar or successor form) or require the Distributor to give an affirmative
response to any of the questions under Item 7 of Distributor's Form

                                      -24-
<PAGE>
BD (or any similar or  successor  form).  There are no  judgments,  injunctions,
orders or other  judicial  or  administrative  mandates  outstanding  against or
affecting the Seller,  Distributor,  Trust, any of the Nicholas-Applegate  Funds
or, to the knowledge of Seller and Distributor,  any officer or director thereof
relating  to  the   activities   of  or  affecting  the  Trust  or  any  of  the
Nicholas-Applegate Funds.

         (j) The exhibit list in the current registration statement of the Trust
includes all of the documents  that would be required to be included  thereon if
such registration statement were being refiled.

         (k) Seller has furnished  Purchaser or provided access to, with respect
to each of the  Nicholas-Applegate  Funds,  complete  and correct  copies of (i)
Annual and  Semi-Annual  Reports  and proxy  statements  of the Trust and Series
pertaining  to the last five  years of the Trust  and  Series,  each in the form
delivered  to the  Trust and  Series'  shareholders,  as well as any  additional
report or other  material  generally  delivered to such  shareholders  since the
delivery of such Annual Report or Semi-Annual  Report,  as the case may be; (ii)
all  Prospectuses,  together with  Statements of Additional  Information  of the
Trust, filed with the SEC in the last five years and (iii) all Annual Reports of
the Trust (on Form N-SAR)  together  with any and all exhibits  annexed  thereto
from the last five years of the Trust;  each in the form filed with the SEC (all
of the foregoing documents referred to in (i), (ii) and (iii) being collectively
referred to herein as the "Trust Statements").  The information contained in the
Trust  Statements  does not contain any untrue  statement of a material  fact or
omit to state a material  fact  required to be stated  therein or  necessary  in
order to make any material statement made therein, in light of the circumstances
under which they were made, not misleading. The financial statements, including,
without  limitation,  the Statement of Assets and Liabilities,  the Statement of
Operations and the Statement of Changes in Net Assets, and the notes thereto set
forth in any such Annual or  Semi-Annual  Report  fairly  present the  financial
position of the Trust and the Series as at the dates of such  statements and the
results of its operations  for the periods  covered  thereby in accordance  with
GAAP consistently applied (except as noted therein). Since the end of the period
covered by the most recent Annual or Semi-Annual

                                      -25-
<PAGE>
Report,  there has  occurred no event or  condition  which would (i) require the
Trust  to file an  additional  amendment,  registration  statement,  prospectus,
prospectus supplement, report or other document with the SEC, which document has
not been so filed with the SEC and  delivered  to  Purchaser or (ii) require the
Trust to conduct a meeting of its stockholders.

         (l) The Trust has adopted procedures relating to brokerage transactions
on  a  securities   exchange  through  an  affiliated   broker  which  meet  the
requirements  of Rule 17e-1  under the  Investment  Company  Act and,  except as
indicated  in  Schedule  3.9(l),  the  Trust  has been in  compliance  with such
procedures since its inception.

         (m) The Trust has adopted a Code of Ethics which meets the requirements
of Rule 17j-1 under the Investment  Company Act and, to the knowledge of Seller,
except as indicated on Schedule 3.9(m), there has been no violation of such Code
of Ethics which would constitute a fraud upon the Trust.

         (n) Where the Trust has issued and offered for sale multiple classes of
shares of a Series,  such classes have been issued and sold in  compliance  with
Rule  18f-3  under  the  Investment  Company  Act  and in  conformity  with  the
applicable requirements of Revenue Procedure 96-47.

         (o)  The  reorganization  of  the   Nicholas-Applegate   Funds  from  a
master-feeder  structure  to a  multi-class  structure  on July  24,  1998  (the
"Reorganization")  resulted in the  recognition of no gain or loss for the Trust
or any Series as set forth in the tax  opinion  dated  July 24,  1998 from Paul,
Hastings,   Janofsky  &  Walker  LLP.  The  Reorganization  was  consummated  in
compliance with applicable federal securities law.

         (p) Since the date of the last effective  registration statement of the
Trust, there have been no changes made to any expense limitations or fee waivers
pertaining to the Nicholas-Applegate Funds.

         3.10  Absence of Certain  Changes.  Since the dates of the most  recent
audited financial statements for the Trust, no event or development has occurred
that has had or

                                      -26-
<PAGE>
would  reasonably be expected to have a Seller  Material  Adverse  Effect on the
Trust. Since the dates of the most recent audited financial  statements referred
to in Section  3.9 hereof,  except as  permitted  by Section  4.2  herein,  with
respect to each of the Series, the Trust has not:

         (a)  declared,   set  aside,   made  or  paid  any  dividend  or  other
distribution  in respect  of its  capital  stock or other  equity  interests  or
otherwise  purchased  or  redeemed,  directly or  indirectly,  any shares of its
capital stock or other equity  interests,  except in the ordinary  course of its
business consistent with past practice;

         (b)  adopted,  or  amended in any  material  respect,  any  employment,
collective  bargaining,  bonus,  profit-sharing,   compensation,  stock  option,
pension, retirement, deferred compensation or other plan, agreement, trust, fund
or arrangement for the benefit of any Trustees of the Trust;

         (c)  amended  its   Certificate  of  Trust  or  By-laws  or  any  other
organizational documents;

         (d)  changed  in any  significant  respect  its  accounting  practices,
policies  or  principles,  except as may be  required  under  applicable  law or
generally accepted accounting principles;

         (e)  operated  its  business in any manner  other than in the  ordinary
course of business consistent with past practice;

         (f) changed the investment objective, policies or restrictions; or

         (g) taken any action or omitted to take any action  that is  reasonably
likely to result in the  occurrence of, or agreed or committed to do, any of the
foregoing.

         3.11  Insurance.  The Trust has in full force and effect such insurance
as is required by the  Investment  Company Act, and has directors' and officers'
and errors and omissions' insurance in amounts believed by Seller to be adequate
and appropriate. The

                                      -27-
<PAGE>
Trust is not in material  default under any such insurance policy and all claims
made  under such  policies  in the last ten years are  listed on  Schedule  3.11
hereto.  True,  correct  and  complete  copies of all Trust  insurance  policies
pertaining to the  operation of the Trust have been made  available to Purchaser
and all premiums that are due and payable have been paid.

         3.12 Trust Records; Copies of Documents.  The record books of the Trust
accurately  record  all  material  corporate  action  taken  by  its  respective
shareholders  and Board of  Trustees  and  committees  and,  originals  or true,
correct  and  complete  copies of such  documents  have been made  available  to
Purchaser for review.

                                   ARTICLE IV
                    CONDUCT OF BUSINESS PRIOR TO THE CLOSING

         4.1 Conduct  Prior to Closing.  Each of Seller and  Distributor  hereby
covenant and agree with Purchaser that,  prior to the Closing,  unless the prior
written  consent of Purchaser  shall have been obtained (which consent shall not
be unreasonably withheld or delayed) and except as otherwise provided in Section
4.2 of this Agreement and as expressly  contemplated in this Agreement,  each of
Seller and Distributor shall, to the extent pertaining to the Nicholas-Applegate
Funds,  use reasonable best efforts to cause the Trust to operate their business
only in the usual,  regular  and  ordinary  course and in  accordance  with past
practice and, in the case of Seller and Distributor, to the extent pertaining to
the  Nicholas-Applegate  Funds, conduct its business in a manner comporting with
the standards of portfolio  management and service quality heretofore met by it,
and  shall to the  extent  pertaining  to the  Nicholas-Applegate  Funds use its
reasonable best efforts to preserve intact its business  organization and assets
and  maintain  its  rights,  franchises  and  business  and  customer  relations
necessary to run such portion of its business as currently  run.  Subject to the
authority of the Trustees of the Trust,  from the date hereof until the Closing,
Seller hereby  covenants and agrees to use its reasonable best efforts to ensure
that, without the prior written consent of Purchaser (which consent

                                      -28-
<PAGE>
shall not be  unreasonably  withheld or delayed),  except in connection with the
transactions contemplated by this Agreement:

         (a) the  Nicholas-Applegate  Funds shall not incur any indebtedness for
borrowed money, or issue or sell any debt securities or prepay any debt,  except
in the ordinary course of business consistent with prior practice;

         (b) the Nicholas-Applegate Funds shall not pledge or hypothecate any of
their  properties  or assets,  tangible or  intangible,  except in the  ordinary
course of business consistent with past practice;

         (c) the  Nicholas-Applegate  Funds shall not,  except where required in
the  exercise of their  fiduciary  obligations,  have any action  (other than in
connection with the transactions  contemplated hereby) taken by them, other than
actions in the  ordinary  course of  business,  including,  but not  limited to,
making any changes to the investment policies of any of the Series;

         (d) the Nicholas-Applegate  Funds shall not forgive or cancel any debts
or  claims,  or waive  any  rights  except  in the  ordinary  cause of  business
consistent with prior practice;

         (e) the  Nicholas-Applegate  Funds shall not enter into any  agreement,
commitment  or other  transaction,  other than  agreements  entered  into in the
ordinary course of business consistent with prior practice;

         (f) the Trust shall not,  except as may be required by  applicable  law
and after notice to  Purchaser,  adopt,  or amend in any material  respect,  any
employment,  collective bargaining, bonus, profit-sharing,  compensation,  stock
option,  pension,  retirement,  deferred  compensation or other plan, agreement,
trust, fund or arrangement for the benefit of trustees of the Nicholas-Applegate
Funds;

         (g) the Trust  shall not,  except  such  changes as may be  proposed by
Purchaser or as may be required by applicable  law and after  written  notice to
Purchaser, amend its Certificate of Trust or By-laws or any other organizational
documents;

                                      -29-
<PAGE>
         (h) the Trust shall not change in any material  respect its  accounting
practices,  policies or principles,  except as may be required by applicable law
or generally accepted accounting principles and after notice to Purchaser;

         (i) the  Nicholas-Applegate  Funds  shall not incur  any  liability  or
obligation  (whether  absolute,  accrued,  contingent  or otherwise  and whether
direct or as guarantor or otherwise with respect to the  obligations of others),
except in the ordinary  course of business  consistent  with past practice or as
otherwise permitted hereunder;

         (j) Seller, the Distributor and Nicholas-Applegate Funds shall not make
any material changes in policies or practices  relating to selling  practices or
other terms of sale or accounting  therefor or in policies of employment  unless
required by applicable law or generally accepted accounting principles and after
notice to Purchaser;

         (k) the  Nicholas-Applegate  Funds  shall  not  enter  into any type of
business not  conducted  as of the date of this  Agreement or create or organize
any subsidiary or enter into or participate in any joint venture or partnership;

         (l) the Nicholas-Applegate  Funds shall not enter into any agreement or
transactions  or make any amendment or  modification  to any existing  agreement
outside of the ordinary course of business, unless required by applicable law or
generally accepted accounting principles and after notice to Purchaser; or agree
or commit to do any of the foregoing.

