490956.002(B&F)
As filed with the Securities and Exchange Commission on March 9, 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. 1 [X]
Post-Effective Amendment No. ____ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1
(Check appropriate box or boxes.)
PBHG ADVISOR FUNDS, INC.
(Exact name of registrant as specified in charter)
825 Duportail Road
Wayne, PA 19087
(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 Pilgrim Baxter & Associates, Ltd.
1735 Market Street, 51st Floor 825 Duportail Road
Philadelphia, PA 19103-7599 Wayne, PA 19087
(215) 864-8600 (610) 647-4100
<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
---------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as this Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PBHG ADVISOR FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
PART A
Item No. Location in Prospectus
- -------- ----------------------
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Summary; Expense Summary
3. Condensed Financial Information Not Applicable
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--Value
Investors; General Information--Analytic;
General Information--Wellington Management;
General Information--The Administrator
and the Sub-Administrator; General
Information--The Transfer Agent;
General Information--The 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>
<TABLE>
<CAPTION>
PART B
<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 Not Applicable
</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>
SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PBHG ADVISOR FUNDS, INC.
PROSPECTUS DATED __________________, 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
o PBHG ADVISOR CORE VALUE FUND
o PBHG ADVISOR VALUE OPPORTUNITIES FUND
o PBHG ADVISOR NEW CONTRARIAN FUND
o PBHG ADVISOR REIT FUND
PBHG ADVISOR GROWTH FUNDS
o PBHG ADVISOR BLUE CHIP GROWTH FUND
o PBHG ADVISOR GROWTH OPPORTUNITIES FUND
o PBHG ADVISOR ENHANCED EQUITY FUND
o PBHG ADVISOR TREND FUND
PBHG ADVISOR AGGRESSIVE GROWTH FUNDS
o PBHG ADVISOR LARGE CAP
CONCENTRATED FUND
o PBHG ADVISOR GROWTH II FUND
o PBHG ADVISOR NEW OPPORTUNITIES FUND
o PBHG ADVISOR GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
PBHG ADVISOR FIXED INCOME FUNDS
o PBHG ADVISOR MASTER FIXED INCOME FUND
o PBHG ADVISOR HIGH YIELD FUND
o PBHG ADVISOR SHORT-TERM GOVERNMENT FUND
o PBHG ADVISOR CASH RESERVES 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 _________________,
which contains important information has been filed with the Securities and
Exchange Commission and is available upon request and without charge by calling
1-800-XXX-XXXX. 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.
<PAGE>
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.
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 ..................................................................... 73
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.
3
<PAGE>
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, and PBHG Advisor New Contrarian Fund. Wellington Management
Company, LLP ("Wellington Management") serves as the sub-adviser to the PBHG
Advisor Cash Reserves Fund. AnalyticoTSA Global Asset Management, Inc.
("Analytic") serves as sub-adviser to the PBHG Adviser 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?
_________________ serves as the transfer agent and dividend disbursing agent
(the "Transfer Agent") of the Company. PBHG Fund Services 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 PBHG Fund Services 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.
4
<PAGE>
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
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."
5
<PAGE>
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 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)
6
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Maximum
Maximum Sales Load Maximum
Sales Load Imposed on Deferred Sales Redemption
Imposed on Reinvested Loads (as a Fees (as a
Purchases Dividends percentage percentage
(as a (as a of original of amount
percentage percentage purchase redeemed, if
of offering of offering price) applicable) Exchange
price) price) (1) (2) Fees
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
PBHG Advisor Core Value Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap
Concentrated Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology &
Communications Fund 5.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund 4.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 4.75% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund 1.50% None None None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund None None None None None
===================================================================================================================================
</TABLE>
7
<PAGE>
(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.
8
<PAGE>
Annual Operating Expenses (Class A Shares)
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
================================================================================================================================
Total
Operating
Other Expenses
Advisory Expenses (net of
Fees (net of fee waivers
(net of expense and expense
fee waivers, 12b-1 reimbursements, reimbursements,
if any)(1) Fees(2) if any)(1)(3) if any)(1)(3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.00% 0.25% 1.16% 1.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund 0.40% 0.25% 1.01% 1.66%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund 0.00% 0.25% 1.21% 1.46%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund 0.00% 0.25% 1.16% 1.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Adviser Trend Fund 0.00% 0.25% 1.21% 1.46%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund 0.40% 0.25% 1.01% 1.66%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% 0.25% 1.21% 1.66%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund 0.10% 0.25% 1.21% 1.56%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology &
Communications Fund 0.20% 0.25% 1.21% 1.66%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund 0.00% 0.25% 1.01% 1.26%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% 0.25% 1.06% 1.31%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund 0.00% 0.25% 0.86% 1.11%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund 0.00% 0.25% 0.86% 1.11%
================================================================================================================================
</TABLE>
9
<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.
10
<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.
11
<PAGE>
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."
12
<PAGE>
Shareholder Transaction Expenses (Class B Shares)
<TABLE>
<CAPTION>
===================================================================================================================================
Maximum
Maximum Sales Load Maximum
Sales Load Imposed on Deferred Redemption
Imposed on Reinvested Sales Loads Fees (as a
Purchases Dividends (as a percentage
(as a (as a percentage of amount
percentage percentage of original redeemed, if
of offering of offering purchase applicable) Exchange
price) price) price) (1) Fees
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Advisor Core Value Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap
Concentrated Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology &
Communications Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund None None 5.00% None None
- -----------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund None None 5.00% None None
===================================================================================================================================
</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.
13
<PAGE>
Annual Operating Expenses (Class B shares)
(as a percentage of average net assets after applicable fee waivers and expense
reimbursements)
<TABLE>
<CAPTION>
================================================================================================================================
Total
Operating
Other Expenses
Advisory Expenses (net of
Fees (net of fee waivers
(net of expense and expense
fee waivers, 12b-1 reimbursements, reimbursements,
if any)(1) Fees(2) if any)(1)(3) if any)(1)(3)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Advisor Core Value Fund 0.00% 1.00% 1.16% 2.16%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Value Opportunities Fund 0.40% 1.00% 1.01% 2.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Contrarian Fund 0.00% 1.16% 2.16%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor REIT Fund 0.00% 1.00% 1.31% 2.31%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Blue Chip Growth Fund 0.00% 1.00% 1.16% 2.16%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund 0.00% 1.00% 1.21% 2.21%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund 0.00% 1.00% 1.16% 2.16%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 0.00% 1.00% 1.21% 2.21%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund 0.40% 1.00% 1.01% 2.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% 1.00% 1.21% 2.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund 0.10% 1.00% 1.21% 2.31%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology &
Communications Fund 0.20% 1.00% 1.21% 2.41%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund 0.00% 1.00% 1.01% 2.01%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% 1.00% 1.06% 2.06%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund 0.00% 1.00% 0.86% 1.86%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund 0.00% 1.00% 0.86% 1.86%
================================================================================================================================
</TABLE>
14
<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% 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.
(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.
15
<PAGE>
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
------------------------------------------------------------------------------
PBHG Advisor High Yield Fund $72 $ 97
- -------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund $70 $ 91
- -------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund $70 $ 91
===============================================================================
16
<PAGE>
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
- -------------------------------------------------------------------------------
PBHGAdvisor 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 Expen
ses 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."
17
<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
Advisory Expenses (net of
Fees (net of fee waivers
(net of expense and 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 Fund 0.40% None 0.80% 1.20%
- --------------------------------------------------------------------------------------------------------------------------------
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 Fund 0.00% None 0.95% 0.95%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth Opportunities Fund 0.00% None 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Enhanced Equity Fund 0.00% None 0.95% 0.95%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Trend Fund 0.00% None 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Large Cap Concentrated Fund 0.40% None 0.80% 1.20%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Growth II Fund 0.20% None 1.00% 1.20%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor New Opportunities Fund 0.10% None 1.00% 1.10%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Global Technology &
Communications Fund 0.20% None 1.00% 1.20%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Master Fixed Income Fund 0.00% None 0.80% 0.80%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor High Yield Fund 0.00% None 0.85% 0.85%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Short-Term Government Fund 0.00% None 0.65% 0.65%
- --------------------------------------------------------------------------------------------------------------------------------
PBHG Advisor Cash Reserves Fund 0.00% None 0.65% 0.65%
================================================================================================================================
</TABLE>
18
<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:
Total
Advisory Other Operating
Fees Expenses Expenses
-------- -------- ---------
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%
19
<PAGE>
(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 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.
20
<PAGE>
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 $22
===============================================================================
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."
21
<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
o PBHG ADVISOR CORE VALUE FUND
o PBHG ADVISOR VALUE OPPORTUNITIES FUND
o PBHG ADVISOR NEW CONTRARIAN FUND
o PBHG ADVISOR REIT FUND
PBHG ADVISOR GROWTH FUNDS
o PBHG ADVISOR BLUE CHIP GROWTH FUND
o PBHG ADVISOR GROWTH OPPORTUNITIES FUND
o PBHG ADVISOR ENHANCED EQUITY FUND
o PBHG ADVISOR TREND FUND
PBHG ADVISOR AGGRESSIVE GROWTH FUNDS
o PBHG ADVISOR LARGE CAP CONCENTRATED FUND
o PBHG ADVISOR GROWTH II FUND
o PBHG ADVISOR NEW OPPORTUNITIES FUND
o PBHG ADVISOR GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
PBHG ADVISOR FIXED INCOME FUNDS
o PBHG ADVISOR MASTER FIXED INCOME FUND
o PBHG ADVISOR HIGH YIELD FUND
o PBHG ADVISOR SHORT-TERM GOVERNMENT 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, [_______________________________________________] or by calling
1-800-XXX-XXXX.
22
<PAGE>
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 "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.
23
<PAGE>
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 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.
24
<PAGE>
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 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.
25
<PAGE>
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 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.
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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).
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 $1 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:
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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
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.
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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 (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.
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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
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).
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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 stocks 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 only purchase 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, 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:
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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;
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.
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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.
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.
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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.
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.
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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 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, 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.
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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 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.
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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 (the "Liquidity Guidelines"). Rule 144A
securities are unregistered securities that may be resold only to "qualified
institutional buyers." In determining whether Rule 144A securities (or other
restricted securities) are liquid and therefore not subject to the 10%
limitation on illiquid securities, the Adviser or Wellington Management,
pursuant to the Liquidity Guidelines, will consider the following factors: (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); (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);
and (vi) other relevant factors. Investments in Rule 144A securities could have
the effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
these securities.
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 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.
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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.
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.
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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.
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).
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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 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,
150%; PBHG Advisor High Yield Fund, 200%; and PBHG Short-Term Government Fund,
300%. 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.
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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 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."
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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 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
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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 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
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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
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.
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.
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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
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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 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
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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 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.
Future 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
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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 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
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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.
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
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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 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
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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 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 reserve 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
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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 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 or IRA
account 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.
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
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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.
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.
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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.
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%
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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.
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
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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.
The term "purchaser" means:
o 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);
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o 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;
o 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;
o 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;
o 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.
Letters of Intent. A "purchaser," as previously defined, may pay reduced
initial sales charges by completing the
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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
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<PAGE>
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.
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.
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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 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, and (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.
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
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<PAGE>
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 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
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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 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
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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 beginning 15 days after
purchase, except as noted below.
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. 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 the Fixed Income Fund shares were directly purchased; net asset value
if such shares were acquired upon an exchange of an Equity Fund's shares; and
the difference in sales charge will apply if Equity Fund shares were 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.
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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 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. Shares purchased by check may not be exchanged until
it is determined that the check has cleared, which may take up to fifteen
business days from the date that the check is received.
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
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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
1-800-XXX-XXXX. 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 Individual Retirement Accounts ("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 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. While contributions to Roth IRAs are not tax-deductible
(while contributions to traditional IRAs may be), if you meet the distribution
requirements, you can withdraw your investments without paying any taxes on the
earnings. In additional to
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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 potential student under the age of 18. There is a $7.00 annual
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.
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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 may take up to 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.
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
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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 60 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, requests
for confirmation of the shareholder's Social Security Number and current
address, and mailings of confirmations promptly after the transaction.
By Wire
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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 writing checks on your account for $250 or more. To
establish this privilege, please call 1-800-XXX-XXX 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
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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 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.
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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.
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:
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(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 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
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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.
Reinstatement Privilege (Class A shares 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 Class A 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.
This reinvestment privilege does not apply to Class B shares.
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
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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 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 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
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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, several of the Funds have the same investment
objectives and follow substantially the same investment strategies as 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 PBHG Advisor Value Opportunities Fund has the same objectives and follows
the same investment strategies as the PBHG Mid-Cap Value Fund (the "Mid-Cap
Value Fund")
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 December 31, 1997 was 41.48%.
PBHG Advisor Large Cap Concentrated Fund
The PBHG Advisor Large Cap Concentrated Fund has the same objectives and follows
the same investment strategies as 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 December 31, 1997 was 32.96%. The average annualized return for the
Large Cap 20 Fund since commencement of operations (December 2, 1996) through
December 31, 1997 was 28.04%.
PBHG Advisor Growth II Fund
The PBHG Advisor Growth II Fund has the same objectives and follows the same
investment strategies as 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
December 31, 1997 was 7.50%.
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PBHG Advisor Enhanced Equity Fund
The PBHG Advisor Enhanced Equity Fund acquired the assets and assumed 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 effective _________________, 1998. The Enhanced
Equity Portfolio was managed by Analytic, which manages the PBHG Advisor
Enhanced Equity Fund as its sub-adviser. The Fund has the same objectives and
follows substantially the same investment strategies and policies as the
Enhanced Equity Portfolio. For the one year period ended February 28, 1998, the
total return of the Enhanced Equity Portfolio was 37.09%. The average annual
total return for the Enhanced Equity Portfolio for the three-year period ended
February 28, 1998 was 30.75%. The average annual total return of the Enhanced
Equity Portfolio from July 1, 1993 (commencement of public offering) through
February 28, 1998 was 21.40%.
PBHG Advisor Master Fixed Income Fund
The PBHG Advisor Master Fixed Income Fund acquired the assets and assumed 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 effective _________________,
1998. The Master Fixed Income Portfolio was managed by Analytic, which manages
the PBHG Advisor Master Fixed Income Fund as its sub-adviser. The Fund has the
same objectives and follows substantially the same investment strategies and
policies as the Master Fixed Income Portfolio. For the one year period ended
February 28, 1998, the total return of the Master Fixed Income Portfolio was
11.11%. The average annual return for the Master Fixed Income Portfolio for the
three year period ended February 28, 1998 was 9.95%. The average annual total
return of the Master Fixed Income Portfolio from July 1, 1993 (commencement of
public offering) through February 28, 1998 was 7.70%.
