As filed with the Securities and Exchange Commission on April 17, 1998
Registration Nos. 333-44193
811-08605
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 2 [X]
-----
Post-Effective Amendment No. [ ]
-----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 2
---
(Check appropriate box or boxes.)
PBHG ADVISOR FUNDS, INC.
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(Exact name of registrant as specified in charter)
825 Duportail Road
Wayne, PA 19087
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(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, Including Area Code (610) 647-4100
--------------
Harold J. Baxter
825 Duportail Road
Wayne, Pennsylvania 19087
--------------------------------------
(Name and Address of Agent For Service)
Copies to:
William H. Rheiner, Esq. John M. Zerr, Esq.
Ballard Spahr Andrews & Ingersoll, LLP Pilgrim Baxter & Associates, Ltd.
1735 Market Street, 51st Floor 825 Duportail Road
Philadelphia, PA 19103-7599 Wayne, PA 19087
(215) 864-8600 (610) 578-1206
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after
effective date of this Filing.
It is proposed that this filing will become effective (check appropriate box)
- --- immediately upon filing pursuant to paragraph (b)
- --- on (date) pursuant to paragraph (b)
- --- 60 days after filing pursuant to paragraph (a)(1)
- --- on (date) pursuant to paragraph (a)(1)
- --- 75 days after filing pursuant to paragraph (a)(2)
- --- on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
- --- this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being registered: Common Stock
---------------------------
This Registration Statement shall hereafter become effective in
accordance with the provisions of Section 8(a) of the Securities Act of 1933.
<PAGE>
PBHG ADVISOR FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
PART A
<TABLE>
<CAPTION>
Item No. Location in Prospectus
- -------- ----------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Performance Advertising
4. General Description of Registrant Investment Objectives and Policies;
General Investment Policies and
Strategies; Risk Factors; Investment
Limitations; General Information--The
Company; Appendix-Glossary of
Permitted Investments
5. Management of the Fund General Information--Directors of the
Company; General Information--The
Advisor; General Information--Value
Investors; General Information--
Analytic; General Information--
Wellington Management; General
Information--The Administrator and the
Sub-Administrator; General
Information--The Transfer Agent;
General Information--Shareholder
Servicing Agents; General Information--
The Distributor
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Securities Taxes; General Information--Voting
Rights; General Information--
Dividends and Distributions
7. Purchase of Securities Being Offered How to Purchase Fund Shares;
Shareholder Services; Determination of
Net Asset Value
8. Redemption or Repurchase How to Redeem Fund Shares;
Shareholder Services; Determination of
Net Asset Value
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
PART B
<TABLE>
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Company
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Limitations; Description of
Shares; Appendix - Ratings of Securities
14. Management of the Fund Directors and Officers of the Company;
The Administrator and Sub-
Administrator
15. Control Persons and Principal Holders 5% and 25% Shareholders; Directors
of Securities and Officers of the Company
16. Investment Advisory and Other The Adviser; The Sub-Advisers; The
Services Administrator and Sub-Administrator;
The Distributor
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Computation of Yield; Calculation of
Total Return
23. Financial Statements Financial Statements
</TABLE>
2
<PAGE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
PBHG ADVISOR FUNDS, INC.
PROSPECTUS DATED APRIL 20, 1998
PBHG Advisor Funds, Inc. (the "Company") is a mutual fund that offers a
convenient and economical means of investing in professionally managed
portfolios of securities. This Prospectus offers three classes of shares of each
of the following portfolios (each a "PBHG Advisor Fund" or "Fund," and together,
the "PBHG Advisor Funds" or "Funds"):
PBHG ADVISOR VALUE FUNDS PBHG ADVISOR GROWTH FUNDS
o PBHG ADVISOR CORE VALUE FUND o PBHG ADVISOR BLUE CHIP GROWTH
o PBHG ADVISOR VALUE OPPORTUNITIES FUND
FUND o PBHG ADVISOR GROWTH OPPORTUNITIES
o PBHG ADVISOR NEW CONTRARIAN FUND FUND
o PBHG ADVISOR REIT FUND o PBHG ADVISOR ENHANCED EQUITY FUND
o PBHG ADVISOR TREND FUND
PBHG ADVISOR AGGRESSIVE PBHG ADVISOR FIXED INCOME
GROWTH FUNDS FUNDS
o PBHG ADVISOR LARGE CAP o PBHG ADVISOR MASTER FIXED INCOME
CONCENTRATED FUND FUND
o PBHG ADVISOR GROWTH II FUND o PBHG ADVISOR HIGH YIELD FUND
o PBHG ADVISOR NEW OPPORTUNITIES o PBHG ADVISOR SHORT-TERM
FUND GOVERNMENT FUND
o PBHG ADVISOR GLOBAL TECHNOLOGY & o PBHG ADVISOR CASH RESERVES FUND
COMMUNICATIONS FUND
This Prospectus sets forth the information about the Company, the PBHG
Advisor Funds and the classes of shares that a prospective investor should know
before investing. Investors are advised to read this Prospectus and retain it
for future reference. A Statement of Additional Information dated April 20,
1998, which contains important information has been filed with the Securities
and Exchange Commission and is available upon request and without charge by
calling 1-888-800-2685. The Securities and Exchange Commission maintains a Web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding the Company
and other registrants that file electronically with the Securities and Exchange
Commission. The Statement of Additional Information is incorporated by reference
into this Prospectus.
AN INVESTMENT IN THE PBHG ADVISOR CASH RESERVES FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY MONEY
MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Mutual fund shares are not deposits or obligations of, or guaranteed by, any
depository institution. Shares are not insured by the FDIC, the Federal Reserve
Board, or any other agency and are subject to investment risk, including the
possible loss of principal.
2
<PAGE>
TABLE OF CONTENTS
Page
----
SUMMARY ................................................................. 3
FINANCIAL HIGHLIGHTS...................................................... 19
THE COMPANY AND THE FUNDS................................................. 19
INVESTMENT OBJECTIVES AND POLICIES........................................ 19
GENERAL INVESTMENT POLICIES AND STRATEGIES................................ 33
RISK FACTORS.............................................................. 38
INVESTMENT LIMITATIONS.................................................... 46
HOW TO PURCHASE FUND SHARES............................................... 48
SHAREHOLDER SERVICES...................................................... 57
HOW TO REDEEM FUND SHARES................................................. 62
DETERMINATION OF NET ASSET VALUE.......................................... 69
PERFORMANCE ADVERTISING................................................... 70
RELATED PERFORMANCE....................................................... 71
TAXES..................................................................... 74
GENERAL INFORMATION....................................................... 75
SUMMARY
The Company is an open-end management investment company which provides a
convenient way to invest in professionally managed portfolios of securities.
This Prospectus provides basic information about the 16 separate series of the
Company: PBHG Advisor Core Value Fund, PBHG Advisor Value Opportunities Fund,
PBHG Advisor New Contrarian Fund, PBHG Advisor REIT Fund, PBHG Advisor Blue Chip
Growth Fund, PBHG Advisor Growth Opportunities Fund, PBHG Advisor Enhanced
Equity Fund, PBHG Advisor Trend Fund, PBHG Advisor Large Cap Concentrated Fund,
PBHG Advisor Growth II Fund, PBHG Advisor New Opportunities Fund, PBHG Advisor
Global Technology & Communications Fund, PBHG Advisor Master Fixed Income Fund,
PBHG Advisor High Yield Fund, PBHG Advisor Short-Term Government Fund, and PBHG
Advisor Cash Reserves Fund. Each Fund has three classes of shares (Class A,
Class B and Class I) which are described below. Except for the PBHG Advisor New
Contrarian Fund, PBHG Advisor REIT Fund, and PBHG Advisor Large Cap Concentrated
Fund, which are classified as non-diversified investment companies, each PBHG
Advisor Fund is classified as a diversified investment company.
Who are the Adviser and the sub-advisers? Pilgrim Baxter & Associates, Ltd.
(the "Adviser") serves as the investment adviser to each PBHG Advisor Fund.
Pilgrim Baxter Value Investors, Inc. ("Value Investors") serves as the
sub-adviser to the PBHG Advisor Core Value Fund, PBHG Advisor Value
Opportunities Fund, PBHG Advisor New Contrarian Fund, and PBHG Advisor REIT
Fund. Wellington Management Company, LLP ("Wellington
3
<PAGE>
Management") serves as the sub-adviser to the PBHG Advisor Cash Reserves Fund.
Analytic o TSA Global Asset Management, Inc. ("Analytic") serves as sub-adviser
to the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income Fund,
and PBHG Advisor Short-Term Government Fund. See "The Adviser," "Value
Investors," "Analytic," and "Wellington Management" under the caption "General
Information."
Who are the Administrator and Sub-Administrator? PBHG Fund Services (the
"Administrator"), a wholly owned subsidiary of the Adviser, serves as the
administrator for the Company, and SEI Fund Resources (the "Sub-Administrator")
serves as sub-administrator for the Company. See "General Information - The
Administrator and Sub-Administrator."
Who are the Transfer Agent and shareholder servicing agents? DST Systems,
Inc. serves as the transfer agent and dividend disbursing agent (the "Transfer
Agent") of the Company. The Administrator serves as shareholder servicing agent
of the Company. UAM Shareholder Service Center, Inc. ("UAM SSC"), an affiliate
of the Adviser, provides services to the Company pursuant to a sub-shareholder
servicing agreement between the Administrator and UAM SSC. The Company may also
pay amounts to certain third parties that provide sub-transfer agency and other
administrative services relating to the Company to persons who beneficially own
interests in the Company. See "General Information - The Transfer Agent" and
"General Information - Shareholder Servicing Agents."
Who is the Distributor? PBHG Fund Distributors (the "Distributor"), a
wholly owned subsidiary of the Adviser, provides the Company with distribution
services. See "General Information - The Distributor."
How Can I Purchase Shares? Purchases are made through your investment
dealer or selected financial institutions. Purchases may be made on any day on
which the New York Stock Exchange ("NYSE") is open for business ("Business
Day"). Shares of the PBHG Advisor Cash Reserves Fund cannot be purchased by
Federal Reserve wire on federal holidays restricting wire transfers. A purchase
order will be effective as of the Business Day received by the PBHG Advisor
Funds if the PBHG Advisor Funds receive sufficient information to execute the
order and receive payment by check or readily available funds prior to 2:00 p.m.
Eastern time for the PBHG Advisor Cash Reserves Fund and 4:00 p.m. Eastern time
for each of the other PBHG Advisor Funds. This Prospectus offers three classes
of shares of each PBHG Advisor Fund. Class A and Class B shares bear sales
charges in different forms and amounts and each class has different levels of
expenses.
Class A Shares. If you purchase Class A shares you will pay a sales charge
at the time of purchase (except that Class A shares of the PBHG Advisor Cash
Reserves Fund are sold without an initial sales charge). As a result, Class A
shares are not subject to any charges when they are redeemed (except for sales
at net asset value in excess of $1 million which are not subject to a sales
charge at the time of purchase but are subject to a contingent deferred sales
4
<PAGE>
charge). Certain purchases of Class A shares qualify for a sales charge waiver
or reduction. Class A shares bear a 12b-1 distribution plan fee at the annual
rate of 0.25% of each PBHG Advisor Fund's average net assets attributable to
Class A shares. Class A shares of the PBHG Advisor Cash Reserves Fund are sold
without an initial sales charge and are not subject to a contingent deferred
sales charge. A contingent deferred sales charge may be imposed upon redemptions
of Class A shares of the PBHG Advisor Cash Reserves Fund when such shares were
purchased in an exchange, and on redemptions of Class A shares for certain large
purchases. See "How to Purchase Fund Shares - Class A Shares" and "How to Redeem
Fund Shares -- Contingent Deferred Sales Charge Program for Large Purchases."
Class B Shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge of up to 5% if redeemed
within six years. Class B shares bear a 12b-1 distribution plan fee at the
annual rate of 1.00% of each PBHG Advisor Fund's average net assets attributable
to Class B shares. The Class B 12b-1 distribution plan fee is greater than the
Class A 12b-1 distribution plan fee. Class B shares will automatically convert
into Class A shares, based on relative net asset value, eight years after the
end of the calendar month in which the order to purchase such Class B shares was
accepted. Class B shares provide the benefit of putting all invested funds to
work from the time the investment is made, but (until conversion) have a higher
expense ratio and pay lower dividends than Class A shares due to the higher
12b-1 distribution plan fee. Class B shares of the PBHG Advisor Cash Reserves
Fund can be purchased only in an exchange and are not available for direct
purchase. See "Class B Shares" under the caption "How to Purchase Fund Shares."
Class I Shares. Class I shares are available only to certain institutional
investors such as defined benefit plans and defined contribution plans,
management account programs, and trusts or custodial accounts maintained at
banks or trust companies, in each case where the institution maintains
individual shareholder records and does not receive any payment from the Company
or the Distributor for administrative, record keeping or transfer agency related
services performed by such institution and where the financial institution has
entered into a participation agreement with the Distributor. Class I shares are
sold without an initial sales charge, are not subject to a contingent deferred
sales charge, and have not adopted a 12b-1 distribution plan. Thus, the entire
purchase price of Class I shares is immediately invested in Class I shares. See
"Class I Shares" under the caption "How to Purchase Fund Shares."
Which Arrangement is Best for You? The decision as to which class of shares
provides a more suitable investment for you depends on a number of factors,
including the amount and intended length of the investment. Investors making
investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. Orders for Class B shares for $250,000 or more will be treated
as orders for Class A shares or will be declined. Class I shares are only
available to certain institutional investors who have entered into a
participation agreement with the Distributor. For more information about these
sales arrangements, consult your investment dealer. Sales
5
<PAGE>
personnel may receive different compensation depending on which class of shares
they sell. Shares may only be exchanged for shares of the same class of another
PBHG Advisor Fund offered for sale by this Prospectus. See "Shareholder Services
- - Exchange Privileges."
Is There a Minimum Investment? Class A and Class B shares of each PBHG
Advisor Fund have a minimum initial investment of $2,500 for regular accounts
and $2,000 for Traditional and Roth IRAs. Class A and Class B shares of each
Fund, however, have a minimum initial investment of only $500 for both regular
accounts and IRAs provided a Systematic Investment Plan is established by the
investor with a minimum investment of $25 per month at the same time that the
initial investment is made. The minimum initial investment for Education IRAs is
$500. See "Shareholder Services - Systematic Investment Plan." The minimum
initial investment for Class I shares for all PBHG Advisor Funds is $1 million
in the aggregate.
How Do I Redeem Shares? Redemptions may be made on any Business Day.
Redemption orders placed prior to 2:00 p.m. Eastern time for the PBHG Advisor
Cash Reserves Fund and 4:00 p.m. Eastern time for each of the other PBHG Advisor
Funds on any Business Day will be effective that day. The redemption price for
shares is the net asset value per share determined as of the end of the day the
order is effective less any applicable contingent deferred sales charge. See
"How to Redeem Fund Shares - Class B Shares" and "How to Redeem Fund Shares -
Contingent Deferred Sales Charge Program for Large Purchases."
EXPENSE SUMMARY
Shareholder Transaction Expenses (Class A Shares)
<TABLE>
<CAPTION>
=====================================================================================================================
Maximum
Maximum Sales Load Maximum Redemption
Sales Load Imposed on Deferred Sales Fees (as a
Imposed on Reinvested Loads (as a percentage of
Purchases (as Dividends (as percentage of amount
a percentage a percentage original redeemed, if
of offering of offering purchase applicable) Exchange
price) price) price)(1) (2) Fees
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Advisor Core 5.75% None None None None
Value Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value 5.75% None None None None
Opportunities Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor New 5.75% None None None None
Contrarian Fund
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
PBHG Advisor REIT 5.75% None None None None
Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue 5.75% None None None None
Chip Growth Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth 5.75% None None None None
Opportunities Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor 5.75% None None None None
Enhanced Equity Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend 5.75% None None None None
Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large 5.75% None None None None
Cap Concentrated Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth 5.75% None None None None
II Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor New 5.75% None None None None
Opportunities Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global 5.75% None None None None
Technology &
Communications Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master 4.75% None None None None
Fixed Income Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor High 4.75% None None None None
Yield Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short- 1.50% None None None None
Term Government Fund
- ---------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash None None None None None
Reserves Fund
=====================================================================================================================
</TABLE>
(1) A contingent deferred sales charge of up to 1% applies to purchases of $1
million or more of Class A Shares that are redeemed within 12 months of the
date of purchase. See "How to Redeem Fund Shares - Contingent Deferred
Sales Charge Program for Large Purchases."
(2) A wire redemption charge, currently $10.00, is deducted from the amount of
a Federal Reserve wire redemption payment made at the request of a
shareholder. A charge of $12.00 may be imposed annually on accounts that
fall below the minimum account size as a result of shareholder redemptions.
See "How to Redeem Fund Shares -- Minimum Account Size" for the minimum
account size of each PBHG Advisor Fund.
7
<PAGE>
Annual Operating Expenses (Class A Shares)
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
===================================================================================================================
Other Total Operating
Advisory Expenses (net of Expenses (net of fee
Fees (net of expense waivers and expense
fee waivers, 12b-1 reimbursements, reimbursements, if
if any)(1) Fees(2) if any) (1)(3) any) (1)(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.00% 0.25% 1.16% 1.41%
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value 0.40% 0.25% 1.01% 1.66%
Opportunities Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian 0.00% 0.25% 1.16% 1.41%
Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund 0.00% 0.25% 1.31% 1.56%
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth 0.00% 0.25% 1.16% 1.41%
Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth 0.00% 0.25% 1.21% 1.46%
Opportunities Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity 0.00% 0.25% 1.16% 1.41%
Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 0.00% 0.25% 1.21% 1.46%
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap 0.40% 0.25% 1.01% 1.66%
Concentrated Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% 0.25% 1.21% 1.66%
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities 0.10% 0.25% 1.21% 1.56%
Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology 0.20% 0.25% 1.21% 1.66%
& Communications Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed 0.00% 0.25% 1.01% 1.26%
Income Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% 0.25% 1.06% 1.31%
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term 0.00% 0.25% 0.86% 1.11%
Government Fund
- -------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves 0.00% 0.25% 0.86% 1.11%
Fund
===================================================================================================================
</TABLE>
8
<PAGE>
- ------------------
(1) Because the PBHG Advisor Funds had not yet commenced operations prior to
the date of this Prospectus, "Other Expenses" are based on estimated
amounts, net of any expense reimbursement. Absent any fee waiver or expense
reimbursement arrangement, "Advisory Fees," "12b-1 Fees," "Other Expenses"
and "Total Operating Expenses," respectively, as a percentage of average
net assets of each Fund are as follows:
<TABLE>
<CAPTION>
Total
Advisory 12b-1 Other Operating
Fees Fees Expenses Expenses
-------- ----- -------- ---------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.60% 0.25% 1.21% 2.06%
PBHG Advisor Value Opportunities Fund 0.85% 0.25% 1.02% 2.12%
PBHG Advisor New Contrarian Fund 0.60% 0.25% 1.21% 2.06%
PBHG Advisor REIT Fund 0.75% 0.25% 1.36% 2.36%
PBHG Advisor Blue Chip Growth Fund 0.60% 0.25% 1.27% 2.12%
PBHG Advisor Growth Opportunities Fund 0.65% 0.25% 1.21% 2.11%
PBHG Advisor Enhanced Equity Fund 0.60% 0.25% 1.27% 2.12%
PBHG Advisor Trend Fund 0.65% 0.25% 1.27% 2.17%
PBHG Advisor Large Cap Concentrated Fund 0.85% 0.25% 1.02% 2.12%
PBHG Advisor Growth II Fund 0.85% 0.25% 1.21% 2.31%
PBHG Advisor New Opportunities Fund 0.75% 0.25% 1.21% 2.21%
PBHG Advisor Global Technology &
Communications Fund 0.85% 0.25% 1.21% 2.31%
PBHG Advisor Master Fixed Income Fund 0.45% 0.25% 1.82% 2.52%
PBHG Advisor High Yield Fund 0.50% 0.25% 1.21% 1.96%
PBHG Advisor Short-Term Government Fund 0.30% 0.25% 1.82% 2.37%
PBHG Advisor Cash Reserves Fund 0.30% 0.25% 1.52% 2.07%
</TABLE>
(2) As a result of the 12b-1 fees, long-term shareholders of Class A shares may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. The
Company estimates that the maximum permissible front-end sales charge would
not be exceeded for a substantial number of years.
(3) The Adviser has agreed to waive or limit its Advisory Fees or assume Other
Expenses in an amount that operates to limit the aggregate annual total of
certain operating expenses of each Fund as follows: 0.82% of the PBHG
Advisor Core Value Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor
Blue Chip Growth Fund, and PBHG Advisor Enhanced Equity Fund; 1.07% of the
PBHG Advisor Value Opportunities Fund, PBHG Advisor Large Cap Concentrated
Fund, PBHG Advisor Growth II Fund, and PBHG Advisor Global Technology &
Communications Fund; 0.97% of the PBHG Advisor REIT Fund and PBHG Advisor
New Opportunities Fund; 0.87% of the PBHG Advisor Growth Opportunities Fund
and PBHG Advisor Trend Fund; 0.67% of the PBHG Advisor Master Fixed Income
Fund; 0.72% of the PBHG Advisor High Yield Fund; and 0.52% of the PBHG
Advisor Short-Term Government Fund and PBHG Advisor Cash Reserves Fund. The
expenses subject to such limitation are those which are not specifically
allocated to a class of shares of a Fund under the Company's multiple class
plan (the "Rule 18f-3 Plan") including, but not limited to, investment
advisory fees of the Adviser, but excluding: (i) interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance
with generally accepted accounting principles; (ii) expenses specifically
allocated to a class of shares of a Fund under the Rule 18f- 3 Plan, such
as Rule 12b-1 expenses and transfer agency fees; and (iii) other
extraordinary expenses
9
<PAGE>
not incurred in the ordinary course of a Fund's business. The fee
waiver/expense reimbursement arrangement for each Fund is expected to
remain in effect for the current fiscal year. Each waiver of Advisory Fees
or assumption of Other Expenses by the Adviser is subject to a possible
reimbursement by each Fund in future years if such reimbursement can be
made within the foregoing annual expense limits.
Example An investor in Class A shares of a PBHG Advisor Fund would pay
the following expenses on a $1,000 investment assuming (1) 5%
annual return, and (2) redemption at the end of each period.
================================================================================
1 Year 3 Years
- --------------------------------------------------------------------------------
PBHG Advisor Core Value Fund $71 $100
- --------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund $73 $107
- --------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund $71 $100
- --------------------------------------------------------------------------------
PBHG Advisor REIT Fund $72 $104
- --------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund $71 $100
- --------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund $72 $101
- --------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund $71 $100
- --------------------------------------------------------------------------------
PBHG Advisor Trend Fund $72 $101
- --------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund $73 $107
- --------------------------------------------------------------------------------
PBHG Advisor Growth II Fund $73 $107
- --------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund $72 $104
- --------------------------------------------------------------------------------
PBHG Advisor Global Technology & Communications Fund $73 $107
- --------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund $60 $ 86
- --------------------------------------------------------------------------------
PBHG Advisor High Yield Fund $60 $ 87
- --------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund $26 $ 50
- --------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund $11 $ 35
================================================================================
The example is based upon Total Operating Expenses for the PBHG Advisor Funds as
set forth in the tables above. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The purpose of this table is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class A shares of each PBHG Advisor Fund. See "General
Information - The Adviser" and "General Information - The Administrator and
Sub-Administrator."
10
<PAGE>
Shareholder Transaction Expenses (Class B Shares)
<TABLE>
<CAPTION>
=======================================================================================================================
Maximum
Maximum Sales Load Redemption
Sales Load Imposed on Maximum Fees (as a
Imposed on Reinvested Deferred Sales percentage of
Purchases (as Dividends (as Loads (as a amount
a percentage a percentage percentage of redeemed, if
of offering of offering original applicable) Exchange
price) price) purchase price) (1) Fees
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Advisor Core None None 5.00% None None
Value Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value None None 5.00% None None
Opportunities Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor New None None 5.00% None None
Contrarian Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT None None 5.00% None None
Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue None None 5.00% None None
Chip Growth Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth None None 5.00% None None
Opportunities Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor None None 5.00% None None
Enhanced Equity Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend None None 5.00% None None
Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large None None 5.00% None None
Cap Concentrated Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth None None 5.00% None None
II Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor New None None 5.00% None None
Opportunities Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global None None 5.00% None None
Technology &
Communications Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master None None 5.00% None None
Fixed Income Fund
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Advisor High None None 5.00% None None
Yield Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short- None None 5.00% None None
Term Government Fund
- -----------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash None None 5.00% None None
Reserves Fund
=======================================================================================================================
</TABLE>
(1) A wire redemption charge, currently $10.00, is deducted from the amount of
a Federal Reserve wire redemption payment made at the request of a
shareholder. A charge of $12.00 may be imposed annually on accounts that
fall below the minimum account size as a result of shareholder redemptions.
See "How to Redeem Fund Shares -- Minimum Account Size" for the minimum
account size of each PBHG Advisor Fund.
Annual Operating Expenses (Class B shares)
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
====================================================================================================================
Advisory Other Total Operating
Fees (net Expenses (net of Expenses (net of fee
of fee expense waivers and expense
waivers, if 12b-1 reimbursements, reimbursements, if
any) (1) Fees (2) if any) (1)(3) any)(1)(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.00% 1.00% 1.16% 2.16%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value 0.40% 1.00% 1.01% 2.41%
Opportunities Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian 0.00% 1.00% 1.16% 2.16%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund 0.00% 1.00% 1.31% 2.31%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth 0.00% 1.00% 1.16% 2.16%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth 0.00% 1.00% 1.21% 2.21%
Opportunities Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity 0.00% 1.00% 1.16% 2.16%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 0.00% 1.00% 1.21% 2.21%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap 0.40% 1.00% 1.01% 2.41%
Concentrated Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% 1.00% 1.21% 2.41%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor New Opportunities 0.10% 1.00% 1.21% 2.31%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology 0.20% 1.00% 1.21% 2.41%
& Communications Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed 0.00% 1.00% 1.01% 2.01%
Income Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% 1.00% 1.06% 2.06%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term 0.00% 1.00% 0.86% 1.86%
Government Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves 0.00% 1.00% 0.86% 1.86%
Fund
====================================================================================================================
</TABLE>
- ---------------
(1) Because the PBHG Advisor Funds had not yet commenced operations prior to
the date of this Prospectus, "Other Expenses" are based on estimated
amounts, net of any expense reimbursement. Absent any fee waiver or expense
reimbursement arrangement, "Advisory Fees," "Other Expenses" and "Total
Operating Expenses," respectively, as a percentage of average net assets of
each Fund are as follows:
<TABLE>
<CAPTION>
Total
Advisory 12b-1 Other Operating
Fees Fees Expenses Expenses
-------- ----- -------- ---------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.60% 1.00% 1.21% 2.81%
PBHG Advisor Value Opportunities Fund 0.85% 1.00% 1.02% 2.87%
PBHG Advisor New Contrarian Fund 0.60% 1.00% 1.21% 2.81%
PBHG Advisor REIT Fund 0.75% 1.00% 1.36% 3.11%
PBHG Advisor Blue Chip Growth Fund 0.60% 1.00% 1.27% 2.87%
PBHG Advisor Growth Opportunities Fund 0.65% 1.00% 1.21% 2.86%
PBHG Advisor Enhanced Equity Fund 0.60% 1.00% 1.27% 2.87%
PBHG Advisor Trend Fund 0.65% 1.00% 1.27% 2.92%
PBHG Advisor Large Cap Concentrated Fund 0.85% 1.00% 1.02% 2.87%
PBHG Advisor Growth II Fund 0.85% 1.00% 1.21% 3.06%
PBHG Advisor New Opportunities Fund 0.75% 1.00% 1.21% 2.96%
PBHG Advisor Global Technology &
Communications Fund 0.85% 1.00% 1.21% 3.06%
PBHG Advisor Master Fixed Income Fund 0.45% 1.00% 1.82% 3.27%
PBHG Advisor High Yield Fund 0.50% 1.00% 1.21% 2.71%
PBHG Advisor Short-Term Government Fund 0.30% 1.00% 1.82% 3.12%
PBHG Advisor Cash Reserves Fund 0.30% 1.00% 1.52% 2.82%
</TABLE>
- ----------
(2) As a result of the 12b-1 fees, long-term shareholders of Class B shares may
pay more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. The
Company estimates that the maximum permissible front-end sales charge would
not be exceeded for a substantial number of years.
13
<PAGE>
(3) The Adviser has agreed to waive or limit its Advisory Fees or assume Other
Expenses in an amount that operates to limit the aggregate annual total of
certain operating expenses of each Fund as follows: 0.82% of the PBHG
Advisor Core Value Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor
Blue Chip Growth Fund, and PBHG Advisor Enhanced Equity Fund; 1.07% of the
PBHG Advisor Value Opportunities Fund, PBHG Advisor Large Cap Concentrated
Fund, PBHG Advisor Growth II Fund, and PBHG Advisor Global Technology &
Communications Fund; 0.97% of the PBHG Advisor REIT Fund and PBHG Advisor
New Opportunities Fund; 0.87% of the PBHG Advisor Growth Opportunities Fund
and PBHG Advisor Trend Fund; 0.67% of the PBHG Advisor Master Fixed Income
Fund; 0.72% of the PBHG Advisor High Yield Fund; and 0.52% of the PBHG
Advisor Short-Term Government Fund and PBHG Advisor Cash Reserves Fund. The
expenses subject to such limitation are those which are not specifically
allocated to a class of shares of a Fund under the Company's multiple class
plan (the "Rule 18f-3 Plan") including, but not limited to, investment
advisory fees of the Adviser, but excluding: (i) interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance
with generally accepted accounting principles; (ii) expenses specifically
allocated to a class of shares of a Fund under the Rule 18f- 3 Plan, such
as Rule 12b-1 expenses and transfer agency fees; and (iii) other
extraordinary expenses not incurred in the ordinary course of a Fund's
business. The fee waiver/expense reimbursement arrangement for each Fund is
expected to remain in effect for the current fiscal year. Each waiver of
Advisory Fees or assumption of Other Expenses by the Adviser is subject to
a possible reimbursement by each Fund in future years if such reimbursement
can be made within the foregoing annual expense limits.
Example An investor in Class B shares of a PBHG Advisor Fund would pay
the following expenses on a $1,000 investment assuming (1) 5%
annual return, and (2) redemption at the end of each period.
================================================================================
1 Year 3 Years
- --------------------------------------------------------------------------------
PBHG Advisor Core Value Fund $73 $100
- --------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund $76 $108
- --------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund $73 $100
- --------------------------------------------------------------------------------
PBHG Advisor REIT Fund $75 $105
- --------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund $73 $100
- --------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund $74 $102
- --------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund $73 $100
- --------------------------------------------------------------------------------
PBHG Advisor Trend Fund $74 $102
- --------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund $76 $108
- --------------------------------------------------------------------------------
PBHG Advisor Growth II Fund $76 $108
- --------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund $75 $105
- --------------------------------------------------------------------------------
PBHG Advisor Global Technology & Communications Fund $76 $108
- --------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund $72 $ 96
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
PBHG Advisor High Yield Fund $72 $ 97
- --------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund $70 $ 91
- --------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund $70 $ 91
================================================================================
You would pay the following expenses on the same investment, assuming no
redemption:
================================================================================
1 Year 3 Years
- --------------------------------------------------------------------------------
PBHG Advisor Core Value Fund $22 $ 68
- --------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund $24 $ 75
- --------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund $22 $ 68
- --------------------------------------------------------------------------------
PBHG Advisor REIT Fund $23 $ 72
- --------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund $22 $ 68
- --------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund $22 $ 69
- --------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund $22 $ 68
- --------------------------------------------------------------------------------
PBHG Advisor Trend Fund $22 $ 69
- --------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund $24 $ 75
- --------------------------------------------------------------------------------
PBHG Advisor Growth II Fund $24 $ 75
- --------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund $23 $ 72
- --------------------------------------------------------------------------------
PBHG Advisor Global Technology & Communications Fund $24 $ 75
- --------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund $20 $ 63
- --------------------------------------------------------------------------------
PBHG Advisor High Yield Fund $21 $ 65
- --------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund $19 $ 58
- --------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund $19 $ 58
================================================================================
The example is based upon Total Operating Expenses for the PBHG Advisor Funds as
set forth in the tables above. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The purpose of this table is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class B shares of each PBHG Advisor Fund. The amount shown
in the table as "Other Expenses" is based on estimated amounts for the current
fiscal year. See "General Information - The Adviser" and "General Information -
The Administrator and Sub-Administrator."
15
<PAGE>
Annual Operating Expenses (Class I Shares)
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
====================================================================================================================
Total Operating
Other Expenses (net of
Advisory Expenses (net of fee waivers and
Fees (net of expense expense
fee waivers, 12b-1 reimbursements, reimbursements,
if any) (1) Fees if any) (1)(2) if any)(1)(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.00% None 0.95% 0.95%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value Opportunities 0.40% None 0.80% 1.20%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund 0.00% None 0.95% 0.95%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund 0.00% None 1.10% 1.10%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth 0.00% None 0.95% 0.95%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities 0.00% None 1.00% 1.00%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity 0.00% None 0.95% 0.95%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 0.00% None 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap 0.40% None 0.80% 1.20%
Concentrated Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% None 1.00% 1.20%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities 0.10% None 1.00% 1.10%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology & 0.20% None 1.00% 1.20%
Communications Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income 0.00% None 0.80% 0.80%
Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% None 0.85% 0.85%
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term 0.00% None 0.65% 0.65%
Government Fund
- --------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund 0.00% None 0.65% 0.65%
====================================================================================================================
</TABLE>
16
<PAGE>
- ---------------
(1) Because the PBHG Advisor Funds had not yet commenced operations prior to
the date of this Prospectus, "Other Expenses" are based on estimated
amounts, net of any expense reimbursement. Absent any fee waiver or expense
reimbursement arrangement, "Advisor Fees," "Other Expenses" and "Total
Operating Expenses," respectively, as a percentage of average net assets of
each Fund are as follows:
<TABLE>
<CAPTION>
Total
Advisory Other Operating
Fees Expenses Expenses
-------- -------- ---------
<S> <C> <C> <C>
PBHG Advisor Core Value Fund 0.60% 1.00% 1.60%
PBHG Advisor Value Opportunities Fund 0.85% 0.80% 1.65%
PBHG Advisor New Contrarian Fund 0.60% 1.00% 1.60%
PBHG Advisor REIT Fund 0.75% 1.15% 1.90%
PBHG Advisor Blue Chip Growth Fund 0.60% 1.06% 1.66%
PBHG Advisor Growth Opportunities Fund 0.65% 1.00% 1.65%
PBHG Advisor Enhanced Equity Fund 0.60% 1.06% 1.66%
PBHG Advisor Trend Fund 0.65% 1.06% 1.71%
PBHG Advisor Large Cap Concentrated Fund 0.85% 0.80% 1.65%
PBHG Advisor Growth II Fund 0.85% 1.00% 1.85%
PBHG Advisor New Opportunities Fund 0.75% 1.00% 1.75%
PBHG Advisor Global Technology &
Communications Fund 0.85% 1.00% 1.85%
PBHG Advisor Master Fixed Income Fund 0.45% 1.61% 2.06%
PBHG Advisor High Yield Fund 0.50% 1.00% 1.50%
PBHG Advisor Short-Term Government Fund 0.30% 1.61% 1.91%
PBHG Advisor Cash Reserves Fund 0.30% 1.30% 1.60%
</TABLE>
(2) A wire redemption charge, currently $10.00, is deducted from the amount of
a Federal Reserve wire redemption payment made at the request of a
shareholder.
(3) The Adviser has agreed to waive or limit its Advisory Fees or assume Other
Expenses in an amount that operates to limit the aggregate annual total of
certain operating expenses of each Fund as follows: 0.82% of the PBHG
Advisor Core Value Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor
Blue Chip Growth Fund, and PBHG Advisor Enhanced Equity Fund; 1.07% of the
PBHG Advisor Value Opportunities Fund, PBHG Advisor Large Cap Concentrated
Fund, PBHG Advisor Growth II Fund, and PBHG Advisor Global Technology &
Communications Fund; 0.97% of the PBHG Advisor REIT Fund and PBHG Advisor
New Opportunities Fund; 0.87% of the PBHG Advisor Growth Opportunities Fund
and PBHG Advisor Trend Fund; 0.67% of the PBHG Advisor Master Fixed Income
Fund; 0.72% of the PBHG Advisor High Yield Fund; and 0.52% of the PBHG
Advisor Short-Term Government Fund and PBHG Advisor Cash Reserves Fund. The
expenses subject to such limitation are those which are not specifically
allocated to a class of shares of a Fund under the Company's multiple class
plan (the "Rule 18f-3 Plan") including, but not limited to, investment
advisory fees of the Adviser, but excluding: (i) interest, taxes, brokerage
commissions, and other expenditures which are capitalized in accordance
with generally accepted accounting principles; (ii) expenses specifically
allocated to a class of shares of a Fund under the Rule 18f-3 Plan, such
as Rule 12b-1 expenses and transfer agency fees; and (iii) other
extraordinary expenses not incurred in the ordinary course of a Fund's
business. The fee waiver/expense reimbursement arrangement for each Fund is
expected to remain in effect for the current fiscal year. Each waiver of
Advisory Fees
17
<PAGE>
or assumption of Other Expenses by the Adviser is subject to a possible
reimbursement by each Fund in future years if such reimbursement can be
made within the foregoing annual expense limits.
Example An investor in Class I shares of a PBHG Advisor Fund would pay
the following expenses on a $1,000 investment assuming (1) 5%
annual return, and (2) redemption at the end of each period.
================================================================================
1 Year 3 Years
- --------------------------------------------------------------------------------
PBHG Advisor Core Value Fund $10 $30
- --------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund $12 $38
- --------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund $10 $30
- --------------------------------------------------------------------------------
PBHG Advisor REIT Fund $11 $35
- --------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund $10 $30
- --------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund $10 $32
- --------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund $10 $30
- --------------------------------------------------------------------------------
PBHG Advisor Trend Fund $10 $32
- --------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund $12 $38
- --------------------------------------------------------------------------------
PBHG Advisor Growth II Fund $12 $38
- --------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund $11 $35
- --------------------------------------------------------------------------------
PBHG Advisor Global Technology & Communications Fund $12 $38
- --------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund $ 8 $26
- --------------------------------------------------------------------------------
PBHG Advisor High Yield Fund $ 9 $27
- --------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund $ 7 $21
- --------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund $ 7 $21
================================================================================
The example is based upon Total Operating Expenses for the PBHG Advisor Funds as
set forth in the tables above. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The purpose of this table is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by investors in Class I shares of each PBHG Advisor Fund. The amount shown
in the table as "Other Expenses" is based on estimated amounts for the current
fiscal year. See "General Information - The Adviser" and "General Information -
The Administrator and Sub-Administrator."
18
<PAGE>
FINANCIAL HIGHLIGHTS
Because the PBHG Advisor Funds had not yet commenced operations prior to
the date of this Prospectus, there are no Financial Highlights to disclose.
THE COMPANY AND THE FUNDS
The Company is an open-end management investment company that offers by means of
this Prospectus shares in 16 separate series:
PBHG ADVISOR VALUE FUNDS PBHG ADVISOR GROWTH FUNDS
o PBHG ADVISOR CORE VALUE FUND o PBHG ADVISOR BLUE CHIP GROWTH
o PBHG ADVISOR VALUE OPPORTUNITIES FUND
FUND o PBHG ADVISOR GROWTH OPPORTUNITIES
o PBHG ADVISOR NEW CONTRARIAN FUND FUND
o PBHG ADVISOR REIT FUND o PBHG ADVISOR ENHANCED EQUITY FUND
o PBHG ADVISOR TREND FUND
PBHG ADVISOR AGGRESSIVE PBHG ADVISOR FIXED INCOME
GROWTH FUNDS FUNDS
o PBHG ADVISOR LARGE CAP o PBHG ADVISOR MASTER FIXED INCOME
CONCENTRATED FUND FUND
o PBHG ADVISOR GROWTH II FUND
o PBHG ADVISOR NEW OPPORTUNITIES o PBHG ADVISOR HIGH YIELD FUND
FUND o PBHG ADVISOR SHORT-TERM
o PBHG ADVISOR GLOBAL TECHNOLOGY & GOVERNMENT FUND
COMMUNICATIONS FUND o PBHG ADVISOR CASH RESERVES FUND
Each share of each PBHG Advisor Fund represents an undivided interest in that
Fund. Each Fund's shares are currently divided into three classes of shares
(Class A, Class B and Class I) having different sales related and shareholder
servicing expenses and such other preferences and special or relative rights and
privileges as the Board of Directors determines. Additional information
pertaining to the Company may be obtained in writing from the PBHG Advisor
Funds, P.O. Box 419229, Kansas City, Missouri 64141-6229, or by calling
1-888-800-2685.
INVESTMENT OBJECTIVES AND POLICIES
The following sections describe the investment objectives and primary investment
policies of each of the PBHG Advisor Funds. For additional information, see
"Portfolio Turnover," "Temporary Defensive Positions," and "Common Investment
Policies" under the caption
19
<PAGE>
"General Investment Policies and Strategies," "Risk Factors," and "Glossary of
Permitted Investments."
PBHG VALUE FUNDS
PBHG Advisor Core Value Fund
The PBHG Advisor Core Value Fund, a diversified portfolio, seeks to achieve
above-average total return over a market cycle of three to five years,
consistent with reasonable risk, by investing in common stocks and other Equity
Securities of large, medium, and small companies which are considered to be
relatively undervalued based on certain proprietary measures of value. "Equity
Securities" as used in this Prospectus include common stocks, preferred stocks,
warrants and securities convertible into or exchangeable for common or preferred
stocks.
In selecting investments for the PBHG Advisor Core Value Fund, the Adviser and
Value Investors emphasize fundamental investment value and consider the
following factors, among others, in identifying and analyzing a security's
fundamental value and capital appreciation potential: the relationship of a
company's potential earnings power to its current stock price; current dividend
income and the potential for dividend growth; low price/earnings ratio relative
to other similar companies; strong competitive advantages, including a
recognized brand or trade name or niche market position; sufficient resources
for expansion; capability of management; and favorable overall business
prospects. The Fund may invest in securities of companies that are considered to
be financially sound and attractive investments based on their operating
history, but which may be experiencing temporary earnings declines due to
adverse economic conditions that may be company or industry specific or due to
unfavorable publicity. The Fund may invest in such companies when the Adviser
and Value Investors believe that those companies will react positively to
changing economic conditions or that such companies have taken or are expected
to take actions designed to improve their financial fundamentals or to otherwise
increase the market price of their securities. The use of a valuation approach
may result in investment selections that may be out-of-favor or counter to those
of other investors. However, such an approach may also produce significant
capital appreciation.
Under normal market conditions, the PBHG Advisor Core Value Fund will invest at
least 65% of its total assets in Equity Securities of undervalued issuers. The
Equity Securities in which the Fund normally invests will be traded in the
United States or Canada on a registered securities exchange or established
over-the-counter market.
PBHG Advisor Value Opportunities Fund
The PBHG Advisor Value Opportunities Fund, a diversified portfolio, seeks to
achieve above average total return over a market cycle of three to five years,
consistent with reasonable risk, by investing in common stocks and other Equity
Securities of companies with market
20
<PAGE>
capitalizations in the range of companies represented in the Standard & Poor's
Mid-Cap 400 Index ("S&P 400"), which are considered to be relatively undervalued
based on certain proprietary measures of value.
The current market capitalization of companies represented in the S&P 400 is
typically between $200 million and over $5 billion. It is expected that
securities purchased by the PBHG Advisor Value Opportunities Fund will typically
exhibit lower price/earnings ratios than the average of those in the S&P 400.
Under normal circumstances, the Fund will be structured taking into account the
economic sector weightings of the S&P 400 with the Fund's sector weightings
normally within 5% of the sector weightings of that index.
In selecting investments for the PBHG Advisor Value Opportunities Fund, the
Adviser and Value Investors emphasize fundamental investment value and consider
the following factors, among others, in identifying and analyzing a security's
fundamental value and capital appreciation potential: the relationship of a
company's potential earnings power to its current stock price; current dividend
income and the potential for dividend growth; low price/earnings ratio relative
to other similar companies; strong competitive advantages including a recognized
brand or trade name or niche market position; sufficient resources for
expansion; capability of management; and favorable overall business prospects.
The Fund may invest in securities of companies that are considered to be
financially sound and attractive investments based on their operating history,
but which may be experiencing temporary earnings declines due to adverse
economic conditions that may be company or industry specific or due to
unfavorable publicity. The Fund may invest in such companies when the Adviser
and Value Investors believe that those companies will react positively to
changing economic conditions or that such companies have taken or are expected
to take actions designed to improve their financial fundamentals or to otherwise
increase the market price of their securities. The use of a valuation approach
may result in investment selections that may be out-of-favor or counter to those
of other investors. However, such an approach may also produce significant
capital appreciation.
Under normal market conditions, the PBHG Advisor Value Opportunities Fund will
invest at least 65% of its total assets in Equity Securities of undervalued
medium capitalization issuers. The Equity Securities in which the Fund normally
invests will be traded in the United States or Canada on a registered securities
exchange or established over-the-counter market.
PBHG Advisor New Contrarian Fund
The PBHG Advisor New Contrarian Fund, a non-diversified portfolio, seeks
long-term capital appreciation. The Fund will invest at least 65% of its net
assets in Equity Securities. To select securities, the Adviser and Value
Investors will seek out domestic, multinational and foreign companies that are
little-known or overlooked, out-of-favor due to a prior decline in value, or
have been oversold or undiscovered by other investors. The Fund may purchase
domestic and foreign securities issued by companies of all sizes, industries and
geographical markets. The
21
<PAGE>
Fund may invest up to 100% of its assets in securities of foreign issuers but
will not invest more than 40% of its total assets in any one foreign country. In
pursuing its investment objective, the Fund may sell securities short, buy put
and call options, write covered call options, and buy and sell index futures.
Although the Fund is classified as a non-diversified investment company under
the 1940 Act, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue Code of
1986, as amended (the "Code"), which requires that, at the end of each quarter
of the taxable year, (i) at least 50% of the market value of the Fund's total
assets be invested in cash, U.S. Government securities, the securities of other
regulated investment companies, and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets, and (ii) not more than
25% of the value of its total assets be invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies).
PBHG Advisor REIT Fund
The PBHG Advisor REIT Fund, a nondiversified portfolio, seeks to achieve maximum
long-term total return. Capital appreciation is a secondary objective. The Fund
seeks to achieve its objectives by concentrating its investments in securities
of companies principally engaged in the real estate industry. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
Equity Securities of real estate investment trusts ("REITs").
The PBHG Advisor REIT Fund invests in Equity Securities of REITs and other real
estate industry operating companies ("REOCs"). For purposes of the Fund's
investments, a REOC is a company that derives at least 50% of its gross revenues
or net profits from either (1) the ownership, development, construction,
financing, management or sale of commercial, industrial or residential real
estate, or (2) products or services related to the real estate industry, such as
building supplies or mortgage servicing. The Fund's investments in Equity
Securities of REITs and REOCs may include, from time to time, sponsored or
unsponsored American Depositary Receipts ("ADRs") actively traded in the United
States.
REITs are pooled investment vehicles which invest primarily in income-producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Like
investment companies such as the Fund, REITs are not taxed on income distributed
to shareholders provided they comply with several requirements in the Code.
REITs are subject to substantial cash flow dependency, defaults by
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borrowers, self-liquidation, and the risk of failing to qualify for tax-free
pass-through of income under the Code, and/or to maintain exemptions from the
1940 Act. By investing in REITs indirectly through the Fund, a shareholder bears
not only a proportionate share of the expenses of the Fund, but also,
indirectly, similar expenses of the REITs.
Although the PBHG Advisor REIT Fund does not invest directly in real estate, the
Fund concentrates its investments in the real estate industry, and an investment
in the Fund may be subject to certain risks associated with direct ownership of
real estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; risks related to
general and local economic conditions; possible lack of availability of mortgage
funds; overbuilding; extended vacancies of properties; increases in competition;
property taxes and operating expenses; changes in zoning laws; costs resulting
from the clean-up of, and liability to third parties resulting from,
environmental problems; casualty or condemnation losses, uninsured damages from
floods, earthquakes or other natural disasters; limitations on and variations in
rents; and changes in interest rates.
While the PBHG Advisor REIT Fund does not intend to invest directly in real
estate, the Fund could, under certain circumstances, own real estate directly as
a result of a default on securities that it owns. In addition, if the Fund has
rental income or income from the direct disposition of real property, the
receipt of such income may adversely affect the Fund's ability to retain its tax
status as a regulated investment company.
The Adviser does not normally intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, the Adviser may take advantage of short-term opportunities that are
consistent with the PBHG Adviser REIT Fund's investment objectives.
Although the PBHG Advisor REIT Fund is classified as a non-diversified
investment company under the 1940 Act, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Code, which requires that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's total assets be invested in
cash, U.S. Government securities, the securities of other regulated investment
companies, and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5% of
the value of the Fund's total assets, and (ii) not more than 25% of the value of
its total assets be invested in the securities of any one issuer (other than
U.S. Government securities or the securities of other regulated investment
companies).
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PBHG ADVISOR GROWTH FUNDS
PBHG Advisor Blue Chip Growth Fund
The PBHG Advisor Blue Chip Growth Fund, a diversified portfolio, seeks long-term
growth of capital by investing primarily in Equity Securities of well-known and
established companies, both domestic and foreign. The Adviser normally will
invest at least 65% of the Fund's net assets in Equity Securities of "blue chip"
companies, i.e., companies which have leading market positions in their
respective industries and strong financial characteristics, as determined by the
Adviser. The Adviser defines blue chip companies to include those in the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500") or the Dow Jones
Industrial Average, or which have a market capitalization of at least $5 billion
if not included in either index. Within this 65% policy, the Adviser may also
include Equity Securities of companies that demonstrate the potential to become
blue chip companies in the future.
Blue chip companies typically have a large number of publicly held shares and a
high trading volume, resulting in a high degree of liquidity. These tend to be
quality companies with strong management organizations.
When choosing the PBHG Advisor Blue Chip Growth Fund's domestic or foreign
investments, the Adviser will seek companies that it expects will demonstrate
greater long-term earnings growth than the average company included in the S&P
500. This method of selecting stocks is based on the belief that growth in a
company's earnings will eventually translate into growth in the price of its
stock. The Adviser looks at strong market sectors and then identifies those
companies that offer the most attractive values based upon earnings prospects.
The Fund's sector emphasis may shift based on changes in the sector's earnings
outlook.
Portfolio candidates for the PBHG Advisor Blue Chip Growth Fund can be
identified as companies that typically possess any of the following
characteristics and which, in the Adviser's opinion, exhibit high earnings
growth relative to their current valuation measures:
Market Leadership
o Superior potential for growth relative to other companies in the same
industry
o Proprietary technology with the potential to bring about major changes
within an industry
o Leading sales or market share within an industry
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Financial Leadership
o Superior earnings growth rates or earnings growth prospects relative
to industry peers
o Higher profitability characteristics (e.g., higher profit margins and
returns on equity) than comparable industry competitors
o Stronger balance sheet characteristics (e.g., low debt levels)
relative to industry competitors
PBHG Advisor Growth Opportunities Fund
The PBHG Advisor Growth Opportunities Fund, a diversified portfolio, seeks long
term capital growth through investments in Equity Securities. In selecting its
equity investments, the Adviser seeks to identify companies which exhibit high
earnings growth relative to their current price to earnings ratio or other
valuation measures or whose fundamental value or growth potential is not yet
reflected in their current market price.
In addition, the Adviser seeks to invest in securities of companies which have
one or more of the following attributes:
o Own proprietary technology or products
o Have a high return on equity
o Are well positioned to increase market share and or improve
profitability relative to their competitors
o Are able to sustain above average growth rates of earnings and sales.
PBHG Advisor Enhanced Equity Fund
The PBHG Advisor Enhanced Equity Fund, a diversified portfolio, seeks above
average total returns through investments in Equity Securities. For this
purpose, "above average total returns" means returns above the average long-term
total returns of other mutual funds with similar investment policies and risk
characteristics. The Fund seeks to achieve its objective by investing primarily
in a diversified equity portfolio consisting of publicly traded Equity
Securities of U.S. domiciled corporations and options and futures that relate to
such securities.
While the Fund may invest in stocks of any market capitalization, it is
anticipated that the average capitalization of the Fund's stocks will be typical
of medium to large companies
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(typically $15 billion or higher). Under normal market conditions, the PBHG
Advisor Enhanced Equity Fund will invest at least 65% of its total assets in
Equity Securities of U.S. domiciled corporations.
PBHG Advisor Trend Fund
The PBHG Advisor Trend Fund, a diversified portfolio, seeks long term growth of
capital. The Fund seeks capital appreciation by investing mainly in Equity
Securities of domestic and foreign issuers. The Fund will invest primarily in
companies that the Adviser believes will be future beneficiaries of social and
economic trends and change. Under normal market conditions, the Fund will invest
at least 65% of its total assets in Equity Securities of such companies. The
Adviser will examine social attitudes, legislative actions, product innovation,
demographics and other relevant factors to determine the underlying trends
shaping or expected to shape the marketplace. The Adviser will identify key
industries and companies that are expected to benefit based upon its
determination of these trends. The Adviser will then analyze the fundamental
merits of these investment candidates.
The Adviser favors companies that show the potential for stronger than expected
earnings or growth. The Adviser also emphasizes industries that are undervalued
or out-of-favor. In following its strategy, the PBHG Advisor Trend Fund may
invest in small and medium sized companies, which carry more risk than larger
ones. Generally, these companies, especially small sized ones, rely on limited
product lines and markets, financial resources, or other factors.
This may make them more susceptible to setbacks or downturns.
PBHG ADVISOR AGGRESSIVE GROWTH FUNDS
PBHG Advisor Large Cap Concentrated Fund
The PBHG Advisor Large Cap Concentrated Fund, a non-diversified portfolio, seeks
long-term growth of capital. The Fund will normally invest at least 65% of its
total assets in securities of large capitalization companies. The Fund will
normally be substantially invested in Equity Securities (including ADRs and
foreign equity securities). The Fund may invest in convertible debt securities
but only if such securities are rated investment grade by an NRSRO (i.e., within
one of the four highest rating categories). The Adviser will consider a broad
range of industries in choosing investments for the Fund.
Under normal market conditions, the PBHG Advisor Large Cap Concentrated Fund
will invest substantially all of its assets in Equity Securities of a limited
number (i.e., no more than 20 issuers) of large capitalization companies that,
in the Adviser's opinion, have a strong earnings growth outlook and potential
for capital appreciation. Such large companies have market capitalization in
excess of $1 billion. Because the Fund focuses on Equity Securities of a small
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number of companies, the impact of a change in value of a single stock holding
may be magnified.
The PBHG Advisor Large Cap Concentrated Fund may invest up to 10% of its net
assets in restricted securities and securities of foreign issuers traded outside
the United States and Canada. The Fund may also invest up to 15% of its net
assets in illiquid securities, but will not invest more than 5% of its net
assets in restricted securities that the Adviser determines are illiquid based
on guidelines approved by the Board of Directors of the Company.
Although the Fund is classified as a non-diversified investment company under
the 1940 Act, the Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Code which requires that, at
the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's total assets be invested in cash, U.S. Government
securities, the securities of other regulated investment companies, and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Fund's total assets, and (ii) not more than 25% of the value of its total
assets be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies).
PBHG Advisor Growth II Fund
The PBHG Advisor Growth II Fund, a diversified portfolio, seeks capital
appreciation. The Fund normally will be as fully invested as practicable in
common stocks and securities convertible into common stock, but also may invest
up to 5% of its total assets in warrants and rights to purchase common stocks.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stocks and convertible securities of small and medium sized
growth companies (market capitalization or annual revenues up to $4 billion).
The average market capitalizations of holdings in the Fund may, however,
fluctuate over time as a result of market valuation levels and the availability
of specific investment opportunities. Normally, the PBHG Advisor Growth II Fund
intends to purchase only securities traded in the United States or Canada on
registered exchanges or in the over-the-counter market. The Fund may invest up
to 15% of its total assets in securities of foreign issuers (including ADRs).
There may be times when, in the opinion of the Adviser, the shareholders'
interests are best served and the investment objective is more likely to be
achieved by having varying amounts of the Fund's assets invested in convertible
securities. In addition, the Fund may continue to hold securities of companies
whose market capitalizations or annual revenues grow above $4 billion subsequent
to purchase, if the company continues to satisfy the other investment policies
of the Fund.
The PBHG Advisor Growth II Fund will seek to achieve its objective by investing
in companies believed by the Adviser to have an outlook for strong earnings
growth and the potential for significant capital appreciation. Securities will
be sold when the Adviser believes that anticipated appreciation is no longer
probable, alternative investments offer superior appreciation prospects,
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or the risk of a decline in market price is too great. Because of its policy
with respect to the sales of investments, the Fund may from time to time realize
short-term gains or losses. The Fund will likely have somewhat greater
volatility than the stock market in general, as measured by the S&P 500. Because
the investment techniques employed by the Adviser are responsive to near-term
earnings trends of the companies whose securities are owned by the Fund,
portfolio turnover can be expected to be fairly high.
PBHG Advisor New Opportunities Fund
The PBHG Advisor New Opportunities Fund, a diversified portfolio, seeks
long-term capital appreciation. The Fund seeks its objective by investing
principally in Equity Securities of companies in sectors of the economy which
the Adviser believes possess above average long-term growth potential. As a
result of the Fund's long-term investment strategy, it is possible that the
Fund's total return over certain periods may be less than that of other equity
investment vehicles.
The PBHG Advisor New Opportunities Fund will generally invest in companies which
the Adviser identifies as offering the best prospects for long-term growth
within a particular sector. The Fund invests primarily in common stocks, but may
also purchase other Equity Securities and debt securities if the Adviser
believes they would help achieve the Fund's objective of capital appreciation.
The Fund may also hold a portion of its assets in cash or money market
instruments.
The sectors of the economy which offer above average growth potential will
change over time. At present, the Adviser has identified the following sectors
of the economy, and examples of industries within these sectors, as having an
above average growth potential over the next three to five years:
Personal Communications - long distance telephone, competitive local exchange
carriers, cellular telephone, paging, personal communication networks;
Media/Entertainment - cable television system operators, cable television
network programmers, film entertainment providers, theme park operators, radio
and television stations, billboard advertisers;
Medical Technology/Cost-Containment - home and outpatient care, medical device
companies, biotechnology, health care information services, physician practice
management, managed care providers;
Environmental Services - solid waste disposal, hazardous waste disposal,
remediation services, environmental testing;
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Energy Related Services - contract drilling services;
Applied/Advanced Technology - database software, application software,
entertainment software, networking software, computer system integrators,
information services, semiconductors, manufacturing technology;
Personal Financial Services - specialty insurance companies, credit card
issuers, and other consumer-oriented financial services companies; and
Value-oriented Consuming - retailers, restaurants, hotel chains, casino
operators, travel companies, consumer franchise companies and other consumer
product or service companies able to provide quality products or service at
lower prices or offering greater perceived value than competitors.
In addition, the PBHG Advisor New Opportunities Fund may also invest a portion
of its assets in securities of companies that, although not in any of the
sectors described above, are expected to experience above average growth.
The sectors described above represent the Adviser's current judgment of the
sectors of the economy which offer the most attractive growth opportunities. The
PBHG Advisor New Opportunities Fund will not necessarily be invested in each of
these market sectors at all times. Such sectors are likely to change over time
and may include a variety of industries. Subject to the Fund's restrictions, the
Fund may invest up to one-half of its assets in any one particular sector.
The PBHG Advisor New Opportunities Fund seeks to invest in companies that offer
above average growth prospects in their particular sector of the economy,
without regard to the company's size. Companies in the Fund's portfolio will
range from small, rapidly growing companies to larger, well-established firms.
The PBHG Advisor New Opportunities Fund will normally emphasize investments in
particular economic sectors. Although the Fund will not invest 25% or more of
its total assets in any one industry, the Fund's emphasis on particular sectors
of the economy may make the value of the Fund's shares more susceptible to any
single economic, political or regulatory development than the shares of an
investment company which is more widely diversified. As a result, the value of
the Fund's shares may fluctuate more than the shares of a more diversified
investment company.
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PBHG Advisor Global Technology & Communications Fund
The PBHG Advisor Global Technology & Communications Fund, a diversified
portfolio, seeks long-term growth of capital. Current income is incidental to
the Fund's objective. The Fund seeks to achieve its objective by concentrating
its investments in the technology and communications industries. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
Equity Securities of companies, both foreign and domestic, which rely
extensively on technology or communications in their product development or
operations, or which are expected to benefit from technological advances and
improvements, and that may be experiencing exceptional growth in sales and
earnings driven by technology-related or communication-related products and
services. The Fund will make investments in securities of companies in at least
three different countries. At least 65% of the total assets of the Fund will be
in investments that reflects the Fund's global investment strategy. The Fund may
invest up to 100% of its assets in securities of foreign issuers.
Such technology and communications companies may be in many different industries
or fields, including computer software and hardware, electronic components and
systems, network and cable broadcasting, telecommunications, multimedia, mobile
communications, satellite communications, defense and aerospace, transportation
systems, data storage and retrieval, biotechnology and medical, and
environmental. As a result of this focus, the PBHG Advisor Global Technology &
Communications Fund hopes to participate in the significant growth potential of
companies that may be responsible for breakthrough products or technologies or
that are positioned to take advantage of cutting-edge developments.
The PBHG Advisor Global Technology & Communications Fund will normally be fully
invested in Equity Securities (including ADRs) of such technology and
communications companies. Stock selections will not be based on company size,
but rather on an assessment of a company's fundamental prospects. As a result,
the Fund's stock holdings can range from small companies developing new
technologies or pursuing scientific breakthroughs to large, established firms
with track records in developing and marketing such scientific advances.
PBHG ADVISOR FIXED INCOME FUNDS
PBHG Advisor Master Fixed Income Fund
The PBHG Advisor Master Fixed Income Fund, a diversified portfolio, seeks above
average total returns. The Fund will invest in a diversified bond portfolio
consisting primarily of U.S. Government, corporate, and mortgage-related fixed
income securities. For this purpose, "above average total returns" means returns
above the average long-term total returns of other mutual funds with similar
investment policies and risk characteristics.
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The PBHG Advisor Master Fixed Income Fund seeks to achieve its objective by
investing primarily in U.S. Treasury, U.S. Government, and U.S. dollar
denominated high grade securities, including mortgage-related securities. The
weighted average duration of the Fund's fixed income investments is generally
expected, under normal market conditions, to range between three and ten years.