         (m) no  Nicholas-Applegate  Fund shall  take any  action  that could be
reasonably expected to affect its ability to qualify as a "regulated  investment
company"  under  Subchapter  M of the Code.  The  Transferred  Series  shall not
knowingly  take any  action  that could  reasonably  be  expected  to affect the
tax-free  status of the  Transfer,  except as necessary to meet its  obligations
under Section 4.2.

         4.2 Redemption of  Institutional  Assets of  Nicholas-Applegate  Funds.
Seller and  Distributor  agree to take all  lawful  steps  necessary  so that no
shares of the class of any series designated as "Institutional  Shares" (or "I")
are outstanding as of the Closing

                                      -30-
<PAGE>
Date.  Towards  this end,  Seller  and  Distributor  shall have the right to (a)
solicit  shareholders  of the I shares of the series  between  this date and the
date of the  Closing  to  redeem  their I shares  and  invest  the  proceeds  in
portfolios  organized by Seller other than the  Nicholas-Applegate  Funds, or in
other  accounts  managed by Seller;  (b) to reorganize the I shares so that they
are no longer a class of any series of the  Trust;  or (c) to merge the I shares
into series of another trust advised by Seller. As between Seller and Purchaser,
Seller  shall be  responsible  and liable for all  expenses,  losses,  and costs
related to such  solicitation  or other means utilized by Seller and Distributor
to effectuate the removal of the  Institutional  Shares.  Seller and Distributor
covenant  and  agree  that  any  solicitation  efforts  shall  be  conducted  in
compliance with reasonable  industry practices and in compliance with applicable
laws.

         4.3 Consents and Approvals.  Subject to the terms and conditions herein
provided,  each of the parties hereto agrees to cooperate with the other and use
its reasonable  best efforts to take, or cause to be taken,  all action,  and to
do, or cause to be done,  all things  necessary,  proper or advisable  under all
applicable laws, regulations and contractual arrangements to consummate and make
effective the  transactions  contemplated by this Agreement.  The parties hereto
covenant and agree to take no action,  and Seller hereby covenants and agrees to
use its reasonable  best efforts to prevent the Trust,  subject to the authority
of the Board of  Trustees  of the Trust,  from taking any action (i) which would
render any of the representations and warranties  contained herein untrue in any
material  respect at and as of the Closing Date, or (ii) which would  materially
and adversely affect the ability of the parties to satisfy any of the conditions
set forth in Article VII hereof.

                                      -31-
<PAGE>
                                    ARTICLE V
                     COMPLIANCE WITH FEDERAL SECURITIES LAWS

         5.1  Cooperation  in  Obtaining   Necessary   Approvals  to  Consummate
Intentions of Parties.

         (a) In  anticipation of the Closing,  and thereafter as necessary,  the
parties hereto shall  cooperate,  in a manner in compliance  with the Investment
Company Act, with one another to obtain the following approvals:

                  (i)  for  the  Nicholas-Applegate   Funds  to  enter  into  an
investment  management  agreement  with PII in  substantially  the form attached
hereto as Exhibit 5.1(a)(i) (the "New Advisory Agreement").  Seller agrees, in a
manner in compliance with the Investment Company Act, to use its best efforts to
induce the Trust to call a meeting of its Board of Trustees and a meeting of the
shareholders  of each of the Series to consider  and  approve  the New  Advisory
Agreement.

                  (ii)  for PII to  enter  into a  sub-advisory  agreement  with
Seller in  substantially  the form attached  hereto as Exhibit  5.1(a)(ii)  (the
"Sub-Advisory  Agreement").  Seller agrees,  in a manner in compliance  with the
Investment  Company  Act, to use its best  efforts to induce the Trust to call a
meeting  of its Board of  Trustees  and a  meeting  of its  shareholders  of the
Sub-Advised  Series to  consider  and approve  the  entering by the  Sub-Advised
Series into the Sub-Advisory  Agreement.  Purchaser  agrees,  in respect of each
Series,  that after Closing and until payment of the Deferred Purchase Price for
that Series,  Purchaser  will,  in a manner in  compliance  with the  Investment
Company  Act, to use its  reasonable  best  efforts to cause Seller to be paid a
subadvisory fee for each  Sub-Advised  Series equal to 50% of its then effective
annual  advisory  fee for each  such  Series  (after  fee  waivers  and  expense
limitations are accounted for);

                  (iii)  subject to Section  6.12,  for each of the  Transferred
Series  to  approve  a  transfer  of all  their  assets  and  liabilities  to an
investment company or

                                      -32-
<PAGE>
series  thereof  for  which  PII  serves  as  investment  adviser  and  that has
investment  policies that are compatible  with those of the  Transferred  Series
(such   investment   company  or  series  the  "PII  Acquiring  Fund"  and  such
transaction, referred to previously as the "Transfer"). Subject to Section 6.12,
Seller agrees, in a manner in compliance with the Investment Company Act, to use
its best  efforts to induce the Trust to call a meeting of its Board of Trustees
and a meeting of the  shareholders  of the  Transferred  Series to consider  and
approve the Mergers.

                  (iv) for the Nicholas-Applegate  Funds to take such actions as
may be necessary to cause the Board of Trustees of the Trust to be reconstituted
consistent with the agreement of the parties.  Seller  covenants and agrees in a
manner in compliance with the Investment  Company Act to use its best efforts to
induce the Trust to call a meeting of its Board of Trustees and a meeting of the
shareholders  of the  Trust for the  purpose  of  appointing  and  electing  the
trustees selected by the parties.

                  (v) for the  Nicholas-Applegate  Funds to enter into a Expense
Limitation  Agreement  with PII and Seller in  substantially  the form  attached
hereto as Exhibit 5.1(a)(v).

         (b) If the Board of Trustees of the Trust approves the items  specified
in Section 5.1(a)(i) and (ii),  above,  Seller shall assist the Trust to prepare
and file with the SEC as soon as is reasonably  practicable  any proxy materials
relating to the transactions contemplated by this Agreement that are required to
be prepared and filed (the "Proxy Statement").  Seller covenants and agrees that
any  material  provided  by Seller or the Trust  that is  included  in the Proxy
Statement  shall comply as to form in all material  respects with all applicable
requirements  of federal  securities laws and shall be accurate and complete and
not contain any untrue statement of material fact, or omit to state any material
fact required to be stated therein or necessary to make the statements  therein,
in the light of the  circumstances  in which  they were  made,  not  misleading.
Seller shall assist, in a manner in compliance with the federal  securities laws
and other applicable

                                      -33-
<PAGE>
law, in the  solicitation of proxies for the required  shareholder  meetings and
shall use its reasonable best efforts to obtain  approval from the  shareholders
and the  Board of  Trustees  of the Trust of the  matters  referred  to  herein.
Purchaser  covenants and agrees that any material provided by Purchaser,  PII or
PSI that is  included  in the  Proxy  Statement  shall  comply as to form in all
material  respects with all applicable  requirements of federal  securities laws
and shall be accurate  and  complete  and not contain  any untrue  statement  of
material  fact, or omit to state any material fact required to be stated therein
or necessary to make the statements therein in the light of the circumstances in
which they were made, not misleading.

         (c) If the Board of Trustees of the Trust approves the items  specified
in Section  5.1(a)(iii) above, Seller shall assist the Trust and Purchaser shall
assist the PII  Acquiring  Fund to  prepare  and file with the SEC as soon as is
reasonably practicable any proxy/prospectus  materials relating to the Transfers
contemplated  by this  Agreement that are required to be prepared and filed (the
"Proxy/Prospectus").  Seller covenants and agrees that any material  provided by
Seller or the Trust that is included in the Proxy/Prospectus  shall comply as to
form in all  material  respects  with all  applicable  requirements  of  federal
securities  laws and shall be accurate  and  complete and not contain any untrue
statement of material  fact,  or omit to state any material  fact required to be
stated therein or necessary to make the statements  therein, in the light of the
circumstances in which they were made, not misleading.  Purchaser  covenants and
agrees that any material provided by Purchaser or the PII Acquiring Fund that is
included  in the  Proxy/Prospectus  shall  comply  as to  form  in all  material
respects with all applicable  requirements of federal  securities laws and shall
be accurate and complete and not contain any untrue  statement of material fact,
or omit to state any material fact required to be stated therein or necessary to
make the statements  therein,  in the light of the  circumstances  in which they
were made, not misleading.  Seller shall assist,  in a manner in compliance with
the federal  securities laws and other  applicable  law, in the  solicitation of
proxies for the required shareholder meetings to approve the Transfers and shall
use its reasonable best efforts to obtain approval from the shareholders and the
Board of Trustees

                                      -34-
<PAGE>
of the Trust of the matters  referred to herein.  Purchaser shall be responsible
and liable for all expenses, losses and costs related to the consummation of the
Transfers  except  those  expenses,  losses  and  costs  incurred  by  Seller in
providing information for the Proxy/Prospectus and otherwise complying with this
Section 5.1.