PBHG Advisor Short-Term Government Fund
The PBHG Advisor Short-Term Government Fund acquired the assets and assumed 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 effective
_________________, 1998. The Short-Term Government Portfolio was managed by
Analytic, which manages the PBHG Advisor Short-Term Government Fund as its
sub-adviser. The Fund has the same objectives and follows substantially the same
investment strategies and policies as the Short-Term Government Portfolio. For
the one year period ended February 28, 1998, the total return of the Short-Term
Government Portfolio was 6.06%. The average annual return for the Short-Term
Government Portfolio for the three year period ended February 28, 1998 was
6.52%. The average annual total return of the Short-Term Government Portfolio
from July 1, 1993 (commencement of public offering) through February 28, 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. The PBHG Advisor Blue Chip Growth
Fund has the same objectives and follows substantially the same investment
strategies and policies as 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, 1997 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
from June 30, 1995 through August 29, 1997, the S&P 500 Index increased by
40.58% and 28.74% (annualized), respectively. For the same one year period and
for the period from June 30, 1995 through August 29, 1997, the Russell 1000
Growth Index increased by 39.36% and 28.37% (annualized), respectively. The PBHG
Advisor Growth Opportunities Fund and the Compass Large Cap Growth Portfolio are
separate funds and the historical performance of the Compass Large Growth
Portfolio is not indicative of the potential performance of the PBHG Advisor
Growth Opportunities Fund.
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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 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.
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Certain securities purchased by the PBHG Advisor Funds (such as U.S. Treasury
STRIPS, defined in "Glossary of Permitted Investments" in the Statement of
Additional Information) are sold with original issue discount and thus do not
make periodic cash interest payments. Each Fund will be required to include as
part 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 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.
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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 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
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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 joining 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 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 a sub-advisory agreement with the Company, on
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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 Fund, 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 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
AnalyticoTSA 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
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Income Fund, and PBHG Advisor Short-Term Government Fund, Analytic, subject to
the control and direction of the Company's 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 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, Harindra de Silva and Charles L. Dobson 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. Mr. Dobson is the Executive
Vice President of Analytic Optioned Equity Fund and has been a portfolio manager
of Analytic since 1978. 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
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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.
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
PBHG Fund Services, a wholly-owned subsidiary of the Adviser, 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.
SEI Fund Resources, 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 a fee at the annual rate of 0.07% of the average daily net
assets of each PBHG Advisor Fund with respect to $2.5 billion of the total
average daily net assets of the Company, The PBHG Funds, Inc., and PBHG
Insurance Series Fund, Inc., taken together, and a fee at the annual rate of
0.025% of the average daily net assets of each PBHG Advisor Fund with respect to
the total average daily net assets of the Company, The PBHG Funds, Inc., and
PBHG Insurance Series Fund, Inc., taken together, in excess of $2.5 billion.
The Transfer Agent
[Name and address of Transfer Agent] 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.
Shareholder Servicing Agents
PBHG Fund Services acts as shareholder servicing agent for the Company. UAM
Shareholder Services Center, Inc., an affiliate of the Adviser, acts as
sub-shareholder servicing agent for the Company.
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The Distributor
The Company has entered into distribution agreements relating to the PBHG
Advisor Funds (the "Distribution Agreements"), dated April 1, 1998, with PBHG
Fund Distributors (the "Distributor"), a registered broker-dealer and a wholly
owned subsidiary of the Advisor, 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 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
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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.
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.
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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.
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[------------------------].
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
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.
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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
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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 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.
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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 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.
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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 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
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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, 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.
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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.
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
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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.
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 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
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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).
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
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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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LOGO
PBHG ADVISOR FUNDS, INC.
PROSPECTUS
______________, 1998
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PBHG Advisor Funds, Inc.
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor:
PBHG Funds Distributor
LOGO
The Power of Discipline.
The rewards of time.(Servicemark)
Toopen an account, receive information,
make inquiries or request literature:
1-800-XXX-XXXX
<PAGE>
490960.005(B&F)
SUBJECT TO COMPLETION
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may any
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
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 __________. The Prospectus for
the Funds may be obtained by calling 1-800-XXX-XXXX.
<PAGE>
TABLE OF CONTENTS
Page
----
THE COMPANY.............................................................. S-2
DESCRIPTION OF PERMITTED INVESTMENTS..................................... S-2
INVESTMENT LIMITATIONS................................................... S-11
THE ADVISER.............................................................. S-14
THE SUB-ADVISERS......................................................... S-15
THE ADMINISTRATOR AND SUB-ADMINISTRATOR.................................. S-18
THE DISTRIBUTION PLANS................................................... S-19
THE DISTRIBUTOR.......................................................... S-21
HOW TO PURCHASE AND REDEEM SHARES........................................ S-22
THE CUSTODIANS........................................................... S-23
DIRECTORS AND OFFICERS OF THE COMPANY.................................... S-23
COMPUTATION OF YIELD..................................................... S-25
CALCULATION OF TOTAL RETURN.............................................. S-26
PURCHASE AND REDEMPTION OF SHARES........................................ S-27
DETERMINATION OF NET ASSET VALUE......................................... S-27
TAXES..................................................................... S-29
PORTFOLIO TRANSACTIONS.................................................... S-34
DESCRIPTION OF SHARES..................................................... S-35
5% AND 25% SHAREHOLDERS................................................... S-36
FINANCIAL STATEMENTS...................................................... S-36
________________, 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 articles of incorporation permit 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
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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 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
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increasing the level of a Fund's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
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.
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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
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
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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 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
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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 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
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transaction if the amount paid to purchase a call option is less or 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
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a securities index written by a Fund will be considered covered if, so long as
it is 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
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limit. The daily limit governs only price movement during a particular trading
day and therefore does not limit potential losses, because the 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
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secondary market on an exchange may exist. If a Fund is unable to effect a
closing 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.
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.
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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 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 permitted borrowing 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.
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.
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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.
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
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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).
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).
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
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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 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
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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).
Analytic o TSA Global Asset Management, Inc.
The Company, on behalf of the PBHG Advisor Enhanced Equity Fund, PBHG 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
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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.
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
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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.
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 on __________ 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
S-18
<PAGE>
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 __________, 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 Sub-Administrator is
entitled to a fee from the Administrator, which is calculated daily and paid
monthly, at (i) an annual rate of 0.07% of the average daily net assets of each
PBHG Advisor Fund with respect to the first $2.5 billion of the total average
daily net assets of the Company, The PBHG Funds, Inc. and PBHG Insurance Series
Fund, Inc. taken together and (ii) an annual rate of .025% of the average daily
net assets of each PBHG Advisor Fund with respect to the total average daily net
assets in excess of $2.5 billion of the Company, The PBHG Funds, Inc. and PBHG
Insurance Series Fund, Inc. taken together.
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
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.
S-19
<PAGE>
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 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.
S-20
<PAGE>
Unless the Plans are terminated earlier in accordance with their terms, the
Plans continue in effect until March 1, 2000, and thereafter, 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 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 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
S-21
<PAGE>
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.
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.
S-22
<PAGE>
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, 1-800-XXX-XXXX, 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.
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.
S-23
<PAGE>
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 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).
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.
- ------------
* 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.
S-24
<PAGE>
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:
<TABLE>
<CAPTION>
====================================================================================================================
Pension or
Retirement Total
Aggregate Benefits Estimated Compensation
Compensation Accrued as Part Annual from Registrant
Name of Person, from of Company Benefits Upon and Complex Fund
Position Registrant(1) Expenses Retirement Paid to Directors(2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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>
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<PAGE>
(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 "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.
S-26
<PAGE>
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, 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
S-27
<PAGE>
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 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
S-28
<PAGE>
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 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.
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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 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
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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 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.
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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 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
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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.
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
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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.
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.
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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, 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.
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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 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 __________, the following persons were the only persons who were record
owners (or to the knowledge of the Fund, beneficial owners) of 5% or more of the
shares of the PBHG Advisor Funds. The Company believes that most of the shares
referred to below were held by the persons indicated in accounts for their
fiduciary, agency or custodial clients.
FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P. serves as the independent accountants
for the Company.
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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-1
<PAGE>
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.
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.
A-2
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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.
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.
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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.
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
A-4
<PAGE>
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.
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.
A-5
<PAGE>
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.
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.
A-6
<PAGE>
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:
A-7
<PAGE>
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+."
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-8
<PAGE>
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
To be filed by amendment
(b) Exhibits:
1(a) Articles of Incorporation (1)
(b) Articles Supplementary of Registrant
2 By-Laws (1)
3 Voting trust agreement - none
4 Not Applicable
5(a) Investment Advisory Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. dated April 1, 1998
5(b) Form of Investment Sub-Advisory Agreement by and among the
Registrant and Analytic o TSA Global Asset Management, Inc.
5(c) Investment Sub-Advisory Agreement by and among the Registrant, Pilgrim
Baxter & Associates, Ltd. and Wellington Management Company, LLP dated
April 1, 1998
5(d) Investment Sub-Advisory Agreement by and among the Registrant, Pilgrim
Baxter & Associates, Ltd. and Pilgrim Baxter Value Investors, Inc.
dated April 1, 1998
6(a) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class A Shares dated April 1, 1998
6(b) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class B Shares dated April 1, 1998
6(c) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class I Shares dated April 1, 1998
6(d) Form of Selected Dealer Agreement
6(e) Form of Bank Agency Agreement relating to shares of the Registrant
6(f) Form of Shareholder Service Agreement for sale of shares of the
Registrant
7 Bonus, profit sharing or pension plans - none
<PAGE>
8 Form of Custodian Agreement between the Registrant and CoreStates
Bank, N.A.
9(a) Administrative Services Agreement by and between the Registrant and
PBHG Fund Services dated April 1, 1998
9(b) Form of Sub-Administrative Services Agreement by and among the
Registrant, PBHG Fund Services and SEI Fund Resources
9(c) Expense Limitation Agreement by and between the Registrant, on behalf
of each portfolio, of the Registrant and Pilgrim Baxter & Associates,
Ltd. dated April 1, 1998
11(a) Consent of Independent Accountants
11(b) Consent of Ballard Spahr Andrews & Ingersoll, LLP
12 Not Applicable
13 Form of Stock Subscription Agreement
14 Not Applicable
15(a) Distribution Plan of the Registrant pursuant to Rule 12b-1 relating to
Class A Shares dated April 1, 1998
15(b) Distribution Plan of the Registrant pursuant to Rule 12b-1 relating to
Class B Shares dated April 1, 1998
16 Not applicable
17 Not Applicable
18 Multiple Class Plan of the Registrant pursuant to Rule 18f-3 dated
April 1, 1998
24(a) Directors' Power of Attorney
24(b) Officers' Power of Attorney
27 Not Applicable
- ----------------
(1) Incorporated herein by reference to Registrant's Registration Statement
on Form N-1A (File Nos. 333-44193 and 811-08605) as filed electronically
with the Commission on January 13, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons that are controlled by or under common control with the
Registrant.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
None
ITEM 27. INDEMNIFICATION
The Articles of Incorporation of the Registrant include the following:
ARTICLE VII
7.4 Indemnification. The Corporation, including its successors and assigns,
shall indemnify its directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in accordance with the procedures
required, by the General Laws of the State of Maryland and the 1940 Act. The
By-Laws may provide that the Corporation shall indemnify its employees and/or
agents in any manner and within such limits as permitted by applicable law. Such
indemnification shall be in addition to any other right or claim to which any
director, officer, employee or agent may otherwise be entitled. The Corporation
may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise or employee benefit plan, against any
liability (including, with respect to employee benefit plans, excise taxes)
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Corporation would have had the
power to indemnify against such liability. The rights provided to any person by
this Article 7.4 shall be enforceable against the Corporation by such person who
shall be presumed to have relied upon such rights in serving or continuing to
serve in the capacities indicated herein. No amendment of these Articles of
Incorporation shall impair the rights of any person arising at any time with
respect to events occurring prior to such amendment.
The By-Laws of the Registrant include the following:
ARTICLE VI
Indemnification
"The Corporation shall indemnify (a) its Directors and officers, whether serving
the Corporation or at its request any other entity, to the full extent required
or permitted by (i) Maryland law now or hereafter in force, including the
advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and be permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be permitted
by law."
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
C-3
<PAGE>
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.
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, 825 Duportail Road
Treasurer and Chief Investment Wayne, PA 19087
Officer
Pilgrim Baxter Value Investors, Inc. Director
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Name and Position with Pilgrim
Baxter & Associates, Ltd. Name of Other Company Connection with Other Company
- ------------------------------ --------------------- -----------------------------
<S> <C> <C>
Paul J. Hondros Pilgrim Baxter Value Investors, Inc. President and Chief Operating Officer
President and Chief Operating
Officer PBHG Fund Distributors President and Trustee
825 Duportail Road
Wayne, PA 19087
Brian F. Bereznak Pilgrim Baxter Value Investors, Inc. Director
Chief Operating Officer
(from 1989 through 1996) PBHG Fund Services President and Trustee
Eric C. Schneider Pilgrim Baxter Value Investors, Inc. Chief Financial Officer and Treasurer
Chief Financial Officer
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
PBHG Fund Services General Counsel and Secretary
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 (1989 - 1996)
Director
PBHG Fund Services President and Trustee
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Position with Pilgrim
Baxter Value Investors, Inc. Name of Other Company Connection with Other Company
- ------------------------------ --------------------- -----------------------------
<S> <C> <C>
Gary L. Pilgrim Pilgrim Baxter & Associates, Ltd. Director, Chief Investment Officer,
Director President, (4/95 - 10/97), Secretary
(4/95 - 11/96)
PBHG Fund Services Trustee
825 Duportail Road
Wayne, PA 19087
Paul J. Hondros Pilgrim Baxter & Associates, Ltd President and Chief Executive Officer
President and Chief Executive
Officer PBHG Fund Distributors President and Trustee
825 Duportail Road
Wayne, PA 19087
David W. Jennings Pilgrim Baxter & Associates, Ltd. Director of Client
Director, President and Chief 825 Duportail Road Service
Executive Officer (6/96 - 12/97) 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
Name and Position with Analytic o TSA
Global Asset Management, Inc. Name of Other Company Connection with Other Company
- ------------------------------------- --------------------- -----------------------------
TBA TBA TBA
Name and Position with Wellington
Management Company, LLP Name of Other Company Connection with Other Company
- --------------------------------- --------------------- -----------------------------
TBA TBA TBA
</TABLE>
C-6
<PAGE>
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.
Registrant's distributor, PBHG Fund Distributors, acts as distributor for:
Class A, Class B and Class I Shares of the PBHG Advisor Funds
(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.
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:
C-7
<PAGE>
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:
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-8
<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. 1 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
4th day of March, 1998.
PBHG ADVISOR FUNDS, INC.
Registrant
By: /s/ Harold J. Baxter
---------------------
Harold J. Baxter
Chairman and Director
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment No. 1 to the Registration Statement has been signed below by the
following persons on the 4th day of March, 1998 in the capacities and on the
dates indicated.
