PBHG INSURANCE SERIES FUND INC
DEFS14A, 2000-12-12
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                            SCHEDULE 14A INFORMATION
                Proxy Statement Pursuant to Section 14(a) of the
                         Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
    14a-6(e)(2))
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                        PBHG Insurance Series Fund, Inc.
                   -------------------------------------------
                (Name of Registrant as Specified in Its Charter)


              -----------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement,
                          if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
|X| No fee required
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)  Title of each class of securities to which transaction applies:

     ------------------------------------------------------------------------
(2)  Aggregate number of securities to which transaction applies:

     ------------------------------------------------------------------------

(3)  Per unit price or other underlying value of transaction computed pursuant
     to Exchange Act rule 0-11 (Set forth the amount on which the filing fee is
     calculated and state how it was determined):

     ------------------------------------------------------------------------

(4)  Proposed maximum aggregate value of transaction:

     ------------------------------------------------------------------------

(5)  Total fee paid:

     ------------------------------------------------------------------------



| |  Fee paid previously with preliminary materials.
| |  Check box if any part of the fee is offset as provided by Exchange
     Act rule 0-11(a)(2) and identify the filing for which the offsetting
     fee was paid previously. Identify the previous filing by registration
     statement number, or the form or Schedule and the date of its filing.
<PAGE>

(1)      Amount Previously Paid:

(2)      Form, Schedule or Registration Statement No.:

(3)      Filing Party:

(4)      Date Filed:
<PAGE>


                                                               DECEMBER 14, 2000

                       IMPORTANT NEWS FOR SHAREHOLDERS OF
                        PBHG INSURANCE SERIES FUND, INC.


         While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting PBHG Insurance
Series Fund, Inc. (the "Company") that require a shareholder vote.


                          Q & A: QUESTIONS AND ANSWERS


Q.       WHAT IS HAPPENING?

A.       Old Mutual plc, an international financial services group based in
         London ("Old Mutual"), has acquired United Asset Management Corporation
         ("UAM"), the parent company of the Company's investment adviser,
         Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), and the Company's
         investment sub-adviser, Pilgrim Baxter Value Investors, Inc. ("Value
         Investors"). This acquisition caused a change in the control of Pilgrim
         Baxter and Value Investors, the sub-adviser to certain portfolios,
         resulting in the automatic termination of the advisory and sub-advisory
         agreements for those separate portfolios of the Company (Each separate
         portfolio is referred to as a "Fund"; collectively, the separate
         portfolios are referred to as the "Funds"). The Company's Board of
         Directors has approved, subject to shareholder approval, new investment
         advisory agreements for all Funds, and new sub-advisory agreements for
         those Funds having a sub-adviser.

         The Board of Directors is also taking this opportunity to ask
         shareholders to vote on certain other matters affecting the Funds. The
         following pages give you additional information about Old Mutual, the
         acquisition, and the matters on which you are being asked to vote. THE
         DIRECTORS OF THE COMPANY, INCLUDING THOSE WHO ARE INDEPENDENT DIRECTORS
         OF THE COMPANY, UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR EACH OF THESE
         PROPOSALS.



Q.       WHY DID YOU SEND ME THESE MATERIALS?

A.       You are receiving these materials--a booklet that includes the Proxy
         Statement and one or more proxy cards--because you have the right to
         instruct your insurance company on how to vote on the important
         proposals concerning your investment in one or more of the Funds.



Q.       WHY ARE MULTIPLE AUTHORIZATIONS ENCLOSED?

A.       If you purchased more than one of the Funds through your variable
         annuity contract or variable insurance policy, you will receive an
         authorization card for each Fund you purchased.


<PAGE>

Q.       WHY AM I BEING ASKED TO VOTE ON A PROPOSED NEW ADVISORY AND
         SUB-ADVISORY AGREEMENTS IN PROPOSALS NO. 1 AND 2?

A.       Under the Investment Company Act of 1940 (which regulates investment
         companies such as the Company), a change in control of an investment
         company's adviser results in an automatic termination of all advisory
         agreements between that investment company and the adviser and requires
         the shareholders to approve new advisory agreements. Therefore, the
         advisory agreement between the Company and Pilgrim Baxter terminated as
         a result of UAM's acquisition by Old Mutual. In addition, all
         sub-advisory agreements for those Funds having a sub-adviser have also
         been automatically terminated. Consequently, shareholder approval of
         new advisory agreements between the Company and Pilgrim Baxter, and new
         sub-advisory agreements among the Company, Pilgrim Baxter, and Value
         Investors are now required. The former advisory and sub-advisory
         agreements contained a provision limiting expenses previously required
         by state securities laws. Those state securities laws were voided in
         1996 by the Federal National Securities Market Improvement Act, and
         therefore, that provision has been deleted from the new advisory and
         sub-advisory agreements. The new advisory and sub-advisory agreements
         are identical in all material respects to the former advisory and
         sub-advisory agreements including the fees paid thereunder.



Q.       HOW WILL THE UAM/OLD MUTUAL TRANSACTION AFFECT ME?

A.       Pilgrim Baxter and Old Mutual have assured the Board that there will be
         no reduction in the nature or quality of its services to the Funds as a
         result of the transaction, nor will there be any increase in fees or
         expenses as a result of the transaction.



Q.       WHAT OTHER ITEMS AM I BEING ASKED TO VOTE ON?

A.       You are being asked to vote on proposals to standardize the various
         fundamental investment policies of the Funds. Additionally, you are
         being asked to vote on reorganizing the Company, which is currently a
         Maryland corporation, into a Delaware business trust. THE BOARD OF
         DIRECTORS OF THE COMPANY, INCLUDING THOSE WHO ARE INDEPENDENT DIRECTORS
         OF THE COMPANY, UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THESE
         PROPOSALS.



Q.       WHOM DO I CALL FOR MORE INFORMATION?

A.       If you need more information on how to vote, or if you have any
         questions, please call your insurance company.



   YOUR VOTE IS IMPORTANT. THANK YOU FOR PROMPTLY RECORDING YOUR INSTRUCTIONS.


<PAGE>

                        PBHG INSURANCE SERIES FUND, INC.

                            PBHG GROWTH II PORTFOLIO
                         PBHG LARGE CAP GROWTH PORTFOLIO
                         PBHG SMALL CAP VALUE PORTFOLIO
                          PBHG MID-CAP VALUE PORTFOLIO
                           PBHG SELECT VALUE PORTFOLIO
                   PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
                            PBHG SELECT 20 PORTFOLIO
                                 P.O. Box 419229
                           Kansas City, MO 64141-6229

                    NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                         TO BE HELD ON January 25, 2001

NOTICE IS HEREBY GIVEN that a special meeting of shareholders of each series
portfolio (each, a "Fund") of PBHG Insurance Series Fund, Inc. (the "Company"),
will be held at the Peninsula Hotel, Le Grande Salle Room, 700 Fifth Avenue in
New York City on January 25, 2001 at 10:30 AM for the following purposes:

     1. To approve new investment advisory agreements for each Fund.

     2. To approve new investment sub-advisory agreements with Pilgrim Baxter
        Value Investors, Inc. for PBHG Select Value Fund, PBHG Mid-Cap Value
        Fund, and PBHG Small Cap Value Fund.

     3. To approve changes to each Fund's fundamental investment restrictions.

     4. To approve reorganizing the Company as a Delaware business trust and
        thereafter dissolving the existing Maryland corporation.

     5. To transact any other business that may properly come before the meeting
        or any adjournments thereof.

Shareholders of record at the close of business on November 17, 2000 are
entitled to notice of, and to vote at, the meeting or any adjournments thereof.
Since all of the shares of the Funds are held exclusively by insurance companies
for the purpose of funding variable annuity contracts and variable life
insurance policies, the insurance companies vote the shares in accordance with
your directions. Therefore, it is important for you to complete the enclosed
authorization and return it in the accompanying envelope as promptly as
possible. Your instructions to your insurance company are very important.

                        By Order of the Board of Directors of the Company.


                        /s/John M. Zerr


                        John M. Zerr
                        Secretary
                        Kansas City, MO
                        December 14, 2000


<PAGE>

                        PBHG INSURANCE SERIES FUND, INC.
                                 P.O. BOX 419229
                           KANSAS CITY, MO 64141-6229
                                 1-800-347-9256



                                 PROXY STATEMENT
                       SPECIAL MEETING OF SHAREHOLDERS OF

                        PBHG INSURANCE SERIES FUND, INC.

                         TO BE HELD ON JANUARY 25, 2001

         This proxy statement is furnished in connection with the solicitation
by the Board of Directors of PBHG Insurance Series Fund, Inc. (the "Company"),
for the special meeting of shareholders of PBHG Growth II Portfolio, PBHG Large
Cap Growth Portfolio, PBHG Small Cap Value Portfolio, PBHG Mid-Cap Value
Portfolio, PBHG Select Value Portfolio, PBHG Technology & Communications
Portfolio, and PBHG Select 20 Portfolio (each a "Fund" and collectively the
"Funds"), to be held at the Peninsula Hotel, La Grande Salle Room, 700 Fifth
Avenue in New York City on Thursday, January 25, 2001 at 10:30 A.M., and all
adjournments thereof (the "Meeting"). Shareholders of record at the close of
business on November 17, 2000 (the "Record Date") are entitled to notice of, and
to vote at, the Meeting. This proxy statement and the accompanying notice of
meeting and proxy card(s) are first being mailed to shareholders on or about
December 14, 2000.

         A director who is an interested person of the Company is referred to in
this proxy statement as an "Interested Director." A director may be an
interested person of the Company because he or she is affiliated with a Fund's
investment adviser, sub-adviser or the Company's distributor, SEI Investments
Distribution Co. ("SEI"). Directors who are not interested persons of the
Company are referred to in this proxy statement as "Independent Directors."

                               SHAREHOLDER VOTING

         The Board intends to bring before the Meeting the matters set forth in
the foregoing notice. As the record owner of the shares of the Funds, your
insurance company will vote those shares at the meeting in accordance with
instructions you provide. Therefore, you should complete the authorization
accompanying this proxy statement and return it in the envelope provided as soon
as possible to ensure that your instructions are included.

                 SUMMARY OF PROPOSALS REQUIRING SHAREHOLDER VOTE

REQUIRED VOTE

         The following table summarizes the proposals submitted at the Meeting,
the Fund shareholders entitled to vote on the proposals and the vote required
approving each proposal.

<TABLE>
<CAPTION>

  Proposal                         Proposal Description                              Fund Shareholders
   Number                                                                             Entitled to Vote
------------------------------------------------------------------------------------------------------------------------------------
   <S>             <C>                                                                        <C>
    1*          To approve a new investment advisory agreement with                         ALL FUNDS
                Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter")
------------------------------------------------------------------------------------------------------------------------------------
    2*          To approve a new investment sub-advisory agreement                PBHG SELECT VALUE PORTFOLIO,
                with Pilgrim Baxter Value Investors, Inc.                         PBHG MID-CAP VALUE PORTFOLIO,
                ("Value Investors")                                                 AND PBHG SMALL CAP VALUE
                                                                                 PORTFOLIO (EACH A "VALUE FUND";
                                                                                COLLECTIVELY, THE "VALUE FUNDS")
------------------------------------------------------------------------------------------------------------------------------------
    3           To adopt changes to the fundamental investment                       SEE 3A THROUGH 3L BELOW
                restrictions for each Fund as listed below:
------------------------------------------------------------------------------------------------------------------------------------


<PAGE>


------------------------------------------------------------------------------------------------------------------------------------
    3A*         ISSUER DIVERSIFICATION                                            ALL FUNDS EXCEPT PBHG SELECT
                                                                                     20 PORTFOLIO AND PBHG
                                                                                   TECHNOLOGY & COMMUNICATIONS
                                                                                            PORTFOLIO
------------------------------------------------------------------------------------------------------------------------------------
    3B*         BORROWING MONEY AND ISSUING SENIOR SECURITIES                               ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3C*         UNDERWRITING SECURITIES                                                     ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3D*         INDUSTRY CONCENTRATION                                                ALL FUNDS EXCEPT PBHG
                                                                                   TECHNOLOGY & COMMUNICATIONS
                                                                                            PORTFOLIO
------------------------------------------------------------------------------------------------------------------------------------
    3E*         PURCHASING OR SELLING REAL ESTATE                                           ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3F*         PURCHASING OR SELLING COMMODITIES                                           ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3G*         MAKING LOANS                                                                ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3H*         INVESTING ALL ASSETS IN AN OPEN-END FUND                                    ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3I*         INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR                       ALL FUNDS
                DEVELOPMENT PROGRAMS
------------------------------------------------------------------------------------------------------------------------------------
    3J*         INVESTING IN COMPANIES FOR THE PURPOSE OF CONTROL                           ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3K*         MAKING SHORT SALES OR MARGIN PURCHASES                                      ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    3L*         PLEDGING ASSETS                                                             ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
    4**         TO REORGANIZE AS A DELAWARE BUSINESS TRUST                                  ALL FUNDS
------------------------------------------------------------------------------------------------------------------------------------
<FN>

*      Under the Investment Company Act of 1940, as amended (the "1940 Act"), approval of each of these proposals requires the
       affirmative vote of the lesser of (a) 67% or more of the voting securities of the particular Fund present at the meeting
       or represented by proxy if the holders of more than 50% of the outstanding voting securities of that Fund are present or
       represented by proxy or (b) more than 50% of the outstanding voting securities of the particular Fund.
**     Approval of this proposal requires a majority of all outstanding shares of the Company.
</FN>
</TABLE>


           PROPOSAL 1: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT

INTRODUCTION

         ASSIGNMENT OF FORMER ADVISORY AGREEMENTS AND APPROVAL OF INTERIM
         ADVISORY ARRANGEMENTS

         Through a tender offer completed on September 26, 2000 and a merger
completed on October 5, 2000, Old Mutual plc, an English public limited company,
("Old Mutual"), acquired the outstanding common stock of United Asset Management
Corporation ("UAM"), the parent company of Pilgrim Baxter and Value Investors
(the "Transaction").

         Old Mutual is an international financial services group based in
London, with operations in life assurance, asset management, banking and general
insurance. Old Mutual's principal offices are located at 3rd Floor, Lansdowne
House, 57 Berkely Square, London, WIX 5DH, United Kingdom.

         The consummation of the Transaction constituted an "assignment," as
that term is defined in the 1940 Act, of the Fund's Former Investment Advisory
and Sub-Advisory Agreements for the Funds. As required by the 1940 Act, these
Former Investment Advisory and Sub-Advisory Agreements (collectively, the
"Former Advisory Agreements") automatically terminated upon their assignment.

         As an interim measure to avoid any lapse in investment advisory
services to the Funds as a consequence of these terminations, the Board has
continued the advisory services under an Interim Investment Advisory Agreement
between each Fund and Pilgrim Baxter, and an Interim Investment Sub-Advisory
Agreement among the Value Funds, Pilgrim Baxter and Value Investors
(collectively, the "Interim Advisory Agreements").



                                        2
<PAGE>
         All compensation earned by Pilgrim Baxter or by Value Investors under
the Interim Advisory Agreements is being held in interest-bearing escrow
accounts pending shareholder approval of proposed new investment advisory and
sub-advisory agreements for a period of up to 150 days from the termination of
the Former Advisory Agreements (see "New Advisory Arrangements" below). If
shareholders approve the proposed new investment advisory and sub-advisory
agreements, the amount held in the escrow accounts, plus interest, will be paid
to Pilgrim Baxter and Value Investors. If shareholders do not approve any of the
proposed new advisory agreements, Pilgrim Baxter and Value Investors, as
applicable, will each receive the lesser of the costs incurred in performing its
services under the applicable Interim Advisory Agreements or the total amount in
the escrow account, plus interest earned.

         All of the Funds are currently operating under these Interim Advisory
Agreements which became effective on September 26, 2000. None of the Interim
Advisory Agreements need to be voted upon by shareholders.

         NEW ADVISORY ARRANGEMENTS

         The Board has also approved, subject to shareholder approvals, a New
Investment Advisory Agreement between the Company on behalf of each Fund and
Pilgrim Baxter and a New Investment Sub-Advisory Agreement among the Company on
behalf of the Value Funds, Pilgrim Baxter and Value Investors (collectively, the
"New Advisory Agreements"). The New Advisory Agreements each have an initial
term of two years. THE NEW ADVISORY AGREEMENTS ARE BEING SUBMITTED TO
SHAREHOLDERS OF EACH FUND FOR APPROVAL.

         TRANSFERS OF CONTROL OF AN INVESTMENT ADVISER UNDER THE 1940 ACT

         Section 15(f) of the 1940 Act provides that an investment adviser to a
registered investment company, and the affiliates of such adviser, may receive
any amount or benefit in connection with a sale of any interest in such
investment adviser which results in an assignment of an investment advisory
contract if the following two conditions are satisfied: (1) for a period of
three years after such assignment, at least 75% of the board of directors of the
investment company cannot be "interested persons" (within the meaning of Section
2(a)(19) of the 1940 Act) of the new investment adviser or its predecessor, and
(2) an unfair burden may not be imposed on the investment company as a result of
the assignment or any express or implied terms, conditions or understandings
applicable thereto.

         Consistent with the first condition of Section 15(f), Old Mutual agreed
as part of the Transaction that, for a period of three years after the closing
of the Transaction, it will not take or recommend any action that would cause
more than 25% of the Company's directors to be interested persons of any entity
affiliated with Pilgrim Baxter.

         With respect to the second condition of Section 15(f), an unfair burden
on an investment company is defined in the 1940 Act to include any arrangement
during the two-year period after any such transaction occurs whereby the manager
or investment adviser or its predecessor or successor, or any interested person
of such adviser, predecessor or successor, receives or is entitled to receive
any compensation from the investment company of two types, either directly or
indirectly. The first type is compensation from any person in connection with
the purchase or sale of securities or other property to, from or on behalf of
the investment company, other than bona fide ordinary compensation as principal
underwriter for such company. The second type is compensation from the
investment company or its security holders for other than bona fide investment
advisory or other services.

         Old Mutual has also agreed not to take or recommend any action that
would constitute an unfair burden on the Company or the Funds within the meaning
of Section 15(f). IN THIS REGARD, OLD MUTUAL AND PILGRIM BAXTER HAVE REPRESENTED
TO THE COMPANY THAT THEY WILL MAINTAIN THE FUNDS' EXISTING EXPENSE LIMITATION
AGREEMENTS FOR A PERIOD OF TWO YEARS FROM THE DATE OF THE CONSUMMATION OF THE
TRANSACTION. THE EXPENSES LIMITATION AGREEMENTS ARE DISCUSSED IN GREATER DETAIL
BELOW UNDER "DESCRIPTION OF NEW INVESTMENT ADVISORY AGREEMENT - EXPENSE
LIMITATIONS."