Under normal market conditions, the PBHG Advisor Master Fixed Income Fund will
invest at least 65% of its total assets in U.S. dollar denominated, high grade,
fixed income debt securities. The high grade investment standard for the Fund
includes only those securities with (i) over one year original maturity and
rated at the time of purchase a minimum of A by Moody's or Standard & Poor's,
(ii) under one year original maturity and rated at the time of purchase a
minimum of Prime 1 by Moody's or A-1 by Standard & Poor's, or (iii) unrated
securities determined by the Adviser or Analytic at the time of purchase to be
equivalent to these ratings.
Subject to certain additional limitations, under normal market conditions, the
remainder of the PBHG Advisor Master Fixed Income Fund's assets may be invested
in floating rate and other types of debt securities, high grade non-U.S. dollar
denominated debt securities, below high grade fixed income securities,
convertible securities, "synthetic convertible" positions, covered call and cash
secured put investments, preferred stock, and the shares of other investment
companies which invest primarily in high grade debt securities. The Fund may
also invest in interest and currency rate-related derivative securities.
PBHG Advisor High Yield Fund
The PBHG Advisor High Yield Fund, a diversified portfolio, seeks to achieve
above-average total return over a market cycle of three to five years,
consistent with reasonable risk, by investing in high yield corporate
fixed-income securities (including bonds rated below investment grade, commonly
referred to as junk bonds). Normally, at least 65% of the PBHG Advisor High
Yield Fund's total assets will be invested in high yield securities. Derivatives
relating to fixed income securities and indexes may be used to pursue the Fund's
portfolio strategy. The Fund may also invest in U.S. Government securities,
mortgage-backed securities, investment grade corporate bonds and short-term
fixed-income securities, such as certificates of deposit, treasury bills, and
commercial paper. The Fund expects to achieve its objective by earning a high
rate of current income, although the Fund may seek capital growth opportunities
when consistent with its objective. The Fund's average weighted maturity will
ordinarily be greater than five years.
The Adviser uses equity and fixed-income valuation techniques and analyses of
economic and industry trends to determine portfolio structure. Individual
securities are selected, and monitored, by the Adviser's fixed-income portfolio
managers who specialize in corporate bonds
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and use in-depth financial analysis to uncover opportunities in undervalued
issues. The Fund may invest in fixed income securities rated C or higher by
Moody's or Standard & Poor's.
PBHG Advisor Short-Term Government Fund
The investment objective of the PBHG Advisor Short-Term Government Fund is to
provide a high level of income consistent with both low fluctuations in market
value and low credit risk. The Fund seeks to achieve its investment objective by
investing primarily in U.S. Treasury or U.S. Government agency securities to
minimize credit risk. To minimize fluctuations in market value, the Fund is
expected, under normal market conditions, to maintain a dollar weighted average
maturity and weighted average duration between one and three years. Duration is
the weighted average time to receipt of both principal and interest payments of
a debt security and also a measure of the sensitivity of fixed income related
investments to interest rate changes.
Under normal market conditions, the PBHG Advisor Short-Term Government Fund will
invest at least 80% of its total assets in U.S. Government securities. Subject
to certain additional limitations, the remainder of the Fund's assets may be
invested in other high grade debt securities, debt securities of foreign
governments and supranational organizations considered to be of high grade
investment quality, currency-rate and interest rate-related options and futures,
and cash and cash equivalents. The high grade investment standard for the Fund
includes only those securities with (i) over one year original maturity and
rated at the time of purchase a minimum of A by Moody's or Standard & Poor's,
(ii) under one year original maturity and rated at the time of purchase a
minimum of Prime 1 by Moody's or A-1 by Standard & Poor's, or (iii) unrated
securities determined by the Adviser or Analytic at the time of purchase to be
equivalent to these ratings. The PBHG Advisor Short-Term Government Fund may
also invest in repurchase agreements collateralized by U.S. Government
securities. For temporary defensive purposes, the Fund may reduce the average
duration to less than one year.
PBHG Advisor Cash Reserves Fund
The PBHG Advisor Cash Reserves Fund, a diversified portfolio, seeks to preserve
principal value and maintain a high degree of liquidity while providing current
income. Under normal market conditions, the Fund will invest in obligations
denominated in U.S. dollars consisting of: (i) commercial paper issued by U.S.
and foreign issuers rated in one of the two highest rating categories by any two
NRSROs at the time of investment, or, if not rated, determined by the Adviser or
Wellington Management to be of comparable quality; (ii) obligations (including
certificates of deposit, time deposits, bank notes and bankers' acceptances) of
U.S. savings and loan and thrift institutions, U.S. commercial banks (including
foreign branches of such banks), and U.S. and foreign branches of foreign banks,
provided that such institutions (or, in the case of a branch, the parent
institution) have total assets of $500 million or more as shown on their last
published financial statements at the time of investment; (iii) short-term
corporate obligations of U.S. and foreign issuers with a remaining term of not
more than one year of issuers with
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commercial paper of comparable priority and security meeting the above ratings;
(iv) U.S. Treasury obligations and obligations issued or guaranteed as to
principal and interest by the agencies or instrumentalities of the U.S.
government; (v) securities issued by foreign governments, including Canadian and
Provincial Government and Crown Agency Obligations; (vi) short-term obligations
issued by state and local governmental issuers which are rated at the time of
investment by at least two NRSROs in one of the two highest municipal bond
rating categories and that carry yields that are competitive with those of other
types of money market instruments of comparable quality; and (vii) repurchase
agreements involving any of the foregoing obligations. The Fund will comply with
regulations of the Securities and Exchange Commission (the "SEC") applicable to
money market funds. These regulations impose certain quality, maturity and
diversification restraints on investments. Under these regulations, the Fund
must maintain a dollar-weighted average portfolio maturity of 90 days or less
and, generally, may invest only in securities with maturities of 397 days or
less. The purchase of single rated or unrated securities by the Adviser or
Wellington Management is subject to approval or ratification by the Board of
Directors.
The PBHG Advisor Cash Reserves Fund intends to maintain a constant net asset
value of $1.00 per share. There can be no assurance that the Fund will be able
to maintain a net asset value of $1.00 per share on a continuing basis. The Fund
may invest in U.S. Treasury STRIPS. The Fund may also invest up to 10% of its
net assets in illiquid securities. Certain restricted securities, including Rule
144A securities and Section 4(2) commercial paper, which might otherwise be
presumed to be illiquid, may be considered liquid pursuant to guidelines
established by the Board of Directors. Rule 144A securities are unregistered
securities that may be resold only to "qualified institutional buyers."
THERE CAN BE NO ASSURANCE THAT ANY PBHG ADVISOR FUND WILL BE ABLE TO ACHIEVE ITS
INVESTMENT OBJECTIVE.
GENERAL INVESTMENT POLICIES AND STRATEGIES
Investment Process of the Adviser
The Adviser's investment process is both quantitative and fundamental. With
respect to the PBHG Advisor Aggressive Growth Funds, the Adviser's investment
process is extremely focused on quality earnings growth. In seeking to identify
investment opportunities, the Adviser begins by creating a universe of rapidly
growing companies with market capitalizations within the parameters described
for each PBHG Advisor Aggressive Growth Fund and that possess certain quality
characteristics. Using proprietary software and research models that incorporate
important attributes of successful growth, such as positive earnings surprises,
upward earnings estimate revisions, and accelerating sales and earnings growth,
the Adviser creates a universe of growing companies. Then, using fundamental
research, the Adviser evaluates each
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company's earnings quality and assesses the sustainability of the company's
current growth trends. Through this highly disciplined process, the Adviser
seeks to construct investment portfolios that possess strong growth
characteristics. The Adviser tries to keep each Fund fully invested at all
times. Because the universe of companies will undoubtedly experience volatility
in stock price, it is important that shareholders in the PBHG Advisor Aggressive
Growth Funds maintain a long-term investment perspective. Of course, there can
be no assurance that use of these techniques will be successful, even over the
long term.
With respect to the PBHG Advisor Growth Funds, the Adviser employs an investment
process which is both quantitative and fundamental but which differs from that
employed for the PBHG Advisor Aggressive Growth Funds. The Adviser screens more
than 9,000 companies and ranks them based upon their future earnings growth
prospects relative to their valuation, as calculated by multiple proprietary
measures, as well as measures such as earnings surprises, the ratio of relative
price to sales and the stability of their past sales growth. The Adviser focuses
on those companies which it has identified as having a low valuation relative to
potential earnings growth and then applies intensive fundamental research to
select the securities of only those companies which the Adviser believes are
undervalued relative to their earnings power or cash flow generation
capabilities. The Adviser will consider selling securities of companies that, in
the Adviser's opinion, have reached their full or fair value relative to their
growth prospects or that of their relevant peers. In constructing its investment
portfolios, the Adviser strives to reduce the risk of excessive volatility in
the net asset value of each of the PBHG Advisor Growth Funds by diversifying
investments for those funds across economic sectors. Of course, there can be no
assurance that the use of these techniques will be successful, even over the
long term.
Investment Process of Value Investors
Value Investors' investment process, like that of the Adviser, is both
quantitative and fundamental. Using custom designed research models and
proprietary software, which incorporate certain key elements of value investing
(such as consistency of dividend payment, balance sheet strength, and low stock
price relative to book, earnings, cash flow, sales and business franchise),
Value Investors screens more than 9,000 possible companies and creates an
initial universe of statistically attractive value companies. Following the
creation of this universe of possible investments, Value Investors uses its
strong fundamental research capabilities to carefully identify securities that
are currently out of favor but which have the potential to achieve significant
appreciation as the marketplace recognizes their fundamental value. Once
constructed, portfolios are continually monitored for change. Value Investors
follows a disciplined valuation approach that requires it to sell any portfolio
security that it believes has become overvalued relative to the market. Sales of
portfolio securities are primarily triggered by the relative change in
price/earnings ratio. Adverse changes in other key value elements are, of
course, factors that would also trigger a sale. Of course, there can be no
assurance that use of these techniques will be successful, even over the long
term.
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Investment Process of Analytic
Since 1996, Analytic has been using a proprietary model with more than 50
factors based on work pioneered by Professor Robert A. Haugen to manage an
equity portfolio with similar investment objectives and policies to those of the
PBHG Advisor Enhanced Equity Fund. Using this model, Analytic constructs a
portfolio of stocks that it believes has the following attractive
characteristics: high return on equity and earnings growth; high cash flow to
price ratio and earnings to price ratio; positive price momentum over the last
six to twelve months; low "beta" and return volatility; and high trading volume
and low bid/ask price spreads.
Such a portfolio of stocks cannot be construed by simply "screening" an equity
data base for individual issues each of which meets all of the desired
characteristics. For example, companies with high profitability generally do not
have low valuations. Analytic believes that the statistical modeling process
developed by Professor Haugen enables it to assemble a portfolio of securities
that in the aggregate has the desired characteristics (a portfolio with an
overall profile that Professor Haugen has called the profile of a "super
stock").
Analytic believes that this approach, which has been discussed in leading
academic journals, has significant ability to identify portfolios of attractive
stocks. Analytic believes that its disciplined multi-factor approach will result
in more consistent value added over a market cycle than traditional strategies
which focus on a single style or factor (e.g., value, growth, small cap, or
earnings momentum). However, because there are risks inherent in all securities
investments, there is no assurance that the PBHG Advisor Enhanced Equity Funds's
investment objective will be achieved.
Using factors from each of the five categories described above, Analytic
determines the relative attractiveness (expected return) of each security from a
universe of approximately 1,100 of the largest publicly traded domestic equity
securities. Once these relative expected returns are calculated, a portfolio is
constructed from the entire universe with the following constraints and
objectives:
Targeted Return -- Expected portfolio return is typically targeted as 3%
higher than the annual return on the stocks comprising the S&P 500.
Industry Weightings -- Typically, industry sector weightings are
constrained to closely match those of the S&P 500, deviating no more than
1% above or below the S&P 500 weightings.
Size -- Average market capitalization is typically targeted to be greater
than $15 billion.
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Growth -- Using specific accounting-related variables, such as return on
equity, the portfolio is constrained to have higher earnings growth than
the average growth of securities in the universe.
Value -- Using specific accounting-related variables, such as the ratio of
cash flow to price, the portfolio is constrained to be of higher value than
securities in the universe (i.e., its cash flow and earnings are priced
relatively cheaply by the market).
Maximum Issuer Weighting -- The market value of the stock of any issuer,
when added to the portfolio, is constrained to be no greater than 3% of the
aggregate market value of the portfolio. The weighting of the stock of an
issuer may increase due to the relative performance of the stock during the
period in which it is held, but under no circumstances will the weighting
of any stock exceed 5% of the aggregate market value of the portfolio.
Liquidity -- The size of the Fund's position in each security is evaluated
relative to the total outstanding shares of the issuer, the market "float"
and the trading volume to ensure that all positions remain liquid and that
Analytic's periodic rebalancing of the portfolio does not significantly
impact the price of the security.
Analytic seeks to control overall portfolio risk by using a mathematical model
designed to minimize portfolio risk relative to that of the overall stock
market. Analytic uses an optimizer to ensure that it accurately takes into
account the relationship among industries, sectors, and individual securities in
order to capture maximum diversification benefits given its expected return
target.
Analytic monitors the stocks held by a portfolio on a real-time basis using its
proprietary portfolio management system. All holdings are monitored for new
developments in terms of new events (such as lawsuits or takeover bids) as well
as significant changes in fundamental factors. Expected returns are updated
monthly and are used to reoptimize the portfolio. Analytic enters into portfolio
trades only when it believes the incremental return more than exceeds the
associated transaction costs.
Portfolio Turnover
Portfolio turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. A higher turnover rate (100% or more)
increases transaction costs (e.g., brokerage commissions) and increases realized
gains and losses. It is expected that under normal market conditions, the annual
portfolio turnover rates for each of the PBHG Advisor Funds will not exceed the
following levels: PBHG Advisor Core Value Fund, 200%; PBHG Advisor Value
Opportunities Fund, 400%; PBHG Advisor New Contrarian Fund, 150%; PBHG Advisor
REIT Fund, 100%; PBHG Advisor Blue Chip Growth Fund, 50%; PBHG Advisor
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Growth Opportunities Fund, 70%; PBHG Advisor Enhanced Equity Fund, 150%; PBHG
Advisor Trend Fund, 100%; PBHG Advisor Large Cap Concentrated Fund, 300%; PBHG
Advisor Growth II Fund, 150%; PBHG Advisor New Opportunities Fund, 150%; PBHG
Advisor Global Technology & Communications Fund, 300%; PBHG Master Fixed Income
Fund, 50%; PBHG Advisor High Yield Fund, 200%; and PBHG Short-Term Government
Fund, 50%. High rates of portfolio turnover necessarily result in
correspondingly greater brokerage and portfolio trading costs, which are paid by
a Fund. Trading in over-the-counter and fixed-income securities does not
generally involve the payment of brokerage commissions, but does involve
indirect transaction costs. In addition to portfolio trading costs, higher rates
of portfolio turnover may result in the realization of capital gains. To the
extent net short-term capital gains are realized, any distributions resulting
from such gains are considered ordinary income for federal income tax purposes.
Temporary Defensive Positions
Under normal market conditions, each PBHG Advisor Fund expects to be fully
invested in its primary investments, as described above. However, for temporary
defensive purposes, when the Adviser or the applicable sub-adviser, as
appropriate, determines that market conditions warrant, each Fund may invest up
to 100% of its assets in investment grade debt securities, cash and money market
instruments (consisting of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; certificates of deposit, time
deposits and bankers' acceptances issued by banks or savings and loan
associations having net assets of at least $500 million as stated on their most
recently published financial statements; commercial paper rated in one of the
two highest rating categories by at least one NRSRO; repurchase agreements
involving such securities; and, to the extent permitted by applicable law and
each Fund's investment restrictions, shares of other investment companies
investing solely in money market securities). To the extent a Fund is invested
in temporary defensive instruments, it will not be pursuing its investment
objective. See "Glossary of Permitted Investments" and the Statement of
Additional Information for additional information.
Common Investment Policies
Except as otherwise discussed in the investment description for each PBHG
Advisor Fund, the following investment policies apply to each Fund except the
PBHG Advisor High Yield Fund, PBHG Advisor Master Fixed Income Fund, PBHG
Advisor Short-Term Government Fund, and PBHG Advisor Cash Reserves Fund:
Each PBHG Advisor Fund may invest up to 20% of its total assets in foreign
securities (i.e., securities traded outside the United States and Canada). For
purposes of this limitation, "foreign securities" do not include ADRs. Each Fund
may also utilize futures contracts (i.e., purchase and sell futures contracts)
to the extent that (i) aggregate initial margin deposits to establish other than
"bona fide hedging" positions do not exceed 5% of the Fund's net assets, and
(ii) the total
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market value of securities underlying all futures contracts does not exceed 50%
of the value of the Fund's total assets. In addition, each Fund may invest up to
15% of its net assets in illiquid securities. This limitation does not include
any Rule 144A or similar security that has been determined to be liquid pursuant
to procedures established by the Board of Directors of the Company. Each Fund
may also engage in securities lending. Each Fund may use high-quality money
market investments or short-term bonds to reduce downside volatility during
uncertain or declining market conditions and, for temporary defensive purposes,
may invest in money market securities or short-term bonds without limitation.
See "Temporary Defensive Positions" for a fuller description. In addition, each
Fund may purchase securities on a when-issued or delayed delivery basis. See
"Glossary of Permitted Investments."
RISK FACTORS
Small and Medium Capitalization Stocks
Investments in Equity Securities in general are subject to market risks that may
cause their prices to fluctuate over time. In certain cases, the PBHG Advisor
Core Value Fund, the PBHG Advisor Value Opportunities Fund, The PBHG Advisor New
Contrarian Fund, the PBHG Advisor Trend Fund, the PBHG Advisor Growth
Opportunities Fund, the PBHG Advisor Enhanced Equity Fund, the PBHG Advisor
Growth II Fund, the PBHG Advisor New Opportunities Fund, and the PBHG Advisor
Global Technology & Communications Fund may invest in securities of issuers with
small or medium market capitalizations. While the Adviser and Value Investors
intend to invest in small and medium capitalization companies that have strong
balance sheets and favorable business prospects, any investment in small and
medium capitalization companies involves greater risk and price volatility than
that customarily associated with investments in larger, more established
companies. This increased risk may be due to the greater business risks of their
small or medium size, limited markets and financial resources, narrow product
lines and frequent lack of management depth. The securities of small and medium
capitalization companies are often traded in the over-the-counter market and
might not be traded in volumes typical of securities traded on a national
securities exchange. Thus, the securities of small and medium capitalization
companies are likely to be less liquid, and subject to more abrupt or erratic
market movements, than securities of larger, more established companies.
Over-the-Counter Market
Each PBHG Advisor Fund (except the PBHG Advisor Master Fixed Income Fund, PBHG
Advisor High Yield Fund, PBHG Advisor Short-Term Government Fund, and PBHG
Advisor Cash Reserves Fund) may invest in over-the-counter stocks. In contrast
to the securities exchanges, the over-the-counter market is not a centralized
facility which limits trading activity to securities of companies which
initially satisfy certain defined standards. Generally, the
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volume of trading in an unlisted or over-the-counter common stock is less than
the volume of trading in a listed stock. This means that the depth of market
liquidity of some stocks in which each Fund invests may not be as great as that
of other securities and, if a Fund were to dispose of such a stock, it might
have to offer the shares at a discount from recent prices, or sell the shares in
small lots over an extended period of time.
Foreign Securities and Emerging Markets
Each PBHG Advisor Fund (except the PBHG Advisor Cash Reserves Fund) may invest
in foreign securities. Investing in the securities of foreign issuers involves
special risks and considerations not typically associated with investing in U.S.
companies. These risks and considerations include differences in accounting,
auditing and financial reporting standards, generally higher commission rates on
foreign portfolio transactions, the possibility of expropriation or confiscatory
taxation, adverse changes in investment or exchange control regulations,
political instability which could affect U.S. investment in foreign countries
and potential restrictions on the flow of international capital and currencies.
Foreign issuers may also be subject to less government regulation than U.S.
companies. Moreover, the dividends and interest payable on foreign securities
may be subject to foreign withholding taxes, thus reducing the net amount of
income available for distribution to a Fund's shareholders. Further, foreign
securities often trade with less frequency and volume than domestic securities
and, therefore, may exhibit greater price volatility. Changes in foreign
exchange rates will affect, favorably or unfavorably, the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar.
The PBHG Advisor Global Technology & Communications Fund's investments in
emerging markets may be considered speculative, and therefore may offer higher
potential for gains and losses than investments in developed markets of the
world. With respect to any emerging country, there may be greater potential for
nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the value
of the PBHG Advisor Global Technology & Communications Fund's investments in
those countries. In addition, it may be difficult to obtain and enforce a
judgment in the courts of such countries. Further, the economies of developing
countries generally are heavily dependent upon international trade and,
accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Investments in Technology Companies
Each PBHG Advisor Fund may invest in securities of technology companies. Such
securities have tended to be subject to greater volatility than securities of
companies that are not dependent upon or associated with technological issues. A
Fund may invest in the securities of technology
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companies operating in various industries. Many of these industries share common
characteristics. Therefore, an event or issue affecting one such industry may
have a significant impact on these other, related industries and, thus, may
affect the value of a Fund's investments in technology companies. For example,
technology companies may be strongly affected by worldwide scientific or
technological developments and their products and services may be subject to
governmental regulation or adversely affected by governmental policies. The more
extensively that a Fund invests in securities of technology companies (e.g., the
PBHG Global Technology & Communications Fund which invests primarily in such
securities), the greater will be its exposure to these risks.
Options and Futures Contracts
Each PBHG Advisor Fund (except the PBHG Advisor Cash Reserves Fund) may utilize
various call option, put option, and financial futures strategies in pursuit of
its objective. Option contracts, futures contracts, and various other financial
contracts are also known as derivative securities because their values depend on
the values of a more basic underlying security (or perhaps multiple underlying
securities), which may be a common stock, a fixed income or other debt security,
a foreign currency exchange rate, a stock index, or some other financial
instrument or index.
These techniques will be used to hedge against changes in securities prices,
interest rates, or foreign currency exchange rates on securities held or
intended to be acquired by a PBHG Advisor Fund, to reduce the volatility of the
currency exposure associated with foreign securities, or as an efficient means
of adjusting exposure to stock or bond markets, and not for speculation.
A call option on securities gives the purchaser of the option the right (but not
the obligation) to buy from the writer of the option the underlying securities
at the exercise price during the option period. Similarly, a put option on
securities gives the purchaser of the option the right (but not the obligation)
to sell to the writer of the option the underlying securities at the exercise
price during the option period.
A financial futures contract is a commitment by both the buyer and the seller of
the contract to trade the underlying financial instrument at a price and time
agreed upon when the contract is executed. The financial instrument may be a
stock index, bond index, interest rate, foreign currency exchange rate, or other
similar instrument. The contract may include an option held by the seller with
regard to the specific underlying instrument to be delivered from a class of
instruments and the specific day of delivery within a delivery month. Options on
futures contracts are similar to options on securities, with the futures
contract playing the role of the underlying security.
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Options on indexes and currencies, and futures on indexes, are similar to
options and futures on securities, with the underlying index or currency playing
the role of the underlying security, and with the difference that at the end of
the option or future period there is generally a cash settlement between buyers
and sellers instead of delivery of the underlying security.
Options may be traded on an exchange ("exchange traded options") or may be
customized agreements between a PBHG Advisor Fund and a counter-party, often a
brokerage firm, bank, or other financial institution. These customized
agreements are also known as "over-the-counter" or OTC options. Futures
contracts are normally traded as standardized contracts on exchanges. When firm
commitment type agreements similar to futures are traded over-the-counter they
are usually known as forward contracts. Exchange-traded options and futures have
the additional financial backing of an intermediary known as a clearing
corporation, whereas OTC options and forwards have no such intermediary and are
subject to the credit risk that the counter-party will not fulfill its
obligations under the contract. While each Fund, to the extent that it utilizes
derivative securities, intends to primarily utilize exchange-traded options and
futures, it may also utilize OTC options, currency forward contracts, and other
OTC derivative securities. No Fund will invest, at the time of purchase, more
than 5% of its net assets in the purchase of OTC options or invest more than 5%
of its net assets in the purchase of forward contracts.
Although options on securities and financial futures by their terms call for
actual delivery and acceptance of securities, in many cases the contracts are
closed out before the expiration date by selling contracts that are owned or by
buying contracts that have been sold or written. Like any security transaction,
this may produce a realized gain or loss to the Fund. Open positions are valued
whenever a Fund's assets are valued and the Fund will have an unrealized gain or
loss depending on the difference between the current value of the position and
the opening value when the position was entered.
Writing Covered Put and Call Options on Securities or Indexes. The PBHG
Advisor Funds will not write uncovered options or utilize written options to
create leverage, but instead will write only covered calls and covered puts.
Writing a covered call option on securities or indexes means that a Fund will
own at the time of selling the option (1) the underlying security (or securities
convertible into the underlying security without additional consideration), or
(2) in the case of an index, a portfolio of securities which correlates with the
index, or (3) a call option on the same security or index with the same or
lesser exercise price, or (4) a call option on the same security or index with a
greater exercise price, with the difference between the exercise prices
maintained as a segregated account containing cash, U.S. Government securities
or other liquid high-grade debt securities, or (5) liquid high-grade segregated
debt securities equal to the fluctuating market value of the optioned securities
which is marked-to-the-market daily.
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Writing a covered put option on securities or indexes means that a PBHG Advisor
Fund will, at the time of selling the option (1) enter a short position in the
underlying security or index portfolio, or (2) purchase a put option on the same
security or index with the same or greater exercise price, or (3) purchase a put
option on the same security or index with a lesser exercise price, with the
difference between the exercise prices maintained as liquid high-grade
segregated debt securities, or (4) maintain the entire exercise price as liquid
high-grade segregated debt securities. No Fund will write put options if as a
result more than 25% of the Fund's assets would be represented by debt
securities segregated for such put options.
The PBHG Advisor Master Fixed Income Fund will only write an "in-the-money"
covered call option on common stock or an "out-of-the-money" covered put option
on common stock or stock indexes. An in-the-money covered call option is an
investment in which the Fund purchases common stock and sells a call option with
an exercise price that is below the market price of the stock at the time of the
option sale. An out-of-the-money covered put option is an investment in which
the Fund sells a put option on a common stock or stock index with an exercise
price that is below the market price of the stock or index at the time of the
option sale and maintains the exercise price as high-grade segregated debt
securities.
Purchasing Put and Call Options on Securities or Indexes. Each PBHG Advisor
Fund may purchase put and call options on securities or indexes in pursuit of
its objective. A Fund may, at the same time, have a long or covered short
position in the underlying security or index, and may have written covered
options on the same security or index. Hence the Fund's entire position in a
particular security may be complex, consisting of a number of different option
positions, a possible position in the underlying security, and a possible
segregated debt securities holding.
Convertible Securities, Synthetic Convertible Investments, Certain Covered Call
and Cash Secured Put Investments, and Warrants
The PBHG Advisor Master Fixed Income Fund and the PBHG Advisor Enhanced Equity
Fund may invest in securities which may be exchanged for, converted into, or
exercised to acquire a predetermined number of shares of the issuer's common
stock at the option of each such Fund during a specified time period (such as
convertible preferred stocks, convertible debentures and warrants). A
convertible security is generally a fixed income security which is senior to
common stock in an issuer's capital structure, but is usually subordinated to
similar non-convertible securities. No more than 5% of such Funds' total assets
will be invested in convertible securities rated at the time of purchase lower
than A or equivalent.
In general, the market value of a convertible security is at least the higher of
its "investment value" (i.e., its value as a fixed income security) or its
"conversion value" (i.e., its value upon conversion into its underlying common
stock). As a fixed income security, a convertible security tends to decrease in
value when interest rates rise. However, the price of a convertible
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security is also influenced by the market value of the security's underlying
common stock. The price of a convertible security tends to increase as the
market value of the underlying stock rises, whereas it tends to decrease as the
market value of the underlying common stock declines. While no securities
investment is without some risk, investments in convertible securities and
synthetic convertible positions generally entail less risk than investments in
the common stock of the same issuer.
Investments in warrants involve certain risks, including the possible lack of a
liquid market for resale of the warrants, potential price fluctuations as a
result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level at
which the warrant can be prudently exercised (in which event the warrant may
expire without being exercised, resulting in a loss of a Fund's entire
investment therein).
The PBHG Advisor Master Fixed Income Fund and the PBHG Advisor Enhanced Equity
Fund may each invest up to 35% of their total assets in convertible securities,
synthetic convertible and certain combinations of covered call and cash secured
put investments. A synthetic convertible investment is a combination investment
in which the Fund purchases both (i) high-grade cash equivalents or a high grade
debt obligation of an issuer or U.S. Government securities and (ii) call options
or warrants on the common stock of the same or different issuer with some or all
of the anticipated interest income from the associated debt obligation that is
earned over the holding period of the option or warrant. The Funds may also
write an "in-the-money" covered call option on common stock or an
"out-of-the-money" covered put option on common stock or stock indexes.
Convertible securities, synthetic convertible and in-the-money covered calls and
out-of-the-money cash secured puts are not taken into account when determining
whether the Funds have met the requirements that 65% of their total assets be
invested in fixed income and equity securities.
While providing a fixed income stream (generally higher in yield than the income
derivable from common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible security's
underlying common stock. A synthetic convertible position has similar investment
characteristics, but may differ with respect to credit quality, time to
maturity, trading characteristics, and other factors. Because the Fund will
create synthetic convertible positions only out of high grade fixed income
securities, the credit rating associated with a Fund's synthetic convertible
investments is generally expected to be higher than that of the average
convertible security, many of which are rated below high grade. However, because
the options used to create synthetic convertible positions will generally have
expirations between one month and three years of the time of purchase, the
maturity of these positions will generally be shorter than average for
convertible securities. Since the option component of a convertible security or
synthetic convertible position is a wasting asset (in the sense of losing "time
value" as maturity approaches), a synthetic convertible position may lose such
value more rapidly than a convertible
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security of longer maturity; however, the gain in option value due to
appreciation of the underlying stock may exceed such time value loss, the market
price of the option component generally reflects these differences in
maturities, and the Adviser and applicable sub-adviser take such differences
into account when evaluating such positions. When a synthetic convertible
position "matures" because of the expiration of the associated option, the Fund
may extend the maturity by investing in a new option with longer maturity on the
common stock of the same or different issuer. If the Fund does not so extend the
maturity of a position, it may continue to hold the associated fixed income
security.
Covered call and cash secured put investments are subject to the risks
associated with common stocks and options described above. While such
investments have a combined volatility similar to that of long-term corporate
bonds, the Adviser and applicable sub-adviser believe they provide greater
returns than investment in such bonds.
Purchase and Sale of Financial Futures and Options on Financial Futures
Each PBHG Advisor Fund may purchase or sell financial and other futures
contracts and options on financial and other futures contracts in pursuit of its
objective.
Futures contracts and their related options may be purchased or sold for various
reasons: to hedge portfolio securities against adverse fluctuations, to adjust
the level of market exposure of a portfolio, to facilitate trading, to reduce
transaction costs, and/or to seek higher investment returns when a futures or
option contract is attractively priced relative to a typical Fund investment in
the underlying security or index or securities highly correlated to the
underlying index. As with all of the investment strategies that a Fund may
employ, there can be no assurance that any such strategy will achieve its
objective.
A Fund's futures and related options transactions will be conducted within the
following limitations:
(i) When a Fund sells a futures contract, the value of that contract will not
exceed the total market value of the portfolio securities being hedged;
(ii) A Fund will write only covered call and put options on futures;
(iii) When a Fund purchases a futures contract it will maintain the market value
of the contract in liquid high-grade segregated debt securities as described
above;
(iv) A Fund will not enter into futures and options on futures contracts which
would cause the aggregate sum of the initial margins for such contracts and
related option premiums to exceed 5% of the Fund's net assets; provided,
however, that in the case of an option that is
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in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing such 5%.
Certain Risk Factors Associated with Hedging Strategies
When a PBHG Advisor Fund utilizes futures or options to hedge the price
fluctuations of securities it may own or want to purchase, the Fund is exposed
to the risk of imperfect correlation between the futures or options and the
securities being hedged. That is, the prices of the securities being hedged may
not move in the same amount, or even in the same direction, as the hedging
instrument. The Adviser or applicable sub-adviser will attempt to minimize this
risk by investing only in those contracts whose behavior is expected to resemble
the Fund securities being hedged. However, if the Adviser's or applicable
sub-adviser's judgment about the general direction of interest rates, market
value, volatility, and other economic factors is incorrect, the Fund would have
been better off without the use of such hedging techniques. In addition, there
is the risk of a possible lack of a liquid secondary market and the resultant
inability to close a futures or option position prior to its maturity or
expiration date. If the Adviser or applicable sub-adviser determines that the
ability to close such a position early is important to its investment strategy,
it will only enter such positions on an exchange with a secondary market that it
judges to be appropriately active.
Investments in Non-Investment Grade Debt Securities
The PBHG Advisor High Yield Fund intends to invest a significant portion of its
assets in non-investment grade debt securities, commonly known as "junk bonds."
Such securities have ratings from S&P and/or Moody's or another NRSRO which are
lower than the ratings for investment grade securities (or are unrated but
determined by the Adviser to be of comparable quality). Although these
securities generally offer higher yields than investment grade securities with
similar maturities, non-investment grade securities involve greater risks,
including the possibility of default or bankruptcy of the issuer. In general,
they are considered to be predominantly speculative with respect to the issuer's
capacity to pay interest and principal. Other potential risks associated with
investing in non-investment grade securities include:
o Greater market price volatility resulting from changes in or
uncertainty about economic conditions, and changes in the actual or
perceived ability of the issuer to meet its obligations;
o Greater sensitivity of highly leveraged issuers to adverse economic
changes and individual issuer developments; and
o Liquidity may be affected by adverse publicity and changing investor
perceptions about these securities in general and/or a particular
issuer's credit quality.
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As with any other asset held by the PBHG Advisor High Yield Fund, any reduction
in market value of such securities as a result of the above factors would be
reflected in the Fund's net asset value. In addition, because the Fund invests
in non-investment grade securities it may incur additional expenses to the
extent it is required to seek recovery upon a default in the payment of
principal and interest on its holdings. Due to such risks, successful
investments in non-investment grade securities will be more dependent on the
Adviser's credit analysis than generally would be the case for investment in
securities which are investment grade.
It is uncertain how the market for non-investment grade securities will perform
during a prolonged period of rising interest rates. A prolonged economic
downturn or a prolonged period of rising interest rates could adversely affect
the market for these securities, increase their volatility, and reduce their
value and liquidity. Moreover, lower quality securities tend to be less liquid
than higher rated securities because the market for them is not as broad or
active. If market quotations are not available, these securities will be valued
in accordance with procedures established by the Company's Board of Directors.
Judgment may therefore play a greater role in valuing non-investment grade
securities.
In the event the PBHG Advisor High Yield Fund experiences an unexpected level of
net redemptions, it could be forced to sell its non-investment grade securities
without regard to their investment merits, thereby decreasing the asset base
upon which the Fund's expenses can be spread and possibly reducing the Fund's
rate of return.
For additional information regarding permitted investments for each PBHG Advisor
Fund and other risks, see "Glossary of Permitted Investments" and the Statement
of Additional Information.
INVESTMENT LIMITATIONS
The investment objectives of each PBHG Advisor Fund and the investment
limitations set forth herein and certain investment limitations contained in the
Statement of Additional Information are fundamental policies of each Fund. A
Fund's fundamental policies cannot be changed without the consent of the holders
of a majority of such Fund's outstanding shares.
Except for the PBHG Advisor Cash Reserves Fund, each PBHG Advisor Fund, as a
fundamental policy, may not:
1. Except for the PBHG Advisor New Contrarian Fund, PBHG Advisor REIT Fund, and
PBHG Advisor Large Cap Concentrated Fund, purchase securities of any issuer
(except securities issued or guaranteed by the United States, its agencies or
instrumentalities and repurchase agreements involving such securities) if, as a
result, more than 5% of the total assets
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of such Fund would be invested in the securities of such issuer, or such Fund
would own more than 10% of the outstanding voting securities of such issuer.
This restriction applies to 75% of each Fund's total assets.
2. Except for the PBHG Advisor REIT Fund and the PBHG Advisor Global Technology
& Communications Fund, purchase any securities which would cause 25% or more of
the total assets of the Fund to be invested in the securities of one or more
issuers conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in obligations
issued or guaranteed by the United States, its agencies or instrumentalities and
repurchase agreements involving such securities. With respect to the PBHG
Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income Fund, and PBHG
Advisor Short-Term Government Fund, in applying this limitation: (i) utility
companies will be divided according to their services (for example, gas, gas
transmission, electric, electric and gas, and telephone will each be considered
a separate industry); and (ii) financial service companies will be classified
according to the end users of their services (for example, automobile finance,
bank finance, and diversified finance will be considered as separate
industries).
3. Except for the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed
Income Fund, and PBHG Advisor Short-Term Government Fund, borrow money, other
than through reverse repurchase agreements and securities lending activities,
except for temporary or emergency purposes and then only in an amount not
exceeding one-third of the value of the Fund's total assets (or 10% of the value
of the PBHG Advisor Large Cap Concentrated Fund's total assets), net of
liabilities other than senior securities, as provided in the 1940 Act. This
borrowing provision is included to facilitate the settlement of securities
transactions, and the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur, and is not for investment
purposes. All borrowings in excess of 5% of a Fund's total assets will be repaid
before making additional investments.
Each of the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income
Fund, and PBHG Advisor Short-Term Government Fund, as a fundamental policy, may
not borrow money, except as a temporary measure for extraordinary or emergency
purposes or for the clearance of transactions, and then only in amounts not
exceeding 15% of its total assets valued at market (for this purpose, delayed
delivery transactions covered by segregated accounts are not considered to be
borrowings).
The percentages stated in items 1 and 2 above apply at the time of the purchase
of a security.
The PBHG Advisor Cash Reserves Fund, as a fundamental policy, may not:
1. Purchase securities of any issuer if, as a result, more than 5% of the total
assets of such Fund would be invested in the securities of such issuer, except
(a) U.S. Government securities, including securities issued by its agencies and
instrumentalities, (b) to the extent permitted by
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Rule 2a-7 under the 1940 Act, as amended, and (c) that the Fund may purchase
securities of other investment companies to the extent permitted by applicable
law or exemptive order.
2. Purchase any securities which would cause 25% or more of the total assets of
the Fund to be invested in the securities of one or more issuers conducting
their principal business activities in the same industry, provided that this
limitation does not apply to investments in obligations issued or guaranteed by
the U.S. government or its agencies and instrumentalities, repurchase agreements
involving such securities, and obligations of domestic banks.
3. Borrow money, other than through reverse repurchase agreements and securities
lending activities, except for temporary or emergency purposes and then only in
an amount not exceeding one-third of the value of the Fund's total assets. This
borrowing provision is included to facilitate the settlement of securities
transactions, and the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur, and is not for investment
purposes. All borrowings in excess of 5% of the Fund's total assets will be
repaid before making additional investments.
The percentages stated in items 1 and 2 above apply at the time of the purchase
of a security.
HOW TO PURCHASE FUND SHARES
You may purchase shares of each PBHG Advisor Fund through select broker-dealers
or other financial institutions that are authorized to sell you shares of the
Funds. Such financial institutions may charge you a fee for this service in
addition to each Fund's public offering price. Purchases of shares of each PBHG
Advisor Fund may be made on any day on which the New York Stock Exchange
("NYSE") is open for business ("Business Day"). Shares of each Fund are offered
only to residents of states in which such shares are eligible for purchase.
Minimum Investment
The minimum initial investment in Class A and Class B shares of each PBHG
Advisor Fund is $2,500 for regular accounts and $2,000 for Traditional or Roth
IRAs. However, investors who establish a Systematic Investment Plan, as
described below, with a minimum investment of $25 per month may at the same time
open a regular account or Traditional or Roth IRA with any Fund with a minimum
initial investment of $500. There is no minimum for subsequent investments. The
Distributor may waive the minimum initial investment amount at its discretion.
No minimum applies to subsequent purchases effected by dividend reinvestment. As
described below, subsequent purchases through the Fund's Systematic Investment
Plan must be at least $25. The minimum initial investment in Class I shares is
$1 million for all PBHG Advisor Funds in the aggregate. The minimum initial
investment for Education IRAs is $500.
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General Information Regarding Purchases
A purchase order will be effective as of the day received by the PBHG Advisor
Funds if the PBHG Advisor Funds receive sufficient information to execute the
order and receives payment before 2:00 p.m. Eastern time for the PBHG Advisor
Cash Reserves Fund and 4:00 p.m. Eastern time for all other PBHG Advisor Funds.
Payment may be made by check or readily available funds. The purchase price of
shares of a Fund is the public offering price per share next determined after a
purchase order is effective. The public offering price per share is, for Class A
shares, the net asset value plus any applicable sales load, and for Class B and
Class I shares, the net asset value. See "Determination of Net Asset Value"
below. Purchases will be made in full and fractional shares calculated to three
decimal places. A Fund will not issue certificates representing shares of such
Funds.
For your purchase order to be effective on the day you place your order with
your broker-dealer or other financial institution, such broker-dealer or
financial institution must (i) receive your order before 2:00 p.m. Eastern time
for the PBHG Advisor Cash Reserves Fund and 4:00 p.m. Eastern time for all other
PBHG Advisor Funds and (ii) promptly transmit the order to the PBHG Advisor
Funds. The broker-dealer or financial institution is responsible for promptly
transmitting purchase orders to the PBHG Advisor Funds so that you may receive
the same day's net asset value.
If a check received for the purchase of shares does not clear, the purchase will
be canceled and you could be liable for any losses or fees incurred by the
applicable PBHG Advisor Fund. Each Fund reserves the right to reject a purchase
order when such Fund determines that it is not in the best interests of the Fund
or its shareholders to accept such an order.
No PBHG Advisor Fund or any of its agents will be responsible for any loss,
liability, cost or expenses for acting upon wire instructions or telephone
instructions that it reasonably believes to be genuine. Each Fund and its agents
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine including requiring a form of personal identification
prior to acting upon instructions received by telephone and recording telephone
instructions.
Each PBHG Advisor Fund reserves the right to reject any purchase order or to
suspend or modify the continuous offering of its shares. For example, the
investment opportunities for small or medium capitalization companies may from
time to time be more limited than those in other sectors of the stock market.
Therefore, in order to retain adequate investment flexibility, the Adviser may
from time to time recommend to the Board of Directors of the Company that a Fund
which invests extensively in such companies indefinitely discontinue the sale of
its shares to new or existing investors. In such event, the Board of Directors
would determine whether such discontinuance is in the best interests of the
applicable Fund and its shareholders.
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Classes of Shares
Each PBHG Advisor Fund offers three classes of shares - Classes A, B and I -
which are described below. Class I shares are only available to certain
institutional purchasers and Class B Shares of the PBHG Advisor Cash Reserve
Fund are not available for direct investment and may only be purchased through
an exchange of Class B shares of another Fund.
Class A Shares. Class A shares are divided into four groups.
Group 1 - Equity Funds. Class A shares of the following PBHG Advisor Funds
(the "Equity Funds") are currently sold with a sales charge ranging from 5.75%
to 2.00% of the offering price on purchases of less than $1 million: the PBHG
Advisor Core Value Fund, PBHG Advisor Blue Chip Growth Fund, PBHG Advisor Global
Technology & Communications Fund, PBHG Advisor Growth II Fund, PBHG Advisor
Growth Opportunities Fund, PBHG Advisor Enhanced Equity Fund, PBHG Advisor Large
Cap Concentrated Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor REIT Fund,
PBHG Advisor Value Opportunities Fund, PBHG Advisor Trend Fund, and PBHG Advisor
New Opportunities Fund.
Dealer
Concession
Investor's Sales Charge ----------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
$0 - 49,999 5.75% 6.10% 5.00%
50,000 - 99,999 4.50% 4.71% 3.75%
100,000 - 249,999 3.50% 3.63% 2.75%
250,000 - 499,999 2.50% 2.56% 2.00%
500,000 - 999,999 2.00% 2.04% 1.75%
Group 2 - PBHG Advisor Master Fixed Income Fund and PBHG Advisor High
Yield. Class A shares of the PBHG Advisor Master Fixed Income Fund and PBHG
Advisor High Yield Fund are currently sold with a sales charge ranging from
4.75% to 2.00% of the offering price on purchases of less than $1 million.
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Dealer
Concession
Investor's Sales Charge ----------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
$0 - 49,999 4.75% 4.99% 4.25%
50,000 - 99,999 4.50% 4.71% 4.00%
100,000 - 249,999 3.50% 3.63% 3.00%
250,000 - 499,999 2.50% 2.56% 2.25%
500,000 - 999,999 2.00% 2.04% 1.75%
Group 3 - PBHG Advisor Short-Term Government Fund. Class A shares of the
PBHG Advisor Short-Term Government Fund are currently sold with a sales charge
ranging from 1.50% to 1.00% of the offering price on purchases of less than $1
million.
Dealer
Concession
Investor's Sales Charge ----------
------------------------------- As a
As a As a Percentage
Percentage Percentage of the
of the Public of the Net Public
Amount of Investment in Offering Amount Offering
Single Transaction Price Invested Price
----------------------- ------------- ---------- ----------
$0 - 99,999 1.50% 1.52% 1.25%
100,000 - 499,999 1.25% 1.27% 1.00%
500,000 - 999,999 1.00% 1.01% 0.75%
Group 4 - PBHG Advisor Cash Reserves Fund. Class A shares of the PBHG
Advisor Cash Reserves Fund are currently sold without a sales charge.
Further Information on Class A Shares. There is no sales charge on
purchases of $1 million or more; however, the Distributor may pay a dealer
concession and/or advance a service fee on such transactions as described below.
Purchases of $1 million or more are at net asset value. Redemptions of Class A
shares purchased at net asset value may result in the imposition of a limited
contingent deferred sales charge if the dealer's concession referred to above
was paid by the Distributor in connection with the purchase of those shares. See
"How to Redeem Fund Shares - Contingent Deferred Sales Charge Program for Large
Purchases."
The Distributor may elect to re-allow the entire initial sales charge to dealers
for all sales with respect to which orders are placed with the Distributor
during a particular period. The SEC takes the position that dealers to whom
substantially the entire sales charge is re-allowed may be deemed to be
"underwriters" as that term is defined under the Securities Act of 1933.
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<PAGE>
In addition to amounts paid to dealers as a dealer concession out of the initial
sales charge paid by investors, the Distributor may, from time to time, at its
expense or as an expense for which it may be compensated under a distribution
plan, if applicable, pay a bonus or other consideration or incentive to dealers
who sell a minimum dollar amount of the shares of the PBHG Advisor Funds during
a specified period of time. In some instances, these incentives may be offered
only to certain dealers who have sold or may sell significant amounts of shares.
At the option of the dealer, such incentives may take the form of payment for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives and their families to places within or
outside the United States. The total amount of such additional bonus payments or
other consideration will not exceed 0.25% of the public offering price of the
shares sold. Any such bonus or incentive programs will not change the price paid
by investors for the purchase of the applicable Fund's shares or the amount that
any particular Fund will receive as proceeds from such sales. Dealers may not
use sales of the Funds' shares to qualify for any incentives to the extent that
such incentives may be prohibited by applicable law.
The Distributor may make payments to dealers and institutions who are dealers of
record for purchases of $1 million or more of Class A shares which are sold at
net asset value and are subject to a limited contingent deferred sales charge,
for each PBHG Advisor Fund other than the PBHG Advisor Short-Term Government
Fund and PBHG Advisor Cash Reserves Fund as follows: 1% of the first $2 million
of such purchases, plus 0.80% of the next $1 million of such purchases, plus
0.50% of the next $47 million of such purchases, plus 0.25% of amounts in excess
of $50 million of such purchases. The Distributor may make similar payments in
an amount equal to 0.10% of purchases of $1 million or more of Class A shares of
the PBHG Advisor Short-Term Government Fund which are sold at net asset value
and are subject to a limited contingent deferred sales charge. The Distributor
pays dealers of record commissions on sales of Class A shares based upon the
investor's cumulative purchases during the one-year period beginning with the
date of the initial purchase at net asset value. Each subsequent one-year
measuring period for these purposes will begin with the first net asset value
purchase following the end of the prior period. See "How to Redeem Fund Shares -
Contingent Deferred Sales Charge Program for Large Purchases."
Reductions in Initial Sales Charges. Reductions in the initial sales
charges shown in the sales charge tables (quantity discounts) apply to purchases
of shares of the PBHG Advisor Funds that are otherwise subject to an initial
sales charge, provided that such purchases are made by a "purchaser" as
hereinafter defined. Purchases of Class A shares of the PBHG Advisor Cash
Reserves Fund and Class B and Class I shares of the other PBHG Advisor Funds
will not be taken into account in determining whether a purchase qualifies for a
reduction in initial sales charges.
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The term "purchaser" means:
(Diamond) an individual and his or her spouse and children, including
any trust established exclusively for the benefit of any such
person; or a pension, profit-sharing, or other benefit plan
established exclusively for the benefit of any such person,
such as an IRA, a single-participant money-purchase/
profit-sharing plan or an individual participant in a 403(b)
plan (unless such 403(b) plan qualifies as the purchaser as
defined below);
(Diamond) a 403(b) plan, the employer/sponsor of which is an
organization described under Section 501(c)(3) of the Internal
Revenue Code of 1986, as amended (the "Code"), provided that:
a. the employer/sponsor must submit contributions for all
participating employees in a single contribution
transmittal;
b. each transmittal must be accompanied by a single check
or wire transfer; and
c. all new participants must be added to the 403(b) plan
by submitting an application on behalf of each new
participant with the contribution transmittal;
(Diamond) a trustee or fiduciary purchasing for a single trust, estate
or single fiduciary account (including a pension,
profit-sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Code)
and 457 plans, although more than one beneficiary or
participant is involved;
(Diamond) a Simplified Employee Pension ("SEP"), Salary Reduction and
other Elective Simplified Employee Pension account ("SAR-SEP")
where the employer has notified the Distributor in writing
that all of its related employee SEP or SAR-SEP accounts
should be linked;
(Diamond) any other organized group of persons, whether incorporated or
not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase
at a discount of redeemable securities of a registered
investment company.
Investors or dealers seeking to qualify orders for a reduced initial sales
charge must identify such orders and, if necessary, support their qualification
for the reduced charge. The Distributor reserves the right to determine whether
any purchaser is entitled, by virtue of the foregoing definition, to the reduced
sales charge. No person or entity may distribute shares of the PBHG Advisor
Funds without payment of the applicable sales charge other than to persons or
entities who qualify for a reduction in the sales charge as provided herein.
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<PAGE>
Letters of Intent. A "purchaser," as previously defined, may pay reduced
initial sales charges by completing the appropriate section of the account
application and by fulfilling the terms of a Letter of Intent ("LOI"). The LOI
confirms such purchaser's intention as to the total investment to be made in
Class A shares of the PBHG Advisor Funds (except for Class A shares of the PBHG
Advisor Cash Reserves Fund) within the following 13 consecutive months. By
marking the LOI section on the account application and by signing the account
application the purchaser indicates that he understands and agrees to the terms
of the LOI and is bound by the provisions described below.
Each purchase of PBHG Advisor Fund shares normally subject to an initial sales
charge made during the 13-month period will be made at the public offering price
applicable to a single transaction of the total dollar amount indicated by the
LOI, as described under "How to Purchase Fund Shares - Classes of Shares." It is
the purchaser's responsibility at the time of purchase to specify the account
numbers that should be considered in determining the appropriate sales charge.
The offering price may be reduced further as described under "Rights of
Accumulation" if the PBHG Advisor Funds are advised of all other accounts at the
time of the investment. Shares acquired through reinvestment of dividends and
capital gains distributions will not be applied to the LOI. At any time during
the 13-month period after meeting the original obligation, a purchaser may
revise his intended investment amount upward by submitting a written and signed
request. Such a revision will not change the original expiration date. By
signing an LOI, a purchaser is not making a binding commitment to purchase
additional shares, but if purchases made within the 13-month period do not total
the amount specified, the investor will pay the increased amount of sales charge
as described below. Purchases made within 90 days before signing an LOI will be
applied toward completion of the LOI. The LOI effective date will be the date of
the first purchase within the 90-day period. The Transfer Agent will process
necessary adjustments upon the expiration or completion date of the LOI.
Purchases made more than 90 days before signing an LOI will be applied toward
completion of the LOI based on the value of the shares purchased calculated at
the public offering price on the effective date of the LOI.
To assure compliance with the provisions of the 1940 Act, out of the initial
purchase (or subsequent purchases if necessary) the purchaser will pledge and
the Transfer Agent will escrow in the form of shares an appropriate dollar
amount (computed to the nearest full share). All dividends and any capital gain
distributions on the escrowed shares will be credited to the purchaser. All
shares purchased, including those escrowed, will be registered in the
purchaser's name. If the total investment specified under this LOI is completed
within the 13-month period, the escrowed shares will be promptly released. If
the intended investment is not completed, the purchaser will pay the Transfer
Agent the difference between the sales charge on the specified amount and the
amount actually purchased. If the purchaser does not pay such difference within
20 days of the expiration date, the purchaser irrevocably constitutes and
appoints the Transfer Agent as his agent to surrender for redemption any or all
shares, to make up such difference within 60 days of the expiration date.
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<PAGE>
If at any time before completing the LOI program the purchaser wishes to cancel
the agreement, he must give written notice to the Distributor. If at any time
before completing the LOI program the purchaser requests the Transfer Agent to
liquidate or transfer beneficial ownership of his total shares, a cancellation
of the LOI will automatically be effected. If the total amount purchased is less
than the amount specified in the LOI, the Transfer Agent will redeem an
appropriate number of escrowed shares equal to the difference between the sales
charge actually paid and the sales charge that would have been paid if the total
purchases had been made at a single time.
Rights of Accumulation. A "purchaser," as previously defined, may also
qualify for reduced initial sales charges based upon such purchaser's existing
investment in shares of any of the PBHG Advisor Funds (except for Class A shares
of the PBHG Advisor Cash Reserves Fund). To determine whether or not a reduced
initial sales charge applies to a proposed purchase, the Distributor takes into
account not only the money which is invested upon such proposed purchase, but
also the value of all Class A shares of the PBHG Advisor Funds (except for Class
A shares of the PBHG Advisor Cash Reserves Fund) owned by such purchaser,
calculated at their then current public offering price. If a purchaser so
qualifies for a reduced sales charge, the reduced sales charge applies to the
total amount of money then being invested by such purchaser and not just to the
portion that exceeds the breakpoint above which a reduced sales charge applies.
For example, if a purchaser already owns qualifying shares of any PBHG Advisor
Fund with a value of $20,000 and wishes to invest an additional $40,000 in a
PBHG Advisor Fund with a maximum initial sales charge of 5.75%, the reduced
initial sales charge of 4.50% will apply to the full $40,000 purchase and not
just to the $10,000 in excess of the $50,000 breakpoint. To qualify for
obtaining the discount applicable to a particular purchase, the purchaser or his
dealer must furnish the PBHG Advisor Fund with a list of the account numbers and
the names in which such accounts of the purchaser are registered at the time the
purchase is made.
Purchases At Net Asset Value. Purchases of Class A shares of any of the
PBHG Advisor Funds at net asset value (without payment of an initial sales
charge) may be made in connection with: (a) the reinvestment of dividends and
distributions from a PBHG Advisor Fund (see "General Information - Dividends and
Distributions"); (b) exchanges of shares of certain other PBHG Advisor Funds
(see "Shareholder Services - Exchange Privileges"); (c) use of the reinstatement
privilege (see "How to Redeem Fund Shares"); or (d) a merger, consolidation or
acquisition of assets of a PBHG Advisor Fund.
The following persons may purchase Class A shares of the PBHG Advisor Funds
through the Distributor without payment of an initial sales charge: (a) the
Adviser and its affiliated companies; (b) any current or retired officer,
director, trustee or employee, or any member of the immediate family (including
spouse, children, parents and parents of spouse) of any such person, of the
Adviser or its affiliates or of certain mutual funds which are advised or
managed by the Adviser, or any trust established exclusively for the benefit of
such persons; (c) any
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<PAGE>
employee benefit plan established for employees of the Adviser or its
affiliates; (d) discretionary advised clients of the Adviser and its affiliates;
(e) registered representatives and employees of dealers who have entered into
agreements with the Distributor (or financial institutions that have
arrangements with such dealers with respect to the sale of shares of the PBHG
Advisor Funds) and any member of the immediate family (including spouse,
children, parents and parents of spouse) of any such person, provided that
purchases at net asset value are permitted by the policies of such person's
employer; and (f) financial institution trust departments investing an aggregate
of $1 million or more in the PBHG Advisor Funds, (g) clients of certain
administrators of tax-qualified plans when proceeds from repayments of loans to
participants are invested (or reinvested) in the PBHG Advisor Funds, (h) managed
account programs for the benefit of clients of broker-dealers and financial
institutions or financial planners adhering to certain standards established by
the PBHG Advisor Funds that provide asset allocation or similar specialized
investment services or investment company transaction services for their
customers, that charge a minimum annual fee for such services, and that have
entered into an agreement with the Distributor with respect to their use of the
PBHG Advisor Funds in connection with such services, (i) clients of registered
representatives of an authorized investment dealer if such purchase is funded by
proceeds from an investment where a front-end sales charge, contingent deferred
sales charge, or other sales charge has been assessed, and (j) former
shareholders of the Analytic Enhanced Equity Portfolio, Analytic Master Fixed
Income Portfolio, or Analytic Short-Term Government Portfolio (the "Analytic
Portfolios") who obtained their initial shares of any PBHG Advisor Fund in a
reorganization of any such Analytic Portfolio into a corresponding PBHG Advisor
Fund.
In addition, Class A shares of any PBHG Advisor Fund may be purchased at net
asset value, without payment of a sales charge, by pension, profit-sharing or
other employee benefit plans created pursuant to a plan qualified under Section
401 of the Code or plans under Section 457 of the Code, or employee benefit
plans created pursuant to Section 403(b) of the Code and sponsored by nonprofit
organizations defined under Section 501(c)(3) of the Code. Such plans will
qualify for purchases at net asset value provided that (1) the total amount
invested is at least $1 million; (2) the sponsor signs a $1 million LOI; (3)
such shares are purchased by an employer-sponsored plan with at least 100
eligible employees; or (4) all of the plan's transactions are executed through a
single financial institution or service organization which has entered into an
agreement with the Distributor with respect to its use of the PBHG Advisor Funds
in connection with such accounts. Section 403(b) plans sponsored by public
educational institutions will not be eligible for net asset value purchases
based on the aggregate investment made by the plan or the number of eligible
employees. Participants in such plans will be eligible for reduced sales charges
based solely on the aggregate value of their individual investments in the
applicable PBHG Advisor Fund.
Class B Shares. Class B shares are sold at net asset value without an
initial sales charge, but are subject to a contingent deferred sales charge of
up to 5% if redeemed within six years. See "How to Redeem Fund Shares - Class B
Shares." The Company has adopted a
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<PAGE>
12b-1 distribution plan applicable to Class B shares. See "General Information -
Class B Plan." Class B shares will automatically convert into Class A shares,
based on relative net asset value, eight years after the end of the calendar
month in which the order to purchase such Class B shares was accepted. Class B
shares of the PBHG Advisor Cash Reserves Fund are only available for exchanges
from other Class B shares and are not available for direct purchase.
The Distributor may pay sales commissions to dealers and institutions who sell
Class B shares of the PBHG Advisor Funds at the time of such sales. Payments
with respect to Class B shares will equal 4.00% of the purchase price of the
Class B shares sold by the dealer or institution, and will consist of a sales
commission equal to 3.75% of the purchase price of the Class B shares sold plus
an advance of the first year service fee of 0.25% with respect to such shares.
These payments are recouped by the Distributor through the Class B Rule 12b-1
distribution plan. See "Distribution Plans."
Class I Shares. Class I shares are sold without an initial sales charge,
are not subject to a contingent deferred sales charge, and are not subject to a
12b-1 distribution plan. Class I shares are available only to certain
institutional investors, such as defined benefit plans and defined contribution
plans, managed account programs, and trusts or custodial accounts at banks or
trust companies, in each case where the institution does not receive any payment
from the Company for administrative, record keeping or transfer agency related
services performed by such institution and where the financial institution has
entered into a participation agreement with the Distributor.
All Classes of Shares. For any PBHG Advisor Fund offered by this
Prospectus, the Distributor and its agents reserve the right at any time (1) to
withdraw all or any part of the offering made by this Prospectus; (2) to reject
any purchase or exchange order or to cancel any purchase due to nonpayment of
the purchase price; (3) to increase, waive or lower the minimum investment
requirements; or (4) to modify any of the terms or conditions of purchase of
shares of such Fund. The Distributor and its agents will use their best efforts
to provide notice of any such actions through correspondence with broker-dealers
and existing shareholders, supplements to the PBHG Advisor Funds' prospectuses,
or other appropriate means, and will provide notice to the extent required by
law in the case of termination or material modification to the exchange
privilege discussed under "Shareholder Services - Exchange Privileges."
SHAREHOLDER SERVICES
Shareholder Services Offered
The PBHG Advisor Funds offer the shareholder services described below. Each PBHG
Advisor Fund reserves the right to amend such shareholder services or to change
the terms or conditions relating to such services. Shareholders will be notified
of such action to the extent required by
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<PAGE>
law. You may, however, discontinue any service you select, provided that with
respect to the Systematic Investment and Systematic Withdrawal Plans described
below, the PBHG Advisor Funds receive your notification to discontinue such
service(s) at least ten (10) days before the next scheduled investment or
withdrawal date.
Systematic Investment Plan. The Systematic Investment Plan is a convenient
way for you to purchase shares in the PBHG Advisor Funds at regular monthly or
quarterly intervals selected by you. The Systematic Investment Plan enables you
to achieve dollar-cost averaging with respect to investments in the PBHG Advisor
Funds despite their fluctuating net asset values through regular purchases of a
fixed dollar amount of shares in the Funds. Dollar-cost averaging brings
discipline to your investing. Dollar-cost averaging results in more shares being
purchased when a Fund's net asset value is relatively low and fewer shares being
purchased when a Fund's net asset value is relatively high, thereby helping to
decrease the average price of your shares. Investors who establish a Systematic
Investment Plan may open an account with a minimum balance of $500. Through the
Systematic Investment Plan, shares are purchased by transferring monies (minimum
of $25 per transaction per Fund) from your designated checking or savings
account. Your systematic investment in the PBHG Advisor Funds designated by you
will be processed on a regular basis at your option beginning on or about either
the first or fifteenth day of the month or quarter you select. This Systematic
Investment Plan must be established on your account at least 15 days prior to
the intended date of your first systematic investment.