SIGNATURE AND TITLE DATE
/s/ Harold J. Baxter Chairman and Director March 4, 1998
- -------------------- -------------
Harold J. Baxter
* Director March 4, 1998
- -------------------- -------------
John R. Bartholdson
* Director March 4, 1998
- -------------------- -------------
Jettie M. Edwards
* Director March 4, 1998
- -------------------- -------------
Albert A. Miller
/s/ Gary L. Pilgrim President March 4, 1998
- -------------------- -------------
Gary L. Pilgrim
/s/ Paul J. Hondros Executive Vice President March 4, 1998
- -------------------- -------------
Paul J. Hondros
/s/Brian F. Bereznak Vice President March 4, 1998
- -------------------- -------------
Brian F. Bereznak
/s/ Lee T. Cummings Treasurer, Chief Financial Officer March 4, 1998
- -------------------- and Controller -------------
Lee T. Cummings
*By: /s/ John M. Zerr
----------------
John M. Zerr
Attorney-in-Fact
<PAGE>
EXHIBIT LIST
Exhibit
Number Description
- ------- -----------
Ex-99.B1(b) Articles Supplementary of Registrant
Ex-99.B5(a) Investment Advisory Agreement between the Registrant
and Pilgrim Baxter & Associates, Ltd. dated April 1,
1998
Ex-99.B5(b) Form of Investment Sub-Advisory Agreement by and among
the Registrant, Pilgrim Baxter & Associates, Ltd. and
Analytic TSA Global Asset Management, Inc.
Ex-99.B5(c) Investment Sub-Advisory Agreement by and among the
Registrant, Pilgrim Baxter & Associates, Ltd. and
Wellington Management Company, LLP dated April 1,
1998
Ex-99.B5(d) Investment Sub-Advisory Agreement by and among the
Registrant, Pilgrim Baxter & Associates, Ltd. and
Pilgrim Baxter Value Investors, Inc. dated April 1, 1998
Ex-99.B6(a) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class A Shares dated April 1, 1998
Ex-99.B6(b) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class B Shares dated April 1, 1998
Ex-99.B6(c) Distribution Agreement between the Registrant and PBHG Fund
Distributors relating to Class I Shares dated April 1, 1998
Ex-99.B6(d) Form of Selected Dealer Agreement
Ex-99.B6(e) Form of Bank Agency Agreement relating to shares of
the Registrant
Ex-99.B6(f) Form of Shareholder Service Agreement for sale of
shares of the Registrant
Ex-99.B8 Form of Custodian Agreement between the Registrant and
CoreStates Bank, N.A.
Ex-99.B9(a) Administrative Services Agreement by and between the
Registrant and PBHG Fund Services dated April 1, 1998
<PAGE>
Exhibit
Number Description
- ------- -----------
Ex-99.B9(b) Form of Sub-Administrative Services Agreement
by and among the Registrant, PBHG Fund Series and SEI Fund
Resources
Ex-99.B9(c) Expense Limitation Agreement by and between the
Registrant, on behalf of each portfolio, of the Registrant
and Pilgrim Baxter & Associates, Ltd. dated April 1,
1998
Ex-99.B11(a) Consent of Independent Accountants
Ex-99.B11(b) Consent of Ballard Spahr Andrews & Ingersoll, LLP
Ex-99.B13 Form of Stock Subscription Agreement
Ex-99.B15(a) Distribution Plan of the Registrant pursuant to Rule 12b-1
relating to Class A Shares dated April 1, 1998
Ex-99.B15(b) Distribution Plan of the Registrant pursuant to Rule 12b-1
relating to Class B Shares dated April 1, 1998
Ex-99.B18 Multiple Class Plan of the Registrant pursuant to
Rule 18f-3 dated April 1, 1998
Ex-99.B24(a) Directors' Power of Attorney
Ex-99.B24(b) Officers' Power of Attorney
Exhibit 99.B1(b)
PBHG ADVISOR FUNDS, INC.
ARTICLES SUPPLEMENTARY
PBHG ADVISOR FUNDS, INC., a Maryland corporation registered as an open-end
investment company under the Investment Company Act of 1940, as amended, having
its principal office in the State of Maryland in the City of Baltimore
(hereinafter called the "Corporation"), hereby certifies to the State Department
of Assessments and Taxation of Maryland that:
FIRST: The sole Director of the Corporation has adopted resolutions to
increase the aggregate number of shares of capital stock which the Corporation
shall have the authority to issue from 5,000,000,000 to 10,000,000,000 shares
with a par value of $.001 each.
SECOND: Immediately prior to the filing of these Articles Supplementary,
the Corporation had authority to issue 5,000,000,000 shares with a par value of
$.001 each, all of which shares have been designated as Common Stock and which
shares were classified in the following series (portfolios):
(a) 300,000,000 shares of the PBHG Advisor Core Value Fund series (of
which 100,000,000 shares were classified as Class A Shares; 100,000,000 as Class
B Shares; and 100,000,000 as Class I Shares);
<PAGE>
300,000,000 shares of the PBHG Advisor Blue Chip Growth Fund series (of which
100,000,000 shares were 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 were 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 were 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 were 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 were 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 were
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 were 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 were
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
2
<PAGE>
PBHG Advisor Global Technology & Communications Fund series (of which
100,000,000 shares were 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 were
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 were 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
were classified as Class A Shares; 100,000,000 as Class B Shares; and
100,000,000 as Class I); 300,000,000 shares of the PBHG Advisor REIT Fund series
(of which 100,000,000 shares were classified as Class A Shares; 100,000,000 as
Class B shares; and 100,000,000 as Class I); and 300,000,000 shares of the PBHG
Advisor Master Fixed Income Fund series (of which 100,000,000 were classified as
Class A Shares; 100,000,000 as Class B; and 100,000,000 as Class I).
(b) The remaining 500,000,000 shares designated as Common Stock were
without further classification.
3
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THIRD: All the shares of Common Stock of the Corporation, both classified
and unclassified, collectively had an aggregate par value of $5,000,000.
FOURTH: As of the filing of these Articles Supplementary, the Corporation
shall have authority to issue 10,000,000,000 shares with a par value of $.001
each, all of which shares shall be designated as Common Stock and which shares
shall be classified in the following series (portfolios):
(a) 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
4
<PAGE>
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
5
<PAGE>
Shares; and 100,000,000 as Class I); 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); 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; and 100,000,000 as Class
I); and 300,000,000 shares of the PBHG Advisor Short- Term Government Fund
series (of which 100,000,000 shall be classified as Class A Shares; 100,000,000
as Class B; and 100,000,000 as Class I).
(b) The remaining 5,200,000,000 shares designated as Common Stock are
without further classification.
FIFTH: Unissued shares of Common Stock (both classified and unclassified)
may be classified and reclassified by the sole Director.
SIXTH: All the shares of Common Stock of the Corporation, both classified
and unclassified, collectively have an aggregate par value of $10,000,000.
SEVENTH: The preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of each class of Shares of Common Stock as set forth in
ARTICLE V of
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the Corporation's Charter, including such provisions with respect to Class B
Shares alone as are set forth in subsection (g) of section 5.2 of Article V, and
in the provisions of the Charter relating to stock of the Corporation generally,
remain unchanged.
EIGHTH: The shares of the Corporation authorized, designated and classified
pursuant to these Articles Supplementary have been so authorized by the sole
Director of the Corporation 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.
7
<PAGE>
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 January 30, 1998.
PBHG ADVISOR FUNDS, INC.
Witness:
/s/ John M. Zerr By: /s/ Gary L. Pilgrim
- -------------------------- -------------------------------
John M. Zerr, Secretary Gary L. Pilgrim, President
8
Exhibit 99.B5(a)
PBHG ADVISOR FUNDS, INC.
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, entered into as of this 1st day of April, 1998, between
Pilgrim Baxter & Associates, Ltd. (the "Adviser") and PBHG Advisor Funds, Inc.
(the "Company").
WHEREAS, the Company is a Maryland corporation organized under Articles
of Incorporation dated January 8, 1998 (the "Articles"), and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end,
management investment company;
WHEREAS, the Company wishes to retain the Adviser to render investment
advisory services to the Company and the Adviser is willing to furnish such
services to the portfolios listed on Schedule A hereto (the "Funds");
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Company and the Adviser as
follows:
1. APPOINTMENT. The Company hereby appoints the Adviser to act as
investment adviser to the Company for the periods and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. INVESTMENT ADVISORY DUTIES. Subject to the supervision of the
Directors of the Company, the Adviser will, (a) provide a program of continuous
investment management for the Funds in accordance with the Funds' investment
objectives, policies and limitations as stated in each Fund's Prospectus and
Statement of Additional Information included as part of the Company's
Registration Statement filed with the Securities and Exchange Commission, as
they may be amended from time to time, copies of which shall be provided to the
Adviser by the Company; (b) make investment decisions for the Funds; and (c)
place orders to purchase and sell securities for the Funds.
In performing its investment management services to the Funds
hereunder, the Adviser will provide the Funds with ongoing investment guidance
and policy direction, including oral and written research, analysis, advice,
statistical and economic data and judgments regarding individual investments,
general economic conditions and trends and long-range investment policy. The
Adviser will determine the securities, instruments,
<PAGE>
repurchase agreements, options, futures and other investments and techniques
that the Funds will purchase, sell, enter into or use, and will prove an ongoing
evaluation of the Funds' investments. The Adviser will determine what portion of
the Funds' investments shall be invested in securities and other assets, and
what portion, if any, should be held uninvested. The Adviser shall furnish to
the Company adequate (i) office space, which may be space within the offices of
the Adviser or in such other places as may be agreed upon from time to time and
(ii) office furnishings, facilities and equipment as may be reasonably required
for managing the corporate affairs and conducting the business of the Company,
including complying with the corporate reporting requirements of the various
states in which the Company does business, and conducting correspondence and
other communications with the stockholders of the Company. The Adviser shall
employ or provide and compensate the executive, secretarial and clerical
personnel necessary to provide such services. Subject to the approval of the
Board of Directors (including a majority of the Directors who are not
"interested persons" of the Company as defined in the 1940 Act) and of the
shareholders of the Company, the Adviser may delegate to a sub-adviser its
duties enumerated in Section 2 hereof. The Adviser shall continue to supervise
the performance of any such sub-adviser and shall report regularly thereon to
the Company's Board of Directors. The Adviser further agrees that, in performing
its duties hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code of 1986, as amended (the
"Code"), and all other applicable federal and state laws and regulations, and
with any applicable procedures adopted by the Directors;
(b) use reasonable efforts to manage each Fund so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for
each Fund directly with the issuer, or with any broker or dealer, in accordance
with applicable policies expressed in each Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements;
(d) furnish to the Company whatever statistical information
the Company may reasonably request with respect to each Fund's assets or
contemplated investments. In addition, the Adviser will keep the Fund and the
Directors informed of developments materially affecting each Funds's investments
and shall, on the Adviser's own initiative, furnish to the Company from time to
time whatever information the Adviser believes appropriate for this purpose;
(e) make available to the Company, promptly upon its request,
such copies of the Adviser's investment records and ledgers with respect of the
Funds as may be
2
<PAGE>
required to assist the Company in its compliance with applicable laws and
regulations. The Adviser will furnish the Directors with such periodic and
special reports regarding each Fund as they may reasonably request; and
(f) immediately notify the Company in the event that the
Adviser or any of its affiliates: (1) becomes aware that it is subject to a
statutory disqualification that prevents the Adviser from serving as investment
adviser pursuant to this Agreement; or (2) becomes aware that it is the subject
of an administrative proceeding or enforcement action by the Securities and
Exchange Commission ("SEC") or other regulatory authority. The Adviser further
agrees to notify the Company immediately of any material fact known to the
Adviser respecting or relating to the Adviser that is not contained in the
Company's Registration Statement, or any amendment or supplement thereto, but
that is required to be disclosed therein, and of any statement contained therein
that becomes untrue in any material respect.
3. ADDITIONAL SERVICES. If the Company so requests, the Adviser shall
also maintain all internal bookkeeping, accounting and auditing services and
records in connection with maintaining the Company's financial books and
records, and shall calculate each Fund's daily net asset value. For these
services, each Fund shall pay to the Adviser a monthly fee, which shall be in
addition to the fees payable pursuant to Section 5 hereof, to reimburse the
Adviser for its costs, without profit, for performing such services.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically
provided in this Section 4, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as officers and executive
employees of the Company (including the Company's share of payroll taxes for
such persons), and the Adviser shall make available, without expense to the
Company, the service of its directors, officers and employees who may be
duly-elected officers of the Company, subject to their individual consent to
serve and to any limitations imposed by law.
The Adviser shall not be required to pay any expenses of the Company
other than those specifically allocated to the Adviser in this Section 4. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Company's employees as are officers or employees of the Adviser
whose services may be involved, for the following expenses of the Company;
organization and certain offering expenses of the Company (including
out-of-pocket expenses, but not including the Adviser's overhead and employee
costs); fees payable to the Adviser and to any other Company advisers or
consultants; legal expenses, auditing and accounting expenses; interest
expenses; telephone, telex, facsimile, postage and other communications
expenses; taxes and governmental fees; fees, dues and expenses incurred by or
with respect to the Company in connection with membership in investment company
trade organizations; costs of insurance relating to fidelity coverage for the
3
<PAGE>
Company's officers and employees; fees and expenses of the Company's custodian,
any sub-custodian, shareholder servicing agent, transfer agent, registrar, or
dividend disbursing agent; payments to the Adviser for maintaining the Company's
financial books and records and calculating the daily net asset value pursuant
to Section 3 hereof, other payments for portfolio pricing or valuation services
to pricing agents, accountants, bankers and other specialists, if any; expenses
of preparing share certificates; other expenses in connection with the issuance,
offering, distribution, sale or redemption of securities issued by the Company;
expenses relating to investor and public relations; expenses of registering and
qualifying shares of the Company for sale, freight, insurance and other charges
in connection with the shipment of the Company's portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
or other assets of the Company, or of entering into other transactions or
engaging in any investment practices with respect to the Company; expenses of
printing and distributing Prospectuses, Statements of Additional Information,
reports, notices and dividends to stockholders; costs of stationery; any
litigation expenses; costs of stockholders' meetings; the compensation and all
expenses (specifically including travel expenses relating to the Company's
business) of officers, directors and employees of the Company who are not
interested persons of the Adviser; and travel expenses (or an appropriate
portion thereof) of officers or directors of the Company who are officers,
directors or employees of the Adviser to the extent that such expenses relate to
attendance at meetings of the Board of Directors of the Company with respect to
matters concerning the Company, or any committees thereof or advisers thereto.
5. COMPENSATION. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, except for any additional services
provided by the Adviser pursuant to Section 3 hereof, each Fund will pay the
Adviser at the end of each calendar month an advisory fee as set forth in
Schedule A hereto. The advisory fee is computed daily as a percentage of each
portfolio's average daily net assets. The "average daily net assets" of a Fund
shall mean the average of the values placed on the Fund's net assets on each day
on which the net asset value of the Fund is determined. The value of net assets
of the Fund shall be determined pursuant to the applicable provisions of the
Articles and the Registration Statement. If, pursuant to such provisions, the
determination of net asset value is suspended for any particular business day,
then for the purposes of this Section 5, the value of the net assets of the Fund
as last determined shall be deemed to be the value of its net assets as of the
close of regular trading on the New York Stock Exchange, or as of such other
time as the value of the net assets of the Fund's securities may lawfully be
determined, on that day. If the determination of the net asset value of the
shares of a Fund has been so suspended for a period including any month and when
the Adviser's compensation is payable at the end of such month, then such value
shall be computed on the basis of the value of the net assets of the Fund as
last determined (whether during or prior to such month). If the Fund determines
the value of the net assets more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this Section 5.