DESCRIPTION OF THE NEW INVESTMENT ADVISORY AGREEMENT WITH PILGRIM BAXTER

         THE NEW INVESTMENT ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL
RESPECTS TO THE COMPANY'S FORMER INVESTMENT ADVISORY AGREEMENT EXCEPT FOR THE
ELIMINATION OF THE EXPENSE

                                        3

<PAGE>

LIMITATIONS PREVIOUSLY REQUIRED BY STATE SECURITIES LAWS. EACH FUND'S ADVISORY
FEE RATE WILL REMAIN UNCHANGED.

         SERVICES AND EXPENSES

         The Company and Pilgrim Baxter had previously entered into a Former
Investment Advisory Agreement with respect to each Fund. Both the Former
Investment Advisory Agreement and the New Investment Advisory Agreement obligate
Pilgrim Baxter to: (i) provide a program of continuous investment management for
the Fund in accordance with the Fund's investment objectives, policies and
limitations; (ii) make investment decisions for the Fund; and (iii) place orders
to purchase and sell securities for the Fund, subject to the supervision of the
Company's Board of Directors.

         Both the Former and the New Investment Advisory Agreement
(collectively, the "Advisory Agreements") require Pilgrim Baxter to pay its
overhead and employee costs and the compensation and expenses of all its
directors, officers and employees who serve as officers and executive employees
of the Company. The Advisory Agreements provide that Pilgrim Baxter is not
responsible for other expenses of operating the Company (these expenses include,
but are not limited to, organization and certain offering expenses, legal
expenses, auditing and accounting expenses, interest expenses, taxes and
governmental fees, and custodial expenses).

         INVESTMENT ADVISORY FEES

         For its services under the New Investment Advisory Agreement, Pilgrim
Baxter is entitled to a fee, which is calculated daily and paid monthly, at an
annual rate of: 0.85 % of each of PBHG Growth II Portfolio's, PBHG Select 20
Portfolio's, PBHG Mid-Cap Value Portfolio's, and PBHG Technology &
Communications Portfolio's average daily net assets; 0.75 % of the PBHG Large
Cap Growth Portfolio's average daily net assets; 0.65% of the PBHG Select Value
Portfolio's average daily net assets; and 1.00% of the PBHG Small Cap Value
Portfolio's average daily net assets. The investment advisory fees paid by
certain of the Funds are higher than those paid by most investment companies,
although Pilgrim Baxter believes the fees to be comparable to those paid by
investment companies with similar investment objectives and policies. The same
fees were payable under the Former Investment Advisory Agreement. A schedule of
the investment advisory fees received by Pilgrim Baxter under the Former
Investment Advisory Agreement for the fiscal year ended December 31, 1999 (and
any fee waivers) from each of the Funds is attached at SCHEDULE 1. Also attached
at SCHEDULE 1 is the date of each former advisory agreement and the date on
which each was submitted to a vote of security holders of the Fund, including
the purpose of such submission.

         EXPENSE LIMITATIONS

         In the interest of limiting the expenses of the Funds, Pilgrim Baxter
has voluntarily entered into expense limitations agreements with the Company
("Expense Limitation Agreements") on behalf of each Fund pursuant to which
Pilgrim Baxter has agreed to waive or limit a portion of its fee and to assume
other expenses in an amount necessary to limit total annual operating expenses
to not more than 1.20% of each of PBHG Growth II Portfolio's, PBHG Small Cap
Value Portfolio's, PBHG Mid-Cap Value, Portfolio's, PBHG Technology and
Communications Portfolio's and PBHG Select 20 Portfolio's average daily net
assets; 1.10% of the PBHG Large Cap Growth Portfolio average daily net assets;
and 1.00% of the PBHG Select Value Portfolio's average daily net assets.
Reimbursement by these Funds of the advisory fees waived or limited and other
expenses paid by Pilgrim Baxter pursuant to the Expense Limitation Agreements
may be made at a later date when the Funds have reached a sufficient asset size
to permit reimbursement to be made without causing the total annual expense rate
of each Fund to exceed these agreed upon percentages. No reimbursement by a Fund
will be made unless (i) the Fund's assets exceed $75 million and (iii) the
payment of such reimbursement is approved by the Board of Directors. For the
fiscal year ended December 31, 1999, the Board elected to reimburse to Pilgrim
Baxter, for fees waived and/or expense reimbursed, $31,616 for the PBHG Growth
II Portfolio, $93,603 for the PBHG Technology & Communications Portfolio and
$27,776 for the PBHG Select 20 Portfolio.

         For purposes of calculating the extent to which advisory fees are
waived or limited or other expenses are reimbursed, the Company and Pilgrim
Baxter will look to compensation payable under the Former Investment Advisory
Agreement, the Interim Investment Advisory Agreement and the New Investment
Advisory Agreement.


                                       4

                                                                <PAGE>



         The Former Investment Advisory Agreement contained a provision
previously required by state securities laws limiting expenses; those applicable
state securities laws have been voided by the Federal National Securities
Markets Improvement Act of 1996 ("NSMIA"), and therefore the provision has been
deleted from the New Investment Advisory Agreement.


         LIMITATIONS ON LIABILITY

         Both Advisory Agreements provide certain limitations on Pilgrim
Baxter's liability, but also provide that Pilgrim Baxter shall not be protected
against any liability to the Company, the Funds or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations and
duties thereunder.

         CONTINUANCE AND RENEWALS

         The continuance of the New Investment Advisory Agreement after the
first two years must be specifically approved at least annually (i) by the
Company's Board of Directors or by vote of a majority of the Fund's outstanding
voting securities and (ii) by the affirmative vote of a majority of the
Directors who are not parties to the agreement or interested persons of any such
party by votes cast in person at a meeting called for such purpose. The New
Investment Advisory Agreement may be terminated (i) at any time without penalty
by the Fund upon the vote of a majority of the directors or by vote of the
majority of the Fund's outstanding voting securities upon 60 days' written
notice to Pilgrim Baxter or (ii) by Pilgrim Baxter at any time without penalty
upon 60 days' written notice to the Fund. The New Investment Advisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act). The Former Investment Advisory Agreement contained identical
provisions.

         INFORMATION ABOUT PILGRIM BAXTER

         Pilgrim Baxter currently has discretionary management authority with
respect to approximately $20 billion in assets. In addition to advising the
Funds, Pilgrim Baxter provides advisory services to The PBHG Funds, Inc.,
pension and profit-sharing plans, charitable institutions, corporations, trusts,
and other investment companies. The principal business address of Pilgrim Baxter
is 825 Duportail Road, Wayne, Pennsylvania 19087. PBHG Fund Services, the
Company's Administrator, and Value Investors, sub-adviser to the Value Funds,
are wholly-owned subsidiaries of Pilgrim Baxter. A schedule of other investment
companies with similar investment objectives as the Funds for which Pilgrim
Baxter serves as investment adviser or sub-adviser, and related fees, is
attached as SCHEDULE 2. The form of New Advisory Agreement is attached to this
proxy statement as EXHIBIT A.

DIRECTORS CONSIDERATION AND RECOMMENDATION

         At the April 4, 2000 and June 6, 2000 meetings of the Board of
Directors, Harold Baxter, Chairman of the Company's Board of Directors and Chief
Executive Officer of Pilgrim Baxter and Value Investors, informed the
Independent Directors that UAM was engaged in merger discussions that might
result in the future acquisition of UAM. The Independent Directors requested Mr.
Baxter to keep them informed if any such plans materialized. At the meeting on
June 6, the Independent Directors retained the firm of Kramer Levin Naftalis &
Frankel, LLP ("Special Counsel") to advise them in the event that UAM entered
into an acquisition agreement that would result in an assignment and termination
of the Company's investment advisory and sub-advisory agreements. On June 19,
2000, Old Mutual and UAM announced that they had entered into a merger agreement
whereby Old Mutual would acquire UAM, subject to certain conditions.

         Following the announcement, and after the details of the Transaction
had become clearer, the Board met by telephone on July 13, 2000 to review the
Transaction. At that meeting, the Independent Directors asked Special Counsel to
request from Old Mutual and Pilgrim Baxter information that would be necessary
and appropriate for them to consider with respect to the approval of new
investment advisory and sub-advisory agreements. On July 21, 2000, Special
Counsel, in a letter to Old Mutual and Pilgrim Baxter, requested that they
provide detailed information relating to the Transaction. The request indicated
that the information would be important to the Independent Directors in making
their decision on whether to approve the Interim Advisory Agreements and any New
Advisory Agreements.

         On August 8, 2000, the Board, including all of the Independent
Directors, met by telephone to discuss the material received from Old Mutual in
response to Special Counsel's request. The



                                        5



<PAGE>



Independent Directors requested that Special Counsel provide them with a
complete analysis of the material provided. That analysis was provided to the
Directors on August 28, 2000.

         On September 6, 2000, the Board, including all of the Independent
Directors, again met by telephone to discuss in detail the information received
and Special Counsel's analysis. The Independent Directors also discussed with
Mr. Baxter how he expected the Transaction to affect Pilgrim Baxter and the
Company. Among other things, the Independent Directors determined that
additional information from Old Mutual was necessary to adequately reach a
conclusion on the Interim Advisory Agreements and New Advisory Agreements.
Special Counsel requested supplemental information, and it was considered by the
Independent Directors at their meeting on September 21, 2000.

         The Board met in person on September 21, 2000 for the purpose of
considering the Interim Advisory Agreements. At the meeting, the Independent
Directors reviewed the following information and representations:

         1. Information about Old Mutual, its corporate structure and general
            information about the Transaction;

         2. Information about how the Transaction would affect UAM, and Old
            Mutual's plan with respect to the future operation of UAM;

         3. Information about how the Transaction would affect Pilgrim Baxter,
            and Old Mutual's plan with respect to the future operation of
            Pilgrim Baxter;

         4. Old Mutual's stated commitment to retain the existing Pilgrim Baxter
            management team, including the portfolio managers for the Funds;

         5. Old Mutual's representation that there were no current plans to
            change any of the sub-advisory relationships in existence with the
            Funds; and

         6. The fact that there were no material differences between the Interim
            Advisory Agreements and the Former Investment Advisory Agreements,
            and that the advisory fees to be imposed under the Interim Advisory
            Agreements would be identical to those that existed under the Former
            Investment Advisory Agreements.

         After reviewing all of this information and the representations
provided, and after the Independent Directors consulted with Special Counsel,
the Board, including the Independent Directors voting unanimously, approved the
Interim Advisory Agreements and requested that appropriate individuals
representing Old Mutual attend a meeting subsequently called for November 13,
2000 to consider the New Investment Advisory and Investment Sub-Advisory
Agreements.

         At its meeting on November 13, 2000, the Directors met in person for
the purpose of considering New Investment Advisory and Investment Sub-Advisory
Agreements. At that meeting, the Directors reviewed and reconsidered all of the
information provided, including the information and representations considered
at the September 22, 2000 meeting, and the analysis of that information. In
addition, the Directors met with Dr. Kevin Carter, then Chairman and CEO of OM
Asset Management (the "Old Mutual Representative"). Further, with respect to the
New Investment Advisory Agreement between each Fund and Pilgrim Baxter, the
Board particularly considered the following factors: (1) the experience of Old
Mutual in the asset management business; (2) the financial strength of Old
Mutual; (3) the stated expectation that there would be no material change to the
corporate structure of Pilgrim Baxter; (4) Old Mutual's stated commitment to
retain the existing Pilgrim Baxter management team, including the portfolio
managers for the Funds, and the terms of new arrangements among UAM, Pilgrim
Baxter, Mr. Baxter and the other Pilgrim Baxter principal and a proposed phantom
stock plan for the principals and other current and future key employees (see
"Additional Information--Certain Transactions"); (5) that there were no current
plans to materially change the Value Investors sub-advisory relationships that
existed with the Funds; (6) that the advisory fees imposed under the New
Investment Advisory Agreement are identical to those that existed under the
Former Investment Advisory Agreement and currently exist under the Interim
Investment Advisory Agreement; (7) the fact that there will be no material
difference in the expense ratios of the Funds under the New Investment Advisory
Agreement; (8) the representation by Old Mutual and Pilgrim Baxter that they
will maintain the Funds' existing expense limitation agreements for a period of
two years from the date of the consummation of the Transaction; (9) that for a
period of three years from the date of the completion of



                                        6
<PAGE>



the Transaction, at least 75% of the Company's Board will be comprised
of directors who are not "interested persons" (as defined in the 1940 Act) of
Pilgrim Baxter or any of the sub-advisers; (10) that there is no "unfair
burden", as that term is described in the 1940 Act, imposed on the Company as a
result of the Transaction and that Old Mutual has agreed not to take or
recommend any action that would constitute such an unfair burden on the Company
or the Funds; and (11) the fairness of the compensation payable to Pilgrim
Baxter under the New Investment Advisory Agreement in light of the services to
be provided and Pilgrim Baxter's past performance.

         Based upon its review of all of the information provided, the
consideration of the factors described above and such other factors it
considered relevant, and after consulting with Special Counsel, the Board,
including all of the Independent Directors, determined that the New Investment
Advisory Agreement between the Funds and Pilgrim Baxter is in the best interests
of the Funds and their shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF THE
COMPANY, INCLUDING THE INDEPENDENT DIRECTORS BY UNANIMOUS VOTE, APPROVED THE NEW
INVESTMENT ADVISORY AGREEMENT AND RECOMMENDED THAT EACH FUND'S SHAREHOLDERS VOTE
FOR THE NEW INVESTMENT ADVISORY AGREEMENT.


         PROPOSAL 2: APPROVAL OF NEW INVESTMENT SUB-ADVISORY AGREEMENTS

         Prior to the closing of the Transaction, a Sub-Advisory Agreement was
in effect with Value Investors for each of the Value Funds. As a result of the
Transaction, that Former Sub-Advisory Agreement terminated. Value Investors is
currently providing sub-advisory services to the Value Funds under an Interim
Investment Sub-Advisory Agreement. For more information, please refer to the
"Introduction" section under Proposal 1.

         THE BOARD HAS APPROVED, SUBJECT TO SHAREHOLDER APPROVAL, A NEW
INVESTMENT SUB-ADVISORY AGREEMENT WITH VALUE INVESTORS FOR THE VALUE FUNDS. THE
NEW SUB-ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL RESPECTS TO THE
COMPANY'S FORMER SUB-ADVISORY AGREEMENT (COLLECTIVELY, THE "SUB-ADVISORY
AGREEMENTS"). EACH FUND'S ADVISORY FEE RATE WILL REMAIN UNCHANGED.

         SERVICES

         The Sub-Advisory Agreements with Value Investors obligate Value
Investors to: (1) manage the investment operations of the relevant Value Fund
and the composition of the Value Funds' investment portfolio, including the
purchase, retention and disposition thereof in accordance with the Value Funds'
investment objective, policies and limitations; (ii) provide supervision of the
Value Funds' investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Value Funds and what
portion of the assets will be invested or held uninvested in cash; and (iii)
place orders with or through such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the Value Funds' Registration
Statement and Prospectus or as the Board of Directors or Pilgrim Baxter may
direct from time to time, in conformity with Federal securities laws.

         INVESTMENT SUB-ADVISORY FEES

         For the services provided under the New Investment Sub-Advisory
Agreement, Value Investors is entitled to receive a fee from Pilgrim Baxter at
an annual rate of: 0.50% of PBHG Mid-Cap Value Portfolio's, average daily net
assets; 0.40% of the PBHG Select Value Portfolio's average daily net assets; and
0.65% of the PBHG Small Cap Value Portfolio's average daily net assets, less 50%
of any fee waivers borne by Pilgrim Baxter. Value Investors does not receive any
sub-advisory fee directly from the Value Funds. The same fees were payable under
the Former Investment Sub-Advisory Agreement. During the fiscal year ended
December 31, 1999, Value Investors received investment sub-advisory fees from
Pilgrim Baxter under the Former Investment Sub-Advisory Agreement in the amounts
of: $0 for PBHG Mid-Cap Value Portfolio; $157,912 for PBHG Select Value
Portfolio and $244,955 for PBHG Small Cap Value Portfolio. During the fiscal
year ended December 31, 1999, Value Investors waived receipt of sub-advisory
fees from Pilgrim Baxter under the Former Investment Sub-Advisory Agreement in
the amounts of: $3,000 for PBHG Mid-Cap Value Portfolio and $25,205 for PBHG
Small Cap Value Portfolio.

         LIMITATIONS ON LIABILITY

         The New Investment Sub-Advisory Agreement provides certain limitations
on Value Investors'

                                        7

         <PAGE>

liability, but also provides that Value Investors shall not be protected against
any liability to the Value Funds or their shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations or duties thereunder or
from a breach of fiduciary duty with respect to the receipt of compensation for
services thereunder. The same provision was included in the Former Sub-Advisory
Agreement.

         CONTINUANCE AND RENEWAL

         The continuance of the New Investment Sub-Advisory Agreement after the
first two years must be specifically approved for each Value Fund at least
annually (i) by the Company's Board of Directors or by vote of a majority of the
outstanding voting securities of the relevant Value Fund and (ii) by the
affirmative vote of a majority of the directors who are not parties to the
agreement or interested persons of any such party by votes cast in person at a
meeting called for such purpose. The New Investment Sub-Advisory Agreement may
be terminated (i) by the relevant Value Fund, without the payment of any
penalty, by the vote of a majority of the directors of the Company or by the
vote of a majority of the outstanding voting securities of the relevant Value
Fund, (ii) by Pilgrim Baxter at any time, without the payment of any penalty, on
not more than 60 days' nor less than 30 days' written notice to the other
parties, or (iii) by Value Investors at any time, without the payment of any
penalty, on 90 days' written notice to the other parties. The New Investment
Sub-Advisory Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act). The same provisions were included in
the Former Investment Sub-Advisory Agreement.

         INFORMATION ABOUT VALUE INVESTORS

         Value Investors is a wholly-owned subsidiary of Pilgrim Baxter. Value
Investors currently has discretionary management authority with respect to $1
billion in assets. In addition to advising the Value Funds, Value Investors
provides advisory services to The PBHG Funds, Inc., pension and profit-sharing
plans, charitable institutions, corporations, trusts, and other investment
companies. The principal business address of Value Investors is 825 Duportail
Road, Wayne, Pennsylvania 19087. A schedule of other investment companies with
similar investment objectives as the Value Funds for which Value Investors
serves as investment adviser or sub-adviser, and related fees, is attached as
SCHEDULE 2. The form of the PBHG Value Funds' New Sub-Advisory Agreement is
attached to this proxy statement as EXHIBIT B.


DIRECTORS CONSIDERATION AND RECOMMENDATION

         In considering whether to recommend that the New Investment
Sub-Advisory Agreement be approved by shareholders, the Board of Directors
considered, among other things, the qualifications of Value Investors'
professional staff and information related to Value Investors' past performance.
In addition, the Board considered the importance of maintaining continuity of
management in light of Old Mutual's acquisition of UAM, and the relationship
Value Investors has had with Pilgrim Baxter and the Funds over the years.
Moreover, the Board noted that the fee to be paid under the New Investment
Sub-Advisory Agreement would remain the same as they had been under the Former
Investment Sub-Advisory Agreements and currently are under the Interim
Investment Sub-Advisory Agreements. Finally, the Board considered the fact that
there would be no material changes to the New Investment Sub-Advisory Agreement
from the Former Investment Sub-Advisory Agreements.