Systematic Withdrawal Plan. The Systematic Withdrawal Plan provides a
convenient way for you to receive current income while maintaining your
investments in the PBHG Advisor Funds. The Systematic Withdrawal Plan permits
you to have payments of $50 or more automatically transferred from your
account(s) in the Funds to your designated checking or savings account on a
monthly, quarterly, or semi-annual basis. The Systematic Withdrawal Plan also
provides the option of having a check mailed to the address of record for your
account. In order to start this Plan, you must have a minimum balance of $5,000
in any account using this feature. Your systematic withdrawals will be processed
on a regular basis beginning on or about either the first or fifteenth day of
the month, quarter or semi-annual period you select.
Exchange Privileges. You can exchange your shares for shares of the same
class of other PBHG Advisor Funds at net asset value.
Certain Class A Exchanges. As noted above, the Equity Funds are the PBHG
Advisor Core Value Fund, PBHG Advisor Blue Chip Growth Fund, PBHG Advisor Global
Technology & Communications Fund, PBHG Advisor Growth II Fund, PBHG Advisor
Growth Opportunities Fund, PBHG Advisor Enhanced Equity Fund, PBHG Advisor Large
Cap Concentrated Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor REIT Fund,
PBHG Advisor Value Opportunities Fund, PBHG Advisor Trend Fund, and PBHG Advisor
New Opportunities Fund.
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Class A shares of the Equity Funds may be exchanged for Class A shares of any
PBHG Advisor Fund at relative net asset value without payment of sales charges.
Class A shares of the PBHG Advisor High Yield Fund, PBHG Advisor Master Fixed
Income Fund, PBHG Advisor Short-Term Government Fund, and PBHG Advisor Cash
Reserves Fund (the "Fixed Income Funds") may be exchanged for Class A shares of
any PBHG Advisor Fund and the exchange will be made at: the public offering
price if PBHG Advisor Cash Reserves Fund shares are being exchanged for Class A
shares of another PBHG Advisor Fund; net asset value if the Fixed Income Fund
shares being exchanged were acquired upon an exchange of an Equity Fund's
shares; and the difference in sales charge will apply if Equity Fund shares are
being acquired upon exchange of Fixed Income Fund shares.
Class A Large Purchases and Class B Shares. If you exchange shares that are
subject to a contingent deferred sales charge, the exchange transaction will not
be subject to the contingent deferred sales charge. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
contingent deferred sales charge, depending upon when you originally purchased
the shares. For purposes of computing the contingent deferred sales charge, the
length of time you have owned your shares will be measured from the date of
original purchase and will not be affected by any exchange.
For federal income tax purposes, an exchange is treated as a sale of shares and
generally results in a capital gain or loss.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where the Adviser or the Board of Directors
believe doing so would be in the best interests of a PBHG Advisor Fund, each
Fund reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. The exchange privilege is
not an option or right to purchase shares but is permitted under the respective
policies of the participating PBHG Advisor Funds, and may be modified or
discontinued by any of such Funds or by the Distributor at any time, and to the
extent permitted by applicable law, without notice.
Shares of any PBHG Advisor Fund (other than the PBHG Advisor Cash Reserves Fund)
to be exchanged are redeemed at their net asset value as determined at the close
of the NYSE, which is normally 4:00 p.m. Eastern Time ("NYSE Close") on the day
that an exchange request in proper form (described below) is received. Exchange
requests received after the NYSE Close will result in the redemption of shares
at their net asset value at the NYSE Close on the next business day. Normally,
shares of a Fund to be acquired by exchange are purchased at their net asset
value or applicable offering price, as the case may be, determined on the date
that such request is received, but under unusual market conditions such
purchases may be delayed for up
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to five business days if it is determined that such Fund would be materially
disadvantaged by an immediate transfer of the proceeds of the exchange.
Exchanging by Mail. You may exchange your shares by mail by sending a
written request to the PBHG Advisor Funds. The request should contain the
account registration and account number, the dollar amount or number of shares
to be exchanged, and the names of the PBHG Advisor Funds from which and into
which the exchange is to be made. Your request should comply with all of the
requirements for redemption by mail, except those required for redemption of
IRAs. See "How to Redeem Fund Shares."
Exchanging by Telephone. You or your investment professional may request an
exchange by telephone. If you do not wish to allow telephone exchanges by any
person in your account, you should decline that option on the account
application. The Distributor has made arrangements with certain dealers and
investment advisory firms to accept telephone instructions to exchange shares
among any of the PBHG Advisor Funds. The Distributor reserves the right to
impose conditions on dealers or investment advisers who make telephone exchanges
of shares among the Funds, including the condition that any such dealer or
investment adviser enter into an agreement (which contains additional conditions
with respect to exchanges of shares) with the Distributor. To exchange shares by
telephone, you or your investment professional who has satisfied the foregoing
conditions must call the PBHG Advisor Funds at 1-888-800-2685. If you are unable
to reach the PBHG Advisor Funds by telephone, you may use overnight courier
services to expedite exchanges by mail, which will be effective on the Business
Day received by the PBHG Advisor Funds as long as such request is received prior
to the NYSE Close. No PBHG Advisor Fund or any of its agents will be liable for
any loss, expense or cost arising out of any telephone exchange request that it
reasonably believes to be genuine, but may be liable in certain cases for losses
due to unauthorized or fraudulent transactions if they do not follow reasonable
procedures for verification of telephone transactions. Such reasonable
procedures may include recordings of telephone transactions (maintained for six
months), requests for confirmation of the shareholder's Social Security Number
and current address, and mailings of confirmations promptly after the
transaction.
The exchange privilege may be exercised only in those states where the shares of
the PBHG Advisor Fund being purchased in an exchange may legally be sold.
Tax-Sheltered Retirement Plans. A variety of retirement plans, including
IRAs, SEP-IRAs, 401(a) Keogh and corporate money purchase pension and profit
sharing plans, and 401(k) and 403(b) plans are available to investors in the
PBHG Advisor Funds.
Traditional IRAs. You may save for your retirement and shelter your
investment income from current taxes by either: (a) establishing a new
Traditional IRA; or (b) "rolling-over" to a PBHG Advisor Fund monies from other
IRAs or lump sum distributions from a qualified retirement plan. If you are
between 18 and 70 1/2 years of age, you can use a Traditional IRA
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to invest up to $2,000 per year of your earned income in any of the PBHG Advisor
Funds. You may also invest up to $2,000 per year in a spousal IRA if your spouse
has no earned income. There is a $10.00 annual maintenance fee charged to
Traditional IRA investors. If you maintain IRA accounts in more than one PBHG
Advisor Fund, you will only be charged one fee. This fee can be prepaid or will
be debited from your account if not received by the announced deadline.
Roth IRAs. Roth IRAs are similar to Traditional IRAs in many respects and
provide a unique opportunity for qualifying individuals to accumulate investment
earnings tax free. Contributions to Roth IRAs are not tax-deductible (while
contributions to Traditional IRAs may be), however, if you meet the distribution
requirements, you can withdraw your investments without paying any taxes on the
earnings. In addition to establishing a new Roth IRA, you may be eligible to
convert a Traditional IRA into a Roth IRA. Maintenance fees charged for Roth
IRAs are similar to those for Traditional IRAs.
SEP-IRAs. If you are a self-employed person, you can establish a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is designed to provide persons with
self-employed income (and their eligible employees) with many of the same tax
advantages as a Keogh, but with fewer administrative requirements.
401(a) Keogh and Corporate Retirement Plans. Both a prototype money
purchase pension plan and a profit sharing plan, which may be used alone or in
combination, are available for self-employed individuals and their partners, and
corporations to provide tax-sheltered retirement benefits for individuals and
employees.
401(k) Plans. Through the establishment of a 401(k) plan by a corporation
of any size, employees can invest a portion of their wages in the PBHG Advisor
Funds on a tax-deferred basis in order to help them meet their retirement needs.
403(b) Plans. Section 403(b) plans are custodial accounts which are
available to employees of most non-profit organizations and public schools.
Other Special Accounts. The PBHG Advisor Funds also offer the following
special accounts to meet your needs:
Education IRAs. Education IRAs allow you to save for qualified higher
education expenses of designated beneficiaries. Like Traditional and Roth IRAs,
Education IRAs provide an opportunity for your investment to grow tax-free until
distributed. Contributions to an Education IRA are not tax deductible, however,
distributions from an Education IRA which are used to pay qualified higher
education expenses are tax-free. You may contribute up to $500 per year for the
benefit of each prospective student under the age of 18. There is a $7.00 annual
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maintenance fee charged to Education IRA accounts. This fee can be prepaid or
will be deducted from your account if not received by the announced deadline.
Uniform Gift to Minors/Uniform Transfers to Minors. By establishing a
Uniform Gift to Minors Account/Uniform Transfers to Minors Account with the PBHG
Advisor Funds you can build a fund for your children's education or a nest egg
for their future and, at the same time, potentially reduce your own income
taxes.
Custodial and Fiduciary Accounts. The PBHG Advisor Funds provide a
convenient means of establishing custodial and fiduciary accounts for investors
with fiduciary responsibilities.
For further information regarding any of the above retirement plans and
accounts, please contact your investment or tax professional.
HOW TO REDEEM FUND SHARES
General
You may sell (redeem) shares in your account by contacting your investment
dealer or the Company. If you sell shares through an investment dealer you may
be charged for this service. Shares held for you in your dealer's street name
must be sold through the dealer.
Redemption orders received by the PBHG Advisor Funds prior to 2:00 p.m. Eastern
time for the PBHG Advisor Cash Reserves Fund and 4:00 p.m. Eastern time for each
of the other PBHG Advisor Funds on any Business Day will be effective that day.
The redemption price of shares is the net asset value per share of a Fund next
determined after the redemption order is effective. The redemption price of
Class B shares and Class A shares subject to a contingent deferred sales charge
will be reduced by any applicable contingent deferred sales charge. Payment of
net redemption proceeds will be made as promptly as possible and, in any event,
within seven days after the redemption order is received, provided, however,
that redemption proceeds for shares purchased by check (including certified or
cashier's checks) or by ACH will be forwarded only upon collection of payment
for such shares; collection of payment will take 15 days.
In order for your redemption order to be effective on the day you place your
redemption order with your broker-dealer or other financial institution, such
broker-dealer or financial institution must (i) receive your order before 2:00
p.m. Eastern time for the PBHG Advisor Cash Reserves Fund and 4:00 p.m. Eastern
Time for each other PBHG Advisor Fund and (ii) promptly transmit the order to
the Transfer Agent. See "Determination of Net Asset Value." The financial
institution is responsible for promptly transmitting redemption orders to the
Transfer Agent so that your shares are redeemed at the same day's net asset
value per share.
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You may receive redemption payments in the form of a check or by Federal Reserve
wire or ACH transfer.
By Mail
Redemption requests must be in writing and sent to the PBHG Advisor Funds.
Requests for redemption must include: (a) original signatures of each registered
owner exactly as the shares are registered; (b) the name of the PBHG Advisor
Fund and the account number of shares to be redeemed; (c) signature guarantees,
as described below; and (d) any additional documents that may be required for
redemption by corporations, partnerships, trusts or other entities. The burden
is on the shareholder to inquire as to whether any additional documentation is
required. Any request not in proper form may be rejected and in such case must
be renewed in writing.
In addition to these requirements, shareholders who have invested in a PBHG
Advisor Fund to establish an IRA should include the following information along
with a written request for either partial or full liquidation of Fund shares:
(a) a statement as to whether or not the shareholder has attained age 59 1/2;
and (b) a statement as to whether or not the shareholder elects to have federal
income tax withheld from the proceeds of the liquidation.
By Telephone
Shareholders may request a redemption by telephone. If a shareholder does not
wish to allow telephone redemptions by any person for his account, the
shareholder should decline that option on the account application. The telephone
redemption feature can be used only if: (a) the redemption proceeds are to be
mailed to the address of record or wired to the pre-authorized bank account as
indicated on the account application; (b) there has been no change of address of
record on the account within the preceding 30 days; (c) the person requesting
the redemption can provide proper identification information; and (d) the
proceeds of the redemption do not exceed $50,000. Accounts in the Distributor's
prototype retirement plans (such as IRA and IRA/SEP) or 403(b) plans are not
eligible for the telephone redemption option. The Distributor has made
arrangements with certain dealers and investment advisers to accept telephone
instructions for the redemption of shares. The Distributor reserves the right to
impose conditions on these dealers and investment advisers, including the
condition that they enter into agreements (which contain additional conditions
with respect to the redemption of shares) with the Distributor. No PBHG Advisor
Fund or any of its agents will be liable for any loss, expense or cost arising
out of any telephone redemption request effected in accordance with the
authorization set forth at that item of the account application if it reasonably
believes such request to be genuine, but may in certain cases be liable for
losses due to unauthorized or fraudulent transactions if they do not follow
reasonable procedures for verification of telephone transactions. Such
reasonable procedures may include recordings of telephone transactions,
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requests for confirmation of the shareholder's Social Security Number and
current address, and mailings of confirmations promptly after the transaction.
By Wire
The Transfer Agent will deduct a wire charge, currently $10.00, from the amount
of a Federal Reserve wire redemption payment made at the request of a
shareholder. Shareholders cannot receive proceeds from redemptions of shares of
a PBHG Advisor Fund by Federal Reserve wire on federal holidays restricting wire
transfers.
By ACH
The PBHG Advisor Funds do not charge for ACH transactions; however, proceeds
from such transactions will not be posted to your bank account until the second
Business Day following the transaction. In order to process a redemption by ACH,
banking information must be established on your account at least 15 days prior
to initiating a transaction. A voided check or deposit slip must accompany
requests to establish this option.
Expedited Redemptions (PBHG Advisor Cash Reserves Fund only)
If a redemption order is received by the PBHG Advisor Funds prior to 2:00 p.m.
Eastern Time, the redemption will be effective on that day and the PBHG Advisor
Cash Reserves Fund will endeavor to transmit payment on that same business day.
If the redemption order is received after 2:00 p.m. and prior to the NYSE Close,
the redemption will be made at the next determined net asset value and payment
will generally be transmitted on the next business day.
Redemptions by Check (PBHG Advisor Cash Reserves Fund only)
After completing the appropriate authorization form, shareholders may use checks
to effect redemptions from the PBHG Advisor Cash Reserves Fund. This privilege
does not apply to retirement accounts or qualified plans. Checks may be drawn in
any amount of $250 or more. Checks drawn against insufficient shares in the
account, against shares held less than fifteen business days, or in amounts of
less than the applicable minimum will be returned to the payee. The payee of the
check may cash or deposit it in the same way as an ordinary bank check. When a
check is presented to the Transfer Agent for payment, the Transfer Agent will
cause a sufficient number of shares of such Fund to be redeemed to cover the
amount of the check. Shareholders are entitled to dividends on the shares
redeemed through the day on which the check is presented to the Transfer Agent
for payment.
Check writing service is offered free of charge to shareholders of the PBHG
Advisor Cash Reserves Fund. If you have an account balance of $5,000 or more,
you may redeem shares by
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writing checks on your account for $250 or more. To establish this privilege,
please call 1-888-800-2685 to request a signature card. Once you have signed
and returned a signature card, you will receive a supply of checks. A check may
be made payable to any person, and your account will continue to earn dividends
until the check clears. Because of the difficulty of determining in advance the
exact value of your account, you may not use a check to close your account. Your
account will be charged a fee for stopping payment of a check upon your request,
or if the check cannot be honored because of insufficient funds or other valid
reasons.
Signature Guarantees
A signature guarantee is a widely accepted way to protect you by verifying the
signature on certain redemption requests. The PBHG Advisor Funds require
signature guarantees to be provided in the following circumstances: (1) written
requests for redemptions in excess of $50,000; (2) all written requests to wire
redemption proceeds; (3) redemption requests that provide that the redemption
proceeds should be sent to an address other than the address of record or to a
person other than the registered shareholder(s) for the account; (4) redemptions
requesting proceeds to be sent to a new address or an address that has been
changed within the past 30 days; (5) requests to transfer the registration of
shares to another owner; (6) written requests to add telephone exchange and
telephone redemption options to an account; and (7) changes in previously
designated wiring instructions. These requirements may be waived or modified
upon notice to shareholders.
Acceptable guarantors include banks, broker-dealers, credit unions, national
securities exchanges, savings associations and any other organization, provided
that such institution or organization qualifies as an "eligible guarantor
institution" as that term is defined in rules adopted by the Securities and
Exchange Commission ("SEC"), and further provided that such guarantor
institution is listed in one of the reference guides contained in the Transfer
Agent's current Signature Guarantee Standards and Procedures, such as certain
domestic banks, credit unions, securities dealers, or securities exchanges. The
Transfer Agent will also accept signatures with either: (1) a signature
guaranteed with a medallion stamp of the STAMP Program, or (2) a signature
guaranteed with a medallion stamp of the NYSE Medallion Signature Program,
provided that in either event, the amount of the transaction involved does not
exceed the surety coverage amount indicated on the medallion. For information
regarding whether a particular institution or organization qualifies as an
"eligible guarantor institution," an investor should contact your investment
dealer. The PBHG Advisor Funds do not accept guarantees from notaries public or
organizations that do not provide reimbursement in the case of fraud.
Minimum Account Size
Due to the relatively high cost of maintaining smaller accounts, each PBHG
Advisor Fund, with respect to its Class A shares and Class B shares, will impose
an annual $12.00 minimum account charge and reserves the right to redeem shares
in any non-retirement account if, as the result of
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redemptions, the value of any account drops below the minimum initial investment
amount, specified above, for such Fund. See "Minimum Investment," "Systematic
Investment Plans" and "Systematic Withdrawal Plans" for minimum investments. You
will be allowed at least 60 days after notice from the applicable PBHG Advisor
Fund to make an additional investment to bring your account value up to at least
the applicable minimum account size before the annual $12.00 minimum account fee
is charged and/or the redemption of a non-retirement account is processed. The
applicable minimum account charge will be imposed annually on any such account
until the account is brought up to the applicable minimum account size.
The right of redemption may be suspended or the date of payment of redemption
proceeds postponed during certain periods as set forth more fully in the
Statement of Additional Information.
Class B Shares
Class B shares may be redeemed on any Business Day at the net asset value per
share next determined following receipt of the redemption order, less the
applicable contingent deferred sales charge shown in the table below. No
contingent deferred sales charge will be imposed (i) on redemptions of Class B
shares following six years from the date such shares were purchased, (ii) on
Class B shares acquired through reinvestments of dividends and distributions
attributable to Class B shares, or (iii) on amounts that represent capital
appreciation in the shareholder's account above the purchase price of the Class
B shares.
Year Contingent Deferred
Since Sales Charge as
Purchase % of Dollar Amount
Made Subject to Charge
-------- -------------------
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh 0%
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that a redemption is made: first, of any shares held in the
shareholder's account that are not subject to such charge; second, of shares
derived from reinvestment of dividends and distributions; third, of shares held
for more than six years from the date such shares were purchased; and fourth, of
shares held less than six years from the date such shares were purchased. The
applicable sales charge will be applied against the original cost of the
redeemed shares.
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The contingent deferred sales charge on Class B shares will be waived on
redemptions (1) following the death or post purchase disability, as defined in
Section 72(m)(7) of the Code, of a shareholder or as settlor of a living trust
(provided the PBHG Advisor Funds are notified of such death or post-purchase
disability at the time of the redemption request and are provided with
satisfactory evidence of such death or post-purchase disability), (2) in
connection with certain distributions from individual retirement accounts,
custodial accounts maintained pursuant to Code Section 403(b), deferred
compensation plans qualified under Code Section 457 and plans qualified under
Code Section 401 (collectively, "Retirement Plans"), (3) pursuant to a
Systematic Withdrawal Plan, provided that amounts withdrawn under such plan do
not exceed on an annual basis 12% of the value of the shareholder's investment
in Class B shares at the time the shareholder elects to participate in the
Systematic Withdrawal Plan, (4) effected pursuant to the right of each PBHG
Advisor Fund to liquidate a shareholder's account if the aggregate net asset
value of shares held in the account is less than the designated minimum account
size described in the prospectus of such Fund, and (5) effected by the Adviser,
the sub-advisers or their affiliates of any of their investments in Class B
shares.
Waiver category (1) above applies only to redemptions of Class B shares held at
the time of death or initial determination of post-purchase disability.
Waiver category (2) above applies only to redemptions resulting from:
(i) required minimum distributions to plan participants or beneficiaries
who are age 70 1/2 or older, and only with respect to that portion of such
distributions which does not exceed 12% annually of the participant's or
beneficiary's account value;
(ii) in kind transfers of assets where the participant or beneficiary
notifies the PBHG Advisor Funds of such transfer no later than the time such
transfer occurs;
(iii) tax-free rollovers or transfers of assets to another Retirement Plan
invested in Class B shares of one or more of the PBHG Advisor Funds;
(iv) tax-free returns of excess contributions or returns of excess deferral
amounts; and
(v) distributions upon the death or disability (as defined in the Code) of
the participant or beneficiary.
Contingent Deferred Sales Charge Program for Large Purchases
A contingent deferred sales charge applies to purchases of $1 million or more of
Class A shares of each PBHG Advisor Fund other than the PBHG Advisor Cash
Reserves Fund that are redeemed within 12 months of the date of purchase. This
charge will be of based on the lesser of the value of the shares redeemed
(excluding reinvested dividends and capital gain
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distributions) or the total original cost of such shares and will be charged at
rates as follows: (i) for each Fund other than the PBHG Advisor Short-Term
Government Fund, 1% of the first $2 million of purchases, plus 0.80% of the next
$1 million of purchases, plus 0.50% of the next $47 million of purchases, plus
0.25% of purchases in excess of $50 million; and (ii) for the PBHG Advisor
Short-Term Government Fund, 0.10% of all purchases of $1 million or more. In
determining whether a contingent deferred sales charge is payable, and the
amount of any such charge, shares not subject to the contingent deferred sales
charge are redeemed first (including shares purchased by reinvested dividends
and capital gains distributions and amounts representing increases from capital
appreciation), and then other shares are redeemed in the order of purchase. No
such charge will be imposed upon exchanges unless the shares acquired by
exchange are redeemed within 12 months of the date the shares were originally
purchased. The charge will be waived in the following circumstances: (1)
redemptions of shares by employee benefit plans ("Plans") qualified under
Sections 401 or 457 of the Code, or Plans created under Section 403(b) of the
Code and sponsored by nonprofit organizations as defined under Section 501(c)(3)
of the Code, where shares are being redeemed in connection with employee
terminations or withdrawals, and (a) the total amount invested in a Plan is at
least $1 million; (b) the sponsor of a Plan signs a Letter of Intent to invest
at least $1 million in one or more of the PBHG Advisor Funds, or (c) the shares
being redeemed were purchased by an employer-sponsored Plan with at least 100
eligible employees; provided, however, that Plans created under Section 403(b)
of the Code which are sponsored by public educational institutions shall qualify
under (a), (b) or (c) above on the basis of the value of each Plan participant's
aggregate investment in the PBHG Advisor Funds, and not on the aggregate
investment made by the Plan or on the number of eligible employees; (2)
redemptions of shares following the death or post-purchase disability, as
defined in Section 72(m)(7) of the Code, of a shareholder or a settlor of a
living trust; (3) redemptions of shares purchased at net asset value by private
foundations or endowment funds where the initial amount invested was at least $1
million; (4) redemptions of shares purchased by an investor in amounts of $1
million or more where such investor's dealer of record, due to the nature of the
investor's account, notifies the Distributor prior to the time of investment
that the dealer waives the payments otherwise payable to the dealer; and (5)
pursuant to a Systematic Withdrawal Plan, provided that amounts withdrawn under
such plan do not exceed on an annual basis 12% of the value of the shareholder's
investment in Class A shares at the time the shareholder elects to participate
in the Systematic Withdrawal Plan.
Class I Shares
Class I shares may be redeemed on any business day at the net asset value per
share next determined following receipt of the redemption order. No contingent
deferred sales charge will be imposed on redemption of Class I shares.
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Reinstatement Privilege (Class A only)
Within 90 days of a redemption, a shareholder may reinvest all or part of the
redemption proceeds in Class A shares of any PBHG Advisor Fund (except Class A
shares of the PBHG Advisor Cash Reserves Fund) at the net asset value next
computed after receipt by the Distributor of the proceeds to be reinvested. The
shareholder must ask for such privilege at the time of reinvestment. A realized
gain on the redemption is taxable, and reinvestment may alter any capital gains
payable. If there has been a loss on the redemption and shares of the same Fund
are repurchased, all of the loss may not be tax deductible, depending on the
timing and amount reinvested. Under the Code, if the redemption proceeds of Fund
shares on which a sales charge was paid are reinvested in (or exchanged for)
shares of another PBHG Advisor Fund at a reduced sales charge within 90 days of
the payment of the sales charge, the shareholder's basis in the Fund shares
redeemed may not include the amount of the sales charge paid, thereby reducing
the loss or increasing the gain recognized from the redemption; however, the
shareholder's basis in the Fund shares purchased will include the sales charge.
Each PBHG Advisor Fund may amend, suspend or cease offering this privilege at
any time as to shares redeemed after the date of such amendment, suspension or
cessation. This privilege may only be exercised once each year by a shareholder
with respect to each Fund.
Shareholders who are assessed a contingent deferred sales charge in
connection with the redemption of Class A shares and who subsequently reinvest a
portion or all of the value of the redeemed shares in the same class of shares
of any PBHG Advisor Fund within 90 days after such redemption may do so at net
asset value if such privilege is claimed at the time of reinvestment. Such
reinvested proceeds will not be subject to either a front-end sales charge at
the time of reinvestment or an additional contingent deferred sales charge upon
subsequent redemption. In order to exercise this reinvestment privilege, the
shareholder must notify the PBHG Advisor Funds of his or her intent to do so at
the time of reinvestment.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of each PBHG Advisor Fund, other than the PBHG
Advisor Cash Reserves Fund, is determined by dividing the total market value of
such Fund's investments and other assets, less any liabilities, by the total
outstanding shares of the Fund. Net asset value per share is determined daily as
of the NYSE Close on any Business Day. The net asset value per share of each
PBHG Advisor Fund, other than the PBHG Advisor Cash Reserves Fund, is listed
under PBHG Advisor in the mutual fund section of most major daily newspapers,
including The Wall Street Journal. Each Fund's assets (other than the PBHG
Advisor Cash Reserves Fund) are valued primarily on the basis of market
quotations. Foreign securities are valued on the basis of quotations from the
primary market in which they are traded, and are translated from the local
currency into U.S. dollars using current exchange rates. In addition, if
quotations are not readily available, or if the values have been materially
affected by events occurring after the
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closing of a foreign market, assets may be valued by another method that the
Board of Directors believes accurately reflects fair value.
The PBHG Advisor Cash Reserves Fund values its portfolio securities using the
amortized cost method of valuation, approximating market value. Net asset value
per share is determined daily as of 2:00 p.m. Eastern time on each Business Day.
PERFORMANCE ADVERTISING
From time to time, each PBHG Advisor Fund may advertise its yield and total
return. These figures will be based on historical earnings and are not intended
to indicate future performance. No representation can be made regarding actual
future yields or returns. For Funds other than the PBHG Advisor Cash Reserves
Fund, yield refers to the annualized income generated by an investment in such
Fund over a specified 30-day period. The yield is calculated by assuming that
the same amount of income generated by the investment during that period is
generated in each 30-day period over one year and is shown as a percentage of
the investment.
The "current yield" of the PBHG Advisor Cash Reserves Fund refers to the net
change (excluding capital changes and income other than investment income) in
the value of an investment in such Fund over a seven-day period (which period
will be stated in the advertisement). This income is then "annualized." That is,
the amount of income generated by the investment during that week is assumed to
be generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" (also called "effective compound yield") is
calculated similarly but, when annualized, the income earned by an investment in
the PBHG Advisor Cash Reserves Fund is assumed to be reinvested. The effective
yield will be slightly higher than the current yield because of the compounding
effect of this assumed reinvestment. The Fund may also from time to time
advertise its total return along with the current yield. The current yield
quotation more closely reflects the current earnings of the Fund than the total
return.
The total return of each PBHG Advisor Fund refers to the average compounded rate
of return on a hypothetical investment for designated time periods (including
but not limited to the period from which the applicable Fund commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period and assuming the reinvestment of all dividend
and capital gain distributions.
Each PBHG Advisor Fund may periodically compare its performance to that of other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical
Services, Inc.) or by financial and business publications and periodicals, broad
groups of comparable mutual funds, unmanaged indices which may assume investment
of dividends but generally do not reflect deductions for administrative and
management costs and other investment alternatives. Each Fund may quote services
such as Morningstar, Inc., a service that ranks mutual funds on the
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basis of risk-adjusted performance, and Ibbotson Associates of Chicago,
Illinois, which provides historical returns of the capital markets in the U.S.
Each Fund may use long-term performance of these capital markets to demonstrate
general long-term risk versus reward scenarios and could include the value of a
hypothetical investment in any of the capital markets. Each Fund may also quote
financial and business publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
Each PBHG Advisor Fund may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.
RELATED PERFORMANCE
The PBHG Advisor Funds had not yet commenced operations as of the date of this
Prospectus. Consequently, the Funds have not yet established their own
performance records. However, the investment objectives, policies and strategies
of several of the Funds are substantially similar to those of the portfolios of
certain other mutual funds whose performance may be relevant to an investor
deciding whether to invest in such Funds.
PBHG Advisor Value Opportunities Funds
The investment objectives, policies and strategies of the PBHG Advisor Value
Opportunities Fund are substantially similar to those of the PBHG Mid-Cap Value
Fund (the "Mid-Cap Value Fund"), a series of The PBHG Funds, Inc. The Mid-Cap
Value Fund is also managed by the Adviser and Value Investors. The aggregate
total return for the Mid-Cap Value Fund for the period May 1, 1997 (commencement
of operations) to March 31, 1998 was 61.06%.
PBHG Advisor Large Cap Concentrated Fund
The investment objectives, policies and strategies of the PBHG Advisor Large Cap
Concentrated Fund are substantially similar to those of the PBHG Large Cap 20
Fund (the "Large Cap 20 Fund"), a series of The PBHG Funds, Inc. The Large Cap
20 Fund is also managed by the Adviser. The total return for the Large Cap 20
Fund for the one-year period ended March 31, 1998 was 72.76%. The average annual
return for the Large Cap 20 Fund since commencement of operations (December 2,
1996) through March 31, 1998 was 42.21%.
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PBHG Advisor Growth II Fund
The investment objectives, policies and strategies of the PBHG Advisor Growth II
Fund are substantially similar to those of the PBHG Growth II Portfolio (the
"Growth II Portfolio"), a series of PBHG Insurance Series Fund, Inc. The Growth
II Portfolio is also managed by the Adviser. The aggregate total return for the
Growth II Portfolio for the period May 1, 1997 (commencement of operations) to
March 31, 1998 was 17.10%.
PBHG Advisor Enhanced Equity Fund
The PBHG Advisor Enhanced Equity Fund will acquire the assets and assume the
liabilities of the Analytic Enhanced Equity Portfolio (the "Enhanced Equity
Portfolio"), a series of The Analytic Series Fund, pursuant to a reorganization
of the Enhanced Equity Portfolio expected to be effective May 29, 1998. The
Enhanced Equity Portfolio is managed by Analytic, which manages the PBHG Advisor
Enhanced Equity Fund as its sub-adviser. The investment objectives, policies and
strategies of the Fund are substantially similar to those of the Enhanced Equity
Portfolio. For the one year period ended March 31, 1998, the total return of the
Enhanced Equity Portfolio was 49.55%. The average annual total return for the
Enhanced Equity Portfolio for the three year period ended March 31, 1998 was
32.25%. The average annual total return of the Enhanced Equity Portfolio from
July 1, 1993 (commencement of public offering) through March 31, 1998 was
22.42%.
PBHG Advisor Master Fixed Income Fund
The PBHG Advisor Master Fixed Income Fund will acquire the assets and assume the
liabilities of the Analytic Master Fixed Income Portfolio (the "Master Fixed
Income Portfolio"), a series of The Analytic Series Fund, pursuant to a
reorganization of the Master Fixed Income Portfolio expected to be effective May
29, 1998. The Master Fixed Income Portfolio is managed by Analytic, which
manages the PBHG Advisor Master Fixed Income Fund as its sub-adviser. The
investment objectives, policies and strategies of the Fund are substantially
similar to those of the Master Fixed Income Portfolio. For the one year period
ended March 31, 1998, the total return of the Master Fixed Income Portfolio was
13.21%. The average annual return for the Master Fixed Income Portfolio for the
three year period ended March 31, 1998 was 9.96%. The average annual total
return of the Master Fixed Income Portfolio from July 1, 1993 (commencement of
public offering) through March 31, 1998 was 7.69%.
PBHG Advisor Short-Term Government Fund
The PBHG Advisor Short-Term Government Fund will acquire the assets and assume
the liabilities of the Analytic Short-Term Government Portfolio (the "Short-Term
Government Portfolio"), a series of The Analytic Series Fund, pursuant to a
reorganization of the Short-Term Government Portfolio expected to be effective
May 29, 1998. The Short-Term Government
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Portfolio is managed by Analytic, which manages the PBHG Advisor Short-Term
Government Fund as its sub-adviser. The investment objectives, policies and
strategies of the Fund are substantially similar to those of the Short-Term
Government Portfolio. For the one year period ended March 31, 1998, the total
return of the Short-Term Government Portfolio was 6.48%. The average annual
return for the Short-Term Government Portfolio for the three year period ended
March 31, 1998 was 6.43%. The average annual total return of the Short-Term
Government Portfolio from July 1, 1993 (commencement of public offering) through
March 31, 1998 was 5.20%.
PBHG Advisor Blue Chip Growth Fund
Robert Urquhart, CFA, is the portfolio manager for the PBHG Advisor Blue Chip
Growth Fund and is primarily responsible for the day-to-day management of the
Fund. See "General Information-The Adviser." Before joining the Adviser, Mr.
Urquhart was Managing Director of PNC Equity Advisor where he was responsible
for managing the Compass Capital Large Cap Growth Equity Portfolio (the "Compass
Large Cap Growth Portfolio"). Mr. Urquhart had full discretionary authority over
the selection of investments for that fund during the period June 30, 1995
through August 29, 1997. The investment objectives, policies and strategies of
the PBHG Advisor Blue Chip Growth Fund are substantially similar to those of the
Compass Large Cap Growth Portfolio. The total return for the Institutional class
shares of the Compass Large Cap Growth Portfolio for the one-year period ended
August 29, 1997 was 37.93%. The average annual return for the period June 30,
1995 through August 29, 1997 was 27.34%. The total return for the Class A shares
of the Compass Large Cap Growth Portfolio for the same one year period was
37.31%, and the average annual return for the period from June 30, 1995 through
August 29, 1995 was 26.77%. The total return for the Class B shares of the
Compass Large Cap Growth Portfolio for the same one year period was 36.32%. For
the same one year period and for the period June 30, 1995 through August 29,
1997, the S&P 500 Index increased by 40.58% and 28.74% (annually), respectively.
For the same one year period and for the period June 30, 1995 through August 29,
1997, the Russell 1000 Growth Index increased by 39.36% and 28.37% (annually),
respectively. The PBHG Advisor Blue Chip Growth Fund and the Compass Large Cap
Growth Portfolio are separate funds and the historical performance of the
Compass Large Cap Growth Portfolio is not indicative of the potential
performance of the PBHG Advisor Blue Chip Growth Fund.
The performance data shown above reflect the deduction of historical fees and
expenses paid by the series corresponding to the applicable PBHG Advisor Funds,
and not those expected to be paid by such PBHG Advisor Funds. The data also do
not reflect the sales load borne by investors in Class A shares of the PBHG
Advisor Funds, expenses paid under the Rule 12b-1 distribution plans for Class A
and Class B shares of such Funds, or the contingent deferred sales charge
applicable to Class B shares and certain Class A share purchases. In addition,
although it is anticipated that each applicable PBHG Advisor Fund and its
corresponding series will invest in similar securities, their investment results
are expected to differ. In particular, differences
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in asset size and in cash flow resulting from purchases and redemptions of
shares may result in different security selections, differences in the relative
weightings of securities or differences in the price paid for particular
portfolio holdings. The results shown reflect the reinvestment of dividends and
distributions, and were calculated in the same manner that will be used by the
PBHG Advisor Funds to calculate their own performance.
TAXES
The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the PBHG
Advisor Funds or their shareholders. Accordingly, you are urged to consult your
tax advisers regarding specific questions as to federal, state and local income
taxes. See the Statement of Additional Information.
Tax Status of the Funds
Each PBHG Advisor Fund is treated as a separate entity for federal income tax
purposes and is not combined with the other PBHG Advisor Funds. Each Fund
intends to qualify or to continue to qualify for the special tax treatment
afforded RICs as defined under Subchapter M of the Code. So long as a Fund
qualifies for this special tax treatment, it will be relieved of federal income
tax on that part of its net investment income and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) which it
distributes to shareholders.
Tax Status of Distributions
Each PBHG Advisor Fund will distribute all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Dividends from net investment income will be taxable to shareholders as ordinary
income whether received in cash or in additional shares. Dividends from net
investment income will qualify for the dividends-received deduction for
corporate shareholders only to the extent such distributions are derived from
dividends paid by domestic corporations. It can be expected that only certain
dividends of a Fund will qualify for that deduction. Any net capital gains will
be distributed annually and will be taxed to shareholders as long-term capital
gains, regardless of how long the shareholder has held shares and regardless of
whether the distributions are received in cash or in additional shares. The PBHG
Advisor Funds will make annual reports to shareholders of the federal income tax
status of all distributions, including the amount of dividends eligible for the
dividends-received deduction.
Certain securities purchased by the PBHG Advisor Funds (such as U.S. Treasury
STRIPS, defined in the "Glossary of Permitted Investments") are sold with
original issue discount and thus do not make periodic cash interest payments.
Each Fund will be required to include as part
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of its current net investment income the accrued discount on such obligations
for purposes of the distribution requirement even though such Fund has not
received any interest payments on such obligations during that period. Because a
Fund distributes all of its net investment income to its shareholders, the Fund
may have to sell portfolio securities to distribute such accrued income, which
may occur at a time when the Adviser or sub-adviser would not have chosen to
sell such securities and which may result in a taxable gain or loss.
Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by a PBHG Advisor Fund and may be exempt,
depending on the state, when received by a shareholder as income dividends from
such Fund provided certain state-specific conditions are satisfied. Not all
states permit such income dividends to be tax exempt and some require that a
certain minimum percentage of an investment company's income be derived from
state tax-exempt interest. Each Fund will inform shareholders annually of the
percentage of income and distributions derived from direct U.S. obligations. You
should consult your tax adviser to determine whether any portion of the income
dividends received from a PBHG Advisor Fund is considered tax exempt in your
particular state.
Dividends declared by a PBHG Advisor Fund in October, November or December of
any year and payable to shareholders of record on a date in one of those months
will be deemed to have been paid by such Fund and received by the shareholders
on December 31 of that year if paid by the Fund at any time during the following
January.
Each PBHG Advisor Fund intends to make sufficient distributions prior to the end
of each calendar year to avoid liability for the federal excise tax applicable
to regulated investment companies.
Tax Treatment of Transactions
Each sale, exchange or redemption of a PBHG Advisor Fund's shares is a taxable
event to the shareholder.
Income derived by a PBHG Advisor Fund from securities of foreign issuers may be
subject to foreign withholding taxes. The PBHG Advisor Funds may be able to
treat shareholders as having paid their proportionate share of such foreign
taxes.
GENERAL INFORMATION
The Company
PBHG Advisor Funds, Inc., an open-end management investment company, was
incorporated in Maryland on January 9, 1998. The Company reserves the right to
create and issue shares of
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additional portfolios. Each PBHG Advisor Fund pays its respective expenses
relating to its operation, including fees of its service providers, audit and
legal expenses, expenses of preparing prospectuses, proxy solicitation material
and reports to shareholders, costs of custodial services and registering the
shares of the Funds under federal and state securities laws, pricing and
insurance expenses, and pays additional expenses including litigation and other
extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
The Adviser
Pilgrim Baxter & Associates, Ltd. is a professional investment management firm
and registered investment adviser that, along with its predecessors, has been in
business since 1982. The sole shareholder of the Adviser is United Asset
Management Corporation ("UAM"), a NYSE listed holding company principally
engaged, through affiliated firms, in providing institutional investment
management services and acquiring institutional investment management firms.
UAM's corporate headquarters are located at One International Place, Boston,
Massachusetts 02110. The Adviser currently has discretionary management
authority with respect to approximately $12 billion in assets. In addition to
advising the PBHG Advisor Funds, the Adviser provides advisory services to
pension and profit-sharing plans, charitable institutions, corporations, trusts
and estates, and other investment companies. The principal business address of
the Adviser is 825 Duportail Road, Wayne, Pennsylvania 19087.
The Adviser serves as the investment adviser to each PBHG Advisor Fund under an
investment advisory agreement with the Company (the "Advisory Agreement"), on
behalf of each of the Funds. The Adviser makes the investment decisions for the
assets of each Fund and continuously reviews, supervises and administers the
investment program of each Fund, subject to the supervision of, and policies
established by, the Board of Directors of the Company.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of: 0.60% for the PBHG Advisor Core Value
Fund; 0.85% for the PBHG Advisor Value Opportunities Fund; 0.60% for the PBHG
Advisor New Contrarian Fund; 0.75% for the PBHG Advisor REIT Fund; 0.60% for the
PBHG Advisor Blue Chip Growth Fund; 0.65% for the PBHG Advisor Growth
Opportunities Fund; 0.60% for the PBHG Advisor Enhanced Equity Fund; 0.65% for
the PBHG Advisor Trend Fund; 0.85% for the PBHG Large Cap Concentrated Fund;
0.85% for the PBHG Advisor Growth II Fund; 0.75% for the PBHG Advisor New
Opportunities Fund; 0.85% for the PBHG Advisor Global Technology &
Communications Fund; 0.45% for the PBHG Advisor Master Fixed Income Fund; 0.50%
for the PBHG Advisor High Yield Fund; 0.30% for the PBHG Advisor Short-Term
Government Fund; and 0.30% for the PBHG Advisor Cash Reserves Fund.
In the interest of limiting the expenses of the PBHG Advisor Funds, the Adviser
has entered into an Expense Limitation Agreement with the Company, on behalf of
each Fund. The Adviser has agreed to waive or limit its advisory fees or assume
other expenses in an amount that operates
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to limit the aggregate annual total of certain operating expenses of each Fund
as follows: 0.82% of the PBHG Advisor Core Value Fund, PBHG Advisor New
Contrarian Fund, PBHG Advisor Blue Chip Growth Fund, and PBHG Advisor Enhanced
Equity Fund; 1.07% of the PBHG Advisor Value Opportunities Fund, PBHG Advisor
Large Cap Concentrated Fund, PBHG Advisor Growth II Fund, and PBHG Advisor
Global Technology & Communications Fund; 0.97% of the PBHG Advisor REIT Fund and
PBHG Advisor New Opportunities Fund; 0.87% of the PBHG Advisor Growth
Opportunities Fund and PBHG Advisor Trend Fund; 0.67% of the PBHG Advisor Master
Fixed Income Fund; 0.72% of the PBHG Advisor High Yield Fund; and 0.52% of the
PBHG Advisor Short-Term Government Fund and PBHG Advisor Cash Reserves Fund. The
expenses subject to such limitation are those that are not specifically
allocated to a class of shares of a Fund under the Company's multiple class plan
(the "Rule 18f-3 Plan") including, but not limited to, investment advisory fees
of the Adviser, but excluding: (i) interest, taxes, brokerage commissions, and
other expenditures which are capitalized in accordance with generally accepted
accounting principles; (ii) expenses specifically allocated to a class of shares
of a Fund under the Rule 18f-3 Plan, such as Rule 12b-1 expenses and transfer
agency fees; and (iii) other extraordinary expenses not incurred in the ordinary
course of a Fund's business. Reimbursement by the Funds of the advisory fees
waived or limited and other expenses paid by the Adviser pursuant to the Expense
Limitation Agreement may be made at a later date when such Funds have reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense ratio of each Fund to exceed the percentages discussed in
this paragraph. Consequently, no reimbursement by a Fund will be made unless:
(i) the Fund's assets exceed $75 million; (ii) the Fund's total annual expense
ratio is less than the specified percentage; and (iii) the payment of such
reimbursement was approved by the Board of Directors on a quarterly basis.
Gary L. Pilgrim, CFA serves as the portfolio manager of the PBHG Advisor Growth
II Fund and PBHG Advisor New Opportunities Fund. Mr. Pilgrim has served as the
Chief Investment Officer for the Adviser for the past six years, and has been
its President since 1993.
James D. McCall, CFA and Ellen A. McGee, CFA co-manage the PBHG Advisor Large
Cap Concentrated Fund. Mr. McCall has been a portfolio manager with the Adviser
since 1994. Prior to joining the Adviser, Mr. McCall was a portfolio manager
with First National Bank of Maryland. Ms. McGee joined the Adviser in March 1997
and is a portfolio manager/analyst. Prior to jointing the Adviser, Ms. McGee was
Vice President and Senior Portfolio Manager with First Union Capital Management
from August 1995 until March 1997, Vice President and Portfolio Manager with
NationsBank Private Client Group from May 1994 until August 1995, and Vice
President and Senior Institutional Portfolio Manager with First National Bank of
Maryland from April 1991 until May 1994.
John F. Force, CFA manages the PBHG Advisor Global Technology & Communications
Fund. Mr. Force joined the Adviser in 1993 and is a portfolio manager/analyst.
Prior to
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joining the Adviser, Mr. Force was Vice President/Fund Manager at Fiduciary
Management Associates from July 1987 to September 1992.
Robert Urquhart, CFA manages the PBHG Advisor Blue Chip Growth Fund, PBHG
Advisor New Opportunities Fund, PBHG Advisor Growth Opportunities Fund, and PBHG
Advisor Trend Fund. Mr. Urquhart joined the Adviser from PNC Equity Advisor,
where he was Managing Director responsible for management of approximately $1.5
billion in assets concentrated in large cap growth and growth and income
products. Previously, Mr. Urquhart was Chief Financial Officer for Cole
Financial Group where he had portfolio management responsibilities. Mr. Urquhart
earned an MBA degree from Harvard University and a BS degree in Business/Finance
from the University of Colorado.
________________ manages the PBHG Advisor High Yield Fund.
Value Investors
Pilgrim Baxter Value Investors, Inc. (formerly, Newbold's Asset Management,
Inc.), 825 Duportail Road, Wayne, PA 19087, a registered investment adviser that
was formed in 1940, is a wholly-owned subsidiary of the Adviser. Value Investors
currently has discretionary management authority with respect to over $4 billion
in assets. In addition to sub-advising certain of the PBHG Advisor Funds, Value
Investors provides advisory services to pension and profit-sharing plans,
charitable institutions, trusts, estates and other investment companies. Value
Investors serves as the investment sub-adviser for the PBHG Advisor Core Value,
PBHG Advisor Value Opportunities, PBHG Advisor New Contrarian, and PBHG Advisor
REIT Funds pursuant to an investment sub-advisory agreement with the Company, on
behalf of such Funds, and the Adviser (the "Sub-Advisory Agreement"). Under the
Sub-Advisory Agreement, Value Investors manages the investments of each of those
Funds, selects investments, and places all orders for purchases and sales of
each such Funds' securities, subject to the general supervision of the Board of
Directors of the Company and the Adviser.
For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreement for the PBHG Advisor Core Value, PBHG Advisor Value Opportunities,
PBHG Advisor REIT, and PBHG Advisor New Contrarian Funds. Value Investors is
entitled to receive from the Adviser a sub-advisory fee with respect to the
average daily net assets of each such Fund that is computed daily and paid
monthly at annual rates of 0.40%, 0.65%, 0.55% and 0.40%, respectively.
James H. Farrell, CFA manages the PBHG Advisor New Contrarian Fund. Mr. Farrell
joined Value Investors in September 1996 and is its Chief Investment Officer.
Mr. Farrell also manages another mutual fund advised by Value Investors and,
until recently, served as President of Farrell Seiwell, Inc., a registered
investment adviser. Prior to joining Value Investors, he
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was an Investment Counselor in a sole proprietorship for two years. From 1983 to
1994, he was a partner at Cashman, Farrell and Associates, an investment
advisory firm.
Gary D. Haubold, CFA manages the PBHG Advisor Core Value Fund and PBHG Advisor
Value Opportunities Fund. Mr. Haubold joined Value Investors in January 1997.
Prior to joining Value Investors, Mr. Haubold was employed by Miller Anderson &
Sherrerd ("MAS") from 1993 until 1997. At MAS, Mr. Haubold served as the
co-manager of the Mid-Cap Value Fund of the MAS Fund from its inception in
December 1994 through January 1997 and the co-manager of the Small Cap Value
Fund of the MAS Fund from December 1994 through January 1997. Mr. Haubold was
the person primarily responsible for the day-to-day management of those two
mutual funds during the periods noted. Prior to joining MAS, Mr. Haubold was
Senior Vice President of Wood, Struthers & Winthrop.
________________ manages the PBHG Advisor REIT Fund.
Analytic
Analytic o TSA Global Asset Management, Inc., 700 South Flower Street, Suite
2400, Los Angeles, CA 90017 is a wholly owned subsidiary of UAM, the parent
company of the Adviser.
Analytic was founded in 1970 as Analytic Investment Management, Inc., one of the
first independent investment counsel firms specializing in the creation and
continuous management of optioned equity and optioned debt portfolios for
fiduciaries and other long term investors. It is one of the oldest and largest
independent investment management firms in this specialized area. In January
1996, Analytic Investment Management, Inc. acquired and merged with TSA Capital
Management ("TSA") which emphasizes U.S. and global tactical asset allocation,
currency management, quantitative equity and fixed income management, as well as
option yield curve strategies. Analytic serves, among others, pension and
profit-sharing plans, endowments, foundations, corporate investment portfolios,
mutual savings banks, and insurance companies, for which it manages in excess of
$1 billion. It has also managed another registered investment company since
1978.
Pursuant to an investment sub-advisory agreement with the Company, on behalf of
the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income Fund,
and PBHG Advisor Short-Term Government Fund, Analytic, subject to the control
and direction of the Adviser and the Board of Directors of the Company, manages
the Funds in accordance with each Fund's stated investment objective and
policies and makes investment decisions for the Funds.
Scott Barker, Greg McMurran and Bob Bannon are the portfolio managers for the
PBHG Advisor Master Fixed Income Fund and PBHG Advisor Short-Term Government
Fund. Mr. Barker has been a member of the portfolio management and research team
for Analytic since August 1995. He concurrently serves as a research analyst
with Analysis Group, Inc. with
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which he has been associated since October 1993. Previously he was with Zontech,
Inc. for six years as a scientific analyst. Mr. McMurran is the Chief Investment
Officer of Analytic and has been with the firm since October of 1976 as a
portfolio manager. Mr. Bannon is a managing director of Analytic specializing in
the fixed income area. He initially joined the firm in January 1996 when TSA
merged with Analytic Investment Management, Inc. He was formerly a managing
director with TSA since April 1995. Previously, he served as a senior bond
strategist with IDEA for four years. The portfolio managers are subject to the
supervision of Analytic's investment management committee.
Dennis M. Bein and Harindra de Silva are the portfolio managers for the PBHG
Advisor Enhanced Equity Fund. Mr. Bein has been a member of the portfolio
management and research team for Analytic since August 1995. He concurrently
serves as a senior associate for Analysis Group, Inc. with which he has been
associated since August 1990. Dr. de Silva is the President of the Analytic
Optioned Equity Fund and serves as a managing director of Analytic, which he
joined in May of 1995. He concurrently serves as a principal of Analysis Group,
Inc., which he joined in March 1986. The portfolio managers are subject to the
supervision of Analytic's investment management committee.
As compensation for furnishing investment advisory, management, and other
services, and costs and expenses assumed, pursuant to the sub-advisory
agreement, the Adviser pays Analytic an annual fee based on the average daily
net assets of each Fund as follows:
PBHG Advisor Master Fixed Income Fund 0.25%
PBHG Advisor Enhanced Equity Fund 0.40%
PBHG Advisor Short-Term Government Fund 0.10%
Wellington Management
Wellington Management Company, LLP serves as the investment sub-adviser for the
PBHG Advisor Cash Reserves Fund pursuant to an investment sub-advisory agreement
with the Company, on behalf of the PBHG Advisor Cash Reserves Fund, and the
Adviser. Under the sub-advisory agreement, Wellington Management manages the
investments of the Fund, selects investments, and places all orders for
purchases and sales of the Fund's securities, subject to the general supervision
of the Board of Directors of the Company and the Adviser.
For the services provided and expenses incurred pursuant to the sub-advisory
agreement, Wellington Management is entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate equal to 0.075% of the PBHG
Advisor Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Fund's average daily net assets over $500 million, but
subject to a minimum annual fee of $50,000.
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Wellington Management is a professional investment counseling firm which
provides investment services to investment companies, employee benefit plans,
endowments, foundations, and other institutions and individuals. As of December
31, 1997, Wellington Management had investment management authority with respect
to approximately $174.5 billion of assets. Wellington Management and its
predecessor organizations have provided investment advisory services to
investment companies since 1933 and to investment counseling clients since 1960.
Wellington Management, 75 State Street, Boston, Massachusetts 02109, is a
Massachusetts limited liability partnership, of which the following persons are
managing partners: Robert W. Doran, Duncan M. McFarland and John R. Ryan.
The Administrator and Sub-Administrator
The Administrator provides the Company with administrative services,
including regulatory reporting and all necessary office space, equipment,
personnel and facilities. For these administrative services, the Administrator
is entitled to a fee, which is calculated daily and paid monthly, at an annual
rate of 0.15% of the average daily net assets of the Company. The principal
place of business of the Administrator is 825 Duportail Road, Wayne, PA 19087.
The Sub-Administrator, an indirect wholly-owned subsidiary of SEI Investments
Company ("SEI"), assists the Administrator in providing administrative services
to the Company. For acting in this capacity, the Administrator pays the
Sub-Administrator fees at an annual rate based on the combined average daily net
assets of the Company, The PBHG Funds, Inc., and PBHG Insurance Series Fund,
Inc., calculated as follows: (i) 0.040% of the first $2.5 billion, plus (ii)
0.025% of the next $7.5 billion, plus (iii) 0.020% of the excess over $10
billion.
The Transfer Agent
DST Systems, Inc., P.O. Box 419534, Kansas City, Missouri, 64141-6534, serves as
the transfer agent and dividend disbursing agent for the Company under a
transfer agency agreement with the Company. From time to time, the Company may
pay amounts to third parties that provide sub-transfer agency and other
administrative services relating to the Company to persons who beneficially own
interests in the Company, such as participants in 401(k) plans. These services
may include, among other things, sub-accounting services, answering inquiries
relating to the PBHG Advisor Funds, delivering, on behalf of the Company, proxy
statements, annual reports, updated prospectuses, other communications regarding
the Company, and related services as the Company or the beneficial owners may
reasonably request.
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Shareholder Servicing Agents
PBHG Fund Services acts as shareholder servicing agent for the Company. UAM SSC
acts as sub-shareholder servicing agent for the Company.
The Distributor
The Company has entered into distribution agreements relating to the PBHG
Advisor Funds (the "Distribution Agreements"), dated April 1, 1998, with
Distributor, a registered broker-dealer, pursuant to which the Distributor acts
as the distributor of Class A, Class B and Class I shares of the PBHG Advisor
Funds. The address of the Distributor is 825 Duportail Road, Wayne, Pennsylvania
19087. Certain directors and officers of the Company are affiliated with the
Distributor.
The Distribution Agreements provide the Distributor with the exclusive right to
distribute shares of the Funds directly and through institutions with whom the
Distributor has entered into selected dealer agreements. Under the Distribution
Agreement for the Class B shares, the Distributor sells Class B shares at net
asset value subject to a contingent deferred sales charge established by the
Distributor. The Distributor is authorized to advance to institutions through
whom Class B shares are sold a sales commission under schedules established by
the Distributor. The Distribution Agreement for the Class B shares provides that
the Distributor (or its assignee or transferee) will receive 0.75% (of the total
1.00% payable under the 12b-1 distribution plan applicable to Class B shares) of
each Fund's average daily net assets attributable to Class B shares attributable
to the sales efforts of the Distributor. In the event the Class B shares
Distribution Agreement is terminated, the Distributor would continue to receive
payments of asset-based sales charges in respect of the outstanding Class B
shares attributable to the distribution efforts of the Distributor; provided,
however, that a complete termination of the Class B shares distribution plan (as
defined in the plan) would terminate all payments to the Distributor.
Termination of the Class B shares distribution plan or Distribution Agreement
does not affect the obligation of Class B shareholders to pay contingent
deferred sales charges.
Distribution Plans
The PBHG Advisor Funds have adopted Distribution Plans applicable to Class A and
Class B shares.
Class A Plan. The Distribution Plan applicable to Class A shares of the
PBHG Advisor Funds (the "Class A Plan") pursuant to Rule 12b-1 under the 1940
Act authorizes the Company to pay an aggregate amount of up to 0.35% of the
average daily net assets of Class A shares of each Fund on an annualized basis
to compensate the Distributor for certain promotional and
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other sales-related costs, and to pay selected dealers who furnish continuing
personal shareholder services to their customers who purchase and own Class A
shares of a Fund. The Company's directors have determined that payments under
the 12b-1 distribution plan will currently be limited to 0.25%. Notice will be
given to shareholders of any proposed increase in such amount. Payments can also
be directed to selected institutions who have entered into service agreements
with respect to Class A shares of the Funds and who provide continuing personal
services to their customers who own Class A shares of a Fund. The service fees
payable to selected institutions are calculated at the annual rate of 0.25% of
the average daily net asset value of those Fund shares that are held in such
institution's customers' accounts.
Of the aggregate amount payable under the Class A Plan, payments to dealers and
other financial institutions that provide continuing personal shareholder
services to their customers who purchase and own shares of a PBHG Advisor Fund,
in amounts of up to 0.25% of the average net assets of such Fund attributable to
the customers of such dealers or financial institutions, are characterized as a
service fee, and payments to dealers and other financial institutions in excess
of such amount and payments to the Distributor in excess of 0.25% are
characterized as an asset-based sales charge pursuant to the Class A Plan.
Class B Plan. Each PBHG Advisor Fund also has adopted a Distribution Plan
applicable to Class B shares of the Funds (the "Class B Plan"). Under the Class
B Plan, each Fund pays an aggregate amount of 1.00% of the average daily net
assets on an annualized basis attributable to such Fund's Class B shares. Of
such amount, the Fund pays a service fee of 0.25% of the average daily net
assets attributable to such Fund's Class B shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own Class B shares of the Fund. Any amounts not
paid as a service fee would constitute an asset based sales charge. Amounts paid
in accordance with the Class B Plan with respect to any Fund may be used to
finance any activity primarily intended to result in the sale of Class B shares
of such Fund.
Class A and Class B Plans. Activities that may be financed under the Class
A Plan and the Class B Plan (collectively, the "Plans") include, but are not
limited to: printing of prospectuses and statements of additional information
and reports for other than existing shareholders, overhead, preparation and
distribution of advertising material and sales literature, supplemental payments
to dealers and other institutions such as asset-based sales charges or payments
of service fees under shareholder service arrangements, and the cost of
administering the Plans. These amounts payable by a PBHG Advisor Fund under the
Plans need not be directly related to the expenses actually incurred by the
Distributor on behalf of each Fund. Thus, even if the Distributor's actual
expenses exceed the fee payable to the Distributor thereunder at any given time,
the Company will not be obligated to pay more than that fee, and if the
Distributor's expenses are less than the fee it receives, the Distributor will
retain the full amount of the fee. Payments pursuant to the Plans are subject to
any applicable limitations imposed by the rules of the NASD Regulation, Inc.
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Each of the Plans may be terminated at any time by a vote of the majority of
those directors who are not "interested persons" of the Company, as defined by
the 1940 Act, or by a vote of the holders of the majority of the outstanding
shares of the applicable class.
Under the Plans, the Distributor may, in its discretion, from time to time agree
to waive voluntarily all or any portion of its fee that has not been assigned or
transferred, while retaining its ability to be reimbursed for such fee prior to
the end of each fiscal year.
Financial intermediaries and any other person entitled to receive compensation
for selling PBHG Advisor Fund shares may receive different compensation for
selling shares of one class than another class.
For additional information concerning the operation of the Plans see the
Statement of Additional Information.
Directors of the Company
The management and affairs of the Company are supervised by the Board of
Directors under the laws of the State of Maryland. The Directors have approved
contracts under which, as described above, certain companies provide essential
management services to the Company.
Voting Rights
Each share held entitles the shareholder of record to one vote for each dollar
of net asset value of shares of stock owned by the shareholder. Shareholders of
each PBHG Advisor Fund will vote separately on matters relating solely to it,
such as approval of advisory agreements and changes in fundamental policies, and
matters affecting some but not all Funds of the Company will be voted on only by
shareholders of the affected series. Shareholders of all series of the Company
will vote together in matters affecting the Fund generally, such as the election
of Directors or selection of independent accountants. Shareholders of each class
of shares of the Company will vote separately on matters relating solely to that
class of shares and not on matters relating solely to another class of shares.
As a Maryland corporation, the Company is not required to hold annual meetings
of shareholders, but shareholder approval will be sought for certain changes in
the operation of the Company and for the election of directors under certain
circumstances. In addition, a director may be removed by the remaining directors
or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Company. In
the event that such a meeting is requested, the Company will provide appropriate
assistance and information to the shareholders requesting the meeting.
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Reporting
The Company issues unaudited financial information semi-annually and audited
financial statements annually for each PBHG Advisor Fund. The Company also
furnishes periodic reports and, as necessary, proxy statements to shareholders
of record.
Year 2000 Compliance
There is general concern throughout the industry that a number of computer
systems and software packages in use today may not be able to recognize the Year
2000 or accurately process information after December 31, 1999. The Company is
actively working with the Adviser, the sub-advisers and the Company's other
service providers, including but not limited to, the Administrator,
Sub-Administrator, Distributor, Transfer Agent and Shareholder Servicing Agents
to identify potential problems and develop plans reasonably designed to address
these potential problems before the Year 2000. While there can be no absolute
assurance that all service providers will be fully Year 2000-compliant or that
non-compliant systems or software will have no impact at all, the Company
believes that these steps will be successful in identifying and minimizing any
negative impact associated with Year 2000 processing problems. Furthermore, the
Company does not currently anticipate that there will be any material cost to
the Company or any PBHG Advisor Fund as a result of this project.
Shareholder Inquiries
You may direct inquiries to the Company by writing to PBHG Advisor Funds, Inc.,
P.O. Box 419229, Kansas City, Missouri 64141-6229.
Dividends and Distributions
Substantially all of the net investment income (exclusive of capital gains) of a
PBHG Advisor Fund (except the PBHG Advisor Master Fixed Income Fund, PBHG
Advisor High Yield Fund, PBHG Advisor Short-Term Government Fund, and PBHG
Advisor Cash Reserves Fund) is distributed in the form of annual dividends. If
any capital gain is realized, substantially all of it will be distributed by
each Fund at least annually. The PBHG Advisor Master Fixed Income Fund, PBHG
Advisor High Yield Fund, PBHG Advisor Short-Term Government Fund, and PBHG
Advisor Cash Reserves Fund accrue dividends daily and pay them monthly to
shareholders.