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<PAGE>
6. BOOKS AND RECORDS. The Adviser agrees to maintain such books and
records with respect to its services to the Company as are required by Section
31 under the 1940 Act, and rules adopted thereunder, and by other applicable
legal provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and 31a-2
under the 1940 Act as otherwise in connection with its services hereunder are
the property of the Company and will be surrendered promptly to the Company upon
its request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Company are being conducted in
accordance with applicable law and regulations. The books and records maintained
by the Adviser under this Section 6 shall be the property of the Company, and
the Adviser will surrender promptly to the Company any such records as the
Company may request; provided, however, that the Adviser may retain a copy of
such records.
7. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Adviser shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Company or the holders of the Company's
shares in connection with the matters to which this Agreement relates, provided
that nothing in this Agreement shall be deemed to protect or purport to protect
the Adviser against any liability to the Company or to holders of the Company's
shares to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of the Adviser's reckless disregard of its obligations and
duties under this Agreement. As used in this Section 7, the term "Adviser" shall
include any officers, directors, employees or other affiliates of the Adviser
performing services with respect to the Company.
8. SERVICES NOT EXCLUSIVE. It is understood that the services
of the Adviser are not exclusive, and that nothing in this Agreement shall
prevent the Adviser from providing similar services to other investment advisory
clients, other investment companies or to other series of investment companies,
or from engaging in other activities, provided such other services and
activities do not, during the term of the Agreement, interfere in a material
manner with the Adviser's ability to meet its obligations to the Company
hereunder. When the Adviser recommends the purchase or sale of the same security
for a Fund, it is understood that in light of its fiduciary duty to the Fund,
such transactions will be executed on a basis that is fair and equitable to the
Fund. In connection with purchases or sales of portfolio securities for the
account of a Fund, provided that portfolio transactions for a Fund may be
executed through firms affiliated with the Adviser, in accordance with
applicable legal requirements. If the Adviser provides any advice to its
5
<PAGE>
clients concerning the shares of the Company, the Adviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Company.
9. DURATION AND TERMINATION. This Agreement shall continue
until April 1, 1999, and thereafter shall continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Directors or (ii) a vote of a "majority" of each Fund's
outstanding voting securities (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the Directors who
are not "interested persons" of any party to this Agreement (as defined in the
1940 Act), by vote cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing, this Agreement may be
terminated as to a Fund (a) at any time without penalty by the Company upon the
vote of a majority of the Directors or by vote of the majority of the Fund's
outstanding voting securities, upon sixty (60) days' written notice to the
Adviser or (b) by the Adviser at any time without penalty, upon sixty (60) days'
written notice to the Company. This Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).
10. AMENDMENTS. No provision of this Agreement may be discharged,
waived, or terminated orally, but only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought, and no amendment of this Agreement shall be effective until approved
by an affirmative vote of (i) a majority of the outstanding voting securities of
the Company, and (ii) a majority of the Directors, including a majority of
Directors who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, if such
approval is required by applicable law.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State
of Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for
convenience only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected hereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
6
<PAGE>
(d) Nothing herein shall be construed as constituting the
Adviser as an agent of the Company.
IN WITNESS WHEREFORE, the parties hereto have caused this Agreement to
be executed by their officers designated below as of April 1, 1998.
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
-------------------------------
Title: Vice President
PILGRIM BAXTER & ASSOCIATES, LTD.
By: /s/ Eric C. Schneider
-------------------------------
Title:
7
<PAGE>
SCHEDULE A DATED APRIL 1, 1998
TO THE INVESTMENT ADVISORY AGREEMENT DATED
APRIL 1, 1998 BETWEEN
PBHG ADVISOR FUNDS, INC.
AND
PILGRIM BAXTER & ASSOCIATES, LTD.
Pursuant to Section 5 of this Agreement, each Fund shall pay
the Adviser, at the end of each calendar month, compensation computed daily at
an annual rate of the Fund's average daily net assets as follows:
FUND FEE
- ---- -----
PBHG Advisor Core Value Fund 0.60%
PBHG Advisor Blue Chip Growth Fund 0.60%
PBHG Advisor Global Technology & Communications Fund 0.85%
PBHG Advisor Growth II Fund 0.85%
PBHG Advisor Growth Opportunities Fund 0.65%
PBHG Advisor High Yield Fund 0.50%
PBHG Advisor Large Cap Concentrated Fund 0.85%
PBHG Advisor New Contrarian Fund 0.60%
PBHG Advisor Trend Fund 0.65%
PBHG Advisor Cash Reserves Fund 0.30%
PBHG Advisor Value Opportunities Fund 0.85%
PBHG Advisor New Opportunities Fund 0.75%
PBHG Advisor Enhanced Equity Fund 0.60%
PBHG Advisor Master Fixed Income Fund 0.45%
PBHG Advisor Short-Term Government Fund 0.30%
PBHG Advisor REIT Fund 0.75%
Exhibit 99.B5(b)
PBHG ADVISOR FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this _____ day of ______, 1998, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Analytic o TSA Global Asset
Management, Inc. (the "Sub-Adviser") and PBHG Advisor Funds, Inc., a Maryland
corporation (the "Company").
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, pursuant to the Investment Advisory Agreement dated ____________,
1998 and Schedule A dated ____________, 1998 between the Adviser and the
Company, the Adviser will act as investment adviser to certain series of the
Company as set forth in Schedule A attached hereto ("Funds"); and
WHEREAS, the Adviser and the Company each desire to retain the Sub-Adviser
to provide investment advisory services to the Company in connection with the
management of the Funds, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of each Fund
and the composition of each Fund's investment portfolio, including the purchase,
retention and disposition thereof, in accordance with each Fund's investment
objectives, policies and restrictions as stated in such Fund's Prospectus (such
Prospectus and Statement of Additional Information, as currently in effect and
as amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of each Fund's
investments and determine from time to time what investments and securities will
be purchased, retained or sold by each Fund, and what portion of the assets will
be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the Company's Charter
and the Prospectus and with the instructions and directions of the Adviser and
of the Board of Directors and will conform and comply with the requirements of
the 1940 Act, the Internal Revenue Code of 1986, as amended, and all other
applicable federal and state laws and regulations, as each is amended from time
to time.
<PAGE>
(3) The Sub-Adviser shall determine the securities to be purchased or
sold by each 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 such
Funds' Registration Statement (as defined herein) and Prospectus or as the Board
of Directors or the Adviser may direct from time to time, in conformity with
federal securities laws. In providing each Fund with investment supervision, the
Sub-Adviser will give primary consideration to securing the most favorable price
and efficient execution. Within the framework of this policy, the Sub-Adviser
may consider the financial responsibility, research and investment information
and other services provided by brokers or dealers who may effect or be a party
to any such transaction or other transactions to which the Sub-Adviser's other
clients may be a party. It is understood that it is desirable for each Fund that
the Sub-Advisor have access to supplemental investment and market research and
security and economic analysis provided by brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price and
efficient execution. Therefore, the Sub-Adviser is authorized to place orders
for the purchase and sale of securities for each Fund with brokers, subject to
review by the Company's Board of Directors from time to time with respect to the
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of a Fund as well as other clients of the
Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the Fund in
question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to each Fund's portfolio transactions required by subparagraphs (b)(5), (6),
(7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act and
shall render to the Company's Board of Directors such periodic and special
reports as the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Funds' Custodian on each business
day with information relating to all transactions concerning each Fund's assets
and shall provide the Adviser with such information upon request of the Adviser.
(6) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as long as such services do not
impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's officers or employees.
It is understood that the Sub-Adviser may obtain certain administrative
services, including, without limitation, services relating to trade
reconciliation and the production of client reports, from its parent company in
carrying out its obligations under this Agreement.
2
<PAGE>
(c) The Sub-Adviser shall keep each Fund's books and records required to be
maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement and
shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Funds required by Rule 31a-1 under the 1940 Act.
The Sub-Adviser agrees that all records that it maintains on behalf of each Fund
are property of the Funds and the Sub-Adviser will surrender promptly to a Fund
any of such records upon that Fund's request; provided, however, that the
Sub-Adviser may retain a copy of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by it pursuant to paragraph 1(a) of
this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to each Fund pursuant to the Advisory Agreement and shall oversee and
review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Statement Department of
Assessments and Taxation of the State of Maryland (such Articles of
Incorporation as in effect on the date of this Agreement, and as amended or
supplemented from time to time, are herein called the "Charter");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of this
Agreement, and as amended from time to time, are herein called the "ByLaws");
(c) A copy of the resolutions of the Company's Board of Directors
authorizing the appointment of the Adviser and the Sub-Adviser and approving the
form of this Agreement; and
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Funds and
shares of common stock of the Funds, and all amendments thereto.
4. For the services to be provided by the Sub-Adviser pursuant, to this
Agreement for each of the Funds set forth in Schedule A, the Adviser will pay to
the Sub-Adviser as full compensation therefor a fee at an annual rate as
specified in Schedule A. Each such fee will be paid to the Sub-Adviser from the
Adviser's advisory fee for such Fund.
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Fund or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
3
<PAGE>
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated (a) by a Fund at any time, without the payment of
any penalty, by the vote of a majority of Directors of the Company or by the
vote of a majority of the outstanding voting securities of a Fund, (b) by the
Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Funds, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the porions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the Sub-Adviser or its clients in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of a Fund.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among he
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
4
<PAGE>
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Sub-Adviser at:
700 South Flower Street
Suite 2400
Los Angeles, CA 90017
To the Company or a Fund at:
825 Duportail Road
Wayne, PA 19087
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. PBHG ADVISOR FUNDS, INC.
By: By:
----------------------------- -------------------------------
Title: Title:
ANALYTIC o TSA Global Asset Management, INC.
By:
----------------------------------------
Title:
5
<PAGE>
SCHEDULE A DATED ___________, 1998
Pursuant to Section 4 of this Agreement, the Sub-Adviser for each Fund listed
below shall be entitled to compensation, to be paid by the Adviser, which shall
be computed daily and paid monthly at the annual rate specified below with
respect to each Fund's average daily net assets:
FUND FEE
---- ---
PBHG Advisor Enhanced Equity Fund 0.40%
PBHG Advisor Master Fixed Income Fund 0.25%
PBHG Advisor Short-Term Government Fund 0.10%
Exhibit 99.B5(c)
PBHG ADVISOR FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of April, 1998, by and among Pilgrim
Baxter & Associates, Ltd., a Pennsylvania partnership (the "Adviser"),
Wellington Management Company, LLP, a Massachusetts limited liability
partnership (the "Sub- Adviser"), and PBHG Advisor Funds, Inc., a Maryland
corporation (the "Company").
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 1, 1998 (the "Advisory Agreement") with the Company, pursuant to
which the Adviser will act as investment adviser to the PBHG Advisor Cash
Reserves Fund (the "Fund"); and
WHEREAS, the Adviser and the Company each desire to retain the Sub-
Adviser to provide investment sub-advisory services to the Company in connection
with the management of the Fund, and the Sub-Adviser is willing to render such
investment sub- advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of
the Fund and the composition of the Fund's portfolio, including the
purchase, retention and disposition thereof, in accordance with the
Fund's investment objectives, policies and restrictions as stated in
the Fund's Prospectus (such Prospectus and the Statement of Additional
Information, as currently in effect and as amended or supplemented from
time to time, being herein called the "Prospectus"), and subject to the
following:
(1) The Sub-Adviser shall 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 Fund's assets will be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under this
Agreement, the Sub-Adviser shall act in conformity with the
Company's Charter (as defined herein) and the Prospectus and with
the instructions and
<PAGE>
directions of the Adviser and of the Board of Directors of the
Company and will conform to and comply with the requirements of the
1940 Act, the Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as each is
amended from time to time.
(3) The Sub-Adviser 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 (as
defined herein) and Prospectus or as the Board of Directors or the
Adviser may direct from time to time, in conformity with federal
securities laws. In providing the Fund with investment sub-advisory
services, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within
the framework of this policy, the Sub- Adviser may consider the
financial responsibility, research and investment information and
other services provided by brokers or dealers who may effect or be
a party to any such transaction or other transactions to which the
Sub-Adviser's other clients may be a party. It is understood that
it is desirable for the Fund that the Sub-Adviser have access to
supplemental investment and market research and security and
economic analysis provided by brokers who may execute brokerage
transactions at higher cost to the Fund than may result when
allocating brokerage to other brokers on the basis of seeking the
most favorable price and efficient execution. Therefore, the
Sub-Adviser is authorized to place orders for the purchase and sale
of securities for the Fund with such brokers, subject to review by
the Company's Board of Directors from time to time with respect to
the extent and continuation of this practice. It is understood that
the services provided by such brokers may be useful to the
Sub-Adviser in connection with the Sub-Adviser's services to other
clients.
On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as other
clients of the Sub-Adviser, the Sub-Adviser, to the extent
permitted by applicable laws and regulations, may, but shall be
under no obligation to, aggregate the securities to be so purchased
or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the
Sub-Adviser in the manner it considers to be the most equitable and
consistent with its fiduciary obligation to the Fund and to such
other clients.
2
<PAGE>
(4) The Sub-Adviser shall maintain all books and records with respect
to the Fund's portfolio transactions required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of rule
31a-1 under the 1940 Act and shall render to the Board of Directors
such periodic and special reports as the Board of Directors may
reasonably request.
(5) The Sub-Adviser shall provide the Fund's Custodian on each business
day with information relating to all transactions concerning the
Fund's assets and shall provide the Adviser with such information
upon request of the Adviser.
(6) The investment sub-advisory services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-
Adviser shall be free to render similar services to others, as long
as such services do not impair the services rendered to the Adviser
or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement may be
furnished through the medium of any of the Sub-Adviser's partners,
officers or employees.
(c) The Sub-Adviser shall keep the Fund's books and records required to be
maintained by the Sub-Adviser pursuant to paragraph 1(a) of this
Agreement and shall timely furnish to the Adviser all information
relating to the Sub- Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the Fund required by
Rule 31a-1 under the 1940 Act. The Sub-Adviser agrees that all records
that it maintains on behalf of the Fund are property of the Fund and
the Sub-Adviser will surrender promptly to the Fund any of such records
upon the Fund's request; provided, however, that the Sub-Adviser may
retain a copy of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to
paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Fund pursuant to the Advisory Agreement and shall oversee
and review the Sub- Adviser's performance of its duties under this
Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if
any:
3
<PAGE>
(a) The Company's Articles of Incorporation, as filed with the Department
of Assessments and Taxation of the State of Maryland (such Articles of
Incorporation, as in effect on the date of this Agreement and as
amended and supplemented from time to time, herein called the
"Charter");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of this
Agreement and as amended from time to time, are herein called the
"By-Laws");
(c) Certified resolutions of the Board of Directors authorizing the
appointment of the Adviser and the Sub-Adviser with respect to the
Fund, and approving the form of this Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as filed
with the Securities and Exchange Commission (the "Commission") relating
to the Fund and shares of the Fund's common stock, and all amendments
thereto;
(e) Notification of Registration of the Company under the 1940 Act on Form
N-8A as filed with the Commission, and all amendments thereto; and
(f) Prospectus of the Fund.