         Based upon its review of all of the information provided, the
consideration of the factors described above and such other factors it
considered relevant, the Board has determined that the New Investment
Sub-Advisory Agreement is in the best interests of each of the Value Funds and
their shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY,
INCLUDING THE INDEPENDENT DIRECTORS BY UNANIMOUS VOTE, APPROVED THE NEW
INVESTMENT SUB-ADVISORY AGREEMENT AND RECOMMENDED THAT THE SHAREHOLDERS OF THE
VALUE FUNDS VOTE FOR THE NEW INVESTMENT SUB-ADVISORY AGREEMENT WITH VALUE
INVESTORS.

                                        8

         <PAGE>

      PROPOSAL 3: CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS

INTRODUCTION

         We are proposing to change the Funds' fundamental investment
restrictions because they are outdated and reflect regulatory, business or
industry conditions that are no longer applicable or are unnecessary.
(Fundamental investment restrictions are those restrictions that under the 1940
Act may be changed only by a vote of a majority of a Funds' voting securities as
defined under the 1940 Act.) The proposed changes will NOT affect any Funds'
investment objective.

         We believe that there are several factors that have caused the Funds'
fundamental investment restrictions to become outdated. For example, certain
fundamental investment restrictions imposed by the various state "Blue Sky" laws
and regulations were preempted by NSMIA and therefore are no longer applicable
to the Funds. In addition, although some of the Funds' investment restrictions
reflect current federal regulatory requirements, they are not required to be
fundamental.

         The Funds are expected to benefit from these changes. First, the
proposed changes will provide each Fund with as much investment flexibility as
is permitted under current law. The proposed changes are designed to provide
flexibility to respond to future legal, regulatory and market changes. In
addition, standardizing the fundamental investment restrictions among the Funds
will enhance the Funds' and Pilgrim Baxter's ability to efficiently and
effectively manage the Funds' assets in changing regulatory and investment
environments. Finally, minimizing the number of investment restrictions that may
only be changed by a shareholder vote will reduce the costs and delays
associated with holding future shareholder meetings to revise fundamental
investment restrictions that have become outdated or inappropriate.

         ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL INVESTMENT RESTRICTIONS
WILL GIVE THE FUNDS GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT
OPPORTUNITIES, THE CHANGES, INDIVIDUALLY AND IN THE AGGREGATE, ARE NOT
ANTICIPATED TO RESULT IN A MATERIAL CHANGE IN THE LEVEL OF INVESTMENT RISK
ASSOCIATED WITH ANY FUND. IN ADDITION, THE PROPOSED CHANGES WILL NOT MATERIALLY
AFFECT THE MANNER IN WHICH ANY FUND IS CURRENTLY MANAGED.

         Moreover, even though the Funds will have increased investment
flexibility if these proposed changes are approved, the Board has approved
several new non-fundamental investment restrictions (which function as internal
guidelines) which the Funds must follow in complying with the new fundamental
investment restrictions. Of course, if circumstances change, the Board of
Directors may change or eliminate any non-fundamental investment restriction in
the future without shareholder approval.

         The proposed changes are set forth below in sub-proposals. Each Fund's
current fundamental investment restrictions are set forth in SCHEDULE 3. You are
asked to vote separately on each sub-proposal. If any sub-proposal is not
approved by a Fund, the fundamental investment restriction in that sub-proposal
will remain unchanged. If approved, the sub-proposals will become effective as
soon as the Fund's updated Prospectus and/or Statement of Additional Information
reflect these changes.

         Several of the proposed fundamental investment restrictions include the
defined term "1940 Act Laws, Interpretations and Exemptions." This term means:
the Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder, as such statute, rule and regulations are amended from
time to time or are interpreted from time to time by the staff of the Securities
and Exchange Commission ("SEC") and any exemptive order or similar relief
granted to a Fund.

         3A:      ISSUER DIVERSIFICATION (all Funds except PBHG Select 20
                  Portfolio and PBHG Technology & Communications Portfolio)

         We want to restate each Fund's policy on issuer diversification. The
proposed policy will provide the Funds with greater flexibility to respond to
future 1940 Act rules, regulations, interpretations, exemptions, orders or
similar relief relating to issuer diversification. The proposed policy will not
have any material impact on any Fund's current investment operations.

         If approved, each Fund's fundamental investment restriction will be
restated to read as follows:

         The Fund is a "diversified company" as defined in the 1940 Act. This
         means that the Fund will not purchase the securities of any issuer if,
         as a result, the Fund would fail to be a diversified



                                        9



         <PAGE>



         company within the meaning of the 1940 Act Laws, Interpretations and
         Exemptions. This restriction does not prevent the Fund from purchasing
         the securities of other investment companies to the extent permitted by
         the 1940 Act Laws, Interpretations and Exemptions.

         If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:

         In complying with the Fund's fundamental restriction regarding issuer
         diversification, the Fund will not, with respect to 75% of its total
         assets, purchase securities of any issuer (other than securities issued
         or guaranteed by the U.S. government or any of its agencies or
         instrumentalities), if, as a result, (i) more than 5% of the Fund's
         total assets would be invested in the securities of that issuer, or
         (ii) the Fund would hold more than 10% of the outstanding voting
         securities of that issuer. The Fund may (i) purchase securities of
         other investment companies as permitted by Section 12(d)(1) of the 1940
         Act and (ii) invest its assets in securities of other money market
         funds and lend money to other investment companies and their series
         portfolios that have Pilgrim Baxter & Associates Ltd. or an affiliate
         of Pilgrim Baxter as an investment advisor (a "Pilgrim Baxter Advised
         Fund"), subject to the terms and conditions of any exemptive orders
         issued by the SEC.

         Because each of PBHG Select 20 Portfolio and Technology &
Communications Portfolio is non-diversified, the foregoing restrictions do not
apply to it.

         3B:      BORROWING MONEY AND ISSUING SENIOR SECURITIES (all Funds)

         We want to change each Fund's policy on borrowing money and issuing
senior securities. Currently, each Fund's policy on borrowings is more
restrictive than required by the 1940 Act. The proposed policy will provide each
Fund with the maximum flexibility for future contingencies. Also, the proposed
policy will standardize the policy on borrowing money and issuing senior
securities among all Funds. Standardized policies will assist each Fund and
Pilgrim Baxter in maintaining compliance with the various investment
restrictions to which the Funds are subject. The proposed policy will not have a
material impact on any Fund's current investment operations.

         If approved, each Fund's fundamental investment restrictions on
borrowing money and issuing senior securities will be changed to read as
follows:

         The Fund may not borrow money or issue senior securities, except as
         permitted by the 1940 Act Laws, Interpretations and Exemptions.

         If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:

         In complying with the Fund's fundamental investment restriction
         regarding borrowing money and issuing senior securities, the Fund may
         borrow money in an amount not exceeding 33 1/3 % of the total assets
         (including the amount borrowed) less liabilities (other than
         borrowings). The Fund may borrow from banks, broker dealers or a
         Pilgrim Baxter Advised Fund. The Fund may not borrow for leveraging,
         but may borrow for temporary or emergency purposes, in anticipation of
         or in response to adverse market conditions, or for cash management
         purposes. The Fund may not purchase additional securities when any
         borrowings from banks exceed 5% of the Fund's total assets.

         3C:      UNDERWRITING SECURITIES (all Funds)

         We want to restate each Fund's policy on underwriting securities. The
proposed policy will clarify the types of transactions in which each Fund may
engage, even if it may be considered to be an underwriter. The proposed policy
will not have any material impact on any Fund's current investment operations.

         If approved, each Fund's fundamental investment restriction will be
restated to read as follows:

         The Fund may not underwrite the securities of other issuers. This
         restriction does not prevent the Fund from engaging in transactions
         involving the acquisition, disposition or resale of its portfolio
         securities, regardless of whether the Fund may be considered to be an
         underwriter under the Securities Act of 1933.





                                       10



         <PAGE>




         3D:      INDUSTRY CONCENTRATION (all Funds except PBHG Technology &
                  Communications Portfolio)

         We want to restate each Fund's policy on industry concentration to
provide flexibility to respond to future laws, interpretations and exemptions.

         If approved, each Fund's fundamental investment restriction will be
restated to read as follows:

         The Fund will not make investments that will result in the
         concentration (as that term may be defined or interpreted by the 1940
         Act, Laws, Interpretations and Exemptions) of its investments in the
         securities of issuers primarily engaged in the same industry. This
         restriction does not limit the Funds' investments in (i) obligations
         issued or guaranteed by the U.S. Government, its agencies or
         instrumentalities, (ii) tax-exempt obligations issued by governments or
         political subdivisions of governments or (iii) repurchase agreements
         collateralized by such obligations. In complying with this restriction,
         the Funds will not consider a bank-issued guaranty or financial
         guaranty insurance as a separate security.

         If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:

         In complying with the Fund's fundamental investment restriction
         regarding industry concentration, the Fund may invest up to 25% of its
         total assets in the securities of issuers whose principal business
         activities are in the same industry.

         Because PBHG Technology & Communications Portfolio has an investment
policy to concentrate its investments in specific industries, this proposed
change does not apply to that Fund.

         3E:      PURCHASING OR SELLING REAL ESTATE (all Funds)

         We propose changing each Fund's policy on purchasing or selling real
estate to provide maximum investment flexibility. The proposed policy also
includes an exception that permits the Funds to hold real estate acquired as a
result of ownership of securities or other instruments. None of the Funds has a
current intention of purchasing or selling real estate, and therefore, the
proposed policy will not have a material impact on any Fund's current investment
operations.

         If approved, each Fund's fundamental investment restriction on
purchasing or selling real estate will be changed to read as follows:

         The Fund may not purchase or sell real estate unless acquired as a
         result of ownership of securities or other instruments. This
         restriction does not prevent the Fund from investing in issuers that
         invest, deal or otherwise engage in transactions in real estate or
         interests therein, or investing in securities that are secured by real
         estate or interests therein.

         3F:      PURCHASING OR SELLING COMMODITIES (all Funds)

         We propose changing each Fund's policy on purchasing or selling
commodities. The purpose of the proposed policy is two-fold. First, it will give
each Fund the maximum flexibility to enter into hedging and other transactions
utilizing financial contracts and derivative products. In addition, the proposed
policy will allow each Fund to respond to the rapid and continuing development
of derivative products. None of the Funds has a current intention of purchasing
or selling commodities, and therefore, the proposed policy will not have a
material impact on any fund's current investment operations.

         If approved, each Fund's fundamental investment restriction on
purchasing or selling commodities will be changed to read as follows:

         The Fund may not purchase or sell physical commodities unless acquired
         as a result of ownership of securities or other instruments. This
         restriction does not prevent the Fund from engaging in transactions
         involving futures contracts and options thereon or investing in
         securities that are secured by physical commodities.



                                       11



         <PAGE>


         3G:      MAKING LOANS (all Funds)

         We propose changing each Fund's policy on making loans. The proposed
policy will broaden the potential circumstances under which the Funds could make
loans and will permit all Funds to lend their securities. The proposed policy
also clarifies the types of debt instruments that are not considered a loan. The
proposed policy will not have a material impact on any Fund's current investment
operations.

         If approved, each Fund's fundamental investment restriction on making
loans will be changed to read as follows:

         The Fund may not make personal loans or loans of its assets to persons
         who control or are under common control with the Fund, except to the
         extent permitted by the 1940 Act Laws, Interpretations or Exemptions.
         This restriction does not prevent the Fund from, among other things,
         purchasing debt obligations, entering repurchase agreements, loaning
         its assets to broker-dealers or institutional investors or investing in
         loans, including assignments and participation interests.

         If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:

         In complying with the Fund's fundamental investment restriction
         regarding making loans, the Fund may lend up to 33 1/3 % of its total
         assets and may lend money to another Pilgrim Baxter Advised Fund, on
         such terms and conditions as the SEC may require in an exemptive order.

         3H:      INVESTING ALL ASSETS IN AN OPEN-END FUND (all Funds)

         We want to change each Fund's policy on investing in securities of
other investment companies so that each Fund may invest all of its assets in
another open-end fund. At present the Board has not considered any specific
proposal to authorize a Fund to invest all of its assets in this fashion. The
Board will authorize investing a Fund's assets in another open-end fund only if
the Board first determines that is in the best interests of such Fund and its
shareholders.

         The purpose of this proposal is to enhance the flexibility of each Fund
and permit it to take advantage of potential efficiencies in the future
available through investment in another open-end fund. This structure allows
several funds with different distribution pricing structures, but the same
investment objective, policies and limitations, to combine their investments in
a pooled fund instead of managing them separately. This could lower the costs of
obtaining portfolio execution, custodial, investment advisory and other services
for the Fund and could assist in portfolio management to the extent the cash
flows of each investment vehicle offset each other or provide for less volatile
asset changes. Of course, such benefits may not occur.

         At present, the fundamental investment restrictions of each Fund may
prevent it from investing all of its assets in another registered investment
company and would require a vote of Fund shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that you vote to permit all of the assets of your
Fund to be invested in an open-end fund, without a further vote of shareholders,
but only if the Board subsequently determines that such action is in the best
interests of your Fund and its shareholders. If you approve this proposal, the
fundamental restrictions of your Fund would be modified to permit such
investment.

         A Fund's methods of operation and shareholder services would not be
materially affected by its investment in an open-end fund, except that the
assets of the Fund might be managed as part of a larger pool. If a Fund invested
all of its assets in an open-end fund, it would hold only investment securities
issued by the open-end fund, and the open-end fund would invest directly in
individual securities of other issuers. The Fund otherwise would continue its
normal operations. The Board would retain the right to withdraw the Fund's
investments from the open-end fund, and the Fund then would resume investing
directly in individual securities of other issuers as it does currently.

         Pilgrim Baxter may benefit from the use of this structure if, as a
result, overall assets under management are increased (since management fees are
based on assets). Also, Pilgrim Baxter's expense of providing investment and
other services to the Funds may be reduced.



                                       12



         <PAGE>



         If approved, the fundamental investment restriction of each Fund on
investing in securities of other investment companies will be changed to read as
follows:

         The Fund may, notwithstanding any other fundamental investment policy
         or restriction, invest all of its assets in the securities of a single
         open-end management investment company with substantially the same
         fundamental investment objective, policies and restrictions as the
         Fund.

         If you approve the proposed restriction, your Fund will have the
ability to invest all of its assets in another open-end investment company.
Because your Fund does not currently intend to do so, the following
non-fundamental investment restriction will become effective for your Fund:

         Notwithstanding the fundamental restriction with regard to investing
         all assets in an open-end fund, the Fund may not invest all of its
         assets in the securities of a single open-end management investment
         company with the same fundamental investment objectives, policies and
         restrictions as the Fund.

         3I:      INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR
                  DEVELOPMENT PROGRAMS (all Funds)

         We want to eliminate each Fund's policy on investing in oil, gas or
other mineral exploration or development programs. The 1940 Act does not require
a Fund to have a fundamental investment restriction on investing in oil, gas or
other mineral exploration or development programs. This restriction was
originally adopted to address state "blue sky" requirements in connection with
the registration of shares of a Fund for sale in certain states. Under NSMIA,
this restriction no longer applies to any Fund. In addition, although the Funds
have no current intention of making any such investments, eliminating this
restriction will increase a Fund's flexibility when choosing investments in the
future.

         3J:      INVESTING IN COMPANIES FOR THE PURPOSE OF CONTROL (all Funds)

         We propose eliminating each Fund's policy on investing in companies for
the purpose of control. There is no legal requirement that a Fund have a
fundamental investment restriction on investing in companies for the purpose of
control. In addition, although the Funds do not currently intend to become
involved in directing or administering the day-to-day operations of any company,
eliminating this restriction would clarify each Fund's ability to freely
exercise its rights in the companies in which it invests. Pilgrims Baxter
believes that it should be able communicate a Fund's views as a shareholder on
important matters of policy to a company when Pilgrim Baxter believes the value
of a Fund's investment may be significantly affected. Pilgrim Baxter believes
that each Fund currently may communicate its views without necessarily violating
this restriction. Nevertheless, the existence of this fundamental investment
restriction might give rise to a claim that communicating a Fund's views
constituted investing for control or management.

         3K:      MAKING SHORT SALES OR MARGIN PURCHASES (all Funds)

         We propose eliminating each Fund's policy on making short sales and
margin purchases. There is no legal requirement that a Fund have a fundamental
investment restriction on making short sales and margin purchases of securities,
and therefore, each Fund should be provided with the maximum flexibility to
pursue its investment objectives. You should also know that current regulations
prohibit a Fund from making margin purchases. In addition, none of the Funds has
a current intention of making short sales.

         3L:      PLEDGING ASSETS  (all Funds)

         We want to eliminate each Fund's policy that limits its ability to
pledge its assets. The 1940 Act does not require a Fund to have a fundamental
investment restriction on pledging assets. Eliminating this restriction will
eliminate any uncertainties regarding whether certain types of transactions that
require the segregation of assets will result in the pledging of assets. In
addition, although the Fund has no current intention of pledging its assets,
eliminating this restriction will provide the Fund with greater flexibility in
entering into transactions that may require the pledge of assets.

         THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH SUB-PROPOSAL OF PROPOSAL 3.



                                       13



         <PAGE>


            PROPOSAL 4 - REORGANIZATION AS A DELAWARE BUSINESS TRUST

         The Board of Directors has approved a plan to reorganize the Company
into a Delaware business trust. THE PURPOSE OF THE REORGANIZATION IS TO PROVIDE
INCREASED FLEXIBILITY IN THE BUSINESS STRUCTURE OF THE COMPANY. To proceed with
the reorganization, we need shareholder approval of the plan of reorganization,
which includes the dissolution of the current legal entity after the
reorganization occurs. The next few pages of this proxy statement discuss
important details of the reorganization plan.

INTRODUCTION

         The Company currently is organized as a Maryland corporation. The Board
has approved an Agreement and Plan of Reorganization (the "Plan"), which
provides for a series of transactions to convert each Fund of the Company (each,
a "Current Fund") to a corresponding series (each, a "New Fund") of a newly
created open-end, management investment company organized as a business trust
(the "Trust") under the Delaware Business Trust Act. Under the Plan, each
Current Fund will transfer all its assets to a corresponding New Fund in
exchange solely for voting shares of beneficial interest in the New Fund and the
New Fund's assumption of all the Current Fund's liabilities (collectively, the
"Reorganization"). A form of the Plan relating to the proposed Reorganization is
in EXHIBIT C. If Proposal 4 is not approved by the Company's shareholders, the
Company will continue to operate as a Maryland corporation.