Shareholders automatically receive all dividends and capital gain distributions
in additional shares at the net asset value determined on the next Business Day
after the record date, unless the shareholder has elected to take such payment
in cash. Shareholders may change their election by providing written notice to
the Transfer Agent at least 15 days prior to the distribution. Shareholders may
receive payments for cash distributions in the form of a check or by Federal
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Reserve wire or ACH transfer. If a shareholder has elected to receive dividends
and/or capital gains distributions in cash and the postal or other delivery
service is unable to deliver checks to the shareholder's address of record, such
shareholder's distribution option will automatically be converted to having all
dividend and other distributions reinvested in additional shares. No interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
Dividends and distributions of the PBHG Advisor Funds are paid on a per share
basis. The value of each share will be reduced by the amount of the payment. If
shares are purchased shortly before the record date for a dividend or
distribution of capital gains, a shareholder will pay the full price for the
shares and receive some portion of the price back as a taxable dividend or
distribution.
Counsel and Independent Accountants
Ballard Spahr Andrews & Ingersoll, LLP serves as counsel to the Company. Coopers
& Lybrand L.L.P. serves as the independent accountants of the Company.
Custodian
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadelphia,
Pennsylvania 19101, serves as the custodian for the Company and each PBHG
Advisor Fund (the "Custodian"). The Custodian holds cash, securities and other
assets of the Funds as required by the 1940 Act.
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Appendix
GLOSSARY OF PERMITTED INVESTMENTS
The following is a description of permitted investments for certain of the PBHG
Advisor Funds:
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") --
ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
include American Depositary Shares and New York Shares. GDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are
securities, typically issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by either a
U.S. or foreign issuer. ADRs, GDRs and CDRs may be available for investment
through "sponsored" or "unsponsored" facilities. A sponsored facility is
established jointly by the issuer of the security underlying the receipt and a
depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security.
Holders of an unsponsored depositary receipt generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through to the holders of the
receipts voting rights with respect to the deposited securities.
Bankers' Acceptance -- A bill of exchange or time draft drawn on and accepted by
a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less.
Certificate of Deposit -- A negotiable interest bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit
generally carry penalties for early withdrawal.
Commercial Paper -- The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues
typically vary from a few days to nine months.
Convertible Securities -- Securities such as rights, bonds, notes and preferred
stocks which are convertible into or exchangeable for common stocks. Convertible
securities have characteristics similar to both fixed income and equity
securities. Because of the conversion feature, the market value of convertible
securities tends to move together with the market value of the underlying common
stock. As a result, a Fund's selection of convertible securities is based, to a
great extent, on the potential for capital appreciation that may exist in the
underlying stock. The value
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of convertible securities is also affected by prevailing interest rates, the
credit quality of the issuer, and any call provisions.
Demand Instruments -- Certain instruments may involve a conditional or
unconditional demand feature which permits the holder to demand payment of the
principal amount of the instrument. Demand instruments may include variable
amount master demand notes.
Derivatives -- Derivatives are securities that derive their value from other
securities. The following are considered derivative securities: futures, options
on futures, options (e.g., puts and calls), swap agreements, mortgage-backed
securities (e.g., CMOs, REMICs, IOs and POs), when-issued securities and forward
commitments, floating and variable rate securities, convertible securities,
"stripped" U.S. Treasury securities (e.g., Receipts and STRIPS) and privately
issued stripped securities (e.g., TGRs, TRs and CATS). See elsewhere in this
"Glossary of Permitted Investments" for discussions of these various
instruments, and see "Investment Objectives and Policies" for more information
about the investment policies and limitations applicable to their use.
Equity Securities -- Securities that evidence ownership interests in a company,
such as common stock and preferred stock. Investments in equity securities are
subject to market risks which may cause their prices to fluctuate over time.
Foreign Currency Transactions -- Each PBHG Advisor Fund may hold foreign
currency deposits from time to time, and may convert dollars and foreign
currencies in the foreign exchange markets. Currency conversion involves dealer
spreads and other costs, although commissions usually are not charged.
Currencies may be exchanged on a spot (i.e., cash) basis, or by entering into
forward contracts to purchase or sell foreign currencies at a future date and
price. Forward contracts generally are traded in an interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. The parties to a forward contract may agree to offset or terminate
the contract before maturity, or may hold the contract to maturity and complete
the contemplated currency exchange.
A PBHG Advisor Fund may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Funds.
In connection with purchases and sales of securities denominated in foreign
currencies, a PBHG Advisor Fund may enter into currency forward contracts to fix
a definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge." The Adviser or the applicable sub-adviser may enter into
settlement hedges in the normal course of managing the Fund's foreign
investments. A Fund may also enter into forward contracts to purchase or sell a
foreign currency in anticipation
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of future purchases or sales of securities denominated in foreign currency, even
if the specific investments have not yet been selected by the Adviser or the
sub-adviser.
A PBHG Advisor Fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge, sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. A Fund could also hedge the position by selling another currency
expected to perform similarly to the pound sterling - for example, by entering
into a forward contract to sell Deutschemarks in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer advantages
in terms of cost, yield, or efficiency, but generally would not hedge currency
exposure as effectively as a simple hedge into U.S. dollars. Proxy hedges may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
Under certain conditions, guidelines of the Securities and Exchange Commission
("SEC") require mutual funds to set aside appropriate liquid assets in a
segregated account to cover currency forward contracts. As required by SEC
guidelines, each PBHG Advisor Fund will segregate assets to cover currency
forward contracts, if any, whose purpose is essentially speculative. A Fund will
not segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the skill of the
Adviser or the applicable sub-adviser in analyzing and predicting currency
values. Forward contracts may substantially change a PBHG Advisor Fund's
investment exposure to changes in currency exchange rates, and could result in
losses to a Fund if currencies do not perform as the Adviser or the applicable
sub-adviser anticipates. For example, if a currency's value rose at a time when
the Adviser or sub-adviser had hedged a Fund by selling that currency in
exchange for dollars, a Fund would be unable to participate in the currency's
appreciation. If the Adviser or a sub-adviser hedges a Fund's currency exposure
through proxy hedges, the Fund could realize currency losses from the hedge and
the security position at the same time if the two currencies do not move in
tandem. Similarly, if the Adviser or the applicable sub-adviser increases a
Fund's exposure to a foreign currency and that currency's value declines, the
Fund will realize a loss. There is no assurance that the use of forward currency
contracts by the Adviser or the sub-advisers will be advantageous to a Fund or
that it will hedge at an appropriate time.
Futures Contracts and Options on Futures Contracts -- The PBHG Advisor Funds may
enter into futures contracts for the purchase or sale of securities, including,
for the Fund, index contracts on foreign currencies. A purchase of a futures
contract means the acquisition of a contractual right to obtain delivery of the
securities or foreign currency called for by the contract
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at a specified price during a specified future month. When a futures contract is
sold, the Fund incurs a contractual obligation to deliver the securities or
foreign currency underlying the contract at a specified price on a specified
date during a specified future month. Each of the specified Funds may sell stock
index futures contracts in anticipation of, or during, a market decline to
attempt to offset the decrease in market value of its common stocks that might
otherwise result; and it may purchase such contracts in order to offset
increases in the cost of common stocks that it intends to purchase. Each of the
specified Funds may enter into futures contracts, and with respect to the Fund
options thereon, to the extent that (i) aggregate initial margin deposits to
establish positions other than "bona fide hedging" positions (and premiums paid
for unexpired options on futures contracts) do not exceed 5% of the Fund's net
assets and (ii) the total market value of obligations underlying all futures
contracts does not exceed 20% of the value of the Fund's total assets or 50% of
the value of each of the other specified Fund's total assets.
The PBHG Advisor Funds may also purchase and write options to buy or sell
futures contracts. The Funds may write options on futures only on a covered
basis. Options on futures are similar to options on securities except that
options on futures give the purchaser the right, in return for the premium paid,
to assume a position in a futures contract, rather than actually to purchase or
sell the futures contract, at a specified exercise price at any time during the
period of the option.
Each PBHG Advisor Fund will maintain assets sufficient to meet its obligations
under such futures contracts in a segregated margin account with the custodian
bank or will otherwise comply with the SEC's position on asset coverage. The
prices of futures contracts are volatile and are influenced by, among other
things, actual and anticipated changes in the market and interest rates.
Illiquid Securities -- Illiquid securities are investments that cannot be sold
or disposed of in the ordinary course of business within seven (7) days at
approximately the prices at which they are valued. Under the supervision of the
Board of Directors of the Company, the Adviser (as defined hereinafter) or
applicable sub-adviser determines the liquidity of each PBHG Advisor Fund's
investments and, through reports from the Adviser or sub-adviser, the Board
monitors investments in illiquid instruments. In determining the liquidity of a
Fund's investments, the Adviser or sub-adviser may consider various factors
including: (i) the frequency of trades and quotations; (ii) the number of
dealers and prospective purchasers in the marketplace; (iii) dealer undertakings
to make a market; (iv) the nature of the security (including any demand or
tender features); and (v) the nature of the marketplace for trades (including
the ability to assign or offset a Fund's rights and obligations relating to the
investment). Investments currently considered by a Fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, over-the-counter options, and non-government
stripped fixed-rate mortgage backed securities. Also, the Adviser or sub-adviser
may determine that some government-stripped fixed-rate mortgage backed
securities,
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loans and other direct debt instruments, and swap agreements are illiquid.
However, with respect to over-the-counter options a Fund writes, all or a
portion of the value of the underlying instrument may be illiquid depending on
the assets held to cover the option and the nature and terms of any agreement a
Fund may have to close out the option before expiration. In the absence of
market quotations, illiquid investments are priced at fair value as determined
in good faith by a committee appointed by the Board of Directors. If, through a
change in values, net assets or other circumstances, a Fund was in a position
where more than 15% of its net assets were invested in illiquid securities (10%
for the PBHG Advisor Cash Reserves Fund), it would seek to take appropriate
steps to protect liquidity.
Mortgage-Related Securities -- Securities that include interests in pools of
mortgage loans made to U.S. residential home buyers, including mortgage loans
made by savings and loan institutions, mortgage bankers, commercial banks, and
others. Mortgage-related securities not issued or guaranteed by U.S. Government
agencies or instrumentalities are not considered U.S. Government securities for
purposes of the 80% test for such securities in the PBHG Advisor Short-Term
Government Fund. Pools of mortgage loans are assembled as securities for sale to
investors by various governmental, government-related and private organizations.
The interest rates earned on such securities may be fixed, in the case of pools
of fixed-rate mortgages, or variable, in the case of pools of adjustable-rate
mortgages. Each PBHG Advisor Fund may also invest in debt securities which are
secured with collateral consisting of U.S. mortgage-related securities, such as
collateralized mortgage obligations, and in other types of mortgage-related
securities.
An example of a mortgage-related security is a GNMA mortgage-backed certificate.
Although the mortgage loans in the pool underlying the certificate will have
maturities of up to 30 years, the actual average life of a GNMA certificate will
be substantially less because the mortgages may be prepaid prior to maturity.
Prepayment rates vary widely and may be affected by changes in mortgage interest
rates. In periods of falling interest rates, the rate of prepayment on higher
interest rate mortgages increases, thereby shortening the average life of the
GNMA certificate. Conversely, when interest rates are rising, the rate of
prepayment decreases, thereby lengthening the actual average life of the
certificate. Reinvestment of prepayments may occur at higher or lower rates than
the original yield on the certificates. Due to the possibility of prepayment and
the need to reinvest prepayments of principal at current rates, GNMA
certificates can be less effective then typical non-callable bonds of similar
maturities at "locking in" higher yields during periods of declining rates,
although they may have comparable risks to decline in value during periods of
rising interest rates.
Options -- The PBHG Advisor Funds may invest in put and call options for various
stocks and stock indices that are traded on national securities exchanges, from
time to time as the Adviser deems to be appropriate. Options will be used for
hedging purposes and will not be engaged in for speculative purposes. The
aggregate value of option positions may not exceed 10% of a Fund's net assets as
of the time a Fund enters into such options.
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A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract.
Although the Funds will engage in option transactions only as hedging
transactions and not for speculative purposes, there are risks associated with
such investment including the following: (i) the success of a hedging strategy
may depend on the ability of the Adviser or the sub-adviser to predict movements
in the prices of the individual securities, fluctuations in markets and
movements in interest rates; (ii) there may be an imperfect correlation between
the changes in market value of the stocks held by the Funds and the prices of
options; (iii) there may not be a liquid secondary market for options; and (iv)
while the Funds will receive a premium when it writes covered call options, it
may not participate fully in a rise in the market value of the underlying
security. When writing options (other than covered call options), the Funds must
establish and maintain a segregated account with the Fund's Custodian containing
cash or other liquid assets in an amount at least equal to the market value of
the option.
Receipts -- Separately traded interest and principal component parts of U.S.
Treasury obligations that are issued by banks or brokerage firms and are created
by depositing U.S. Treasury obligations into a special account at a custodian
bank. The custodian bank holds the interest and principal payments for the
benefit of the registered owners of the receipts. The custodian bank arranges
for the issuance of the receipts evidencing ownership and maintains the
register.
Repurchase Agreements -- Repurchase agreements are agreements by which a person
(e.g., a PBHG Advisor Fund) obtains a security and simultaneously commits to
return the security to the seller (a member bank of the Federal Reserve System
or primary securities dealer as recognized by the Federal Reserve Bank of New
York) at an agreed upon price (including principal and interest) on an agreed
upon date within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed upon
market rate of interest which is unrelated to the coupon rate or maturity of the
underlying security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying security.
Repurchase agreements are considered to be loans by a PBHG Advisor Fund for
purposes of its investment limitations. The repurchase agreements entered into
by the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement. With
respect to all repurchase agreements entered into by a Fund, the Fund's
custodians or their agents must take possession of the underlying collateral.
However, if the seller defaults, the Fund could realize a loss on the sale of
the underlying security to the extent that the proceeds of the sale, including
accrued interest, are less than the resale price provided in the agreement
including interest. In addition, even though the Bankruptcy Code provides
protection for most repurchase agreements, if the seller should be involved in
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bankruptcy or insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor of the seller and is required to
return the underlying security to the seller's estate.
Restricted Securities -- Securities that may not be sold freely to the public
absent registration under the Securities Act of 1933, as amended ("1933 Act"),
or an exemption from registration. A Fund may invest in restricted securities
that the Adviser determines are not illiquid, based on guidelines and procedures
developed and established by the Board of Directors of the Company. The Board of
Directors will periodically review such procedures and guidelines and will
monitor the Adviser's implementation of such procedures and guidelines. Under
these procedures and guidelines, the Adviser will consider the frequency of
trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security, and the nature of the security and of the marketplace trades. A Fund
may purchase restricted securities sold in reliance upon the exemption from
registration provided by Rule 144A under the 1933 Act. Investing in Rule 144A
securities may increase the level of a Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities. Restricted securities may be difficult to value because market
quotations may not be readily available. Because of the restrictions on the
resale of restricted securities, they may pose liquidity problems for the Funds.
Securities Lending -- In order to generate additional income, certain of the
PBHG Advisor Funds may lend the securities in which they are invested pursuant
to agreements requiring that the loan be continuously secured by cash,
securities of the U.S. Government or its agencies or any combination of cash and
such securities as collateral equal at all times to 100% of the market value of
the securities lent. Each Fund will continue to receive interest on the
securities lent while simultaneously earning interest on the investment of cash
collateral in U.S. Government securities. Collateral is marked to market daily
to provide a level of collateral at least equal to the value of the securities
lent. There may be risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail financially.
However, loans will only be made to borrowers deemed by the Adviser or
sub-advisers to be of good standing and when, in the judgment of the Adviser or
sub-advisers, the consideration which can be earned currently from such
securities loans justifies the attendant risk.
Swaps -- As a way of managing its exposure to different types of investments, a
PBHG Advisor Fund may enter into interest rate swaps, currency swaps and other
types of swap agreements such as caps, collars and floors. In a typical interest
rate swap, one party agrees to make regular payments equal to a floating
interest rate times a "notional principal amount" in return for payments equal
to a fixed rate times the same amount, for a specific period of time. If a swap
agreement provides for payment in different currencies, the parties might agree
to
A-7
<PAGE>
exchange the notional principal amount as well. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage prepayment rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
other party. For example, the buyer of an interest rate cap obtains the right to
receive payments to the extent that a specific interest rate exceeds an
agreed-upon level, while the seller of an interest rate floor is obligated to
make payments to the extent that a specified interest rate falls below an
agreed-upon level. An interest rate collar combines elements of buying a cap and
selling a floor.
Swap agreements will tend to shift a Fund's investments exposure from one type
of investment to another. For example, if the Fund agrees to exchange payments
in dollars for payments in foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of investments and their share price
and yield.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risks assumed. As a
result, swaps can be highly volatile and have a considerable impact on a Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside high quality liquid securities in
a segregated account. The Fund will enter into swaps only with counterparties
deemed creditworthy by the Adviser.
Time Deposit -- A non-negotiable receipt issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market. Time deposits with a withdrawal penalty are considered to be
illiquid securities.
U.S. Government Agency Obligations -- Certain Federal agencies such as the
Government National Mortgage Association ("GNMA") have been established as
instrumentalities of the United States Government to supervise and finance
certain types of activities. Issues of these agencies, while not direct
obligations of the United States Government, are either backed by the full faith
and credit of the United States (e.g., GNMA securities) or supported by the
issuing agencies' right to borrow from the Treasury. The issues of other
agencies are supported by the credit of the instrumentality (e.g., Fannie Mae
securities).
A-8
<PAGE>
U.S. Government Securities -- Bills, notes and bonds issued by the U.S.
Government and backed by the full faith and credit of the United States.
U.S. Treasury Obligations -- Bills, notes and bonds issued by the U.S. Treasury,
and separately traded interest and principal component parts of such obligations
that are transferable through the Federal book-entry system known as Separately
Traded Registered Interest and Principal Securities ("STRIPS"). STRIPS are
usually structured with two classes that receive different proportions of the
interest and principal distributions on a pool of mortgage assets. One type of
STRIPS will have one class receiving all of the interest ("interest only" or "IO
class"), while the other class will receive all of the principal
("principal-only" or "PO class"). The yield to maturity on IO classes and PO
classes is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on the portfolio yield to
maturity. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, a Fund may fail to fully recoup its initial investment
in these securities, even if the security is in one of the highest rating
categories.
Variable and Floating Rate Instruments -- Certain of the obligations purchased
by the Fund may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. The interest rates on these securities may be
reset daily, weekly, quarterly or some other reset period, and may have a floor
or ceiling on interest rate changes. There is a risk that the current interest
rate on such obligations may not accurately reflect existing market interest
rates. A demand instrument with a demand notice exceeding seven days may be
considered illiquid if there is no secondary market for such securities.
When-Issued and Delayed-Delivery Securities -- When-issued and delayed-delivery
securities are securities subject to settlement on a future date. For fixed
income securities, the interest rate realized on when-issued or delayed-delivery
securities is fixed as of the purchase date and no interest accrues to the Fund
before settlement. These securities are subject to market fluctuation due to
changes in market interest rates and will have the effect of leveraging the
Fund's assets. The PBHG Advisor Funds are permitted to invest in forward
commitments or when-issued securities where such purchases are for investment
and not for leveraging purposes. One or more segregated accounts will be
established with the Custodian, and the Funds will maintain liquid assets in
such accounts in an amount at least equal in value to each Fund's commitments to
purchase when-issued securities.
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<PAGE>
LOGO
PBHG ADVISOR FUNDS, INC.
PROSPECTUS
APRIL 20, 1998
<PAGE>
PBHG Advisor Funds, Inc.
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor:
PBHG Funds Distributor
LOGO
The Power of Discipline.
The rewards of time.(Servicemark)
To open an account, receive information,
make inquiries or request literature:
1-888-800-2685
<PAGE>
Company:
PBHG ADVISOR FUNDS, INC.
Portfolios:
PBHG ADVISOR CORE VALUE FUND
PBHG ADVISOR VALUE OPPORTUNITIES FUND
PBHG ADVISOR NEW CONTRARIAN FUND
PBHG ADVISOR REIT FUND
PBHG ADVISOR BLUE CHIP GROWTH FUND
PBHG ADVISOR GROWTH OPPORTUNITIES FUND
PBHG ADVISOR ENHANCED EQUITY FUND
PBHG ADVISOR TREND FUND
PBHG ADVISOR LARGE CAP CONCENTRATED FUND
PBHG ADVISOR GROWTH II FUND
PBHG ADVISOR NEW OPPORTUNITIES FUND
PBHG ADVISOR GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
PBHG ADVISOR MASTER FIXED INCOME FUND
PBHG ADVISOR HIGH YIELD FUND
PBHG ADVISOR SHORT-TERM GOVERNMENT FUND
PBHG ADVISOR CASH RESERVES FUND
(each, a "PBHG Advisor Fund" or "Fund," collectively,
the "PBHG Advisor Funds" or "Funds")
Adviser:
PILGRIM BAXTER & ASSOCIATES, LTD.
This Statement of Additional Information is not a prospectus and relates
only to each of the Funds listed above. It is intended to provide additional
information regarding the activities and operations of PBHG Advisor Funds, Inc.
and the Funds. The Statement of Additional Information should be read in
conjunction with the Prospectus for the Fund shares dated April 20, 1998. The
Prospectus for the Funds may be obtained by calling 1-888-800-2685.
TABLE OF CONTENTS
Page
----
THE COMPANY................................................................ S-2
DESCRIPTION OF PERMITTED INVESTMENTS....................................... S-2
INVESTMENT LIMITATIONS.....................................................S-11
THE ADVISER................................................................S-16
THE SUB-ADVISERS...........................................................S-17
THE ADMINISTRATOR AND SUB-ADMINISTRATOR....................................S-20
THE DISTRIBUTION PLANS.....................................................S-20
THE DISTRIBUTOR............................................................S-23
HOW TO PURCHASE AND REDEEM SHARES..........................................S-24
THE CUSTODIANS.............................................................S-25
DIRECTORS AND OFFICERS OF THE COMPANY......................................S-25
COMPUTATION OF YIELD.......................................................S-27
CALCULATION OF TOTAL RETURN................................................S-28
PURCHASE AND REDEMPTION OF SHARES..........................................S-28
DETERMINATION OF NET ASSET VALUE...........................................S-29
TAXES......................................................................S-31
PORTFOLIO TRANSACTIONS.....................................................S-36
DESCRIPTION OF SHARES......................................................S-37
5% AND 25% SHAREHOLDERS....................................................S-38
FINANCIAL STATEMENTS.......................................................S-38
April 20, 1998
<PAGE>
THE COMPANY
This Statement of Additional Information relates to PBHG Advisor Funds, Inc.
(the "Company") and each of the PBHG Advisor Funds listed on the first page of
this Statement of Additional Information. Each Fund is a separate series of the
Company, which was incorporated in Maryland on January 9, 1998 and is registered
as an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). The charter of the Company permits the
Company to offer separate classes of shares of each Fund. Shareholders may
purchase shares through separate classes, which provide for differences in
distribution costs, voting rights and dividends ("Classes"). Except for these
differences, each share of each Class of a Fund represents an equal
proportionate interest in that Fund. See "Description of Shares." This Statement
of Additional Information relates to all Classes of shares of the Company. No
investment in shares of a Fund should be made without first reading the Fund's
Prospectus. Capitalized terms not defined herein are defined in each Prospectus
offering shares of the PBHG Advisor Funds.
DESCRIPTION OF PERMITTED INVESTMENTS
Repurchase Agreements
Repurchase agreements are agreements by which a person (e.g., a PBHG Advisor
Fund) obtains a security and simultaneously commits to return the security to
the seller (a member bank of the Federal Reserve System or primary securities
dealer as recognized by the Federal Reserve Bank of New York) at an agreed upon
price (including principal and interest) on an agreed upon date within a number
of days (usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus an agreed upon market rate of interest
which is unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.
Repurchase agreements are considered to be loans by a PBHG Advisor Fund for
purposes of its investment limitations. The repurchase agreements entered into
by the Funds will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement. With
respect to all repurchase agreements entered into by a Fund, the Fund's
custodians or their agents must take possession of the underlying collateral.
However, if the seller defaults, the Fund could realize a loss on the sale of
the underlying security to the extent that the proceeds of the sale, including
accrued interest, are less than the resale price provided in the agreement
including interest. In addition, even though the Bankruptcy Code provides
protection for most repurchase agreements, if the seller should be involved in
bankruptcy or insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal and interest
if the Fund is treated as an unsecured creditor of the seller and is required to
return the underlying security to the seller's estate.
Investment Company Shares
Investment company shares that each PBHG Advisor Fund may invest in are limited
to shares of money market mutual funds, except as set forth under "Investment
Limitations" below. Since such mutual funds pay management fees and other
expenses, shareholders of the Funds would indirectly pay both Fund expenses and
the expenses of underlying funds with respect to Fund assets invested therein.
Applicable regulations prohibit an investment company from acquiring the
securities of other investment companies that are not "part of the same group of
investment companies" if, as a result of such acquisition: (i) the investment
company owns more than 3% of the total voting stock of the company; (ii) more
than 5% of the investment company's total assets are invested in securities of
any one investment company; or (iii) more than 10% of the total assets of the
investment company are
S-2
<PAGE>
invested in securities (other than treasury stock of the investment company)
issued by all investment companies. Each PBHG Advisor Fund has no intention
currently or in the foreseeable future of investing more than 5% of its assets
in investment company securities.
Illiquid Investments
Illiquid investments are investments that cannot be sold or disposed of in the
ordinary course of business within seven (7) days at approximately the prices at
which they are valued. Under the supervision of the Board of Directors of the
Company, the Adviser (as defined hereinafter) or applicable sub-adviser
determines the liquidity of each PBHG Advisor Fund's investments and, through
reports from the Adviser or sub-adviser, the Board monitors investments in
illiquid instruments. In determining the liquidity of a Fund's investments, the
Adviser or Sub-Adviser may consider various factors including: (i) the frequency
of trades and quotations; (ii) the number of dealers and prospective purchasers
in the marketplace; (iii) dealer undertakings to make a market; (iv) the nature
of the security (including any demand or tender features); and (v) the nature of
the market place for trades (including the ability to assign or offset a Fund's
rights and obligations relating to the investment). Investments currently
considered by a Fund to be illiquid include repurchase agreements not entitling
the holder to payment of principal and interest within seven days,
over-the-counter options, and non-government stripped fixed-rate mortgage backed
securities. Also, the Adviser or sub-adviser may determine that some
government-stripped fixed-rate mortgage backed securities, loans and other
direct debt instruments, and swap agreements are illiquid. However, with respect
to over-the-counter options a Fund writes, all or a portion of the value of the
underlying instrument may be illiquid depending on the assets held to cover the
option and the nature and terms of any agreement a Fund may have to close out
the option before expiration. In the absence of market quotations, illiquid
investments are priced at fair value as determined in good faith by a committee
appointed by the Board of Directors. If, through a change in values, net assets
or other circumstances, a Fund was in a position where more than 15% of its net
assets were invested in illiquid securities (10% for the PBHG Advisor Cash
Reserves Fund), it would seek to take appropriate steps to protect liquidity.
Restricted Securities
Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, as amended (the "1933 Act"), or in a registered public offering.
Where registration is required, a PBHG Advisor Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time a Fund may be permitted to
sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security. Moreover, investing in Rule 144A securities (i.e., securities that
qualify for resale under Rule 144A under the 1933 Act) would have the effect of
increasing the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities. Restricted securities may be deemed to be liquid in the same manner
as determined under the preceding paragraph, ("Illiquid Investments").
S-3
<PAGE>
Foreign Currency Transactions
A PBHG Advisor Fund may hold foreign currency deposits from time to time, and
may convert dollars and foreign currencies in the foreign exchange markets.
Currency conversion involves dealer spreads and other costs, although
commissions usually are not charged. Currencies may be exchanged on a spot
(i.e., cash) basis, or by entering into forward contracts to purchase or sell
foreign currencies at a future date and price. Forward contracts generally are
traded in an interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The parties to a forward
contract may agree to offset or terminate the contract before maturity, or may
hold the contract to maturity and complete the contemplated currency exchange.
A PBHG Advisor Fund may use currency forward contracts to manage currency risks
and to facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Funds.
In connection with purchases and sales of securities denominated in foreign
currencies, a PBHG Advisor Fund may enter into currency forward contracts to fix
a definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge." The Adviser or the applicable sub-adviser may enter into
settlement hedges in the normal course of managing the Fund's foreign
investments. A Fund may also enter into forward contracts to purchase or sell a
foreign currency in anticipation of future purchases or sales of securities
denominated in foreign currency, even if the specific investments have not yet
been selected by the Adviser or the sub-adviser.
A PBHG Advisor Fund may also use forward contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. For example,
if a Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge, sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. A Fund could also hedge the position by selling another currency
expected to perform similarly to the pound sterling - for example, by entering
into a forward contract to sell Deutschemarks in return for U.S. dollars. This
type of hedge, sometimes referred to as a "proxy hedge," could offer advantages
in terms of cost, yield, or efficiency, but generally would not hedge currency
exposure as effectively as a simple hedge into U.S. dollars. Proxy hedges may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.
Under certain conditions, guidelines of the Securities and Exchange Commission
("SEC") require mutual funds to set aside appropriate liquid assets in a
segregated account to cover currency forward contracts. As required by SEC
guidelines, each PBHG Advisor Fund will segregate assets to cover currency
forward contracts, if any, whose purpose is essentially speculative. A Fund will
not segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy hedges.
Successful use of forward currency contracts will depend on the skill of the
Adviser or the applicable sub-adviser in analyzing and predicting currency
values. Forward contracts may substantially change
S-4
<PAGE>
a PBHG Advisor Fund's investment exposure to changes in currency exchange rates,
and could result in losses to a Fund if currencies do not perform as the Adviser
or the applicable sub-adviser anticipates. For example, if a currency's value
rose at a time when the Adviser or sub-adviser had hedged a Fund by selling that
currency in exchange for dollars, a Fund would be unable to participate in the
currency's appreciation. If the Adviser or a sub-adviser hedges a Fund's
currency exposure through proxy hedges, the Fund could realize currency losses
from the hedge and the security position at the same time if the two currencies
do not move in tandem. Similarly, if the Adviser or the applicable sub-adviser
increases a Fund's exposure to a foreign currency and that currency's value
declines, the Fund will realize a loss. There is no assurance that the use of
forward currency contracts by the Adviser or the sub-advisers will be
advantageous to a Fund or that it will hedge at an appropriate time.
Futures Contracts
A futures contract is a bilateral agreement to buy or sell a security (or
deliver a cash settlement price, in the case of a contract relating to an index
or otherwise not calling for physical delivery at the end of trading in the
contracts) for a set price in the future. Futures contracts are designated by
boards of trade which have been designated "contracts markets" by the
Commodities Futures Trading Commission ("CFTC").
No purchase price is paid or received when the contract is entered into.
Instead, a PBHG Advisor Fund, upon entering into a futures contract (and to
maintain that Fund's open positions in futures contracts), would be required to
deposit with its custodian in a segregated account in the name of the futures
broker an amount of cash, or other assets, known as "initial margin." The margin
required for a particular futures contract is set by the exchange on which the
contract is traded, and may be significantly modified from time to time by the
exchange during the term of the contract. Futures contracts are customarily
purchased and sold on margin that may range upward from less than 5% of the
value of the contract being traded. By using futures contracts as a risk
management technique, given the greater liquidity in the futures market than in
the cash market, it may be possible to accomplish certain results more quickly
and with lower transaction costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the applicable PBHG Advisor Fund. These subsequent payments,
called "variation margin," to and from the futures broker, are made on a daily
basis as the price of the underlying assets fluctuate making the long and short
positions in the futures contract more or less valuable, a process known as
"marking to the market." A Fund expects to earn interest income on its initial
and variation margin deposits.
A PBHG Advisor Fund will incur brokerage fees when it purchases and sells
futures contracts. Positions taken in the futures markets are not normally held
until delivery or cash settlement is required, but are instead liquidated
through offsetting transactions which may result in a gain or a loss. While
futures positions taken by a Fund will usually be liquidated in this manner, a
Fund may instead make or take delivery of underlying securities whenever it
appears economically advantageous
S-5
<PAGE>
to that Fund to do so. A clearing organization associated with the exchange on
which futures are traded assumes responsibility for closing out transactions and
guarantees that, as between the clearing members of an exchange, the sale and
purchase obligations will be performed with regard to all positions that remain
open at the termination of the contract.
Securities Index Futures Contracts. Purchases or sales of securities index
futures contracts may be used in an attempt to protect each PBHG Advisor Fund's
current or intended investments from broad fluctuations in securities prices. A
securities index futures contract does not require the physical delivery of
securities, but merely provides for profits and losses resulting from changes in
the market value of the contract to be credited or debited at the close of each
trading day to the respective accounts of the parties to the contract. On the
contract's expiration date a final cash settlement occurs and the futures
positions are simply closed out. Changes in the market value of a particular
index futures contract reflect changes in the specified index of securities on
which the future is based.
By establishing an appropriate "short" position in index futures, a PBHG Advisor
Fund may also seek to protect the value of its portfolio against an overall
decline in the market for such securities. Alternatively, in anticipation of a
generally rising market, a Fund can seek to avoid losing the benefit of
apparently low current prices by establishing a "long" position in securities
index futures and later liquidating that position as particular securities are
in fact acquired. To the extent that these hedging strategies are successful, a
Fund will be affected to a lesser degree by adverse overall market price
movements than would otherwise be the case.
Limitations on Purchase and Sale of Futures Contracts. A PBHG Advisor Fund,
except the PBHG Advisor Value Opportunities Fund, PBHG Advisor New Contrarian
Fund, PBHG Enhanced Equity Fund, PBHG Master Fixed Income Fund, and PBHG Advisor
Short-Term Government Fund, will not purchase or sell futures contracts unless
either (i) the futures contracts are purchased for "bona fide hedging" purposes
(as that term is defined under the CFTC regulations) or (ii) if purchased for
other than "bona fide hedging" purposes, the sum of the amounts of initial
margin deposits on a Fund's existing futures contracts and premiums required to
establish non-hedging positions would not exceed 5% of the liquidation value of
that Fund's total assets. In instances involving the purchase of futures
contracts by a Fund, an amount of cash or other liquid assets, equal to the cost
of such futures contracts (less any related margin deposits), will be deposited
in a segregated account with its custodian, thereby insuring that the use of
such futures contracts is unleveraged. In instances involving the sale of
futures contracts by a Fund, the securities underlying such futures contracts or
options will at all times be maintained by that Fund or, in the case of index
futures contracts, the Fund will own securities the price changes of which are,
in the opinion of the Adviser, expected to replicate substantially the movement
of the index upon which the futures contract is based.
The PBHG Advisor Value Opportunities Fund, PBHG Advisor New Contrarian Fund,
PBHG Enhanced Equity Fund, PBHG Master Fixed Income Fund, and PBHG Advisor
Short-Term Government Fund may purchase and sell ("write") both put options and
call options on securities, securities indices and foreign currencies, enter
into interest rate, foreign currency and index futures contracts, and purchase
and sell options on such futures contracts ("Futures options") for various
reasons: to hedge portfolio securities against adverse fluctuations, to adjust
the level of market exposure of a portfolio, to facilitate trading, to reduce
transaction costs,
S-6
<PAGE>
and/or to seek higher investment returns when a futures or option contract
is attractively priced relative to a typical portfolio investment in the
underlying security or index or securities highly correlated to the underlying
index, and not for speculation. The PBHG Advisor Value Opportunities Fund, PBHG
Advisor New Contrarian Fund, PBHG Enhanced Equity Fund, PBHG Master Fixed Income
Fund, and PBHG Advisor Short-Term Government Fund may purchase and sell foreign
currency options for purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. If
other types of options, futures contracts, or futures options are traded in the
future, the PBHG Advisor Value Opportunities Fund, PBHG Advisor New Contrarian
Fund, PBHG Enhanced Equity Fund, PBHG Master Fixed Income Fund, and PBHG Advisor
Short-Term Government Fund may also use those instruments, provided the Board of
Directors determines that their use is consistent with such Fund's investment
objectives, and their use is consistent with restrictions applicable to options
and futures contracts currently eligible for use by such Fund.
For information concerning the risks associated with utilizing futures
contracts, please see "Risks of Transactions in Futures Contracts Options"
below.
Options
The types of options transactions that each PBHG Advisor Fund is permitted to
utilize are discussed below.
Writing Call Options. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration of
the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.
A PBHG Advisor Fund will write covered call options both to reduce the risks
associated with certain of its investments and to increase total investment
return through the receipt of premiums. In return for the premium income, a Fund
will give up the opportunity to profit from an increase in the market price of
the underlying security above the exercise price so long as its obligations
under the contract continue, except insofar as the premium represents a profit.
Moreover, in writing the call option, a Fund will retain the risk of loss should
the price of the security decline. The premium is intended to offset that loss
in whole or in part. Unlike the situation in which a Fund owns securities not
subject to a call option, a Fund, in writing call options, must assume that the
call may be exercised at any time prior to the expiration of its obligation as a
writer, and that in such circumstances the net proceeds realized from the sale
of the underlying securities pursuant to the call may be substantially below the
prevailing market price.
A PBHG Advisor Fund may terminate its obligation under an option it has written
by buying an identical option. Such a transaction is called a "closing purchase
transaction." A Fund will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or
S-7
<PAGE>
more than the amount received from the sale of the corresponding call option.
Also, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the exercise or closing out of a call option is likely to be
offset in whole or part by unrealized appreciation of the underlying security
owned by the Fund. When an underlying security is sold from a Fund's securities
portfolio, that Fund will effect a closing purchase transaction so as to close
out any existing covered call option on that underlying security.
Writing Put Options. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A PBHG Advisor
Fund when it writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash or
other liquid obligations having a value equal to or greater than the exercise
price of the option.
A PBHG Advisor Fund may write put options either to earn additional income in
the form of option premiums (anticipating that the price of the underlying
security will remain stable or rise during the option period and the option will
therefore not be exercised) or to acquire the underlying security at a net cost
below the current value (e.g., the option is exercised because of a decline in
the price of the underlying security, but the amount paid by such Fund, offset
by the option premium, is less than the current price). The risk of either
strategy is that the price of the underlying security may decline by an amount
greater than the premium received. The premium which a Fund receives from
writing a put option will reflect, among other things, the current market price
of the underlying security, the relationship of the exercise price to that
market price, the historical price volatility of the underlying security, the
option period, supply and demand and interest rates.
A PBHG Advisor Fund may effect a closing purchase transaction to realize a
profit on an outstanding put option or to prevent an outstanding put option from
being exercised.
Purchasing Put and Call Options. A PBHG Advisor Fund may purchase put options on
securities to protect its holdings against a substantial decline in market
value. The purchase of put options on securities will enable a Fund to preserve,
at least partially, unrealized gains in an appreciated security in its portfolio
without actually selling the security. In addition, a Fund will continue to
receive interest or dividend income on the security. A Fund may also purchase
call options on securities to protect against substantial increases in prices of
securities that the Fund intends to purchase pending its ability to invest in an
orderly manner in those securities. A Fund may sell put or call options it has
previously purchased, which could result in a net gain or loss depending on
whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put or call option which was bought.
Securities Index Options. Each PBHG Advisor Fund may write covered put and call
options and purchase call and put options on securities indexes for the purpose
of hedging against the risk of unfavorable price movements adversely affecting
the value of the Fund's securities or securities it intends to purchase. A Fund
will only write "covered" options. A call option on a securities index is
considered covered, for example, if, so long as the Fund is obligated as the
writer of the call, it holds securities the price changes of which are, in the
opinion of the Adviser, expected to replicate substantially the movement of the
index or indexes upon which the options written by the Fund are based. A put on
a securities index written by a Fund will be considered covered if, so long as
it is
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obligated as the writer of the put, the Fund segregates with its custodian cash
or other liquid obligations having a value equal to or greater than the exercise
price of the option. Unlike a stock option, which gives the holder the right to
purchase or sell a specified stock at a specified price, an option on a
securities index gives the holder the right to receive a cash "exercise
settlement amount" equal to (i) the difference between the exercise price of the
option and the value of the underlying stock index on the exercise date,
multiplied by (ii) a fixed "index multiplier." A securities index fluctuates
with changes in the market value of the securities so included. For example,
some securities index options are based on a broad market index such as the S&P
500 or the NYSE Composite Index, or a narrower market index such as the S&P 100.
Indexes may also be based on an industry or market segment such as the AMEX Oil
and Gas Index or the Computer and Business Equipment Index.
Over-the-Counter Options. Each PBHG Advisor Fund may enter into contracts with
primary dealers with whom it may write over-the-counter options. Such contracts
will provide that the Fund has the absolute right to repurchase an option it
writes at any time at a repurchase price which represents the fair market value,
as determined in good faith through negotiation between the parties, but which
in no event will exceed a price determined pursuant to a formula contained in
the contract. Although the specific details of the formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by a Fund for writing the option, plus the
amount, if any, of the option's intrinsic value (i.e., the amount the option is
"in-the-money"). The formula will also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written "out-of-the-money." Each PBHG Advisor Fund has
established standards of creditworthiness for these primary dealers, although
such Fund may still be subject to the risk that firms participating in such
transactions will fail to meet their obligations. In instances in which a Fund
has entered into agreements with respect to the over-the-counter options it has
written, and such agreements would enable the Fund to have an absolute right to
repurchase at a pre-established formula price the over-the-counter option
written by it, the Fund would treat as illiquid only securities equal in amount
to the formula price described above less the amount by which the option is
"in-the-money," i.e., the amount by which the price of the option exceeds the
exercise price.
For information concerning the risks associated with utilizing options and
futures contracts, please see "Risks of Transactions in Futures Contracts and
Options" below.
Risks of Transactions in Futures Contracts and Options
Futures. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.
Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session. Once the daily limit has been reached in a particular type of
futures contract, no trades may be made on that day at a price beyond that
limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the
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limit may prevent the liquidation of unfavorable positions. Futures contract
prices have occasionally moved to the daily limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation of
futures positions and subjecting some futures traders to substantial losses.
Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the futures contract were closed out.
Thus, a purchase or sale of a futures contract may result in losses in excess of
the amount invested in the futures contract.
A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by a Fund of futures contracts as a
hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. The Adviser or
applicable sub-adviser will, however, attempt to reduce this risk by entering
into futures contracts whose movements, in its judgment, will have a significant
correlation with movements in the prices of a PBHG Advisor Fund's underlying
instruments sought to be hedged.
Successful use of futures contracts by a PBHG Advisor Fund for hedging purposes
is also subject to the Fund's ability to correctly predict movements in the
direction of the market. It is possible that, when a Fund has sold futures to
hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in that Fund's portfolio might decline. If this were to occur,
the Fund would lose money on the futures and also would experience a decline in
value in its underlying instruments.
Positions in futures contracts may be closed out only on an exchange or a board
of trade which provides the market for such futures. Although the PBHG Advisor
Funds intend to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active market, there is no guarantee that such will
exist for any particular contract or at any particular time. If there is not a
liquid market at a particular time, it may not be possible to close a futures
position at such time, and, in the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin.
However, in the event futures positions are used to hedge portfolio securities,
the securities will not be sold until the futures positions can be liquidated.
In such circumstances, an increase in the price of securities, if any, may
partially or completely offset losses on the futures contracts.
Options. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange. There is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time, and for some options, such as over-the-counter options, no
secondary market on an exchange may exist. If a Fund is unable to effect a
closing
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purchase transaction, that Fund will not sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise.
Options traded in the over-the-counter market may not be as actively traded as
those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter. A Fund will engage in such
transactions only with firms of sufficient credit so as to minimize these risks.
Such options and the securities used as "cover" for such options may be
considered illiquid securities.
The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by a Fund will not exactly match the composition of the
securities indexes on which options are written. In the purchase of securities
index options the principal risk is that the premium and transaction costs paid
by a Fund in purchasing an option will be lost if the changes (increase in the
case of a call, decrease in the case of a put) in the level of the index do not
exceed the cost of the option.
INVESTMENT LIMITATIONS
Fundamental Policies
Each Fund has adopted certain investment restrictions which, in addition to
those restrictions in the Prospectus, are fundamental and may not be changed
without approval by a majority vote of the Fund's shareholders. Such majority is
defined in the 1940 Act as the lesser of (i) 67% or more of the voting
securities of the Fund present in person or by proxy at a meeting, if the
holders of more than 50% of the outstanding voting securities are present or
represented by proxy; or (ii) more than 50% of the outstanding voting securities
of the Fund.
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Each Fund other than the PBHG Advisor Enhanced Equity Fund, PBHG Advisor
Master Fixed Income Fund and PBHG Advisor Short-Term Government Fund, as a
fundamental investment policy, may not:
1. Pledge any of its assets, except that each Fund may pledge assets to the
extent permitted by the 1940 Act in order to (i) secure temporary borrowings
including securities lending and reverse repurchase arrangements, (ii) secure
permitted borrowings, or (iii) as may be necessary in connection with the Fund's
use of options and futures contracts.
2. Make loans except by the purchase of bonds or other debt obligations of types
commonly offered publicly or privately and purchased by financial institutions,
including investment in repurchase agreements, provided that each Fund will not
make any investment in repurchase agreements maturing in more than seven days if
such investments, together with any other illiquid securities held by the Fund,
would exceed 15% of the value of its net assets (or 10% of the value of net
assets of the PBHG Advisor Cash Reserves Fund), and each Fund may lend its
portfolio securities to the extent permitted by the 1940 Act.
3. Engage in the underwriting of securities of other issuers, except that the
Fund may sell an investment position even though it may be deemed to be an
underwriter as that term is defined in the 1933 Act.
4. Purchase or sell futures contracts, commodities or commodity contracts,
except that this shall not prevent a Fund from: (i) investing in readily
marketable securities of issuers which can invest in commodities; and (ii)
entering into forward contracts, futures contracts and options thereon that are
based on securities, market or currency indexes, or similar financial
instruments where, as a result thereof, no more than 5% of the total assets for
that Fund (taken at market value at the time of entering into the futures
contracts) would be committed to margin deposits on such futures contracts and
premiums paid for unexpired options on such futures contracts; provided that, in
the case of an option that is "in-the-money" at the time of purchase, the
"in-the-money" amount, as defined under the Commodity Futures Trading Commission
regulations, may be excluded in computing the 5% limit. These limitations shall
not be applicable to the PBHG Advisor Value Opportunity Fund, PBHG Advisor New
Contrarian Fund, PBHG Advisor Enhanced Equity Fund and the PBHG Advisor Master
Fixed Income Fund.
5. Purchase or sell real estate, or real estate partnership interests, except
that this shall not prevent a Fund from investing in readily marketable
securities of issuers which can invest in real estate, institutions that issue
mortgages, or real estate investment trusts which deal with real estate or
interests therein.
6. Issue senior securities (as defined in the 1940 Act) except in
connection with a permitted borrowing of money or pledging, mortgaging or
hypothecating assets, as described in each Fund's limitation on borrowing money
and each Fund's limitation on permitted borrowings and each Fund's limitation on
pledging, mortgaging or hypothecating assets, or as permitted by rule,
regulation or order of the SEC.
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Non-fundamental Policies
In addition to the foregoing, and the policies set forth in each Fund's
Prospectus, each Fund has adopted additional investment restrictions which may
be amended by the Board of Directors without a vote of shareholders.
Each Fund other than the PBHG Advisor Enhanced Equity Fund, PBHG Advisor
Master Fixed Income Fund and PBHG Advisor Short-Term Government Fund, as a
non-fundamental investment policy, may not:
1. Purchase or hold the securities of an issuer if, at the time thereof, any
such purchase or holding would cause more than 15% of the Fund's net assets to
be invested in illiquid securities. This limitation does not include any Rule
144A security that has been determined by, or pursuant to procedures established
by, the Board, based on trading markets for such security, to be liquid.
2. Purchase puts, calls, straddles, spreads, and any combination thereof (except
for such instruments based upon or derived from securities, market and currency
indexes or similar financial instruments), except to the extent permitted by the
1940 Act or the rules or regulations thereunder.
3. Except to the extent permitted by the 1940 Act, invest in the securities of
other open-end investment companies, or invest in the securities of closed-end
investment companies except through purchase in the open market in a transaction
involving no commission or profit to a sponsor or dealer (other than the
customary broker's commission) or as part of a merger, consolidation or other
acquisition.
4. Invest in companies for the purpose of exercising control.
5. Except for PBHG Advisor New Contrarian Fund make short sales of
securities, maintain a short position or purchase securities on margin, except
that each Fund may: (i) obtain short-term credits as necessary for the clearance
of security transactions; and (ii) establish margin accounts as may be necessary
in connection with the Fund's use of options and futures contracts.
6. Invest in interests in oil, gas or other mineral leases, exploration or
development programs, except that this shall not prevent a Fund from investing
in readily marketable securities of issuers which can invest in oil, gas or
other mineral leases, exploration or development programs.
Each of the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed
Income Fund and PBHG Advisor Short-Term Government Fund, as a non-fundamental
investment policy, may not:
1. Invest directly in real estate, oil, gas, or other mineral exploration or
development programs; however, this limitation will not prevent the purchase of
securities of companies engaged in such activities or secured by interests in
such activities.
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2. Make loans, except that such Fund may (i) purchase money market securities
and enter into repurchase agreements, (ii) acquire bonds, debentures, notes and
other debt securities, and (iii) lend portfolio securities in an amount not to
exceed 30% of its total assets.
3. Purchase securities on margin, except that such Fund may (i) use short-term
credit necessary for clearance of purchases of portfolio securities, and (ii)
make margin deposits in connection with futures contracts and options on futures
contracts.
4. Underwrite securities issued by other persons except to the extent that such
Fund may be deemed to be an underwriter within the meaning of the 1933 Act in
connection with the purchase and sale of its portfolio securities in the
ordinary course of pursuing its investment program.
5. Purchase or sell commodities or commodity contracts, except that such Fund
may (i) enter into financial and currency futures contracts and options on such
futures contracts, (ii) enter into forward foreign currency exchange contracts
(the Fund does not consider such contracts to be commodities), and (iii) invest
in instruments which have the characteristics of both futures contracts and
securities.
6. Purchase a security if, as a result of such purchase, more than 15% of the
value of the Fund's net assets would be invested in illiquid securities or other
securities that are not readily marketable, including repurchase agreements
which do not provide for payment within seven days.
7. Purchase securities of open-end or closed-end investment companies except in
compliance with the 1940 Act.
8. Purchase or retain the securities of any issuer if, to the knowledge of the
Company's management, any officers and directors of the Company and of the
Adviser or sub-adviser who own beneficially more than 0.5% of the outstanding
securities of such issuer, together own beneficially more than 5% of such
securities.
9. Purchase securities (other than obligations issued or guaranteed by the U.S.
Government or any foreign government, their agencies or instrumentalities) if,
as a result, more than 5% of the value of the Fund's net assets would be
invested in the securities of issuers which at the time of purchase had been in
operation for less than three years (for this purpose, the period of operation
of any issuer will include the period of operation of any predecessor or
unconditional guarantor of such issuer).
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The foregoing percentages will apply at the time of each purchase of a security
(except with respect to the limitation on investments in illiquid securities).
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THE ADVISER
The Company and Pilgrim Baxter & Associates, Ltd. (the "Adviser") have entered
into an investment advisory agreement with respect to the Funds (the "Advisory
Agreement"). The Advisory Agreement provides certain limitations on the
Adviser's liability, but also provides that the Adviser shall not be protected
against any liability to the Company or each of its 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 or
duties thereunder.
The Advisory Agreement obligates the Adviser to: (i) provide a program of
continuous investment management for the Company in accordance with the
Company's investment objectives, policies and limitations; (ii) make investment
decisions for the Company; and (iii) place orders to purchase and sell
securities for the Company, subject to the supervision of the Board of
Directors. The Advisory Agreement provides that the Adviser is not responsible
for other expenses of operating the Company. (See the Prospectuses for a
description of expenses borne by the Company.)
In the interest of limiting the expenses of the PBHG Advisor Funds, the
Adviser has entered into an Expense Limitation Agreement with the Company, on
behalf of each Fund. The Adviser has agreed to waive or limit its advisory fees
or assume other expenses in an amount that operates to limit the aggregate
annual total of certain operating expenses of each Fund as follows: 0.82% of the
PBHG Advisor Core Value Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor
Blue Chip Growth Fund, and PBHG Advisor Enhanced Equity Fund; 1.07% of the PBHG
Advisor Value Opportunities Fund, PBHG Advisor Large Cap Concentrated Fund, PBHG
Advisor Growth II Fund, and PBHG Advisor Global Technology & Communications
Fund; 0.97% of the PBHG Advisor REIT Fund and PBHG Advisor New Opportunities
Fund; 0.87% of the PBHG Advisor Growth Opportunities Fund and PBHG Advisor Trend
Fund; 0.67% of the PBHG Advisor Master Fixed Income Fund; 0.72% of the PBHG
Advisor High Yield Fund; and 0.52% of the PBHG Advisor Short-Term Government
Fund and PBHG Advisor Cash Reserves Fund. The expenses subject to such
limitation are those which are not specifically allocated to a class of shares
of a Fund under the Company's multiple class plan (the "Rule 18f-3 Plan")
including, but not limited to, investment advisory fees of the Adviser, but
excluding: (i) interest, taxes, brokerage commissions, and other expenditures
which are capitalized in accordance with generally accepted accounting
principles; (ii) expenses specifically allocated to a class of shares of a Fund
under the Rule 18f-3 Plan, such as Rule 12b-1 expenses and transfer agency fees;
and (iii) other extraordinary expenses not incurred in the ordinary course of a
Fund's business. Reimbursement by the Funds of the advisory fees waived or
limited and other expenses paid by the Adviser pursuant to the Expense
Limitation Agreement may be made at a later date when such Funds have reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense ratio of each Fund to exceed the percentages discussed in
this paragraph. Consequently, no reimbursement by a Fund will be made unless:
(i) the Fund's assets exceed $75 million; (ii) the Fund's total annual expense
ratio is less than the specified percentage; and (iii) the payment of such
reimbursement was approved by the Board of Directors on a quarterly basis.
The continuance of the Advisory Agreement with respect to a PBHG Advisor Fund
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
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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 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 the Adviser or (ii) by the Adviser at any time without penalty upon 60
days' written notice to the Company. The Advisory Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
THE SUB-ADVISERS
Pilgrim Baxter Value Investors, Inc.
The Company, on behalf of each of the PBHG Advisor Core Value Fund, PBHG Advisor
New Contrarian Fund, PBHG Advisor Value Opportunities Fund, and PBHG Advisor
REIT Fund, and the Adviser have entered into a sub-advisory agreement (the
"Value Investors Sub-Advisory Agreement") with Pilgrim Baxter Value Investors,
Inc. ("Value Investors"), a wholly owned subsidiary of the Adviser. The Value
Investors 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 Company 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 or
duties thereunder.
The Value Investors Sub-Advisory Agreement obligates Value Investors to: (i)
manage the investment operations of the applicable PBHG Advisor Fund and the
composition of such Fund's investment portfolios, including the purchase,
retention and disposition thereof in accordance with such Fund's investment
objective, policies and limitations; (ii) provide supervision of such Fund's
investments and to determine from time to time what investments and securities
will be purchased, retained or sold by such Fund and what portion of the assets
will be invested or held uninvested in cash; and (iii) determine the securities
to be purchased or sold by such Fund and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in the Fund's Prospectus or as the Board of Directors or the Adviser
may direct from time to time, in conformity with federal securities laws.
With respect to each applicable PBHG Advisor Fund, the continuance of the Value
Investors Sub-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 outstanding voting securities of such 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 Value Investors Sub-Advisory Agreement may
be terminated with respect to a Fund (i) by the Company, 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 applicable Fund,
(ii) by the Adviser at any time, without the payment of any penalty, on not more
than 60 days' nor less than 30 days' written notice to the other parties, or
(iii) by Value Investors at any time, without the payment of any penalty, on 90
days' written notice to the other parties. The Value Investors Sub-Advisory
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act).
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Analytic o TSA Global Asset Management, Inc.
The Company, on behalf of the PBHG Advisor Enhanced Equity Fund, PBHG Advisor
Master Fixed Income Fund, and PBHG Advisor Short-Term Government Fund, and the
Adviser have entered into a sub-advisory agreement (the "Analytic Sub-Advisory
Agreement") with Analytic o TSA Global Asset Management, Inc. ("Analytic"), 700
South Flower Street, Suite 2400, Los Angeles, CA 90017, which is a wholly owned
subsidiary of United Asset Management Corporation, the parent of the Adviser.
Analytic was founded in 1970 as Analytic Investment Management, Inc., one of the
first independent investment counsel firms specializing in the creation and
continuous management of optioned equity and optioned debt portfolios for
fiduciaries and other long term investors. It is one of the oldest and largest
independent investment management firms in this specialized area. In January
1996, Analytic Investment Management, Inc. acquired and merged with TSA Capital
Management which emphasizes U.S. and global tactical asset allocation, currency
management, quantitative equity and fixed income management, as well as option
yield curve strategies. Analytic serves, among others, pension and
profit-sharing plan, endowments, foundations, corporate investment portfolios,
mutual savings banks, and insurance companies, for which it manages in excess of
$1 billion. It has also managed another registered investment company since
1978.
Pursuant to the Analytic Sub-Advisory Agreement, Analytic, subject to the
control and direction of the Company's Officers and Board of Directors, manages
the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income Fund,
and PBHG Advisor Short-Term Government Fund in accordance with each Fund's
stated investment objective and policies and makes investment decisions for the
Funds.
PBHG Advisor Enhanced Equity Fund. Dennis M. Bein, Harindra de Silva and Charles
L. Dobson have been the portfolio managers since November 1996 for a portfolio
with similar investment objectives and policies to the PBHG Advisor Enhanced
Equity Fund. Mr. Bein has been a member of the portfolio management and research
team for Analytic since August 1995. He concurrently serves as a senior
associate for Analysis Group, Inc. with which he has been associated since
August 1990. Dr. de Silva serves as a managing director of Analytics, which he
joined in May of 1995. He concurrently serves as a principal of Analysis Group,
Inc., which he joined in March 1986. Mr. Dobson has been a portfolio manager of
Analytic since 1978. They are subject to the supervision of Analytic's
investment management committee.
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PBHG Advisor Master Fixed Income Fund and PBHG Advisor Short-Term Government
Fund. Scott Barker, Greg McMurran and Bob Bannon are the portfolio managers for
the PBHG Advisor Master Fixed Income Fund and PBHG Advisor Short-Term Government
Fund. Mr. Barker has been a member of the portfolio management and research team
for Analytic since August 1995. He concurrently serves as a research analyst
with Analysis Group, Inc. with which he has been associated since October 1993.
Previously, he was with Xontech, Inc. for six years as a scientific analyst. Mr.
McMurran is the Chief Investment Officer of Analytic and has been with the firm
since October of 1976 as a portfolio manager. Mr. Bannon is a managing director
of Analytic specializing in the fixed income area. He initially joined the firm
in January 1996 when TSA Capital Management merged with Analytic Investment
Management, Inc. He was formerly a managing director with TSA since April 1995.
Previously, he served as a senior bond strategist with IDEA for four years. They
are subject to the supervision of Analytic's investment management committee.
Wellington Management Company, LLP
The Company, on behalf of the PBHG Advisor Cash Reserves Fund, and the Adviser
have entered into a sub-advisory agreement (the "Wellington Sub-Advisory
Agreement") with Wellington Management Company, LLP ("Wellington Management").
The Wellington Sub-Advisory Agreement provides certain limitations on Wellington
Management's liability, but also provides that Wellington Management shall not
be protected against any liability to the Company or its shareholders by reason
of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from a breach of fiduciary duty with respect to the
receipt of compensation for services thereunder.
The Wellington Sub-Advisory Agreement obligates Wellington Management to: (i)
manage the investment operations of the PBHG Advisor Cash Reserves Fund and the
composition of such Fund's portfolio, including the purchase, retention and
disposition thereof in accordance with the Fund's investment objectives,
policies and restrictions; (ii) provide supervision of the Fund's investments
and determine from time to time what investments and securities will be
purchased, retained or sold by the Fund, and what portion of the assets will be
invested or held uninvested in cash; and (iii) determine the securities to be
purchased or sold by the Fund and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in the Fund's Registration Statement or as the Board of Directors or
the Adviser may direct from time to time, in conformity with federal securities
laws.
The Wellington Sub-Advisory Agreement will continue in effect for a period of
more than two years from the date thereof only so long as continuance is
specifically approved at least annually in conformance with the 1940 Act;
provided, however, that this Agreement may be terminated with respect to the
Company (i) by the Company at any time, without the payment of any penalty, by
the vote of a majority of Directors of the Company or by the vote of a majority
of the outstanding voting securities of the PBHG Advisor Cash Reserves Fund,
(ii) by the Adviser at any time, without the payment of any penalty, on not more
than 60 days' nor less than 30 days' written notice to the other parties, or
(iii) by Wellington Management at any time, without the payment of any penalty,
on 90 days' written notice to the other parties. The Wellington Sub-Advisory
Agreement shall terminate automatically and immediately in the event of its
assignment as defined in the 1940 Act.
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THE ADMINISTRATOR AND SUB-ADMINISTRATOR
The Company and PBHG Fund Services (the "Administrator") have entered into an
Administrative Services Agreement (the "Administrative Agreement") pursuant to
which the Administrator oversees the administration of the Company's and each
Fund's business and affairs, including services performed by various third
parties. The Administrator, a wholly-owned subsidiary of the Adviser, is
organized as a Pennsylvania business trust and has its principal place of
business at 825 Duportail Road, Wayne, Pennsylvania 19087. The Administrator is
entitled to a fee from the Company, which is calculated daily and paid monthly
at an annual rate of 0.15% of the average daily net assets of each Fund. The
Administrative Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with the matters to which the Administrative Agreement relates,
except a loss resulting from willful misfeasance, bad faith or negligence on the
part of the Administrator in the performance of its duties. The Administrative
Agreement shall remain in effect until December 31, 1999 and shall thereafter
continue for successive periods of one year, unless terminated by either party
upon not less than 90 days' prior written notice to the other party.