4. For the services to be provided by the Sub-Adviser pursuant to this
Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser agrees
to accept as full compensation therefore a sub-advisory fee at an annual
rate of .075% of the average daily net assets of the Fund up to and
including $500 million and .020% of the average daily net assets of the Fund
over $500 million. The Fund is subject to a minimum annual sub-advisory fee
of $50,000. This fee will be computed daily and paid to the Sub-Adviser
monthly.
5. The Sub-Adviser shall not be liable for any error of judgment or for any
loss suffered by the Fund or the Adviser in connection with performance of
its obligations under this Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services
(in which case any award of damages shall be limited to the period and the
amount set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting
from willful misfeasance, bad faith or gross negligence on the Sub-
Adviser's part in the performance of its duties or from reckless disregard
of its obligations and duties under this Agreement, except as may otherwise
be provided under provisions of applicable state law which cannot be waived
or modified hereby.
4
<PAGE>
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however, that
this Agreement may be terminated with respect to the Fund (a) by the Fund 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 Fund, (b) by the Adviser at any time, without the
payment of any penalty, on not more than 60 days' nor less than 30 days'
written notice to the other parties, or (c) by the Sub-Adviser at any time,
without the payment of any penalty, on 90 days' written notice to the other
parties. This Agreement shall terminate automatically and immediately in the
event of its assignment. As used in this Section 6, the terms "assignment"
and "vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the Commission
under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's partners, officers, or employees to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or
dissimilar nature, nor limit or restrict the Sub-Adviser's right to engage
in any other business or to render services of any kind to any other
corporation, firm, individual or association.
8. During the term of this Agreement,the Adviser agrees to furnish the
Sub-Adviser at it principal office all prospectuses, proxy statements,
reports to stockholders, sales literature or other materials prepared for
distribution to stockholders of the Fund, the Company or the public that
refer to the Sub-Adviser or its clients in any way prior to use thereof and
not to use material if the Sub-Adviser reasonably objects in writing within
five business days (or such other period as may be mutually agreed) after
receipt thereof. The Sub-Adviser's right to object to such materials is
limited to the portions of such materials that expressly relate to the
Sub-Adviser, its services and its clients. The Adviser agrees to use its
reasonable best efforts to ensure that materials prepared by its employees
or agents or its affiliates that refer to the Sub-Adviser or its clients in
any way are consistent with those materials previously approved by the Sub-
Adviser as referenced in the first sentence of this paragraph. Sales
literature may be furnished to the Sub-Adviser by first class or overnight
mail, facsimile transmission equipment or hand delivery.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved
by the vote of the majority of the outstanding voting securities of the
Fund.
5
<PAGE>
10. This Agreement shall be governed by the laws of the State of Maryland;
provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings
relating to this Agreement's subject matter. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an
original, but such counterparts shall, together, constitute only one
instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
Pilgrim Baxter & Associates, Ltd.
825 Duportail Road
Wayne, PA 19087
Attention: President
To the Sub-Advisor at:
Wellington Management Company, LLP
75 State Street
Boston, MA 02109
Attention: Legal Department
To the Company or the Fund at:
PBHG Advisor Funds, Inc.
825 Duportail Road
Wayne, PA 19087
Attention: President
Any party may change its address for notices or reports
hereunder by giving notice of such change to the other parties
in accordance with this Section 13.
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the
Commission, whether of
6
<PAGE>
special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
15. In the event that there is a change in the partners of the Sub-Adviser, the
Adviser will notify the Adviser and the Company within a reasonable period
of time.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. WELLINGTON MANAGEMENT
COMPANY, LLP
By: /s/ Eric C. Schneider By: /s/
---------------------------------- ----------------------------
Title: Chief Financial Officer Title: Senior Vice President
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
----------------------------------
Title: Vice President
7
Exhibit 99.B5(d)
PBHG ADVISOR FUNDS, INC.
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 1st day of April, 1998, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Pilgrim Baxter Value Investors, Inc.
(the "Sub-Adviser") and PBHG Advisor Funds, Inc., a Maryland corporation (the
"Company").
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, pursuant to the Investment Advisory Agreement dated April 1,
1998 and Schedule A dated April 1, 1998 between the Adviser and the Company, the
Adviser will act as investment adviser to certain series of the Company as set
forth in Schedule A attached hereto ("Funds"); and
WHEREAS, the Adviser and the Company each desire to retain the
Sub-Adviser to provide investment advisory services to the Company in connection
with the management of the Funds, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of each Fund
and the composition of each Fund's investment portfolio, including the purchase,
retention and disposition thereof, in accordance with each Fund's investment
objectives, policies and restrictions as stated in such Fund's Prospectus (such
Prospectus and Statement of Additional Information, as currently in effect and
as amended or supplemented from time to time, being herein called the
"Prospectus"), and subject to the following understandings:
(1) The Sub-Adviser shall provide supervision of each Fund's
investments and determine from time to time what investments and securities will
be purchased, retained or sold by each Fund, and what portion of the assets will
be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity with the Company's
Charter and the Prospectus and with the instructions and directions of the
Adviser and of the Board of Directors and will conform and comply with the
requirements of the 1940 Act, the Internal Revenue Code of 1986, as amended, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
<PAGE>
(3) The Sub-Adviser shall determine the securities to be
purchased or sold by each 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 such Funds' Registration Statement (as defined herein) and
Prospectus or as the Board of Directors or the Adviser may direct from time to
time, in conformity with federal securities laws. In providing each Fund with
investment supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the framework
of this policy, the Sub-Adviser may consider the financial responsibility,
research and investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for each Fund that the Sub-Advisor have access
to supplemental investment and market research and security and economic
analysis provided by brokers who may execute brokerage transactions at a higher
cost to the Fund than may result when allocating brokerage to other brokers on
the basis of seeking the most favorable price and efficient execution.
Therefore, the Sub-Adviser is authorized to place orders for the purchase and
sale of securities for each Fund with brokers, subject to review by the
Company's Board of Directors from time to time with respect to the extent and
continuation of this practice. It is understood that the services provided by
such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or
sale of a security to be in the best interest of a Fund as well as other clients
of the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund in question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with
respect to each Fund's portfolio transactions required by subparagraphs (b)(5),
(6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the 1940 Act
and shall render to the Company's Board of Directors such periodic and special
reports as the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Funds' Custodian on each
business day with information relating to all transactions concerning each
Fund's assets and shall provide the Adviser with such information upon request
of the Adviser.
(6) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this Agreement
may be furnished through the medium of any of the Sub-Adviser's officers or
employees. It is understood that the Sub-Adviser may obtain certain
administrative services, including, without limitation, services relating to
trade reconciliation and the production of client reports, from its parent
company in carrying out its obligations under this Agreement.
2
<PAGE>
(c) The Sub-Adviser shall keep each Fund's books and records required
to be maintained by the Sub-Adviser pursuant to paragraph 1(a) of this Agreement
and shall timely furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by the Adviser to keep the
other books and records of the Funds required by Rule 31a-1 under the 1940 Act.
The Sub-Adviser agrees that all records that it maintains on behalf of each Fund
are property of the Funds and the Sub-Adviser will surrender promptly to a Fund
any of such records upon that Fund's request; provided, however, that the
Sub-Adviser may retain a copy of such records. The Sub-Adviser further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any such
records as are required to be maintained by it pursuant to paragraph 1(a) of
this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to each Fund pursuant to the Advisory Agreement and shall oversee and
review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Statement Department
of Assessments and Taxation of the State of Maryland (such Articles of
Incorporation as in effect on the date of this Agreement, and as amended or
supplemented from time to time, are herein called the "Charter");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"ByLaws");
(c) A copy of the resolutions of the Company's Board of Directors
authorizing the appointment of the Adviser and the Sub-Adviser and approving the
form of this Agreement; and
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Funds and
shares of common stock of the Funds, and all amendments thereto.
4. For the services to be provided by the Sub-Adviser pursuant, to this
Agreement for each of the Funds set forth in Schedule A, the Adviser will pay to
the Sub-Adviser as full compensation therefor a fee at an annual rate as
specified in Schedule A. Each such fee will be paid to the Sub-Adviser from the
Adviser's advisory fee for such Fund.
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Fund or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
3
<PAGE>
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated (a) by a Fund at any time, without the payment of
any penalty, by the vote of a majority of Directors of the Company or by the
vote of a majority of the outstanding voting securities of a Fund, (b) by the
Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Funds, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed) after receipt thereof. The
Sub-Adviser's right to object to such materials is limited to the porions of
such materials that expressly relate to the Sub-Adviser, its services and its
clients. The Adviser agrees to use its reasonable best efforts to ensure that
materials prepared by its employees or agents or its affiliates that refer to
the Sub-Adviser or its clients in any way are consistent with those materials
previously approved by the Sub-Adviser as referenced in the first sentence of
this paragraph. Sales literature may be furnished to the Sub-Adviser by
first-class or overnight mail, facsimile transmission equipment or hand
delivery.
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of a Fund.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among he
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
4
<PAGE>
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Sub-Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Company or a Fund at:
825 Duportail Road
Wayne, PA 19087
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. PBHG ADVISOR FUNDS, INC.
By: /s/ Eric C. Schneider By: /s/ Brian F. Bereznak
--------------------------------------- -------------------------
Title: Chief Financial Officer Title: Vice President
PILGRIM BAXTER VALUE INVESTORS, INC.
By: /s/ Harold J. Baxter
---------------------------------------
Title: Chairman and Chief Executive Officer
5
<PAGE>
SCHEDULE A DATED APRIL 1, 1998
Pursuant to Section 4 of this Agreement, the Sub-Adviser for each Fund listed
below shall be entitled to compensation, to be paid by the Adviser, which shall
be computed daily and paid monthly at the annual rate specified below with
respect to each Fund's average daily net assets:
FUND FEE
---- -----
PBHG Advisor Core Value Fund 0.40%
PBHG Advisor Value Opportunities Fund 0.65%
PBHG New Contrarian Fund 0.40%
PBHG REIT Fund 0.55%
Exhibit 99.B6(a)
DISTRIBUTION AGREEMENT
between
PBHG ADVISOR FUNDS, INC.
(CLASS A SHARES)
and
PBHG FUND DISTRIBUTORS
THIS AGREEMENT made as of this 1st day of April, 1998, by and between
PBHG ADVISOR FUNDS, INC., a Maryland corporation (the "Company"), with respect
to the Class A shares ("Shares") of each portfolio of the Company set forth on
Schedule A to this agreement (the "Portfolios" and each individually a
"Portfolio"), and PBHG FUND DISTRIBUTORS, a Pennsylvania business trust (the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Appointment of Distributor. The Company hereby appoints the
Distributor as its exclusive agent for the sale of Shares to the public directly
and through investment dealers and other financial institutions in the United
States and throughout the world in accordance with the terms of the current
prospectus applicable thereto.
2. Sales of Shares. The Company shall not sell any Shares except
through the Distributor and under the terms and conditions set forth in
paragraph 4 below. Notwithstanding the provisions of the foregoing sentence,
however:
(A) The Company may issue Shares otherwise than through the Distributor
in connection with the payment or reinvestment of dividends or distributions;
<PAGE>
(B) The Company may issue Shares of a Portfolio to any other investment
company or personal holding company, or to the shareholders thereof, in exchange
for all or a majority of the shares or assets of any such company;
(C) The Company may issue Shares of a Portfolio at their net asset
value in connection with certain classes of transactions or to certain classes
of persons, in accordance with Rule 22d-1 under the Investment Company Act of
1940, as amended (the "1940 Act"), provided that any such class is specified in
the then current prospectus with respect to those Shares; and
(D) The Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares of a Portfolio.
3. Acceptance of Appointment. The Distributor hereby accepts
appointment as exclusive agent for the sale of Shares and agrees that it will
use its best efforts to sell Shares; provided, however, that:
(A) The Distributor may, and when requested by the Company on behalf of
any Portfolio shall, suspend its efforts to effectuate sales of Shares of such
Portfolio at any time when, in the opinion of the Distributor or of the Company,
no sales should be made because of market or other economic considerations or
abnormal circumstances of any kind;
(B) The Company may withdraw the offering of Shares of any Portfolio
(i) at any time with the consent of the Distributor, or (ii) without such
consent when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction; and
(C) The Distributor, as agent, does not undertake to sell any specific
amount of Shares.
4. Offering and Redemption of Shares.
(A) The public offering price of Shares shall be the net asset value
per share of Shares of the applicable Portfolio plus any sales charge set forth
in the prospectus. Net asset value per share shall be determined in accordance
with the provisions applicable to such Portfolio in the then current prospectus
and statement of additional information with respect to Shares. The Distributor
may establish a schedule of contingent deferred sales charges to be imposed at
the time of redemption of Shares (the "CDSC"), and such schedule shall be
disclosed in the current prospectus with respect to Shares. Such schedule of the
CDSC may reflect variations in or waivers of such charges on redemptions of
Shares, either
2
<PAGE>
generally to the public or to any specified class of shareholders and/or in
connection with any specified class of transactions, in accordance with
applicable rules and regulations and/or exemptive relief granted by the
Securities and Exchange Commission, and as set forth in the current prospectus
with respect to Shares. The Distributor and the Company shall apply any then
applicable scheduled variation in or waiver of the CDSC uniformly to all
shareholders and/or all transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other financial
institutions through whom Shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales commissions
shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers and financial institutions where such payments are made
under a distribution plan adopted by the Company pursuant to Rule 12b-1 under
the 1940 Act.
(D) The Company shall redeem Shares from shareholders in accordance
with the terms set forth from time to time in the current prospectus and
statement of additional information with respect to Shares. The price to be paid
to a shareholder to redeem Shares shall be equal to the net asset value of
Shares being redeemed ("gross redemption proceeds"), less any applicable CDSC,
calculated pursuant to the then applicable schedule of the CDSC ("net redemption
proceeds"). The Distributor shall be entitled to receive the amount of the CDSC
that has been subtracted from gross redemption proceeds. The Company shall pay
or cause the Company's transfer agent to pay the applicable CDSC to the
Distributor on the date net redemption proceeds are payable to the redeeming
shareholder.
5. Distributor as Agent. The Distributor shall act as an agent of the
Company in connection with the sale and redemption of Shares and the provision
of shareholder services pursuant to paragraph 9 hereof. Except with respect to
such sales and redemptions and shareholder services, the Distributor shall act
as principal in all matters relating to the promotion of the sale of Shares and
shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into agreements with
investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and sell
Shares to the public upon the terms and conditions set forth therein, which
shall not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer or financial institution shall not act
as an agent of the Company.