         5.2  Required  Fund  Actions.  Seller  shall  use its  reasonable  best
efforts,  in a manner in compliance  with the Investment  Company Act, to induce
the Board of Trustees  of the Trust,  to  approve,  with  respect to each of the
Series:

         (a) entering into an Interim  Distribution  Agreement (as complies with
the Investment  Company Act) with PSI in substantially  the form attached hereto
as Exhibit 5.2(a) (the "Interim Distribution  Agreement"),  to commence upon the
date of this Agreement or as provided in its terms.

         (b) entering  into a written  distribution  agreement (as complies with
the Investment  Company Act) with PSI in substantially  the form attached hereto
as Exhibit 5.2(b) (the "New Distribution Agreement") with respect to each of the
Series other than the Transferred  Series,  to commence upon  termination of the
Interim Distribution Agreement; and in connection therewith,  changing the names
of the Nicholas-Applegate  Funds to such names as may be requested by Purchaser;
and

         (c) entering into such written fund service  agreements (as comply with
the  Investment  Company  Act)  as may be  necessary  to  replace  fund  service
agreements in existence prior to Closing,  provided,  however, that the terms of
the replacement fund service  agreements shall not be any more burdensome to the
Nicholas-Applegate  Funds in any material  respect  than the current  agreements
unless otherwise agreed to by Seller.

         5.3 Section 15(f).

         (a)  Seller  and  Purchaser   intend  to  structure  and  complete  the
transactions contemplated by this Agreement, and Purchaser intends thereafter to
conduct  the  affairs of the  Nicholas-Applegate  Funds,  in such a manner as to
obtain the benefits and  protections of Section 15(f) of the Investment  Company
Act.



                                      -35-
<PAGE>
         (b)  Purchaser, PII and PSI covenant and agree to:

                  (i) use best efforts to comply  with,  and use best efforts to
                  cause  the  Nicholas-Applegate   Funds  to  comply  with,  the
                  provisions  contained in Section 15(f)(1)(A) of the Investment
                  Company  Act  for  the  period  specified  therein.  For  this
                  purpose, "best efforts" shall mean Purchaser, PII and PSI:


                           (A)      causing to be distributed to the Trustees of
                                    the Nicholas-Applegate  Funds on at least an
                                    annual  basis,  a  questionnaire  containing
                                    questions   reasonably  designed  to  elicit
                                    information pertaining to the status of such
                                    Trustees  as   "interested   persons"   (for
                                    purposes  of  Section   15(f)(1)(A)  of  the
                                    Investment   Company  Act)  of  PII  or  its
                                    Affiliates, or of the predecessor investment
                                    adviser to the Series (including "interested
                                    persons"   of  Seller  or  its   Affiliates)
                                    (collectively, the "Relevant Entities");


                           (B)      requesting  Trustees to promptly  notify PII
                                    of any change in their status under  Section
                                    15(f)(1)(A) of the Investment Company Act;

                           (C)      at such  time as they  learn of a change  in
                                    the  status of a Trustee  that  would  cause
                                    more than 25% of the members of the Board of
                                    Trustees of  Nicholas-Applegate  Funds to be
                                    "interested  persons" of Relevant  Entities,
                                    taking  reasonable  steps  to  correct  such
                                    situation   as  promptly   as   practicable,
                                    including  causing any  Trustees  affiliated
                                    with PII or any of its  Affiliates to resign
                                    from the  Board to the  extent  required  to
                                    correct such situation;

                                      -36-
<PAGE>
                           (D)      obtaining the agreement of any transferee of
                                    all or a portion of the  business  of PII to
                                    comply   with    provisions    substantially
                                    identical to the  provisions of this Section
                                    5.3(b); and

                           (E)      taking such  additional  steps  (which shall
                                    not   require   the    incurrence   of   any
                                    out-of-pocket  expenses by  Purchaser or its
                                    Affiliates)  as Seller may from time to time
                                    reasonably  request in writing in connection
                                    with compliance with Section  15(f)(1)(A) of
                                    the Investment Company Act.

         (c)  Purchaser,  PII and PSI  covenant and agree to use best efforts to
comply  with,  and use best  efforts to cause each  Series to comply  with,  the
provisions  contained in Section  15(f)(1)(B) of the Investment  Company Act for
the period specified therein. In connection  therewith,  Purchaser,  PII and PSI
will obtain the agreement of any  transferee of all or a portion of the business
of PII to comply with  provisions  substantially  identical to the provisions of
this Section 5.3(c).

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

         6.1 Current Information.

         (a) Seller or  Distributor  (as the case may be) will  promptly  notify
Purchaser  of any  material  change in the normal  course of the business of the
Nicholas-Applegate  Funds or of any complaints from a governmental or regulatory
authority   or  a   self-regulatory   body,   investigations   or  hearings  (or
communications indicating that the same may be contemplated), or the institution
or the threat of any litigation  that comes to its attention which would, in any
manner,  challenge,  prevent,  alter or materially delay any of the transactions
contemplated hereby, and Seller or Distributor (as the case may be) will

                                      -37-
<PAGE>
keep  Purchaser  fully  informed  with respect to any event which would cause or
constitute a breach or default,  or would have caused or constituted a breach or
default had such event occurred or been known to Seller or Distributor  prior to
the date  hereof,  of any of the  representations,  warranties  or  covenants of
Seller or  Distributor  contained  in or  referred to in this  Agreement  or any
Schedule  or Exhibit  referred  to in this  Agreement,  in which case  Seller or
Distributor  (as the case may be) shall give detailed  written notice thereof to
Purchaser  and  Seller  or  Distributor  (as  the  case  may be)  shall  use its
reasonable best efforts to prevent or promptly remedy the same. Seller will also
notify Purchaser of the status of regulatory applications, third party consents,
shareholder approvals and registration amendments required pursuant to Article V
hereof.

         (b) Purchaser  will promptly  notify Seller and  Distributor of (i) any
complaints  from a  governmental  or regulatory  authority or a  self-regulatory
body, investigations or hearings (or communications indicating that the same may
be contemplated),  or the institution or the threat of any litigation that comes
to its  attention  with  respect  to  Purchaser  which  would,  in  any  manner,
challenge,   prevent,   alter  or  materially  delay  any  of  the  transactions
contemplated  hereby,  and  Purchaser  will keep  Seller and  Distributor  fully
informed  with  respect to such  events;  (ii) any event  which  would  cause or
constitute a breach or default,  or would have caused or constituted a breach or
default  had such event  occurred or been known to  Purchaser  prior to the date
hereof,  of any of the  representations,  warranties  or  covenants of Purchaser
contained  in or  referred  to in this  Agreement  or any  Schedule  or  Exhibit
referred  to in this  Agreement,  in which case  Purchaser  shall give  detailed
written notice  thereof to Seller and  Distributor  and Purchaser  shall use its
reasonable  best efforts to prevent or promptly  remedy the same;  and (iii) the
status of regulatory applications,  third party consents,  shareholder approvals
and registration amendments required pursuant to Article V hereof.

         6.2 Access. Seller shall upon reasonable notice afford to Purchaser and
its  representatives  such access during normal  business  hours  throughout the
period  prior to the Closing Date to counsel and the  accountants  to the Trust,
any books and records  included in the Assets and the  Trust's  books,  records,
properties, and to such other

                                      -38-
<PAGE>
information as Purchaser may reasonably  request,  provided such access does not
unreasonably interfere with the business of Seller and the Trust.

         6.3  Information.  Purchaser shall hold, and shall cause its respective
partners,  officers,  employees,  agents,  consultants  and advisors to hold, in
strict confidence,  unless disclosure to a regulatory  authority is necessary in
connection  with any  necessary  regulatory  approval  or  unless  compelled  to
disclose by judicial or administrative process or by other requirement of law or
the applicable requirements of any regulatory agency or relevant stock exchange,
all nonpublic records,  books, contracts,  instruments,  computer data and other
data and information  (collectively,  the  "Information")  concerning Seller and
Distributor  or,  during the period from the date hereof until the Closing Date,
the Trust (or,  if  required  under a contract  with a third  party,  such third
party)  furnished  to  Purchaser  by Seller,  Distributor  or the Trust or their
respective representatives pursuant to this Agreement (except to the extent that
such information can be shown to have been (a) previously known by such party on
a non-confidential basis, (b) in the public domain through no fault of Purchaser
or its employees or agents or (c) later lawfully  acquired from other sources by
the  party to which it was  furnished),  and  Purchaser  shall  not  release  or
disclose such Information to any other person,  except its auditors,  attorneys,
financial advisors,  other consultants and advisors and, to the extent permitted
above,  regulatory  authorities.  In  the  event  of  the  termination  of  this
Agreement, Purchaser shall return or destroy all information furnished to it and
its  representatives  and all  analyses,  compilations,  data,  studies or other
documents prepared by them or their representatives containing or based in whole
or in part on any such furnished information or reflecting Purchaser's review of
the Nicholas-Applegate Funds.

         6.4  Qualification  of the  Nicholas-Applegate  Funds.  Subject  to the
authority  of the Board of  Trustees  of the Trust,  up to and until the Closing
Date Seller will use its reasonable best efforts to cause the Nicholas-Applegate
Funds to take no action (i) that would prevent each Series from  qualifying as a
"regulated  investment company",  within the meaning of Section 851 of the Code,
or (ii) that would be inconsistent with each

                                      -39-
<PAGE>
Series' prospectus and other offering,  advertising and marketing materials. The
provisions of this Section 6.4 shall not apply to the Transfer.