         The Reorganization is being proposed primarily to provide the Company
with greater flexibility in conducting its business operations. The operations
of each New Fund following the Reorganization will be substantially similar to
those of its predecessor Current Fund. The fundamental investment restrictions
for all of the New Funds will conform to the changes proposed in Proposal 3, to
the extent that Proposal 3 is approved. Finally, as described below, the Trust's
Agreement and Declaration of Trust will differ from the Company's Charter in
certain respects that are expected to improve the Company's and each New Fund's
operations.

REASONS FOR THE REORGANIZATION

         The Company's Board of Directors and Pilgrim Baxter believe that the
Delaware business trust organizational form offers a number of advantages over
the Maryland corporate organizational form. As a result of these advantages, the
Delaware business trust organizational form has been increasingly used by other
investment companies.

         The Delaware business trust organizational form offers greater
flexibility than the Maryland corporate form. A Maryland corporation is governed
by the detailed requirements imposed by Maryland corporate law and by the terms
of its Charter. A Delaware business trust is subject to fewer statutory
requirements. The Trust will be governed primarily by the terms of an Agreement
and Declaration of Trust ("Trust Agreement") and Bylaws (collectively, the
"Governing Instruments"). In particular, the Trust will have greater flexibility
to conduct business without the necessity of engaging in expensive proxy
solicitations of shareholders. For example, under Maryland corporation law,
amendments to the Company's Charter would typically require shareholder
approval. Under Delaware law, unless the Trust Agreement of a Delaware business
trust provides otherwise, amendments to it may be made without first obtaining
shareholder approval. In addition, unlike Maryland corporation law, which
restricts the delegation of a board of directors' functions, Delaware law
permits the board of trustees of a Delaware business trust to delegate certain
of its responsibilities. For example, the board of trustees of a Delaware
business trust may delegate the responsibility of declaring dividends to duly
empowered committees of the board or to appropriate officers. Finally, Delaware
law permits the Trustees to adapt a Delaware business trust to future
contingencies. For example, the Trustees may, without a shareholder vote, change
a Delaware business trust's domicile or organizational form. In contrast, under
Maryland corporation law, a Company's board of directors would be required to
obtain shareholder approval prior to changing domicile or organizational form.

         The Reorganization will also have certain other effects on the Company,
its shareholders and management, which are described below under the heading
"How the Trust Will Compare to the Company".



                                       14



         <PAGE>


WHAT THE PROPOSED REORGANIZATION WILL INVOLVE

         To accomplish the Reorganization, the Trust has been formed as a
Delaware business trust pursuant to its Trust Agreement, and each New Fund has
been established as a series of the Trust. On the closing date, each Current
Fund will transfer all of its assets to the New Fund in exchange solely for a
number of full and fractional of the New Fund equal to the number of full and
fractional shares of common stock of the corresponding Current Fund then
outstanding and the New Fund's assumption of the Current Fund's liabilities.
Immediately thereafter, each Current Fund will distribute those New Fund shares
to its shareholders in complete liquidation and will, as soon as practicable
thereafter, be terminated. Upon completion of the Reorganization, each
shareholder of each Current Fund will be the owner of full and fractional shares
of the corresponding New Fund equal in number and aggregate net asset value to
the shares he or she held in the Current Fund. After completion of the
Reorganization, the Company will be dissolved as a Maryland corporation. A vote
to approve the Reorganization will be deemed to be a vote to approve the
dissolution of the Company.

         The obligations of the Company and the Trust under the Plan are subject
to various conditions stated therein. To provide against unforeseen events, the
Plan may be terminated or amended at any time prior to the closing of the
Reorganization by action of the Board, notwithstanding the approval of the Plan
by the shareholders of the Company. However, no amendments may be made that
would materially adversely affect the interests of shareholders of any Current
Fund. The Company and the Trust may at any time waive compliance with any
condition contained in the Plan, provided that the waiver does not materially
adversely affect the interests of shareholders of any Current Fund.

         The Plan authorizes the Company to acquire one share of each class of
each New Fund and, as the sole shareholder of the Trust prior to the
Reorganization, to do each of the following:

           o Approve with respect to each New Fund a new investment advisory
             and, if applicable, sub-advisory agreement that will be
             substantially identical to that described in Proposals 1 and 2.

           o Approve a new distribution agreement with PBHG Fund Distributors,
             an affiliate of Pilgrim Baxter, which will be substantially
             identical to the current distribution agreement between the
             Company's and its current distributor SEI.

           o Approve with respect to each New Fund a custodian agreement with
             First Union National Bank and a transfer agency and servicing
             agreement with DST Systems, Inc., each of which currently provides
             such services to the corresponding Current Fund.

           o Elect the directors of the Company as the trustees of the Trust to
             serve without limit in time, except as they may resign or be
             removed by action of the Trust's trustees or shareholders.

           o Ratify the selection of PricewaterhouseCoopers LLP, the
             accountants for the Company, as the independent public accountants
             for the Trust.

           o Approve such other agreements and plans as are necessary for each
             New Fund's operation as a series of an open-end, management
             investment company.

         The Trust's transfer agent will establish for each shareholder an
account containing the appropriate number of shares of each class of each New
Fund. Such accounts will be identical in all respects to the accounts currently
maintained by the Company's transfer agent for each shareholder of the Current
Funds. Shares held in the Current Fund accounts will automatically be designated
as shares of the New Funds. Certificates for Current Fund shares issued before
their organization will represent shares of the corresponding New Fund after
their organization. The Trust, however, will not normally issue share
certificates. Any account options or privileges on accounts of shareholders of
the Current Funds will be replicated on their New Fund account.


THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION

         The Company and the Trust will receive an opinion of Ballard Spahr
Andrews & Ingersoll, LLP to the effect that the Reorganization will constitute a
tax-free reorganization under section 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended. Accordingly, the Current Funds, the New Funds and the
shareholders of the New Funds will recognize no gain or loss for federal income
tax purposes as a result of the Reorganization. Shareholders of the Current
Funds should consult their tax advisers

                                       15

         <PAGE>

regarding the effect, if any, of the Reorganization in light of their individual
circumstances and as to state and local consequences, if any.

APPRAISAL RIGHTS

         Appraisal rights are not available to shareholders. However,
shareholders retain the right to redeem their shares of the Current Funds or the
New Funds, as the case may be, at any time before or after the Reorganization.

HOW THE TRUST WILL COMPARE WITH THE COMPANY

         STRUCTURE OF THE TRUST

         The Trust has been established under the laws of the State of Delaware
by the filing of a certificate of trust in the office of the Secretary of State
of Delaware. The Trust has established series corresponding to and having
identical designations as the series portfolios of the Company. Each New Fund
will have the same investment objectives, policies, and restrictions as its
predecessor Current Fund, except that the New Funds' fundamental restrictions
will conform to the changes proposed in Proposal 3 (assuming approval of each of
item in Proposal 3 by the shareholders). If any of the items in Proposal 3 is
not approved by shareholders, the New Funds affected by the non-approval will
continue to be subject to the corresponding Current Funds' existing fundamental
restrictions. The Trust's fiscal year is the same as that of the Company. The
Trust will not have any operations prior to the Reorganization. Initially, the
Company will be the sole shareholder of the Trust.

         As a Delaware business trust, the Trust's operations are governed by
its Governing Instruments and applicable Delaware law rather than by the
Company's Charter and Amended and Restated Bylaws and applicable Maryland law.
Certain differences between the two domiciles and organizational forms are
summarized below. The operations of the Trust will continue to be subject to the
provisions of the 1940 Act and the rules and regulations thereunder.

         TRUSTEES AND OFFICERS OF THE TRUST

         Subject to the provisions of the Governing Instruments, the business of
the Trust will be managed by its Trustees, who serve indefinite terms and who
have all powers necessary or convenient to carry out their responsibilities. The
responsibilities, powers, and fiduciary duties of the Trustees are substantially
the same as those of the Directors of the Company.

         The Trustees of the Trust would be those persons who currently serve as
Directors of the Company. The current officers of the Company will be elected to
serve as officers of the Trust and the current officers of the Company will
perform the same functions on behalf of the Trust following the Reorganization
that they now perform on behalf of the Company.

         SHARES OF THE TRUST

         The beneficial interests in the New Funds will be represented by
transferable shares, par value $0.001 per share. Shareholders do not have the
right to demand or require the Trust to issue share certificates, although the
Trust, in its sole discretion, may issue them. The Trustees have the power under
the Trust Instrument to establish new series and classes of shares; the
Company's Directors currently have a similar right. The Governing Instruments
permit the Trustees to issue an unlimited number of shares of each class and
series. The Company is authorized to issue only the number of shares specified
in the Charter and may issue additional shares only with Board approval and
after payment of a fee to the State of Maryland on any additional shares
authorized.

         SHAREHOLDER MEETING REQUIREMENTS

         Maryland law provides that a special meeting of shareholders shall be
called upon the written request of shareholders holding 25% of the Company's
shares. The Trust's Bylaws provide that a special meeting of shareholders for
the purpose of voting on the removal of any trustee may be called by the holders
of 10% or more of the outstanding shares of the Trust.

         The Trust, like the Company, will operate as an open-end, management
investment Company registered with the SEC under the 1940 Act. As permitted by
SEC rules, the Trust will adopt as its own



                                       16



                                                                <PAGE>



the registration statement of the Company. Shareholders of the New Funds
therefore will have the power to vote at special meetings with respect to, among
other things, changes in any fundamental investment objectives and the
fundamental restrictions and policies of the New Funds; approval of certain
changes to investment advisory contracts and plans of distribution; and
additional matters relating to the Trust as required by the 1940 Act.

         SHAREHOLDER VOTING RIGHTS

         Under Maryland law, shareholders of the Company have the right to vote
on the following matters: the substantive amendment or complete restatement of
the Company's Charter; generally, a consolidation, merger, or share exchange
involving the Company or a transfer of the Company's assets not in the ordinary
course of business; and the voluntary or, in some cases, involuntary dissolution
of the Company.

         Shareholders of the Trust will have only those voting rights that are
explicitly set forth in the Governing Instruments. Under the Governing
Instruments, shareholders of the Trust have the right to vote on the following
matters: the election or removal of Trustees, provided that a meeting of
shareholders has been called for that purpose; the termination of the Trust or
any Fund or class, provided that a meeting of shareholders has been called for
that purpose and unless there are fewer than 100 holders of record of the Trust
or such terminating Fund or class; the sale of all or substantially all of the
assets of the Trust or any Fund or class, unless the primary purpose of such
sale is to change the Trust's domicile or organizational form; under certain
circumstances, the merger or consolidation of the Trust or any Fund or class
with and into another company or with and into another Fund or class of the
Trust; and the amendment of the section of the Trust Agreement that governs
shareholders' voting rights.

         DOLLAR BASED VOTING

         After the Reorganization your voting rights will become "dollar-based,"
which will ensure that shareholders' voting rights remain proportionate to their
economic interests. Currently, Current Fund shareholders are entitled to one
vote for each share that they own. However this "share-based" system is
inequitable if all of the shares of a particular Current Fund do not have the
same share price. This occurs when the Company offers more than one series of
shares or more than one class of shares. The share prices of the Company's
Current Funds inevitably diverge over time due to their different investment
programs. Similarly, the share prices of a Current Fund's different share
classes will deviate over time because of their different expense structures. As
a result, when issues are voted at the Current Fund level, the owners of
lower-priced shares have more votes per dollar than the owners of higher-priced
shares. Current Funds might offer multiple classes or additional portfolios in
the future. Dollar-based voting rights would also apply to any multiple classes
or additional portfolios the Company might offer in the future.

         REMOVAL OF DIRECTORS AND TRUSTEES

         The Company's Charter permits the removal of a Director prior to the
expiration of his or her term of office for cause, and not otherwise, by the
affirmative vote of a majority of all votes entitled to be cast for the election
of directors. Under the Trust Agreement, a Trustee may be removed by a written
instrument, signed by at least two-thirds of the number of Trustees prior to
such removal, or by the affirmative vote of holders of two-thirds of the Trust's
outstanding shares at a special meeting called for that purpose.

         SHAREHOLDERS' RIGHTS OF INSPECTION

         Maryland law provides generally that persons who have been shareholders
of record for six months or more and who own of record at least 5% of a Current
Fund's outstanding shares of any class may inspect that Current Fund's books of
account and stock ledger. Under the Trust's Governing Instruments, New Fund
shareholders who have held shares of record for at least six months and who hold
at least 5% of the outstanding shares of any class of a New Fund are permitted,
upon written request, to inspect a list of the shareholders of that Fund.

         SHAREHOLDER LIABILITY

         Maryland law provides that a shareholder is not obligated to the
Company with respect to the stock held therein, except to the extent that: (1)
the subscription price or other agreed consideration for the stock has not been
paid (subject to limited exceptions); (2) the shareholder knowingly accepted an

                                       17

                                                                <PAGE>

illegal distribution; or (3) the shareholder is subject to any liability imposed
by law upon the dissolution, voluntary or involuntary, of the Company.

         Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations; however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Governing Instruments provide for indemnification
out of the property of a New Fund for all losses and expenses of any shareholder
of such New Fund held liable on account of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss due to shareholder
liability is limited to circumstances in which a New Fund would be unable to
meet its obligations and the complaining party was held not to be bound by the
liability disclaimer.

         LIABILITY OF DIRECTORS AND TRUSTEES

         Under its Charter, the Company limits the liability of and indemnifies
its present and past directors and officers to the maximum extent permitted by
Maryland law and the 1940 Act. Directors may be personally liable to the Company
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of their duties or by reason of reckless disregard of their duties
as directors. In the event of any litigation or other proceeding against a
director or officer of the Company, Maryland law permits the Company to
indemnify the director or officer for certain expenses and to advance money for
such expenses unless (a) it is established that the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
the act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; (b) the director or officer actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe the
act or omission was unlawful. The Governing Instruments provide indemnification
for current and former trustees, officers, employees and agents of the Trust to
the fullest extent permitted by Delaware law and other applicable law. Trustees
of the Trust may be personally liable to the Trust and its shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties or by reason of reckless disregard of their duties as trustees.

         AMENDMENT OF CHARTER AND TRUST AGREEMENT

         Under the Company's Charter and Maryland law, the Charter may be
amended upon (a) adoption by the Board of a resolution setting forth the
proposed amendment and declaring that such amendment is advisable and (b)
approval of such resolution by the holders of a majority of the Company's
outstanding shares. The Trust Agreement may be amended by a majority of the
Trustees without any shareholder vote, except that the shareholders will have
the right to vote on any amendment that affects their voting rights, that
reduces the indemnification provided to shareholders or former shareholders,
that is required to have shareholder approval by law or by the Trust's
registration statement, or that is submitted to the shareholders by the
Trustees.

         The foregoing is only a summary of certain differences between and
among the Company's Charter and Bylaws and Maryland law and the Trust's Trust
Agreement and Bylaws and Delaware law. It is not a complete list of the
differences. Shareholders should refer to the provisions of these documents and
state law directly for a more thorough comparison. Copies of the Charter and
Bylaws of the Company, and of the Trust's Trust Agreement and the Bylaws are
available to shareholders without charge upon written request to the Company or
the Trust at P.O. Box 419229, Kansas City, Missouri 64141-6229.

WHEN THE REORGANIZATION WILL BE IMPLEMENTED

         Assuming shareholder approval of Proposal 4, the Company currently
contemplates that the Reorganization will close on or about April 1, 2001.
However, the Reorganization may close on another date if circumstances warrant.

         THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 4.


                                       18

                                                                <PAGE>
                             ADDITIONAL INFORMATION

         PBHG Fund Services is the Company's administrator and until September
1, 2000 was the Company's shareholder servicing agent. Since September 1, 2000,
the services performed by PBHG Fund Services as shareholder servicing agent are
performed by DST Systems, Inc. PBHG Fund Services also serves as administrator,
shareholder servicing agent and web services agent to The PBHG Funds, Inc., an
investment company also managed by Pilgrim Baxter. PBHG Fund Services is located
at 825 Duportail Road, Wayne, Pennsylvania 19087.

         SEI, the Fund's Distributor is located at One Freedom Valley Road,
Oaks, Pennsylvania 19456.

         SCHEDULE 5 lists other material payments by the Funds to Pilgrim
Baxter, or other affiliated persons of Pilgrim Baxter, during the last fiscal
year of the Funds

         SCHEDULE 6 lists the Directors and Principal Executive Officer of
Pilgrim Baxter and Value Investors

BROKERAGE COMMISSIONS

         Pilgrim Baxter or Value Investors, for the Value Funds, is authorized
to select brokers and dealers to effect securities transactions for the Funds.
Pilgrim Baxter or Value Investors, whichever the case may be, will seek to
obtain the most favorable net results by taking into account various factors,
including price, commission, if any, size of the transactions and difficulty of
executions, the firm's general execution and operational facilities and the
firm's risk in positioning the securities involved. While Pilgrim Baxter or
Value Investors generally seeks reasonably competitive spreads or commissions,
the Fund will not necessarily be paying the lowest spread or commission
available. Pilgrim Baxter or Value Investors seeks to select brokers or dealers
that offer the Funds best price and execution or other services that are of
benefit to the Funds. Certain brokers or dealers assist their clients in the
purchase of shares from the SEI and charge a fee for this service in addition to
a Fund's public offering price. In the case of securities traded in the
over-the-counter market, Pilgrim Baxter or Value Investors expects normally to
seek to select primary market makers.

         Pilgrim Baxter or Value Investors may, consistent with the interests of
the Funds, select brokers on the basis of the research services they provide to
the Pilgrim Baxter or Value Investors. Such services may include analyses of the
business or prospects of a company, industry or economic sector, or statistical
and pricing services. Information so received by Pilgrim Baxter or Value
Investors will be in addition to and not in lieu of the services required to be
performed by the Adviser or Sub-Adviser under the New Advisory Agreements. If,
in the judgment of Pilgrim Baxter or Value Investors, a Fund or other accounts
managed by Pilgrim Baxter or Value Investors will benefit from supplemental
research services, Pilgrim Baxter or Value Investors is authorized to pay
brokerage commissions to a broker furnishing such services which are in excess
of commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of Pilgrim
Baxter or Value Investors will not necessarily be reduced as a result of the
receipt of such information, and such services may not be used exclusively, or
at all, with respect to the Fund or account generating the brokerage, and there
can be no guarantee that Pilgrim Baxter or Value Investors will find all of such
services of value in advising the Funds.

         It is expected that the Funds may execute brokerage or other agency
transactions through the SEI, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules promulgated by the SEC. Under these provisions, the SEI is
permitted to receive and retain compensation for effecting portfolio
transactions for the Funds on an exchange if a written contract is in effect
between the SEI and the Fund expressly permitting the SEI to receive and retain
such compensation. These rules further require that commissions paid to the SEI
by the Fund for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other bro-



                                       19



                                                                <PAGE>



kers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable
period of time." In addition, Pilgrim Baxter or Value Investors may direct
commission business to one or more designated broker-dealers, including the SEI,
in connection with such broker-dealer's payment of certain of the Fund's or the
Fund's expenses. In addition, Pilgrim Baxter or Value Investors may place orders
for the purchase or sale of portfolio securities with qualified broker-dealers
that refer prospective shareholders to the Funds. The Directors, including those
who are not "interested persons" of the Fund, have adopted procedures for
evaluating the reasonableness of commissions paid to the SEI and will review
these procedures periodically. SCHEDULE 7 lists the commissions paid to SEI in
the last fiscal year. These commissions were paid to the SEI in connection with
repurchase agreement transactions.

         Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD") and subject to seeking best execution and such
other policies as the Board of Directors may determine, Pilgrim Baxter or Value
Investors may consider sales of the Fund's shares as a factor in the selection
of broker-dealers to execute portfolio transactions for the Fund.

SHAREHOLDER VOTING PROCEDURES

         Shares of the Funds are held exclusively by insurance companies for the
purpose of funding variable annuity contracts and variable life insurance
policies. The insurance companies vote these shares in accordance with the
directions of the contract holders and policy owners. The number of votes a
contract holder or policy owner may direct is equal to the contract or policy
value invested in the Fund's shares on November 17, 2000, divided by the net
asset value of one share of the Fund on that date. The number of votes that each
contract holder may direct (or for which a participant may give instructions
under group contracts where the contract holder permits such instructions) or
each policy owner may direct, is stated in the authorization and furnished with
this proxy statement. Shares for which no instructions have been given by
participants under a group contract will be voted in the same proportion as
shares for which instructions have been give under the same contract. Undirected
shares of the Funds will be voted in the same proportion as directed shares.
Directions or instructions may be revoked or changed by written notice to the
insurance carrier.

         All proxy cards solicited that are properly executed and received in
time to be voted at the Meeting will be voted at the Meeting or any adjournment
thereof according to the instructions on the proxy card. IF NO SPECIFICATION IS
MADE ON A PROXY CARD, IT WILL BE VOTED FOR EACH OF THE MATTERS SPECIFIED ON THE
PROXY CARD. For purposes of determining the presence of a quorum, abstentions,
or withheld votes will be counted as present; however, they will have no effect
on the outcome of the vote to approve any Proposal requiring a vote based on the
percentage of shares actually voted. You should note that while votes to ABSTAIN
will count toward establishing a quorum, passage of any Proposal being
considered at the Meeting will occur only if a sufficient number of votes are
cast FOR the Proposal. Accordingly, votes to ABSTAIN and votes AGAINST will have
the same effect in determining whether the Proposal is approved.

         If a quorum is not present at the Meeting, or if a quorum is present at
the Meeting but sufficient votes to approve one or more of the proposed items
are not received, or if one or more Funds require additional votes on a selected
item, or if other matters arise requiring shareholder attention, the persons
named as proxy agents may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. A shareholder vote may be taken on one or more of the
items in this Proxy Statement prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate. The persons named as proxies will
vote those proxies that they are entitled to vote FOR any such proposal, in
favor of such an adjournment, and will vote those proxies required to be voted
AGAINST any such proposal, against any such adjournment.

PAYMENT OF EXPENSES

         Pilgrim Baxter or its affiliates will pay the expenses relating to the
holding of this meeting of shareholders including the preparation, printing and
mailing of this proxy statement and its enclosures and of all solicitations,
including telephone or internet voting.


                                       20



                                                                <PAGE>
BENEFICIAL OWNERSHIP OF SHARES

         SCHEDULE 8 lists the beneficial owners of five percent or more of each
Fund's outstanding shares as of November 17, 2000. On that date, the directors
and officers of the Funds, together as a group, beneficially owned less than one
percent of each Fund's outstanding shares.

         SCHEDULE 9  contains information on the total number of outstanding
shares of each Fund as of November 17, 2000.

         The term "beneficial ownership" is as defined under Section 13(d) of
the Securities and Exchange Act of 1934. The information as to beneficial
ownership is based on statements furnished to each Fund by the existing
directors and officers of the Company and/or on the records of the Company's
transfer agent.

ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS

         FOR A FREE COPY OF THE COMPANY'S MOST RECENT ANNUAL REPORT (AND MOST
RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF ANY) SHAREHOLDERS OF
THE FUNDS MAY CALL 800-347-9256 OR WRITE TO THE COMPANY AT PO BOX 64141-6229,
KANSAS CITY, MO 64141-6229.

CERTAIN TRANSACTIONS

         Since the beginning of the most recently completed fiscal year, Harold
J. Baxter, Chairman of the Board of Directors of the Company held warrants and
options and a related UAM promissory note to purchase 1,246,274 shares of common
stock of UAM. In connection with Old Mutual's acquisition of UAM, by means of a
tender offer completed on September 26, 2000 and a merger completed on October
5, 2000, Mr. Baxter received net proceeds of approximately $21 million in
respect of his UAM warrants options and related promissory note (based upon the
transaction price of $25 per share paid to all UAM common stockholders.)

         Effective as of November 20, 2000, Mr. Baxter and the other principal
of Pilgrim Baxter entered into certain agreements with Pilgrim Baxter, UAM and
Old Mutual. To help ensure the continued services of Mr. Baxter and the other
principal of Pilgrim Baxter in the future, the two Pilgrim Baxter principals
have entered into new long-term employment contracts with Pilgrim Baxter. In
addition, to help ensure continued management incentives, Pilgrim Baxter
established a phantom stock plan in which existing key employees of Pilgrim
Baxter received or will receive phantom stock rights equal to 13.8% of Pilgrim
Baxter's equity and phantom stock rights equal to an additional 3.7% of Pilgrim
Baxter's equity have been earmarked for new employees to provide incentives in
the context of the future expansion of the firm. Under this plan, each of Mr.
Baxter and the other Pilgrim Baxter principal received phantom stock rights
equal to 3.75% of Pilgrim Baxter's equity. In addition, in consideration for Mr.
Baxter and the other Pilgrim Baxter principal agreeing to amend their revenue
sharing agreement with Pilgrim Baxter and UAM to reduce their revenue sharing
interests by 52% effective January 1, 2001, entering into new employment and
extended non-compete agreements and relinquishing certain other rights, Old
Mutual, UAM and Pilgrim Baxter agreed to pay each of the two principals $110
million. Of this amount, 50% was paid in November and 50% will be paid after
shareholder approval of Proposals 1 and 2 described above. The Pilgrim Baxter
principals also granted Old Mutual, UAM and Pilgrim Baxter an option to purchase
the remaining 48% of the revenue sharing interests held by the Pilgrim Baxter
principals from January 2002 for $420 million payable in six equal annual
installments beginning in April 2002.

SHAREHOLDER PROPOSALS

         As a general matter, the Funds do not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a Fund, you should send such proposal to the Company at the
address set forth on the first page of this Proxy Statement. To be considered
for presentation at a shareholder's meeting, the Company must receive proposals
a reasonable time before proxy materials are prepared relating to that meeting.
Mere submission of a shareholder proposal does not guarantee the inclusion of
the proposal in the proxy statement or presentation of the proposal at the
meeting since inclusion and presentation are subject to compliance with certain
Federal regulations.


                                       21



                                                                <PAGE>



OTHER BUSINESS

         The Board does not intend to present any other business at the Meeting.
Other matters will be considered if notice is given within a reasonable amount
of time prior to the meeting. If any other matter may properly come before the
meeting, or any adjournment thereof, the persons named in the accompanying proxy
card(s) intend to vote, act, or consent thereunder in accordance with their best
judgment at that time with respect to such matters.

         THE DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMEND APPROVAL
OF EACH PROPOSAL. ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL
BE VOTED IN FAVOR OF APPROVAL OF EACH PROPOSAL.




                                       22


                                                                <PAGE>





         EXHIBIT A -- NEW INVESTMENT ADVISORY AGREEMENT (PILGRIM BAXTER)

                          INVESTMENT ADVISORY AGREEMENT


                  AGREEMENT, entered into as of this ____day of __________,
between Pilgrim Baxter & Associates, Ltd. (the "Adviser") and PBHG Insurance
Series Fund, Inc. (the "Fund").

                  WHEREAS, the Fund is a Maryland corporation, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company;

                  WHEREAS, the Fund wishes to retain the Adviser to render
investment advisory services to the Fund and the Adviser is willing to furnish
such services to the portfolios listed on Schedule A hereto (the "Portfolios");
and

                  WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").

                  NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Fund and the Adviser as
follows:

1. APPOINTMENT. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.

2. INVESTMENT ADVISORY DUTIES. Subject to the supervision of the Directors of
the Fund, the Adviser will, (a) provide a program of continuous investment
management for the Portfolios in accordance with the Portfolios' investment
objectives, policies and limitations as stated in each Portfolio's Prospectus
and Statement of Additional Information included as part of the Fund's
Registration Statement filed with the Securities and Exchange Commission, as
they may be amended from time to time, copies of which shall be provided to the
Adviser by the Fund; (b) make investment decisions for the Portfolios; and (c)
place orders to purchase and sell securities for the Portfolios.

         In performing its investment management services to the Portfolios
hereunder, the Adviser will provide the Portfolios with ongoing investment
guidance and policy direction, including oral and written research, analysis,
advice, statistical and economic data, and judgments regarding individual
investments, general economic conditions and trends and long-range investment
policy. The Adviser will determine the securities, instruments, repurchase
agreements, options, futures and other investments and techniques that the
Portfolios will purchase, sell, enter into or use, and will provide an ongoing
evaluation of the Portfolios' investments. The Adviser will determine what
portion of the Portfolios' investments shall be invested in securities and other
assets, and what portion, if any, should be held uninvested. The Adviser shall
furnish to the Fund adequate (i) office space, which may be space within the
offices of the Adviser or in such other places as may be agreed upon from time
to time, and (ii) office furnishings, facilities and equipment as may be
reasonably required for managing the corporate affairs and conducting the
business of the Fund, including complying with the corporate reporting
requirements of the various states in which the Fund does business, and
conducting correspondence and other communications with the stockholders of the
Fund. The Adviser shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such services. Subject
to the approval of the Fund's Board of Directors (including a majority of the
Directors who are not "interested persons" of the Fund as defined in the 1940
Act) and of the shareholders of the Fund, the Adviser may delegate to a
sub-adviser its duties enumerated in Section 2 hereof. The Adviser shall
continue to supervise the performance of any such sub-adviser and shall report
regularly thereon to the Fund's Board of Directors.
The Adviser further agrees that, in performing its duties hereunder, it will:

         (a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code"), and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Directors;


                                       A-1



                                                                <PAGE>



         (b) use reasonable efforts to manage each Portfolio so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;

         (c) place orders pursuant to its investment determinations for each
Portfolio directly with the issuer, or with any broker or dealer, in accordance
with applicable policies expressed in each Portfolio's Prospectus and/or
Statement of Additional Information and in accordance with applicable legal
requirements;

         (d) furnish to the Fund whatever statistical information the Fund may
reasonably request with respect to each Portfolio's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the Directors
informed of developments materially affecting each Portfolio's investments and
shall, on the Adviser's own initiative, furnish to the Fund from time to time
whatever information the Adviser believes appropriate for this purpose;

         (e) make available to the Fund, promptly upon its request, such copies
of the Adviser's investment records and ledgers with respect to the Portfolios
as may be required to assist the Fund in its compliance with applicable laws and
regulations. The Adviser will furnish the Directors with such periodic and
special reports regarding each Portfolio as they may reasonably request; and

         (f) immediately notify the Fund in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees to
notify the Fund immediately of any material fact known to the Adviser respecting
or relating to the Adviser that is not contained in the Fund's Registration
Statement, or any amendment or supplement thereto, but that is required to be
disclosed therein, and of any statement contained therein that becomes untrue in
any material respect.

3. ADDITIONAL SERVICES. If the Fund so requests, the Adviser shall also maintain
all internal bookkeeping, accounting and auditing services and records in
connection with maintaining the Fund's financial books and records, and shall
calculate each Portfolio's daily net asset value. For these services, each
Portfolio shall pay to the Adviser a monthly fee, which shall be in addition to
the fees payable pursuant to Section 5 hereof, to reimburse the Adviser for its
costs, without profit, for performing such services.

4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically provided
in this Section 4, the Adviser shall pay the compensation and expenses of all
its directors, officers and employees who serve as officers and executive
employees of the Fund (including the Fund's share of payroll taxes for such
persons), and the Adviser shall make available, without expense to the Fund, the
service of its directors, officers and employees who may be duly-elected
officers of the Fund, subject to their individual consent to serve and to any
limitations imposed by law.

         The Adviser shall not be required to pay any expenses of the Fund other
than those specifically allocated to the Adviser in this Section 4. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Fund's employees as are officers or employees of the Adviser whose
services may be involved, for the following expenses of the Fund: organization
and certain offering expenses of the Fund (including out-of-pocket expenses, but
not including the Adviser's overhead and employee costs); fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses; auditing
and accounting expenses; interest expenses, telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by or with respect to the Fund in connection with membership
in investment company trade organizations; costs of insurance relating to
fidelity coverage for the Fund's officers and employees; fees and expenses of
the Fund's custodian, any sub-custodian, transfer agent, registrar, or dividend
disbursing agent; payments to the Adviser for maintaining the Fund's financial
books and records and calculating the daily net asset value pursuant to Section
3 hereof; other payments for portfolio pricing or valuation services to pricing
agents,

                                       A-2

                                                                <PAGE>

accountants, bankers and other specialists, if any; expenses of preparing share
certificates; other expenses in connection with the issuance, offering,
distribution, sale or redemption of securities issued by the Fund; expenses
relating to investor and public relations; expenses of registering and
qualifying shares of the Fund for sale, freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Fund, or of entering into other transactions or engaging
in any investment practices with respect to the Fund; expenses of printing and
distributing Prospectuses, Statements of Additional Information, reports,
notices and dividends to stockholders; costs of stationery; any litigation
expenses; costs of stockholders' meetings; the compensation and all expenses
(specifically including travel expenses relating to the Fund's business) of
officers, directors and employees of the Fund who are not interested persons of
the Adviser; and travel expenses (or an appropriate portion thereof) of officers
or directors of the Fund who are officers, directors or employees of the Adviser
to the extent that such expenses relate to attendance at meetings of the Board
of Directors of the Fund with respect to matters concerning the Fund, or any
committees thereof or advisers thereto.

5. COMPENSATION. As compensation for the services provided and expenses assumed
by the Adviser under this Agreement, except for any additional services provided
by the Adviser pursuant to Section 3 hereof, each Portfolio will pay the Adviser
at the end of each calendar month an advisory fee as set forth in Schedule A
hereto. The advisory fee is computed daily as a percentage of each portfolio's
average daily net assets. The "average daily net assets" of a Portfolio shall
mean the average of the values placed on the Portfolio's net assets as of 4:00
p.m. (Eastern time) on each day on which the net asset value of the Portfolio is
determined consistent with the provisions of Rule 22c-1 under the 1940 Act or,
if the Portfolio lawfully determines the value of its net assets as of some
other time on each business day, as of such other time. The value of net assets
of the Portfolio shall always be determined pursuant to the applicable
provisions of the Fund's Articles of Incorporation and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 5, the value of the net assets of the Portfolio as last determined shall
be deemed to be the value of its net assets as of the close of regular trading
on the New York Stock Exchange, or as of such other time as the value of the net
assets of the Portfolio's securities may lawfully be determined, on that day. If
the determination of the net asset value of the shares of a Portfolio has been
so suspended for a period including any month and when the Adviser's
compensation is payable at the end of such month, then such value shall be
computed on the basis of the value of the net assets of the Portfolio as last
determined (whether during or prior to such month). If the Portfolio determines
the value of the net assets more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this Section 5.

6. BOOKS AND RECORDS. The Adviser agrees to maintain such books and records with
respect to its services to the Fund as are required by Section 31 under the 1940
Act, and rules adopted thereunder, and by other applicable legal provisions, and
to preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-1 and 31a-2 under the
1940 Act and otherwise in connection with its services hereunder are the
property of the Fund and will be surrendered promptly to the Fund upon its
request. And the Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority, any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable law and regulations.

7. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund or the holders of the Fund's shares in connection
with the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Fund or to the holders of the Fund's shares to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement. As used in this Section 7, the term "Adviser" shall include any
officers, directors, employees or other affiliates of the Adviser performing
services with respect to the Fund.


                                       A-3

                                                                <PAGE>

8. SERVICES NOT EXCLUSIVE. It is understood that the services of the Adviser are
not exclusive, and that nothing in this Agreement shall prevent the Adviser from
providing similar services to other investment companies or to other series of
investment companies, or from engaging in other activities, provided such other
services and activities do not, during the term of the Agreement, interfere in a
material manner with the Adviser's ability to meet its obligations to the Fund
hereunder. When the Adviser recommends the purchase or sale of the same security
for a Portfolio, it is understood that in light of its fiduciary duty to the
Portfolio, such transactions will be executed on a basis that is fair and
equitable to the Portfolio. In connection with purchases or sales of portfolio
securities for the account of a Portfolio, neither the Adviser nor any of its
directors, officers, or employees shall act as principal or agent or receive any
commission provided that portfolio transactions for a Portfolio may be executed
through firms affiliated with the Adviser, in accordance with applicable legal
requirements. If the Adviser provides any advice to its clients concerning the
shares of the Fund, the Adviser shall act solely as investment counsel for such
clients and not in any way on behalf of the Fund.

9. DURATION AND TERMINATION. This Agreement shall continue until __________, and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Directors
or (ii) a vote of a "majority" (as defined in the 1940 Act) of each Portfolio's
outstanding voting securities (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing, this Agreement may be
terminated as to a Portfolio (a) at any time without penalty by the Fund upon
the vote of a majority of the Directors or by vote of the majority of the
Portfolio's outstanding voting securities, upon sixty (60) days' written notice
to the Adviser or (b) by the Adviser at any time without penalty, upon sixty
(60) days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).

10. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including a
majority of Directors who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.

11.      MISCELLANEOUS.

         (a) This Agreement shall be governed by the laws of the State of
Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.

         (b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.

         (c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.

         (d) Nothing herein shall be construed as constituting the Adviser as an
agent of the Fund.



                                       A-4

                                                                <PAGE>

                  IN WITNESS WHEREFORE, the parties hereto have caused this
Agreement to be executed by their officers designated below as of __________.

PBHG INSURANCE SERIES                     PILGRIM BAXTER & ASSOCIATES, LTD.
FUND, INC.


By: _________________________             By: _______________________________

Title: _______________________            Title: ______________________________


                                       A-5

                                     <PAGE>


                          INVESTMENT ADVISORY AGREEMENT
                                   SCHEDULE A

Pursuant to Section 5 of this Agreement, each Portfolio shall pay the Adviser,
at the end of each calendar month, compensation computed daily at an annual rate
of the Portfolio's average daily net assets as follows:



PBHG Insurance Series Fund, Inc.