3
<PAGE>
6. Company Expenses. The Company shall pay, or arrange for others to
pay, the following expenses:
(A) (i) expenses of preparation, printing and distribution to
shareholders of prospectuses and statements of additional information; (ii)
expenses of preparation, printing and distribution of shareholder reports and
other communications required by law to shareholders; (iii) registration of
Shares under the federal securities laws; (iv) qualification of Shares for sale
in such states as the Distributor and the Company may approve; (v) maintenance
of facilities for the issue and transfer of Shares; (vi) expenses of provision
of information, prices and other data to be furnished by the Company under this
Agreement; and (vii) taxes applicable to the sale or delivery of Shares or
certificates therefor; and
(B) All legal expenses in connection with the foregoing.
7. Distributor Expenses. Except as otherwise provided herein, the
Distributor shall pay, or arrange for others to pay, all of the following
expenses: (i) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders), and any other promotional or sales literature used by the
Distributor or furnished by the Distributor to dealers in connection with such
public offerings, and expenses of advertising in connection with such public
offerings; (ii) payments to sales representatives of the Distributor and at the
discretion of the Distributor to qualified brokers, dealers and others in
respect of the sale of Shares; (iii) compensation and expenses of employees of
the Distributor who engage in or support distribution of Shares; and (iv) the
cost of obtaining such information, analysis, and reports with respect to
marketing and promotional activities as the Company may from time to time
reasonably request.
8. Distribution Fees.
(A) In accordance with the Company's distribution plan in respect of
Shares (the "Plan") the Company agrees: (i) to pay to the Distributor or, at the
Distributor's direction, to a third party, monthly in arrears on or prior to the
5th Business Day of the following calendar month an amount equal to 0.25 of 1%
per annum of the average daily net asset value of Shares of each Portfolio
outstanding from time to time, and (ii) to withhold from redemption proceeds in
respect of Shares of each Portfolio the CDSC payable in respect of such
redemption as provided in the prospectus with respect to Shares and to pay the
same over to
4
<PAGE>
such Distributor or at its direction at the time the redemption proceeds in
respect of such redemption are payable to the holder of Shares redeemed.
(B) The amounts paid under paragraph 8(A)(i) shall be used by the
Distributor to pay shareholder service fees to dealers, financial institutions
and 401(k) service providers pursuant to shareholder service agreements as
provided in paragraph 10 hereof. To the extent any portion of such amount is not
so disbursed, it may be retained by the Distributor first for any shareholder
services it provides and then as reimbursement for its expenses or as
compensation for its other services rendered hereunder.
(C) The Company will not take any action to waive or change any CDSC in
respect of Shares of a Portfolio, except as provided in the prospectus or
statement of additional information with respect to Shares as in effect as of
the date hereof, without the consent of the Distributor and the permitted
assigns of all or any portion of its right to the Distributor's CDSC.
9. Shareholder Service Agreements and Fees.
(A) Pursuant to the Plan and this Agreement, the Distributor, as agent
of the Company, may enter into shareholder service agreements (each a
"Shareholder Service Agreement") with investment dealers and financial
institutions (collectively "Service Providers") selected by the Distributor for
the provision of certain continuing personal services to customers of such
Service Providers who have purchased Shares. Such agreements shall authorize
Service Providers to provide continuing personal shareholder services to their
customers upon the terms and conditions set forth therein, which shall not be
inconsistent with the provisions of this Agreement. Each Shareholder Service
Agreement shall provide that the Service Provider shall not act as an agent of
the Company.
(B) Each Shareholder Service Agreement may provide that the Service
Provider may receive a service fee in the amount of 0.25% of the average daily
net assets of Shares of a Portfolio held by customers of such Service Provider,
provided that such Service Provider furnishes continuing personal shareholder
services to its customers in respect of such Shares. The continuing personal
services to be rendered by Service Providers under a Shareholder Service
Agreement may include, but shall not be limited to, some or all of the
following: distributing sales literature; answering routine customer inquiries
concerning the Company; assisting customers in changing dividend elections,
options, account designations and addresses, and in enrolling in any of several
special investment plans offered in connection with the purchase of Shares;
assisting in the establishment and maintenance of or establishing and
maintaining customer
5
<PAGE>
accounts and records and the processing of purchase and redemption transactions;
performing subaccounting; investing dividends and any capital gains
distributions automatically in Shares; providing periodic statements showing a
customer's account balance and the integration of such statements with those of
other transactions and balances in the customer's account serviced by the
Service Provider; forwarding applicable prospectuses, proxy statements, reports
and notices to customers who hold Shares and providing such other information
and services as the Company or the customers may reasonably request.
(C) The Distributor may advance service fees payable to Service
Providers pursuant to the Plan or any other distribution plan adopted by the
Company with respect to Shares of one or more of the Portfolios pursuant to Rule
12b-1 under the 1940 Act; and thereafter the Distributor may be reimbursed for
such advances through retention of service fee payments during the period for
which the service fees were advanced.
10. Limitation on Order Acceptance. The Distributor will accept orders
for the purchase of Shares only to the extent of purchase orders actually
received and not in excess of such orders, and it will not avail itself of any
opportunity of making a profit by expediting or withholding orders. It is
mutually understood and agreed that the Company may reject purchase orders
where, in the judgment of the Company, such rejection is in the best interest of
the Company.
11. Compliance with Laws. The Company and the Distributor shall each
comply with all applicable provisions of the 1940 Act, the Securities Act of
1933, as amended, and of all other federal and state laws, rules and regulations
governing the issuance and sale of Shares.
12. Indemnification.
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company shall indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, as amended, or common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained in
any registration statement or prospectus with respect to Shares, or any omission
to state a material fact therein, the omission of which makes any statement
contained therein misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company or Shares
6
<PAGE>
may incur arising out of or based upon (i) any act or deed of the Distributor or
its sales representatives which has not been authorized by the Company in any
prospectus or in this Agreement and (ii) the Company's reliance on the
Distributor's books, records, calculations and notices hereunder.
(B) The Distributor shall indemnify the Company against any and all
claims, demands, liabilities and expenses which the Company may incur under the
Securities Act of 1933, as amended, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus with respect to Shares, or any omission to
state a material fact therein if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the transfer agent(s) of the
Shares, or for any failure of any such transfer agent to perform its duties.
13. No Conflict with Laws. Nothing herein contained shall be deemed to
require the Company or the Distributor to take any action contrary to its
Articles of Incorporation or By-Laws or Trust Instrument, 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. Effective Date. This Agreement shall become effective with respect
to Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not parties
to this Agreement or interested persons (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement, cast in person at a meeting called for
such purpose; shall continue in force and effect until two years from the
effective date, and from year to year thereafter, provided, that such
continuance is specifically approved with respect to Shares of each Portfolio at
least annually (a)(i) by the Board of Directors of the Company or (ii) by the
vote of a majority of the outstanding Shares of such Portfolio, and (b) by vote
of a majority of the Company's directors who are not parties to this Agreement
or "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any
party to this Agreement, cast in person at a meeting called for such purpose.
7
<PAGE>
15. Termination.
(A) This Agreement may be terminated with respect to Shares of any
Portfolio, at any time, without the payment of any penalty, by vote of the Board
of Directors of the Company or by vote of a majority of the outstanding Shares
of such Portfolio, or by the Distributor, on sixty (60) days' written notice to
the other party.
(B) This Agreement shall also automatically terminate in the event of
its assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
(C) The Transfer of the Distributor's rights to the Distributor's
Allocable Portion of Distribution Fees and the Distributor's Allocable CDSC
shall not cause a termination of this Agreement or be deemed to be an assignment
for purposes of paragraph 15(B) above.
16. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, the addresses of both the Company and the
Distributor shall be 825 Duportail Road, Wayne, PA 19087.
17. No Personal Liability. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any trustee, shareholder, officer, employee or agent of the
Distributor individually or personally, but are binding only upon the assets and
property of the Distributor and that the trustees, shareholders, officers,
employees and agents of the Distributor shall be entitled, to the fullest extent
permitted by applicable law, to the same limitation on personal liability as
stockholders of private corporations for profit.
18. Governing Law. This Agreement shall be deemed to be a contract made
in the Commonwealth of Pennsylvania and governed by, construed in accordance
with and enforced pursuant to the internal laws of the Commonwealth of
Pennsylvania without reference to its conflicts of laws rules.
19. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its trustees, officers,
employees or representatives is or shall be an employee of the Company in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control and conduct of its
agents and employees
8
<PAGE>
and for injury to such agents or employees or to others through its agents or
employees. The Distributor assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all employee taxes
thereunder.
20. Counterparts. 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.
(This space intentionally left blank)
9
<PAGE>
21. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect construction or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
-----------------------------
Name: Brian F. Bereznak
Title: Vice President
Attest:
/s/ John M. Zerr
- -----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
PBHG FUND DISTRIBUTORS
By: /s/ Lee T. Cummings
----------------------------
Name: Lee T. Cummings
Title: Vice President
Attest:
/s/ John M. Zerr
- ----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
10
<PAGE>
SCHEDULE A
PBHG ADVISOR FUNDS, INC.
PBHG Advisor Funds, Inc. consists of the following Funds, each of which
is subject to this Agreement:
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
Dated: April 1, 1998
Exhibit 99.B6(b)
DISTRIBUTION AGREEMENT
between
PBHG ADVISOR FUNDS, INC.
(CLASS B SHARES)
and
PBHG FUND DISTRIBUTORS
THIS AGREEMENT made as of this 1st day of April, 1998, by and between
PBHG ADVISOR FUNDS, INC., a Maryland corporation (the "Company"), with respect
to the Class B shares ("Shares") of each portfolio of the Company set forth on
Schedule A to this agreement (the "Portfolios" and each individually a
"Portfolio"), and PBHG FUND DISTRIBUTORS, a Pennsylvania business trust (the
"Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other
good and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Appointment of Distributor. The Company hereby appoints the
Distributor as its exclusive agent for the sale of Shares to the public directly
and through investment dealers and other financial institutions in the United
States and throughout the world in accordance with the terms of the current
prospectus applicable thereto. If subsequent to the termination of the
Distributor's services to the Company pursuant to this Agreement, the Company
retains the services of another distributor, the distribution agreement with
such distributor shall contain provisions comparable to paragraphs 4 and 8
hereof and Exhibit A hereto, and without limiting the generality of the
foregoing, will require such distributor to maintain and make available to the
Distributor records regarding sales, redemptions and reinvestments of Shares
necessary to implement the terms of paragraphs 4 and 8 hereof.
2. Sales of Shares. The Company shall not sell any Shares except
through the Distributor and under the terms and conditions set forth in
paragraph 4 below. Notwithstanding the provisions of the foregoing sentence,
however:
<PAGE>
(A) The Company may issue Shares otherwise than through the Distributor
in connection with the payment or reinvestment of dividends or distributions;
(B) The Company may issue Shares of a Portfolio to any other investment
company or personal holding company, or to the shareholders thereof, in exchange
for all or a majority of the shares or assets of any such company;
(C) The Company shall have the right to specify minimum amounts for
initial and subsequent orders for the purchase of Shares of a Portfolio.
3. Acceptance of Appointment. The Distributor hereby accepts
appointment as exclusive agent for the sale of Shares and agrees that it will
use its best efforts to sell Shares; provided, however, that:
(A) The Distributor may, and when requested by the Company on behalf of
any Portfolio shall, suspend its efforts to effectuate sales of Shares of such
Portfolio at any time when, in the opinion of the Distributor or of the Company,
no sales should be made because of market or other economic considerations or
abnormal circumstances of any kind;
(B) The Company may withdraw the offering of Shares of any Portfolio
(i) at any time with the consent of the Distributor, or (ii) without such
consent when so required by the provisions of any statute or of any order, rule
or regulation of any governmental body having jurisdiction; and
(C) The Distributor, as agent, does not undertake to sell any specific
amount of Shares.
4. Offering and Redemption of Shares.
(A) The public offering price of Shares shall be the net asset value
per share of Shares of the applicable Portfolio plus any sales charge set forth
in the prospectus. Net asset value per share shall be determined in accordance
with the provisions applicable to such Portfolio in the then current prospectus
and statement of additional information with respect to Shares. The Distributor
may establish a schedule of contingent deferred sales charges to be imposed at
the time of redemption of Shares (the "CDSC"), and such schedule shall be
disclosed in the current prospectus with respect to Shares. Such schedule of the
CDSC may reflect variations in or waivers of such charges on redemptions of
Shares, either generally to the public or to any specified class of shareholders
and/or in connection with any specified class of transactions, in accordance
with applicable
2
<PAGE>
rules and regulations and/or exemptive relief granted by the Securities and
Exchange Commission, and as set forth in the current prospectus with respect to
Shares. The Distributor and the Company shall apply any then applicable
scheduled variation in or waiver of the CDSC uniformly to all shareholders
and/or all transactions belonging to a specified class.
(B) The Distributor may pay to investment dealers and other financial
institutions through whom Shares are sold, such sales commission as the
Distributor may specify from time to time. Payment of any such sales commissions
shall be the sole obligation of the Distributor.
(C) No provision of this Agreement shall be deemed to prohibit any
payments by the Company to the Distributor or by the Company or the Distributor
to investment dealers and financial institutions where such payments are made
under a distribution plan adopted by the Company pursuant to Rule 12b-1 under
the 1940 Act.
(D) The Company shall redeem Shares from shareholders in accordance
with the terms set forth from time to time in the current prospectus and
statement of additional information with respect to Shares. The price to be paid
to a shareholder to redeem Shares shall be equal to the net asset value of
Shares being redeemed ("gross redemption proceeds"), less any applicable CDSC,
calculated pursuant to the then applicable schedule of the CDSC ("net redemption
proceeds"). The Distributor shall be entitled to receive the amount of the CDSC
that has been subtracted from gross redemption proceeds, provided that Shares
being redeemed were (i) issued by a Portfolio during the term of this Agreement
and any predecessor agreement between the Company and the Distributor or (ii)
issued by a Portfolio during or after the term of this Agreement or any
predecessor agreement between the Company and the Distributor in one or a series
of free exchanges of Shares for class B shares of another portfolio, which can
be traced to Shares or class B shares of another portfolio initially issued by a
Portfolio or such other portfolio during the term of this Agreement, any
predecessor agreement or any other distribution agreement with the Distributor
with respect to such other portfolio (the "Distributor's Allocable CDSC"). The
Company shall pay or cause the Company's transfer agent to pay the Distributor's
Allocable CDSC to the Distributor on the date net redemption proceeds are
payable to the redeeming shareholder.
(E) The Distributor shall maintain adequate books and records to
identify Shares (i) issued by a Portfolio during the term of this Agreement and
any predecessor agreement between the Company and the Distributor or (ii) issued
by a Portfolio during or after the term of this Agreement or any predecessor
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<PAGE>
agreement between the Company and the Distributor in one or a series of free
exchanges of Shares for class B shares of another portfolio, which can be traced
to Shares or class B shares of another portfolio initially issued by a Portfolio
or such other portfolio during the term of this Agreement, any predecessor
agreement or any other distribution agreement with the Distributor with respect
to such other portfolio and shall calculate the Distributor's Allocable CDSC, if
any, with respect to such Shares, upon their redemption. The Company shall be
entitled to rely on the Distributor's books, records and calculations with
respect to Distributor's Allocable CDSC.
