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:
|X | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)) | | Definitive Proxy Statement | | Definitive Additional
Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PBHG Insurance Series Fund, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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| | 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.
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(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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DECEMBER 6, 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, a United Kingdom-based financial services group ("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 Pilgrim
Baxter Value Investors Inc., the sub-advisor 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-advisor.
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 your variable annuity or variable insurance policy is provided by more
than one of the Funds, you will receive an authorization card for each Fund.
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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 a termination of all advisory agreements
between that investment company and the adviser and requires the
shareholders to approve a new advisory agreements. Therefore, the advisory
agreement between the Company and Pilgrim Baxter terminated as a result of
UAM's Transaction with Old Mutual. In addition, all sub-advisory agreements
for those Funds having a sub-advisor 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
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 or the Company's information agent at 1-800-433-0051.
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YOUR VOTE IS IMPORTANT. THANK YOU FOR PROMPTLY RECORDING YOUR INSTRUCTIONS.
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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 219534
Kansas City, MO 64121-9534
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.
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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.
John M. Zerr
Secretary
Kansas City, MO
November __, 2000
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PBHG Insurance Series Fund, Inc.
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-433-0051
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 6, 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
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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
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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
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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
Number Proposal Description Fund Shareholders
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<S> <C> <C>
1* To approve a new investment advisory agreement with ALL FUNDS
Pilgrim Baxter & Associates , Ltd. ("Pilgrim Baxter")
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2* To approve a new investment sub-advisory agreement PBHG SELECT VALUE PORTFOLIO, PBHG
with Pilgrim Baxter Value Investors, Inc.
("Value Investors")
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3 To adopt changes to the fundamental investment SEE 3A THROUGH 3L BELOW
restrictions for each Fund as listed below:
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3A* ISSUER DIVERSIFICATION ALL FUNDS EXCEPT PBHG SELECT 20
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3B* BORROWING MONEY AND ISSUING SENIOR SECURITIES ALL FUNDS
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3C* UNDERWRITING SECURITIES ALL FUNDS
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</TABLE>
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<TABLE>
<CAPTION>
Proposal
Number Proposal Description Fund Shareholders
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<C> <S> <C>
3D* INDUSTRY CONCENTRATION ALL FUNDS EXCEPT PBHG TECHNOLOGY &
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3E* PURCHASING OR SELLING REAL ESTATE ALL FUNDS
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3F* PURCHASING OR SELLING COMMODITIES ALL FUNDS
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3G* MAKING LOANS ALL FUNDS
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3H* INVESTING ALL ASSETS IN AN OPEN-END FUND ALL FUNDS
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3I* INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR ALL FUNDS
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3J* INVESTING IN COMPANIES FOR THE PURPOSE OF CONTROL ALL FUNDS
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3K* MAKING SHORT SALES OR MARGIN PURCHASES ALL FUNDS
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3L* PLEDGING ASSETS ALL FUNDS
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4** TO REORGANIZE AS A DELAWARE BUSINESS TRUST ALL FUNDS
</TABLE>
* 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.
PROPOSAL 1: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
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INTRODUCTION
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ASSIGNMENT OF FORMER ADVISORY AGREEMENTS AND APPROVAL OF INTERIM
ADVISORY ARRANGEMENTS
On September 26, 2000, Old Mutual plc, an English public limited
company, ("Old Mutual"), acquired the outstanding shares of United Asset
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Management Corporation ("UAM"), the parent company of Pilgrim Baxter, Value
Investors and Murray Johnstone, through a cash tender offer and subsequent
merger (the "Transaction").
Old Mutual is a United Kingdom-based financial services group with a
substantial life assurance business in South Africa and other southern African
countries and an integrated, international portfolio of activities in asset
management, banking and general insurance. The acquisition of UAM increased Old
Mutual's assets under management to approximately $275 billion. Old Mutual's
principal offices are located at 3rd Floor, Lansdowne House, 57 Berkley 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 Interim Investment Sub-Advisory
Agreement among the PBHG Value Funds, Pilgrim Baxter and Value Investors.
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 new investment advisory and
sub-advisory agreements for a period of up to 150 days from the termination of
the Former Advisory Agreements. If shareholders approve the 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
Agreement 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, and none of these
Agreements have been voted upon by shareholders.
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NEW ADVISORY ARRANGEMENTS
The Board has also approved, subject to shareholder approvals, longer
term investment advisory agreements under 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 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
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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 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 Former Investment
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Advisory Agreement for the fiscal year ended March 31, 2000 (and any fee
waivers) from each of the Funds is attached at SCHEDULE 1.
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 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.
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, and therefore the provision has been deleted
from the New Investment Advisory Agreement.
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LIMITATIONS ON LIABILITY
Both Advisory Agreements provide certain limitations on Pilgrim
Baxter's liability, but also provided 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 over $25 billion in assets. In addition to advising the Funds,
Pilgrim Baxter provides advisory services to PBHG Insurance Series Fund, 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 PBHG Value Investors, Inc., 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,
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2000, both Old Mutual and UAM announced that they had entered into an 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 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, Independent Directors determined that additional
information from Old Mutual was necessary to adequately reach a conclusion on
the advisory and sub-advisory agreements. Special Counsel requested supplemental
information, and it was considered by the Independent Directors at their meeting
on September 22, 2000.