The Company, the Administrator and SEI Fund Resources (the "Sub-Administrator")
entered into a Sub-Administrative Services Agreement, as will be amended
effective May 1, 1998, pursuant to which the Sub-Administrator assists the
Administrator in connection with the administration of the business and affairs
of the Company. SEI Investment Management Corporation ("SEI Investments"), which
is a wholly owned subsidiary of SEI Investment Company ("SEI"), owns all
beneficial interest in the Sub-Administrator. The Sub-Administrator is organized
as a Delaware business trust, and has its principal business offices at One
Freedom Valley Road, Oaks, Pennsylvania 19456. The Sub-Administrative Services
Agreement provides that the Sub-Administrator shall not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with the matters to which the Sub-Administrative Service Agreement relates,
except a loss resulting from willful misfeasance, bad faith or negligence on the
part of the Sub-Administrator in the performance of its duties. The
Sub-Administrative Service Agreement shall remain in effect until December 31,
2000, and shall continue for successive periods of one year, unless terminated
by either party upon not less than 90 days' prior written notice to the other
party.
Under the Sub-Administrative Services Agreement, the Administrator pays the
Sub-Administrator fees at an annual rate based on the combined average daily net
assets of the Company, The PBHG Funds, Inc. and PBHG Insurance Series Fund,
Inc., calculated as follows: (i) 0.040% of the first $2.5 billion, plus (ii)
0.025% of the next $7.5 billion, plus (iii) 0.020% of the excess over $10
billion.
THE DISTRIBUTION PLANS
The Class A Plan. The Company has adopted a Distribution Plan pursuant to Rule
12b-1 under the 1940 Act relating to the Class A shares of each PBHG Advisor
Fund (the "Class A Plan"). The Class A Plan provides that the Class A shares pay
up to 0.35% per annum of their daily average net assets as compensation to the
Distributor for the purpose of financing any activity which is primarily
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intended to result in the sale of Class A shares and for shareholder services.
Activities appropriate for financing under the Class A Plan include, but are not
limited to, the following: printing of prospectuses and statements of additional
information and reports for other than existing shareholders; overhead;
preparation and distribution of advertising material and sales literature;
expenses of organizing and conducting sales seminars; supplemental payments to
dealers and other institutions such as asset-based sales charges or as payments
of service fees under shareholder service arrangements; and costs of
administering the Class A Plan. The directors of the Company have determined to
limit payments under the Class A Plan to 0.25% per annum of the Class A shares
daily net assets for the time being.
The Class B Plan. The Company has also adopted a Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act relating to Class B shares of each PBHG Advisor
Fund (the "Class B Plan", and collectively with the Class A Plan, the "Plans").
Under the Class B Plan, the Funds pay compensation to the Distributor at an
annual rate of 1.00% of the average daily net assets attributable to Class B
shares. Of such amount, the Funds pay a service fee of 0.25% of the average
daily net assets attributable to Class B shares to selected dealers and other
institutions which furnish continuing personal shareholder services to their
customers who purchase and own Class B shares. Amounts paid in accordance with
the Class B Plan may be used to finance any activity primarily intended to
result in the sale of Class B shares, including, but not limited to, printing of
prospectuses and statements of additional information and reports for other than
existing shareholders; overhead; preparation and distribution of advertising
material and sales literature; expenses or organizing and conducting sales
seminars; supplemental payments to dealers and other institutions such as
asset-based sales charges or as payments of service fees under shareholder
service arrangements; and costs of administering the Class B Plan. The
Distributor may transfer and sell its right under the Class B Plan in order to
finance distribution expenditures in respect of Class B shares.
Both Plans. The Distributor may enter into agreements ("Shareholder Service
Agreements") with investment dealers, banks and other financial institutions
selected from time to time by the Distributor for the provision of shareholder
service assistance in connection with the sale of the Funds' shares to such
dealers' customers, and for the provision of continuing personal shareholder
services to customers who may from time to time directly or beneficially own
shares of the Funds. The distribution assistance and continuing personal
shareholder services to be rendered by dealers under the Shareholder Service
Agreements may include, but shall not be limited to, the following: distributing
sales literature; answering routine customer inquiries concerning the Funds;
assisting customers in changing dividend options, account designations and
addresses, and in enrolling in any of several special investment plans offered
in connection with the purchase of the Fund's shares; assisting in the
establishment and maintenance of customer accounts and records and in the
processing of purchase and redemption transactions; investing dividends and any
capital gains distributions automatically in the Fund's shares; and providing
such other information and services as the Funds or the customer may reasonably
request.
Under a Shareholder Service Agreement, the Funds agree to pay periodically fees
to selected dealers and other institutions who render the foregoing services to
their customers. The fees payable under a Shareholder Service Agreement
generally will be calculated at the end of each payment period for each business
day of the Funds during such period at the annual rate of 0.25% of the average
daily net asset value of the Funds' shares purchased or acquired through
exchange. Fees calculated in this
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manner shall be paid only to those selected dealers or other institutions who
are dealers or institutions of record at the close of business on the last
business day of the applicable payment period for the account in which the
Funds' shares are held.
The Plans are subject to any applicable limitations imposed from time to time by
rules of the National Association of Securities Dealers, Inc.
The Plans require the Distributor to provide the Board of Directors at least
quarterly with a written report of the amounts expended pursuant to the Plans
and the purposes for which such expenditures were made. The Board of Directors
reviews these reports in connection with their decisions with respect to the
Plans.
As required by Rule 12b-1, the Plans were approved by the Board of Directors,
including a majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Company and who have no direct or indirect
financial interest in the operation of the Plans or in any agreements related to
the Plans ("Qualified Directors"). In approving the Plans in accordance with the
requirements of Rule 12b-1, the directors considered various factors and
determined that there is a reasonable likelihood that the Plans would benefit
each class of the Fund and its respective shareholders.
The Plans do not obligate the Fund to reimburse the Distributor for the actual
expenses the Distributor may incur in fulfilling its obligations under the
Plans. Thus, even if the Distributor's actual expenses exceed the fee payable to
the Distributor thereunder at any given time, the Fund will not be obligated to
pay more than that fee. If the Distributor's expenses are less than the fee it
receives, the Distributors will retain the full amount of the fee.
Unless the Plans are terminated earlier in accordance with their terms, both
Plans continue as long as such continuance is specifically approved at least
annually by the Board of Directors, including a majority of the Qualified
Directors.
The Plans may be terminated with respect to any or all Funds by the vote of
a majority of the Qualified Directors, or, with respect to a particular class,
by the vote of a majority of the outstanding voting securities of that class.
Any change in the Plans that would increase materially the distribution expenses
paid by the applicable class requires shareholder approval; otherwise, it may be
amended by the directors, including a majority of the Qualified Directors, by
votes cast in person at a meeting called for the purpose of voting upon such
amendment. As long as the Plans are in effect, the selection or nomination of
the Qualified Directors is committed to the discretion of the Qualified
Directors. In the event the Class A Plan is amended in a manner which the Board
of Directors determines would materially increase the charges paid by holders of
Class A shares under the Class A Plan, the Class B shares of the Fund will no
longer convert into Class A shares of the Fund unless the Class B shares, voting
separately, approve such amendment. If the Class B shareholders do not approve
such amendment, the Board of Directors will (i) create a new class of shares of
the Fund which is identical in all material respects to the Class A shares as
they existed prior to the implementation of the amendment, and (ii) ensure that
the existing Class B shares of the Fund will be exchanged or
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<PAGE>
converted into such new class of shares no later than the date the Class B
shares were scheduled to convert into Class A shares.
The principal differences between the Class A Plan and the Class B Plan are: (i)
the Class A Plan allows payment to the Distributor or to dealers or financial
institutions of up to .35% of average daily net assets of Class A Shares
(although the payments are currently limited to 0.25% of average net assets);
(ii) the Class B Plan obligates the Class B shares to continue to make payments
to the Distributor following termination of the Class B shares Distribution
Agreement with respect to Class B shares sold by or attributable to the
distribution efforts of the Distributor unless there has been a complete
termination of the Class B Plan (as defined in such Plan); and (iii) the Class B
Plan expressly authorizes the Distributor to assign, transfer or pledge its
rights to payments pursuant to the Class B Plan.
THE DISTRIBUTOR
Information concerning the Distributor and the continuous offering of the Funds'
shares is set forth in the Prospectus under the headings "How to Purchase Fund
Shares." A Distribution Agreement with the Distributor relating to the Class A
shares of the PBHG Advisor Funds was approved by the Board of Directors on
February 20, 1998. A Distribution Agreement with the Distributor relating to the
Class B shares of the Funds was also approved by the Board of Directors on
February 20, 1998. A third Distribution Agreement which relates to the Class I
shares of the Funds was approved by the Board of Directors on February 20, 1998.
Such Distribution Agreements are hereinafter, collectively, referred to as the
"Distribution Agreements."
The Distribution Agreements provide that the Distributor will bear the expenses
of printing from the final proof and distributing prospectuses and statements of
additional information of the Funds relating to public offerings made by the
Distributor pursuant to the Distribution Agreements (other than those
prospectuses and statements of additional information distributed to existing
shareholders of the Funds), and any promotional or sales literature used by the
Distributor or furnished by the Distributor to dealers in connection with the
public offering of the Funds' shares, including expenses of advertising in
connection with such public offerings. The Distributor has not undertaken to
sell any specified number of shares of any classes of the Funds.
The Distributor expects to pay sales commissions from its own resources to
dealers and institutions who sell Class B shares of the Funds at the time of
such sales. Payments with respect to Class B shares will equal 4.0% of the
purchase price of the Class B shares sold by the dealer or institution, and will
consist of a sales commission equal to 3.75% of the purchase price of the Class
B shares sold plus an advance of the first year service fee of 0.25% with
respect to such shares. The portion of the payments to the Distributor under the
Class B Plan which constitutes an asset-based sales charge (0.75%) is intended
in part to permit the Distributor to recoup a portion of such sales commissions
plus financing costs. The Distributor anticipates that it will require a number
of years to recoup from Class B Plan payments the sales commissions paid to
dealers and institutions in connection with sales of Class B shares.
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<PAGE>
In the future, if multiple distributors serve the Funds, each such distributor
(or its assignee or transferee) would receive a share of the payments under the
Class B Plan based on the portion of such Fund's Class B shares sold by or
attributable to the distribution efforts of that distributor.
The Company (on behalf of any class of the Funds) or the Distributor may
terminate the Distribution Agreements on sixty (60) days' written notice without
penalty. The Distribution Agreements will terminate in the event of their
assignment. In the event the Class B shares Distribution Agreement is
terminated, the Distributor would continue to receive payments of asset-based
distribution fees in respect of the outstanding Class B shares attributable to
the distribution efforts of the Distributor; provided, however, that a complete
termination of the Class B Plan (as defined in such Plan) would terminate all
payments to the Distributor. Termination of the Class B Plan or Distribution
Agreement does not affect the obligations of Class B shareholders to pay
contingent deferred sales charges.
HOW TO PURCHASE AND REDEEM SHARES
A completion description of the manner by which shares of the Funds may be
purchased appears in the Prospectus under the caption "How to Purchase Fund
Shares."
The sales charge normally deducted on purchases of Class A shares of the Funds
is used to compensate the Distributor and participating dealers for their
expenses incurred in connection with the distribution of such shares. Since
there is little expense associated with unsolicited orders placed directly with
the Distributor by persons, who because of their relationship with the Funds or
with the Adviser and its affiliates, are familiar with the Funds, or whose
programs for purchase involve little expense (e.g., because of the size of the
transaction and shareholder records required), the Distributor believes that it
is appropriate and in the Funds' best interests that such persons be permitted
to purchase Class A shares of the Funds through the Distributor without payment
of a sales charge. The persons who may purchase Class A shares of the Funds
without a sales charge are shown in the Prospectus.
Complete information concerning the method of exchanging shares of the Funds for
shares of the other Funds is set forth in the Prospectus under the Caption
"Exchange Privileges."
Information concerning redemption of the Funds' shares is set forth in the
Prospectus under the caption "How to Redeem Fund Shares." The Funds intend to
redeem all shares of the Funds in cash. See "Purchase and Redemption of Shares."
In addition to the Funds' obligation to redeem shares, the Distributor may also
repurchase shares as an accommodation to shareholders. To effect a repurchase,
those dealers who have executed Selected Dealer Agreements with the Distributor
must phone orders to the order desk of the Fund telephone, 1-888-800-2685, and
guarantee delivery of all required documents in good order. A repurchase is
effected at the net asset value of the Fund next determined after such order is
received. Such arrangement is subject to timely receipt of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation. While
there is no charge imposed by the Funds or by the Distributor (other than any
applicable contingent deferred sales charge) when shares are redeemed or
repurchased, dealers may charge a service fee for handling the transaction.
S-24
<PAGE>
The right of redemption may be suspended or the date of payment postponed when
(a) trading on the New York Stock Exchange is restricted, as determined by
applicable rules and regulations of the SEC, (b) the New York Stock Exchange is
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC
exists making disposition of portfolio securities or the valuation of the net
assets of the Fund not reasonably practicable.
THE CUSTODIANS
Corestates Bank, N.A., Broad and Chestnut Streets, P.O. 7618, Philadelphia,
Pennsylvania 19101, serves as the custodian for the Company and each PBHG
Advisor Fund. The Custodian holds cash, securities and other assets of the
Company as required by the 1940 Act.
DIRECTORS AND OFFICERS OF THE COMPANY
The management and affairs of the Company are supervised by the Directors under
the laws of the State of Maryland. The Directors and executive officers of the
Company and the principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Each Director serves as a Director of two other registered investment
companies advised by the Adviser and each officer serves as an officer in a
similar capacity of two other investment companies advised by the Adviser. The
age of each Director and officer is indicated in the parentheses.
JOHN R. BARTHOLDSON (51) - Director - Triumph Group Holdings, Inc.
(manufacturing), 1255 Drummers Lane, Suite 200, Wayne, PA 19087-1590. Chief
Financial Officer and Director, the Triumph Group Holdings, Inc. since 1992.
Senior Vice President and Chief Financial Officer, Lukens, Inc., 1978-1992.
HAROLD J. BAXTER (51)* - Chairman of the Board and Director - Chairman, Chief
Executive Officer and Director, the Adviser, 825 Duportail Road, Wayne, PA
19087. Trustee, the Administrator since May 1996. Chief Executive Officer, Value
Investors, 825 Duportail Road, Wayne, PA 19087, since June 1996. Trustee, the
Distributor since January 1998.
JETTIE M. EDWARDS (49) - Director - Syrus Associates, 76 Seaview Drive, Santa
Barbara, California 93108. Consultant, Syrus Associates since 1986. Trustee,
Provident Investment Counsel Trust (investment company) since 1992.
ALBERT A. MILLER (62) - Director - 7 Jennifer Drive, Holmdel, New Jersey 07733.
Principal and Treasurer, JK Equipment Exporters since 1995. Advisor and
Secretary, the Underwoman Shoppes Inc. (retail clothing stores) since 1980.
Merchandising Group Vice President, R.H. Macy & Co., 1958-1995 (retired).
- --------
* Mr. Baxter is a Director who may be deemed to be an "interested person" of
the Company as that term is defined in the 1940 Act.
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<PAGE>
GARY L. PILGRIM (57) - President - Chief Investment Officer and Director, the
Adviser since 1982. Trustee, the Administrator since May 1996. Director, Value
Investors since June 1996.
PAUL J. HONDROS (49) - Executive Vice President - President and Chief Operating
Officer, the Adviser since October 1997. President and Chief Operating Officer,
Value Investors since January 1998. Trustee, the Distributor since January 1998.
President and Chief Executive Officer, Fidelity Investments Retail Group,
1990-1997.
SANDRA K. ORLOW (44) - Vice President - Vice President and Assistant Secretary
of SEI and the Sub-Administrator since 1983 and SEI Investments since 1996.
KATHRYN L. STANTON (39) - Vice President, Assistant Secretary - Vice President
and Assistant Secretary of SEI and the Sub-Administrator since 1994 and SEI
Investments since 1996. Associate, Morgan, Lewis & Bockius LLP (law firm),
1989-1994.
TODD CIPPERMAN (32) - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of SEI and the Sub-Administrator since 1995 and SEI
Investments since 1996. Associate, Dewey Ballantine (law firm) 1994-1995.
Associate, Winston & Strawn, (law firm) 1991-1994.
BARBARA A. NUGENT (41) - Vice President, Assistant Secretary - Counsel, the
Adviser since February 1998. Vice President and Assistant Secretary, SEI,
1996-1998. Associate, Drinker, Biddle & Reath (law firm), 1994-1996. Assistant
Vice President/Operations, Delaware Group of Funds, 1980-1994.
MICHAEL J. HARRINGTON (29) - Vice President - Director of Fund Services, the
Adviser since 1994. Secretary, the Administrator since May 1996. Vice President,
the Distributor since January 1998. Account Manager, SEI, 1991-1994.
LEE T. CUMMINGS (34) - Treasurer, Chief Financial Officer and Controller -
Director of Mutual Fund Operations, the Adviser since 1996. Treasurer, the
Administrator since May 1996. Vice President and Treasurer, the Distributor
since January 1998. Investment Accounting Officer, Delaware Group of Funds,
1994-1996. Vice President, Fund/Plan Services, Inc., 1992-1994.
BRIAN F. BEREZNAK (36) - Vice President - Trustee and President, the
Administrator since May 1996. Chief Operating Officer, the Adviser from 1989
through December 31, 1996. Director, Value Investors since June 1996. President,
the Distributor since January 1998.
JOHN M. ZERR (35) - Vice President and Secretary - General Counsel and
Secretary, the Adviser since November 1996. General Counsel and Secretary, Value
Investors since November 1996. General Counsel and Secretary, the Distributor
since January 1998. Vice President and Assistant Secretary, Delaware Management
Company, Inc. and the Delaware Group of Funds, 1995-1996. Associate, Ballard
Spahr Andrews & Ingersoll (law firm), 1987-1995.
Each current Director of the Company who is not an "interested person" of the
Company received the following compensation during the year ended December 31,
1997:
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<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Pension or
Retirement Total
Benefits Estimated Compensation
Aggregate Accrued as Annual from Registrant
Compensation Part Benefits and Complex
Name of Person, from of Company Upon Fund Paid to
Position Registrant(1) Expenses Retirement Directors(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
John R. Bartholdson, $0 N/A N/A $47,583
Director
- -------------------------------------------------------------------------------------------------
Harold J. Baxter, N/A N/A N/A N/A
Director(3)
- -------------------------------------------------------------------------------------------------
Jettie M. Edwards, $0 N/A N/A $47,583
Director
- -------------------------------------------------------------------------------------------------
Albert A. Miller, $0 N/A N/A $47,583
Director
=================================================================================================
</TABLE>
(1) The Company was not in existence during 1997.
(2) The Company is expected to pay approximately $27,500 to each Director who
is not an "interested person" of the Company for the fiscal year ending
October 31, 1998, which includes $1000 for each Board meeting and $500 for
each committee meeting attended. Each Portfolio pays its proportionate
share of the total compensation, based on its total net assets relative to
the total net assets of the Company.
(3) Mr. Baxter is a Director who may be deemed to be an "interested person" of
the Company, as that term is defined in the 1940 Act, and consequently will
be receiving no compensation from the Company.
As of the date of this Statement of Additional Information, the Directors and
officers of the Company as a group owned less than 1% of the outstanding shares
of each class of shares of each PBHG Advisor Fund.
COMPUTATION OF YIELD
From time to time, the PBHG Advisor Cash Reserves Fund may advertise its
"current yield" and "effective compound yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance. The
"yield" of the PBHG Advisor Cash Reserves Fund refers to the income generated by
an investment in such Fund over a seven-day period (which period will be stated
in the advertisement). This income is then "annualized," that is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested. The
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"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment.
The current yield of the PBHG Advisor Cash Reserves Fund will be calculated
daily based upon the seven days ending on the date of calculation ("base
period"). The yield is computed by determining the net change (exclusive of
capital changes and income other than investment income) in the value of a
hypothetical pre-existing shareholder account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return and multiplying the result by (365/7). Realized and unrealized gains and
losses are not included in the calculation of the yield. The effective compound
yield of the Fund is determined by computing the net change (exclusive of
capital changes and income other than investment income) in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = ((Base Period Return + 1) 365/7) - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
The yield of the PBHG Advisor Cash Reserves Fund fluctuates, and the
annualization of a week's dividend is not a representation by the Fund as to
what an investment in the Fund will actually yield in the future. Actual yields
will depend on such variables as asset quality, average asset maturity, the type
of instruments the Fund invests in, changes in interest rates on money market
instruments, changes in the expenses of the Fund and other factors.
Yields are one basis upon which investors may compare the PBHG Advisor Cash
Reserves Fund with other money market funds; however, yields of other money
market funds and other investment vehicles may not be comparable because of the
factors set forth above and differences in the methods used in valuing portfolio
instruments.
CALCULATION OF TOTAL RETURN
From time to time, each of the PBHG Advisor Funds may advertise its total
returns. The total return refers to the average compounded rate of return to a
hypothetical investment for designated time periods (including, but not limited
to, the period from which a Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made on any day on which the New York Stock
Exchange is open for business. However, shares of the PBHG Advisor Cash Reserves
Fund cannot be purchased,
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<PAGE>
exchanged or redeemed (i) on days when the Federal Reserve is closed, or (ii) by
Federal Reserve wire on federal holidays restricting wire transfers. Currently,
the following holidays are observed by the PBHG Advisor Funds: New Year's Day,
Martin Luther King, Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Shares of the Funds are offered on a continuous basis.
It is currently the Company's policy to pay all redemptions in cash. The Company
retains the right, however, to provide for redemptions in whole or in part by a
distribution in-kind of securities held by the Funds in lieu of cash in certain
cases. Each PBHG Advisor Fund has made an election pursuant to Rule 18f-1 under
the 1940 Act by which such Fund has committed itself to pay in cash all requests
for redemption by any shareholder of record, limited in amount with respect to
each shareholder during any 90-day period to the lesser of (1) $250,000 or (2)
one percent of the net asset value of the Fund at the beginning of such 90-day
period. Shareholders may incur brokerage charges on the sale of any securities
received in payment of redemptions.
The Company reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a PBHG Advisor Fund's securities is not reasonably
practicable, or for such other periods as the SEC has by order permitted. The
Company also reserves the right to suspend sales of shares of a Fund for any
period during which the New York Stock Exchange, the Adviser, the Administrator,
Sub-Administrator, the Transfer Agent and/or the Custodian are not open for
business.
DETERMINATION OF NET ASSET VALUE
The securities of each PBHG Advisor Fund are valued by the Sub-Administrator.
The Sub-Administrator will use an independent pricing service to obtain
valuations of securities. The pricing service relies primarily on prices of
actual market transactions as well as trade quotations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Company
under the general supervision of the Directors.
Securities listed on an exchange or quoted on a national market system are
valued at the last sales price. Other securities are quoted at the last bid
price. In the event a listed security is traded on more than one exchange, it is
valued at the last sale price on the exchange on which it is principally traded.
If there are no transactions in a security during the day, it is valued at the
most recent bid price. However, debt securities (other than short-term
obligations), including listed issues, are valued on the basis of valuations
furnished by a pricing service which utilizes electronic data processing
techniques to determine valuations for normal institutional size trading units
of debt securities, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations are valued at amortized cost. Securities for
which market quotations are not readily available and other assets held by the
PBHG Advisor Funds, if any, are valued at their fair value as determined in good
faith by the Board of Directors.
Foreign securities are valued on the basis of quotations from the primary market
in which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. In
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<PAGE>
addition, if quotations are not readily available, or if the values have been
materially affected by events occurring after the closing of a foreign market,
assets may be valued by another method that the Board of Directors believes
accurately reflects fair value.
The net asset value per share of the PBHG Advisor Cash Reserves Fund is
calculated by adding the value of securities and other assets, subtracting
liabilities and dividing by the number of outstanding shares. Securities will be
valued by the amortized cost method which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of the
PBHG Advisor Cash Reserves Fund may tend to be higher than a like computation
made by a company with identical investments utilizing a method of valuation
based upon market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by the Fund resulted in a lower
aggregate portfolio value on a particular day, a prospective investor in the
Fund would be able to obtain a somewhat higher yield than would result from
investment in a company utilizing solely market values, and existing investors
in the Fund would experience a lower yield. The converse would apply in a period
of rising interest rates.
The use of amortized cost valuation by the PBHG Advisor Cash Reserves Fund and
the maintenance of the Fund's net asset value at $1.00 are permitted by
regulations set forth in Rule 2a-7 under the 1940 Act, provided that certain
conditions are met. Under Rule 2a-7, as amended, a money market portfolio must
maintain a dollar-weighted average maturity in the Fund of 90 days or less and
not purchase any instrument having a remaining maturity of more than 397 days.
In addition, money market funds may acquire only U.S. dollar denominated
obligations that present minimal credit risks and that are "eligible securities"
which means they are (i) rated, at the time of investment, by at least two
nationally recognized statistical rating organizations (one if it is the only
organization rating such obligation) in the highest short-term rating category
or, if unrated, determined to be of comparable quality (a "first tier
security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). The Adviser will determine that an
obligation presents minimal credit risks or that unrated instruments are of
comparable quality in accordance with guidelines established by the Directors.
The Directors must approve or ratify the purchase of any unrated securities or
securities rated by only one rating organization. In addition, investments in
second tier securities are subject to the further constraints that (i) no more
than 5% of the Fund's assets may be invested in such securities in the
aggregate, and (ii) any investment in such securities of one issuer is limited
to the greater of 1% of the Fund's total assets or $1 million. The regulations
also require the Directors to establish procedures which are reasonably designed
to stabilize the net asset value per share at $1.00 for the Fund. However, there
is no assurance that the Fund will be able to meet this objective. The Fund's
procedures include the determination of the extent of deviation, if any, of the
Fund's current net asset value per unit calculated using available market
quotations from the Fund's amortized cost price per share at such intervals as
the Directors deem appropriate and reasonable in light of market conditions and
periodic reviews of the amount of the deviation and the methods used to
calculate such deviation. In the event that such deviation exceeds 1/2 of 1%,
the Directors are required to consider promptly
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<PAGE>
what action, if any, should be initiated. If the Directors believe that the
extent of any deviation may result in material dilution or other unfair results
to shareholders, the Directors are required to take such corrective action as
they deem appropriate to eliminate or reduce such dilution or unfair results to
the extent reasonably practicable. In addition, if the Fund incurs a significant
loss or liability, the Directors have the authority to reduce pro rata the
number of shares of that Fund in each shareholder's account and to offset each
shareholder's pro rata portion of such loss or liability from the shareholder's
accrued but unpaid dividends or from future dividends.
TAXES
The following is only a summary of certain income tax considerations generally
affecting the PBHG Advisor Funds and their shareholders and is not intended as a
substitute for careful tax planning. Shareholders are urged to consult their tax
advisors with specific reference to their own tax situations, including their
state and local income tax liabilities.
Federal Income Tax
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
Qualification as a Regulated Investment Company
Each PBHG Advisor Fund intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. In order to qualify for
treatment as a RIC under the Code, each Fund must distribute annually to its
shareholders at least the sum of 90% of its net interest income excludable from
gross income plus 90% of its investment company taxable income (generally, net
investment income plus net short-term capital gain) ("Distribution
Requirement"). In addition to the Distribution Requirement, each Fund must meet
several other requirements. Among these requirements are the following: (i) each
Fund must derive at least 90% of its gross income in each taxable year from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
and other income (including but not limited to gains from options, futures or
forward contracts derived with respect to the Fund's business of investing in
such stock, securities or currencies) (the "Income Requirement"); (ii) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and securities of other issuers, with such
securities of other issuers limited, in respect to any one issuer, to an amount
that does not exceed 5% of the value of the Fund's assets and that does not
represent more than 10% of the outstanding voting securities of such issuer; and
(iii) no more than 25% of the value of a Fund's total assets may be invested in
the securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses (the "Asset Diversification Test"). For purposes of the Asset
Diversification Test, it is unclear under present law who should be treated as
the issuer of forward foreign currency exchange contracts, of
S-31
<PAGE>
options on foreign currencies, or of foreign currency futures and related
options. It has been suggested that the issuer in each case may be the foreign
central bank or foreign government backing the particular currency.
Consequently, a Fund may find it necessary to seek a ruling from the Internal
Revenue Service on this issue or to curtail its trading in forward foreign
currency exchange contracts in order to stay within the limits of the Asset
Diversification Test.
For purposes of the Income Requirement, foreign currency gains (including gains
from options, futures or forward contracts on foreign currencies) that are not
"directly related" to a Fund's principal business may, under regulations not yet
issued, be excluded from qualifying income.
If a PBHG Advisor Fund fails to qualify as a RIC for any taxable year, it will
be taxable at regular corporate rates on its net investment income and net
capital gain without any deductions for amounts distributed to shareholders. In
such an event, all distributions (including capital gains distributions) will be
taxable as ordinary dividends to the extent of that Fund's current and
accumulated earnings and profits and such distributions will generally be
eligible for the corporate dividends-received deduction.
Fund Distributions
Notwithstanding the Distribution Requirement described above, which requires
only that a PBHG Advisor Fund distribute at least 90% of its annual investment
company taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), the Fund will be subject to a nondeductible 4% federal excise tax
to the extent it fails to distribute by the end of any calendar year 98% of its
ordinary income for that year and 98% of its capital gain net income (the excess
of short- and long-term capital gains over short-and long-term capital losses)
for the one-year period ending on October 31 of that calendar year, plus certain
other amounts.
Treasury regulations permit a RIC in determining its investment company taxable
income and undistributed net capital gain for any taxable year to elect to treat
all or part of any net capital loss, any net long-term capital loss, or any net
foreign currency loss incurred after October 31 as if it had been incurred in
the succeeding year.
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in shares. Capital gain dividends are taxable to
shareholders as a long-term capital gain, regardless of the length of time a
shareholder has held his shares. Under the Taxpayer Relief Act of 1997, the
Internal Revenue Service is authorized to issue regulations that will enable
shareholders to determine the tax rates applicable to such capital gain
distributions. For calendar year 1997, the Internal Revenue Service has
announced that RICs will be required to report to their shareholders the amount
of capital gain dividends subject to taxation at the 28 percent tax rate.
Withholding
In certain cases, a PBHG Advisor Fund will be required to withhold, and remit to
the U.S. Treasury, 31% of any distributions paid to a shareholder who (i) has
failed to provide a correct taxpayer
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<PAGE>
identification number, (ii) is subject to backup withholding by the Internal
Revenue Service, or (iii) has not certified to the Fund that such shareholder is
not subject to backup withholding.
Redemption or Exchange of Shares.
Upon a redemption or exchange of shares, a shareholder will recognize a taxable
gain or loss depending upon his or her basis in the shares. Unless the shares
are disposed of as part of a conversion transaction, such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Any loss recognized by a
shareholder on the sale of Fund shares held six months or less will be treated
as a long-term capital loss to the extent of any distributions of net capital
gains received by the shareholder with respect to such shares.
Any loss recognized on a sale or exchange will be disallowed to the extent that
Fund shares are sold and replaced within the 61-day period beginning 30 days
before and ending 30 days after the disposition of such shares. In such a case,
the basis of the shares acquired will be increased to reflect the disallowed
loss. Shareholders should particularly note that this loss disallowance rule
applies even where shares are automatically replaced under the dividend
reinvestment plan.
Investment in Foreign Financial Instruments. Under Code Section 988, gains or
losses from certain foreign currency forward contracts or fluctuations in
currency exchange rates will generally be treated as ordinary income or loss.
Such Code Section 988 gains or losses will increase or decrease the amount of a
PBHG Advisor Fund's investment company taxable income available to be
distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gains. Additionally, if Code
Section 988 losses exceed other investment company taxable income during a
taxable year, the Fund would not be able to pay any ordinary income dividends,
and any such dividends paid before the losses were realized, but in the same
taxable year, would be recharacterized as a return of capital to shareholders,
thereby reducing the tax basis of Fund shares.
Hedging Transactions
Some of the forward foreign currency exchange contracts, options and futures
contracts that the Funds may enter into will be subject to special tax treatment
as "Section 1256 contracts." Section 1256 contracts are treated as if they are
sold for their fair market value on the last business day of the taxable year,
regardless of whether a taxpayer's obligations (or rights) under such contracts
have terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is combined with any other
gain or loss that was previously recognized upon the termination of Section 1256
contracts during that taxable year. The net amount of such gain or loss for the
entire taxable year (including gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is deemed to be 60% long-term and 40%
short-term gain or loss. However, in the case of Section 1256 contracts that are
forward foreign currency exchange contracts, the net gain or loss is separately
determined and (as discussed above) generally treated as ordinary income or
loss.
Generally, the hedging transactions in which the PBHG Advisor Funds may engage
may result in "straddles" or "conversion transactions" for U.S. federal income
tax purposes. The straddle and
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<PAGE>
conversion transaction rules may affect the character of gains (or in the case
of the straddle rules, losses) realized by the Funds. In addition, losses
realized by the Funds on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules and the
conversion transaction rules have been promulgated, the tax consequences to the
Funds of hedging transactions are not entirely clear. The hedging transactions
may increase the amount of short-term capital gain realized by the Funds (and,
if they are conversion transactions, the amount of ordinary income) which is
taxed as ordinary income when distributed to shareholders.
Each PBHG Advisor Fund may make one or more of the elections available under the
Code which are applicable to straddles. If a Fund makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Transactions that may be engaged in by certain of the Funds (such as short sales
"against the box") may be subject to special tax treatment as "constructive
sales" under section 1259 of the Code if a Fund holds certain "appreciated
financial positions" (defined generally as any interest (including a futures or
forward contract, short sale or option) with respect to stock, certain debt
instruments, or partnership interests if there would be a gain were such
interest sold, assigned, or otherwise terminated at its fair market value). Upon
entering into a constructive sales transaction with respect to an appreciated
financial position, a Fund will be deemed to have constructively sold such
appreciated financial position and will recognize gain as if such position were
sold, assigned, or otherwise terminated at its fair market value on the date of
such constructive sale (and will take into account any gain for the taxable year
which includes such date).
Because application of the straddle, conversion transaction and constructive
sale rules may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected straddle or
investment positions, the amount which must be distributed to shareholders and
which will be taxed to shareholders as ordinary income or long-term capital gain
may be increased or decreased as compared to a fund that did not engage in such
transactions.
Requirements relating to each PBHG Advisor Fund's tax status as a RIC may limit
the extent to which a Fund will be able to engage in transactions in options and
futures contracts.
State Taxes
Distributions by a PBHG Advisor Fund to shareholders and the ownership of shares
may be subject to state and local taxes.
S-34
<PAGE>
Foreign Income Taxes
Foreign Tax Consequences
Investment Income received from foreign sources may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on a PBHG Advisor Fund's securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
taxes. Foreign countries generally do not impose taxes on capital gains with
respect to investments by foreign investors. If a Fund meets the Distribution
Requirement and if more than 50% of the value of the Fund's total assets at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to file an election with the Internal Revenue Service that
will enable shareholders, in effect, to receive the benefit of the foreign tax
credit with respect to any foreign and U.S. possessions income taxes paid by the
Fund (the "Foreign Tax Credit Election"). Pursuant to the Foreign Tax Credit
Election, the Fund will treat those taxes as dividends paid to its shareholders.
Each shareholder will be required to include a proportionate share of those
taxes in gross income as income received from a foreign source and must treat
the amount so included as if the shareholder had paid the foreign tax directly.
The shareholder may then either deduct the taxes deemed paid by him or her in
computing his or her taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against the shareholder's
federal income tax. However, the Taxpayer Relief Act of 1997 has imposed holding
period requirements that must be satisfied by both the Fund and the shareholders
before a shareholder will be allowed a deduction or credit. If the Fund makes
the Foreign Tax Credit Election, it will report annually to its shareholders the
respective amounts per share of the Fund's income from sources within, and taxes
paid to, foreign countries and U.S. possessions.
Foreign Shareholders
Dividends from a PBHG Advisor Fund's investment company taxable income and
distributions constituting returns of capital paid to a nonresident alien
individual, a foreign trust or estate, foreign corporation, or foreign
partnership (a "foreign shareholder") generally will be subject to U.S.
withholding tax at a rate of 30% (or lower treaty rate) upon the gross amount of
the dividend. Foreign shareholders may be subject to U.S. withholding tax at a
rate of 30% on the income resulting from a Fund's Foreign Tax Credit Election,
but may not be able to claim a credit or deduction with respect to the
withholding tax for the foreign taxes treated as having been paid by them.
A foreign shareholder generally will not be subject to U.S. taxation on gain
realized upon the redemption or exchange of shares of a PBHG Advisor Fund or on
capital gain dividends. In the case of a foreign shareholder who is a
nonresident alien individual, however, gain realized upon the sale or redemption
of shares of a Fund and capital gain dividends ordinarily will be subject to
U.S. income tax at a rate of 30% (or lower applicable treaty rate) if such
individual is physically present in the U.S. for 183 days or more during the
taxable year and certain other conditions are met. In the case of a foreign
shareholder who is a nonresident alien individual, the Funds may be required to
withhold U.S. federal income tax at a rate of 31% unless proper notification of
such shareholder's foreign status is provided.
S-35
<PAGE>
Notwithstanding the foregoing, if distributions by the PBHG Advisor Funds are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from such Fund's investment company taxable income, capital
gains, and any gains realized upon the sale of shares of the Fund will be
subject to U.S. income tax at the graduated rates applicable to U.S. citizens or
domestic corporations.
Transfers by gift of shares of a PBHG Advisor Fund by a foreign shareholder who
is a nonresident alien individual will not be subject to U.S. federal gift tax.
An individual who, at the time of death, is a foreign shareholder will
nevertheless be subject to U.S. federal estate tax with respect to shares at the
graduated rates applicable to U.S. citizens and residents, unless a treaty
exception applies. In the absence of a treaty, there is a $13,000 statutory
estate tax credit.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisors with respect to the
particular tax consequences to them of an investment in any of the PBHG Advisor
Funds.
Miscellaneous Considerations
The foregoing general discussion of federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on November 1, 1997.
Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.
Prospective shareholders are encouraged to consult their tax advisors as to the
consequences of these and other U.S., state, local, and foreign tax rules
affecting investments in the PBHG Advisor Funds.
PORTFOLIO TRANSACTIONS
The Adviser or sub-advisers are authorized to select brokers and dealers to
effect securities transactions for the PBHG Advisor Funds. The Adviser or
sub-advisers will seek to obtain the most favorable net results by taking into
account various factors, including price, commission, if any, size of the
transactions and difficulty of executions, the firm's general execution and
operational facilities and the firm's risk in positioning the securities
involved. While the Adviser or sub-advisers generally seek reasonably
competitive spreads or commissions, the Fund will not necessarily be paying the
lowest spread or commission available. The Adviser or sub-advisers seek to
select brokers or dealers that offer the Funds best price and execution or other
services which are of benefit to the Funds. Certain brokers or dealers assist
their clients in the purchase of shares from the Distributor and charge a fee
for this service in addition to a Fund's public offering price. In the case of
securities traded in the over-the-counter market, the Adviser or sub-advisers
expect normally to seek to select primary market makers.
The Adviser or sub-advisers may, consistent with the interests of the PBHG
Advisor Funds, select brokers on the basis of the research services they provide
to the Adviser or sub-advisers. Such services may include analyses of the
business or prospects of a company, industry or economic sector,
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<PAGE>
or statistical and pricing services. Information so received by the Adviser will
be in addition to and not in lieu of the services required to be performed by
the Adviser under the Advisory Agreement. If, in the judgment of the Adviser or
sub-adviser, a Fund or other accounts managed by the Adviser or sub-adviser will
be benefitted by supplemental research services, the Adviser or sub-advisers are
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. These research services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software used in security analyses; and providing
portfolio performance evaluation and technical market analyses. The expenses of
the Adviser or sub-advisers will not necessarily be reduced as a result of the
receipt of such information, and such services may not be used exclusively, or
at all, with respect to the Fund or account generating the brokerage, and there
can be no guarantee that the Adviser or sub-advisers will find any specific
service of value in advising the Funds.
It is expected that the PBHG Advisor Funds may execute brokerage or other agency
transactions through the Distributor, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules promulgated by the SEC. In addition, the Adviser or
sub-advisers may direct commission business to one or more designated
broker-dealers, including the Distributor, in connection with such
broker-dealer's payment of certain of the Fund's or the Company's expenses. In
addition, the Adviser or sub-adviser may place orders for the purchase or sale
of Fund securities with qualified broker-dealers that refer prospective
shareholders to the Funds. The Directors, including those who are not
"interested persons" of the Company, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") and subject to seeking best execution and such other
policies as the Board of Directors may determine, the Adviser may consider sales
of a PBHG Advisor Fund's shares as a factor in the selection of broker-dealers
to execute portfolio transactions for the Fund.
The Company's Board of Directors has adopted a Code of Ethics governing personal
trading by persons who manage, or who have access to trading activity by a PBHG
Advisor Fund. The Code of Ethics allows trades to be made in securities that may
be held by the Fund, however, it prohibits a person from taking advantage of
Fund trades or from acting on inside information.
DESCRIPTION OF SHARES
The Company may increase the number of shares which each PBHG Advisor Fund is
authorized to issue and may create additional portfolios of the Company. Each
share of a Fund represents an equal proportionate interest in that Fund with
each other share. Shares are entitled upon liquidation to a pro rata share in
the net assets of the Fund available for distribution to shareholders.
Shareholders have no preemptive rights. All consideration received by the
Company for shares of any Fund and all
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<PAGE>
assets in which such consideration is invested would belong to that Fund and
would be subject to the liabilities related thereto.
5% AND 25% SHAREHOLDERS
As of March 31,1998, Pilgrim Baxter & Associates, Ltd. owned all of the shares
of each Fund.
FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P. serves as the independent accountants for the Company.
An audited Statement of Assets and Liabilities with notes thereto of each Fund
as of March 20, 1998, and the report of Coopers & Lybrand, L.L.P. with respect
thereto are set forth below.
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<PAGE>
PBHG Advisor Funds, Inc.
Statements of Assets and Liabilities
March 20, 1998
<TABLE>
<CAPTION>
PBHG Advisor
PBHG Advisor Value PBHG Advisor PBHG Advisor
Core Value Opportunities New Contrarian REIT
Fund Fund Fund Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash $ 300 $10,900 $10,875 $ 300
Organizational Cost $25,875 $ 2,875 $ 2,875 $2,875
------- ------- ------- ------
Total Assets $26,175 $13,775 $13,750 $3,175
Liabilities:
Accrued Expenses $25,875 $ 2,875 $ 2,875 $2,875
------- ------- ------- ------
Total Liabilities $25,875 $ 2,875 $ 2,875 $2,875
Net Assets:
Portfolio shares of Class A (authorized 100,000,000 shares -
$0.001 par value for each fund) based on 10, 365, 363 and 10
outstanding shares of common stock, respectively $ 100 $ 3,650 $ 3,625 $ 100
Net Assets:
Portfolio shares of Class B (authorized 100,000,000 shares -
$0.001 par value for each fund) based on 10, 363, 363 and 10
outstanding shares of common stock, respectively $ 100 $ 3,625 $ 3,625 $ 100
Net Assets:
Portfolio shares of Class I (authorized 100,000,000 shares -
$0.001 par value for each fund) based on 10, 363, 363 and 10
outstanding shares of common stock, respectively $ 100 $ 3,625 $ 3,625 $ 100
- --------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 300 $10,900 $10,875 $ 300
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share - Class A $ 10.00 $ 10.00 $ 10.00 $10.00
Net Asset Value Per Share - Class B $ 10.00 $ 10.00 $ 10.00 $10.00
Net Asset Value Per Share - Class I $ 10.00 $ 10.00 $ 10.00 $10.00
The accompanying notes are an integral part of the statements of assets and liabilities.
</TABLE>
<PAGE>
PBHG Advisor Funds, Inc.
Statements of Assets and Liabilities
March 20, 1998
<TABLE>
<CAPTION>
PBHG
PBHG PBHG PBHG PBHG Advisor
Advisor Advisor Advisor PBHG Advisor Global
Blue Chip Growth Enhanced Advisor New Technology &
Growth Opportunities Equity Trend Opportunities Communications
Fund Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 300 $10,875 $10,875 $ 300 $10,875 $10,875
Organizational Cost $29,571 $ 2,555 $29,571 $2,555 $ 2,555 $ 2,555
------- ------- ------- ------ ------- -------
Total Assets $29,871 $13,430 $40,446 $2,855 $13,430 $13,430
Liabilities:
Accrued Expenses $29,571 $ 2,555 $29,571 $2,555 $ 2,555 $ 2,555
------- ------- ------- ------ ------- -------
Total Liabilities $29,571 $ 2,555 $29,571 $2,555 $ 2,555 $ 2,555
Net Assets:
Portfolio shares of Class A
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 363, 10, 363 and 363
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 3,625 $ 100 $ 3,625 $ 3,625
Net Assets:
Portfolio shares of Class B
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 363, 10, 363 and 363
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 3,625 $ 100 $ 3,625 3,625
Net Assets:
Portfolio shares of Class I
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 363, 10, 363 and 363
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 3,625 $ 100 $ 3,625 $ 3,625
- -----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 300 $10,875 $10,875 $ 300 $10,875 $10,875
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share - Class A $ 10.00 $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00
Net Asset Value Per Share - Class B $ 10.00 $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00
Net Asset Value Per Share - Class I $ 10.00 $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00
The accompanying notes are an integral part of the statements of assets and liabilities.
</TABLE>
<PAGE>
PBHG Advisor Funds, Inc.
Statements of Assets and Liabilities
March 20, 1998
<TABLE>
<CAPTION>
PBHG
PBHG Advisor PBHG PBHG
PBHG Advisor PBHG Master Advisor Advisor
Advisor Large Cap Advisor Fixed Short-Term Cash
Growth II Concentrated High Yield Income Government Reserves
Fund Fund Fund Fund Fund Fund
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Cash $ 300 $10,875 $ 300 $10,875 $ 300 $10,875
Organizational Cost $ 2,555 $29,571 $2,555 $29,571 $29,571 $29,571
------- ------- ------ ------- ------- -------
Total Assets $ 2,855 $40,446 $2,855 $40,446 $29,871 $40,446
Liabilities:
Accrued Expenses $ 2,555 $29,571 $2,555 $29,571 $29,571 $29,571
------- ------- ------ ------- ------- -------
Total Liabilities $ 2,555 $29,571 $2,555 $29,571 $29,571 $29,571
Net Assets:
Portfolio shares of Class A
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 10, 363, 10 and 3,625
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 100 $ 3,625 $ 100 $ 3,625
Net Assets:
Portfolio shares of Class B
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 10, 363, 10 and 3,625
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 100 $ 3,625 $ 100 $ 3,625
Net Assets:
Portfolio shares of Class I
(authorized 100,000,000 shares -
$0.001 par value for each fund)
based on 10, 363, 10, 363, 10 and 3,625
outstanding shares of common stock,
respectively $ 100 $ 3,625 $ 100 $ 3,625 $ 100 $ 3,625
- -----------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 300 $10,875 $ 300 $10,875 300 $10,875
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share - Class A $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00 $ 1.00
Net Asset Value Per Share - Class B $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00 $ 1.00
Net Asset Value Per Share - Class I $ 10.00 $ 10.00 $10.00 $ 10.00 $ 10.00 $ 1.00
The accompanying notes are an integral part of the statements of assets and liabilities.
</TABLE>
<PAGE>
Notes To Statements of Assets and Liabilities PBHG Advisor Funds, Inc.
March 20, 1998
(1) Organization
PBHG Advisor Funds, Inc. (the "Funds"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company with sixteen series: the PBHG Advisor Core Value Fund (the
"Core Value Fund"), the PBHG Advisor Value Opportunities Fund (the "Value
Opportunities Fund"), the PBHG Advisor New Contrarian Fund (the "New Contrarian
Fund"), the PBHG Advisor REIT Fund (the "REIT Fund"), the PBHG Advisor Large Cap
Concentrated Fund (the "Large Cap Concentrated Fund"), the PBHG Advisor Growth
II Fund (the "Growth II Fund"), the PBHG Advisor New Opportunities Fund (the
"New Opportunities Fund"), the PBHG Advisor Global Technology & Communications
Fund (the "Global Technology & Communications Fund"), the PBHG Advisor Blue Chip
Growth Fund (the "Blue Chip Growth Fund"), the PBHG Advisor Growth Opportunities
Fund (the "Growth Opportunities Fund"), the PBHG Advisor Enhanced Equity Fund
(the "Enhanced Equity Fund"), the PBHG Advisor Trend Fund (the "Trend Fund"),
(collectively referred to as the "Equity Portfolios"), the PBHG Advisor Master
Fixed Income Fund (the "Master Fixed Income Fund"), the PBHG Advisor High Yield
Fund (the "High Yield Fund"), the PBHG Advisor Cash Reserves Fund (the "Cash
Reserves Fund"), and the PBHG Advisor Short-Term Government Fund (the
"Short-Term Government Fund") (each a "Fund" and, collectively, the "Funds"). To
date, the Fund has had no transactions other than those relating to
organizational matters and the issuance of 10,000 shares of common stock to
Pilgrim Baxter & Associates, Ltd. (the "Adviser"). Each of the Funds has
distinct investment objectives and policies that are described in the
prospectus.
(2) Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Funds.
Security Valuation -- Investment securities of the Equity Funds that are listed
on a securities exchange for which market quotations are available are valued at
the last quoted sales price on each business day. If there is no such reported
sale, these securities and unlisted securities for which market quotations are
readily available, are valued at the most recently quoted bid price. However,
debt securities (other than short-term obligations), including listed issues,
are valued on the basis of valuations furnished by the pricing service which
utilizes electronic data processing techniques to determine valuations for
normal institutional size trading units of debt securities, without exclusive
reliance upon exchange or over-the-counter prices. Short-term investments may be
valued at amortized cost which approximates market value. Foreign securities are
valued based upon quotations from the primary market in which they are traded,
and are translated from the local currency into U.S. dollars using current
exchange rates. In addition, if quotations are not readily available, or if the
values have been materially affected by events occurring after the closing of a
foreign market, assets may be valued by another method that the Board of
Directors believes accurately reflects fair value. The values of investment
securities held by the Cash Reserves Fund are stated at amortized cost, which
approximates market value. Under this valuation method, acquisition discounts
and premiums are accreted and amortized ratably to maturity and are included in
interest income.
Security Transactions and Investment Income - Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during
<PAGE>
Notes To Statements of Assets and Liabilities PBHG Advisor Funds, Inc.
March 20, 1998 (continued)
the respective holding periods. Acquisition discounts and premiums are accreted
and amortized to maturity using a method which approximates the effective
interest method.
Dividends - Dividends from net investment income for the Equity Funds are
declared annually, if available. Dividends from net investment income for the
Master Fixed Income Fund, the High Yield Fund, the Short-Term Government Fund
and the Cash Reserves Fund are declared daily and paid monthly. Distributions of
net realized capital gains, for all funds, are generally made to shareholders
annually. Dividends from net investment income and distributions from net
realized capital gains are determined in accordance with U.S. Federal income tax
regulations, which may differ from those amounts determined under generally
accepted accounting principles. These book/tax differences are either temporary
or permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise.
Organizational Costs -- All organizational costs incurred with the start up of
the Funds will be amortized on a straight line basis over a period of sixty
months commencing with operations provided that the series commence operations
prior to June 30, 1998. For those series that commence operations after June 30,
1998 such costs will be expensed over a period not to exceed one year. In the
event that any of the initial shares of the Fund are redeemed by any holder
thereof during the period that the Fund is amortizing its organizational costs,
the redemption proceeds payable to the holder thereof will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of redemption.
Federal Income Taxes -- It is each Fund's intention to qualify as a regulated
investment company for federal income tax purposes, and to distribute all of its
taxable income and net capital gains. Accordingly, no provision has been made
for Federal income taxes.
Net Asset Value Per Share - The net asset value per share is calculated each
business day by dividing the total value of each Fund's assets, less
liabilities, by the number of shares outstanding.
Repurchase Agreements - Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements and procedures adopted by
Pilgrim Baxter & Associates, Ltd. (the "Adviser") ensure that the market value
of the collateral including accrued interest thereon, is sufficient in the event
of default by the counterparty. If the counterparty defaults and the value of
the collateral declines, or if the counterparty enters into insolvency
proceedings, realization of the collateral by a Fund may be delayed or limited.
Other - Expenses that are directly related to one of the Funds are charged
directly to that Fund. Other operating expenses are prorated to the Funds on the
basis of relative net assets. Class specific expenses, such as l2b-1 service
fees and transfer agent fees, are borne directly by that class. Income, other
expenses and realized and unrealized gains and losses of a Fund are allocated to
the respective class on the basis of the relative net assets each day.
(3) Investment Advisory Fees, Administrative Fees and Other Transactions with
Affiliates
The Funds and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
entitled to a fee, which is calculated daily and paid monthly, at an annual rate
of 0.85% of the average daily net assets of the Value Opportunities, Large Cap
Concentrated, Growth II, and Global Technology & Communications Funds; 0.75% of
the average net assets of the REIT and New Opportunities Funds; 0.65% of the
average net assets of the Growth Opportunities and Trend Funds; 0.60% of the
average net assets of the Core Value, New Contrarian, Blue Chip Growth, and
Enhanced Equity Funds; 0.50% of the average net assets of the
<PAGE>
Notes To Statements of Assets and Liabilities PBHG Advisor Funds, Inc.
March 20, 1998 (continued)
High Yield Fund; 0.45% of the average net assets of the Master Fixed Income
Fund; and 0.30% of the average net assets of the Cash Reserves and Short-Term
Government Funds.
Pilgrim Baxter Value Investors ("Value Investors") serves as the sub-adviser to
the Core Value, New Contrarian, REIT, and Value Opportunities Funds. For its
services provided pursuant to its Investment Sub-Advisory Agreement with the
Adviser and the Fund, Value Investors is entitled to receive, from the Adviser,
a sub-advisory fee with respect to the average daily net assets of each such
Fund that is computed daily and paid monthly at annual rates of 0.40%, 0.40%,
0.55% and 0.65%, respectively. Value Investors receives no fees directly from
the Core Value, New Contrarian, REIT, and Value Opportunities Funds.
Wellington serves as the sub-adviser to the Cash Reserves Fund. For its services
provided pursuant to its Investment Sub-Advisory Agreement with the Adviser and
the Fund, Wellington is entitled to receive, from the Adviser, a sub-advisory
fee that is computed daily and paid monthly at an annual rate of 0.075% of the
average daily net assets up to and including $500 million and 0.020% of the
Fund's average daily net assets over $500 million, but subject to a minimum
annual fee of $50,000. Wellington receives no fees directly from the Cash
Reserves Fund.
Analytic TSA serves as the sub-adviser to the Enhanced Equity, Master Fixed
Income, and Short-Term Government Funds. For its services provided pursuant to
its Investment Sub-Advisory Agreement with the Adviser and the Fund, Analytic
TSA is entitled to receive, from the Adviser, a sub-advisory fee with respect to
the average daily net assets of each such Fund that is computed daily and paid
monthly at annual rates of 0.40%, 0.25%, and 0.10%, respectively. Analytic TSA
receives no fees directly from the Enhanced Equity, Master Fixed Income, and
Short-Term Government Funds.
In the interest of limiting the expenses of the PBHG Advisor Funds, the Adviser
has entered into an Expense Limitation Agreement with the Company, on behalf of
each Fund. The Adviser has agreed to waive or limit its advisory fees or assume
other expenses in an amount that operates to limit the aggregate annual total of
certain operating expenses of each Fund as follows: 0.82% of the PBHG Advisor
Core Value Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor Blue Chip Growth
Fund, and PBHG Advisor Enhanced Equity Fund; 1.07% of the PBHG Advisor Value
Opportunities Fund, PBHG Advisor Large Cap Concentrated Fund, PBHG Advisor
Growth II Fund, and PBHG Advisor Global Technology & Communications Fund; 0.97%
of the PBHG Advisor REIT Fund and PBHG Advisor New Opportunities Fund; 0.87% of
the PBHG Advisor Growth Opportunities Fund and PBHG Advisor Trend Fund; 0.67% of
the PBHG Advisor Master Fixed Income Fund; 0.72% of the PBHG Advisor High Yield
Fund; and 0.52% of the PBHG Advisor Short-Term Government Fund and PBHG Advisor
Cash Reserves Fund. The expenses subject to such limitation are those that are
not specifically allocated to a class of shares of a Fund under the Company's
multiple class plan (the "Rule l8f-3 Plan") including, but not limited to,
investment advisory fees of the Adviser, but excluding: (i) interest, taxes,
brokerage commissions, and other expenditures which are capitalized in
accordance with generally accepted accounting principles; (ii) expense
specifically allocated to a class of shares of a Fund under the Rule l8f-3 Plan,
such as Rule l2b-1 expenses and transfer agency fees; and (iii) other
extraordinary expenses not incurred in the ordinary course of a Fund's business.
Reimbursement by the Funds of the advisory fees waived or limited and other
expenses paid by the Adviser pursuant to the Expense Limitation Agreement may be
made at a later date when such Funds have reached a sufficient asset size to
permit reimbursement to be made without causing the total annual expense ratio
of each Fund to exceed the percentages discussed in this paragraph.
Consequently, no reimbursement by a Fund will be made unless: (i) the Fund's
assets exceed $75 million; (ii) the Fund's total annual expense ratio is less
than the specified percentage; and (iii) the payment of such reimbursement was
approved by the Board of Directors on a quarterly basis. The total amount of
reimbursement to which the Adviser may be entitled shall equal, at any time, the
sum of all investment advisory fees previously waived or reduced by the Adviser
and all other payments remitted by the Adviser to the Fund, during any of the
previous two fiscal years, less any reimbursement previously paid by such Fund
to the Adviser.
<PAGE>
Notes To Statements of Assets and Liabilities PBHG Advisor Funds, Inc.
March 20, 1998 (continued)
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Funds with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator is entitled to a fee, which
is calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of the Funds.
SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, is the owner of all beneficial interest in SEI Fund Resources (the
"Sub-Administrator"). The Sub-Administrator assists the Administrator in
providing administrative services to the Funds.
PBHG Fund Distributors, a wholly owned subsidiary of the Adviser, provides the
Funds with distribution services.
DST Systems, Inc. serves as the transfer agent, dividend disbursing agent for
the Funds under a transfer agent agreement with the Funds. PBHG Fund Services
provides shareholder support and other shareholder account-related services with
assistance from UAM Shareholder Service Center. CoreStates Bank, N.A. serves as
the custodian for the Funds.
The Funds have adopted Distribution Plans (the "12b-1 Plan") for those Funds
offering Class A and B shares. The Plan provides for the payment by the Funds to
the Distributor of up to 0.35% of each Fund's average net assets attributable to
Class A shares and up to 1.00% for Class B shares. The Funds' directors have
determined that payments under the l2b-1 distribution plan for Class A shares
will currently be limited to 0.25%. Class I shares are not subject to l2b-1
fees.
Certain officers and directors of the Fund who are or were officers of the
Adviser, Administrator, Sub-Administrator and the Distributor receive no
compensation from the Fund for their services.
(4) Reorganization
On February 20, 1998, the Board of Directors of the Fund and the Board of
Trustees of The Analytic Series Fund approved an Agreement and Plan of
Reorganization to reorganize the Analytic Enhanced Equity Portfolio, Analytic
Master Fixed Income Portfolio, and Analytic Short-Term Government Portfolios
into the PBHG Advisor Enhanced Equity Fund, PBHG Advisor Master Fixed Income
Fund and PBHG Advisor Short-Term Government Fund, respectively. This
reorganization is pending approval of the shareholders of the Analytic Series
Fund at a special meeting currently scheduled to be held on May- 28, 1998.
The reorganization is expected to be performed on May 31, 1998 with all of the
property and assets of the Analytic Series Fund to be transferred to the
corresponding PBHG Advisor Fund. Upon this transfer, the PBHG Advisor Fund will
issue Class A shares of the voting common stock. The portfolios of the Analytic
Series Fund will be accounting survivors for financial reporting purposes.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors
of PBHG Advisor Series Fund, Inc.:
We have audited the accompanying Statements of Assets and Liabilities of PBHG
Advisor Funds, Inc. (the "Fund"), comprised of the PBHG Advisor Core Value, PBHG
Advisor Value Opportunities, PBHG Advisor New Contrarian, PBHG Advisor REIT,
PBHG Advisor Blue Chip Growth, PBHG Advisor Growth Opportunities, PBHG Advisor
Enhanced Equity, PBHG Advisor Trend, PBHG Advisor New Opportunities, PBHG
Advisor Global Technology & Communications, PBHG Advisor Growth II, PBHG Advisor
Large Cap Concentrated, PBHG Advisor High Yield, PBHG Advisor Master Fixed
Income, PBHG Advisor Short-Term Government and PBHG Advisor Cash Reserves Funds,
as of March 20, 1998. These financial statements are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Fund as of March 20, 1998
in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 30, 1998
<PAGE>
Appendix
RATINGS OF SECURITIES
The following is a description of the factors underlying the commercial paper
and debt ratings of Moody's, S&P and Fitch:
Moody's Bond Ratings
Moody's describes its ratings for corporate bonds as follows:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than the Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
A-1
<PAGE>
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B. The modifier 1 indicates that the company ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the company ranks in the
low end of its generic rating category.
Moody's Commercial Paper Ratings
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months.
Prime-1: Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structures with moderate reliance on
debt and ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; and well established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2: Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or related supported institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
S&P Bond Ratings
S&P describes its ratings for corporate bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
A-2
<PAGE>
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it nominally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. BB indicates the least degree of speculation and C
the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or large exposure
to adverse conditions.
S&P Dual Ratings
S&P assigns "dual" ratings to all debt issues that have a put option or demand
feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest
as due, and the second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term maturity and the
commercial paper rating symbols for the put option (for example, AAA/A-1+). With
short-term demand debt, the note rating symbols are used with the commercial
paper rating symbols (for example, SP-1+/A-1+).
S&P Commercial Paper Ratings
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Rating categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
A-3
<PAGE>
B: Issues with this rating are regarded as having only speculative capacity for
timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D: Debt with this rating is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless it is believed that such
payments will be made during such grace period.
Fitch Investment Grade Bond Ratings
Fitch investment grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings represent
Fitch's assessment of the issuer's ability to meet the obligations of a specific
debt issue in a timely manner.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
Fitch ratings do not reflect any credit enhancement that may be provided by
insurance policies or financial guaranties unless otherwise indicated.
Bonds carrying the same rating are of similar but not necessarily identical
credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.
Fitch ratings are not recommendations to buy, sell or hold any security. Ratings
do not comment on the adequacy of market price, the suitability of any security
for a particular investor, or the tax-exempt nature or taxability of payments
made in respect of any security.
Fitch ratings are based on information obtained from issuers, other obligors,
underwriters, their experts, and other sources Fitch believes to be reliable.
Fitch does not audit or verify the truth or accuracy of such information.
Ratings may be changed, suspended, or withdrawn as a result of changes in, or
the unavailability of, information or for other reasons.
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
A-4
<PAGE>
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds and, therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
Plus (+) Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
Conditional: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
Suspended: A rating is suspended when Fitch deems the amount of information
available from the issuer to be inadequate for rating purposes.