         PBHG Growth II Portfolio                       0.85%
         PBHG Large Cap Growth Portfolio                0.75%
         PBHG Small Cap Value Portfolio                 1.00%
         PBHG Select Value Portfolio                    0.65%
         PBHG Technology & Communications Portfolio     0.85%
         PBHG Select 20 Portfolio                       0.85%
         PBHG Mid-Cap Value Portfolio                   0.85%


                                       A-6

                                                                <PAGE>


                EXHIBIT B --NEW INVESTMENT SUB-ADVISORY AGREEMENT
                                (VALUE INVESTORS)

                        INVESTMENT SUB-ADVISORY AGREEMENT


         AGREEMENT made as of this _____ day of _______, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Pilgrim Baxter Value Investors, Inc.
(the "Sub-Adviser"), and PBHG Insurance Series Fund, Inc., a Maryland
corporation (the "Company").

         WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");

         WHEREAS, pursuant to the Investment Advisory Agreement dated
_______________ and Schedule A dated _______________ (as such Schedule may be
amended from time to time to add or delete new portfolios) between the Adviser
and the Company, the Adviser will act as investment adviser to the separate
portfolios of the Company (the "Portfolios") specified in Schedule A; and

         WHEREAS, the Adviser and the Company each desire to retain the
Sub-Adviser to provide investment advisory services to the Company in connection
with the management of the Portfolios, and the Sub-Adviser is willing to render
such investment advisory services.

                  NOW, THEREFORE, the parties hereto agree as follows:

1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the
Portfolios and the composition of the Portfolios' investment portfolios,
including the purchase, retention and disposition thereof, in accordance with
the Portfolios' investment objectives, policies and restrictions as stated in
such Portfolios' Prospectus (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from time to
time, being herein called the "Prospectus"), and subject to the following
understandings:

                  (1) The Sub-Adviser shall provide supervision of the
Portfolios' investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Portfolios, and what
portion of the assets will be invested or held uninvested in cash.

                  (2) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity with the Company's
Articles of Incorporation and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Directors and will conform and
comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended, and all other applicable federal and state laws and regulations, as
each is amended from time to time.

                  (3) The Sub-Adviser shall determine the securities to be
purchased or sold by the Portfolios and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in such Portfolios' Registration Statement (as defined herein) and
Prospectus or as the Board of Directors or the Adviser may direct from time to
time, in conformity with federal securities laws. In providing the Portfolios
with investment supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the framework
of this policy, the Sub-Adviser may consider the financial responsibility,
research and investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for the Portfolios that the Sub-Advisor have
access to supplemental investment and market research and security and economic
analysis provided by brokers who may execute brokerage transactions at a higher
cost to the Portfolios than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolios with brokers, subject to
review by the Company's Board of Directors from time to time with

                                       B-1

                                                                <PAGE>

respect to the extent and continuation of this practice. It is understood that
the services provided by such brokers may be useful to the Sub-Adviser in
connection with the Sub-Adviser's services to other clients.

                      On occasions when the Sub-Adviser deems the purchase or
sale of a security to be in the best interest of a Portfolio as well as other
clients of the Sub-Adviser, the Sub-Adviser, to the extent permitted by
applicable laws and regulations, may, but shall be under no obligation to,
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Sub-Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Portfolio in question and to such other clients.

                  (4) The Sub-Adviser shall maintain all books and records with
respect to the Portfolios' portfolio transactions required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act and shall render to the Company's Board of Directors such periodic and
special reports as the Company's Board of Directors may reasonably request.

                  (5) The Sub-Adviser shall provide the Portfolios' Custodian on
each business day with information relating to all transactions concerning the
Portfolios' assets and shall provide the Adviser with such information upon
request of the Adviser.

                  (6) (a) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the Company.

                      (b) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of the Sub-Adviser's
officers or employees. It is understood that the Sub-Adviser may obtain certain
administrative services, including, without limitation, services relating to
trade reconciliation and the production of client reports, from its parent
company in carrying out its obligations under this Agreement.

                      (c) The Sub-Adviser shall keep the Portfolios' books
and records required to be maintained by the Sub-Adviser pursuant to paragraph 1
(a) of this Agreement and shall timely furnish to the Adviser all information
relating to the Sub-Adviser's services under this Agreement needed by the
Adviser to keep the other books and records of the Portfolios required by Rule
31a-1 under the 1940 Act. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolios are property of the Portfolios and the
Sub-Adviser will surrender promptly to a Portfolio any of such records upon that
Portfolio's request; provided, however, that the Sub-Adviser may retain a copy
of such records. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are required to
be maintained by it pursuant to paragraph 1(a) of this Agreement.

2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolios pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.

3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:

   (a) Articles of Incorporation, as filed with the Secretary of State of
Maryland (such Articles of Incorporation as in effect on the date of this
Agreement, and as amended from time to time, are herein called the "Articles of
Incorporation");

   (b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"By-Laws");


                                       B-2

                                                                <PAGE>

   (c) Certified resolutions of the Company's Board of Directors authorizing the
appointment of the Sub-Adviser and approving the form of this Agreement;

   (d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Portfolios
and shares of the Portfolios' beneficial shares, and all amendments thereto;

   (e) Notification of Registration of the Portfolios under the 1940 Act
on Form N-8A as filed with the Commission, and all amendments thereto; and

   (f) Prospectus of the Portfolios.

4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolios, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate specified in Schedule A. This fee will be paid
to the Sub-Adviser from the Adviser's advisory fee for such Portfolios.

5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.

6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act provided, however, that this
Agreement may be terminated (a) by a Portfolio at any time, without the payment
of any penalty, by the vote of a majority of Directors of the Company or by the
vote of a majority of the outstanding voting securities of a Portfolio, (b) by
the Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.

7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.

8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolios, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed upon) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Adviser agrees to use its reasonable best efforts
to ensure that materials prepared by its employees or agents or its affiliates
that refer to the Sub-Adviser or its clients in any way are consistent with
those materials previously approved by the Sub-Adviser as referenced in the
first sentence of this paragraph. Sales

                                       B-3

<PAGE>

literature may be furnished to the Sub-Adviser by first-class or overnight mail,
facsimile transmission equipment or hand delivery.

9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of a Portfolio.

10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however that nothing herein shall be construed as being inconsistent
with the 1940 Act.

11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.

13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:

                             To the Adviser at:

                                    825 Duportail Road
                                    Wayne, PA 19087

                             To the Sub-Adviser at:

                                    825 Duportail Road
                                    Wayne, PA 19087

                             To the Company or a Portfolio at:

                                    825 Duportail Road
                                    Wayne, PA 19087

14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.


                                       B-4

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.

PILGRIM BAXTER & ASSOCIATES, LTD.            PBHG INSURANCE SERIES FUND, INC.


By:  _______________________________         By: _______________________________

Title: _____________________________         Title: ____________________________



PILGRIM BAXTER VALUE INVESTORS, INC.

By:  ________________________________

Title: ______________________________


                                      B-5

<PAGE>

                                   SCHEDULE A
                             SUB-ADVISED PORTFOLIOS

PBHG INSURANCE SERIES FUND, INC.                FEE

PBHG Mid-Cap Value Portfolio                    0.50%
PBHG Small Cap Value Portfolio                  0.65%
PBHG Select Value Portfolio                     0.40%


                                       B-6

                                     <PAGE>

                EXHIBIT C -- AGREEMENT AND PLAN OF REORGANIZATION


                        PBHG INSURANCE SERIES FUND, INC.

                      AGREEMENT AND PLAN OF REORGANIZATION



         AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
October __, 2000, is entered into by and between PBHG Insurance Series Fund,
Inc., a Maryland corporation (the "Company"), acting on its own behalf and on
behalf of each of its series portfolios, all of which are identified on Schedule
A to this Agreement, and PBHG Insurance Series Fund, a Delaware business trust
(the "Trust"), acting on its own behalf and on behalf of each of its series
portfolios, all of which are identified on Schedule A to this Agreement.

                                   BACKGROUND

                  The Company is organized as a series management investment
company and is registered with the Securities and Exchange Commission under the
Investment Company Act of 1940. The Company currently publicly offers shares of
common stock representing interests in seven separate series portfolios. Each of
these series portfolios is listed on Schedule A and is referred to in this
Agreement as a "Current Fund."

                  The Company desires to change its form and place of
organization by reorganizing as the Trust. In anticipation of such
reorganization (the "Reorganization"), the Board of Trustees of the Trust has
established seven series portfolios corresponding to the Current Funds (each a
"New Fund"). Schedule A lists the New Funds.

                  The Reorganization will occur through the transfer of all of
the assets of each Current Fund to the corresponding New Fund. In consideration
of its receipt of these assets, each New Fund will assume all of the liabilities
of the corresponding Current Fund, and will issue to the Current Fund shares of
beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares
received by the Current Fund will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Current Fund immediately prior to
the Reorganization (the "Current Fund Shares"). The Current Fund will then
distribute the New Fund Shares it has received to its shareholders.

                  The Reorganization is subject to, and shall be effected in
accordance with, the terms of this Agreement. This Agreement is intended to be
and is adopted by the Company, on its own behalf and on behalf of the Current
Funds, and by the Trust, on its own behalf and on behalf of the New Funds, as a
Plan of Reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").

                  NOW THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows:

1.       DEFINITIONS

Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background of this Agreement. In addition,
the following terms shall have the following meanings:

         1.1. "ASSETS" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.


                                       C-1

<PAGE>

         1.2.  "CLOSING" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.

         1.3.  "CODE" shall mean the Internal Revenue Code of 1986, as amended.
         1.4. "CURRENT FUND" shall mean each of the Company's series portfolios
listed on Schedule A.

         1.5.  "CURRENT FUND SHARES" shall mean the shares of the Current Funds
outstanding immediately prior to the Reorganization.

         1.6.  "EFFECTIVE TIME" shall have the meaning set forth in Section 3.1.

         1.7.  "LIABILITIES" shall mean all liabilities of a Current Fund
including, without limitation, all debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not determinable at the Effective Time, and whether or not specifically referred
to herein.

         1.8.  "NEW FUND" shall mean each of the series portfolios of the Trust,
each of which shall correspond to one of the Current Funds as shown on Schedule
A.

         1.9.  "NEW FUND SHARES" shall mean those shares of beneficial interest
in a New Fund, issued to a Current Fund in consideration of the New Fund's
receipt of the Current Fund's Assets.

         1.10. "REGISTRATION STATEMENT" shall have the meaning set forth in
Section 5.4.

         1.11. "RIC" shall mean a regulated investment company under Subchapter
M of the Code.

         1.12. "SEC" shall mean the Securities and Exchange Commission.

         1.13. "SHAREHOLDER(S)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.

         1.14. "SHAREHOLDERS MEETING" shall have the meaning set forth in
Section 5.1.

         1.15. "TRANSFER AGENT" shall have the meaning set forth in Section 2.2.

         1.16. "1940 ACT" shall mean the Investment Company Act of 1940, as
amended.

2.       PLAN OF REORGANIZATION

         2.1 The Company agrees, on behalf of each Current Fund, to assign,
sell, convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of each New Fund, agrees in
exchange therefor: (a) to issue and deliver to the Current Fund the number of
full and fractional (rounded to the third decimal place) New Fund Shares for
each New Fund designated in Schedule A equal to the number of full and
fractional Current Fund Shares for each corresponding Current Fund designated in
Schedule A that are issued and outstanding immediately prior to the Effective
Time; and

                  (b)      to assume all of the Current Fund's Liabilities.

Such transactions shall take place at the Closing.

2.2 At the Effective Time (or as soon thereafter as is reasonably practicable),
(a) the New Fund Shares issued pursuant to paragraph 5.2 shall be redeemed by
each New Fund for $1.00 and (b) each Current Fund shall distribute the New Fund
Shares received by it pursuant to paragraph 2.1 to the Current Fund's
Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer

                                       C-2

<PAGE>

Agent"), on each New Fund's share transfer books in the Shareholders' names and
transferring New Fund Shares to such accounts. Each Shareholder's account shall
be credited with the respective PRO RATA number of full and fractional (rounded
to the third decimal place) New Fund Shares of each New Fund due that
Shareholder. All outstanding Current Fund Shares, including those represented by
certificates, if any, shall simultaneously be deemed to have been redeemed by
the Company. The Trust shall not issue certificates representing the New Fund
Shares in connection with the Reorganization. However, certificates representing
Current Fund Shares shall represent New Fund Shares after the Reorganization.
         2.3 As soon as reasonably practicable after distribution of the New
Fund Shares pursuant to paragraph 2.2, the Company shall dissolve its existence
as a corporation under Maryland law.

         2.4 Any transfer taxes payable on the issuance of New Fund Shares in a
name other than that of the registered holder of the Current Fund Shares
exchanged therefor shall be paid by the person to whom such New Fund Shares are
to be issued, as a condition of such transfer.

         2.5 Any reporting responsibility of the Company or each Current Fund to
a public authority is, and shall remain, its responsibility up to and including
the date on which it is terminated.

3.       CLOSING

         3.1 The Closing shall occur at the principal office of the Company on
March 31, 2001, or on such other date and at such other place upon which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Company's and the Trust's close of business on
the date of the Closing or at such other time as the parties may agree (the
"Effective Time").

         3.2 The Company or its fund accounting agent shall deliver to the Trust
at the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or a
provision for payment has been made.

         3.3 The Company's transfer agent shall deliver to the Trust's transfer
agent at the Closing a list of the names and addresses of each Shareholder of
each Current Fund and the number of outstanding Current Fund Shares of the
Current Fund owned by each Shareholder, all as of the Effective Time, certified
by the Company's Secretary or Assistant Secretary. The Trust shall cause the
Transfer Agent to deliver at the Closing a certificate as to the opening on each
New Fund's share transfer books of accounts in the Shareholders' names. The
Trust shall issue and deliver a confirmation to the Company evidencing the New
Fund Shares to be credited to each corresponding Current Fund at the Effective
Time or provide evidence satisfactory to the Company that such shares have been
credited to each Current Fund's account on such books. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts, or other documents as the other party or its counsel may
reasonably request.

         3.4 The Company and the Trust shall deliver to the other at the Closing
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.

4.       REPRESENTATIONS AND WARRANTIES

         4.1 The Company represents and warrants on its own behalf and on behalf
of each Current Fund as follows:


                                       C-3

                                                                <PAGE>

         (a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter is on
file with the Maryland Department of Assessments and Taxation;

         (b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full force
and effect;

         (c) Each Current Fund is a duly established and designated series of
the Company;

         (d) At the Closing, each Current Fund will have good and marketable
title to its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other encumbrances; and
upon delivery and payment for the Assets, the corresponding New Fund will
acquire good and marketable title to the Assets;

         (e) The New Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms hereof;

(f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of the Code;
each Current Fund qualified for treatment as a RIC for each past taxable year
since it commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year (and the Assets will be invested
at all times through the Effective Time in a manner that ensures compliance with
the foregoing); each Current Fund has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M did not apply to it; and
each Current Fund has made all distributions for each such past taxable year
that are necessary to avoid the imposition of federal excise tax or has paid or
provided for the payment of any excise tax imposed for any such year;

(g) There is no plan or intention of the Shareholders who individually own 5% or
more of any Current Fund Shares and, to the best of the Company's knowledge,
there is no plan or intention of the remaining Shareholders to redeem or
otherwise dispose of any New Fund Shares to be received by them in the
Reorganization. The Company does not anticipate dispositions of those shares at
the time of or soon after the Reorganization to exceed the usual rate and
frequency of redemptions of shares of the Current Fund as a series of an
open-end investment company. Consequently, the Company is not aware of any plan
that would cause the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization to be one
percent (1%) or more of the shares of the Current Fund outstanding as of the
Effective Time;

         (h) The Liabilities were incurred by the Current Funds in the ordinary
course of their business and are associated with the Assets;

         (i) The total adjusted basis of the Assets of each Current Fund
transferred to each New Fund will equal or exceed the sum of the Liabilities to
be assumed by each New Fund, plus the amount of Liabilities, if any, to which
the transferred Assets are subject;

         (j) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code;

         (k) As of the Effective Time, no Current Fund will have outstanding any
warrants, options, convertible securities, or any other type of rights pursuant
to which any person could acquire Current Fund Shares except for the right of
investors to acquire its shares at net asset value in the normal course of its
business as an open-end diversified management investment company operating
under the 1940 Act;

         (l) At the Effective Time, the performance of this Agreement shall have
been duly authorized by all necessary action by the Company's shareholders;

         (m) Throughout the five-year period ending on the date of the Closing,
each Current Fund will have conducted its historic business within the meaning
of Section 1.368-1(d) of the Income Tax Regulations under the Code in a
substantially unchanged manner;


                                       C-4

                                                                <PAGE>

         (n) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of the
Liabilities assumed by the New Fund plus the amount of Liabilities, if any, to
which the transferred Assets are subject; and

         (o) Each Current Fund will pay its respective expenses, if any,
incurred in connection with the Reorganization.

         4.2      The Trust represents and warrants on its own behalf, and on
behalf of each New Fund, as follows:

         (a) The Trust is a business trust duly organized, validly existing, and
in good standing under the laws of the State of Delaware, and its Certificate of
Trust has been duly filed in the office of the Secretary of State of Delaware;

         (b) At the Effective Time, the Trust will succeed to the Company's
registration statement filed under the 1940 Act with the SEC and thus will
become duly registered as an open-end management investment company under the
1940 Act;

         (c) At the Effective Time, each New Fund will be a duly established and
designated series of the Trust;

         (d) No New Fund has commenced operations nor will any New Fund commence
operations until after the Closing;

         (e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the Trust
on behalf of any New Fund, except as provided in paragraph 5.2;

         (f) The New Fund Shares to be issued and delivered to the corresponding
Current Fund hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and validly
issued and outstanding shares of the New Fund, fully paid and non-assessable;

         (g) Each New Fund will be a "fund" as defined in section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a RIC
for its taxable year in which the Reorganization occurs;

         (h) The Trust, on behalf of the New Funds, has no plan or intention to
issue additional New Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an open-end
investment company; nor does the Trust, on behalf of the New Funds, have any
plan or intention to redeem or otherwise reacquire any New Fund Shares issued
pursuant to the Reorganization, other than in the ordinary course of its
business or to the extent necessary to comply with its legal obligation under
Section 22(e) of the 1940 Act;

         (i) Each New Fund will actively continue the corresponding Current
Fund's business in substantially the same manner that the Current Fund conducted
that business immediately before the Reorganization; and no New Fund has any
plan or intention to sell or otherwise dispose of any of the Assets, except for
dispositions made in the ordinary course of its business or dispositions
necessary to maintain its qualification as a RIC, although in the ordinary
course of its business the New Fund will continuously review its investment
portfolio (as each Current Fund did before the Reorganization) to determine
whether to retain or dispose of particular stocks or securities, including those
included in the Assets;

         (j) There is no plan or intention for any of the New Funds to be
dissolved or merged into another corporation or business trust or "fund" thereof
(within the meaning of section 851(g)(2) of the Code) following the
Reorganization; and


                                       C-5

                                                                <PAGE>

         (k) Each New Fund will pay its respective expenses, if any, incurred in
connection with the Reorganization.