The Board met in person on September 22, 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
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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 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 Kevin Carter, 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; (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 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
10
<PAGE>
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 PBHG 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.
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<PAGE>
INVESTMENT SUB-ADVISORY FEES
For the services provided and expenses incurred pursuant to the New
Investment Sub-Advisory Agreement for each 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 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 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' 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.
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<PAGE>
INFORMATION ABOUT VALUE INVESTORS
Value Investors is a wholly-owned subsidiary of Pilgrim Baxter. Value
Investors currently has discretionary management authority with respect to over
$950 million 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.
13
<PAGE>
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.
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 the National Securities Markets Improvement
Act of 1996 ("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
14
<PAGE>
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 Fund 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.
15
<PAGE>
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 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.
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<PAGE>
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for each 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.
3C: UNDERWRITING SECURITIES (all Funds)
----------------------
We want to restate each Fund's policy on underwriting securities. The
proposed policy will expand 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.
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 rules, regulations, interpretations, exemptions, orders or similar
relief thereunder) 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
17
<PAGE>
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 each 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 will 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. 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
18
<PAGE>
policy will allow each Fund to respond to the rapid and continuing development
of derivative products. 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.
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 each 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
19
<PAGE>
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.
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, each Fund will have the
ability to invest all of its assets in another open-end investment company.
20
<PAGE>
Because the Funds do not currently intend to do so, the following
non-fundamental investment restriction will become effective for each 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.
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<PAGE>
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, and
therefore, each Fund should be provided with the maximum flexibility to pursue
its investment objectives.
3L: PLEDGING ASSETS (all Funds)
---------------
We want to eliminate each Fund's policy that limits its ability to
pledge its assets. The current policy generally prohibits the Fund from pledging
more than 10% of its total assets, and only permits pledges of assets to secure
permitted borrowings, and as may be necessary in connection with the Fund's use
of options and futures contracts. 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.
22
<PAGE>
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH SUB-PROPOSAL OF PROPOSAL 3.
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 differs 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.
23
<PAGE>
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"
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
24
<PAGE>
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, Inc.,
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, and a multiple class plan pursuant to Rule
18f-3 of the 1940 Act which will be substantially identical to the
multiple class plan that exists for 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.
25
<PAGE>
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 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
26
<PAGE>
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 Securities and Exchange Commission (the
"SEC") under the 1940 Act. As permitted by SEC rules, the Trust will adopt as
its own 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
27
<PAGE>
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 in the future. Dollar-based
voting rights would also apply to any 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
28
<PAGE>
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
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.
29
<PAGE>
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 219534, Kansas City, Missouri 64121-9534.
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.
Additional Information
----------------------
PBHG Fund Services is the Company's administrator and until September
1, 2000 was the Company's shareholder servicing agent. PBHG Fund Services also
serves as administrator and shareholder servicing 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 for
Pilgrim Baxter and Value Investors
30
<PAGE>
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.
31
<PAGE>
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.
BENEFICIAL OWNERSHIP OF SHARES
SCHEDULE 7 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 8 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 800-433-0051 OR WRITE TO THE COMPANY AT PO BOX 219081, KANSAS
CITY, MO 64121.
CERTAIN TRANSACTIONS
Since the beginning of the most recently completed fiscal year, Harold
J. Baxter, Chairman of the Board of Directors of the Company had warrants and
options to purchase 1,246,274 shares of common stock of UAM. In connection with
Old Mutuals' acquisition of UAM, Old Mutual purchased or redeemed from all
holders shares of common stock of UAM, underlying stock options and warrants for
$25 a share.
In connection with the Transaction and in order to help ensure the
continued services of Mr. Baxter with the Advisor in the future, Old Mutual and
Mr. Baxter have entered into a new long-term employment contract and have
restructured the existing revenue sharing agreement among UAM, the Advisor, Mr.
Baxter and another individual pursuant to which the parties shared in the
revenues of the Advisor. In exchange, Mr. Baxter has received consideration in
the form of a combination of phantom equity (contractual rights which provide
the economic equivalent of stock ownership) in the Advisor, a cash payment and a
reduced interest in the revenues of the Advisor pursuant to a restructured
revenue sharing arrangement. Old Mutual has the option in the future to
terminate Mr. Baxter's interest in the revenues of the Advisor pursuant to the
restructured revenue sharing arrangement in exchange for an additional cash
payment.
32
<PAGE>
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.
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.
33
PBHG Insurance Series Fund, Inc.
PBHG Growth II Portfolio
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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 Growth II 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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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 Large Cap Growth 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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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 Small Cap Value Portfolio, with Pilgrim Baxter
& Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Small Cap
Value 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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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 Mid-Cap Value Portfolio, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Mid-Cap Value
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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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 Value Portfolio, with
Pilgrim Baxter & Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Select
Value 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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
<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
P.O. Box 219534
Kansas City, MO 64121-9534
1-800-xxx-xxxx
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. [YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, BY FACSIMILE OR IN
PERSON]. A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE, IF YOU CHOOSE TO VOTE BY MAIL.
<PAGE>
To vote by Telephone
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Call 1-800-xxx-xxxx
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
To vote by Internet
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to web site WWW.XXXXX.COM
3) Enter the 12-digit Control Number set forth on the Proxy Card and follow the
simple instructions.
2
<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>