Withdrawn: A rating will be withdrawn when an issue matures or is called or
refinanced, and, at Fitch's discretion, when an issuer fails to furnish proper
and timely information.
FitchAlert: Ratings are placed on FitchAlert to notify investors of an
occurrence that is likely to result in a rating change and the likely direction
of such change. These are designated as "Positive," indicating a potential
upgrade, "Negative," for potential downgrade, or "Evolving," where ratings may
be raised or lowered. FitchAlert is relatively short-term and should be resolved
within 12 months.
Ratings Outlook
An outlook is used to describe the most likely direction of any rating change
over the intermediate term. It is described as "Positive" or "Negative." The
absence of a designation indicates a stable outlook.
Fitch Speculative Grade Bond Ratings
Fitch speculative grade bond ratings provide a guide to investors in determining
the credit risk associated with a particular security. The ratings ("BB" to "C")
represent Fitch's assessment of the likelihood of timely payment of principal
and interest in accordance with the terms of obligation for bond issues not in
default. For defaulted bonds, the rating ("DDD" to "D") is an assessment of the
ultimate recovery value through reorganization or liquidation.
The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, the current and prospective financial condition and operating
performance of the issuer and any guarantor, as well as the economic and
political environment that might affect the issuer's future financial strength.
A-5
<PAGE>
Bonds that have the same rating are of similar but not necessarily identical
credit quality since rating categories cannot fully reflect the differences in
degrees of credit risk.
BB: Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified, which could assist the
obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
Plus (+) Minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "DDD", "DD", or "D" categories.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch short-term ratings are as follows:
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."
A-6
<PAGE>
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned "F-1+" and "F-1" ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
F-S: Weak Credit Quality. Issues assigned this rating have characteristics
suggesting a minimal degree of assurance for timely payment and are vulnerable
to near-term adverse changes in financial and economic conditions.
D: Default. Issues assigned this rating are in actual or imminent payment
default.
LOC: The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
A-7
<PAGE>
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The Report of Independent Accountants and Statements of Assets and
Liabilities, along with Notes to Financial Statements, are being filed
as part of the Statement of Additional Information.
(b) Exhibits:
1(a) Articles of Amendment and Restatement of the Registrant dated
April 9, 1998
1(b) Articles Supplementary of Registrant dated April 9, 1998
2 Amended and Restated Bylaws of the Registrant adopted
effective April 9, 1998
3 Voting trust agreement - none
4 Not Applicable
5(a) Investment Advisory Agreement between the Registrant and
Pilgrim Baxter & Associates, Ltd. dated as of April 1, 1998 (1)
5(b) Form of Investment Sub-Advisory Agreement by and among the
Registrant and Analytic o TSA Global Asset Management,
Inc. (1)
5(c) Investment Sub-Advisory Agreement by and among the Registrant,
Pilgrim Baxter & Associates, Ltd. and Wellington Management
Company, LLP dated as of April 1, 1998 (1)
5(d) Investment Sub-Advisory Agreement by and among the Registrant,
Pilgrim Baxter & Associates, Ltd. and Pilgrim Baxter Value
Investors, Inc. dated as of April 1, 1998 (1)
6(a) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class A Shares dated as of April 1,
1998 (1)
6(b) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class B Shares dated as of April 1,
1998 (1)
6(c) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class I Shares dated as of April 1,
1998 (1)
6(d) Form of Selected Dealer Agreement (1)
6(e) Form of Bank Agency Agreement relating to shares of the
Registrant (1)
6(f) Form of Shareholder Service Agreement for sale of shares
of the Registrant (1)
<PAGE>
7 Bonus, profit sharing or pension plans - none
8 Custodian Agreement between the Registrant and CoreStates
Bank, N.A. dated as of April 1, 1998
9(a) Administrative Services Agreement by and between the
Registrant and PBHG Fund Services dated as of April 1, 1998 (1)
9(b) Sub-Administrative Services Agreement by and among the
Registrant, PBHG Fund Services and SEI Fund Resources dated as
of May 1, 1998
9(c) Amendment to Sub-Administrative Services Agreement by and
among the Registrant, PBHG Fund Services and SEI Fund
Resources dated as of May 1, 1998
9(d) Expense Limitation Agreement by and between the Registrant,
on behalf of each portfolio of the Registrant, and Pilgrim
Baxter & Associates, Ltd. dated as of April 1, 1998 (1)
9(e) Shareholder Services Agreement between the Registrant and PBHG
Fund Services dated as of April 1, 1998
9(f) Sub-Shareholder Services Agreement between the Registrant and
PBHG Fund Services dated as of April 1, 1998
10 Opinion and Consent of Ballard Spahr Andrews & Ingersoll, LLP
11 Consent of Independent Accountants
12 Not Applicable
13 Stock Subscription Agreement between the Registrant and
Pilgrim Baxter & Associates, Ltd. dated as of February 20,
1998
14 Not Applicable
15(a) Distribution Plan of the Registrant pursuant to Rule 12b-1
relating to Class A Shares dated as of April 1, 1998 (1)
15(b) Distribution Plan of the Registrant pursuant to Rule 12b-1
relating to Class B Shares dated as of April 1, 1998 (1)
16 Not applicable
17 Not Applicable
18 Amended and Restated Multiple Class Plan of the Registrant
pursuant to Rule 18f-3 dated April 9, 1998
24(a) Directors' Power of Attorney
C-2
<PAGE>
24(b) Officers' Power of Attorney
27 Financial Data Schedule
(1) Incorporated herein by reference to Registrant's Pre-Effective
Amendment No. 1 and Amendment No. 1 to Registration Statement on Form
N-1A (File Nos. 333-44193 and 811-08605) as filed electronically with
the Commission on March 9, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1998, Pilgrim Baxter & Associates, Ltd., the sole
shareholder of the Registrant, owned all shares of each class of common stock of
the Registrant.
ITEM 27. INDEMNIFICATION
The Articles of Incorporation of the Registrant include the following:
ARTICLE VI
Section 6.1 Directors. To the maximum extent permitted by Maryland law in effect
from time to time, but subject to the limits on indemnification contained in the
1940 Act and the Bylaws, the Corporation shall indemnify and, without requiring
a preliminary determination of the ultimate entitlement to indemnification,
shall pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director of the
Corporation or (b) any individual who, while a director of the Corporation and
at the request of the Corporation, serves or has served another corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner, trustee,
employee, agent or fiduciary of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director of the Corporation. The Corporation may, with the approval of the Board
of Directors, provide such indemnification and advance for expenses to a person
who served a predecessor of the Corporation in any of the capacities described
in (a) or (b) above.
Section 6.2 Officers. The Corporation shall have the power, to the maximum
extent permitted by Maryland law in effect from time to time, but subject to the
limits on indemnification contained in the 1940 Act and the Bylaws, to obligate
itself to indemnify, and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to, (a) any individual who is a present or
former officer of the Corporation or (b) any individual who, while an officer of
the Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become
C-3
<PAGE>
subject or which such person may incur by reason of his status as a present or
former officer of the Corporation. The Corporation shall have the power, with
the approval of the Board of Directors, to provide such indemnification and
advance for expenses to a person who served a predecessor of the Corporation in
any of the capacities described in (a) or (b) above and to any employee or agent
of the Corporation or a predecessor of the Corporation.
The By-Laws of the Registrant include the following:
ARTICLE IX
INDEMNIFICATION AND ADVANCE OF EXPENSES
Section 1. Indemnification of Directors and Officers. The Corporation
shall indemnify its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify its officers to the same extent as its directors and to such
further extent as is consistent with law. The Corporation shall indemnify its
directors and officers who, while serving as directors or officers, also serve
at the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint venture,
real estate investment trust, trust, other enterprise or employee benefit plan
to the fullest extent consistent with law. The indemnification and other rights
provided for by this Article shall continue as to a person who has ceased to be
a director or officer, and shall inure to the benefit of the heirs, executors
and administrators of such a person. This Article shall not protect any such
person against any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office ("disabling conduct").
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
To the extent that the Articles of Incorporation, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnify any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment adviser or
principal underwriter to the Registrant, any such provision protecting or
purporting to protect such persons against any liability to the Registrant or
its security holders to which he would otherwise by subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties,
or by reason of his contract or agreement, will be interpreted and enforced in a
manner consistent with the provisions of Sections 17(h) and (i) of the
Investment Company Act of 1940, as amended, and Release No. IC-11330 issued
thereunder.
C-4
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal officer of Pilgrim Baxter & Associates, Ltd.,
Pilgrim Baxter Value Investors, Inc., Analytic o TSA Global Asset Management,
Inc., and Wellington Management Company, LLP, is or has been, at any time during
the last two fiscal years, engaged for his own account or in the capacity of
director, officer, employee, partner or trustee are as follows:
<TABLE>
<CAPTION>
Name and Position with Pilgrim
Baxter & Associates, Ltd. Name of Other Company Connection with Other Company
- ------------------------------ --------------------- -----------------------------
<S> <C> <C>
Harold J. Baxter Pilgrim Baxter Value Investors, Inc. Director, Chairman and Chief
Director, Chairman and Executive Officer
Chief Executive Officer
PBHG Fund Services Trustee
PBHG Fund Distributors Trustee
825 Duportail Road
Wayne, PA 19087
United Asset Management Director
Corporation
Gary L. Pilgrim PBHG Fund Services Trustee
Director, President and Chief 825 Duportail Road
Investment Officer Wayne, PA 19087
Pilgrim Baxter Value Investors, Inc. Director
Paul J. Hondros Pilgrim Baxter Value Investors, Inc. Director, President and Chief
President and Chief Operating Operating Officer
Officer
PBHG Fund Distributors President and Trustee
825 Duportail Road
Wayne, PA 19087
Brian F. Bereznak PBHG Fund Services President and Trustee
Chief Operating Officer
(5/95 - 10/97)
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C> <C>
Eric C. Schneider Pilgrim Baxter Value Investors, Inc. Chief Financial Officer and Treasurer
Chief Financial Officer and
Treasurer PBHG Fund Services Chief Financial Officer
PBHG Fund Distributors Trustee
825 Duportail Road
Wayne, PA 19087
John M. Zerr Pilgrim Baxter Value Investors, Inc. General Counsel and Secretary
General Counsel and Secretary
PBHG Fund Services General Counsel and Secretary
PBHG Fund Distributors General Counsel and Secretary
825 Duportail Road
Wayne, PA 19087
Name and Position with Pilgrim
Baxter Value Investors, Inc. Name of Other Company Connection with Other Company
- ------------------------------ --------------------- -----------------------------
Harold J. Baxter Pilgrim Baxter & Associates, Ltd. Director, Chairman and Chief
Director, Chairman and Chief Executive Officer
Executive Officer
PBHG Fund Services Trustee
PBHG Fund Distributors Trustee
825 Duportail Road
Wayne, PA 19087
United Asset Management Corporation Director
Brian F. Bereznak Pilgrim Baxter & Associates, Ltd. Chief Operating Officer (5/95 - 12/97)
Director
PBHG Fund Services President and Trustee
Gary L. Pilgrim Pilgrim Baxter & Associates, Ltd. Director, Chief Investment Officer,
Director President, (4/95 - 10/97), Secretary
(5/95 - 12/96)
PBHG Fund Services Trustee
825 Duportail Road
Wayne, PA 19087
Paul J. Hondros Pilgrim Baxter & Associates, Ltd President and Chief Operating Officer
President and Chief Operating
Officer PBHG Fund Distributors President and Trustee
825 Duportail Road
Wayne, PA 19087
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C> <C>
David W. Jennings Pilgrim Baxter & Associates, Ltd. Director of Client
Director, President and Chief 825 Duportail Road Service
Operating Officer (10/96 - 1/98) Wayne, PA 19087
Eric C. Schneider Pilgrim Baxter & Associates, Ltd. Chief Financial Officer and Treasurer
Chief Financial Officer and
Treasurer PBHG Fund Services Chief Financial Officer
PBHG Fund Distributors Trustee
825 Duportail Road
Wayne, PA 19087
John M. Zerr Pilgrim Baxter & Associates, Ltd. General Counsel and Secretary
General Counsel and Secretary
PBHG Fund Services General Counsel and Secretary
PBHG Fund Distributors General Counsel and Secretary
825 Duportail Road
Wayne, PA 19087
</TABLE>
The list required by this Item 28 of officers and directors of
Analytic o TSA Global Asset Management, Inc., together with information as to
any other business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV, filed by
AnalyticoTSA Global Asset Management, Inc. pursuant to the Investment Advisers
Act of 1940, as amended ("Advisers Act"), (SEC File No. 801-7082).
The list required by this Item 28 of officers and directors of Wellington
Management Company, LLP, a Massachusetts limited partnership, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors during the past two
years, is incorporated by reference to Schedules A and D of Form ADV, filed by
Wellington Management Company, LLP pursuant to the Advisers Act, (SEC File No.
801-15908).
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of the
Registrant also acts as a principal underwriter, distributor or investment
adviser.
None.
(b) Furnish the information required by the following table with respect to each
director, officer or partner of each principal underwriter named in the answer
to Item 21 of Part B.
C-7
<PAGE>
The principal business address of each person named in the table below is PBHG
Fund Distributors, 825 Duportail Road, Wayne, Pennsylvania 19087.
<TABLE>
<CAPTION>
Positions and Offices with
Name Positions and Offices with Underwriter Registrant
---- -------------------------------------- ----------------------------
<S> <C> <C>
Harold J. Baxter Trustee Director and Chairman
Paul J. Hondros Trustee and President Executive Vice President
Eric C. Schneider Trustee None
Lee T. Cummings Vice President Treasurer, Chief Financial Officer and
Controller
Michael J. Harrington Vice President Vice President
John M. Zerr General Counsel and Secretary Vice President and Secretary
Michael T. Brophy Chief Financial Officer and Chief None
Financial Compliance Officer
Amy S. Yuter Chief Compliance Officer None
</TABLE>
(c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1), (2)(a) and (b), (3), (6), (8),
(12); and 31a-1(d), the required books and records are maintained at the offices
of Registrant's Custodian:
CoreStates Bank, N.A.
Broad and Chestnut Streets
P.O. Box 7618
Philadelphia, PA 19101
(b) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4); (5);
(6); (8); (9); (10); (11) and 31a-1(f), the required books and records are
currently maintained at the offices of Registrant's Sub-Administrator:
SEI Fund Resources
One Freedom Valley Road
Oaks, PA 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Adviser or Sub-Advisers:
C-8
<PAGE>
Pilgrim Baxter & Associates, Ltd.
825 Duportail Road
Wayne, PA 19087
Pilgrim Baxter Value Investors, Inc.
825 Duportail Road
Wayne, PA 19087
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Analytic o TSA Global Asset Management, Inc.
700 South Flower Street, Suite 2400
Los Angeles, CA 90017
ITEM 31. MANAGEMENT SERVICES
None
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to file a post-effective amendment, including
financial statements which need not be audited, within 4-6 months from the later
of the commencement of operations of the Registrant or the effective date of the
Registrant's 1933 Act Registration Statement.
C-9
<PAGE>
SIGNATURES
Pursuant to the Securities Act of 1933 and the Investment Company Act of 1940,
the Registrant has duly caused this Pre-Effective Amendment No. 2 to the
Registration Statement to be signed on its behalf by the undersigned thereto
duly authorized, in the City of Wayne, and Commonwealth of Pennsylvania, on the
14th day of April, 1998.
PBHG ADVISOR FUNDS, INC.
Registrant
By: *
-----------------------------
Harold J. Baxter
Chairman and Director
*By: /s/ John M. Zerr
----------------------------
John M. Zerr
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment No. 2 to the Registration Statement has been signed below by the
following persons on the 14th day of April, 1998 in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman and Director April 14, 1998
- ---------------------------
Harold J. Baxter
* Director April 14, 1998
- ---------------------------
John R. Bartholdson
* Director April 14, 1998
- ---------------------------
Jettie M. Edwards
* Director April 14, 1998
- ---------------------------
Albert A. Miller
/s/ Gary L. Pilgrim President April 14, 1998
- ---------------------------
Gary L. Pilgrim
* Executive Vice President April 14, 1998
- ---------------------------
Paul J. Hondros
/s/ Brian F. Bereznak Vice President April 14, 1998
- ---------------------------
Brian F. Bereznak
/s/ Lee T. Cummings Treasurer, Chief Financial Officer April 14, 1998
- --------------------------- and Controller
Lee T. Cummings
*By: /s/ John M. Zerr
-----------------------
John M. Zerr
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
- ------- -----------
Ex-99.B1(a) Articles of Amendment and Restatement of the
Registrant dated April 9, 1998
Ex-99.B1(b) Articles Supplementary of Registrant dated April 9, 1998
Ex-99.B2 Amended and Restated Bylaws of the Registrant adopted
effective April 9, 1998
Ex-99.B8 Custodian Agreement between the Registrant and
CoreStates Bank, N.A. dated as of April 1, 1998
Ex-99.B9(b) Sub-Administrative Services Agreement by and among the
Registrant, PBHG Fund Services and SEI Fund Resources dated as
of May 1, 1998
Ex-99.B9(c) Amendment to Sub-Administrative Services Agreement by and
among the Registrant, PBHG Fund Services and SEI Fund
Resources dated as of May 1, 1998
Ex-99.B9(e) Shareholder Services Agreement between the Registrant
and PBHG Fund Services dated as of April 1, 1998
Ex-99.B9(f) Sub-Shareholder Services Agreement between the
Registrant and PBHG Fund Services dated as of April 1,
1998
Ex-99.B10 Opinion and Consent of Ballard Spahr Andrews &
Ingersoll, LLP
Ex-99.B11 Consent of Independent Accountants
Ex-99.B13 Stock Subscription Agreement between the Registrant
and Pilgrim Baxter & Associates, Ltd. dated as of
February 20, 1998
Ex-99.B18 Amended and Restated Multiple Class Plan of the
Registrant pursuant to Rule 18f-3 dated April 9, 1998
Ex-99.B24(a) Directors' Power of Attorney
Ex-99.B24(b) Officers' Power of Attorney
Ex-99.B27 Financial Data Schedule
Exhibit 1(a)
PBHG ADVISOR FUNDS, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: PBHG Advisor Funds, Inc., a Maryland corporation, desires to
amend and restate its charter as currently in effect and as hereinafter amended.
SECOND: The following provisions are all the provisions of the charter
currently in effect and as hereinafter amended:
ARTICLE I
NAME OF CORPORATION
The name of the corporation is PBHG Advisor Funds, Inc. (hereinafter
called the "Corporation").
ARTICLE II
PURPOSE OF CORPORATION
The Corporation is formed for the purpose of carrying on any lawful business,
which may include acting as an open-end management investment company registered
with the Securities and Exchange Commission under the Investment Company Act of
1940, as amended (the "1940 Act"), and exercising and generally enjoying all of
the powers, rights and privileges granted to, or conferred upon, corporations by
the general laws of the State of Maryland now or hereafter in force.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
The address of the principal office of the Corporation in the State of Maryland
is c/o The Corporation Trust Incorporated, 300 East Lombard Street, Baltimore,
Maryland 21202. The name of the Corporation's resident agent in the State of
Maryland is The Corporation Trust Incorporated, a corporation of the State of
Maryland, and the address of the resident agent is 300 East Lombard Street,
Baltimore, Maryland 21202.
<PAGE>
ARTICLE IV
CAPITAL STOCK
Section 4.1 Authorized Stock. The total number of shares of capital stock which
the Corporation shall have authority to issue is Ten Billion (10,000,000,000)
shares of the par value of one tenth of one cent ($0.001) per share and of the
aggregate par value of Ten Million Dollars ($10,000,000), all of which shares
are designated Common Stock and which shares shall be classified in the
following series (portfolios): 300,000,000 shares of the PBHG Advisor Core Value
Fund series (of which 100,000,000 shares are classified as Class A Shares;
100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); 300,000,000
shares of the PBHG Advisor Blue Chip Growth Fund series (of which 100,000,000
shares are classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I Shares); 300,000,000 shares of the PBHG Advisor Cash
Reserves Fund series (of which 100,000,000 shares are classified as Class A
Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor High Yield Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Enhanced Equity Fund series (of which 100,000,000 shares are classified
as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor Growth II Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Large Cap Concentrated Fund series (of which 100,000,000 shares are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares); 300,000,000 shares of the PBHG Advisor Trend Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Value Opportunities Fund series (of which 100,000,000 shares are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares); 300,000,000 shares of the PBHG Advisor Global Technology &
Communications Fund series (of which 100,000,000 shares are classified as Class
A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor Growth Opportunities Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor New Contrarian Fund series (of which 100,000,000 shares are classified
as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor New Opportunities Fund series
(of which 100,000,000 are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor REIT Fund series (of which 100,000,000 shares are classified as Class A
Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor Master Fixed Income Fund series (of which
100,000,000 are classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I Shares); and 300,000,000 shares
2
<PAGE>
of the PBHG Advisor Short-Term Government Fund series (of which 100,000,000 are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares).
The remaining 5,200,000,000 shares are shares of Common Stock without further
classification.
Section 4.2 Authorization of Stock Issuance. The Board of Directors may classify
any unissued shares of Common Stock from time to time in one or more classes or
series of stock. The Board of Directors may reclassify any previously classified
but unissued shares of any class or series of stock from time to time in one or
more classes or series of stock. The Board of Directors may authorize the
issuance and sale of capital stock of the Corporation, from time to time in such
amounts and on such terms and conditions, for such purposes and for such amount
or kind of consideration as the Board of Directors shall determine, subject to
such restrictions or limitations, if any, as may be set forth in the charter or
the Bylaws. All shares shall be issued on a fully paid and non-assessable basis.
Section 4.3 Fractional Shares. The Board of Directors may issue fractional
shares of stock of the Corporation. Any fractional shares so issued shall
entitle the holder thereof to exercise voting rights, receive dividends and
participate in the distribution of assets of the Corporation in the event of
liquidation or dissolution to the extent of the proportionate interest
represented by such fractional shares.
Section 4.4 Description of Stock.
(a) Assets Belonging to Each Class or Series. Subject to the power of
the Board of Directors to classify unissued shares (and to reclassify
previously classified but unissued shares) of capital stock of the
Corporation and to set or change preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of such unissued
shares of stock, the shares of each class or series of stock of the
Corporation shall have the following preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and condition of redemption:
(1) All consideration received by the Corporation for the
issuance or sale of shares of a particular class or series,
together with all income, earnings, profits and proceeds
thereon, shall irrevocably belong to such class or series for
all purposes, subject only to the rights of creditors, and are
herein referred to as "assets belonging to" such class or
series.
(2) The assets belonging to each class or series shall be
charged with the liabilities of the Corporation in respect of
such class or series, and with such
3
<PAGE>
class' or series' respective share of the general liabilities
of the Corporation, in the latter case in the proportion that
the net asset value of such class or series bears to the net
asset value of all classes and series. The determination of
the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and
reserves, to each class or series.
(3) Dividends or distributions on shares of any class or
series, whether payable in stock, cash or other property,
shall be paid only out of earnings, surplus or other assets
belonging to such class or series.
(4) In the event of the liquidation or dissolution of any
class or series of stock of the Corporation, stockholders of
such class or series shall be entitled to receive out of the
assets of such class or series available for distribution to
stockholders the assets belonging to such class or series; and
the assets so distributable to the stockholders of such class
or series shall be distributed among such stockholders in
proportion to the number of shares of such class or series
held by them and recorded on the books of the Corporation.
Except as provided above, all provisions of the charter relating to
stock of the Corporation shall apply to shares of and to holders of
shares of all classes and series of stock.
(b) Class B Shares. Except as set forth below, the preferences,
conversion and other rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption
of the Class B Shares of Common Stock are those set forth in this
Article IV, and in the provisions of the charter relating to stock of
the Corporation generally. In addition, all such Class B Shares shall
have the following preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption:
(1) Subject to the provisions of paragraph (3) below, all
Class B Shares other than those purchased through the
reinvestment of dividends and distributions shall
automatically convert to Class A Shares of the same series
eight (8) years after the end of the calendar month in which a
stockholder's order to purchase such shares was accepted.
(2) Subject to the provisions of paragraph (3) below, Class B
Shares purchased through the reinvestment of dividends and
distributions paid in respect of Class B Shares will be
considered held in a separate sub-account, and will
automatically convert to Class A Shares of the same series in
the same proportion as any Class B Shares (other than those in
the sub-account) convert to Class A Shares. Other than this
conversion feature, the Class B Shares purchased through the
reinvestment of dividends and distributions paid
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in respect of Class B Shares shall have all the preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption of Class B Shares generally.
(3) If a series of the Corporation implements any amendment to
a Rule 12b-1 Plan (or, if presented to stockholders, adopts or
implements a non-Rule 12b-1 stockholder services plan) that
the Board of Directors determines would materially increase
the charges that may be borne by the holders of Class A Shares
under such plan, the Class B Shares will stop converting to
the Class A Shares unless the Class B Shares, voting
separately, approve the amendment or adoption. The Board of
Directors shall have sole discretion in determining whether
such amendment or adoption is submitted to a vote of the
holders of Class B Shares. Should such amendment or adoption
not be submitted to a vote of the holders of Class B shares
or, if submitted, should the holders of Class B Shares fail to
approve such amendment or adoption, the Board of Directors
shall take such action as is necessary to: (A) create a new
class (the "New Class A Shares") which shall be identical in
all material respects to the Class A Shares as they existed
prior to the implementation of the amendment or adoptions; and
(B) ensure that the existing Class B Shares will be exchanged
or converted into New Class A Shares no later than the date
such Class B Shares were scheduled to convert to Class A
Shares. If deemed advisable by the Board of Directors to
implement the foregoing, and at the sole discretion of the
Board of Directors, such action may include the exchange or
conversion of all Class B Shares for or into a new class (the
"New Class B Shares"), identical in all respects to the Class
B Shares except that the New Class B Shares will automatically
convert into the New Class A Shares. Such exchanges or
conversions shall be effected in a manner that the Board of
Directors reasonably believes will not be subject to federal
taxation.
(c) Dividends and Distributions. The holders of the Corporation's
capital stock of record as of a date determined by the Board of
Directors from time to time shall be entitled, from funds or other
assets legally available therefor, to dividends and distributions,
including distributions of capital gains, in such amounts and at such
times as may be determined by the Board of Directors. Any such
dividends or distributions may be declared payable in cash, property or
shares of the Corporation's stock, as determined by the Board of
Directors or pursuant to a standing resolution or program adopted or
approved by the Board of Directors. Dividends and distributions may be
declared with such frequency, including daily, as the Board of
Directors may determine and in any reasonable manner, including by
standing resolution, by resolutions adopted only once or with such
frequency as the Board of Directors may determine, or by formula or
other similar method of determination, whether or not the amount of the
dividend or distribution so declared can be calculated at the time of
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such declaration. The Board of Directors may establish payment dates
for such dividends and distributions on any basis, including payment
that is less frequent than the effectiveness of such declarations. The
Board of Directors shall have the discretion to designate for such
dividends and distributions amounts sufficient to enable the
Corporation to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986 or any successor or comparable statute,
and regulations promulgated thereunder (collectively, the "IRC"), and
to avoid liability of the Corporation for Federal income tax in respect
of a given year and to make other appropriate adjustments in connection
therewith. Nothing in the foregoing sentence shall limit the authority
of the Board of Directors to designate greater or lesser amounts for
such dividends or distributions.
(d) Voting Rights. Each share of stock shall entitle the holder thereof
to one vote for each dollar (and each fractional dollar thereof) of net
asset value (number of shares owned times net asset value per share) of
shares of stock outstanding in such holder's name on the books of the
Corporation, irrespective of the class or series thereof, and all
shares of stock shall be voted in the aggregate and not by class;
provided, however, that to the extent class or series voting is
required by the 1940 Act or Maryland law, or otherwise directed by the
Board of Directors, as to any such matter, shares of stock shall be
voted by individual class or series. No holder of shares of any class
or series of stock shall be entitled to vote on any acquisition of
assets of another corporation or merger of another corporation with and
into the Corporation if the consideration for such acquisition consists
solely of the shares of another class or series of stock of the
Corporation.
(e) Quorum. At any meeting of stockholders, holders of thirty percent
(30%) of the dollar value of the outstanding shares of stock entitled
to vote at such meeting, present in person or represented by proxy,
shall constitute a quorum. If any matter is to be voted on by an
individual class or series of stock, then holders of thirty percent
(30%) of the dollar value of the outstanding shares of stock of such
class or series entitled to vote at such meeting, present in person or
represented by proxy, shall constitute a quorum as to each such class
or series.
Section 4.5 Authorizing Vote. Any action which would otherwise require the
affirmative vote of the holders of shares entitled to cast greater than a
majority of all the votes entitled to be cast on the matter pursuant to the
Corporations and Associations Article of the Annotated Code of Maryland shall be
effective and valid if taken or authorized by the affirmative vote of holders of
shares entitled to cast a majority of all the votes entitled to be cast on the
matter.
Section 4.6 Preemptive Rights. Except as may be provided by the Board of
Directors in setting the terms of classified or reclassified shares of stock, no
holder of shares of stock of
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the Corporation shall, as such holder, have any preemptive right to purchase or
subscribe for any additional shares of stock of the Corporation or any other
security of the Corporation.
Section 4.7 Redemption.
(a) The Board of Directors shall authorize the Corporation, to the
extent it has funds or other property legally available therefor and
subject to such reasonable conditions as the directors may determine,
to permit each holder of shares of stock of the Corporation to require
the Corporation to redeem all or any number of the shares of stock
outstanding in the name of such holder on the books of the Corporation,
at the net asset value of such shares, less any fees or charges as the
Board of Directors may establish from time to time. Notwithstanding the
foregoing, the Board of Directors may suspend the right of holders of
shares of stock of the Corporation to require the Corporation to redeem
such shares or to receive payment for redeemed shares for such periods
and to the extent permitted by, or in accordance with, the 1940 Act or
any rule or regulation of the Securities and Exchange Commission
promulgated thereunder. The Board of Directors may, in the absence of a
ruling by a responsible regulatory official, terminate such suspension
at such time as the Board of Directors, in its sole discretion, shall
deem reasonable, such determination to be conclusive. Payments for
redeemed stock shall be made in cash unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist which
make it necessary or desirable for the Corporation to make payment
wholly or partially in securities or other property or assets of the
Corporation. Payment made wholly or partially in securities or other
property or assets may be delayed to such reasonable extent, not
inconsistent with applicable law, as is reasonably necessary under the
circumstances. No stockholder shall have the right, except as
determined by the Board of Directors, to have his shares redeemed in
such securities, property or other assets.
(b) Without limiting the generality of the foregoing, the Board of
Directors may authorize the Corporation, at its option and to the
extent permitted by and in accordance with the conditions of applicable
law, to redeem shares of stock of the Corporation owned by any
stockholder under circumstances deemed appropriate by the Board of
Directors in its sole discretion from time to time, such circumstances
including but not limited to (1) failure to provide the Corporation
with a tax identification number, (2) failure to maintain ownership of
a specified minimum number or value of shares of any class or series of
stock of the Corporation, and (3) failure to maintain the
characteristics or qualifications established by the Board of Directors
for a particular class or series, such redemption to be effected at
such price, at such time and subject to such conditions as may be
required or permitted by applicable law.
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(c) All rights of a stockholder with respect to shares redeemed,
including the right to receive dividends and distributions with respect
to such shares, shall cease as of the date on which the redemption
price to be paid for such shares is fixed in accordance with applicable
law, except the right of such stockholder to receive payment for such
shares as provided herein.
(d) Shares which have been redeemed shall constitute authorized but
unissued shares of such class and series redeemed.
Section 4.8 Valuation. The net asset value of the shares of any class or series
of stock of the Corporation shall be determined by or pursuant to the
determination of the Board of Directors, which is authorized to determine the
methods to be used to value the assets of a class or series, the amount and
allocation of liabilities of the Corporation to such class or series and all
other matters in connection therewith. Any determination made in good faith by
or pursuant to the direction of the Board of Directors as to the amount of the
assets, debts, obligations or liabilities of the Corporation, as to the amount
of any reserves or charges set up and the propriety thereof, as to the time of
or purpose for creating such reserves or charges, as to the use, alteration,
cancellation of any reserves or charges (whether or not any debt, obligation or
liability for which such reserves or charges shall have been created, shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of any security or other asset owned or held by the
Corporation, as to the number of shares of stock of the Corporation outstanding,
as to the net investment income of the Corporation or as to any other matters
relating to the issue, sale, purchase and/or other acquisition or disposition of
securities or shares of the Corporation or the amount or payment of dividends
shall be final and conclusive, and shall be binding upon the Corporation and all
holders of its shares, past, present and future. Shares of stock of the
Corporation are issued and sold on the condition and understanding that any and
all determinations shall be binding as aforesaid.
Section 4.9 Certificates. Subject to the requirements of the Maryland General
Corporation Law, the Board of Directors may authorize the issuance of some or
all of the shares of stock of the Corporation without certificates and may
establish such conditions as it may determine in connection with the issuance of
certificates. The Corporation is not obligated to issue certificates evidencing
fractional shares.
Section 4.10 Shares Subject to Charter and By-Laws. All persons who shall
acquire shares of stock in the Corporation shall acquire the same subject to the
provisions of the charter and the Bylaws of the Corporation, as each may be
amended, supplemented and/or restated from time to time.
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ARTICLE V
BOARD OF DIRECTORS
Section 5.1 Number of Directors. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. The number of
directors of the Corporation shall be four, which number may be increased or
decreased pursuant to the Bylaws, but shall never be less than the minimum
number required by the Maryland General Corporation Law. The names of the
directors who are currently in office and who shall serve until the next meeting
of stockholders and until their successors are duly elected and qualified are:
Harold J. Baxter
John R. Bartholdson
Jettie M. Edwards
Albert A. Miller
Section 5.2 Removal of Directors. Subject to the limits of the 1940 Act, a
director may be removed, with or without cause, by the affirmative vote of a
majority of (a) the Board of Directors, or (b) a committee of the Board of
Directors appointed for such purpose. The stockholders of the Corporation may
remove any director of the Corporation prior to the expiration of his 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. "Cause" shall mean
with respect to any particular director (a) a final judgment of a court of
competent jurisdiction holding that such director caused demonstrable, material
harm to the Corporation through bad faith or active and deliberate dishonesty,
or (b) the barring or prohibition of such director from serving as a director of
a registered investment company under Section 9 of the 1940 Act.
Section 5.3 Liability of Directors and Officers.
(a) To the fullest extent permitted by the Maryland General Corporation
Law and the 1940 Act, no director or officer of the Corporation shall
be liable to the Corporation or to its stockholders for money damages.
No amendment to the charter or repeal of any of its provisions shall
limit or eliminate the benefits provided to directors and officers
under this provision with respect to any act or failure to act which
occurred prior to such amendment or repeal.
(b) In performance of his duties, a director is entitled to rely on any
information, opinion, report, or statement, including any financial
statement or other financial data,
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prepared by others, to the extent not inconsistent with the General
Laws of the State of Maryland. A person who performs his duties in
accordance with the standards of Article 2-405.1 of the Maryland
General Corporation Law or otherwise in accordance with applicable law
shall have no liability by reason of being or having been a director of
the Corporation.
Section 5.4 Powers of Directors. In addition to any powers conferred herein or
in the Bylaws, the Board of Directors may, subject to any express limitations
contained in the charter or in the Bylaws, exercise the full extent of powers
conferred by the General Laws of the State of Maryland or other applicable law
upon corporations or directors thereof and the enumeration and definition of
particular powers herein or in the Bylaws shall in no way be deemed to restrict
or otherwise limit those lawfully conferred powers. In furtherance and without
limitation of the foregoing, the Board of Directors shall have power:
(a) to make, alter, amend or repeal from time to time the Bylaws of the
Corporation except as otherwise provided by the Bylaws;
(b) subject to requirements of the 1940 Act and the General Laws of the
State of Maryland, the Corporation may enter into any management or
investment advisory contract or underwriting contract or any other type
of contract with, and may otherwise engage in any transaction or do
business with, any person, firm or corporation or any subsidiary or
other affiliate of any such person, firm or corporation, and may
authorize such person, firm or corporation or such subsidiary or other
affiliate to enter into any other contracts or arrangements with any
other person, firm or corporation which relate to the Corporation or
the conduct of its business, notwithstanding that any directors or
officers of the Corporation are or may subsequently become partners,
directors, officers, stockholders or employees of such person, firm or
corporation or of such subsidiary or other affiliate or may have a
material financial interest in any such contract, transaction or
business; and except to the extent otherwise provided by applicable
law, no such contract, transaction or business shall be invalidated or
voidable, or in any way affected thereby, nor shall any of such
directors or officers of the Corporation be liable to the Corporation
or to any stockholder or creditor thereof or to any other person for
any loss incurred solely because of the entering into and performance
of such contract or the engaging in such transaction or business or the
existence of such material financial interest therein, provided that
such relationship to such person, firm or corporation or such
subsidiary or affiliate or such material financial interest was
disclosed or otherwise known to the Board of Directors prior to the
Corporation's entering into such contract or engaging in such action or
business, and in the case of directors of the Corporation, that Section
2-419 of the Maryland General Corporation Law has been satisfied; and
(c) to make such elections as to the tax status of the Corporation as
may be permitted or required by the IRC without the vote of
stockholders of the Corporation.
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Section 5.5 Independent and Disinterested Directors. A director of the
Corporation who with respect to the Corporation is not an interested person, as
defined in the 1940 Act, shall be deemed to be independent and disinterested
when making any determination or taking any action as a director of the
Corporation.
ARTICLE VI
INDEMNIFICATION AND ADVANCE OF EXPENSES
Section 6.1 Directors. To the maximum extent permitted by Maryland law in effect
from time to time, but subject to the limits on indemnification contained in the
1940 Act and the Bylaws, the Corporation shall indemnify and, without requiring
a preliminary determination of the ultimate entitlement to indemnification,
shall pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any individual who is a present or former director of the
Corporation or (b) any individual who, while a director of the Corporation and
at the request of the Corporation, serves or has served another corporation,
real estate investment trust, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner, trustee,
employee, agent or fiduciary of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may become subject
or which such person may incur by reason of his status as a present or former
director of the Corporation. The Corporation may, with the approval of the Board
of Directors, provide such indemnification and advance for expenses to a person
who served a predecessor of the Corporation in any of the capacities described
in (a) or (b) above.
Section 6.2 Officers. The Corporation shall have the power, to the maximum
extent permitted by Maryland law in effect from time to time, but subject to the
limits on indemnification contained in the 1940 Act and the Bylaws, to obligate
itself to indemnify, and to pay or reimburse reasonable expenses in advance of
final disposition of a proceeding to, (a) any individual who is a present or
former officer of the Corporation or (b) any individual who, while an officer of
the Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner, trustee, employee, agent or fiduciary of another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise from and against any claim or
liability to which such person may become subject or which such person may incur
by reason of his status as a present or former officer of the Corporation. The
Corporation shall have the power, with the approval of the Board of Directors,
to provide such indemnification and advance for expenses to a person who served
a predecessor of the Corporation in any of the capacities described in (a) or
(b) above and to any employee or agent of the Corporation or a predecessor of
the Corporation.
Section 6.3 Amendment. Neither the amendment nor repeal of this Article, nor the
adoption or amendment of any other provision of the charter or Bylaws of the
Corporation
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inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding Sections with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE VII
AMENDMENTS
(a) The Corporation reserves the right from time to time to make any
amendment to the charter, now or hereafter authorized by law, including any
amendment altering the terms or contract rights, as expressly set forth in the
charter, of any shares of outstanding stock. All rights and powers conferred by
the charter on stockholders, directors and officers are granted subject to this
reservation.
(b) All references herein to statutes, to the charter or to the Bylaws
shall be deemed to refer to those statutes, the charter or Bylaws as they are
amended and in effect from time to time.
THIRD: The amendment to and restatement of the charter as hereinabove set
forth have been duly authorized and advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is
as set forth in Article III of the foregoing amendment and restatement of the
charter.
FIFTH: The name and address of the Corporation's current resident agent
is as set forth in Article III of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
currently in office are as set forth in Article V of the foregoing amendment and
restatement of the charter.
SEVENTH: The undersigned President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
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IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
President and attested to by its Secretary on this 9th day of April, 1998.
ATTEST: PBHG ADVISOR FUNDS, INC.
/s/ John M. Zerr By: /s/ Gary L. Pilgrim (SEAL)
- ------------------------------- ------------------------
Secretary President
13
Exhibit 1(b)
PBHG ADVISOR FUNDS, INC.
ARTICLES SUPPLEMENTARY
PBHG ADVISOR FUNDS, INC., a Maryland corporation having its principal
office in the State of Maryland in the City of Baltimore (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Board of Directors of the Corporation has adopted resolutions
to classify a portion of the Corporation's authorized unissued shares of capital
stock designated as Common Stock without further classification.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue 10,000,000,000 shares of Common Stock
with a par value of $0.001 per share and having an aggregate par value of
$10,000,000. Of these shares:
(a) 4,800,000,000 shares were classified in the following series
(portfolios): 300,000,000 shares of the PBHG Advisor Core Value Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Blue Chip Growth Fund series (of which 100,000,000 shares are classified
as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor Cash Reserves Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of
<PAGE>
the PBHG Advisor High Yield Fund series (of which 100,000,000 shares are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares); 300,000,000 shares of the PBHG Advisor Enhanced Equity Fund
series (of which 100,000,000 shares are classified as Class A Shares;
100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); 300,000,000
shares of the PBHG Advisor Growth II Fund series (of which 100,000,000 shares
are classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000
as Class I Shares); 300,000,000 shares of the PBHG Advisor Large Cap
Concentrated Fund series (of which 100,000,000 shares are classified as Class A
Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor Trend Fund series (of which 100,000,000
shares are classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I Shares); 300,000,000 shares of the PBHG Advisor Value
Opportunities Fund series (of which 100,000,000 shares are classified as Class A
Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor Global Technology & Communications Fund
series (of which 100,000,000 shares are classified as Class A Shares;
100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); 300,000,000
shares of the PBHG Advisor Growth Opportunities Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor New Contrarian Fund series (of which 100,000,000 shares are classified
as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor New
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Opportunities Fund series (of which 100,000,000 are classified as Class A
Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor REIT Fund series (of which 100,000,000
shares are classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I Shares); 300,000,000 shares of the PBHG Advisor Master
Fixed Income Fund series (of which 100,000,000 are classified as Class A Shares;
100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); and
300,000,000 shares of the PBHG Advisor Short-Term Government Fund series (of
which 100,000,000 are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); and
(b) 5,200,000,000 shares were shares of Common Stock without further
classification.
THIRD: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue 10,000,000,000 shares of Common Stock with a par
value of $0.001 per share and having an aggregate par value of $10,000,000. Of
these shares: (a) 5,100,000,000 shares have been classified in the following
series (portfolios): 300,000,000 shares of the PBHG Advisor Core Value Fund
series (of which 100,000,000 shares are classified as Class A Shares;
100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); 300,000,000
shares of the PBHG Advisor Blue Chip Growth Fund series (of which 100,000,000
shares are classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
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Advisor Cash Reserves Fund series (of which 100,000,000 shares are classified as
Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor High Yield Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Enhanced Equity Fund series (of which 100,000,000 shares are classified
as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor Growth II Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Large Cap Concentrated Fund series (of which 100,000,000 shares are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares); 300,000,000 shares of the PBHG Advisor Trend Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Value Opportunities Fund series (of which 100,000,000 shares are
classified as Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as
Class I Shares); 300,000,000 shares of the PBHG Advisor Global Technology &
Communications Fund series (of which 100,000,000 shares are classified as Class
A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares);
300,000,000 shares of the PBHG Advisor Growth Opportunities Fund series (of
which 100,000,000 shares are classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor New Contrarian Fund series (of which
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<PAGE>
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor New Opportunities Fund series (of which 100,000,000 are classified as
Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor REIT Fund series (of which
100,000,000 shares are classified as Class A Shares; 100,000,000 as Class B
Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the PBHG
Advisor Master Fixed Income Fund series (of which 100,000,000 are classified as
Class A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I
Shares); 300,000,000 shares of the PBHG Advisor Short-Term Government Fund
series (of which 100,000,000 are classified as Class A Shares; 100,000,000 as
Class B Shares; and 100,000,000 as Class I Shares); 300,000,000 shares of the
PBHG Advisor Defensive Equity Fund (of which 100,000,000 are classified as Class
A Shares; 100,000,000 as Class B Shares; and 100,000,000 as Class I Shares); and
(b) 4,900,000,000 shares are shares of Common Stock without further
classification.
FOURTH: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
FIFTH: Unissued shares of Common Stock may be classified and reclassified
by the Board of Directors.
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SIXTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of the Class A, Class B, and Class I Shares of Common
Stock described in ARTICLE THIRD hereof are as set forth in ARTICLE IV of the
Corporation's Charter, and in the provisions relating to stock of the
Corporation generally, except that Class B Shares have the additional
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as are set forth in Section 4.4(b) of ARTICLE IV of the Charter.
SEVENTH: The shares of the Corporation authorized and classified pursuant
to these Articles Supplementary have been so authorized and classified by the
Board of Directors under the authority contained in the Charter of the
Corporation and Section 2-105(c) of the Maryland General Corporation Law (the
"MGCL"), and these Articles Supplementary are filed pursuant to Section 2-208.1
of the MGCL.
The undersigned President acknowledges these Articles Supplementary to be
the corporate act of the Corporation and states that to the best of his
knowledge, information and belief, the matters and facts set forth in these
Articles with respect to authorization and approval are true in all material
respects and that this statement is made under the penalties for perjury.
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IN WITNESS WHEREOF, PBHG ADVISOR FUNDS, INC. has caused these Articles
Supplementary to be executed in its name and on its behalf by its President and
witnessed by its Secretary on April 9, 1998.
PBHG ADVISOR FUNDS, INC.
Witness:
/s/ John M. Zerr /s/ Gary L. Pilgrim
- ---------------- -------------------
Secretary President
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Exhibit 2
AMENDED AND RESTATED BYLAWS
FOR
PBHG ADVISOR FUNDS, INC.
Adopted Effective April 9, 1998
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation in
the State of Maryland shall be in the City of Baltimore.
Section 2. Other Offices. The Corporation may have such other offices in
such places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. Meetings of the stockholders of
the Corporation need not be held except as required under the general laws of
the State of Maryland, as the same may be amended from time to time. Meetings of
stockholders shall be held at such place within the United States designated by
the Board of Directors and set forth in the notice of the meeting.
<PAGE>
Section 2. Annual Meetings. If a meeting of the stockholders of the
Corporation is required by the Investment Company Act of 1940, as amended (the
"1940 Act"), to take action with respect to the election of directors, then such
matter shall be submitted to the stockholders at a special meeting called for
such purpose, which shall be deemed the annual meeting of stockholders for that
year. In years in which no such action by stockholders is so required, no annual
meeting of stockholders need be held.
Section 3. Special Meetings. Special meetings of stockholders may be
called at any time by the chairman of the board, if any, the president or by a
majority of the Board of Directors. Special meetings of stockholders shall also
be called by the secretary upon the written request of the holders of shares
entitled to cast not less than ten percent (10%) of the votes entitled to be
cast at such meeting. Such request shall state the purpose of the meeting and
the matters proposed to be acted on at the meeting. The secretary shall inform
such stockholders of the reasonably estimated cost of preparing and mailing
notice of the meeting and, upon payment to the Corporation by such stockholders
of such costs, the secretary shall give notice to each stockholder entitled to
notice of the meeting. Unless requested by the stockholders entitled to cast a
majority of all the votes entitled to be cast at the meeting, a special meeting
need not be called to consider any matter which
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is substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve months.
Section 4. Notice of Meetings. Not less than ten nor more than 90 days
before each meeting of stockholders, the secretary shall give to each
stockholder entitled to vote at such meeting and to each stockholder not
entitled to vote who is entitled to notice of the meeting, written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by any statute, the purpose for which
the meeting is called, either by mail or by delivering such notice personally or
by leaving it at each stockholder's residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, addressed to the stockholder at such stockholder's
address as it appears on the records of the Corporation.
Section 5. Scope of Notice. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.
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Section 6. Quorum; Adjournment of Meetings. The presence in person or by
proxy of stockholders entitled to cast thirty percent (30%) of the votes
entitled to be cast at the meeting, present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders, except for any
matter which by law or the charter of the Corporation requires the separate
approval of one or more series or classes of stock, in which case the presence
in person or by proxy of stockholders entitled to cast thirty percent (30%) of
the votes of such series or class (or of such series or classes voting together
as a single class) entitled to be cast on the matter shall constitute a quorum.
The holders of a majority of the votes entitled to be cast at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer entitled to preside or act as secretary of such meeting may
adjourn the meeting without determining the date of the new meeting or from time
to time without further notice to a date not more than 120 days after the
original record date. Any business that might have been transacted at the
meeting originally called may be transacted at any such adjourned meeting at
which a quorum is present.
Section 7. Conduct of Stockholders Meetings. The meetings of stockholders
shall be presided over by the chairman of the board or, if the chairman shall
not be present or if there is no chairman, by one of the following officers who
shall be
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present in the order stated: the president, the vice presidents in their order
of rank and seniority, or a chairman elected for such purpose at the meeting.
The secretary, or, in his absence, an assistant secretary, or in the absence of
both the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the charter
of the Corporation, each stockholder of record having voting power shall be
entitled at each meeting of the stockholders to one vote for each dollar (and
each fractional dollar thereof) of net asset value (number of shares owned times
net asset value per share) of shares of stock outstanding in such holder's name
on the record of stockholders of the Corporation as of the record date
determined pursuant to Section 13 of this Article II. A plurality of all the
votes cast at a meeting of stockholders duly called and at which a quorum is
present shall be sufficient to elect a director. Each vote may be cast for as
many individuals as there are directors to be elected and for whose election the
vote is entitled to be cast. A majority of the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
approve any other matter which may properly come before the meeting, unless more
than a majority of the votes cast is required by statute or by the charter of
the Corporation.
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Section 9. Proxies. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his duly authorized agent. Signing may be
accomplished by the stockholder or the stockholder's authorized agent signing
the proxy or causing the stockholder's signature to be affixed to the proxy by
any reasonable means, including facsimile signature. The stockholder also may
authorize another person to act as proxy by transmitting, or authorizing the
transmission of, a telegram, cablegram, datagram or other means of electronic
transmission to the person authorized to act as proxy or to a proxy solicitation
firm, proxy support service organization or other person authorized by the
person who will act as proxy to receive the transmission. No proxy shall be
valid after the expiration of eleven months from the date thereof, unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the stockholder executing it, except in those cases where such proxy states
that it is irrevocable and where an irrevocable proxy is coupled with an
interest.
Section 10. Voting of Stock by Certain Holders.
(a) Stock of the Corporation registered in the name of a corporation,
partnership, trust or other entity, if entitled to be voted, may be voted by the
president or a vice president, a general partner or trustee thereof, as the case
may be, or a proxy appointed by any of the foregoing individuals, unless some
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other person, who has been appointed to vote such stock pursuant to a bylaw or a
resolution of the governing body of such corporation or other entity or
agreement of the partners of a partnership, presents a certified copy of such
bylaw, resolution or agreement, in which case such person may vote such stock.
Any director or other fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.
(b) Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of votes that may be cast at any given time, unless they are held
by it in a fiduciary capacity, in which case they may be voted and shall be
counted in determining the total number of votes that may be cast at any given
time.
(c) The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
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of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 11. Inspectors.
(a) At any meeting of stockholders, the chairman of the meeting may
appoint one or more persons as inspectors for such meeting. Such inspectors
shall ascertain and report the number of shares represented at the meeting based
upon their determination of the validity and effect of proxies, count all votes,
report the results and perform such other acts as are proper to conduct the
election and voting with impartiality and fairness to all the stockholders.
(b) Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of votes represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
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Section 12. Voting by Ballot. If a vote shall be taken on any question
other than the election of directors, which shall be by written ballot, then
unless required by statute or these Bylaws, or determined by the chairman of the
meeting to be advisable, any such vote need not be by ballot. On a vote by
ballot, each ballot shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and shall state the dollar value of shares voted.
Section 13. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of making any proper determination with respect to
stockholders, including determining which stockholders are entitled to notice of
and to vote at a meeting or by consent, to receive a dividend or be allotted
other rights. The record date may not be prior to the close of business on the
date the record date is fixed and shall not be more than ninety (90) days before
the date on which the action requiring the determination is taken. In the case
of a meeting of stockholders, the record date shall be at least ten (10) days
before the date of the meeting. Only stockholders of record on such date shall
be entitled to notice of and to vote at such meeting or by consent or to receive
such dividends or rights, as the case may be.
Section 14. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the charter
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of the Corporation, any action required or permitted to be taken at any meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if the following are filed with the records of stockholders meetings:
(i) a unanimous written consent which sets forth the action and is signed by
each stockholder entitled to vote on the matter and (ii) a written waiver of any
right to dissent signed by each stockholder entitled to notice of the meeting
but not entitled to vote thereat.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors and all powers of
the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by law, the
charter of the Corporation or these Bylaws.
Section 2. Number of Directors. The number of directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the directors then in office; provided, however, that the number of directors
shall in no event be less than three nor more than fifteen except that the
Corporation shall have at least one director if there is no stock
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<PAGE>
outstanding, and, if there is stock outstanding and so long as there are less
than three stockholders, the number of directors may be less than three but not
less than the number of stockholders. Any vacancy created by an increase in
directors may be filled in accordance with Section 6 of this Article III. No
reduction in the number of directors shall have the effect of removing any
director from office prior to the expiration of his term unless such director is
specifically removed pursuant to Section 5 of this Article III at the time of
such decrease. Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be elected
annually, by written ballot at the annual meeting of stockholders or a special
meeting held for that purpose; provided, however, that if no annual meeting of
the stockholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these Bylaws, directors shall be elected
at the next annual meeting held. The term of office of each director shall be
from the time of his election and qualification until the election of directors
next succeeding his election and until his successor is elected and qualifies.
Section 4. Resignation. A director of the Corporation may resign at any
time by giving written notice of his resignation to the board or the chairman of
the board, if
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any, the president or the secretary. Any such resignation shall take effect at
the time specified therein or, if no time is specified, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Removal of Directors. Any director of the Corporation may be
removed in accordance with the charter of the Corporation.
Section 6. Vacancies. Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, even if such majority is less than a quorum. Any
vacancy on the Board of Directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors. Any
individual so elected as director shall hold office until the next annual
meeting of stockholders and until his successor is elected and qualifies.
Section 7. Place of Meeting. The directors may hold their meetings and
keep the books of the Corporation outside the State of Maryland, at any office
or offices of the Corporation, or at any place as they may from time to time
determine; and in the case of meetings, as shall be specified in the respective
notices of such meetings.
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Section 8. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and on such notice, if any, as the directors may from
time to time determine.
Section 9. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the chairman of the board, if any, the
president or by two or more directors by oral, telegraphic, telephonic or
written notice duly given to each director not less than one business day before
such meeting or sent or mailed to each director not less than three business
days before such meeting.
Section 10. Quorum.
(a) One-third of the directors then in office (but in no event less than
two directors) shall constitute a quorum of the Board of Directors for the
transaction of business. If at any meeting of the Board of Directors there shall
be less than a quorum present, a majority of the directors present may adjourn
the meeting from time to time without further notice until a quorum shall be
attained. If, pursuant to law, the charter of the Corporation or these Bylaws,
the vote of a majority of a particular group of directors is required for
action, a quorum must also include a majority of such group.
(b) The directors present at a meeting which has been duly called and
convened may continue to transact business until
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adjournment, notwithstanding the withdrawal of enough directors to leave less
than a quorum.
Section 11. Voting. The action of the majority of the Directors present
at a meeting at which a quorum is present shall be the action of the Board of
Directors, except as may be otherwise specifically provided by applicable law,
the charter of the Corporation or these Bylaws.
Section 12. Telephone Meetings. The members of the Board of Directors, or
any committee of the Board of Directors, may participate in a meeting by means
of a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time. Participation
in a meeting by these means shall constitute presence in person at the meeting.
Section 13. Executive Committee. The Board of Directors may appoint an
Executive Committee consisting of one or more directors. Between meetings of the
Board of Directors, the Executive Committee, if any, shall have and may exercise
any or all of the powers of the Board of Directors, except (a) as otherwise
provided by law and (b) the power to increase or decrease the size of, or fill
vacancies on, the Board of Directors. The Executive Committee may determine its
own rule of procedure, and may meet when and as the Executive Committee
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determines, or when directed by resolution of the Board of Directors. The
presence of a majority of the Executive Committee shall constitute a quorum. The
Board of Directors shall have the power at any time to change the members and
powers of, to fill vacancies on, and to dissolve the Executive Committee. In the
absence of any member of the Executive Committee, the members present at a
meeting, whether or not they constitute a quorum, may appoint a director to act
in place of such absent member.
Section 14. Other Committees. The Board of Directors may appoint other
committees, which shall in each case consist of such number of directors (not
less than one), which shall have and may exercise such powers as the Board of
Directors may from time to time determine, subject to applicable law. A majority
of all members of any such committee may determine its action, and the time and
place of its meetings, unless the Board of Directors shall provide otherwise.
The Board of Directors shall have the power at any time to change the members
and powers of, to fill vacancies on, and to dissolve any such committee. In the
absence of any member of such committee, the members present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of such absent member.
Section 15. Informal Action by Directors. Except to the extent otherwise
specifically prohibited by applicable law, any action required or permitted to
be taken at any meeting of
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the Board of Directors or any committee thereof may be taken without a meeting,
if a consent in writing to such action is signed by all members of the board or
such committee, and such written consent is filed with the minutes of
proceedings of the board or such committee.
Section 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors or otherwise in such manner
and in such amounts as may be fixed from time to time by the Board of Directors.
ARTICLE IV
OFFICERS, AGENTS AND EMPLOYEES
Section 1. General Provisions. The Board of Directors shall elect the
executive officers of the Corporation, which shall include a president, a
secretary and a treasurer and may include a chairman of the board, one or more
vice presidents, one or more assistant secretaries and one or more assistant
treasurers. The chairman of the board, if any, shall be selected from among the
directors. The Board of Directors may also in its discretion appoint assistant
vice presidents, assistant secretaries, assistant treasurers, and other
officers, agents and employees, who shall have such authority and perform such
duties as the Board of Directors may determine. The Board of Directors may fill
any vacancy which may occur in any office. Any two
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offices, except those of president and vice president, may be held by the same
person, but no officer shall execute, acknowledge or verify any instrument on
behalf of the Corporation in more than one capacity, if such instrument is
required by law to be executed, acknowledged or verified by two or more
officers.
Section 2. Term of Office. Unless otherwise specifically
determined by the Board of Directors, the officers shall serve at the pleasure
of the Board of Directors. If the Board of Directors in its judgment finds that
the best interests of the Corporation will be served, the Board of Directors may
remove any officer of the Corporation at any time with or without cause.
Section 3. President. The president shall be the chief
executive officer of the Corporation and, subject to the Board of Directors,
shall generally manage the business and affairs of the Corporation. If there is
no chairman of the board, or if the chairman of the board has been appointed but
is absent, the president shall, if present, preside at all meetings of the
stockholders and the Board of Directors.
Section 4. Chairman of the Board. The chairman of the board, if
any, shall preside at all meetings of the stockholders and the Board of
Directors, if the chairman of the board is present. The chairman of the board
shall have such
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other powers and duties as shall be determined by the Board of Directors, and
shall undertake such other assignments as may be requested by the president.
Section 5. Other Officers. The chairman of the board or one or more vice
presidents shall have and exercise such powers and duties of the president in
the absence or inability to act of the president, as may be assigned to them,
respectively, by the Board of Directors or, to the extent not so assigned, by
the president. In the absence or inability to act of the president, the powers
and duties of the president not otherwise assigned by the Board of Directors or
the president shall devolve upon the chairman of the board, or in the chairman's
absence, the vice presidents in the order of their election.
Section 6. Secretary. The secretary shall have custody of the seal of the
Corporation, and shall keep the minutes of the meetings of the stockholders, the
Board of Directors and any committees thereof, and shall issue all notices of
the Corporation. The secretary shall have charge of the stock records and such
other books and papers as the Board of Directors may direct, and shall perform
such other duties as may be incidental to the office or which are assigned by
the Board of Directors.
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Section 7. Treasurer. The treasurer shall have the care and custody of
the funds and securities of the Corporation and shall deposit the same in the
name of the Corporation in such bank or banks or other depositories, subject to
withdrawal in such manner as these Bylaws or the Board of Directors may
determine. The treasurer shall, if required by the Board of Directors, give such
bond for the faithful discharge of duties in such form as the Board of Directors
may require.
ARTICLE V
CHECKS, DEPOSITS AND CUSTODIANS
Section 1. Checks and Drafts. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or agent of the Corporation in
such manner as shall from time to time be determined by the Board of Directors.
Section 2. Deposits. The funds of the Corporation shall be deposited with
such banks or other depositories as the Board of Directors may from time to time
determine.
Section 3. Custodians. All securities and other investments shall be
deposited in the safekeeping of such banks or other companies as the Board of
Directors may from time to
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time determine. Every arrangement entered into with any bank or other company
for the safekeeping of the securities and investments of the Corporation shall
contain provisions complying with the 1940 Act and the general rules and
regulations thereunder.
ARTICLE VI
STOCK
Section 1. Certificates. Stock certificates shall not be issued unless
authorized by the Board of Directors. Within a reasonable time after the
issuance or transfer of uncertificated stock, the Corporation shall send to the
registered owner thereof a written notice containing the information required to
be set forth or stated on certificates pursuant to Section 2-211 of the Maryland
General Corporation Law.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the holder(s) thereof, in person
or by such holder's duly authorized attorney or legal representative, upon
surrender and cancellation of certificates, if any, for the same number of
shares, duly endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature(s) as the
Corporation or its agents may reasonably
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require. In the case of shares not represented by certificates, the same or
similar requirements may be imposed by the Board of Directors.
Section 3. Stock Ledgers. The stock ledger of the Corporation, which may
be maintained by means of computer systems, containing the names and addresses
of the stockholders and the number and class or series of any class of shares of
stock held by them, respectively, and the dates when they became record owners
thereof, shall be kept at the principal offices of the Corporation, or if the
Corporation has appointed a transfer agent, at the offices of such transfer
agent.
ARTICLE VII
FISCAL YEAR
The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation.
ARTICLE VIII
SEAL
Section 1. Seal. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall contain the name of the Corporation and
the year of its incorporation and the words "Incorporated Maryland." The Board
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of Directors may authorize one or more duplicate seals and
provide for the custody thereof.
Section 2. Affixing Seal. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.