         4.3 Each of the Company and the Trust, on its own behalf and on behalf
of each Current Fund or each New Fund, as appropriate, represents and warrants
as follows:

         (a) The fair market value of the New Fund Shares of each New Fund
received by each Shareholder will be approximately equal to the fair market
value of the Current Fund Shares of the corresponding Current Fund surrendered
in exchange therefor;

         (b) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares of each New Fund and will own such
shares solely by reason of their ownership of the Current Fund Shares of the
corresponding Current Fund immediately before the Reorganization;

         (c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;

         (d) There is no intercompany indebtedness between a Current Fund and a
New Fund that was issued or acquired, or will be settled, at a discount;

         (e) Immediately following consummation of the Reorganization, each New
Fund will hold the same assets, except for assets distributed to shareholders in
the course of its business as a RIC and assets used to pay expenses incurred in
connection with the Reorganization, and be subject to the same liabilities that
the corresponding Current Fund held or was subject to immediately prior to the
Reorganization. Assets used to pay (i) expenses, (ii) all redemptions (other
than redemptions at the usual rate and frequency of the Current Fund as a series
of an open-end investment company), and (iii) distributions (other than regular,
normal distributions), made by a Current Fund after the date of this Agreement
will, in the aggregate, constitute less than one percent (1%) of its net assets;
and

         (f) No consideration other than New Fund Shares (and the New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets and no
consideration other than New Fund Shares will be received by the Shareholders in
connection with the Reorganization.

5.       COVENANTS

5.1 As soon as practicable after the date of this Agreement, the Company shall
call a meeting of its Shareholders (the "Shareholders Meeting") to consider and
act on this Agreement. The Board of Directors of the Company shall recommend
that Shareholders approve this Agreement and the transactions contemplated by
this Agreement. Approval by Shareholders of this Agreement will authorize the
Company, and the Company hereby agrees, to vote on the matters referred to in
Sections 5.2 and 5.3.

         5.2 The Trust's trustees shall authorize the issuance of, and each New
Fund shall issue, prior to the Closing, one New Fund Share of each New Fund that
corresponds to a Current Fund for which shares are issued and outstanding to the
Company in consideration of the payment of $1.00 per share for the purpose of
enabling the Company to elect the Company's directors as the Trust's trustees
(to serve without limit in time, except as they may resign or be removed by
action of the Trust's trustees or shareholders), to ratify the selection of the
Trust's independent accountants, and to vote on the matters referred to in
Section 5.3.

         5.3 Prior to the Closing, the Trust (on its own behalf of and with
respect to each New Fund) shall enter into an Investment Advisory Agreement, a
Sub-Advisory Agreement, an Administrative Services Agreement, Sub-Administrative
Services Agreement, Distribution Agreement, Custodian Agreements, and an Agency
Agreement and shall enter into or adopt, as appropriate, such other agreements
and plans as are necessary for each New Fund's operation as a series of an
open-end investment company. Each such agreement and plan shall have been
approved by the Trust's trustees

                                       C-6

                                                                <PAGE>

and, to the extent required by law, by such of those trustees who are
not "interested persons" of the Trust (as defined in the 1940 Act) and by the
Company as the sole shareholder of each New Fund.

The Company or the Trust, as appropriate, shall file with the SEC one or more
post-effective amendments to the Company's Registration Statement on Form N-1A
under the Securities Act of 1933, as amended, and the 1940 Act, as amended (the
"Registration Statement"), (i) which contain such amendments to such
Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own, and shall use its
best efforts to have such post-effective amendment or amendments to the
Registration Statement become effective as of the Closing.

CONDITIONS PRECEDENT

         The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated hereby, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, and (c) the further
conditions that, at or before the Effective Time:

         6.1 The Shareholders of the Company shall have approved this Agreement
and the transactions contemplated by this Agreement in accordance with
applicable law.

         6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions.

         6.3 Each of the Company and the Trust shall have received an opinion
from Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax
consequences mentioned below. In rendering such opinion, such counsel may rely
as to factual matters, exclusively and without independent verification, on the
representations made in this Agreement (and in separate letters of
representation that the Company and the Trust shall use their best efforts to
deliver to such counsel upon request) and the certificates delivered pursuant to
Section 3.4. Such opinion shall be substantially to the effect that, based on
the facts and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:

         (a) The transfer of the Assets of each Current Fund to the
corresponding New Fund pursuant to the Reorganization will constitute a
reorganization within the meaning of section 368(a) of the Code, and each
Current Fund and each New Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;

         (b) No gain or loss will be recognized to a Current Fund on the
transfer of the Assets to the corresponding New Fund in exchange solely for New
Fund Shares and the New Fund's assumption of the Liabilities or on the
subsequent distribution of New Fund Shares to the Shareholders, in constructive
exchange for their Current Fund Shares, in liquidation of the Current Fund;

         (c) No gain or loss will be recognized to a New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;


                                       C-7

                                                                <PAGE>

         (d) Each New Fund's basis for the Assets will be the same as the basis
thereof in the corresponding Current Fund's hands immediately before the
Reorganization, and the New Fund's holding period for the Assets will include
the Current Fund's holding period therefor;

         (e) A Shareholder will recognize no gain or loss on the constructive
exchange of Current Fund Shares solely for New Fund Shares pursuant to the
Reorganization; and

         (f) A Shareholder's basis for the New Fund Shares of each New Fund to
be received in the Reorganization will be the same as the basis for the Current
Fund Shares of the corresponding Current Fund to be constructively surrendered
in exchange for such New Fund Shares, and a Shareholder's holding period for
such New Fund Shares will include its holding period for the Current Fund Shares
constructively surrendered, provided that the New Fund Shares are held as
capital assets by the Shareholder at the Effective Time.

         6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).

         At any time prior to the Closing, any of the foregoing conditions
(except those set forth in Section 6.1) may be waived by the directors/trustees
of either the Company or the Trust if, in their judgment, such waiver will not
have a material adverse effect on the interests of the Current Fund's
shareholders.

7.       EXPENSES

         Except as otherwise provided in Section 4.3(c), all expenses incurred
in connection with the transactions contemplated by this Agreement (regardless
of whether they are consummated) will be borne by the parties as they mutually
agree.

8.       ENTIRE AGREEMENT

         Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties.

9.       AMENDMENT

         This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's Shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.

10.      TERMINATION

         This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by the Company's Shareholders:

         10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
August 31, 2001; or

         10.2     By the parties' mutual agreement.

         Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.

                                       C-8

                                                                <PAGE>

11.      MISCELLANEOUS

         11.1 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.

         11.2 Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.

         11.3 The execution and delivery of this Agreement have been authorized
by the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the New Funds, as provided in the Trust's Agreement and
Declaration of Trust.


                                       C-9

                                                                <PAGE>

         IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.


Attest:                              PBHG INSURANCE SERIES FUND, INC.,
                                              on behalf of each of its series
                                              listed in Schedule A to this
                                              Agreement

________________________________     By:____________________________________

                                     Title:___________________________________


Attest:                              PBHG INSURANCE SERIES FUND
                                              on behalf of each of its series
                                              listed in Schedule A to this
                                              Agreement

________________________________     By:____________________________________

                                     Title:___________________________________




                                      C-10

                                     <PAGE>

                                   SCHEDULE A

        SERIES OF PBHG INSURANCE                 CORRESPONDING SERIES OF PBHG
            SERIES FUND, INC.                        INSURANCE SERIES FUND
        (each a "Current Fund")                        (each a "New Fund")
<TABLE>
<CAPTION>
<S>                                                 <C>
PBHG Growth II Portfolio                     PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio              PBHG Large Cap Growth Portfolio
PBHG Select Value Portfolio                  PBHG Select Value Portfolio
PBHG Mid-Cap Value Portfolio                 PBHG Mid-Cap Value Portfolio
PBHG Small Cap Value Portfolio               PBHG Small Cap Value Portfolio
PBHG Technology & Communications Portfolio   PBHG Technology & Communications Portfolio
PBHG Select 20 Portfolio                     PBHG Select 20 Portfolio
PBHG Small Cap Growth Portfolio*             PBHG Small Cap Growth Portfolio
</TABLE>


*Shares of this Current Fund are or will be registered with the SEC shortly.


                                      C-11

<PAGE>

                                   SCHEDULE 1
                   ADVISORY FEES PAID AND ADVISORY FEES WAIVED
                 UNDER THE FORMER INVESTMENT ADVISORY AGREEMENT
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

         The amount of advisory fees paid by each Fund to Pilgrim Baxter &
Associates, Ltd. under the Former Investment Advisory Agreement for the fiscal
year ended December 31, 1999 is set forth below under the column "Advisory Fees
Paid." The amount of advisory fees waived and/or expenses reimbursed for each
Fund by Pilgrim Baxter & Associates, Ltd. under the expense limitation
agreements for the fiscal year ended December 31, 1999 is set forth below under
the column "Advisory Fees Waived/Expenses Reimbursed."

<TABLE>
<CAPTION>

                                                          Advisory Fees           Advisory Fees Waived/
Fund                                                          Paid                 Expenses Reimbursed
----------------------------------------------------------------------------------------------------------
<S>                                                         <C>                         <C>
PBHG Growth II Portfolio                                    $420,736                    $0
PBHG Large Cap Growth Portfolio                             $114,971                    $10,085
PBHG Select Value Portfolio                                 $256,577                    $0
PBHG Select 20 Portfolio                                    $3,673,475                  $0
PBHG Mid-Cap Value Portfolio                                $5,102                      $27,773
PBHG Small Cap Value Portfolio                              $415,589                    $38,777
PBHG Technology & Communications Portfolio                  $3,374,963                  $0
</TABLE>

         The date of the Former Investment Advisory Agreement for each Fund
other than PBHG Mid-Cap Value Portfolio was April 1, 1997. The date of the
Former Investment Advisory Agreement for PBHG Mid-Cap Value Portfolio was
February 20, 1998. The date the Former Investment Advisory Agreement for each
Fund other than PBHG Mid-Cap Value Portfolio was last submitted to shareholders
was April 1, 1997. At that time, these Former Agreements were submitted to the
initial shareholder of each Fund for approval. The date the Former Investment
Advisory Agreement for PBHG Mid-Cap Value Portfolio was last submitted to
shareholders was February 20, 1998. At that time, the Former Agreement was
submitted to the initial shareholder of PBHG Mid-Cap Value Portfolio for
approval.


                                       S-1

<PAGE>

       SCHEDULE 2 - OTHER INVESTMENT COMPANIES ADVISED BY PILGRIM BAXTER
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                            NET ASSETS                                     EXPENSE LIMITATION/
                                      INVESTMENT          ($ MIL) AS OF                                       FEE RATE PAID
          FUND                        OBJECTIVE            10/31/00              FEE                           AFTER WAIVER
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>                    <C>                <C>                       <C>
PBHG Large Cap Growth             Large Cap Growth         $455,837,544          0.75%                     None
                                                                                                           0.75%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20                 Large Cap Growth         $1,058,909,831        0.85%                     1.50%
                                                                                                           0.85%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value              Large Cap Value          $77,865,953           0.65%                     1.50%
                                                                                                           0.65%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value                Mid-Cap Value            $115,939,645          0.85%                     1.50%
                                                                                                           0.85%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value              Small Cap Value          $198,580,287          1.00%                     1.50%
                                                                                                           0.92%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Technology &                 Technology               $2,752,877,700        0.85%                     None
Communications                                                                                             0.85%
------------------------------------------------------------------------------------------------------------------------------------
WRL PB Mid Cap                    Mid Cap Growth           $265,457,054          0.50% to $100             No expense
Growth (Sub-adviser)                                                             million; 0.40%            limitation on
                                                                                 above $100                sub-advisory
                                                                                 million                   fees
------------------------------------------------------------------------------------------------------------------------------------
IDEX PB Mid Cap                   Mid Cap Growth           $147,604,939          0.50% to $100             No expense
Growth (Sub-adviser)                                                             million; 0.40%            limitation on
                                                                                 above $100                sub-advisory
                                                                                 million                   fees
------------------------------------------------------------------------------------------------------------------------------------
IDEX PB Technology                Technology               $87,153,157           0.55% to $100             No expense
(Sub-adviser)                                                                    million; 0.50%            limitation on
                                                                                 above $100                sub-advisory
                                                                                 million                   fees
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      S-2

<PAGE>


       SCHEDULE 3 - OTHER INVESTMENT COMPANIES ADVISED BY VALUE INVESTORS
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------
                                                             NET ASSETS
                                       INVESTMENT           ($ MIL) AS OF                                  EXPENSE
          FUND                         OBJECTIVE              10/31/00                 FEE               LIMITATION
----------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                        <C>                     <C>                 <C>
PBHG Large Cap Value Fund           Large Cap Value         $77,865,953               0.50%              No expense
                                                                                                         limitation with
                                                                                                         the Fund
----------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund             Mid-Cap Value           $115,939,645              0.50%              No expense
                                                                                                         limitation with
                                                                                                         the Fund
----------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value Fund           Small Cap Value         $198,580,287              0.50%              No expense
                                                                                                         limitation with
                                                                                                         the Fund
----------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      S-3

<PAGE>

                  SCHEDULE 4 - CURRENT FUNDAMENTAL RESTRICTIONS

Each Fund may not:

      1.       Make loans, except that each Portfolio, in accordance with that
               Portfolio's investment objectives and policies, may (i) purchase
               debt instruments, and (ii) enter into repurchase agreements. In
               addition, the PBHG Mid-Cap Value Portfolio may lend its portfolio
               securities in an amount not exceeding one-third the value of its
               total assets.

      2.       Act as an underwriter of securities of other issuers, except as
               it may be deemed an underwriter under the 1933 Act in connection
               with the purchase and sale of portfolio securities.

      3.       Purchase or sell commodities or commodity contracts, except that
               a Portfolio, in accordance with its investment objective and
               policies may: (i) invest in readily marketable securities of
               issuers which invest or engage in such activities; and (ii) enter
               into forward contracts, futures contracts and options thereon.

      4.       Purchase or sell real estate, or real estate partnership
               interests, except that this limitation shall not prevent a
               Portfolio from investing directly or indirectly in readily
               marketable securities of issuers which can invest in real estate,
               institutions that issue mortgages, or real estate investment
               trusts which deal with real estate or interests therein.

      5.       Issue senior securities (as defined in the 1940 Act), except as
               permitted in connection with the Portfolio's policies on
               borrowing and pledging, or as permitted by rule, regulation or
               order of the SEC.

      6.       Purchase more than 10% of the voting securities of any one issuer
               or purchase securities of any one issuer if, at the time of
               purchase, more than 5% of its total assets will be invested in
               that issuer, except with respect to each Portfolio, up to 25% of
               its assets may be invested without regard to these limits.

               This limitation does not apply to the Select 20 Portfolio or the
               Technology & Communications Portfolio. In addition, for purposes
               of this investment limitation, the term "issuer" does not include
               obligations issued or guaranteed by the U.S. Government, its
               agencies or instrumentalities and repurchase agreements
               collateralized by such obligations.

      7.       Invest 25% or more of its total assets at the time of purchase in
               securities of one or more issuers (other than obligations issued
               or guaranteed by the U.S. Government or its agencies and
               instrumentalities and repurchase agreements collateralized by
               such obligations) whose principal business activities are in the
               same industry. For purposes of this limitation, supranational
               organizations are deemed to be issuers conducting their principal
               business activities in the same industry; state and municipal
               governments and their agencies and authorities are not deemed to
               be industries, utility companies will be divided according to
               their services (e.g., gas, gas transmission, electric, electric
               and gas and telephone) and financial service companies will be
               classified according to the end use of their service (e.g.,
               automobile finance, bank finance and diversified finance).

               This  limitation does not apply to the Technology &
               Communications Portfolio.

      8.       Borrow money except for temporary or emergency purposes and then
               only in an amount not exceeding 10% of the value of the
               Portfolio's total assets (except not exceeding 33 1/3% of the
               value of total assets with respect to the Growth II, Mid-Cap
               Value, and Small Cap Value Portfolios). This borrowing provision
               is intended to facilitate the orderly sale of portfolio
               securities to accommodate substantial redemption requests if they
               should occur, and is not for investment purposes. All borrowings
               in excess of 5% of the Portfolio's total assets will be repaid
               before making investments.


                                       S-4

                                                                <PAGE>


      9.       Invest in companies for the purpose of exercising control.

      10.      Pledge, mortgage or hypothecate assets, except (i) to secure
               temporary borrowings permitted by each Portfolio's limitation on
               permitted borrowings, or (ii) in connection with permitted
               transactions regarding options and futures contracts.

      11.      Make short sales of securities, maintain a short position or
               purchase securities on margin, except that each Portfolio may (i)
               obtain short-term credits as necessary for the clearance of
               security transactions and (ii) establish margin accounts as may
               be necessary in connection with the Portfolio's use of options
               and futures contracts.

      12.      Purchase securities of other investment companies except as
               permitted by the 1940 Act and the rules and regulations
               thereunder.

      13.      Invest in interests in oil, gas or other mineral exploration or
               development programs.



                                       S-5

                                                                <PAGE>

                       SCHEDULE 5- OTHER MATERIAL PAYMENTS

The following chart sets forth the fees paid during the fiscal year ended
December 31, 1999 by each Fund to PBHG Fund Services, a wholly-owned subsidiary
of Pilgrim Baxter for administrative services and shareholder services and
amount reimbursed during the fiscal year ended December 31, 1999 by each Fund to
Pilgrim Baxter pursuant to the expense limitation agreements for advisory fees
previously waived and/or expenses previously reimbursed by Pilgrim Baxter. The
administrative and other services currently provided by and shareholder services
and its affiliates will continue to be provided after the investment advisory
contract with Pilgrim Baxter is approved. In addition, Pilgrim Baxter has
committed to maintain the expense limitation agreements for a period of two
years from the date of the consummation of the Transaction.


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                               ADMINISTRATIVE AND
                                              SHAREHOLDER SERVICES
                                               FEES PAID TO PBHG        AMOUNTS REIMBURSED
NAME OF FUND                                      FUND SERVICES         TO PILGRIM BAXTER
------------------------------------------------------------------------------------------------
<S>                                                <C>                        <C>
PBHG Growth II Portfolio                           $ 50,976                   $31,616
------------------------------------------------------------------------------------------------
PBHG Large Cap Growth Portfolio                    $ 24,937                   $0
------------------------------------------------------------------------------------------------
PBHG Select Value Portfolio                        $ 52,808                   $0
------------------------------------------------------------------------------------------------
PBHG Select 20 Portfolio                           $471,811                   $27,776
------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value Portfolio                       $  3,918                   $0
------------------------------------------------------------------------------------------------
PBHG Small Cap Value Portfolio                     $ 55,487                   $0
------------------------------------------------------------------------------------------------
PBHG Technology & Communications Portfolio         $360,137                   $93,603
------------------------------------------------------------------------------------------------
</TABLE>


                                       S-6

<PAGE>

                                   SCHEDULE 6

                    PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
                      OF PILGRIM BAXTER AND VALUE INVESTORS

            OFFICERS & DIRECTORS OF PBHG INSURANCE SERIES FUND, INC.
                    WHO ARE OFFICERS, EMPLOYEES OR DIRECTORS
                      OF PILGRIM BAXTER AND VALUE INVESTORS

         The following table provides information with respect to the principal
executive officer and the directors of Pilgrim Baxter and Value Investors and
officers and directors of The PBHG Funds, Inc., all of whose business address is
825 Duportail Road, Wayne, Pennsylvania 19087.