5. Distributor as Agent. The Distributor shall act as an agent of the
Company in connection with the sale and redemption of Shares and the provision
of shareholder services pursuant to paragraph 9 hereof. Except with respect to
such sales and redemptions and shareholder services, the Distributor shall act
as principal in all matters relating to the promotion of the sale of Shares and
shall enter into all of its own engagements, agreements and contracts as
principal on its own account. The Distributor shall enter into agreements with
investment dealers and financial institutions selected by the Distributor,
authorizing such investment dealers and financial institutions to offer and sell
Shares to the public upon the terms and conditions set forth therein, which
shall not be inconsistent with the provisions of this Agreement. Each agreement
shall provide that the investment dealer or financial institution shall not act
as an agent of the Company.
6. Company Expenses. The Company shall pay, or arrange for others to
pay, the following expenses:
(A) (i) expenses of preparation, printing and distribution to
shareholders of prospectuses and statements of additional information; (ii)
expenses of preparation, printing and distribution of shareholder reports and
other communications required by law to shareholders; (iii) registration of
Shares under the federal securities laws; (iv) qualification of Shares for sale
in such states as the Distributor and the Company may approve; (v) maintenance
of facilities for the issue and transfer of Shares; (vi) expenses of provision
of information, prices and other data to be furnished by the Company under this
Agreement; and (vii) taxes applicable to the sale or delivery of Shares or
certificates therefor; and
(B) All legal expenses in connection with the foregoing.
4
<PAGE>
7. Distributor Expenses. Except as otherwise provided herein, the
Distributor shall pay, or arrange for others to pay, all of the following
expenses: (i) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders), and any other promotional or sales literature used by the
Distributor or furnished by the Distributor to dealers in connection with such
public offerings, and expenses of advertising in connection with such public
offerings; (ii) payments to sales representatives of the Distributor and at the
discretion of the Distributor to qualified brokers, dealers and others in
respect of the sale of Shares; (iii) compensation and expenses of employees of
the Distributor who engage in or support distribution of Shares; and (iv) the
cost of obtaining such information, analysis, and reports with respect to
marketing and promotional activities as the Company may from time to time
reasonably request.
8. Distribution Fees.
(A) In consideration of the Distributor's services as principal
distributor of Shares pursuant to this Agreement and the Company's distribution
plan in respect of Shares (the "Plan") the Company agrees: (i) to pay to the
Distributor or, at the Distributor's direction, to a third party, monthly in
arrears on or prior to the 5th Business Day of the following calendar month its
Allocable Portion (as hereinafter defined) of a fee (the "Distribution Fees")
equal to 0.75 of 1% per annum of the average daily net asset value of Shares of
each Portfolio outstanding from time to time, and (ii) to withhold from
redemption proceeds in respect of Shares of each Portfolio the Distributor's
Allocable CDSC payable in respect of such redemption as provided in the
prospectus with respect to Shares and to pay the same over to such Distributor
or at its direction at the time the redemption proceeds in respect of such
redemption are payable to the holder of Shares redeemed.
(B) The Distributor will be deemed to have performed all services
required to be performed in order to be entitled to receive its Allocable
Portion of the Distribution Fees payable in respect of Shares (including
Reinvested Shares, Exchange Shares and Free Appreciation Shares and any other
Shares that derive from a Commission Share as such terms are defined in the
Allocation Schedule attached hereto as Schedule B) upon the settlement of each
sale of a Commission Share of the Company taken into account in determining such
Distributor's Allocable Portion of such Distribution Fees.
(C) Notwithstanding anything to the contrary set forth in this
Agreement or (to the extent waiver thereof is permitted thereby) applicable law,
the
5
<PAGE>
Company's obligation to pay the Distributor's Allocable Portion of the
Distribution Fees payable in respect of Shares of a Portfolio shall not be
terminated or modified for any reason (including a termination of this
Agreement) except to the extent required by a change in the 1940 Act or the
Conduct Rules of NASD Regulation, Inc., in either case enacted or promulgated
after February __, 1998, or in connection with a Complete Termination (as
hereinafter defined) of the Plan.
(D) The Company will not take any action to waive or change any CDSC in
respect of Shares of a Portfolio, except as provided in the prospectus or
statement of additional information with respect to Shares as in effect as of
the date hereof, without the consent of the Distributor and the permitted
assigns of all or any portion of its right to the Distributor's Allocable CDSC.
(E) Notwithstanding anything to the contrary set forth in this
Agreement, neither the termination of the Distributor's role as principal
distributor of Shares, nor the termination of this Agreement nor the termination
of the Plan will terminate such Distributor's right to the Distributor's
Allocable CDSC in respect of Shares of the Company.
(F) Notwithstanding anything to the contrary in this Agreement, the
Distributor may assign, sell or pledge (collectively, a "Transfer") its rights
to its Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC earned by it (but not its obligations to the Company under this
Agreement) in respect of Shares of a Portfolio to raise funds to make the
expenditures related to the distribution of Shares of such Portfolio and in
connection therewith upon receipt of notice of such Transfer, the Company shall
pay, or cause to be paid to the assignee, purchaser or pledgee (collectively
with their subsequent transferees, "Transferees") such portion of the
Distributor's Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC in respect of Shares of any Portfolio so transferred in
connection with such Transfer. Except as provided in clause (C) above and
notwithstanding anything to the contrary in this Agreement, to the extent the
Distributor has transferred its rights as aforesaid, the Company's obligation to
pay the Distributor's Allocable Portion of the Distribution Fees and the
Distributor's Allocable CDSC payable in respect of Shares of a Portfolio shall
be absolute and unconditional and shall not be subject to dispute, offset,
counterclaim or any defense whatsoever, at law or equity, including without
limitation, any of the foregoing based on the insolvency or bankruptcy of the
Distributor (it being understood that such provision is not a waiver of the
Company's right to pursue the Distributor and enforce such claims against the
assets of the Distributor other than the Distributor's right to the
Distributor's Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC in respect of Shares of any Portfolio transferred in connection
with such Transfer). The Company agrees that each
6
<PAGE>
such Transferee is a third party beneficiary of the provisions of this clause
(F) but only insofar as these provisions relate to Distribution Fees and CDSCs
transferred to such Transferee.
(G) For purposes of this Agreement, the term Allocable Portion of
Distribution Fees payable in respect of Shares of a Portfolio shall mean the
portion of such Distribution Fees allocated to the Distributor in accordance
with the Allocation Schedule attached hereto as Schedule B.
(H) For purposes of this Agreement, the term Complete Termination in
respect of the Plan means a termination of the Plan involving the complete
cessation of the payment of Distribution Fees in respect of all Shares of a
Portfolio, and the complete cessation of the payment of distribution fees
pursuant to the Plan in respect of Shares of a Portfolio and of shares of any
successor fund or any fund acquiring a substantial portion of the assets of such
Portfolio and for every future class of shares which has substantially similar
characteristics to Shares of such Portfolio including the manner of payment and
amount of sales charge, contingent deferred sales charge or other similar
charges borne directly or indirectly by the holders of such shares.
(I) The Distributor shall maintain adequate books and records to permit
calculations periodically (but not less than monthly) of, and shall calculate on
a monthly basis, the Distributor's Allocable Portion of Distribution Fees and
the Distributor's Allocable CDSC to be paid to the Distributor. The officers of
the Company may modify the allocation procedures set forth in paragraph 4 and
Schedule B hereof in order to permit the Company's transfer agent to maintain
the data necessary to implement the substance of such allocation procedures and
to permit the Transfer of the Distributor's rights to the Distributor's
Allocable Portion of the Distribution Fees and the Distributor's Allocable CDSC.
The Company shall be entitled to rely on the Distributor's books, records and
calculations relating to the Distributor's Allocable Portion of Distribution
Fees and the Distributor's Allocable CDSC.
9. Shareholder Service Agreements and Fees.
(A) Pursuant to the Plan and this Agreement, the Distributor, as agent,
may enter into shareholder service agreements (each a "Shareholder Service
Agreement") with investment dealers and financial institutions (collectively
"Service Providers") selected by the Distributor for the provision of certain
continuing personal services to customers of such Service Providers who have
purchased Shares. Such agreements shall authorize Service Providers to provide
continuing personal shareholder services to their customers upon the terms and
7
<PAGE>
conditions set forth therein, which shall not be inconsistent with the
provisions of this Agreement. Each Shareholder Service Agreement shall provide
that the Service Provider shall not act as an agent of the Company.
(B) Each Shareholder Service Agreement may provide that the Service
Provider may receive a service fee in the amount of 0.25% of the average daily
net assets of Shares of a Portfolio held by customers of such Service Provider,
provided that such Service Provider furnishes continuing personal shareholder
services to its customers in respect of such Shares. The continuing personal
services to be rendered by Service Providers under a Shareholder Service
Agreement may include, but shall not be limited to, some or all of the
following: distributing sales literature; answering routine customer inquiries
concerning the Company; assisting customers in changing dividend elections,
options, account designations and addresses, and in enrolling in any of several
special investment plans offered in connection with the purchase of Shares;
assisting in the establishment and maintenance of or establishing and
maintaining customer accounts and records and the processing of purchase and
redemption transactions; performing subaccounting; investing dividends and any
capital gains distributions automatically in Shares; providing periodic
statements showing a customer's account balance and the integration of such
statements with those of other transactions and balances in the customer's
account serviced by the Service Provider; forwarding applicable prospectuses,
proxy statements, reports and notices to customers who hold Shares and providing
such other information and services as the Company or the customers may
reasonably request.
(C) The Distributor may advance service fees payable to Service
Providers pursuant to the Plan or any other distribution plan adopted by the
Company with respect to Shares of one or more of the Portfolios pursuant to Rule
12b-1 under the 1940 Act; and thereafter the Distributor may be reimbursed for
such advances through retention of service fee payments during the period for
which the service fees were advanced.
10. Limitation on Order Acceptance. The Distributor will accept orders
for the purchase of Shares only to the extent of purchase orders actually
received and not in excess of such orders, and it will not avail itself of any
opportunity of making a profit by expediting or withholding orders. It is
mutually understood and agreed that the Company may reject purchase orders
where, in the judgment of the Company, such rejection is in the best interest of
the Company.
11. Compliance with Laws. The Company and the Distributor shall each
comply with all applicable provisions of the 1940 Act, the Securities Act of
1933,
8
<PAGE>
as amended, and of all other federal and state laws, rules and regulations
governing the issuance and sale of Shares.
12. Indemnification.
(A) In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company shall indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, as amended, or common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained in
any registration statement or prospectus with respect to Shares, or any omission
to state a material fact therein, the omission of which makes any statement
contained therein misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company or Shares may incur arising out of or based upon (i)
any act or deed of the Distributor or its sales representatives which has not
been authorized by the Company in any prospectus or in this Agreement and (ii)
the Company's reliance on the Distributor's books, records, calculations and
notices hereunder.
(B) The Distributor shall indemnify the Company against any and all
claims, demands, liabilities and expenses which the Company may incur under the
Securities Act of 1933, as amended, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus with respect to Shares, or any omission to
state a material fact therein if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the
Distributor shall not be liable for any errors of the transfer agent(s) of the
Shares, or for any failure of any such transfer agent to perform its duties.
13. No Conflict with Laws. Nothing herein contained shall be deemed to
require the Company or the Distributor to take any action contrary to its
Articles of Incorporation or By-Laws or Trust Instrument, 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.
9
<PAGE>
14. Effective Date. This Agreement shall become effective with respect
to Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not parties
to this Agreement or interested persons (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement, cast in person at a meeting called for
such purpose; shall continue in force and effect until two years from the
effective date, and from year to year thereafter, provided, that such
continuance is specifically approved with respect to Shares of each Portfolio at
least annually (a)(i) by the Board of Directors of the Company or (ii) by the
vote of a majority of the outstanding Shares of such Portfolio, and (b) by vote
of a majority of the Company's directors who are not parties to this Agreement
or "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any
party to this Agreement, cast in person at a meeting called for such purpose.
15. Termination.
(A) This Agreement may be terminated with respect to Shares of any
Portfolio, at any time, without the payment of any penalty, by vote of the Board
of Directors of the Company or by vote of a majority of the outstanding Shares
of such Portfolio, or by the Distributor, on sixty (60) days' written notice to
the other party.
(B) This Agreement shall also automatically terminate in the event of
its assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
(C) The Transfer of the Distributor's rights to the Distributor's
Allocable Portion of Distribution Fees and the Distributor's Allocable CDSC
shall not cause a termination of this Agreement or be deemed to be an assignment
for purposes of paragraph 15(B) above.
16. Notice. Any notice under this Agreement shall be in writing,
addressed and delivered, or mailed postage prepaid, to the other party at such
address as the other party may designate for the receipt of notices. Until
further notice to the other party, the addresses of both the Company and the
Distributor shall be 825 Duportail Road, Wayne, PA 19087.
17. No Personal Liability. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any trustee, shareholder, officer, employee or agent of the
Distributor individually or personally, but are binding only upon the assets and
property of the Distributor and that the trustees, shareholders, officers,
employees and agents of
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<PAGE>
the Distributor shall be entitled, to the fullest extent permitted by applicable
law, to the same limitation on personal liability as stockholders of private
corporations for profit.
18. Governing Law. This Agreement shall be deemed to be a contract made
in the Commonwealth of Pennsylvania and governed by, construed in accordance
with and enforced pursuant to the internal laws of the Commonwealth of
Pennsylvania without reference to its conflicts of laws rules.
19. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its trustees, officers,
employees or representatives is or shall be an employee of the Company in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control and conduct of its
agents and employees and for injury to such agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employee taxes thereunder.
20. Counterparts. 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.
(This space intentionally left blank)
11
<PAGE>
21. Captions. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect construction or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in duplicate on the day and year first above written.
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
-----------------------------
Name: Brian F. Bereznak
Title: Vice President
Attest:
/s/ John M. Zerr
- -----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
PBHG FUND DISTRIBUTORS
By: /s/ Lee T. Cummings
-----------------------------
Name: Lee T. Cummings
Title: Vice President
Attest:
/s/ John M. Zerr
- -----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
12
<PAGE>
SCHEDULE A
PBHG ADVISOR FUNDS, INC.
PBHG Advisor Funds, Inc. consists of the following Funds, each of which
is subject to this Agreement:
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
Dated: April 1, 1998
A-1
<PAGE>
SCHEDULE B
The Distributor's Allocable Portion of Distribution Fees in respect of
each Portfolio shall be 100 percent until such time as the Distributor shall
cease to serve as exclusive distributor of the Shares of such Portfolio and
thereafter shall be a percentage, recomputed first on the date of any
termination of the Distributor's services as exclusive distributor of Shares of
any Portfolio and thereafter periodically (but not less than monthly),
representing the percentage of Shares of such Portfolio outstanding on each such
computation date allocated to the Distributor in accordance with the following
rules:
1. Definitions. For purposes of this Schedule B defined terms used
herein shall have the meaning assigned to such terms in the Distribution
Agreement and the following terms shall have the following meanings:
"Commission Shares" shall mean shares of the Portfolio or another
portfolio the redemption of which would, in the absence of the application of
some standard waiver provision, give rise to the payment of a CDSC and shall
include Commission Shares which due to the expiration of the CDSC period no
longer bear a CDSC.