         6.5 Press Releases,  Etc.. Up to and until the Closing Date, Purchaser,
Seller and  Distributor  will consult with each other as to the form,  substance
and timing of any press release or other public disclosure of matters related to
this Agreement or any of the transactions  contemplated hereby and no such press
release or other  public  disclosure  shall be made  without  the consent of the
other  party,  which shall not be  unreasonably  withheld or delayed;  provided,
however, that the parties may make such disclosures as are required by law after
making  reasonable best efforts in the  circumstances to consult in advance with
the other parties.

         6.6  Administrative  Fees and Other Expenses of the  Nicholas-Applegate
Funds.

         (a)  For a  period  of two  years  from  the  Closing  Date,  Purchaser
covenants and agrees that neither it nor its Affiliates (as defined herein) will
directly  or  indirectly  charge  the  Nicholas-Applegate  Funds  fees  for  the
provision of administrative services.

         (b)  For a  period  of two  years  from  the  Closing  Date,  Purchaser
covenants and agrees that neither it nor its Affiliates (as defined herein) will
increase any fees charged to the Nicholas-Applegate  Funds, except to the extent
not  prohibited by Section 15(f) of the  Investment  Company Act.  Purchaser may
increase  sales  charges on any class to the extent  necessary  to conform  with
sales charges on the same class of other mutual funds managed by PII.

         (c)  For a  period  of two  years  from  the  Closing  Date,  Purchaser
covenants  and  agrees  that its  Affiliates  (as  defined  herein)  and it will
maintain the limits on operating expenses shown on Schedule 6.6(c) hereto.

         (d) To the extent  Purchaser or an Affiliate enters into agreement with
a  Sub-Advised  Series  to seek  recoupment  of  expenses  that  are  waived  or
reimbursed,  Purchaser and Seller will share equally any  recoupment of such fee
waivers, fund subsidies or

                                      -40-
<PAGE>
expense  reimbursements  collected from the Sub-Advised Series after the Closing
Date through the date of termination of the  Sub-Advisory  Agreement.  Purchaser
will promptly pay Seller its share of such  reimbursements.  Purchaser  does not
presently intend to collect reimbursements related to fee waivers incurred prior
to Closing.

         "Affiliate" shall mean with respect to any person or entity (the "first
party"), any other person or entity that directly or indirectly controls,  or is
controlled  by, or is under common  control  with,  such first  party.  The term
"control" means the possession, directly or indirectly, of the power to (a) vote
twenty-five  percent (25%) or more of the outstanding  voting securities of such
person or entity,  or (b)  otherwise  direct the  management or policies of such
person or entity by contract or otherwise.

         6.7      Rule 12b-1 Fees.

         (a)  Purchaser, PII and PSI agree:

                  (i) to use  reasonable  best  efforts  so long as any  Class B
shares of the Series  outstanding at the Closing remain  outstanding,  including
Other Shares (as defined  herein),  to cause there to be no decrease in the rate
of 12b-1 fees, as listed on Schedule 6.7 hereto, paid by any Series with respect
to assets  attributable  to Class B shares  of such  Series  outstanding  at the
Closing;

                  (ii) so long as any Class B shares of the  Series  outstanding
at the Closing remain outstanding,  including Other Shares, to pay to Seller or,
in Seller's  discretion,  its  assignee,  the 12b-1 fees paid by any Series with
respect to assets  attributable to Class B shares of such Series  outstanding at
the Closing;

                  (iii) that Seller or, in Seller's  discretion,  its  assignee,
shall be entitled to receive all  contingent  deferred sales charges paid at any
time after the Closing with respect to Class B shares of the Series  outstanding
at the  Closing and that,  except as  otherwise  permitted  in  accordance  with
arrangements described in the prospectus, such sales charges shall not be waived
without the consent of Seller;

                                      -41-
<PAGE>
                  (iv)  that  Seller   acknowledges   that  the  obligations  of
Purchaser,  PII and PSI with respect to 12b-1 fees  pursuant to this Section 6.7
are subject to the existence of a plan pursuant to Rule 12b-1 of the  Investment
Company Act, and no payments of 12b-1 fees would be required upon termination of
a plan  pursuant  to Rule 12b-1 of the  Investment  Company  Act by the Board of
Trustees of  Nicholas-Applegate  Funds or  termination  of the New  Distribution
Agreement by the Trust.  Seller  acknowledges that the obligations of Purchaser,
PII and PSI pursuant to this  Section  6.7(a) are subject to the receipt of such
fees by PSI or its assignee from a Series.

                  (v) that Seller and its Affiliates will not be responsible for
providing any financing for Purchaser or its Affiliates with respect to sales of
any class of shares of the Series  following  the Closing.  Seller and Purchaser
intend to coordinate and cooperate to approach a third party to investigate:

                  (A) the availability and pricing of a financing  facility with
such third party for  Purchaser  with  respect to sales of Class B shares of the
Series to be made following the Closing; and

                  (B) the possible  assignment by the Seller to such third party
of the right to  receive  (I) the 12b-1 fees paid  following  the  Closing  with
respect to assets  attributable  to Class B shares of the Series  outstanding at
the Closing,  and (II) the contingent  deferred sales charges paid following the
Closing with respect to Class B shares of the Series outstanding at the Closing;
in the event the Seller assigns the rights  described in this clause (B) to such
a third party,  Purchaser  agrees to promptly remit to the Seller the portion of
the proceeds of such assignment received by Purchaser or its Affiliates (if any)
attributable to the Seller's rights assigned to such third party.

         (vi) Purchaser and its Affiliates agree to cooperate with the Seller in
all reasonable  respects in connection  with the Seller's  assignment to a third
party or  retention  of its rights to receive the 12b-1 fees and the  contingent
deferred  sales  charges  described in this Section  6.7(a),  including  without
limitation providing representations, warrants

                                      -42-
<PAGE>
and  covenants  customarily  provided in  connection  with such an assignment or
retention of such rights.

         (b) PSI and  Purchaser  agree that so long as any Class B shares of the
Funds outstanding at the Closing remain outstanding,  including Other Shares, to
use reasonable best efforts to cause brokers  receiving trail  commissions  with
respect  to  assets  attributable  to  shares  of the  Nicholas-Applegate  Funds
outstanding at the Closing to continue  receiving  such  commissions at the same
rates as in effect at the Closing (as described in the  prospectus)  for so long
as such assets remain invested in the  Nicholas-Applegate  Funds but only to the
extent the  shareholder  services  fees under the 12b-1 plan received by PSI are
sufficient to pay such 12b-1 trail commissions.

         (c) In the event that any of the Funds are merged into other funds,  or
otherwise  recognized such that any such Fund is not the survivor of such merger
or  reorganization,  the provisions of Section 6.7(a) and 6.7(b) shall be deemed
to apply to such successor fund.

         Each of the parties shall be responsible  for all expenses,  losses and
costs incurred by it in accordance  with Section  6.7(a)(v) and (vi);  provided,
however,  that  Seller  shall pay any  reasonable  attorneys'  fees  incurred by
Purchaser  and its  Affiliates  not to exceed a maximum  amount of $50,000.  For
purposes of this Section  6.7,  "Other  Shares"  shall be defined as shares into
which such  outstanding  Class B shares are  exchanged  and shares  issued  upon
reinvestment  of any  dividends  declared on Class B shares  outstanding  on the
Closing  Date,  as  reasonably  estimable.  To the extent the 12b-1 plan  and/or
shareholder  servicing agreement is amended,  the parties agree to construe this
Section 6.7 in the same manner as intended to be applied to the current plans.

         6.8 Performance Records of Sub-Advised Series.  Purchaser and PII agree
that Seller may, to the extent  permissible  under applicable law, use after the
Closing Date the  performance  records of any Sub-Advised  Series  following the
Closing  Date but only with  respect to  performance  during the period that the
Sub-Advisory  Agreement  remains in effect for such Series.  Seller  agrees that
Purchaser or its Affiliates may, to the extent

                                      -43-
<PAGE>
permissible  under  applicable  law, use after the Closing Date the  performance
records of any  Sub-Advised  Series earned prior to the Closing Date for so long
as the Sub-Advisory Agreement remains in effect for such Series.

         6.9 Resale  Penalty.  If,  within one year  following the Closing Date,
Purchaser enters into an agreement  requiring it to seek shareholder  consent to
assign  to a third  party the right to  advise  or  distribute  any  Sub-Advised
Series, whether or not still sub-advised by Seller at that time, Purchaser shall
promptly pay a fee to Seller in immediately available funds of $4,000,000.

         6.10 Non-Competition. Except for any existing advisory and sub-advisory
relationships  to the series of  investment  companies  as set forth on Schedule
6.10, until the second anniversary of the Closing, neither Seller nor any of its
Affiliates  will serve or act as an  investment  adviser or  sub-adviser  to any
open-end  investment  company  registered  under the  Investment  Company Act or
series thereof (i) having investment  objectives  substantially similar to those
of any of the Sub-Advised Series for which Seller then serves as sub-adviser and
(ii) whose shares are offered through  distribution  channels directed primarily
to U.S. retail investors.  Notwithstanding the foregoing,  Seller may distribute
on a non-retail  basis and/or act as adviser or sub-adviser  to open-end  mutual
funds in the  institutional  401(k) market,  so long as all classes of shares of
such funds carry no 12b-1 fees,  loads or shareholder  service fees in excess of
0.25%.  "Institutional  401(k)  market"  shall  mean  the  market  comprised  of
institutions  which desire to utilize one or more of Seller's  funds as a 401(k)
investment  option,  as well as the 401(k) "Taft Hartley"  market covered by the
agreement between Seller and Trust Fund Advisors.