PILGRIM BAXTER (*)
------------------
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                  Position with
             Name                                 Pilgrim Baxter                                              Principal Occupation
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                                                                     <C>
Harold J. Baxter                         Director, Chairman of the Board and Chief Executive Officer                   Same
------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim                          Director,  President and Chief Investment Officer                             Same
------------------------------------------------------------------------------------------------------------------------------------

VALUE INVESTORS
---------------

------------------------------------------------------------------------------------------------------------------------------
                                         Position with
             Name                        Pilgrim Baxter                                                       Principal Occupation
------------------------------------------------------------------------------------------------------------------------------
Harold J. Baxter                         Director, Chairman of the Board and Chief Executive Officer                   Same
------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim                          Director, President and Chief Investment Officer                              Same
------------------------------------------------------------------------------------------------------------------------------------
Eric C. Schneider                        Treasurer, Chief Financial Officer, Controller                                Same
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
PBHG INSURANCE SERIES FUND, INC.
--------------------------------

------------------------------------------------------------------------------------------------------------------------------------
                                                     Position with
                                                  PBHG Insurance Series         Position with                  Position with
             Name                                      Fund, Inc.               Pilgrim Baxter                Value Investors
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                         <C>                                 <C>
Harold J. Baxter                                  Chairman/Director             Director/CEO                    Director/CEO
                                                                                  Chairman                         Chairman
------------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim                                   President                  Director/President CIO           Director/President
------------------------------------------------------------------------------------------------------------------------------------
John M. Zerr                                      Vice President/               General Counsel/               General Counsel/
                                                  Secretary                        Secretary                      Secretary
------------------------------------------------------------------------------------------------------------------------------------
Meghan M. Mahon                                   Vice President/                    Counsel/                       Counsel/
                                                  Assistant Secretary           Assistant Secretary           Assistant Secretary
------------------------------------------------------------------------------------------------------------------------------------
Matthew R. DiClemente                             Assistant Secretary           Legal Assistant                  Legal Assistant
------------------------------------------------------------------------------------------------------------------------------------
<FN>

(*) Effective January 1, 2001, the number of directors on Pilgrim Baxter's Board of Directors will be increased from two to
    seven. As of the date of this proxy, the names of the individuals to fill the five newly created director seats have not
    been finalized, although it is expected that 4 representatives from Old Mutual and 1 representative from Pilgrim Baxter will
    fill these newly created seats.
</FN>


</TABLE>


                                      S-7

                                                                <PAGE>

           SCHEDULE 7 - BROKERAGE COMMISSIONS PAID TO SEI INVESTMENTS
          DISTRIBUTION CO. FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

         The following chart sets forth the aggregate amount of brokerage
     commissions paid by each Fund to SEI Distribution Co., the distributor for
     PBHG Insurance Series Fund, Inc. for the fiscal year ended December 31,
     1999 and the percentage of each Fund's aggregate brokerage commissions paid
     to SEI Investments Distribution Co. for the fiscal year ended December 31,
     1999. These commissions were paid to SEI Investments Distribution co. in
     connection with repurchase agreements.

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------
                                        Aggregate Amount of           Percent of Aggregate
                                        Brokerage Commissions paid    Brokerage Commissions
                                        to SEI Investments            Paid to SEI Investments
Fund                                    Distribution Co.              Distribution Co.
---------------------------------------------------------------------------------------------------
<S>                                     <C>                           <C>
PBHG Growth II Portfolio                $3,168                        2%
---------------------------------------------------------------------------------------------------
PBHG Large Cap Growth Portfolio         $823                          3%
---------------------------------------------------------------------------------------------------
PBHG Select Value Portfolio             $1,147                        0%
---------------------------------------------------------------------------------------------------
PBHG Select 20 Portfolio                $23,014                       4%
---------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value Portfolio            $15                           0%
---------------------------------------------------------------------------------------------------
PBHG Small Cap Value Portfolio          $733                          0%
---------------------------------------------------------------------------------------------------
PBHG Technology & Communications        $16,280                       2%
Portfolio
---------------------------------------------------------------------------------------------------
</TABLE>

                                       S-8

                                                                <PAGE>

      SCHEDULE 8--BENEFICIAL OWNERS OF 5% OR MORE OF EACH FUNDS SHARES ON
                               NOVEMBER 17, 2000


--------------------------------------------------------------------------------
       Fund                                       5% of More Beneficial Owner
--------------------------------------------------------------------------------
PBHG Growth II Portfolio

Fidelity Investments                              71.22%
Life Insurance Co
82 Devonshire St # R27A
Boston, Massachusetts 02109-3614

GE Life & Annuity Assurance Co                    16.43%
Attn Variable Accounting
6610 W Broad Street
Richmond, Virginia 23239-1702

Empire Fidelity Investments                       7.05%
Life Insurance Co
200 Liberty St
One Financial Center
New York, New York 10005-3500
--------------------------------------------------------------------------------

PBHG Large Cap Growth Portfolio

GE Life & Annuity Assurance Co                    86.15%
Attn Variable Accounting
6610 W Broad Street
Richmond, Virginia 23239-1702

Annuity Investors Life Ins Co                     12.55%
250 E. Fifth St
Cincinnati, Ohio 45202-4119
--------------------------------------------------------------------------------

PBHG Select Value Portfolio

Empire Fidelity Investments                       13.37%
Life Insurance Co
200 Liberty St
One Financial Center
New York, New York 10005-3500

Fidelity Investments                              86.59%
Life Insurance Co
82 Devonshire St # R27A
Boston, Massachusetts 02109-3614
--------------------------------------------------------------------------------


                                       S-9

                                                                <PAGE>

--------------------------------------------------------------------------------
Fund                                              5% of More Beneficial Owner
--------------------------------------------------------------------------------
PBHG Select 20 Portfolio

Empire Fidelity Investments                       9.34%
Life Insurance Co
200 Liberty St
One Financial Center
New York, New York 10005-3500

Fidelity Investments                              90.17%
Life Insurance Co
82 Devonshire St # R27A
Boston, Massachusetts 02109-3614
--------------------------------------------------------------------------------

PBHG Mid-Cap Value Portfolio

Pilgrim Baxter & Associates, Ltd.                 99.98%
825 Duportail Road
Wayne, Pennsylvania 19087-5525
--------------------------------------------------------------------------------

PBHG Small Cap Value Portfolio

Empire Fidelity Investments                       7.37%
Life Insurance Co
200 Liberty St
One Financial Center
New York, New York 10005-3500

Fidelity Investments                              92.62%
Life Insurance Co
82 Devonshire St # R27A
Boston, Massachusetts 02109-3614
--------------------------------------------------------------------------------

PBHG Technology & Communications Portfolio

Empire Fidelity Investments                       9.14%
Life Insurance Co
200 Liberty St
One Financial Center
New York, New York 10005-3500

Fidelity Investments                              85.92%
Life Insurance Co
82 Devonshire St # R27A
Boston, Massachusetts 02109-3614
--------------------------------------------------------------------------------



                                      S-10

                                                                <PAGE>

     SCHEDULE 9 - Outstanding Shares of the Company as of NOVEMBER 17, 2000


--------------------------------------------------------------------------------
NAME OF FUND                                       NUMBER OF SHARES OUTSTANDING
--------------------------------------------------------------------------------
PBHG Growth II Portfolio                           20,148,804.40
--------------------------------------------------------------------------------
PBHG Large Cap Growth Portfolio                     2,976,531.79
--------------------------------------------------------------------------------
PBHG Select Value Portfolio                         5,479,195.90
--------------------------------------------------------------------------------
PBHG Select 20 Portfolio                           28,968,792.65
--------------------------------------------------------------------------------
PBHG Mid-Cap Value Portfolio                           61,494.35
--------------------------------------------------------------------------------
PBHG Small Cap Value Portfolio                     14,203,332.60
--------------------------------------------------------------------------------
PBHG Technology & Communications Portfolio         48,519,043.72
--------------------------------------------------------------------------------


                                      S-11

<PAGE>


                        PBHG Insurance Series Fund, Inc.
                            PBHG Growth II Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________
                               _____________________________


                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
              INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>

This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of Portfolio, with Pilgrim Baxter & Associates, Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                       [  ]               [  ]


2.  THIS ITEM IS NOT APPLICABLE.




3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Issuer Diversification                   [   ]      [   ]      [   ]

    (b)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Borrowing Money and Issuing Senior       [   ]      [   ]      [   ]
    Securities

    (c)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Underwriting Securities                  [   ]      [   ]      [   ]

    (d)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Industry Concentration                   [   ]      [   ]      [   ]

    (e)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Real Estate        [   ]      [   ]      [   ]

    (f)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Commodities        [   ]      [   ]      [   ]

    (g)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Making Loans                             [   ]      [   ]      [   ]

    (h)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Investing all Assets in an Open End      [   ]      [   ]      [   ]
    Fund

    (i)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Investing in Oil, Gas or Other Mineral   [   ]      [   ]      [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Investing in Companies for the Purpose   [   ]      [   ]      [   ]
    of Control

    (k)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Making Short Sales or Margin Purchases   [   ]      [   ]      [   ]

    (l)  Change to Fundamental Restriction       FOR      AGAINST    ABSTAIN
    on Pledging Assets                          [   ]      [   ]      [   ]


                                       3

<PAGE>


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                 [  ]                         [  ]             [  ]


                                       4


<PAGE>


                        PBHG Insurance Series Fund, Inc.
                         PBHG Large Cap Growth Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
               INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>


This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of the Portfolio, with Pilgrim Baxter & Associates,
    Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                       [  ]               [  ]


2.  THIS ITEM IS NOT APPLICABLE.



3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  Change to Fundamental Restriction         FOR      AGAINST   ABSTAIN
    on Issuer Diversification                     [   ]      [   ]     [   ]

    (b)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Borrowing Money and Issuing Senior         [   ]      [   ]     [   ]
    Securities

    (c)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Underwriting Securities                    [   ]      [   ]     [   ]

    (d)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Industry Concentration                     [   ]      [   ]     [   ]

    (e)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Purchasing or Selling Real Estate          [   ]      [   ]     [   ]

    (f)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Purchasing or Selling Commodities          [   ]      [   ]     [   ]

    (g)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Making Loans                               [   ]      [   ]     [   ]

    (h)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Investing all Assets in an Open End        [   ]      [   ]     [   ]
    Fund

                                       3

<PAGE>


    (i)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Investing in Oil, Gas or Other Mineral     [   ]      [   ]     [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Investing in Companies for the Purpose     [   ]      [   ]     [   ]
    of Control

    (k)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Making Short Sales or Margin Purchases     [   ]      [   ]     [   ]

    (l)  Change to Fundamental Restriction         FOR      AGAINST  ABSTAIN
    on Pledging Assets                            [   ]      [   ]     [   ]


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


                                       4

<PAGE>



                        PBHG Insurance Series Fund, Inc.
                         PBHG Small Cap Value Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
              INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>


This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of the Portfolio, with Pilgrim Baxter & Associates,
    Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


2.  To approve the Investment Sub-Advisory Agreement for the Portfolio with
    Pilgrim Baxter Value Investors, Inc.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Issuer Diversification                      [   ]      [   ]       [   ]

    (b)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Borrowing Money and Issuing Senior          [   ]      [   ]       [   ]
    Securities

    (c)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Underwriting Securities                     [   ]      [   ]       [   ]

    (d)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Industry Concentration                      [   ]      [   ]       [   ]

    (e)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Purchasing or Selling Real Estate           [   ]      [   ]       [   ]

    (f)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Purchasing or Selling Commodities           [   ]      [   ]       [   ]

    (g)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Making Loans                                [   ]      [   ]       [   ]

    (h)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Investing all Assets in an Open End         [   ]      [   ]       [   ]
    Fund

                                       3

<PAGE>

    (i)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Investing in Oil, Gas or Other Mineral      [   ]      [   ]       [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Investing in Companies for the Purpose      [   ]      [   ]       [   ]
    of Control

    (k)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Making Short Sales or Margin Purchases      [   ]      [   ]       [   ]

    (l)  Change to Fundamental Restriction         FOR      AGAINST     ABSTAIN
    on Pledging Assets                             [   ]      [   ]       [   ]


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]

4

<PAGE>



                        PBHG Insurance Series Fund, Inc.
                          PBHG Mid-Cap Value Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
              INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>


This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of the Portfolio, with Pilgrim Baxter & Associates,
    Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


2.  To approve the Investment Sub-Advisory Agreement for the Portfolio with
    Pilgrim Baxter Value Investors, Inc.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Issuer Diversification                       [   ]      [   ]      [   ]

    (b)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Borrowing Money and Issuing Senior           [   ]      [   ]      [   ]
    Securities

    (c)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Underwriting Securities                      [   ]      [   ]      [   ]

    (d)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Industry Concentration                       [   ]      [   ]      [   ]

    (e)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Real Estate            [   ]      [   ]      [   ]

    (f)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Commodities            [   ]      [   ]      [   ]

    (g)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Loans                                 [   ]      [   ]      [   ]

    (h)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing all Assets in an Open End          [   ]      [   ]      [   ]
    Fund

                                       3

<PAGE>

    (i)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Oil, Gas or Other Mineral       [   ]      [   ]      [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Companies for the Purpose       [   ]      [   ]      [   ]
    of Control

    (k)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Short Sales or Margin Purchases       [   ]      [   ]      [   ]

    (l)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Pledging Assets                              [   ]      [   ]      [   ]


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]

                                       4

<PAGE>



                        PBHG Insurance Series Fund, Inc.
                           PBHG Select Value Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
              INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>


This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.       To approve the Investment Advisory Agreement between PBHG Insurance
         Series Fund, Inc., on behalf of the Portfolio, with Pilgrim Baxter &
         Associates, Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                       [  ]               [  ]


2.       To approve the Investment Sub-Advisory Agreement for the Portfolio with
         Pilgrim Baxter Value Investors, Inc.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                       [  ]               [  ]


3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Issuer Diversification                       [   ]      [   ]      [   ]

    (b)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Borrowing Money and Issuing Senior           [   ]      [   ]      [   ]
    Securities

    (c)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Underwriting Securities                      [   ]      [   ]      [   ]

    (d)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Industry Concentration                       [   ]      [   ]      [   ]

    (e)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Real Estate            [   ]      [   ]      [   ]

    (f)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Commodities            [   ]      [   ]      [   ]

    (g)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Loans                                 [   ]      [   ]      [   ]

    (h)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing all Assets in an Open End          [   ]      [   ]      [   ]
    Fund

                                       3

<PAGE>

    (i)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Oil, Gas or Other Mineral       [   ]      [   ]      [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Companies for the Purpose       [   ]      [   ]      [   ]
    of Control

    (k)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Short Sales or Margin Purchases       [   ]      [   ]      [   ]

    (l)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Pledging Assets                              [   ]      [   ]      [   ]


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


                                       4


<PAGE>


PHL_A #1418933 v1 WORD97
                        PBHG Insurance Series Fund, Inc.
                   PBHG Technology & Communications Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


   THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>


This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of PBHG Technology & Communications Portfolio, with
    Pilgrim Baxter & Associates, Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


2.  THIS ITEM IS NOT APPLICABLE.




3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  THIS ITEM IS NOT APPLICABLE.

    (b)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Borrowing Money and Issuing Senior           [   ]      [   ]      [   ]
    Securities

    (c)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Underwriting Securities                      [   ]      [   ]      [   ]

    (d)  THIS ITEM IS NOT APPLICABLE.

    (e)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Real Estate            [   ]      [   ]      [   ]

    (f)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Commodities            [   ]      [   ]      [   ]

    (g)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Loans                                 [   ]      [   ]      [   ]

    (h)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing all Assets in an Open End          [   ]      [   ]      [   ]
    Fund

                                       3

<PAGE>

    (i)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Oil, Gas or Other Mineral       [   ]      [   ]      [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Companies for the Purpose       [   ]      [   ]      [   ]
    of Control

    (k)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Short Sales or Margin Purchases       [   ]      [   ]      [   ]

    (l)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Pledging Assets                              [   ]      [   ]      [   ]



4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


                                       4


<PAGE>


                        PBHG Insurance Series Fund, Inc.
                            PBHG Select 20 Portfolio

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

         SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001

The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:30
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.

                           Note: Please sign exactly as your name appears on
                           this proxy. If joint owners, both should sign this
                           proxy. An authorized individual should sign corporate
                           or partnership proxies in full corporate or
                           partnership name. When signing as attorney, executor,
                           administrator, trustee, guardian, or corporate
                           officer, please give your full title.

                           DATE_____________________________
                               _____________________________
                               _____________________________

                           Signature(s) and Title(s), If Applicable


            THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
              INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.

PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.

<PAGE>

This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.

1.  To approve the Investment Advisory Agreement between PBHG Insurance Series
    Fund, Inc., on behalf of PBHG Select 20 Portfolio, with Pilgrim Baxter &
    Associates, Ltd.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                       [  ]              [  ]


2.  THIS ITEM IS NOT APPLICABLE.




3.  To approve the proposed changes to the Fund's fundamental investment
    restrictions.

    (a)  THIS ITEM IS NOT APPLICABLE.

    (b)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Borrowing Money and Issuing Senior           [   ]      [   ]      [   ]
    Securities

    (c)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Underwriting Securities                      [   ]      [   ]      [   ]

    (d)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Industry Concentration                       [   ]      [   ]      [   ]

    (e)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Real Estate            [   ]      [   ]      [   ]

    (f)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Purchasing or Selling Commodities            [   ]      [   ]      [   ]

    (g)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Loans                                 [   ]      [   ]      [   ]

    (h)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing all Assets in an Open End          [   ]      [   ]      [   ]
    Fund

                                       3

<PAGE>


    (i)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Oil, Gas or Other Mineral       [   ]      [   ]      [   ]
    Exploration or Development Programs

    (j)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Investing in Companies for the Purpose       [   ]      [   ]      [   ]
    of Control

    (k)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Making Short Sales or Margin Purchases       [   ]      [   ]      [   ]

    (l)  Change to Fundamental Restriction           FOR      AGAINST    ABSTAIN
    on Pledging Assets                              [   ]      [   ]      [   ]


4.  To approve the Agreement and Plan of Reorganization and subsequent
    dissolution of the Maryland corporation.

                  FOR                       AGAINST           ABSTAIN
                  [  ]                        [  ]              [  ]


                                       4


<PAGE>




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