ARTICLE IX
INDEMNIFICATION AND ADVANCE OF EXPENSES
Section 1. Indemnification of Directors and Officers. The Corporation
shall indemnify its directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify its officers to the same extent as its directors and to such
further extent as is consistent with law. The Corporation shall indemnify its
directors and officers who, while serving as directors or officers, also serve
at the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint venture,
real estate investment trust, trust, other enterprise or employee benefit plan
to the fullest extent consistent with law. The indemnification and other rights
provided for by this Article
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shall continue as to a person who has ceased to be a director or officer, and
shall inure to the benefit of the heirs, executors and administrators of such a
person. This Article shall not protect any such person against any liability to
the Corporation or any stockholder thereof to which such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's office
("disabling conduct").
Section 2. Advances. The Corporation shall advance payment to any current
or former director or officer of the Corporation for reasonable expenses
incurred in connection with any proceeding in which the individual is made a
party by reason of service as a director or officer in the manner and to the
fullest extent permissible under the Maryland General Corporation Law upon
receipt by the Corporation of a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to repay any such advance if
it should ultimately be determined that the requisite standard of conduct has
not been met. In addition, at least one of the following conditions must be
satisfied: (a) the individual shall provide security in form and amount
acceptable to the Corporation for the foregoing undertaking, (b) the Corporation
shall be insured against losses arising by reason of the advance, or (c) a
majority of a quorum of directors of the Corporation who are
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neither interested persons, as defined in Section 2(a)(19) of the 1940 Act, as
amended, nor parties to the proceeding ("disinterested non-party directors"), or
independent legal counsel in a written opinion, shall have determined, based on
a review of facts readily available to the Corporation at the time the advance
is proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to meet the requisite standard of
conduct.
Section 3. Procedure. At the request of any person claiming
indemnification under this Article, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, whether the standards required by this Article have been met.
Indemnification shall be made only following: (a) a final decision on the merits
by a court or other body before whom the proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct, or (b) in the
absence of such a decision, a reasonable determination, based upon a review of
the facts, that the person to be indemnified was not liable by reason of
disabling conduct by, (i) the vote of a majority of a quorum of disinterested
non-party directors, or (ii) an independent legal counsel in a written opinion.
Section 4. Indemnification of Employees and Agents. Employees and agents
who are not officers or directors of the
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Corporation may be indemnified, and reasonable expenses may be advanced to such
employees or agents, as may be provided by action of the Board of Directors or
by contract, subject to any limitations imposed by the 1940 Act.
Section 5. Other Rights. The Board of Directors may make further
provision consistent with law for indemnification and advancement of expenses to
directors, officers, employees and agents by resolution, agreement or otherwise.
The indemnification provided for by this Article shall not be deemed exclusive
of any other right, with respect to indemnification or otherwise, to which those
seeking indemnification may be entitled under any insurance, other agreement,
resolution of stockholders or disinterested non-party directors, or otherwise.
Section 6. Subsequent Changes to Law. References in this Article are to
the Maryland General Corporation Law and to the 1940 Act as from time to time
amended. No amendment of these Bylaws shall affect any right of any person under
this Article based on any event, omission or proceeding occurring prior to such
amendment.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
ARTICLE XI
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
26
Exhibit 8
CUSTODIAN AGREEMENT
This Agreement, dated as of the 1st day of April, 1998 by and between
PBHG Advisor Funds, Inc. ("Fund"), a corporation operating as an open-end
management investment company and duly organized under the laws of the state of
Maryland, and CoreStates Bank N.A.;
WITNESSETH
WHEREAS, the Fund desires to deposit cash and securities of certain of
its series ("Portfolios"), which Portfolios shall be set forth in Schedule A
hereto attached, with CoreStates Bank N.A. as custodian; and
WHEREAS, Corestates Bank N.A. is qualified and authorized to act as
custodian for the cash and securities of an open-end management investment
company and is willing to act in such capacity upon the terms and conditions
herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
do hereby agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this Agreement,
or in any amendment or supplement hereto, shall have meanings herein specified
unless the context otherwise requires.
CUSTODIAN: The term Custodian shall mean CoreStates Bank N.A. in its capacity
as Custodian under this Agreement.
PROPER INSTRUCTIONS: For purposes of this Agreement the Custodian shall be
deemed to have received Proper Instructions upon receipt of written (including
instructions received by means of computer terminals), telephone or telegraphic
instructions from a person or persons authorized from time to time by the
Directors of the Fund to give the particular class of instructions. Telephone or
telegraphic instructions shall be confirmed in writing by such person or persons
as said Board of Directors shall have from time to time authorized to give the
particular class of instructions in question. The Custodian may act upon
telephone or telegraphic instructions without awaiting receipt of written
confirmation, and shall not be liable for the Fund's or its investment adviser's
failure to confirm such instructions in writing.
SHAREHOLDERS: The term Shareholders shall mean the registered owners from time
to time of the Shares of the Fund in accordance with the registry records
maintained by the Fund or agents on its behalf.
<PAGE>
SHARES: The term Shares of the Fund shall mean the shares of the Fund including
any classes of shares.
SECTION 2. the Fund shall from time to time file with the Custodian a certified
copy of each resolution of its Board of Directors authorizing the person or
persons to give Proper Instructions (as defined in Section 1) and specifying the
class of instructions that may be given by each person to the Custodian under
this Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered in
full force and effect with the Custodian fully protected in acting in reliance
thereon until it receives written notice to the contrary; provided, however,
that if the certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the Fund.
SECTION 3. The Fund hereby appoints the Custodian as custodian of cash and
securities of the Portfolios from time to time on deposit hereunder, to be held
by the Custodian and applied as provided in this Agreement. The Custodian hereby
accepts such appointment subject to the terms and conditions hereinafter
provided. Such cash and securities shall, however, be segregated from the assets
of others and shall be and remain the sole property of the company and the
Custodian shall have only the bare custody thereof.
The Custodian may perform some or all of its duties hereunder through a
subcustodian.
The Custodian may deposit the Fund's portfolio securities with a U.S. securities
depository or in U.S. Federal book-entry systems pursuant to rules and
regulations of the Securities and Exchange Commission.
SECTION 4. The Fund will make an initial deposit of cash to be held and applied
by the Custodian hereunder. Thereafter the Fund will cause to be deposited with
the Custodian hereunder the applicable net asset value of Shares sold from time
to time whether representing initial issue, other stock or reinvestments of
dividends and/or distributions payable to Shareholders.
SECTION 5. The Custodian is hereby authorized and directed to disburse cash from
time to time upon receipt of and in accordance with Proper Instructions.
SECTION 6. The Custodian's compensation shall be as set forth in Schedule B
hereto attached, and the Custodian will charge fees for specific transactions as
set forth in Schedule C hereto attached, or as shall be set forth in amendments
to such Schedules approved by the Fund and the Custodian.
2
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SECTION 7. In connection with its functions under this Agreement, the Custodian
shall:
(a) render to the Fund a daily report of all monies or paid on
behalf of the Fund.
(b) create, maintain and retain all records relating to its
activities and obligations under this Agreement in such manner
as will meet the obligations of the Fund with respect to said
Custodian's activities in accordance with generally accepted
accounting principles. All records maintained by the Custodian
in connection with the performance of its duties under this
Agreement will remain the property of the Fund and in the
event of termination of this Agreement will be relinquished to
the Fund.
SECTION 8. No liability of any kind shall be attached to or incurred by the
Custodian by reason of its custody of the assets held by it from time to time
under this Agreement, or otherwise by reason of its position as Custodian
hereunder except only for its own negligence, bad faith, or willful misconduct
in the performance of its duties as specifically set forth in the Agreement.
Without limiting the generality of the foregoing sentence, the Custodian:
(a) may rely upon the advice of counsel, who may be counsel for
the Fund or for the Custodian, and upon statements of
accountants, brokers and other persons believed by it in good
faith to be expert in the matters upon which they are
consulted; and for any action taken or suffered in good faith
based upon such advice or statements the Custodian shall not
be liable to anyone;
(b) shall not be liable for anything done or suffered to be done
in good faith in accordance with any request or advice of, or
based upon information furnished by, the Fund or its
authorized officers or agents;
(c) is authorized to accept a certificate of the Secretary or
Assistant Secretary of the Fund, or Proper Instructions, to
the effect that a resolution in the form submitted has been
duly adopted by its Board of Directors or by the Shareholders,
as conclusive evidence that such resolution has been duly
adopted and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature,
written (including telegraph or other mechanical)
instructions, request, letter of transmittal, certificate,
opinion of counsel, statement, instrument, report, notice,
consent, order, or other paper or document reasonably believed
by
3
<PAGE>
it to be genuine and to have been signed, forwarded or
presented by the purchaser, Fund or other proper party or
parties.
SECTION 9. The Fund, its successors and assignees hereby indemnify and hold
harmless the Custodian, its successors and assignees, of and from any and all
liability whatsoever arising out of or in connection with the Custodian's
status, acts, or omissions under this Agreement, except only for liability
arising out of the Custodian's own negligence, bad faith, or willful misconduct
in the performance of its duties specifically set forth in this Agreement.
Without limiting the generality of the foregoing, the Fund, its successors and
assignees do hereby fully indemnify and hold harmless the Custodian its
successors and assignees from any and all loss, liability, claims, demand,
actions, suits and expenses of any nature as the same may arise from the failure
of the Fund to comply with any law, rule, regulation or order of the United
States, any state or any other jurisdiction, governmental authority, body, or
board relating to the sale, registration, qualification of units of beneficial
interest in the Fund, or from the failure of the Fund to perform any duty or
obligation under this Agreement.
Upon written request of the Custodian, the Fund shall assume the entire defense
of any claim subject to the foregoing indemnity, or the joint defense with the
Custodian of such claim, as the Custodian shall request. The indemnities and
defense provisions of this Section 9 shall indefinitely survive termination of
this Agreement.
SECTION 10. This Agreement may be amended from time to time without notice to or
any approval of the Shareholders by a supplemental agreement executed by the
Fund and the Custodian and amending and supplementing this Agreement in the
manner mutually agreed.
SECTION 11. Either the Fund or the Custodian may give one hundred twenty (120)
days' written notice to the other of the termination of this Agreement, such
termination to take effect at the time specified in the notice. In case such
notice of termination is given either by the Fund or by the Custodian, the
Directors of the Fund shall, by resolution duly adopted, promptly appoint a
Successor Custodian which Successor Custodian shall be a bank, trust company, or
a bank and trust company in good standing, with legal capacity to accept custody
of the cash and securities of a mutual fund.
Upon receipt of written notice from the company of the appointment of such
successor and upon receipt of Proper Instructions, the Custodian shall deliver
such cash and securities as it may then be holding hereunder directly and only
to the Successor Custodian. Unless or until a Successor Custodian has been
appointed as above provided, the Custodian then acting shall continue to act as
Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers,
4
<PAGE>
obligations and custody of its predecessor Custodian. The Custodian ceasing to
act shall nevertheless, upon request of the company and the Successor Custodian
and upon payment of its charges and disbursements, executed an instrument in
form approved by its counsel transferring to the Successor Custodian all the
predecessor Custodian's rights, duties, obligations and custody.
In case the Custodian shall consolidate with or merge into any other corporation
remaining after or resulting from such consolidation or merger shall ipso facto
without the execution or filing of any papers or other documents, succeed to and
be substituted for the Custodian with like effect as though originally named as
such.
SECTION 12. This Agreement shall take effect when assets of the Fund are first
delivered to the Custodian.
SECTION 13. This Agreement may be executed in two or more counterparts, each of
which when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
SECTION 14. A copy of the Amended Articles of Incorporation of the Fund are on
file with the Secretary of State of Maryland, and notice is hereby given that
this instrument is executed on behalf of the Directors of the Fund as Directors
and not individually and that the obligations of this instrument are not binding
upon any of the Directors, officers, or Shareholders of the Fund individually,
but binding only upon the assets and property of the Fund.
SECTION 15. The Custodian shall create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable Federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian and such
regulations as to the conduct of such monitors as may be reasonably imposed by
the Custodian after prior consultation with an officer of the Fund, the books
and records of the Custodian pertaining to its actions under this Agreement
shall be open to inspection and audit at any reasonable times by officers of,
attorneys for, and auditors employed by, the Fund.
SECTION 16. Nothing contained in this Agreement is intended to or shall require
the Custodian in any capacity hereunder to perform any functions or duties on
any holiday or other days of special observance on which the Custodian is
closed. Functions or duties normally scheduled to be performed on such days
shall be performed on, and as of, the next business day the Custodian is open.
5
<PAGE>
SECTION 17. This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assignees; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Directors.
IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement to be
signed by their respective officers as of the day and year first above written.
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
-------------------------------
Title: Vice President
Attest: /s/ John M. Zerr
---------------------------
CORESTATES BANK N.A.
By: /s/ Paul T. Cahill
-------------------------------
Title: Vice President
Attest: /s/
---------------------------
6
<PAGE>
SCHEDULE A
PORTFOLIOS OF THE PBHG FUNDS, INC.
This Custodian Agreement is by and between CoreStates Bank N.A. and the
Fund, on behalf of the following Portfolios:
PBHG Advisor Core Value Fund
PBHG Advisor Blue Chip Growth Fund
PBHG Advisor Global Technology & Communications Fund
PBHG Advisor Growth II Fund
PBHG Advisor Growth Opportunities Fund
PBHG Advisor High Yield Fund
PBHG Advisor Large Cap Concentrated Fund
PBHG Advisor New Contrarian Fund
PBHG Advisor Trend Fund
PBHG Advisor Cash Reserves Fund
PBHG Advisor Value Opportunities Fund
PBHG Advisor New Opportunities Fund
PBHG Advisor Enhanced Equity Fund
PBHG Advisor Master Fixed Income Fund
PBHG Advisor Short-Term Government Fund
PBHG Advisor REIT Fund
Date: April 1, 1998
-------------
<PAGE>
SCHEDULE B
FEE SCHEDULE
1.00 BASIS POINTS ON THE FIRST $2.5 BILLION
.75 BASIS POINTS ON THE NEXT $2.5 BILLION
.50 BASIS POINTS ON THE NEXT $4 BILLION
.40 BASIS POINTS ON THE REMAINDER
Transactions billed separately by Portfolio at the now current rates. Asset
level charges billed as one invoice covering all Portfolios custodied at
CoreStates Bank N.A. Pilgrim Baxter Fund Services will allocate charges back to
individual Portfolios. Transaction charges are subject to change.
<PAGE>
SCHEDULE C
CUSTODY SERVICES
TRANSACTION FEES
- ----------------
$ 4.00 Per trade and maturity clearing through Depository
Trust Company.
$10.00 Per trade and maturity clearing book-entry through
Federal Reserve.
$15.00 Per trade and maturity for assets requiring physical
settlement.
$10.00 Per trade and maturity clearing through Participants
Trust Company.
$ 4.00 Paydowns on Mortgage Backed securities.
$ 5.50 Fed wire charge on Repo Collateral in/out.
$5.50/7.50 Other cash wire transfers in/out.
$ 5.50 Dividend Re-Investment.
$ 2.50 Fed charge for sale/return of Collateral.
Exhibit 9(b)
PBHG ADVISOR FUNDS, INC.
SUB-ADMINISTRATIVE SERVICES AGREEMENT
SUB-ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") made as of the 1st
day of May, 1998, by and among PBHG Advisor Funds, Inc., a Maryland corporation
(the "Company"), PBHG Fund Services, a Pennsylvania business trust (the
"Administrator"), and SEI Fund Resources, a Delaware business trust (the
"Sub-Administrator").
W I T N E S S E T H:
WHEREAS, the Company is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator and the Company have entered into an
Administrative Services Agreement (the "Administrative Services Agreement")
pursuant to which the Administrator will provide administrative services to the
Company and each of its several series (the "Funds"), which are identified in
Schedule A to the Administrative Services Agreement; and
WHEREAS, the Company and the Administrator desire to retain the
Sub-Administrator to provide certain administrative services to the Company, and
each Fund, and the Administrator in the manner and on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements hereinafter set forth, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. DUTIES AND RESPONSIBILITIES OF THE SUB-ADMINISTRATOR.
The Sub-Administrator shall assist the Administrator in connection with
the Administrator's duties and responsibilities to the Company specified in the
Administrative Services Agreement. In addition, the Sub-Administrator shall
perform or supervise the performance by others of all administrative services in
connection with the operations of the Funds, other than those administrative
services to be provided by the Administrator pursuant to the Administrative
Services Agreement. The administrative services to be provided by the
Sub-Administrator pursuant to this Agreement shall include general
administrative services, regulatory reporting services, fund accounting
services, and such services as set forth herein. The duties of the
Sub-Administrator shall be confined to those expressly set forth herein and no
implied duties are assumed by or may be asserted against the Sub-Administrator
hereunder. Without limiting the generality of the foregoing, the
Sub-Administrator shall provide the services described below:
1.1. GENERAL ADMINISTRATIVE SERVICES.
1.1.1. OFFICE AND OTHER FACILITIES. Furnish, without cost to the
Company or the Administrator, or provide and pay the cost of, such office
facilities, furnishings, and office
<PAGE>
equipment as are necessary for the performance of the Sub-Administrator's duties
to the Company under this Agreement.
1.1.2. PERSONNEL. Provide, without additional remuneration from or
other cost to the Company or the Administrator, the services of individuals
competent to perform all of the Sub-Administrator's duties under this Agreement.
1.1.3. BOOKS AND RECORDS. Maintain customary records, on behalf of
the Company, in connection with the performance of the Sub-Administrator's
duties under this Agreement. In connection with this, the Sub-Administrator
shall monitor and oversee the performance of its agents and the Company's
independent auditors with respect to all financial, accounting, corporate, and
other records required to be maintained and preserved by the Company or on its
behalf so that such records will be maintained in accordance with the provisions
of rules and regulations of the Securities and Exchange Commission ("SEC") under
Section 31(a) of the 1940 Act.
1.1.4. REPORTS TO THE COMPANY. Assist the Administrator in
furnishing to or placing at the disposal of the Company such information,
reports, evaluations, analysis, and opinions relating to its duties as the
Company may at any time or from time to time reasonably request, or as the
Administrator may reasonably deem helpful to the Company. The Sub-Administrator
also shall assist the Administrator in the preparation of all necessary agendas
and related meeting materials for meetings of the Board of Directors.
1.1.5. SHAREHOLDER INQUIRIES. Respond to all inquiries from
Company shareholders or otherwise answer communications from Company
shareholders if such inquiries or communications are directed to the
Sub-Administrator. If any such inquiry or communication would be more properly
answered by one of its agents or those agents of the Company listed in Section 1
above, the Sub-Administrator will refer the inquiry to the Administrator to
direct to the appropriate party for response.
1.1.6. AUTOMATED FUND SYSTEMS. Assist in implementing and
monitoring the Company's use of automated systems for: (i) the purchase, sale,
redemption and transfer of Company shares; (ii) the payment of Rule 12b-1
service fees to broker-dealers and others that provide personal services,
distribution support services, and/or account maintenance services to
shareholders; and (iii) the recording and tracking of such transactions and/or
payments. The Sub-Administrator also shall assist in developing, implementing,
and monitoring the Company's use of automated communications systems with
brokers, dealers, custodians, and other service providers, including without
limitation trade clearance systems.
1.2. ACCOUNTING. The Sub-Administrator shall on a continuing basis
perform the fund accounting services and other functions described below.
1.2.1. FINANCIAL STATEMENTS. Maintain the Company's general
ledger, including expense accruals and payments, and prepare the Company's and
each Fund's annual and semi-annual financial statements. On a monthly basis,
with respect to each Fund, the Sub-Administrator shall prepare and provide to
the Administrator and the Company monthly reports as mutually agreed to by the
parties (in U.S. dollars) which may include the following items: schedule
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<PAGE>
of investments; statement of assets and liabilities; statement of operations;
statement of changes in net assets; cash statement; and schedule of capital
gains and losses.
1.2.2. OVERSIGHT. Assist in developing, reviewing, maintaining,
and monitoring the effectiveness of Company accounting policies and procedures,
in light of industry standards and the "Audits of Investment Companies" of the
American Institute of Certified Public Accountants and, in this regard, devote
particular attention to areas where accounting standards may change or develop.
In this capacity, the Sub-Administrator shall assist in the resolution of
recommendations made by the Fund's independent auditors to improve internal
controls and shall implement such recommendations as required by the Board.
1.2.3. FUND VALUATION AND ACCOUNTING. Conduct, or monitor and
oversee, portfolio valuation procedures, including without limitation procedures
for the calculation of expenses and the control of disbursements of each Fund.
The Sub-Administrator shall calculate, or monitor and oversee the calculation
of, the daily net asset value ("NAV") of each Portfolio in accordance with the
procedures described in the Company's then-current registration statement and
such other procedures as may be established by the Company's Board of Directors.
The Sub-Administrator, on a daily basis, shall provide by electronic
transmission or other mutually agreed upon means, such NAV information to: (i)
the investment adviser and sub-adviser for each Fund; (ii) the NASD for
reporting to newspapers and other news media; and (iii) all sub-transfer agents
that have entered into agreements with the Company. In connection with this
responsibility, the Sub-Administrator shall determine or oversee the
determination of the value of each Fund's assets, and shall review and monitor
pricing methodologies relating to such valuation, procedures, including: (i)
oversight of any third-party pricing services used by them; (ii) establishment
and maintenance of appropriate "back up" pricing service arrangements so that
the NAV for each Fund will be provided to each required party specified above;
(iii) assistance in the review and verification of daily securities price
changes in excess of percentages specified by the Sub-Administrator (and
promptly reported to the Administrator); (iv) review for "stale" prices; and (v)
assistance in determining the resolution of any NAV calculation errors.
Notwithstanding the foregoing, the Sub-Administrator shall bear no
responsibility for incorrect prices provided by a third party pricing service,
provided the Sub-Administrator fulfills its obligation as described above.
The Sub-Administrator shall also prepare annual Company and/or Fund
expense budgets and the determination of related daily accruals. In addition,
the Sub-Administrator shall: determine the Company's and each Fund's net income
both in terms of U.S. dollars and, if appropriate, foreign currencies; calculate
capital gains and losses and, if appropriate, foreign exchange gains and losses;
control all disbursements from the Company and authorize such disbursements upon
written instructions, which may be continuing instructions, from the
Administrator or such other persons authorized by the Fund's Board of Directors;
calculate various contractual expenses for budget and accrual purposes;
reconcile cash and investment balances of each Fund with the Company's custodian
and provide each Fund's investment adviser or, if applicable, sub-adviser with
the beginning cash balance available for investment purposes in both U.S.
dollars and, if appropriate, foreign currency; and maintain historical tax lots
for each security and foreign currency. The Sub-Administrator shall also for
each Fund: monitor timely income collection and tax reclaims; monitor daily
expense accruals and the related calculation of investment advisory fee waivers
and/or expense reimbursements
3
<PAGE>
(if any) and notify the Administrator of any proposed adjustments thereto; and
assist in developing and reviewing daily accounting reports for the Funds.
1.2.4. PERFORMANCE DATA. Calculate performance data of each Fund
for dissemination to information services covering the investment company
industry, including, as appropriate, each Fund's average annual total return,
cumulative total return, expense ratio, and portfolio turnover rate. In
connection with this function, the Sub-Administrator shall, as reasonably
requested by the Company's Board of Directors, develop fund performance and
other databases to facilitate internal and external reporting and shall monitor
the calculation of financial information.
1.2.5. OPERATIONS. Participate, as reasonably requested, in the
development of policies and procedures, including operational, accounting,
reporting, and monitoring procedures, to effectuate securities and other
transactions on behalf of the Company and the Funds, including, stated
objectives as appropriate, securities lending programs, the establishment and
use of lines of credit on behalf of the Company and/or inter-Fund lending
capabilities, and the establishment and use of inter-Fund securities trading
capabilities. In connection with the foregoing, the Sub-Administrator shall,
upon reasonable request, assist in the preparation of any application for
exemptive or no-action relief, if required.
1.2.6. CASH BALANCES. Participate, as reasonably requested, in the
development of policies and procedures, including operational, accounting,
reporting, and monitoring procedures, regarding the management of the Funds'
cash balances, including procedures regarding the use of "sweep" transactions
and repurchase agreements, the temporary reinvestment of credits to cash
balances, and the processing of dividends and other disbursements to the Funds.
In connection with the foregoing, the Sub-Administrator shall assist in the
preparation of any application for exemptive or no-action relief, if required.
The Sub-Administrator shall also provide the cash availability throughout each
day, as required by each Fund's investment adviser or, if applicable,
sub-adviser.
1.3. OVERSIGHT OF AGENTS AND SERVICE PROVIDERS.
The Sub-Administrator shall on a continuing basis perform the
oversight and other services and functions described below:
1.3.1. IN GENERAL. Assist the Administrator and Company counsel in
the preparation, negotiation, and administration of contracts on behalf of the
Company with third-party service providers, such as the Company's distributor,
custodian, transfer agent, sub-transfer agents, and intermediaries with respect
to mutual fund alliance programs. At the reasonable request of the Company or
the Administrator, the Sub-Administrator shall assist in the preparation of
reports to the Company on the performance and service quality of these service
providers, as more fully described in Section 1.3.2. below. The
Sub-Administrator shall review the performance of each Fund's custodian or
custodians regarding the timely recording of cash receipts and disbursements and
position reconciliation and shall periodically report to the Administrator its
findings in that regard, as mutually agreed to by the parties. The
Sub-Administrator shall also monitor and review compliance as documented and
reported by each Fund's custodian or custodians with Rule 17f-5 under the 1940
Act, as applicable. The Sub-Administrator shall have no responsibility for
supervising the performance of the investment adviser or sub-adviser for each
Fund.
4
<PAGE>
1.3.2. SERVICE QUALITY STANDARDS. Assist the Administrator in
establishing service quality standards and developing and implementing
procedures for monitoring and benchmarking the performance of third-party
service providers, such as those specified in Section 1.3.1. above, against
industry standards. Upon reasonable request, the Sub-Administrator shall provide
the Administrator and the Company's Board of Directors with periodic reports
concerning the results of monitoring of the performance and service quality of
these service quality of these service providers.
1.4. OVERSIGHT OF TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
The Sub-Administrator shall on a continuing basis perform the
oversight and other services and functions described below:
1.4.1. POLICIES AND PROCEDURES. Assist the Administrator in the
development of policies and procedures concerning the transfer agent's
processing of shareholder transactions, including policies and procedures
concerning inactive or dormant accounts and compliance with related escheatment
requirements, telephone exchanges and redemptions, effectuation of transactions
through the use of facsimile transmissions, name and address changes, and the
receipt and maintenance of appropriate legal documentation. The
Sub-Administrator also shall participate in the establishment of policies and
procedures for ensuring that shareholder redemption requests are timely honored,
even in periods of significant or unusual market activity. The Sub-Administrator
also shall assist in the development of controls over, and policies and
procedures governing, the Company's cash remittance processing, and the
processing of dividend and distribution payments, check writing, wire
redemptions and other disbursements.
1.4.2. COMPLIANCE WITH SERVICE QUALITY STANDARDS. Assist the
Administrator in establishing service quality standards and developing and
implementing procedures for monitoring and benchmarking the transfer agent's
performance against industry standards in areas such as: compliance with initial
and subsequent investment minimums; accuracy of the establishment of new
accounts, including the establishment of shareholder privileges and dividend
reinvestment options; accuracy of transaction processing, including monetary and
non-monetary transactions; timeliness of problem resolution and correspondence,
including review of shareholder complaints; compliance with document completion
and retention requirements; timeliness and accuracy of confirmations and
periodic shareholder statements; and quality of telephonic communications with
shareholders, including a review of abandon rates, response times, and average
talk time. The Sub-Administrator also shall review and participate in
determinations concerning the resolution of "as of" transactions in accordance
with the Company's policies as approved by the Administrator and the Board of
Directors of the Company.
1.4.3. OVERSIGHT OF SHAREHOLDER TRANSACTIONS. Assist the Company,
as requested, in developing and implementing procedures with respect to omnibus
accounts, in order to ensure that such accounts are properly serviced and that
Company expenses are allocated appropriately.
1.4.4. TRANSFER AGENT EXPENSES. Assist the Administrator, as
requested, in reviewing the level and allocation of transfer agent out-of-pocket
expenses charged to the Company
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with respect to whether particular expenses are appropriately charged to the
Company and appropriately allocated among the Funds.
1.5. REPORTS, FILINGS, AND COMMUNICATIONS.
The Sub-Administrator on a continuing basis shall perform the
reporting and other services and functions described below:
1.5.1. REPORTS AND FILINGS. Assist in the development,
preparation, and filing of all reports and communications by the Company to
Company shareholders and all reports and filings necessary to maintain the
registrations and qualifications of the Company's shares under federal and state
"Blue Sky" securities laws, including registration statements, prospectuses,
statements of additional information, proxy statements, semi-annual reports for
the Company on Form N-SAR, all sales reports, and all required notices pursuant
to Rule 24f-2 of the 1940 Act. The Sub-Administrator also shall assist with and
coordinate the layout and printing of publicly disseminated prospectuses and the
Company's semi-annual and annual reports to shareholders.
1.5.2. STATE BLUE SKY FILINGS. Prepare all reports, applications,
and documents (including reports regarding the sale and redemption of the
Company's shares as may be required in order to comply with state Blue Sky
securities laws) as may be necessary or desirable to: (i) register and maintain
the registration of the Company's shares with state securities authorities; and
(ii) monitor the sale of the Company's shares for compliance with state Blue Sky
securities laws. The Sub-Administrator shall file with the appropriate state
securities authorities all registration statements and reports for the Company
and the Company's shares, and all amendments thereto and other filings as may be
necessary or convenient to register the Company and the Company's shares and
keep such registration effective with state security authorities so as to enable
the Company to make a continuous offering of its shares in all 50 states and the
District of Columbia.
1.5.3. SHAREHOLDER COMMUNICATIONS. Coordinate mailing Company
prospectuses, notices, proxy statements, proxies and other reports to Company
shareholders, and supervise and facilitate the solicitation of proxies solicited
by the Company for all shareholder meetings, including tabulation process for
shareholder meetings.
1.5.4. TAX RETURNS. Coordinate and supervise the preparation and
filing of all required tax returns for the Company and monitor the accuracy of
all tax reports sent to shareholders of the Company.
1.6. LEGAL AND AUDIT SERVICES.
The Sub-Administrator on a continuing basis shall perform the
services and functions described below:
1.6.1. INDEPENDENT AUDITS. Assist in the coordination of the
Company audit process and provide, upon request, account analysis, fiscal year
summaries, and other audit-related schedules. In connection with this
responsibility, the Sub-Administrator shall take all actions to assure that
necessary information is made available to the Company's independent auditor for
the
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expression of its opinion, as such may be required by the Company from time to
time. The Sub-Administrator also shall assist and participate in the resolution
of issues raised in the audit process.
1.6.2. 1940 ACT. The Sub-Administrator shall obtain and keep in
effect, at the Company's expense, fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company in accordance
with the requirements of Rules 17g-1 and 17d-1(d)(7) under the 1940 Act, as such
bonds and policies are approved by the Company's Board of Directors. The
Sub-Administrator also shall develop and maintain fund manager "handbooks" to
facilitate compliance by portfolio managers with respect to investment
restrictions. In addition, the Sub-Administrator shall assist the Company's
Administrator in monitoring the Company's compliance with provisions of the 1940
Act and the rules and regulations thereunder as well as compliance with each
Fund's investment objectives, program, policies and restrictions. In connection
with this responsibility, the Sub-Administrator shall promptly advise the
Company and the Administrator as to any compliance problems or issues detected.
1.6.3. TAX COMPLIANCE. Monitor compliance with the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations thereunder, applicable to regulated investment companies, including:
portfolio diversification requirements and minimum distribution requirements;
review of expense allocations to individual classes to ensure compliance with
applicable IRS pronouncements regarding preferential dividends; wash sales;
short-short income; qualifying income; asset diversification; and investments in
Passive Foreign Investment Companies. In connection with this responsibility,
the Sub-Administrator shall monitor and advise the Company and the Funds as to
their status as "regulated investment companies" under the Code.
1.6.4. REGULATORY EXAMINATIONS. Assist in the Company's
participation in regulatory examinations, including examinations by the SEC, the
National Association of Securities Dealers, Inc., and/or state securities
regulators. In connection therewith, the Sub-Administrator, on behalf of the
Company, shall provide such information as the regulator may reasonably request,
and shall assist and participate in the resolution of any issues raised in
connection with such examinations.
1.7. DISASTER RECOVERY. The Sub-Administrator shall employ, monitor and
oversee disaster recovery and related back-up procedures and facilities commonly
utilized by others in the mutual fund industry. In this regard, the
Sub-Administrator shall enter into and maintain in effect with appropriate
parties, at no additional expense to the Company, one or more agreements making
appropriate and reasonable provision for emergency use of electronic data
processing equipment and other equipment and/or facilities necessary for the
performance of its duties and obligations under this Agreement in the event of
emergency conditions or equipment failures.
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2. EXPENSES.
2.1. EXPENSES PAID BY THE SUB-ADMINISTRATOR.
2.1.1. IN GENERAL. The Sub-Administrator shall bear all of its
expenses in connection with the performance of its duties under this Agreement,
except documented out-of-pocket expenses or expenses associated with telephone
support relating to shareholder services.
2.1.2. WAIVER OR ASSUMPTION AND REIMBURSEMENT OF EXPENSES BY THE
SUB-ADMINISTRATOR. The waiver or assumption and reimbursement by the
Sub-Administrator of any expense of the Company that the Sub-Administrator is
not required by this Agreement to waive, assume or reimburse shall not obligate
the Sub-Administrator to waive, assume or reimburse the same or any similar
expense of the Company on any subsequent occasion, unless so required pursuant
to a separate agreement between the Company and the Sub-Administrator.
2.2. EXPENSES PAID BY THE COMPANY. The Company shall bear all expenses
of its organization, operation, and business not specifically waived, assumed,
or agreed to be paid by the Administrator or the Sub-Administrator, as provided
in this Agreement, the Administrative Services Agreement of any other agreement
between the Company and the Administrator or the Sub-Administrator, and as
described in the Company's then-current Prospectuses and Statements of
Additional Information.
3. FEES.
3.1. COMPENSATION RATE. As compensation for all services rendered,
facilities provided, and expenses paid and any expense waived or assumed and
reimbursed by the Sub-Administrator, the Administrator shall pay the
Sub-Administrator a fee per Fund: (i) at the annual rate of .07% of the average
daily assets of each Fund with respect to $2.5 billion of the total average
daily net assets of the Company; and (ii) at the annual rate of .025% of the
average daily net assets of each Fund with respect to the total average daily
net assets of the Company in excess of $2.5 billion.
3.2. METHOD OF COMPUTATION. The Sub-Administrator's fee shall accrue on
each calendar day and the sum of the daily fee accruals shall be paid monthly to
the Sub-Administrator by the fifth (5th) business day of the next calendar
month. The daily fee accruals shall be computed by multiplying the fraction of
one (1) over the number of calendar days in the year by the applicable annual
rates described in Section 3.1. above, and multiplying this product by the net
assets of the Funds, as determined in accordance with the current Prospectuses
of the Company, as of the close of business on the last preceding business day
on which the Company was open for business.
3.3. PRORATION OF FEE. If this Agreement becomes effective or
terminates before the end of any month, the fee for the period from the
effective date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such effectiveness
or termination occurs.
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3.4. RESPONSIBILITY FOR PAYMENT. The Sub-Administrator shall not be
entitled to receive any payment for the performance of its services hereunder
from the Company and shall look solely and exclusively to the Administrator for
payment of all fees for such services.
4. SUB-ADMINISTRATOR'S USE OF THE SERVICES OF OTHERS.
The Sub-Administrator may at its own cost employ, retain, or otherwise
avail itself of the services and facilities of other persons or organizations
for the purpose of providing the Sub-Administrator, the Administrator, or the
Company with such information or assistance as the Sub-Administrator may deem
necessary, appropriate, or convenient for the discharge of its duties hereunder
or otherwise helpful to the Administrator.
5. OWNERSHIP AND CONFIDENTIALITY OF RECORDS.
All records required to be maintained and preserved by the Company,
pursuant to rules or regulations of the SEC under Section 31(a) of the 1940 Act
and maintained and preserved by the Sub-Administrator on behalf of the Company,
are the property of the Company and shall be surrendered by the
Sub-Administrator promptly on request by the Company. The Sub-Administrator
shall not disclose or use any record or information obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized by this
Agreement and applicable law. The Sub-Administrator shall keep confidential any
information obtained in connection with its duties and shall disclose such
information only if the Company has authorized such disclosure or if such
disclosure is expressly required by applicable law or federal or state
regulatory authorities.
6. REPORTS TO THE SUB-ADMINISTRATOR.
The Company and/or the Administrator shall furnish or otherwise make
available to the Sub-Administrator such Prospectuses, Statements of Additional
Information, financial statements, proxy statements, reports, and other
information relating to the business and affairs of the Company as the
Sub-Administrator may, at any time or from time to time, require in order to
discharge its duties under this Agreement.
7. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the
Sub-Administrator or any affiliated person of the Sub-Administrator to render
similar corporate administrative services to other investment companies, or to
engage in other business activities.
8. LIMITATION OF LIABILITY OF THE SUB-ADMINISTRATOR AND INDEMNIFICATION BY THE
COMPANY AND THE ADMINISTRATOR.
8.1. LIMITATION OF LIABILITY OF THE SUB-ADMINISTRATOR.
8.1.1. Neither the Sub-Administrator nor any of its directors,
officers, employees, or agents performing services for the Company and the
Administrator at the direction or request of the Sub-Administrator in connection
with the Sub-Administrator's discharge of its duties undertaken or
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assumed with respect to this Agreement shall be liable for any act or omission
in the course of or in connection with the Sub-Administrator's services
hereunder, including any error of judgment or mistake of law or for any loss
suffered by the Company or the Administrator in connection with the matters to
which this Agreement relates; provided, that nothing herein contained shall be
construed to protect the Sub-Administrator or any such persons against any
liability to the Company or its shareholders or the Administrator to which the
Sub-Administrator or such persons would otherwise be subject by reason of
willful misfeasance, bad faith, or negligence in the performance of its or their
duties on behalf of the Company or the Administrator or for failure by the
Sub-Administrator or any such persons to exercise due care in rendering other
services to the Company or the Administrator. The limitation and liability
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
8.1.2. The Sub-Administrator may apply to the Board of Directors
of the Company or to the Administrator at any time for instructions and may
consult counsel for the Company or the Administrator or the Sub-Administrator's
own counsel and with accountants and other experts with respect to any matter
arising in connection with the Sub-Administrator's duties, and the
Sub-Administrator shall not be liable or accountable for any action taken or
omitted by it in good faith in accordance with such instructions or with the
opinion of such counsel, accountants, or other experts.
8.1.3. The Sub-Administrator shall at all times have the right to
mitigate or cure any and all losses, damages, costs, charges, fees,
disbursements, payments, expenses and liabilities to the Company, its
shareholders or the Administrator.
8.2. INDEMNIFICATION BY THE COMPANY AND THE ADMINISTRATOR.
8.2.1. As long as the Sub-Administrator acts in good faith and
with due diligence and without negligence, the Company and the Administrator
shall indemnify the Sub-Administrator, its directors, officers, employees, and
agents and hold them harmless from and against any and all actions, suits, and
claims, whether groundless or otherwise, and from and against any and all
losses, damages (excluding consequential, punitive or other indirect damages),
costs, charges, reasonable counsel fees and disbursements, payments, expenses,
and liabilities (including reasonable investigation expenses) arising directly
or indirectly out of the administrative services or any other service rendered
to the Company or the Administrator hereunder. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
8.2.2. The rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may ultimately be
merited. In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Company or the
Administrator may be asked for indemnification under Section 8.2.1., the Board
of Directors of the Company or the Administrator shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Sub-Administrator will use all reasonable care to
identify and notify the Board of Directors of the Company or the Administrator
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the Company or the
Administrator, but failure to do so in good faith shall not
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affect the rights hereunder. The rights hereunder shall be limited, during each
term of this Agreement, to no more than six (6) months of fees of the
Sub-Administrator (as computed in accordance with Section 3.1 of this Agreement)
either (i) payable to the Sub-Administrator in accordance with Section 3 hereof
or (ii) if the Agreement has been terminated, those fees paid to the
Sub-Administrator for the six (6) month period prior to termination.
9. INDEMNIFICATION BY THE SUB-ADMINISTRATOR.
9.1. The Sub-Administrator shall indemnify the Company, the
Administrator, and their directors, officers, employees, and agents and hold
them harmless from and against any and all actions, suits, and claims, whether
groundless or otherwise, and from and against any and all losses, damages
(excluding consequential, punitive or other indirect damages), costs, charges,
reasonable counsel fees and disbursements, payments, expenses, and liabilities
(including reasonable investigation expenses) arising directly or indirectly out
of the administrative services or any other service rendered to the Company and
the Administrator hereunder and arising or based upon the willful misfeasance or
bad faith of the Sub-Administrator, its directors, officers, employees, and
agents in the performance of its or their duties on behalf of the Company and
the Administrator. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
9.2. The rights hereunder shall include the right to reasonable
advances of defense expenses in the event of any pending or threatened
litigation with respect to which indemnification hereunder may ultimately be
merited. In order that the indemnification provision contained herein shall
apply, however, it is understood that if in any case the Sub-Administrator may
be asked for indemnification under Section 9.1, the Sub-Administrator shall be
fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Company and the Administrator
will use all reasonable care to identify and notify the Sub-Administrator
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the
Sub-Administrator, but failure to do so in good faith shall not affect the
rights hereunder. The rights hereunder shall be limited, during each term of
this Agreement, to no more than six (6) months of fees to the Sub-Administrator
(as computed in accordance with Section 3.1 of this Agreement) either (i)
payable to the Sub-Administrator in accordance with Section 3 hereof or (ii) if
the Agreement has been terminated, those fees paid to the Sub-Administrator for
the six (6) month period prior to termination.
10. FORCE MAJEURE.
In the event the Sub-Administrator is unable to perform its obligations
or duties under the terms of this Agreement because of any act of God, strike,
riot, act of war, equipment failure, power failure or damage or other causes
reasonably beyond its control, the Sub-Administrator shall not be liable for any
loss, damage, cost, charge, counsel fee, payment, expense or inability to any
other party (whether or not a party to this Agreement) resulting from such
failure to perform its obligations or duties under this Agreement or otherwise
from such causes. This provision, however, shall in no way excuse the
Sub-Administrator from being liable to the Administrator or the Company or any
and all losses, damages, costs, charges, counsel fees, payments and expenses
incurred by the Administrator or the Company due to the non-performance or delay
in performance by the Sub-Administrator of its duties and obligation under this
Agreement if such non-performance or delay
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in performance reasonably could have been prevented by the Sub-Administrator
through back-up systems and other procedures commonly employed by other
administrators and sub-administrators in the mutual fund industry, provided that
the Sub-Administrator shall have the right, at all times, to mitigate or cure
any losses, including the making of adjustments or corrections to any current or
former shareholder accounts.
11. TERM OF AGREEMENT.
The term of this Agreement shall begin on the day and year first
written above, and unless sooner terminated as hereinafter provided, shall
continue in effect for an initial period that will expire on December 31, 1998.
Thereafter, this Agreement shall continue in effect from year to year, subject
to the termination provisions and all other terms and conditions hereof. The
Sub-Administrator shall furnish to the Company or the Administrator, promptly
upon a request by the Company or the Administrator, such information as may be
reasonably necessary to evaluate the terms of this Agreement or any extension,
renewal, or amendment thereof.
12. AMENDMENT AND ASSIGNMENT OF AGREEMENT.
Any amendment to this Agreement shall be in writing and signed by the
parties hereto; provided, that no material amendment shall be effective unless
authorized by a resolution of the Board of Directors of the Company or by a vote
of a majority of the outstanding voting securities of the Company or, in the
case of an amendment to this Agreement with respect to a particular Fund, by a
resolution of the Board of Directors of the Company or by a vote of a majority
of the outstanding voting securities of such Fund.
The assignment (as that term is defined in Section 2(a)(4) of the 1940
Act and rules thereunder) of this Agreement or any rights or obligations
thereunder shall be prohibited by either party without the written consent of
the other party. This Agreement shall inure to the benefit of and be binding
upon the parties and their respected permitted successors and assigns.
13. TERMINATION OF AGREEMENT.
This Agreement may be terminated by any of the parties hereto, without
the payment of any penalty:
(a) for a material breach of this Agreement, upon thirty (30) days
prior written notice to the breaching party; provided that the breaching party
has not cured the material breach of this Agreement during such thirty (30) day
period.
(b) following the initial term of this Agreement for any reason
upon ninety (90) days' prior written notice to the other parties; provided, that
in the case of termination by the Company such action shall have been authorized
by resolution of the Board of Directors of the Company or by a vote of a
majority of the outstanding voting securities of the Company or, in the case of
termination with respect to a particular Fund, by a resolution of the Board of
Directors of the Company or by a vote of a majority of the outstanding voting
securities of such Fund. In the case of termination by the Sub-Administrator,
such termination shall not be effective until the Company and
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the Administrator shall have contracted with one or more person(s) serve as
successor Sub-Administrator(s) for the Company and such persons(s) shall have
assumed such position.
14. MISCELLANEOUS.
14.1. NOTICES. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid: (a) if to the
Sub-Administrator, to SEI Fund Resources, One Freedom Valley Road, Oaks, PA
19456, Attention: General Counsel; (b) if to the Administrator, to PBHG Fund
Services, 825 Duportail Road, Wayne, PA 19087, Attention: Brian Bereznak; and
(c) if to the Company, to PBHG Advisor Funds, Inc., 825 Duportail Road, Wayne,
PA 19087, Attention: Michael Harrington.
14.2. CAPTIONS. The captions contained in this Agreement are included
for convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
14.3. INTERPRETATION. Nothing herein contained shall be deemed to
require the Company to take any action contrary to its Articles of Incorporation
or By-Laws, or any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Board of Directors
of its responsibility for and control of the conduct of the affairs of the
Company.
14.4. DEFINITIONS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations, or orders of the SEC validly issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is relaxed by a rule, regulation, or order of
the SEC, whether of special or of general application, such provision shall be
deemed to incorporate the effect of such rule, regulation, or order.
14.5. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule, or otherwise, the remainder of
this Agreement shall not be affected thereby.
14.6. GOVERNING LAW. Except insofar as the 1940 Act or other federal
laws and regulations may be controlling, this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers hereunto duly authorized and their respective
corporate seals to be hereunto affixed, as of the day and year first above
written.
ATTEST: PBHG ADVISOR FUNDS, INC.
___________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
ATTEST: PBHG FUND SERVICES
___________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
ATTEST: SEI FUND RESOURCES
__________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
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SCHEDULE A
The Funds of the Company that will receive services pursuant to this Agreement
are:
PBHG Advisor Core Value Fund
PBHG Advisor Blue Chip Growth Fund
PBHG Advisor Global Technology & Communications Fund
PBHG Advisor Growth II Fund
PBHG Advisor Growth Opportunities Fund
PBHG Advisor High Yield Fund
PBHG Advisor Large Cap Concentrated Fund
PBHG Advisor New Contrarian Fund
PBHG Advisor Trend Fund
PBHG Advisor Cash Reserves Fund
PBHG Advisor Value Opportunities Fund
PBHG Advisor New Opportunities Fund
PBHG Advisor Enhanced Equity Fund
PBHG Advisor Master Fixed Income Fund
PBHG Advisor Short-Term Government Fund
PBHG Advisor REIT Fund
Date: __________, 1998
Exhibit 9(c)
AMENDMENT TO SUB-ADMINISTRATIVE SERVICES AGREEMENT
This Amendment dated this first day of May, 1998 hereby amends the
Sub-Administrative Services Agreement (the "Agreement") dated May 1, 1998 made
by and among PBHG Advisor Funds, Inc., a Maryland corporation ("Advisor Funds"),
PBHG Fund Services, a Pennsylvania business trust (the "Administrator"), and SEI
Fund Resources, a Delaware business trust ("SEI"); (collectively, the
"Parties").
WITNESSETH
WHEREAS Advisor Funds operates as an open-end management investment
company registered under the Investment Company Act of 1940, as amended, (the
"1940 Act"); and
WHEREAS pursuant to its articles of incorporation Advisor Funds offers
separate series of shares representing interests in separate investment
portfolios (the "Portfolios") as set forth on Schedule "A" attached hereto; and
WHEREAS under the terms of the Agreement, SEI provides certain services
to Advisor Funds on behalf of the Administrator; and
WHEREAS the Administrator and SEI hereby amend the Agreement as set
forth below.
NOW THEREFORE in consideration of the premises and mutual covenants and
agreements hereunder and for good and valuable and consideration the sufficiency
and receipt of which is hereby acknowledged, the Parties hereto, intending to be
legally bound, hereby agree as follows:
1. Incorporation by Reference
The terms of the Agreement are hereby incorporated into and hereby
become part of this Amendment provided if any such term or terms of the
Agreement is/are in conflict with any term or terms of this Amendment, this
Amendment shall control the contractual obligations of the Parties.
2. Duration and Termination of this Amendment. The terms of this Amendment shall
become effective on May 1, 1998 and shall continue and remain in effect until
December 31, 2000 (the "Initial Term"). After the Initial Term, the terms of
this Amendment shall continue on a year to year basis (a "Renewal Term") subject
to further amendment or termination. After the Initial Term, this Amendment may
be terminated as follows: (a) by the mutual written agreement of the Parties;
(b) by either
<PAGE>
Party on 90 days' written notice as of the end of the Initial Term or the end of
any Renewal Term; (c) by either Party hereto on such date as is specified by
written notice given by the terminating Party, in the event of a material breach
of this Amendment by the other Party, provided the terminating party has
notified the other party of such breach at least 45 days prior to the specified
date of termination and the breaching party has not remedied such breach by the
specified date; (d) effective upon the liquidation of SEI; or (e) upon the
liquidation of Advisor Funds or any Portfolio thereof, as the case may be. For
purposes of this paragraph, the term "liquidation" shall mean a transaction in
which the assets of SEI, Advisor Funds or of a Portfolio thereof are sold or
otherwise disposed of and the proceeds therefrom are distributed in cash to the
shareholders in complete liquidation of the interests of such shareholders in
the particular entity.
3. Year 2000 Warranty. SEI warrants that all software code owned or under
control by it, used in the performance of its obligations hereunder will be Year
2000 compliant. For purposes of this paragraph, "Year 2000 Compliant" means that
the software will continue to operate beyond December 31, 1999 without creating
any logical or mathematical inconsistencies concerning any date after December
31, 1999 and without decreasing the functionality of the system applicable to
dates prior to January 1, 2000 including, but not limited to, making changes to
(a) date and data century recognition; (b) calculations which accommodate same-
and multi-century formulas and date values; and (c) input/output of date values
which reflect century dates. All changes described in this paragraph will be
made at no additional cost to Advisor Funds or the Administrator.
4. Compensation of SEI. In compensation for the services provided to Advisor
Funds, the Administrator agrees to pay to SEI fees based upon the greater sum
(higher value) which results from making the following calculations:
o A. Asset based fee calculated upon the combined assets of Advisor Funds, The
PBHG Fund, Inc. and PBHG Insurance Series Fund, Inc. (the "Companies") at the
rate of
0.040% on the first $2.5 Billion of combined assets
0.025% on the next $7.5 Billion of combined assets
0.020% on combined assets in excess of $10 Billion
o B. A fee based on the aggregate number of Portfolios and classes of each
Portfolio of the Companies calculated at the sum of
$35,000.00 per Portfolio, plus
$5,000 per additional class of shares of each Portfolio.
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be
executed by their respective officers duly authorized on the day and year first
written above.
PBHG ADVISOR FUNDS, INC. PBHG FUND SERVICES
BY: _________________________ BY:_________________________
TITLE:________________________ TITLE:______________________
SEI FUND RESOURCES
BY:_________________________
TITLE:______________________
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SCHEDULE A
The Following Portfolios are included under the terms of this Amendment:
1. PBHG Advisor Core Value Fund
2. PBHG Advisor Value Opportunities Fund
3. PBHG Advisor New Contrarian Fund
4. PBHG Advisor REIT Fund
5. PBHG Advisor Blue Chip Growth Fund
6. PBHG Advisor Growth Opportunities Fund
7. PBHG Advisor Enhanced Equity Fund
8. PBHG Advisor Trend Fund
9. PBHG Advisor Large Cap Concentrated Fund
10. PBHG Advisor Growth II Fund
11. PBHG Advisor New Opportunities Fund
12. PBHG Advisor Global Technology & Communications Fund
13. PBHG Advisor Master Fixed Income Fund
14. PBHG Advisor High Yield Fund
15. PBHG Advisor Cash Reserves Fund
16. PBHG Advisor Short-Term Government Fund
4
Exhibit 9(e)
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT is entered into the 1st day of April, 1998, by and
between PBHG Advisor Funds, Inc. a Maryland corporation (the "Fund"), and PBHG
Fund Services, a Pennsylvania business trust ("Fund Services").
WITNESSETH:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, Fund Services serves as Administrator to the Fund and each of
its separate series (the "Portfolios") and classes and provides administrative
services pursuant to an administrative services agreement between the Fund and
Fund Services; and
WHEREAS, the Fund desires to retain Fund Services to provide certain
additional services to the Fund, its Portfolios and the holders of shares
thereof, which services are supplemental and related to services provided by DST
Systems, Inc. ("DST") pursuant to a transfer agency agreement between the Fund
and DST (the "DST Agreement"); and
WHEREAS, Fund Services proposes to engage UAM Shareholder Services
Center, Inc. ("UAM SSC") to assist in providing certain services provided for by
this Agreement pursuant to a sub-shareholder services agreement between Fund
Services and UAM SSC.
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Fund and Fund Services, intending to be legally bound,
hereby agree as follows:
1. Scope. In addition to the Portfolio and classes of shares thereof existing on
the effective date of this Agreement, the Fund may from time to time hereafter
create additional Portfolios and issue separate classes of its shares of common
stock or classify and reclassify shares of any Portfolio or class, and the
appointment effected hereby shall constitute appointment for the provision of
services with respect to all existing Portfolios and classes and any additional
Portfolios and classes unless the parties shall otherwise agree in writing.
2. Appointment. The Fund hereby appoints Fund Services to perform such services
and to serve such functions as are set forth in Appendix A hereto, which
appendix is incorporated herein by this reference. Appendix A may not be amended
except by written agreement between the Fund and Fund Services. Fund Services
hereby agrees to perform such services and serve such functions as provided in
Appendix A in accordance with the terms and conditions set forth in this
Agreement.
3. Obligations Under DST Agreement. To the extent that the provisions or
requirements of the DST Agreement and any agreement related thereto may impose
obligations on Fund Services to provide services, conform to a standard of
conduct, adhere to a stipulated process or procedure, or otherwise undertake to
perform a defined duty or responsibility, or may require the Fund to ensure that
Fund Services fulfills such obligations, Fund Services shall
2
<PAGE>
perform such obligations and shall at all times use reasonable care and act in
good faith in performing such obligations.
4. Duties and Responsibilities of Fund Services. In connection with the services
provided by Fund Services pursuant to this Agreement, Fund Services shall
directly or indirectly:
a. Personnel. Provide the services of personnel competent to perform the
obligations of Fund Services under this Agreement.
b. Facilities. Furnish, at its own expense, such office facilities,
furnishings, office equipment and other property and resources as are necessary
for the fulfillment of the obligations of Fund Services under this Agreement.
c. Books and Records. With respect to the services provided by Fund
Services, maintain customary records, and particularly shall maintain those
records required to be maintained pursuant to subparagraph (2)(iv) of paragraph
(b) of Rule 31a-1 under the 1940 Act. Fund Services may send periodically to the
Fund, or to where designated by the Secretary or an Assistant Secretary of the
Fund, all books, documents, and all records no longer deemed needed for current
purposes, upon the understanding that such books, documents, and records will be
maintained by the Fund under and in accordance with the requirements of Rule
17Ad-7 adopted under the Securities Exchange Act of 1934. Such materials will
not be destroyed by the Fund without the consent of Fund Services (which consent
will not be unreasonably withheld), but will be safely stored for possible
future reference.
3
<PAGE>
d. Reports to the Fund. Furnish to or place at the disposal of the Fund
such information, reports, evaluations, analyses, and opinions relating to the
services performed by Fund Services under this Agreement, and performed by UAM
SSC (or other third party service provider) under any sub-shareholder services
agreement (as provided for hereunder), as the Fund may reasonably request or as
Fund Services may deem helpful to the Fund to make an informed determination
regarding the rendering of services by Fund Services, the continuation of this
Agreement, and the payments contemplated to be made hereunder.
5. Fees. In consideration of the services performed by Fund Services under this
Agreement, the Fund shall such pay fees to Fund Services as are set forth in
Appendix B hereto, which appendix is incorporated herein by this reference. In
addition to the fees set forth in Appendix B, Fund Services shall be entitled to
reimbursement from the Fund for all reasonable out-of-pocket expenses without
mark-up incurred by Fund Services in connection with the performance of the
services provided for in this Agreement. Fund Services shall conduct an
evaluation of the fees payable under this Agreement at six month intervals and
shall advise the Fund as to any adjustments in fees that Fund Services deems
appropriate, but in any event, Appendix B may not be amended except by the
written agreement of the Fund and Fund Services.
6. Third Party Service Providers. The Fund agrees that Fund Services may enter
into a sub-shareholder services agreement or related agreements with UAM SSC or
other service providers to perform certain services provided for by this
Agreement. Fund Services' obligations and the standards of care under which Fund
Services has undertaken to fulfill
4
<PAGE>
such obligations, and the indemnification that Fund Services has agreed to
provide under this Agreement may not, however, be impaired or assigned by Fund
Services without the consent and approval of the Board of Directors of the Fund.
7. Certain Representations and Warranties of Fund Services. Fund Services
represents and warrants to the Fund that:
a. It is a business trust duly formed and validly subsisting under the
laws of the Commonwealth of Pennsylvania.
b. It is duly qualified to carry on its business in the Commonwealth of
Pennsylvania.
c. It is empowered under applicable laws and by its Declaration of
Trust and Bylaws to enter into and perform the services contemplated in this
Agreement.
d. It is registered as a transfer agent to the extent required under
the Securities Exchange Act of 1934.
e. All requisite proceedings of the Trustees have been taken to
authorize it to enter into and perform this Agreement.
f. It has and will continue to have and maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
8. Certain Representations and Warranties of the Fund. The Fund represents and
warrants to Fund Services that:
a. It is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland.
5
<PAGE>
b. It is an open-end management investment company registered under the
1940 Act.
c. A registration statement under the Securities Act of 1933 has been
filed and will be effective with respect to all shares of the Fund being offered
for sale.
d. All requisite steps have been and will continue to be taken to
register the Fund's shares for sale in all applicable states and such
registration will be effective at all times shares are offered for sale in such
states.
e. The Fund is empowered under applicable laws and by its Charter and
Bylaws to enter into and perform this Agreement.
9. Certain Covenants of Fund Services and the Fund.
a. Records are Property of the Fund. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, Fund Services agrees that all
records maintained by Fund Services relating to the services to be performed by
Fund Services under this Agreement are the property of the Fund and will be
preserved and will be surrendered promptly to the Fund on request. The Fund
agrees that Fund Services may make such records available for inspection by
other authorized persons in connection with financing arrangements related to
the sale of Fund shares.
b. Financial Statements. Fund Services agrees to furnish to the Fund
annual reports of its financial condition, consisting of a balance sheet,
earnings statement and any other financial information reasonably requested by
the Fund. The annual financial
6
<PAGE>
statements shall be certified by the independent auditors retained by the parent
of Fund Services.
c. Information Concerning the Fund. The Fund agrees to furnish or
otherwise make available to Fund Services such information relating to the
business and affairs of the Fund as Fund Services may reasonably require to
discharge its duties and obligations hereunder. The Fund further agrees to
provide Fund Services with information and updates relating to new product and
service introductions and sales and marketing efforts that may reasonably be
expected to impact on shareholder or prospective shareholder telephone call
volume so that Fund Services can properly allocate the resources necessary to
fulfill its obligations under this Agreement.
d. Cooperation in Shareholder Responses. The Fund agrees that the Fund
will, and shall cause the Fund's investment adviser to, cooperate with Fund
Services to the extent necessary to formulate appropriate responses to written
inquiries from shareholders concerning investment strategy and philosophy and
market commentary.
10. Quality Control.
a. Audits. Fund Services shall be responsible for periodically
conducting quality control audits with respect to telephone purchase, redemption
and exchange requests and account changes received and processed by Fund
Services or any third party service provider with which Fund Services has
contracted to perform any of the services provided for under this Agreement.
Fund Services shall promptly report the results of such quality control audits
to the Fund.
7
<PAGE>
b. Inspections. Fund Services shall permit the Fund and its authorized
representatives, including, but not limited to, the Fund's independent auditors,
to have reasonable access to the personnel and records of Fund Services, and to
make periodic inspections of the operations of Fund Services as such would
involve the Fund at reasonable times during business hours for the purpose of
monitoring the quality of services performed by Fund Services, and the level of
fees and reimbursements to which Fund Services is entitled, under this
Agreement.
c. Monitoring of Exchange Privileges. Fund Services shall use its
reasonable efforts to detect and prevent shareholder violations of telephone
exchange privileges as described in the Fund's prospectuses.
d. Service Improvement. Fund Services shall use its reasonable efforts
to keep current on the trends of the investment company industry relating to
shareholder services and to continue to modernize and improve its service
delivery mechanisms.
e. Year 2000 Compliance. Fund Services represents that its Information
System (as defined in Appendix C) will be Year 2000 Compliant as set forth in
Appendix C, attached hereto.
11. Liability and Indemnification.
a. Indemnification by the Fund. Fund Services shall not be responsible
for, and the Fund shall indemnify and hold Fund Services harmless from and
against, any and all losses, liabilities, claims, demands, suits, costs and
expenses (including reasonable attorneys' fees) which may be asserted against
Fund Services or for which Fund Services may be held
8
<PAGE>
to be liable, arising out of, or are attributable to, the Fund's failure to
comply with the terms of this Agreement, or arising out of or attributable to,
the Fund's negligence or willful misconduct or breach of any representation or
warranty of the Fund hereunder.
b. Indemnification by Fund Services. The Fund shall not be responsible
for, and Fund Services shall indemnify the Fund, its officers and directors and
hold them harmless from and against, any and all losses, liabilities, claims,
demands, suits, costs and expenses (including reasonable attorneys' fees) which
may be asserted against the Fund or for which the Fund may be held to be liable,
arising out of, or attributable to, Fund Services' failure to comply with the
terms of this Agreement, or arising out of, or are attributable to, any
negligence or willful misconduct or breach of any representation or warranty of
Fund Services hereunder.
c. Notice of Potential Claims; Defense of Claims. Fund Services and the
Fund agree that each shall promptly notify the other in writing of any situation
which represents or appears to involve a claim which may be the subject of
indemnification hereunder, although the failure to provide such notification
shall not relieve the indemnifying party of its liability pursuant to this
Section 11. The indemnifying party shall have the option to defend against any
such claim. In the event the indemnifying party so elects, it will notify the
indemnified party and shall assume the defense of such claim, and the
indemnified party shall cooperate fully with the indemnifying party, at the
indemnifying party's expense, in the defense of such claim. If the indemnifying
party elects not to defend against such claim, the indemnified party shall be
entitled to advance of reasonable expenses to defend such claim.