         6.11 Road Shows. For a total of not more than four days in any calendar
year,  the Seller will make  available  in  Phoenix,  Arizona one or more of its
senior investment personnel  sufficiently  conversant with matters pertaining to
each of the Sub-Advised  Series for the purpose of either attending a meeting of
the Board of Trustees of the Trust or making such  presentations  to dealers and
potential dealers as may regard matters  pertaining to each Sub-Advised  Series.
It is understood that Seller shall not be required

                                      -44-
<PAGE>
to make available more than one  representative  for each Sub-Advised Series and
that one person may act as a representative for one or more than one Sub-Advised
Series so long as such  representative  is sufficiently  conversant with matters
pertaining   to  the  relevant   Series  for  which  he  or  she  is  acting  as
representative.  The  Purchaser  or PSI  shall  reimburse  the  Seller  for  the
reasonable  out-of-pocket  expenses incurred by the Seller in making such senior
representatives  available and shall provide  reasonable  advance  notice to the
Seller of each meeting or presentation.

         6.12  Transferred  Series.  Purchaser agrees to use its reasonable best
efforts to induce the investment company managed by PII that plans to assume the
assets  of the  Transferred  Series  to  obtain an  opinion  of  counsel  to the
investment  company  that the  Transfer  constitutes  a tax-free  reorganization
within the meaning of Section 368(a) of the Internal  Revenue Code,  dated as of
the closing of the Transfer.  In the event that such opinion cannot be obtained,
Purchaser  agrees  to treat  the  Transferred  Series  as a  Stand-Alone  Series
hereunder.


                                   ARTICLE VII
                                   CONDITIONS

         7.1  Conditions  to  Each  Party's   Obligations  to  Consummate.   The
respective obligations of each party to consummate the transactions contemplated
by this Agreement  shall be subject to the  fulfillment or waiver at or prior to
the Closing of the following conditions:

         (a)  Regulatory  Approvals.  The  transactions   contemplated  by  this
Agreement  shall have been  approved  by all  federal,  state,  foreign or local
governmental or regulatory  authorities or self-regulatory  bodies, the approval
of which is required to permit consummation  thereof,  without the imposition of
any condition or  requirement of any  commitment  which is reasonably  likely to
have a Purchaser  Material  Adverse Effect or Seller Material Adverse Effect (as
the case may be) with respect to any of the parties

                                      -45-
<PAGE>
hereto;  and all waiting  periods  arising under  applicable law shall have duly
lapsed or been terminated.

         (b) No Orders. None of Purchaser, PII, PSI, Seller,  Distributor or any
Series shall be subject to any order,  decree or injunction of a court or agency
of competent  jurisdiction which enjoins or prohibits the consummation of any of
the transactions contemplated by this Agreement.

         (c) Litigation.  No action or proceeding  shall have been instituted or
threatened by any court, governmental body, self-regulatory body or other person
or  entity  and  remain   pending  before  any  court,   governmental   body  or
self-regulatory  body or be  threatened,  to  restrain or prohibit or to recover
damages  in  respect  of any or all of the  transactions  contemplated  by  this
Agreement;  nor  shall any  governmental  body or other  person  or entity  have
notified any party to this Agreement or any of its affiliates that  consummation
of any  or  all  of  the  transactions  contemplated  by  this  Agreement  would
constitute  a violation  of the laws of any  jurisdiction  or that it intends to
commence any action or proceeding to restrain or prohibit or to recover  damages
in respect of any or all of the  transactions  contemplated  by this  Agreement,
unless such  governmental  body or other person or entity  shall have  withdrawn
such notice and abandoned such action or proceeding.

         (d)  Consents.  All  consents or approvals of the Boards of Trustees of
the Trust and the shareholders of the Nicholas-Applegate Funds that are required
to  be  obtained  in  connection  with  the  transactions  contemplated  hereby,
including those specified in Article V, shall have been obtained.

         7.2 Conditions to Obligation of Purchaser to Consummate. The obligation
of Purchaser to consummate the transactions contemplated hereby shall be subject
to the  fulfillment  or  waiver  at or prior  to the  Closing  of the  following
additional conditions:

         (a)  Representations  and Warranties.  Each of the  representation  and
warranties  of Seller and  Distributor  contained in this  Agreement  and in any
Schedule or Exhibit

                                      -46-
<PAGE>
attached  hereto  shall be true and correct in all  material  respects as of the
Closing Date as though made at and as of the Closing  Date (it being  understood
that  representations  and  warranties  that speak as of a specified  date shall
continue to speak as of the date specified), and Purchaser shall have received a
signed certificate of each of Seller and Distributor to that effect.

         (b)  Performance  of  Obligations.  Seller shall have  performed in all
material  respects  all  obligations  required to be  performed by it under this
Agreement at or prior to the Closing Date,  and Purchaser  shall have received a
signed certificate of Seller to that effect.

         (c) Opinion of Counsel to Seller and Distributor.  Purchaser shall have
received the opinion of Paul Hastings  Janofsky & Walker LLP,  counsel to Seller
and Distributor,  or other counsel reasonably acceptable to Purchaser, dated the
Closing  Date,  addressed  to Purchaser  substantially  in the form set forth in
Exhibit 7.2(c).

         (d) Opinion of Counsel to the Trust and the  Nicholas-Applegate  Funds.
Purchaser shall have received the favorable  opinion of Paul Hastings Janofsky &
Walker LLP,  counsel to the Trust and the  Nicholas-Applegate  Funds,  dated the
Closing  Date,  addressed  to Purchaser  substantially  in the form set forth in
Exhibit 7.2(d).

         (e)  Nicholas-Applegate  Funds Trustees. All of the persons recommended
by  Purchaser  to serve as Trustees of the  Nicholas-Applegate  Funds shall have
been elected by the stockholders of each respective Series.

         (f) Delivery. Seller and/or Distributor (as the case may be) shall have
executed and delivered to Purchaser the following:

                  (i) certified  copies of resolutions of the partners of Seller
and  Distributor  authorizing  the  execution of this  Agreement and each of the
agreements, documents and instruments contemplated hereby to which Seller and/or
Distributor is a party;



                                      -47-
<PAGE>
                  (ii) a copy  of the  Certificate  of  Limited  Partnership  of
Seller and Distributor;

                  (iii)  true,  correct  and  complete  copies  of  each  of the
agreements, documents and instruments contemplated hereby to which Seller and/or
Distributor  is  a  party,  and  all  agreements,   documents,  instruments  and
certificates  delivered  or to be delivered  in  connection  therewith by Seller
and/or Distributor, including evidence of termination of such agreements between
Seller and/or Distributor and the Trust, with respect to the  Nicholas-Applegate
Funds,  where  applicable to consummate the  transactions  contemplated  by this
Agreement;

                  (iv) a  certificate  of the  Secretary  of Seller on behalf of
Seller  certifying that the  resolutions and Certificate of Limited  Partnership
provided for in paragraphs  (i) and (ii) above  pertaining to Seller are in full
force and effect and have not been amended or modified, and that the officers of
Seller are those persons named in the certificate;

                  (v) a certificate of the Secretary of Distributor on behalf of
Distributor   certifying   that  the  resolutions  and  Certificate  of  Limited
Partnership  provided  for in  paragraphs  (i)  and  (ii)  above  pertaining  to
Distributor  are in full force and effect and have not been amended or modified,
and that the officers of Distributor are those persons named in the certificate;

                  (vi)  all  bills  of  sale,   deeds,   assignments  and  other
instruments  of transfer  referenced  herein which are necessary to transfer the
Assets; and

                  (vii) such other  certificates  and  documents as are required
hereby or are reasonably requested by Purchaser.

         (g) Material  Adverse Change.  Since the date of this Agreement,  there
shall have been no event or  condition  or events or  conditions  which,  either
individually  or in the  aggregate,  has had or could  reasonably be expected to
have a Seller Material  Adverse  Effect,  and Purchaser shall be provided with a
certificate  from the President of each of Seller and Distributor to that effect
at the Closing.

                                      -48-
<PAGE>
         (h)  Further  Assurances.  Purchaser  shall  have  received  such other
certificates  and instruments  signed by Seller and/or  Distributor as Purchaser
may reasonably request to consummate the transactions contemplated hereby.

         7.3  Conditions to Obligation of Seller and  Distributor to Consummate.
The  obligation  of  Seller  and  Distributor  to  consummate  the  transactions
contemplated hereby shall be subject to the fulfillment or waiver at or prior to
the Closing of the following additional conditions:

         (a)  Representations  and Warranties.  Each of the  representations and
warranties  of  Purchaser,  PII and PSI  contained in this  Agreement and in any
Schedule or Exhibit attached  hereto,  shall be true and correct in all material
respects  as of the  Closing as though  made at and as of the  Closing (it being
understood that representations and warranties that speak as of a specified date
shall continue to speak as of the date so specified), and Seller and Distributor
shall have received a signed certificate of Purchaser to that effect.

         (b)  Performance  of  Obligations.  Purchaser,  PII and PSI shall  have
performed in all material  respects all obligations  required to be performed by
them under this Agreement at or prior to the Closing, and Seller and Distributor
shall have received a signed certificate of Purchaser to that effect.

         (c) Delivery. Purchaser shall have executed and delivered to Seller the
following:

                  (i) certified  copies of resolutions of the board of directors
and, to the extent necessary, stockholders of Purchaser, PII and PSI authorizing
the  execution of this  Agreement,  and each of the  agreements,  documents  and
instruments contemplated hereby to which Purchaser is a party;

                  (ii) a  copy  of  the  Amended  and  Restated  Certificate  of
Incorporation  of  Purchaser,  and  the  Amended  and  Restated  Certificate  of
Incorporation  of each of PII and PSI, each of which is certified as of a recent
date by the Secretary of State of the State of Delaware;

                                      -49-
<PAGE>
                  (iii)  true,  correct  and  complete  copies  of  each  of the
agreements,  documents and instruments  contemplated  hereby to which Purchaser,
PII  or  PSI  is  a  party,  and  all  agreements,  documents,  instruments  and
certificates  delivered or to be delivered in connection therewith by Purchaser,
PII or PSI;

                  (iv) a certificate of the Secretary of each of Purchaser,  PII
and PSI on behalf of Purchaser,  PII or PSI (as the case may be) certifying that
the resolutions, Amended and Restated Certificates of Incorporation, and By-laws
provided in paragraphs  (i) and (ii) above are in full force and effect had have
not been  amended or  modified,  and that the  officers of each entity are those
persons named in the certificate;

                  (v) the Purchase Price to be delivered as consideration at the
Closing Date pursuant to Section 1.4 hereof; and

                  (vi) such other  certificates  and  documents  as are required
hereby or are reasonably requested by Seller.

         (d) Opinion of Counsel to  Purchaser,  PII and PSI.  Seller  shall have
received the opinion of Bryan Cave LLP, counsel to Purchaser, PII and PSI, dated
the Closing Date, addressed to Seller,  Distributor and the Trust, substantially
in the form set forth in Exhibit 7.3(d).

         (e) Material  Adverse Change.  Since the date of this Agreement,  there
shall have been no event or condition,  or events or conditions,  which,  either
individually  or in the  aggregate,  has had or could  reasonably be expected to
have a Purchaser  Material Adverse Effect,  and Seller and Distributor  shall be
provided  with a  certificate  from the President of Purchaser to that effect at
the Closing.

         (f) Further Assurances. Seller and Distributor shall have received such
other certificates and instruments signed by Purchaser as Seller and Distributor
shall reasonably request.

                                      -50-
<PAGE>
         (g) Schwab  Contract.  PSI shall have  assumed the  obligations  of the
Distributor  pursuant  to  the  terms  of the  Services  Agreement  dated  as of
September 14, 1995 among Charles Schwab & Co., Inc.,  Distributor  and the Trust
and the Operating Agreement dated as of the same date between the same parties.

                                  ARTICLE VIII
                                 INDEMNIFICATION

         8.1  Indemnification.  (a) Seller and  Distributor  shall indemnify and
hold Purchaser,  PII and PSI and their  respective  subsidiaries  and Affiliates
(including persons serving as directors,  officers,  registered representatives,
members,   employees  or  controlling  persons  thereof,  and  their  respective
successors and assigns,  each a "Purchaser  Indemnified Party" and collectively,
the "Purchaser Indemnified Parties"), harmless from and against all liabilities,
demands,  claims, actions or causes of action,  assessments,  losses (including,
but not limited to, diminution in value),  fines,  penalties,  costs (including,
but not limited to,  reasonable  attorneys'  and expert  witness  fees),  taxes,
damages and  expenses,  including,  without  limitation,  those  asserted by any
federal,  state, local or foreign governmental entity, third party, or former or
present employee of any kind or nature  whatsoever (any and all of the foregoing
being referred to as "Losses" or individually a "Loss"), sustained by Purchaser,
PII, PSI, any such director,  trustee,  officer or  controlling  person or their
respective successors or assigns to the extent any such Loss arises out of or by
virtue of (i) any  breach of a  representation  or  warranty  made by Seller and
Distributor  herein; (ii) any liability incurred by PSI pursuant to distribution
services provided to the  Nicholas-Applegate  Funds or Distributor in respect of
the  Nicholas-Applegate  Funds  as of the  date of this  Agreement  through  and
including the Closing Date arising in  connection  with the use of any materials
prepared  by Seller or  Distributor,  or written  information  provided  by such
parties,  or  arising  from  an  untrue  statement  of a  material  fact  in the
prospectus or registration statement for any of the Nicholas-Applegate  Funds or
an omission to state a material fact required to be stated  therein or necessary
to make a statement  therein,  in light of the circumstances  under which it was
made, not

                                      -51-
<PAGE>
misleading,  except insofar as such untrue  statements or omissions were made in
reliance upon information furnished by Purchaser,  PII or PSI in writing for use
in such documents;  or (iii) any failure to perform any covenant or agreement of
Seller  herein;  provided,  however,  that  except  as  set  forth  below,  such
indemnification shall not apply to any Claim (as defined below) for which notice
pursuant to Section 8.2 has not been  received  by an  indemnifying  party on or
before the date (W) on which the applicable statute of limitations  expires with
respect to Losses  that arise out of or by virtue of (i),  (ii) or (iii) of this
Section  8.1 and  relate  to  Taxes;  (X) on which  the  applicable  statute  of
limitations  expires  with  respect to Losses  that arise out of or by virtue of
(i),  (ii),  or (iii) of this  Section  8.1 and relate to  Section  15(f) of the
Investment Company Act; (Y) six months following the date on which the covenants
specified in Sections  6.6, 6.7 and 6.9 expire for any Losses  pertaining to any
failure to perform  such  covenants;  provided,  however  that  Losses  incurred
following the second  anniversary of the Closing Date pertaining to this section
(Y) shall not  include  any  consequential  damages;  and (Z) that is the second
anniversary of the Closing Date for all other Losses except Losses pertaining to
any failure to perform any covenant specified in Section 6.6, 6.7 and 6.9, (each
an  "Indemnification  Cut-Off Date"). In the event Seller and Distributor or any
of their respective  successors or assigns (X) reorganizes or consolidates  with
or merges into or enters into another business combination  transaction with any
other  person  or  entity  and is not the  resulting,  continuing  or  surviving
corporation  or entity of such  consolidation,  merger  or  transaction,  or (Y)
liquidates,  dissolves or transfers all or  substantially  all of its properties
and  assets to any  person  or  entity,  then,  and in each  such  case,  proper
provisions  shall be made so that the  successors  and  assigns  of  Seller  and
Distributor as the case may be assume the  obligations set forth in this Section
8.1(a).

         (b)   Purchaser,   PII  and  PSI  shall   indemnify  and  hold  Seller,
Distributor,   the  Trust  and  their  respective  Affiliates  and  subsidiaries
(including persons serving as directors,  officers,  registered representatives,
members,   employees  or  controlling  persons  thereof,  and  their  respective
successors and assigns, each a "Seller Indemnified Party" and collectively,  the
"Seller Indemnified Parties"), harmless from and against all Losses

                                      -52-
<PAGE>
sustained or incurred by Seller, Distributor or by the Trust, any such director,
trustee officer or controlling person or their respective  successors or assigns
to the  extent  any such Loss  arises out of or by virtue of (i) any breach of a
representation or warranty made by Purchaser herein; (ii) any failure to perform
any  covenant  or  agreement  of  Purchaser  herein;  and (iii)  any  misleading
statements or  representations  concerning the  Nicholas-Applegate  Funds (other
than statements or representations  contained in the  Nicholas-Applegate  Funds'
current  Prospectuses  and  Statements  of Additional  Information  or any other
written  material  Seller or Distributor  has provided to Purchaser,  PII or PSI
relating to the  Nicholas-Applegate  Funds) made by PSI or its  employees or the
wrongful  conduct of PSI in connection with services  rendered under the Interim
Distribution  Agreement provided,  however, that except as set forth below, such
indemnification shall not apply to any Claim (as defined below) for which notice
pursuant to Section  8.2 has not been  received  by  Purchaser  on or before the
respective Indemnification Cut-Off Date to which the Losses pertain.

         In  the  event  Purchaser  or  any of its  successors  or  assigns  (i)
reorganizes or consolidates  with or merges into or enters into another business
combination  transaction  with  any  other  person  or  entity  and is  not  the
resulting,  continuing or surviving corporation or entity of such consolidation,
merger  or  transaction,  or (ii)  liquidates,  dissolves  or  transfers  all or
substantially  all of its properties  and assets to any person or entity,  then,
and in each such case,  proper  provisions  shall be made so that the successors
and  assigns of  Purchaser  assume  the  obligations  set forth in this  Section
8.1(b).

         8.2      Claims Procedures.

         (a) An indemnified party may make claims for indemnification  hereunder
by giving written notice thereof to the indemnifying  party within the period in
which   indemnification   claims  can  be  made   hereunder  (a   "Claim").   If
indemnification  is sought for a claim or  liability  asserted by a third party,
the indemnified party shall also give written notice thereto to the indemnifying
party  promptly  after  it  receives  notice  of the  claim or  liability  being
asserted, but the failure to do so shall not relieve the indemnifying

                                      -53-
<PAGE>
party from any  liability  except to the  extent  that it is  prejudiced  by the
failure or delay in giving such notice.  Such notice shall  summarize  the bases
for the claim for indemnification and any claim or liability being asserted by a
third party.  Within twenty (20) business days after  receiving  such notice the
indemnifying  party shall give written notice to the  indemnified  party stating
whether it  disputes  the claim for  indemnification  and whether it will defend
against any third party claim or liability at its own cost and expense.