9
<PAGE>
Notwithstanding the foregoing, the indemnified party shall not enter into any
settlement of such matter without the written consent of the indemnifying party,
which consent shall not be withheld unreasonably. The indemnifying party shall
not be obligated to indemnify the indemnified party for any settlement entered
into without the written consent of the indemnifying party. If the consent of
the indemnified party is required to effectuate any settlement and the
indemnified party refuses to consent to any settlement negotiated by the
indemnifying party, the liability of the indemnifying party for losses arising
out of or due to such matter shall be limited to the amount to the rejected
proposed settlement.
d. Except for violations of Section 17c. hereunder, in no event and
under no circumstances shall either party to this Agreement be liable to anyone,
including, without limitation, to the other party, for consequential damages for
any act or failure to act under any provision of this Agreement even if advised
of the possibility thereof.
e. Survival of Provisions. The obligations of Fund Services and the Fund
pursuant to this Section 11 shall survive the termination of this Agreement.
12. Limitations on Liability
a. Subcontractors. Nothing herein shall impose any duty upon Fund
Services in connection with or make Fund Services liable for the actions or
omissions to act of unaffiliated third parties such as, by way of example and
not limitation, Airborne Services, the U.S. mails and telecommunication
companies, provided, if Fund Services selected such company, Fund Services shall
have exercised reasonable care in selecting the same. The foregoing limitation
of liability with respect to actions or omissions of unaffiliated third
10
<PAGE>
parties shall not be construed to relieve Fund Services of any obligations under
Section 6 hereof with respect to any services that Fund Services has agreed to
perform under this agreement that are ultimately performed by other parties.
b. Portfolios as Separate Parties. Each Portfolio shall be regarded for
all purposes hereunder as a separate party apart from each other Portfolio.
Unless the context otherwise requires, with respect to every transaction covered
by this Agreement, every reference herein to the Fund shall be deemed to relate
solely to the particular Portfolio to which such transaction relates. Under no
circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio constitute a right, obligation or remedy applicable to any
other Portfolio. The use of this single document to memorialize the separate
agreement of each Portfolio is understood to be for clerical convenience only
and shall not constitute any basis for joining the Portfolios for any reason.
13. Term of Agreement. This Agreement shall become effective on the day and year
first written above and, unless sooner terminated as hereinafter provided, shall
continue in effect for an initial period that will expire on December 31, 1998,
and thereafter shall continue in effect from year to year provided such
continuance is approved at least annually by the vote of a majority of the
directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined by the 1940 Act) of any such party, which vote shall be
cast in person at a meeting called for the purpose of voting on such approval.
11
<PAGE>
14. Termination.
a. Material Breach. This Agreement may be terminated by either party in
the event of a material breach of the Agreement by the other party upon thirty
(30) days' prior written notice to the other party; provided, however, that the
Agreement shall not terminate if such material breach is cured within such
thirty (30) day period.
b. Termination by the Fund. The Fund may, without payment of penalty,
terminate this Agreement upon 90 days' written notice to Fund Services.
c. Termination by Fund Services. Fund Services may, without payment of
penalty, terminate this Agreement upon 90 days' written notice to the Fund.
d. Assignment. No assignment of this Agreement by Fund Services shall
occur without the written consent of the Fund and approval by the Board of
Directors of the Fund as described in Section 13 herein.
15. Notices. All notices to be given hereunder shall be deemed properly given if
given in writing, delivered in person, or if sent by U.S. mail, first class,
postage prepaid, or if sent by facsimile and thereafter confirmed by mail, (i)
if to Fund Services, to PBHG Fund Services, 825 Duportail Road, Wayne, PA 19087,
Attn: Brian Bereznak, and (ii) if to the Fund, to The PBHG Funds, Inc., 825
Duportail Road, Wayne, PA 19087, Attn: Michael Harrington, or to such other
address as shall have been specified in writing by the party to whom such notice
is to be given.
16. Force Majeure. In the event Fund Services is unable to perform its
obligations or duties under the terms of this Agreement because of any act of
God, strike, riot, act of war, equipment failure, power failure or damage or
other causes reasonably beyond its control,
12
<PAGE>
Fund Services shall not be liable for any losses, damages, costs, charges,
counsel fees, payments, expenses or liability to any other party (whether or not
a party to this Agreement) resulting from such failure to perform its
obligations or duties under this Agreement or otherwise from such causes. This
provision, however, shall in no way excuse Fund Services from being liable to
the Fund for any and all losses, damages, costs, charges, counsel fees, payments
and expenses incurred by the Fund due to the non-performance or delay in
performance by Fund Services of its duties and obligation under this Agreement
if such non-performance or delay in performance could have been reasonably
prevented by Fund Services through back-up systems and other procedures commonly
employed by other persons in the mutual fund industry who provide services
similar to those to be provided by Fund Services under this Agreement, provided
that Fund Services shall have the right, at all times, to mitigate or cure any
losses, including by making adjustments or corrections to any current or former
shareholder accounts.
17. Miscellaneous.
a. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the Commonwealth of Pennsylvania,
except as such laws may conflict with the 1940 Act and the rules thereunder or
other applicable federal laws or regulations.
b. Severability. If any provision of this Agreement shall be held or
made invalid in whole or in part by a court decision, statute, rule, or
otherwise, the remaining provisions of the Agreement shall not be affected
thereby. Invalid provisions shall, in accordance with
13
<PAGE>
the intent and purpose of this Agreement, be replaced by mutual consent of the
parties with such valid provisions which in their economic effect come as
closely as legally possible to such invalid provisions.
c. Confidentiality. Fund Services agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Fund and its prior, present, or prospective shareholders, except, after
prior notification to and approval in writing by the Fund, which approval shall
not be withheld unreasonably and may not be withheld where Fund Services may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund.
d. Amendments in Writing. Any part of this Agreement or any appendix
hereto may be amended or waived only by an instrument in writing signed by the
parties hereto.
e. Headings and Captions. The headings and captions contained in this
Agreement are included for convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect their construction or
effect.
f. Interpretation. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to its Articles of Incorporation or Bylaws,
or any applicable statutory or regulatory requirement to which it is subject or
by which it is bound, or to relieve or deprive the Board of Directors of its
responsibility for and control of the conduct of the affairs of the Fund.
14
<PAGE>
g. Enforceability by Successors and Assigns. All terms and provisions
of this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
h. Survival of Representations, Warranties and Indemnification. The
representations and warranties, and the indemnification extended hereunder, if
any, are intended to and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
i. No Joint Venture. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or joint venture by and
between the Fund and Fund Services. It is understood and agreed that all
services performed hereunder by Fund Services shall be as an independent
contractor. This Agreement is between Fund Services and the Fund and neither
this Agreement nor the performance of the services provided for herein shall
create any rights in any third parties. There are no third party beneficiaries
hereto.
j. No Waiver. The failure of either party to insist upon the performance of
any terms or conditions of this Agreement or to enforce any rights resulting
from any breach of any of the terms or conditions of this Agreement, including
the payment of damages, shall not be construed as a continuing or permanent
waiver of any such terms, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, to be effective as of the
day and year first above written.
PBHG FUND SERVICES
By: /s/ Lee T. Cummings
----------------------------
Title: Treasurer
-------------------------
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
----------------------------
Title: Vice President
-------------------------
16
<PAGE>
APPENDIX A
Services
Fund Services shall be responsible for receiving telephone calls,
faxes, letters and transmissions from shareholders and institutions and
processing transactions generated by such telephone calls, faxes, letters and
transmissions. The general categories of services Fund Services will be
responsible for performing include but are not limited to:
1. Purchase, redemption and exchange of shares
2. Addition or deletion of services for an account
3. Explanation of fund or market conditions and performance
4. Research account inquiries, respond to such inquiries, and
make any required account corrections
5. Change account address or distribution option
6. Correct registration or account error
7. Send additional account statements or other requested materials
or forms
Without limitation of the foregoing, Fund Services shall at a minimum
perform the following specific services:
1. Provide Shareholder Support
2. Process "Phone" Transactions
ACH Buys
ACH Sells
Purchase Orders (Settle by Wire or Check)
Redemption Orders (Settle by Wire or Check)
Account Exchanges
3. Process Account Maintenance
4. Problem Research and Resolution
5. Prepare Research Documentation for DST
<PAGE>
6. All Correspondence Services except for Correspondence Requiring
the Return of Original Documentation received at DST
7. Institutional Desk Servicing, included but not limited to:
Dealer Servicing
Account Maintenance
Dealer File Maintenance
Transaction Processing
Order Settlement Support
Adjustment Processing Support
NSCC Networking Support
Fund Info/Data Dissemination
8. Redemption by ACH to bank of record
9. Redemption by check to address of record
10. Redemption by wire to bank of record
11. Exchange between funds
12. ACH purchase from bank of record
13. Process purchase order (a.k.a. confirmed purchase)
14. Request stop/replace redemption checks to address of record
15. Research/document/request corrective processing
16. Account Maintenance
Non-Signature Guaranteed address change
Stop/restart/defer a Systematic Monthly Investment (SIP)
Increase/decrease a Systematic Monthly Investment (SIP)
Increase/decrease/defer/discontinue a systematic withdrawal
plan (SWP)
Add a beneficiary birth date
Change dividend/capital gains distribution method
Stop dividend mail
Add/change a dividend move Combine identical accounts
within the same funds
Add or delete stop mail from the account
Request stop or replace a redemption check after fifteen
(15) days
Add/change/delete systematic exchanges (SYSEXCH) with the
same registration
<PAGE>
Correct minor errors in names on registration if clearly
indicated on the application
Reissue checkwriting drafts on a Cash Reserve account where
the privilege has been established
Link/unlink accounts for the INVESTOR statement product
(managers only)
<PAGE>
APPENDIX B
Fees
A. Minimum Fee:
For each operational class of shares for each
Portfolio of the Fund: $3,333 per year minimum.
However, if the aggregate minimum per class fee
calculated for all Portfolios of the Fund is less
than the aggregate per account fee calculated for all
Portfolios of the Fund, each class will pay only the
per account fee for its open accounts.
B. Per account Fee:
Open Accounts - $8.00 per open account per year.
<PAGE>
APPENDIX C
Year 2000 Compliance
Definitions:
"Embedded Control" shall mean any microprocessor,
microcontroller, smart instrumentation or other sensor, driver, monitor, robotic
or other device containing a semiconductor, memory circuit, BIOS, PROM or other
microchip, whether it is part of or operates in conjunction with any mainframes,
midrange computers, personal computers, notebooks, servers, switches, printers,
modems, drives or peripherals ("Hardware") or any other electronic or mechanical
device that operates, controls or monitors any function of any real or personal
property, including but not limited to any security, access control or
telecommunications devices or systems.
"Information System" shall mean any combination of any
Hardware, software, databases or Embedded Controls employed primarily for the
creation, manipulation, storage, retrieval, display and use of information in
electronic form or media.
"Year 2000 Compliant": shall mean:
(a) that each component of an Information System or any
Embedded Control:
(i) is designed (or has been modified) to be used prior
to and after January 1, 2000; and
(ii) will operate without error arising from the
creation, recognition, acceptance, calculation, display, storage,
retrieval, accessing, comparison, sorting, manipulation, processing or
other use of dates or date-based, date-dependent or date-related data,
including but not limited to century recognition, day-of-the-week
recognition, leap years, date values and interfaces of the date
functionalities; and
(iii) will not be adversely affected by the advent of
the year 2000, the advent of the twenty-first century or the transition
from the twentieth century through the year 2000 and into the
twenty-first century.
(b) that the design architectures and functionalities
embodying, reflecting or affecting the criteria set forth in subparagraph (a),
above, of all components of an Information System (or the methods used to modify
them) are compatible and, when operated in, on or in conjunction with any other
component of such Information System, will not
<PAGE>
cause it or any of its components to fail to satisfy the criteria set forth in
subparagraph (a), above.
(c) that an Information System does not receive data from or
communicate with any component or Information System external to itself (whether
or not such external component or Information System is Fund Service's or any
third party's) that does not conform to the criteria set forth in subparagraphs
(a) and (b), above.
Fund Service represents and warrants that all Information
Systems of Fund Service used in the performance of Fund Service's obligations
under this Agreement are Year 2000 Compliant.
Fund Service covenants that it will take all actions necessary
to ensure:
(a) that all Information Systems of Fund Service and the
databases used therewith or created thereby:
(i) shall remain Year 2000 Compliant at all times
during the term of this Agreement;
(ii) shall be adequately protected from contamination
by non-Year 2000 Compliant third-party communications received by any
electro-mechanical or electronic devices of Fund Service; and
Fund Service acknowledges and agrees that for the purposes of
this Agreement:
(a) the Fund may request, and Fund Service will provide a
detailed summary of the Year 2000 Compliant status of Fund Service's Information
Systems and Embedded Controls; and
(b) Fund Service shall not be relieved of any liability or
responsibility for any losses to the Fund pursuant to paragraph 11 of this
Agreement in respect of any breach of Fund Service's obligations pursuant to
this Appendix C.
Exhibit 9(f)
SUB-SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT is entered into the 1st day of April, 1998, by and
between PBHG Fund Services ("Fund Services"), a Pennsylvania business trust, and
UAM Shareholder Service Center, Inc. ("UAM SSC"), a Delaware Corporation.
WITNESSETH:
WHEREAS, Fund Services serves as Shareholder Service Agent to PBHG
Advisor Funds, Inc. (the "Fund") and each of the Fund's separate series (the
"Portfolios") and classes pursuant to a shareholder services agreement (the
"PBHG Agreement") between the Fund and Fund Services; and
WHEREAS, the Fund has retained Fund Services to provide such services
to the Fund, its Portfolios and the holders of shares thereof, which services
are supplemental and related to services provided by DST Systems, Inc. ("DST")
pursuant to a transfer agency agreement between the Fund and DST (the "DST
Agreement"); and
WHEREAS, Fund Services desires to engage UAM SSC to assist in providing
such services pursuant to this sub-shareholder services agreement (the "UAM SSC
Agreement") between Fund Services and UAM SSC.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, Fund Services and UAM SSC, intending to be legally bound,
hereby agree as follows:
<PAGE>
1. Scope. In addition to the Portfolio and classes of shares thereof existing on
the effective date of this UAM SSC Agreement, the Fund may from time to time
hereafter create additional Portfolios and issue separate classes of its shares
of common stock or classify and reclassify shares of any Portfolio or class, and
the appointment effected hereby shall constitute appointment for the provision
of services with respect to all existing Portfolios and classes and any
additional Portfolios and classes unless the parties shall otherwise agree in
writing.
2. Appointment. UAM SSC hereby agrees to perform such services and to serve such
functions as are set forth in Appendix A hereto, which appendix is incorporated
herein by this reference. Appendix A may not be amended except by written
agreement between Fund Services and UAM SSC. UAM SSC hereby agrees to perform
such services and serve such functions as provided in Appendix A in accordance
with the terms and conditions set forth in this Agreement.
3. Obligations Under this Agreement. To the extent that the provisions or
requirements of this Agreement and any agreement related thereto including the
PBHG Agreement, may impose obligations on UAM SSC to provide services, conform
to a standard of conduct, adhere to a stipulated process or procedure, or
otherwise undertake to perform a defined duty or responsibility, or may require
Fund Services to fulfill such obligations, UAM SSC shall perform such
obligations and shall at all times use reasonable care and act in good faith in
performing such obligations.
2
<PAGE>
4. Duties and Responsibilities of Fund Services. In connection with the services
provided by UAM SSC pursuant to this Agreement, UAM SSC shall directly or
indirectly:
a. Personnel. Provide the services of personnel competent to perform
the obligations under this Agreement.
b. Facilities. Furnish, at its own expense, such office facilities,
furnishings, office equipment and other property and resources as are necessary
for the fulfillment of the obligations under this Agreement.
c. Books and Records. Maintain customary records, and particularly
shall maintain those records required to be maintained pursuant to subparagraph
(2)(iv) of paragraph (b) of Rule 31a-1 under the 1940 Act. UAM SSC may send
periodically to the Fund, or to where designated by the Secretary or an
Assistant Secretary of the Fund, all books, documents, and all records no longer
deemed needed for current purposes, upon the understanding that such books,
documents, and records, will be maintained by the Fund under and in accordance
with the requirements of Rule 17Ad-7 adopted under the Securities Exchange Act
of 1934. Such materials will not be destroyed by the Fund without the consent of
UAM SSC (which consent will not be unreasonably withheld), but will be safely
stored for possible future reference.
d. Reports to the Fund. Furnish to or place at the disposal of Fund
Services and the Fund such information, reports, evaluations, analyses, and
opinions relating to the services performed by UAM SSC under any sub-shareholder
services agreement (as provided for hereunder), as Fund Services and the Fund
may reasonably request or as Fund Services
3
<PAGE>
may deem helpful to the Fund to make an informed determination regarding the
rendering of services by UAM SSC, the continuation of this Agreement, and the
payments contemplated to be made hereunder.
5. Fees. In consideration of the services performed by UAM SSC under this
Agreement, Fund Services shall pay such fees to UAM SSC as are set forth in
Appendix B hereto, which appendix is incorporated herein by this reference. In
addition to the fees set forth in Appendix B, UAM SSC shall be entitled to
reimbursement from Fund Services for all reasonable out-of-pocket expenses
without mark-up incurred by UAM SSC in connection with the performance of the
services provided for in this Agreement. UAM SSC shall conduct an evaluation of
the fees payable under this Agreement at six month intervals and shall advise
Fund Services as to any adjustments in fees that UAM SSC deems appropriate, but
in any event, Appendix B may not be amended except by the written agreement of
Fund Services and UAM SSC.
6. Third Party Service Providers. Fund Services agrees that UAM SSC may enter
into a sub-shareholder services agreement or related agreements with BFDS or
other service providers to perform certain services provided for by this
Agreement. UAM SSC obligations and the standards of care under which UAM SSC has
undertaken to fulfill such obligations, and the indemnification that UAM SSC has
agreed to provide under this Agreement may not, however, be impaired or assigned
by UAM SSC without the consent and approval of Fund Services and of the Board of
Directors of the Fund.
4
<PAGE>
7. Certain Representations and Warranties of UAM SSC. UAM SSC represents and
warrants to Fund Services that:
a. It is a corporation duly formed and validly subsisting under the
laws of the State of Delaware.
b. It is duly qualified to carry on its business in the Commonwealth of
Pennsylvania.
c. It is empowered under applicable laws and by its [Declaration of
Trust] and Bylaws to enter into and perform the services contemplated in this
Agreement.
d. It is registered as a transfer agent to the extent required under
the Securities Exchange Act of 1934.
e. All requisite proceedings of the Directors have been taken to
authorize it to enter into and perform this Agreement.
f. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
8. Certain Representations and Warranties of Fund Services. Fund Services
represents and warrants to UAM SSC that:
a. It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania.
b. It is duly qualified to carry on its business in the Commonwealth of
Pennsylvania.
5
<PAGE>
c. It is empowered under applicable laws and by its trust agreement and
Bylaws to enter into and perform this Agreement.
d. All requisite proceedings of the Trustees have been taken to
authorize it to enter into and perform this Agreement.
9. Certain Covenants of UAM SSC Fund Services.
a. Records are Property of the Fund. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, UAM SSC agrees that all records
maintained by Fund Services relating to the services to be performed by UAM SSC
under this Agreement are the property of the Fund and will be preserved and will
be surrendered promptly to the Fund on request.
b. Financial Statements. UAM SSC agrees to furnish to the Fund annual
reports of its financial condition, consisting of a balance sheet, earnings
statement and any other financial information reasonably requested by the Fund.
c. Information Concerning the Fund. Fund Services agrees to furnish or
otherwise make available to UAM SSC such information relating to the business
and affairs of the Fund as UAM SSC may reasonably require to discharge its
duties and obligations hereunder. Fund Services further agrees to provide UAM
SSC with information and updates relating to new product and service
introductions and sales and marketing efforts that may reasonably be expected to
impact on shareholder or prospective shareholder telephone call volume so that
UAM SSC can properly allocate the resources necessary to fulfill its obligations
under this Agreement.
6
<PAGE>
d. Cooperation in Shareholder Responses. Fund Services agrees that the
Fund Services will, and shall cause the Fund's investment adviser, Fund Services
parent, to, cooperate with UAM SSC to the extent necessary to formulate
appropriate responses to written inquiries from shareholders concerning
investment strategy and philosophy and market commentary.
10. Quality Control.
a. Audits. UAM SSC shall be responsible for periodically conducting
quality control audits with respect to telephone purchase, redemption and
exchange requests and account changes received and processed by UAM SSC or any
third party service provider with which UAM SSC has contracted to perform any of
the services provided for under this Agreement. UAM SSC shall promptly report
the results of such quality control audits to Fund Services.
b. Inspections. UAM SSC shall permit the Fund and Fund Services and its
authorized representatives, including, but not limited to, the Fund's
independent auditors, to have reasonable access to the personnel and records of
UAM SSC, and to make periodic inspections of the operations of UAM SSC as such
would involve the Fund at reasonable times during business hours for the purpose
of monitoring the quality of services performed by UAM SSC, and the level of
fees and reimbursements to which UAM SSC is entitled, under this Agreement.
7
<PAGE>
c. Monitoring of Exchange Privileges. UAM SSC shall use its reasonable
efforts to detect and prevent shareholder violations of telephone exchange
privileges as described in the Fund's prospectuses.
d. Service Improvement. UAM SSC shall use its reasonable efforts to
keep current on the trends of the investment company industry relating to
shareholder services and to continue to modernize and improve its service
delivery mechanisms.
e. Year 2000 Compliance. UAM SSC represents that its Information
Systems (as defined in Appendix C) will be Year 2000 Compliant as set forth in
Appendix C, attached hereto.
11. Liability and Indemnification.
a. Indemnification by Fund Services. UAM SSC shall not be responsible
for, and Fund Services shall indemnify and hold UAM SSC harmless from and
against, any and all losses, liabilities, claims, demands, suits, costs and
expenses (including reasonable attorneys' fees) which may be asserted against
UAM SSC or for which UAM SSC may be held to be liable, arising out of, or are
attributable to, the Fund Services' failure to comply with the terms of this
Agreement, or arising out of or attributable to, Fund Services' negligence or
willful misconduct or breach of any representation or warranty of Fund Services
hereunder.
b. Indemnification by UAM SSC. The Fund and Fund Services shall not be
responsible for, and UAM SSC shall indemnify the Fund and Fund Services, its
officers and directors and hold them harmless from and against, any and all
losses, liabilities, claims,
8
<PAGE>
demands, suits, costs and expenses (including reasonable attorneys' fees) which
may be asserted against the Fund and Fund Services or for which the Fund and
Fund Services may be held to be liable, arising out of, or attributable to, UAM
SSC's failure to comply with the terms of this Agreement, or arising out of, or
are attributable to, any negligence or willful misconduct or breach of any
representation or warranty of UAM SSC hereunder.
c. Notice of Potential Claims; Defense of Claims. Fund Services and UAM
SSC agree that each shall promptly notify the other in writing of any situation
which represents or appears to involve a claim which may be the subject of
indemnification hereunder, although the failure to provide such notification
shall not relieve the indemnifying party of its liability pursuant to this
Section 11. The indemnifying party shall have the option to defend against any
such claim. In the event the indemnifying party so elects, it will notify the
indemnified party and shall assume the defense of such claim, and the
indemnified party shall cooperate fully with the indemnifying party, at the
indemnifying party's expense, in the defense of such claim. If the indemnifying
party elects not to defend against such claim, the indemnified party shall be
entitled to advance of reasonable expenses to defend such claim. Notwithstanding
the foregoing, the indemnified party shall not enter into any settlement of such
matter without the written consent of the indemnifying party, which consent
shall not be withheld unreasonably. The indemnifying party shall not be
obligated to indemnify the indemnified party for any settlement entered into
without the written consent of the indemnifying party. If the consent of the
indemnified party is required to effectuate any settlement and the indemnified
party refuses to consent to any settlement negotiated by the
9
<PAGE>
indemnifying party, the liability of the indemnifying party for losses arising
out of or due to such matter shall be limited to the amount to the rejected
proposed settlement.
d. Except for violations of Section 17c. hereunder, in no event and
under no circumstances shall either party to this Agreement be liable to anyone,
including, without limitation, to the other party, for consequential damages for
any act or failure to act under any provision of this Agreement even if advised
of the possibility thereof.
e. Survival of Provisions. The obligations of Fund Services and UAM SSC
pursuant to this Section 11 shall survive the termination of this Agreement.
12. Limitations on Liability
a. Subcontractors. Nothing herein shall impose any duty upon UAM SSC in
connection with or make UAM SSC liable for the actions or omissions to act of
unaffiliated third parties such as, by way of example and not limitation,
Airborne Services, the U.S. mails and telecommunication companies, provided, if
UAM SSC selected such company, UAM SSC shall have exercised reasonable care in
selecting the same. The foregoing limitation of liability with respect to
actions or omissions of unaffiliated third parties shall not be construed to
relieve UAM SSC of any obligations under Section 6 hereof with respect to any
services that UAM SSC has agreed to perform under this agreement that are
ultimately performed by other parties.
b. Portfolios as Separate Parties. Each Portfolio shall be regarded for
all purposes hereunder as a separate party apart from each other Portfolio.
Unless the context otherwise requires, with respect to every transaction covered
by this Agreement, every
10
<PAGE>
reference herein to the Fund shall be deemed to relate solely to the particular
Portfolio to which such transaction relates. Under no circumstances shall the
rights, obligations or remedies with respect to a particular Portfolio
constitute a right, obligation or remedy applicable to any other Portfolio. The
use of this single document to memorialize the separate agreement each Portfolio
is understood to be for clerical convenience only and shall not constitute any
basis for joining the Portfolios for any reason.
13. Term of Agreement. This Agreement shall become effective on the day and year
first written above and, unless sooner terminated as hereinafter provided, shall
continue in effect for an initial period that will expire on December 31, 1998,
and thereafter shall continue in effect from year to year.
14. Termination.
a. Material Breach. This Agreement may be terminated by either party in
the event of a material breach of the Agreement by the other party upon thirty
(30) days' prior written notice to the other party; provided, however, that the
Agreement shall not terminate if such material breach is cured within such
thirty (30) day period.
b. Termination by Fund Services. Fund Services may, without payment of
penalty, terminate this Agreement upon 90 days' written notice to UAM SSC.
c. Termination by UAM. UAM SSC may, without payment of penalty,
terminate this Agreement upon 90 days' written notice to Fund Services.
d. Assignment. No assignment of this Agreement by either party shall
occur without the written consent of the other party.
11
<PAGE>
15. Notices. All notices to be given hereunder shall be deemed properly given if
given in writing, delivered in person, or if sent by U.S. mail, first class,
postage prepaid, or if sent by facsimile and thereafter confirmed by mail, (i)
if to Fund Services, to PBHG Fund Services Inc., 825 Duportail Road, Wayne, PA
19087, Attn: Brian Bereznak, and (ii) if to the UAM SSC, to UAM Shareholder
Service Center, 600 Willowbrook Lane, Suite 620 West Chester, PA 19382, Attn:
Robert J. Wagner, or to such other address as shall have been specified in
writing by the party to whom such notice is to be given.
16. Force Majeure. In the event UAM SSC is unable to perform its obligations or
duties under the terms of this Agreement because of any act of God, strike,
riot, act of war, equipment failure, power failure or damage or other causes
reasonably beyond its control, UAM SSC shall not be liable for any losses,
damages, costs, charges, counsel fees, payments, expenses or liability to any
other party (whether or not a party to this Agreement) resulting from such
failure to perform its obligations or duties under this Agreement or otherwise
from such causes. This provision, however, shall in no way excuse UAM SSC from
being liable to the Fund or Fund Services for any and all losses, damages,
costs, charges, counsel fees, payments and expenses incurred by the Fund or Fund
Services due to the non-performance or delay in performance by UAM SSC of its
duties and obligation under this Agreement if such non-performance or delay in
performance could have been reasonably prevented by UAM SSC through back-up
systems and other procedures commonly employed by other persons in the mutual
fund industry who provide services similar to those to be provided by UAM SSC
under this Agreement, provided that UAM SSC shall have the right,
12
<PAGE>
at all times, to mitigate or cure any losses, including by making adjustments or
corrections to any current or former shareholder accounts.
17. Miscellaneous.
a. Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the Commonwealth of Pennsylvania,
except as such laws may conflict with the 1940 Act and the rules thereunder or
other applicable federal laws or regulations.
b. Severability. If any provision of this Agreement shall be held or
made invalid in whole or in part by a court decision, statute, rule, or
otherwise, the remaining provisions of the Agreement shall not be affected
thereby. Invalid provisions shall, in accordance with the intent and purpose of
this Agreement, be replaced by mutual consent of the parties with such valid
provisions which in their economic effect come as closely as legally possible to
such invalid provisions.
c. Confidentiality. UAM SSC agrees on behalf of itself and its
employees to treat confidentially all records and other information relative to
the Fund and its prior, present, or prospective shareholders, except, after
prior notification to and approval in writing by Fund Services and the Fund,
which approval shall not be withheld unreasonably and may not be withheld where
UAM SSC may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities.
13
<PAGE>
d. Amendments in Writing. Any part of this Agreement or any appendix
hereto may be amended or waived only by an instrument in writing signed by the
parties hereto.
e. Headings and Captions. The headings and captions contained in this
Agreement are included for convenience of reference only and in no way define or
delineate any of the provisions hereof or otherwise affect their construction or
effect.
f. Interpretation. Nothing herein contained shall be deemed to require
the Fund to take any action contrary to its Articles of Incorporation or Bylaws,
or any applicable statutory or regulatory requirement to which it is subject or
by which it is bound, or to relieve or deprive the Board of Directors of its
responsibility for and control of the conduct of the affairs of the Fund.
g. Enforceability by Successors and Assigns. All terms and provisions
of this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns.
h. Survival of Representations, Warranties and Indemnification. The
representations and warranties, and the indemnification extended hereunder, if
any, are intended to and shall continue after and survive the expiration,
termination or cancellation of this Agreement.
i. No Joint Venture. Neither the execution nor performance of this
Agreement shall be deemed to create a partnership or joint venture by and
between the Fund, Fund Services and UAM SSC. It is understood and agreed that
all services performed hereunder by UAM SSC shall be as an independent
contractor. While this Agreement is between Fund Services and the UAM SSC, the
Parties agree that this Agreement and the performance of
14
<PAGE>
the services provided for herein shall be performed for the benefit of the Fund,
and the Parties also agree that the Fund shall be a third party beneficiary to
this Agreement.
j. No Waiver. The failure of either party to insist upon the
performance of any terms or conditions of this Agreement or to enforce any
rights resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as a
continuing or permanent waiver of any such terms, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officers, to be effective as of the
day and year first above written.
PBHG FUND SERVICES
By: /s/ Lee T. Cummings
-------------------------------
Title: Treasurer
----------------------------
UAM SHAREHOLDER SERVICE
CENTER, INC.
By: /s/
-------------------------------
Title: Vice President - Gen. Mgr.
----------------------------
16
<PAGE>
APPENDIX A
Services
UAM SSC shall be responsible for receiving telephone calls, faxes,
letters and transmissions from shareholders and institutions and processing
transactions generated by such telephone calls, faxes, letters and
transmissions. The general categories of services UAM SSC will be responsible
for performing include but are not limited to:
1. Purchase, redemption and exchange of shares
2. Addition or deletion of services for an account
3. Explanation of fund or market conditions and performance
4. Research account inquiries, respond to such inquiries, and make any
required account corrections
5. Change account address or distribution option
6. Correct registration or account error
7. Send additional account statements or other requested materials or
forms
Without limitation of the foregoing, UAM SSC shall at a minimum perform
the following specific services:
1. Provide Shareholder Support
2. Process "Phone" Transactions
ACH Buys
ACH Sells
Purchase Orders (Settle by Wire or Check)
Redemption Orders (Settle by Wire or Check)
Account Exchanges
3. Process Account Maintenance
4. Problem Research and Resolution
5. Prepare Research Documentation for DST
<PAGE>
6. All Correspondence Services except for Correspondence Requiring the
Return of Original Documentation received at DST
7. Institutional Desk Servicing, included but not limited to:
Dealer Servicing
Account Maintenance
Dealer File Maintenance
Transaction Processing
Order Settlement Support
Adjustment Processing Support
NSCC Networking Support
Fund Info/Data Dissemination
8. Redemption by ACH to bank of record
9. Redemption by check to address of record
10. Redemption by wire to bank of record
11. Exchange between funds
12. ACH purchase from bank of record
13. Process purchase order (a.k.a. confirmed purchase)
14. Request stop/replace redemption checks to address of record
15. Research/document/request corrective processing
16. Account Maintenance
<TABLE>
<S> <C>
Non-Signature Guaranteed address change
Stop/restart/defer a Systematic Monthly Investment (SIP)
Increase/decrease a Systematic Monthly Investment (SIP)
Increase/decrease/defer/discontinue a systematic withdrawal plan (SWP)
Add a beneficiary birth date
Change dividend/capital gains distribution method
Stop dividend mail
Add/change a dividend move
Combine identical accounts within the same funds
Add or delete stop mail from the account
Request stop or replace a redemption check after fifteen (15) days
Add/change/delete systematic exchanges (SYSEXCH) with the same
registration
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Correct minor errors in names on registration if clearly indicated on the
application
Reissue checkwriting drafts on a Cash Reserve account where the
privilege has been established
Link/unlink accounts for the INVESTOR statement product (managers
only)
</TABLE>
<PAGE>
APPENDIX B
Fees
A. Minimum Fee:
For each operational class of shares for each
Portfolio of the Fund: $3,333 per year minimum.
However, if the aggregate minimum per class fee
calculated for all Portfolios of the Fund is less
than the aggregate per account fee calculated for all
Portfolios of the Fund, each class will pay only the
per account fee for its open accounts.
B. Per account Fee:
Open Accounts - $8.00 per open account per year.
<PAGE>
APPENDIX C
Year 2000 Compliance
Definitions:
"Embedded Control" shall mean any microprocessor, microcontroller,
smart instrumentation or other sensor, driver, monitor, robotic or other device
containing a semiconductor, memory circuit, BIOS, PROM or other microchip,
whether it is part of or operates in conjunction with any mainframes, midrange
computers, personal computers, notebooks, servers, switches, printers, modems,
drives or peripherals ("Hardware") or any other electronic or mechanical device
that operates, controls or monitors any function of any real or personal
property, including but not limited to any security, access control or
telecommunications devices or systems.
"Information System" shall mean any combination of any Hardware,
software, databases or Embedded Controls employed primarily for the creation,
manipulation, storage, retrieval, display and use of information in electronic
form or media.
"Year 2000 Compliant": shall mean:
(a) that each component of an Information System or any Embedded
Control:
(i) is designed (or has been modified) to be used prior to and
after January 1, 2000; and
(ii) will operate without error arising from the creation,
recognition, acceptance, calculation, display, storage, retrieval, accessing,
comparison, sorting, manipulation, processing or other use of dates or
date-based, date-dependent or date-related data, including but not limited to
century recognition, day-of-the-week recognition, leap years, date values and
interfaces of the date functionalities; and
(iii) will not be adversely affected by the advent of the year
2000, the advent of the twenty-first century or the transition from the
twentieth century through the year 2000 and into the twenty-first century.
(b) that the design architectures and functionalities embodying,
reflecting or affecting the criteria set forth in subparagraph (a), above, of
all components of an Information System (or the methods used to modify them) are
compatible and, when operated in, on or in conjunction with any other component
of such Information System, will not
<PAGE>
cause it or any of its components to fail to satisfy the criteria set forth in
subparagraph (a), above.
(c) that an Information System does not receive data from or
communicate with any component or Information System external to itself (whether
or not such external component or Information System is UAM SSC's or any third
party's) that does not conform to the criteria set forth in subparagraphs (a)
and (b), above.
UAM SSC represents and warrants that all Information Systems of UAM SSC
used in the performance of UAM SSC's obligations under this Agreement are Year
2000 Compliant.
UAM SSC covenants that it will take all actions necessary to ensure:
(a) that all Information Systems of UAM SSC and the databases used
therewith or created thereby:
(i) shall remain Year 2000 Compliant at all times during the
term of this Agreement;
(ii) shall be adequately protected from contamination by non-
Year 2000 Compliant third-party communications received by any
electro-mechanical or electronic devices of UAM SSC; and
UAM SSC acknowledges and agrees that for the purposes of this
Agreement:
(a) the Fund may request, and UAM SSC will provide a detailed
summary of the Year 2000 Compliant status of UAM SSC's Information Systems and
Embedded Controls; and
(b) UAM SSC shall not be relieved of any liability or
responsibility for any losses to the Fund pursuant to paragraph 11 of this
Agreement in respect of any breach of UAM SSC's obligations pursuant to this
Appendix C.
Exhibit 10
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
April 14, 1998
PBHG Advisor Funds, Inc.
825 Duportail Road
Wayne, PA 19087
Re: PBHG Advisor Funds, Inc.
Pre-Effective Amendment No. 2
to the Registration Statement on Form N-1A
Gentlemen:
We have acted as counsel to PBHG Advisor Funds, Inc. (the "Company"), a
corporation organized under the laws of the State of Maryland registered under
the Investment Company Act of 1940 ("1940 Act") as an open-end series management
investment company.
This opinion is given in connection with the filing by the Company of
its Pre-Effective Amendment No. 2 to the Registration Statement on Form N-1A
("Registration Statement") under the 1933 Act and under the 1940 Act relating to
the registration of an indefinite number of Class A, Class B and Class I shares
of common stock, par value $.001 per share (the "Shares"), representing
interests in the PBHG Advisor Core Value Fund, PBHG Advisor Value Opportunities
Fund, PBHG Advisor New Contrarian Fund, PBHG Advisor REIT Fund, PBHG Advisor
Large Cap Concentrated Fund, PBHG Advisory Growth II Fund, PBHG Advisor New
Opportunities Fund, PBHG Advisor Global Technology & Communications Fund, PBHG
Advisor Blue Chip Growth Fund, PBHG Advisor Growth Opportunities Fund, PBHG
Advisor Enhanced Equity Fund, PBHG Advisor Trend Fund, PBHG Advisor Master Fixed
Income Fund, PBHG Advisor High Yield Fund, and PBHG Advisor Cash Reserves Fund,
each a series portfolio of the Company.
<PAGE>
PBHG Advisor Funds, Inc.
April 14, 1998
Page 2
In connection with our giving this opinion, we have examined a copy of
the Charter of the Company, and originals or copies, certified or otherwise
identified to our satisfaction, of such other documents, corporate records and
other instruments as we have deemed necessary or advisable for purposes of this
opinion. We have also examined the prospectus included in the Registration
Statement substantially in the form in which it is to become effective (the
"Prospectus"). As to various questions of fact material to our opinion, we have
relied upon information provided by officers of the Company.
Based on the foregoing, we are of the opinion that the Shares to be
offered for sale pursuant to the Prospectus are, to the extent of the number of
Shares authorized to be issued by the Company in its Charter, duly authorized
and, when sold, issued and paid for as described in the Prospectus, will have
been legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"General Information - Counsel and Independent Accountants" in the Prospectus
included in the Registration Statement.
Very truly yours,
/s/Ballard Spahr Andrews & Ingersoll, LLP
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our report dated March 30, 1998, on our
audit of the Statements of Assets and Liabilities of PBHG Advisor Funds, Inc.,
as of March 20, 1998 under the heading "Financial Statements" in the Statement
of Additional Information. We also consent to the reference to our Firm under
the heading "Counsel and Independent Accountants" in the Prospectus and under
the heading "Financial Statements" in the Statement of Additional Information
with respect to this Pre-Effective Amendment No. 2 to the Registration Statement
under the Securities Act of 1933 on Form N-1A.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 16, 1998
Exhibit 13
STOCK SUBSCRIPTION AGREEMENT
February 20, 1998
PBHG Advisor Funds, Inc.
825 Duportail Road
Wayne, PA 19087
Gentlemen:
PBHG Advisor Funds, Inc. (the "Corporation"), a newly-organized
open-end management investment company, proposes to make a continuous public
offering of its shares of common stock, par value $ .001 per share, pursuant to
a registration statement on Form N-1A as from time to time amended (the
"Registration Statement"), filed with the Securities and Exchange Commission. In
order to provide the Corporation with a net worth sufficient to commence
operations and to meet the requirements of Section 14 of the Investment Company
of Act of 1940, as amended, Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter")
agrees to purchase shares of the Corporation in accordance with the terms and
conditions set forth below.
1. Purchase of Shares. Pilgrim Baxter hereby agrees to purchase from
the Corporation 10,000 shares of its common stock (the "Shares") at a price per
share of $10.00 (except that the price per share of the PBHG Advisor Cash
Reserves Fund shall be $1.00) for an aggregate purchase price of $100,000.00
allocable as follows:
10 Class A shares, 10 Class B shares and 10 Class I shares of the PBHG Advisor
Core Value Fund; 365 Class A shares, 362.5 Class B shares and 362.5 Class I
shares of the PBHG Advisor Value Opportunities Fund; 362.5 Class A shares, 362.5
Class B shares and 362.5 Class I shares of the PBHG Advisor New Contrarian Fund;
362.5 Class A shares, 362.5 Class B shares and 362.5 Class I shares of the PBHG
Advisor Large Cap Concentrated Fund; 10 Class A shares, 10 Class B shares and 10
Class I shares of the PBHG Advisor Growth II Fund; 362.5 Class A shares, 362.5
Class B shares and 362.5 Class I shares of the PBHG Advisor New Opportunities
Fund; 362.5 Class A shares, 362.5 Class B shares and 362.5 Class I shares of the
PBHG Advisor Global Technology & Communications Fund; 10 Class A shares, 10
Class B shares and 10
<PAGE>
Class I shares of the PBHG Advisor Blue Chip Growth Fund; 362.5 Class A shares,
362.5 Class B shares and 362.5 Class I shares of the PBHG Advisor Growth
Opportunities Fund; 362.5 Class A shares, 362.5 Class B shares and 362.5 Class I
shares of the PBHG Advisor Enhanced Equity Fund; 10 Class A shares, 10 Class B
shares and 10 Class I shares of the PBHG Advisor Trend Fund; 362.5 Class A
shares, 362.5 Class B shares and 362.5 Class I shares of the PBHG Advisor Master
Fixed Income Fund; 10 Class A shares, 10 Class B shares and 10 Class I shares of
the PBHG Advisor High Yield Fund; 10 Class A shares, 10 Class B shares and 10
Class I shares of the PBHG Advisor Short-Term Government Fund; 3,625 Class A
shares, 3,625 Class B shares and 3,625 Class I shares of the PBHG Advisor Cash
Reserves Fund; and 10 Class A shares, 10 Class B shares and 10 Class I shares of
the PBHG Advisor REIT Fund.
2. Payment of Purchase Price. Pilgrim Baxter will pay to the
Corporation by wire transfer, at least two business days prior to the date
specified by the Corporation as the effective date of the Registration
Statement, $100,000.00, to be allocated to each of the Funds as set forth above.
3. Agreement Not to Sell Shares. Pilgrim Baxter hereby agrees not to
sell, hypothecate or otherwise dispose of any of the Shares unless the Shares
have been registered under the Securities Act of 1933, as amended, and any
applicable state securities laws or, in the opinion of counsel for the
Corporation, valid exemptions from the registration requirements of said Act and
those state laws are available.
4. Representations, Warranties and Acknowledgements. Pilgrim Baxter
represents and warrants that it is acquiring the Shares for its own account for
investment and not with any view to resale or further distribution thereof, and
that it has no present intention to redeem any of the Shares. Pilgrim Baxter
acknowledges and agrees that in the event any of the Shares are redeemed prior
to complete amortization by the Funds of their deferred organization expenses,
the amount payable by the Corporation upon redemption of such Shares shall be
reduced by the pro rata share (based on the number of Shares redeemed and the
total number of Shares then outstanding) of the unamortized organization
expenses as of the date of such redemption.
5. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed under the laws of the State
of Maryland.
2
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please so indicate in the space provided below for that purpose,
whereupon this letter will become a binding agreement between us in accordance
with its terms.
Very truly yours,
PILGRIM BAXTER & ASSOCIATES, LTD.
BY: _____________________________
Harold J. Baxter,
Chairman and
Chief Executive Officer
The foregoing Stock Subscription
Agreement is hereby confirmed and
accepted as of the date
first above written.
PBHG ADVISOR FUNDS, INC.
BY: /s/ Gary L. Pilgrim,
-----------------------
Gary L. Pilgrim,
President
3
Exhibit 18
AMENDED AND RESTATED
MULTIPLE CLASS PLAN
OF
PBHG ADVISOR FUNDS, INC.
1. This Multiple Class Plan (the "Plan") adopted in accordance with Rule 18f-3
under the Act shall govern the terms and conditions under which PBHG Advisor
Funds, Inc. may issue separate Classes of Shares.
2. Definitions. As used herein, the terms set forth below shall have the
meanings ascribed to them below.
a. Act - Investment Company Act of 1940, as amended.
b. CDSC - contingent deferred sales charge.
c. CDSC Period - the period following acquisition of Shares during which such
Shares may be assessed a CDSC upon redemption.
d. Class - a class of Shares of the Company representing an interest in a
Portfolio.
e. Charter - shall mean the Articles of Incorporation of the Company as now
or hereafter amended, supplemented, amended and restated or corrected.
f. Class A Shares - shall mean those Shares designated as Class A Shares in
the Company's Charter.
g. Class B Shares - shall mean those Shares designated as Class B Shares in
the Company's Charter.
h. Class I Shares - shall mean those Shares designated as Class I Shares in
the Company's Charter.
i. Company - PBHG Advisor Funds, Inc.
j. Directors - the directors of the Company.
k. Distribution Expenses - expenses incurred in activities that are primarily
intended to result in the distribution and sale of Shares as defined in a
Plan of Distribution and/or agreements implementing such Plan of
Distribution.
<PAGE>
l. Distribution Fee - a fee paid by the Company to the Distributor to
compensate the Distributor for Distribution Expenses.
m. Distributor - PBHG Fund Distributors, a Pennsylvania business trust.
n. Plan of Distribution - any plan adopted by the Company under Rule 12b-1
under the Act with respect to payment of a Distribution Fee.
o. Portfolio - a series of the Shares of the Company constituting a separate
investment portfolio of the Company.
p. Service Fee - the amount paid by the Company to the Distributor which the
Distributor may reallow all or a portion of such amount to financial
intermediaries for the ongoing provision of personal services to Company
shareholders and/or the maintenance of shareholder accounts.
q. Share - a share of common stock in the Company.
3. Allocation of Income and Expenses.
a. Distribution and Service Fees - Each Class shall bear directly any and all
Distribution Fees and/or Service Fees payable by such Class pursuant to a
Plan of Distribution adopted by the Company with respect to such Class.
b. Transfer Agency and Shareholder Recordkeeping Fees - Each Class shall bear
directly the transfer agency fees and expenses and other shareholder
recordkeeping fees and expenses specifically attributable to that Class.
c. Allocation of Other Expenses - Each Class shall bear proportionately all
other expenses incurred by the Company based on the relative net assets
attributable to each such Class.
d. Allocation of Income, Gains and Losses - Except to the extent provided in
the following sentence, each Portfolio will allocate income and realized
and unrealized capital gains and losses to a Class based on the relative
net assets of each Class. Notwithstanding the foregoing, each Portfolio
that declares dividends on a daily basis will allocate income on the basis
of settled shares.
e. Waiver and Reimbursement of Expenses - A Portfolio's adviser, underwriter
or any other provider of services to the Portfolio may waive or reimburse
the expenses of a particular Portfolio.
2
<PAGE>
4. Distribution and Servicing Arrangements. The distribution and servicing
arrangements identified below will apply for the following Classes offered by
the Company with respect to a Portfolio. The provisions of the Company's
prospectus describing the distribution and servicing arrangements in detail
are incorporated herein by this reference.
a. Class A Shares. Class A Shares shall be offered at net asset value plus a
front-end sales charge as approved from time to time by the Directors and
set forth in the Company's prospectus, which sales charge may differ or be
eliminated for certain Portfolios, for larger purchases, under a combined
purchase privilege, under a right of accumulation, under a letter of
intent or for certain categories of purchasers as permitted by Section
22(d) of the Act and as set forth in the Company's prospectus. Class A
Shares that are not subject to a front-end sales charge because of large
purchases shall be subject to a CDSC for the CDSC Period set forth in
Section 5(a) of this Plan if so provided in the Company's prospectus. The
offering price of Shares subject to a front-end sales charge shall be
computed in accordance with Rule 22c-1 and Section 22(d) of the Act and
the rules and regulations thereunder. Class A Shares shall be subject to
ongoing Service Fees and/or Distribution Fees at an annual rate of 0.25%
of net assets which may be increased to an annual rate of 0.35% of net
assets if such larger amount is approved by the Directors.
b. Class B Shares. Class B Shares shall be (i) offered at net asset value,
(ii) subject to a CDSC for the CDSC Period set forth in Section 5(b),
(iii) subject to ongoing Service Fees and Distribution Fees at the
aggregate annual rate of 1.00% of net assets, and (iv) converted to Class
A Shares eight years from the end of the calendar month in which the
shareholder's order to purchase was accepted as set forth in the Company's
records.
c. Class I Shares. Class I Shares shall be (i) offered at net asset value,
(ii) offered only to certain categories of institutional customers as
approved from time to time by the Directors and as set forth in the
Company's prospectus and (iii) are not subject to Service Fees or
Distribution Fees.
5. CDSC. A CDSC shall be imposed upon redemptions of Class A Shares that do not
incur a front-end sales charge by reason of large purchases and of Class B
Shares as follows:
a. Class A Shares. The CDSC Period for Class A Shares shall be 12 months. The
CDSC rate shall be as set forth in the Company's prospectus, the relevant
portions of which are incorporated herein by this reference. No CDSC shall
3
<PAGE>
be imposed on Class A Shares unless so provided in the Company's
prospectus.
b. Class B Shares. The CDSC Period for the Class B Shares shall be six years.
The CDSC rate for the Class B Shares shall be as set forth in the
Company's prospectus, the relevant portions of which are incorporated
herein by this reference.
c. Method of Calculation. The CDSC shall be assessed on an amount equal to
the initial purchase price of the Shares being redeemed. No CDSC shall be
imposed on increases in the net asset value of the Shares being redeemed
above the initial purchase price. No CDSC shall be assessed on Shares
derived from reinvestment of dividends or capital gains distributions. The
order in which Shares are to be redeemed when not all of such Shares would
be subject to a CDSC shall be determined by the Distributor in accordance
with the provisions of Rule 6c-10 under the Act.
d. Waiver. The Distributor may in its discretion waive a CDSC otherwise due
upon the redemption of Shares on terms disclosed in the Company's
prospectus or statement of additional information and, for the Class A
Shares, as allowed under Rule 6c-10 under the Act.
6. Exchange Privileges. Exchanges of Shares shall be permitted between
Portfolios as follows:
a. Class A Shares may be exchanged for Class A Shares of another Portfolio at
their relative net asset value, subject to certain limitations set forth
in the Company's prospectus as it may be amended from time to time,
relevant portions of which are incorporated herein by this reference.
b. Class B Shares may be exchanged for Class B Shares of another Portfolio at
their relative net asset value.
c. Class I Shares may be exchanged for Class I Shares of another Portfolio at
their relative net asset value.
d. Depending upon the Portfolio from which and into which an exchange is
being made and when the shares were purchased, shares being acquired in an
exchange may be acquired at their offering price, at their net asset value
or by paying the difference in sales charges, as disclosed in the
Company's prospectus and statement of additional information.
4
<PAGE>
e. CDSC Computation. The CDSC payable upon redemption of Class A Shares and
Class B Shares subject to a CDSC shall be computed in the manner described
in the Company's prospectus.
7. Service and Distribution Fees. The Service Fee and Distribution Fee
applicable to any Class shall be those set forth in paragraph 4. All other
terms and conditions with respect to Service Fees and Distribution Fees shall
be governed by the Plan of Distribution adopted by the Company with respect
to such fees and Rule 12b-1 under the Act.
8. Conversion of Class B Shares.
a. Shares Received upon Reinvestment of Dividends and Distributions - Shares
purchased through the reinvestment of dividends paid on Shares subject to
conversion shall be treated as if held in a separate sub-account. Each
time any Shares in a Shareholder's account (other than Shares held in the
sub-account) convert to Class A Shares, a proportionate number of Shares
held in the sub-account shall also convert to Class A Shares.
b. Conversions on Basis of Relative Net Asset Value - All conversions shall
be effected on the basis of the relative net asset values of the two
Classes without the imposition of any sales load or other charge.
c. Amendments to Plan of Distribution for Class A Shares - If any amendment
is proposed to the Plan of Distribution under which Service Fees and
Distribution Fees are paid with respect to Class A Shares of the Company
that would increase materially the amount to be borne by those Class A
Shares, then no Class B Shares shall convert into Class A Shares until the
holders of Class B Shares of the Company have also approved the proposed
amendment. If the holders of such Class B Shares do not approve the
proposed amendment, the Directors of the Company and the Distributor shall
take such action as is necessary to ensure that the Class voting against
the amendment shall convert into another Class identical in all material
respects to Class A Shares of the Company as constituted prior to the
amendment.
9. Nomination of Directors. As long as any Class is subject to a Plan of
Distribution, the selection and nomination of Directors who are not
interested persons of the Company shall be committed to the discretion of the
Directors who are not interested persons of the Company.
10. Effective Date. This Plan shall not take effect until a majority of the
Directors of the Company, including a majority of the Directors who are not
interested persons of the
5
<PAGE>
Company, shall find that the Plan, as proposed and including the expense
allocations, is in the best interests of each Class individually and the
Company as a whole.
11. Amendments. This Plan may not be amended to change materially the provisions
of this Plan unless such amendment is approved in the manner specified in
Section 10 above.
12. Periodic Review. The Directors of the Company must periodically review this
plan for continued appropriateness.
PBHG ADVISOR FUNDS, INC.
Dated as of: April 9, 1998 BY: /s/ Gary L. Pilgrim
--------------------------
President
6
Exhibit 24(a)
POWER OF ATTORNEY
We, the undersigned Directors of PBHG Advisor Funds, Inc. (the
"Company"), whose signatures appear below, hereby make, constitute and appoint
Harold J. Baxter, John M. Zerr and William H. Rheiner, and each of them acting
individually, to be our true and lawful attorneys and agents, each of them with
the power to act without any other and with full power of substitution, to
execute, deliver and file in each undersigned Director's capacity as shown
below, any and all instruments that said attorneys and agents may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1933, as
amended, including any and all pre-effective and post-effective amendments to
the Company's registration statement, and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission thereunder in
connection with the registration of shares or additional shares of common stock
of the Company or any of its series or classes thereof, and the registration of
the Company or any of its series under the Investment Company Act of 1940, as
amended, including any and all amendments to the Company's registration
statement; and without limitation of the foregoing, the power and authority to
sign the name of the the Company on its behalf, and to sign the name of each
such Director on his or her behalf, and we hereby grant to said attorney or
attorneys, full power and authority to do and perform each and every act and
thing whatsoever as said attorney or attorneys may deem necessary or advisable
to carry out fully the intent of this
<PAGE>
Power of Attorney to the same extent and with the same effect as if we might or
could do personally in our capacity as aforesaid and we ratify, confirm and
approve all acts and things which said attorney or attorneys might do or cause
to be done by virtue of this Power of Attorney and his and her signatures as the
same may be signed by said attorney or attorneys.
SIGNATURE TITLE DATE
/s/ Harold J. Baxter Director 2/20/98
- ------------------------ -------
Harold J. Baxter
/s/ John R. Bartholdson Director 2/20/98
- ------------------------ -------
John R. Bartholdson
/s/ Jettie M. Edwards Director 2/20/98
- ------------------------ -------
Jettie M. Edwards
/s/ Albert A. Miller Director 2/20/98
- ------------------------ -------
Albert A. Miller
Exhibit 24(b)
POWER OF ATTORNEY
We, the undersigned Officers of PBHG Advisor Funds, Inc. (the
"Company"), whose signatures appear below, hereby make, constitute and appoint
Harold J. Baxter, John M. Zerr and William H. Rheiner, and each of them acting
individually, to be our true and lawful attorneys and agents, each of them with
the power to act without any other and with full power of substitution, to
execute, deliver and file in each undersigned Officer's capacity as shown below,
any and all instruments that said attorneys and agents may deem necessary or
advisable to enable the Company to comply with the Securities Act of 1933, as
amended, including any and all pre-effective and post-effective amendments to
the Company's registration statement, and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission thereunder in
connection with the registration of shares or additional shares of common stock
of the Company or any of its series under the Investment Company Act of 1940, as
amended, including any and all amendments to the Company's registration
statement; and without limitation of the foregoing, the power and authority to
sign the name of the Company on its behalf, and to sign the name of each such
Officer on his behalf and we grant to said attorney or attorneys, full power and
authority to do and perform each and every act and thing whatsoever as said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of this Power of Attorney to the same extent and with the same effect as
if we might or
<PAGE>
could do personally in our capacity as aforesaid and we ratify, confirm and
approve all acts and things which said attorney or attorneys might do or cause
to be done by virtue of this Power of Attorney and his signatures as the same
may be signed by said attorney or attorneys.
SIGNATURE TITLE DATE
/s/ Gary L. Pilgrim President 2/20/98
- ---------------------- -------
Gary L. Pilgrim
/s/ Paul J. Hondros Executive Vice 2/20/98
- ---------------------- President -------
Paul J. Hondros
/s/ Brian F. Bereznak Vice President 2/20/98
- ---------------------- -------
Brian F. Bereznak
/s/ Lee T. Cummings Treasurer, Chief 2/20/98
- ---------------------- Financial Officer -------
Lee T. Cummings and Controller
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 162
<NAME> TREND FUND CLASS I
<MULTIPLIER> 1
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<S> <C>
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</TABLE>
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<NAME> TREND FUND CLASS B
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
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<PERIOD-START> MAR-20-1998
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<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,875
<TOTAL-LIABILITIES> 2,875
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
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<PER-SHARE-NAV-BEGIN> 10.00
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<PER-SHARE-NAV-END> 10.00
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
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<NAME> TREND FUND CLASS A
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-20-1998
<PERIOD-END> MAR-20-1998
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<TOTAL-LIABILITIES> 2,875
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100
<SHARES-COMMON-STOCK> 10
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
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<NET-CHANGE-IN-ASSETS> 10
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<AVERAGE-NET-ASSETS> 100
<PER-SHARE-NAV-BEGIN> 10.00
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<PER-SHARE-NAV-END> 10.00
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
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<NAME> ENHANCED EQUITY CLASS I
<MULTIPLIER> 1
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<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-20-1998
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<TOTAL-LIABILITIES> 25,875
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 363
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
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<EXPENSES-NET> 0
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<DISTRIBUTIONS-OF-INCOME> 0
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<NUMBER-OF-SHARES-SOLD> 363
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<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 3,625
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
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<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 151
<NAME> ENHANCED EQUITY CLASS B
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-20-1998
<PERIOD-END> MAR-20-1998
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
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<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,750
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 150
<NAME> ENHANCED EQUITY CLASS A
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 142
<NAME> GROWTH OPPORTUNITIES CLASS I
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 141
<NAME> GROWTH OPPORTUNITIES FUND CLASS B
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<S> <C>
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<PERIOD-START> MAR-20-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 140
<NAME> GROWTH OPPORTUNITIES FUND CLASS A
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 132
<NAME> BLUE CHIP GROWTH FUND CLASS I
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<CURRENCY> U.S. DOLLARS
<S> <C>
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<PERIOD-START> MAR-20-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 131
<NAME> BLUE CHIP GROWTH FUND CLASS B
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-20-1998
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<EXCHANGE-RATE> 1.000
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 130
<NAME> BLUE CHIP GROWTH FUND CLASS A
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAR-20-1998
<PERIOD-END> MAR-20-1998
<EXCHANGE-RATE> 1.000
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 122
<NAME> REIT CLASS I
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<CURRENCY> U.S. DOLLARS
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 121
<NAME> REIT CLASS B
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<S> <C>
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<NAME> REIT CLASS A
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<NAME> NEW CONTRARIAN CLASS I
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<TABLE> <S> <C>
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<NAME> NEW CONTRARIAN CLASS B
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<TABLE> <S> <C>
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<NUMBER> 110
<NAME> NEW CONTRARIAN CLASS A
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<TABLE> <S> <C>
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<NAME> VALUE OPPORTUNITIES CLASS I
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 101
<NAME> VALUE OPPORTUNITIES CLASS B
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 100
<NAME> VALUE OPPORTUNITIES CLASS A
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</TABLE>
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<NAME> CORE VALUE CLASS I
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</TABLE>
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<NAME> CORE VALUE CLASS B
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<TABLE> <S> <C>
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<NAME> CORE VALUE CLASS A
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<TABLE> <S> <C>
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<NAME> ADVISOR CASH RESERVE CLASS I
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<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 081
<NAME> ADVISOR CASH RESERVE CLASS B
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 080
<NAME> ADVISOR CASH RESERVE CLASS A
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<CURRENCY> U.S. DOLLARS
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
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<NUMBER> 072
<NAME> ADVISOR SHORT-TERM GOVERNMENT CLASS I
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<CURRENCY> U.S. DOLLARS
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> ADVISOR SHORT-TERM GOVERNMENT CLASS B
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1998
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 070
<NAME> ADVISOR SHORT-TERM GOVERMENT CLASS A
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<CURRENCY> U.S. DOLLARS
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 062
<NAME> PBHG MASTER FIXED INCOME CLASS I
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<NUMBER> 061
<NAME> PBHG MASTER FIXED INCOME CLASS B
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 060
<NAME> PBHG MASTER FIXED INCOME CLASS A
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> OTHER
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<TABLE> <S> <C>
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<NAME> ADVISOR HIGH YIELD CLASS I
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<TABLE> <S> <C>
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<SERIES>
<NUMBER> 051
<NAME> ADVISOR HIGH YIELD CLASS B
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 050
<NAME> ADVISOR HIGH YIELD CLASS A
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<CURRENCY> U.S. DOLLAR
<S> <C>
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</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 042
<NAME> ADVISOR LARGE CAP CONCENTRATED CLASS I
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> ADVISOR LARGE CAP CONCENTRATED CLASS B
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 040
<NAME> ADVISOR LARGE CAP CONCENTRATED CLASS A
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<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> ADVISOR GROWTH II CLASS I
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<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> OTHER
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> ADVISOR GROWTH II CLASS B
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<CURRENCY> U.S. DOLLAR
<S> <C>
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 030
<NAME> ADVISOR GROWTH II CLASS A
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<S> <C>
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