         (b) The  indemnifying  party  shall be  entitled  to direct the defense
against a third party claim or liability with counsel selected by it (subject to
the consent of each indemnified  party,  which consent shall not be unreasonably
withheld or  delayed) as long as the  indemnifying  party is  conducting  a good
faith and diligent  defense.  Each indemnified party shall at all times have the
right to participate fully in the defense of a third party claim or liability at
its own expense  directly or through  counsel;  provided,  however,  that if the
named parties to the action or proceeding  include either both the  indemnifying
party  and/or  one or more  indemnified  parties  and an  indemnified  party  is
reasonably  advised by a third party lawyer that  representation of both parties
by the same  counsel  would  be  inappropriate  under  applicable  standards  of
professional  conduct,  an indemnified party may engage separate counsel.  If no
such timely notice of intent to defend a third party claim or liability is given
by the  indemnifying  party,  or if such good faith and diligent  defense is not
being or ceases to be conducted by the indemnifying party, the indemnified party
shall have the right, at the expense of the indemnifying party, to undertake the
defense of such claim or liability  (with  counsel  selected by the  indemnified
party with the  consent of the  indemnifying  party which  consent  shall not be
unreasonably  withheld or delayed).  In no circumstances  shall the indemnifying
party  be  required  to pay  the  expenses  of more  than  one  counsel  for the
indemnified party. The indemnified party shall obtain the written consent of the
indemnifying party (which consent shall not be unreasonably withheld or delayed)
prior to  compromising  or settling such claim or liability.  If the third party
claim or  liability is one that by its nature  cannot be defended  solely by the
indemnifying party, then the indemnified party shall make

                                      -54-
<PAGE>
available  such  information  and  assistance  as  the  indemnifying  party  may
reasonably  request  and shall  cooperate  with the  indemnifying  party in such
defense, at the expense of the indemnifying party.

         (c) The indemnified  party shall take all reasonable  steps to mitigate
all Losses,  including,  but not limited to,  availing  itself of any  defenses,
limitations,  rights of  contribution,  claims  against  third parties and other
rights at law (it being  understood that any out of pocket costs reasonably paid
to third parties in connection with such mitigation  shall  constitute  Losses),
and shall  provide such evidence and  documentation  of the nature and extent of
any Loss as may be reasonably requested by the indemnifying party.

         (d) An indemnifying party shall not, without the written consent (which
shall not be  unreasonably  withheld  or delayed)  of the  indemnified  party or
parties,  settle or compromise any  indemnifiable  Losses or permit a default or
consent to entry of any judgment unless the claimant and the indemnifying  party
provide to the  indemnified  party or parties an  unqualified  release  from all
liability  in  respect  of  the  claim.  Notwithstanding  the  foregoing,  if  a
settlement  offer solely for money damages is made by the applicable third party
claimant,  and the indemnifying  party notifies the indemnified party in writing
of the indemnifying  party's willingness to accept the settlement offer and make
the entire payment  required,  and the indemnified party declines to accept such
offer,  the  indemnified  party may  continue  to defend  such  claim at its own
expense,  free of any participation by the indemnifying party, and the amount of
any  ultimate  liability  with  respect  to such  indemnifiable  claim  that the
indemnifying  party has an obligation  to pay hereunder  shall be limited to the
lesser of (i) the  amount of the  settlement  offer that the  indemnified  party
declined to accept or (ii) the aggregate  Losses of the  indemnified  party with
respect to such claim. If the indemnifying party makes any payment on any claim,
the indemnifying  party shall be subrogated,  to the extent of such payment,  to
all rights and remedies of the  indemnified  party to any insurance  benefits or
other claims of the indemnified party with respect to such claim.

                                      -55-
<PAGE>
         (e) Absent fraud or criminal  activity,  the  remedies  provided for in
this Article VIII shall  constitute the sole and exclusive remedy for any claims
made for breach of the representations and warranties contained herein.

         8.3  Indemnification  Limits.  Except as otherwise  provided in Section
8.2(e) and this Section 8.3, the parties shall not be liable for indemnification
under  this  Article  VIII for any  Losses  (i)  unless and until the Claims (as
defined  herein) of the  indemnified  party exceed  $250,000,  at which time the
indemnified  party  shall only be entitled  to receive  indemnification  for all
Losses in excess of $250,000 or (ii) for any  amounts in the  aggregate  greater
than $7,500,000;  provided, however that such deductible and cap shall not apply
to any Losses (W) that relate to Taxes,  (X) that  relate to Section  8.1(a)(ii)
and (b)(iii),  (Y) specified  under Section 8.1(Y) or (Z) that relate to Section
15(f) of the Investment Company Act.  Notwithstanding the foregoing, the maximum
amount of indemnification payable by Purchaser, PII and PSI on the one hand, and
Seller and  Distributor  on the other hand under the terms of this  Article VIII
shall not exceed the Purchase Price.

                                   ARTICLE IX
                                   TERMINATION

         9.1 Termination.  At any time prior to the Closing Date, this Agreement
may be terminated as follows:

         (a)  by mutual written consent of Seller and Purchaser;

         (b) by either  Seller or Purchaser at any time after August 31, 1999 if
the Closing shall not theretofore have occurred;

         (c) by either  Seller or  Purchaser  in the event of the  breach by the
other party of (i) any  representation  or warranty  contained  herein or in any
schedule or document  delivered  herewith  which has  resulted or is  reasonably
likely to result in a Material Adverse Effect with respect to the  non-breaching
party; or (ii) any agreement contained herein, which

                                      -56-
<PAGE>
breach  cannot be or has not been cured within 30 days after  written  notice to
the party committing such breach;

         (d) by  Purchaser  or Seller,  pursuant to written  notice to the other
party, if the conditions and approvals  required under Article V and Article VII
shall  not have been  satisfied  at or prior to August  31,  1999;  or if it has
become  reasonably  certain that any of such approvals or conditions will not be
satisfied at or prior to August 31, 1999;

         (e) by either Seller or Purchaser if any permanent injunction or action
by any  court or other  governmental  agency or body of  competent  jurisdiction
enjoining,  denying approval of or otherwise prohibiting  consummation of any of
the  transactions   contemplated  by  this  Agreement  shall  become  final  and
nonappealable;

         (f) at the  election  of  Purchaser  or Seller,  if any  litigation  or
judicial,  governmental,  administrative  or arbitration or any investigation or
governmental inquiry (collectively,  "Action") shall have been instituted, or is
known to be contemplated,  or is threatened in writing:  which is related to and
could  reasonably  be expected to have a Purchaser  Material  Adverse  Effect or
Seller Material Adverse Effect, as applicable.

         9.2 Effect of Termination and Abandonment.  In the event of termination
of this  Agreement  and  abandonment  of the  transactions  contemplated  hereby
pursuant  to this  Article  IX,  no party  hereto  (or any of its  directors  or
officers)  shall have any liability or further  obligation to any other party to
this  Agreement,  provided  that  nothing  herein  will  relieve  any party from
liability for any breach of this  Agreement  covered by Section  9.1(c) above or
the provisions of Sections 6.3, 6.5 and 10.4.

                                    ARTICLE X
                               GENERAL PROVISIONS

         10.1 Notices. All notices and other  communications  hereunder shall be
in writing and shall be given and deemed to have been duly  received  (i) on the
date given if delivered  personally  or by telex or telecopy or (ii) on the date
received if mailed by

                                      -57-
<PAGE>
registered or certified mail (return receipt  requested),  to the parties at the
following  addresses (or at such other address for a party as shall be specified
by like notice):

(a)  if to Purchaser, to:

         Mr. James M. Hennessy
         Executive Vice President
         Pilgrim America Capital Corporation
         Two Renaissance Square
         40 North Central Avenue, Suite 1200
         Phoenix, Arizona 85004-4424
         Telecopy:  602-417-8301

Copy to:

         Jeffrey S. Puretz, Esq.
         Dechert Price & Rhoads
         1775 Eye Street, N.W.
         Washington, D.C.  20005
         Telecopy:  (202) 261-3333

(b)      if to Seller, to:

         Nicholas-Applegate Capital Management
         600 West Broadway, 29th Floor
         San Diego, California 92101
         Attn:  E. Blake Moore
         Telecopy:  619-687-8138

Copy to:

         Raj Marphatia, Esq.
         Ropes & Gray
         One International Place
         Boston, Massachusetts  02110
         Telecopy:  617-951-7050



         10.2  Counterparts.  This  Agreement  may be executed  in  counterparts
(including   executed   counterparts   delivered   and  exchanged  by  facsimile
transmission) each of which

                                      -58-
<PAGE>
shall be deemed to  constitute  an  original,  but all of which  together  shall
constitute one and the same instrument.

         10.3  Governing   Law.  This  Agreement   shall  be  governed  by,  and
interpreted  in accordance  with,  the laws of the State of  California  without
regard to its conflict of law  principles,  except to the extent federal law may
apply.

         10.4     Expenses.

         (a) Except as specifically provided herein, each party hereto will bear
all  expenses  incurred  by  it  in  connection  with  this  Agreement  and  the
transactions contemplated hereby, including attorney's fees.

         (b) Seller and  Purchaser  shall bear  equally  the costs and  expenses
pertaining  to  the  printing,   distribution  and  solicitation  of  all  Proxy
Statements for the  Nicholas-Applegate  Funds other than the Transferred Series,
including attorneys' fees; provided,  however, that Purchaser shall not bear any
expenses  pertaining to the redemption of the Institutional  Class of shares and
other activities described in Section 4.2 herein.

         (c)  Purchaser  shall  bear the costs and  expenses  pertaining  to the
printing,  distribution,  and  solicitation  of all  Proxy/Prospectuses  for the
Transferred Series, including attorney's fees.

         10.5 Waiver,  Amendment.  Any  provision of this  Agreement  may be (i)
waived by the party  benefited by the provision,  or (ii) amended or modified at
any time (including the structure of the transactions  contemplated  hereby,  or
any part  thereof),  by an  agreement  in writing  among the parties  hereto and
executed  in the same  manner  as this  Agreement.  Any  waiver  of any terms or
conditions or of the breach of any covenant,  representation or warranty of this
Agreement  in one  instance  shall not operate as or be deemed or construed as a
further  or  continuing  waiver of any other  breach  of such  term,  condition,
covenant, representation or warranty, nor shall any failure or delay at any time
or times to enforce or require  performance of any provision hereof operate as a
waiver of or affect in any manner such party's  right at a later time to enforce
or require performance

                                      -59-
<PAGE>
of such provision or of any provision hereof;  provided,  however,  that no such
waiver, unless it, by its own terms, explicitly provides to the contrary,  shall
be construed to effect a continuing  waiver of the provision being waived and no
such waiver in any instance  shall  constitute a waiver in any other instance or
for any other  purpose or impair the right of the party against whom such waiver
is claimed in all other  instances  or for all other  purposes  to require  full
compliance.

         10.6 Entire  Agreement;  No Third-Party  Beneficiaries.  This Agreement
represents the entire  understanding of the parties hereto with reference to the
transactions  contemplated  hereby  and  supersedes  any and all  other  oral or
written  agreements  heretofore made. All terms and provisions of this Agreement
shall be binding  upon and shall inure to the benefit of the parties  hereto and
their  respective  personal  representatives,  heirs,  successors  and permitted
assigns.  Nothing in this Agreement,  other than Section 8.1 hereof, is intended
to confer upon any other person any rights or remedies of any nature  whatsoever
under or by reason of this Agreement.

         10.7 Assignment. This Agreement may not be assigned by any party hereto
without  the  written  consent of the other  parties.  This  Agreement  shall be
binding upon and  enforceable by, and shall inure to the benefit of, the parties
hereto and their respective  successors,  heirs,  executors,  administrators and
permitted assigns.

         10.8  Captions  and  Gender.  The  captions in this  Agreement  are for
convenience only and shall not affect the construction or  interpretation of any
term or provision hereof.  The use in this Agreement of the masculine pronoun in
reference  to a party  hereto shall be deemed to include the feminine or neuter,
as the context may require.

         10.9  Waiver  of  Jury  Trial.   Each  of  the  parties  hereto  hereby
irrevocably  and  unconditionally  waives  trial by jury in any legal  action or
proceeding relating to this agreement and for any counterclaim therein.

         10.10 License to Use  Nicholas-Applegate  Name.  It is understood  that
Seller and its Affiliates  own all right,  title and interest in and to the name
"Nicholas-Applegate

                                      -60-
<PAGE>
Capital  Management,"  "Nicholas-Applegate"  or any  derivative  thereof or logo
associated with that name (the "Nicholas-Applegate marks"). Seller hereby grants
to PII and its Affiliates and the  Nicholas-Applegate  Funds a non-exclusive and
non-assignable license to use the Nicholas-Applegate marks in offering materials
of the  Nicholas-Applegate  Funds, or in  promotional,  sales or other marketing
materials with respect to the Nicholas-Applegate  Funds. Purchaser,  PII or PSI,
on behalf of its Affiliates and the  Nicholas-Applegate  Funds, shall obtain the
prior  approval of Seller for the public  release of any  materials  bearing the
Nicholas-Applegate  marks.  The  grant of  license  by  Seller  shall  terminate
automatically  with  respect to a  particular  Series  upon  termination  of the
Sub-Advisory  Agreement  with respect to such Series.  Upon  termination of such
Agreement,   PII  and  its  Affiliates  shall   immediately  cease  to  use  the
Nicholas-Applegate marks with respect to that Series.

                                   ARTICLE XI

         11.1 Certain Defined Terms.  The following terms used in this Agreement
will have the meanings  specified below (such meanings to be equally  applicable
to both the singular and plural forms of the terms defined):

         "Action" has the meaning specified in Section 9.1(f).

         "Advisory  Agreement" has the meaning specified in the Recitals to this
Agreement.

         "Affiliate" has the meaning specified in Section 6.6(d).

         "Assets" has the meaning specified in Section 1.1(b).

         "Claim" has the meaning specified in Section 8.2(a).

         "Closing" has the meaning specified in Section 1.1.

         "Closing Date" has the meaning specified in Section 1.3(b).

                                      -61-
<PAGE>
         "Continuing Shares" has the meaning specified in Section 1.4(c).

         "Deferred Purchase Price" has the meaning specified in Section 1.5.

         "Distributor"  has  the  meaning  specified  in the  Preamble  to  this
Agreement.

         "Distribution  Agreement" has the meaning  specified in the Recitals to
this Agreement.

         "Encumbrances" has the meaning specified in Section 1.1(b).

         "Exchange  Act"  shall mean the  Securities  Exchange  Act of 1934,  as
amended.

         "Gross  Annual  Management  Fee" has the meaning  specified  in Section
1.4(a).

         "Indemnification  Cut-Off  Date" has the meaning  specified  in Section
8.1(a).

         "Information" has the meaning specified in Section 6.3.

         "Interim  Distribution  Agreement" has the meaning specified in Section
5.2(a).

         "Investment  Advisers  Act" shall mean the  Investment  Advisers Act of
1940, as amended.

         "Investment Company Act" shall mean the Investment Company Act of 1940,
as amended.

         "Loss" has the meaning specified in Section 8.1(a).

         "Measurement Date" has the meaning specified in Section 1.4(a)(i).

         "Mutual Fund Agreements" has the meaning specified in Section 3.9(b).

         "Mutual Fund Financial  Statement" has the meaning specified in Section
3.9(h).

         "NACM" shall mean Nicholas-Applegate Capital Management or Seller.

                                      -62-
<PAGE>
         "Net  Annual  Management  Fee" has the  meaning  specified  in  Section
1.4(a).

         "New  Advisory   Agreement"  has  the  meaning   specified  in  Section
5.1(a)(i).

         "New  Distribution  Agreement"  has the  meaning  specified  in Section
5.2(b).

         "Nicholas-Applegate Funds" has the meaning specified in the Recitals to
this Agreement.

         "Nicholas-Applegate marks" has the meaning specified in Section 10.10.

         "Other Shares" has the meaning specified in Section 6.7.

         "PACC" shall mean Pilgrim America Capital Corporation or Purchaser.

         "PII" shall mean Pilgrim Investments, Inc.

         "PII Acquiring Fund" has the meaning specified in Section 5.1(a)(iii).

         "Preliminary  Purchase  Price"  has the  meaning  specified  in Section
1.8(a).

         "Proxy/Prospectus" has the meaning specified in Section 5.1(c).

         "Proxy Statement" has the meaning specified in Section 5.1(b).

         "PSI" shall mean Pilgrim Securities, Inc.

         "Purchase Date" has the meaning specified in Section 1.4(b)(ii).

         "Purchase Price" has the meaning specified in Section 1.4(a).

         "Purchased Shares" has the meaning specified in Section 1.4(b)(ii).

         "Purchaser"  has  the  meaning   specified  in  the  Preamble  to  this
Agreement.

         "Purchaser  Indemnified  Party" has the  meaning  specified  in Section
8.1(a).

         "Purchaser  Material  Adverse  Effect"  has the  meaning  specified  in
Section 1.6.



                                      -63-
<PAGE>
         "Redeemed Shares" has the meaning specified in Section 1.4(b)(i).

         "Reorganization" has the meaning specified in Section 3.9(o).

         "Retail Assets" has the meaning specified in Section 1.4(d).

         "SEC" shall mean the United States Securities and Exchange Commission.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Seller" shall mean Nicholas-Applegate Capital Management.

         "Seller Material  Adverse Effect" has the meaning  specified in Section
1.6.

         "Seller Indemnified Party" has the meaning specified in Section 8.1(b).

         "Series" has the meaning specified in the Recitals to this Agreement.

         "Stand-Alone  Series" has the meaning specified in the Recitals to this
Agreement.

         "Sub-Advised  Series" has the meaning specified in the Recitals to this
Agreement.

         "Sub-Advisory   Agreement"   has  the  meaning   specified  in  Section
5.1(a)(ii).

         "Taxes" has the meaning specified in Section 3.9(e).

         "Taxing Authority" has the meaning specified in Section 3.9(f).

         "Transfer"  has the  meaning  specified  in the  Recitals  and  Section
5.1(a)(iii).

         "Transferred  Series" has the meaning specified in the Recitals to this
Agreement.

                            [CONTINUED ON NEXT PAGE]

                                      -64-
<PAGE>
         "Trust" has the meaning specified in the Recitals to this Agreement.

         "Trust Statements" has the meaning specified in Section 3.9(k).

         IN WITNESS WHEREOF, the parties have duly executed this Agreement,  all
as of the date first written above.

                            PILGRIM AMERICA CAPITAL CORPORATION


                       By:  _____________________________________
                            Name:
                            Title:


                            PILGRIM INVESTMENTS, INC.


                       By:  _____________________________________
                            Name:
                            Title:


                            PILGRIM SECURITIES, INC.

                       By:  _____________________________________
                            Name:
                            Title:





                            NICHOLAS-APPLEGATE CAPITAL MANAGEMENT

                       By:  _____________________________________
                            Name:
                            Title:


                            NICHOLAS-APPLEGATE SECURITIES


                       By:  _____________________________________
                            Name:
                            Title:

                                      -65-
<PAGE>
                                   SCHEDULE A


Nicholas-Applegate Small Cap Growth
Nicholas-Applegate Mid Cap Growth
Nicholas-Applegate Large Cap Growth
Nicholas-Applegate Emerging Countries
Nicholas-Applegate Worldwide Growth
Nicholas-Applegate International Small Cap Growth
Nicholas-Applegate International Core Growth
Nicholas-Applegate Convertible Fund

                                      -66-
<PAGE>
                                   SCHEDULE B

Nicholas-Applegate High Yield Fund



                                      -67-
<PAGE>

                                   SCHEDULE C

Nicholas-Applegate Balanced Growth Fund
Nicholas-Applegate High Quality Bond Fund




 .0.

                                      -68-