"Distributor" shall mean the Distributor.
"Other Distributor" shall mean each person appointed as the exclusive
distributor for the Shares of the Portfolio after the Distributor ceases to
serve in that capacity.
2. Allocation Rules. In determining the Distributor's
Allocable Portion of Distribution Fees in respect of a particular Portfolio:
(a) There shall be allocated to the Distributor and each Other
Distributor all Commission Shares of such Portfolio which were sold while such
Distributor or such Other Distributor, as the case may be, was the exclusive
distributor for the Shares of the Portfolio, determined in accordance with the
transfer records maintained for such Portfolio.
(b) Reinvested Shares: On the date that any Shares are issued by
a Portfolio as a result of the reinvestment of dividends or other distributions,
whether ordinary income, capital gains or exempt-interest dividends or
distributions ("Reinvested Shares"), Reinvested Shares shall be allocated to the
Distributor and each Other Distributor in a number obtained by multiplying the
total
B-1
<PAGE>
number of Reinvested Shares issued on such date by a fraction, the numerator of
which is the total number of all Shares outstanding in such Portfolio as of the
opening of business on such date and allocated to the Distributor or Other
Distributor as of such date of determination pursuant to these allocation
procedures and the denominator is the total number of Shares outstanding as of
the opening of business on such date.
(c) Exchange Shares: There shall be allocated to the Distributor
and each Other Distributor, as the case may be, all Commission Shares of such
Portfolio which were issued during or after the period referred to in (a) as a
consequence of one or more free exchanges of Commission Shares of the Portfolio
or of another portfolio (other than Free Appreciation Shares as hereinafter
defined) (the "Exchange Shares"), which in accordance with the transfer records
maintained for such Portfolio can be traced to Commission Shares of the
Portfolio or another portfolio initially issued by the Company or such other
portfolio during the time the Distributor or such Other Distributor, as the case
may be, was the exclusive distributor for the Shares of the Portfolio or such
other portfolio.
(d) Free Appreciation Shares: Shares (other than Exchange Shares)
that were acquired by the holders of such Shares in a free exchange of Shares of
any other Portfolio, which represent the appreciated value of the Shares of the
exiting portfolio over the initial purchase price paid for the Shares being
redeemed and exchanged and for which the original purchase date and the original
purchase price are not identified on an on-going basis, shall be allocated to
the Distributor and each Other Distributor ("Free Appreciation Shares") daily in
a number obtained by multiplying the total number of Free Appreciation Shares
issued by the exiting portfolio on such date by a fraction, the numerator of
which is the total number of all Shares outstanding as of the opening of
business on such date allocated to the Distributor or such Other Distributor as
of such date of determination pursuant to these allocation procedures and the
denominator is the total number of Shares outstanding as of the opening of
business on such date.
(e) Redeemed Shares: Shares (other than Reinvested Shares and
Free Appreciation Shares) that are redeemed will be allocated to the Distributor
and each Other Distributor to the extent such Share was previously allocated to
the Distributor or such Other Distributor in accordance with the rules set forth
in 2(a) or (c) above. Reinvested Shares and Free Appreciation Shares that are
redeemed will be allocated to the Distributor and each Other Distributor daily
in a number obtained by multiplying the total number of Free Appreciation Shares
and Reinvested Shares being redeemed by such Portfolio on such date by a
fraction, the numerator of which is the total number of all Free Appreciation
Shares and Reinvested Shares of such Portfolio outstanding as of the opening of
business on
B-2
<PAGE>
such date allocated to the Distributor or such Other Distributor as of such date
of determination pursuant to these allocation procedures and the denominator is
the total number of Free Appreciation Shares and Reinvested Shares of such
Portfolio outstanding as of the opening of business on such date.
The Company shall use its best efforts to assure that the
transfer agents and sub-transfer agents for each Portfolio maintain the data
necessary to implement the foregoing rules. If, notwithstanding the foregoing,
the transfer agents or sub-transfer agents for such Portfolio are unable to
maintain the data necessary to implement the foregoing rules as written, or if
the Distributor shall cease to serve as exclusive distributor of the Shares of
the Portfolio, the Distributor and the Company agree to negotiate in good faith
with each other, with the transfer agents and sub-transfer agents for such
Portfolio and with any third party that has obtained an interest in the
Distributor's Allocable Portion of Distribution Fees in respect of such
Portfolio with a view to arriving at mutually satisfactory modifications to the
foregoing rules designed to accomplish substantially identical results on the
basis of data which can be made available.
B-3
Exhibit 99.B6(c)
DISTRIBUTION AGREEMENT
between
PBHG ADVISOR FUNDS, INC.
(CLASS I SHARES)
and
PBHG FUND DISTRIBUTORS
THIS AGREEMENT made as of this 1st day of April, 1998, by and between PBHG
ADVISOR FUNDS, INC., a Maryland corporation (the "Company"), with respect to the
Class I shares ("Shares") of each portfolio of the Company set forth on Schedule
A to this agreement (the "Portfolios" and each individually a "Portfolio"), and
PBHG FUND DISTRIBUTORS, a Pennsylvania business trust (the "Distributor").
W I T N E S S E T H:
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt whereof is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Appointment of Distributor. The Company hereby appoints the Distributor
as its exclusive agent for the sale of Shares to the public directly and through
investment dealers and other financial institutions in the United States and
throughout the world in accordance with the terms of the current prospectus
applicable thereto.
2. Sales of Shares. The Company shall not sell any Shares except through
the Distributor and under the terms and conditions set forth in paragraph 4
below. Notwithstanding the provisions of the foregoing sentence, however:
(A) The Company may issue Shares otherwise than through the Distributor in
connection with the payment or reinvestment of dividends or distributions;
<PAGE>
(B) The Company may issue Shares of a Portfolio to any other investment
company or personal holding company, or to the shareholders thereof, in exchange
for all or a majority of the shares or assets of any such company; and
(C) The Company shall have the right to specify minimum amounts for initial
and subsequent orders for the purchase of Shares of a Portfolio.
3. Acceptance of Appointment. The Distributor hereby accepts appointment as
exclusive agent for the sale of Shares and agrees that it will use its best
efforts to sell Shares; provided, however, that:
(A) The Distributor may, and when requested by the Company on behalf of any
Portfolio shall, suspend its efforts to effectuate sales of Shares of such
Portfolio at any time when, in the opinion of the Distributor or of the Company,
no sales should be made because of market or other economic considerations or
abnormal circumstances of any kind;
(B) The Company may withdraw the offering of Shares of any Portfolio (i) at
any time with the consent of the Distributor, or (ii) without such consent when
so required by the provisions of any statute or of any order, rule or regulation
of any governmental body having jurisdiction; and
(C) The Distributor, as agent, does not undertake to sell any specific
amount of Shares.
4. Offering and Redemption of Shares.
(A) The public offering price of Shares shall be the net asset value per
share of Shares of the applicable Portfolio as set forth in the prospectus. Net
asset value per share shall be determined in accordance with the provisions
applicable to such Portfolio in the then current prospectus and statement of
additional information with respect to Shares.
(B) The Company shall redeem Shares from shareholders in accordance with
the terms set forth from time to time in the current prospectus and statement of
additional information with respect to Shares. The price to be paid to a
shareholder to redeem Shares shall be equal to the net asset value of Shares
being redeemed.
5. Distributor as Agent. The Distributor shall act as an agent of the
Company in connection with the sale and redemption of Shares. Except with
respect to such sales and redemptions, the Distributor shall act as principal in
2
<PAGE>
all matters relating to the promotion of the sale of Shares and shall enter into
all of its own engagements, agreements and contracts as principal on its own
account. The Distributor shall enter into agreements with investment dealers and
financial institutions selected by the Distributor, authorizing such investment
dealers and financial institutions to offer and sell Shares to the public upon
the terms and conditions set forth therein, which shall not be inconsistent with
the provisions of this Agreement. Each agreement shall provide that the
investment dealer or financial institution shall not act as an agent of the
Company.
6. Company Expenses. The Company shall pay, or arrange for others to pay,
the following expenses:
(A) (i) expenses of preparation, printing and distribution to shareholders
of prospectuses and statements of additional information; (ii) expenses of
preparation, printing and distribution of shareholder reports and other
communications required by law to shareholders; (iii) registration of Shares
under the federal securities laws; (iv) qualification of Shares for sale in such
states as the Distributor and the Company may approve; (v) maintenance of
facilities for the issue and transfer of Shares; (vi) expenses of provision of
information, prices and other data to be furnished by the Company under this
Agreement; and (vii) taxes applicable to the sale or delivery of Shares or
certificates therefor; and
(B) All legal expenses in connection with the foregoing.
7. Distributor Expenses. Except as otherwise provided herein, the
Distributor shall pay, or arrange for others to pay, all of the following
expenses: (i) the expenses of printing from the final proof and distributing
prospectuses and statements of additional information (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this
Agreement (which shall not include those prospectuses and statements of
additional information, and supplements thereto, to be distributed to
shareholders), and any other promotional or sales literature used by the
Distributor or furnished by the Distributor to dealers in connection with such
public offerings, and expenses of advertising in connection with such public
offerings; (ii) payments to sales representatives of the Distributor and at the
discretion of the Distributor to qualified brokers, dealers and others in
respect of the sale of Shares; (iii) compensation and expenses of employees of
the Distributor who engage in or support distribution of Shares; and (iv) the
cost of obtaining such information, analysis, and reports with respect to
marketing and promotional activities as the Company may from time to time
reasonably request.
8. Limitation on Order Acceptance. The Distributor will accept orders for
the purchase of Shares only to the extent of purchase orders actually received
3
<PAGE>
and not in excess of such orders, and it will not avail itself of any
opportunity of making a profit by expediting or withholding orders. It is
mutually understood and agreed that the Company may reject purchase orders
where, in the judgment of the Company, such rejection is in the best interest of
the Company.
9. Compliance with Laws. The Company and the Distributor shall each comply
with all applicable provisions of the 1940 Act, the Securities Act of 1933, as
amended, and of all other federal and state laws, rules and regulations
governing the issuance and sale of Shares.
10. Indemnification.
(A) In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of the
Distributor, the Company shall indemnify the Distributor against any and all
claims, demands, liabilities and expenses which the Distributor may incur under
the Securities Act of 1933, as amended, or common law or otherwise, arising out
of or based upon any alleged untrue statement of a material fact contained in
any registration statement or prospectus with respect to Shares, or any omission
to state a material fact therein, the omission of which makes any statement
contained therein misleading, unless such statement or omission was made in
reliance upon, and in conformity with, information furnished to the Company in
connection therewith by or on behalf of the Distributor. The Distributor shall
indemnify the Company against any and all claims, demands, liabilities and
expenses which the Company or Shares may incur arising out of or based upon (i)
any act or deed of the Distributor or its sales representatives which has not
been authorized by the Company in any prospectus or in this Agreement and (ii)
the Company's reliance on the Distributor's books, records, calculations and
notices hereunder.
(B) The Distributor shall indemnify the Company against any and all claims,
demands, liabilities and expenses which the Company may incur under the
Securities Act of 1933, as amended, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact contained in any
registration statement or prospectus with respect to Shares, or any omission to
state a material fact therein if such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Company in connection
therewith by or on behalf of the Distributor.
(C) Notwithstanding any other provision of this Agreement, the Distributor
shall not be liable for any errors of the transfer agent(s) of the Shares, or
for any failure of any such transfer agent to perform its duties.
4
<PAGE>
11. No Conflict with Laws. Nothing herein contained shall be deemed to
require the Company or the Distributor to take any action contrary to its
Articles of Incorporation or By-Laws or Trust Instrument, 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.
12. Effective Date. This Agreement shall become effective with respect to
Shares of each Portfolio upon its approval by the Board of Directors of the
Company and by vote of a majority of the Company's directors who are not parties
to this Agreement or interested persons (as defined in Section 2(a)(19) of the
1940 Act) of any party to this Agreement, cast in person at a meeting called for
such purpose; shall continue in force and effect until two years from the
effective date, and from year to year thereafter, provided, that such
continuance is specifically approved with respect to Shares of each Portfolio at
least annually (a)(i) by the Board of Directors of the Company or (ii) by the
vote of a majority of the outstanding Shares of such Portfolio, and (b) by vote
of a majority of the Company's directors who are not parties to this Agreement
or "interested persons" (as defined in Section 2(a)(19) of the 1940 Act) of any
party to this Agreement, cast in person at a meeting called for such purpose.
13. Termination.
(A) This Agreement may be terminated with respect to Shares of any
Portfolio, at any time, without the payment of any penalty, by vote of the Board
of Directors of the Company or by vote of a majority of the outstanding Shares
of such Portfolio, or by the Distributor, on sixty (60) days' written notice to
the other party.
(B) This Agreement shall also automatically terminate in the event of its
assignment, the term "assignment" having the meaning set forth in Section
2(a)(4) of the 1940 Act.
14. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered, or mailed postage prepaid, to the other party at such address as
the other party may designate for the receipt of notices. Until further notice
to the other party, the addresses of both the Company and the Distributor shall
be 825 Duportail Road, Wayne, PA 19087.
15. No Personal Liability. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any trustee, shareholder, officer, employee or agent of the
Distributor
5
<PAGE>
individually or personally, but are binding only upon the assets and property of
the Distributor and that the trustees, shareholders, officers, employees and
agents of the Distributor shall be entitled, to the fullest extent permitted by
applicable law, to the same limitation on personal liability as stockholders of
private corporations for profit.
16. Governing Law. This Agreement shall be deemed to be a contract made in
the Commonwealth of Pennsylvania and governed by, construed in accordance with
and enforced pursuant to the internal laws of the Commonwealth of Pennsylvania
without reference to its conflicts of laws rules.
17. Independent Contractor. The Distributor shall be an independent
contractor and neither the Distributor nor any of its trustees, officers,
employees or representatives is or shall be an employee of the Company in the
performance of the Distributor's duties hereunder. The Distributor shall be
responsible for its own conduct and the employment, control and conduct of its
agents and employees and for injury to such agents or employees or to others
through its agents or employees. The Distributor assumes full responsibility for
its agents and employees under applicable statutes and agrees to pay all
employee taxes thereunder.
18. Counterparts. 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.
[This space intentionally left blank]
6
<PAGE>
19. Captions. The captions in this Agreement are included for convenience
of reference only and in no other way define or delineate any of the provisions
hereof or otherwise affect construction or effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate on the day and year first above written.
PBHG ADVISOR FUNDS, INC.
By: /s/ Brian F. Bereznak
-------------------------------
Name: Brian F. Bereznak
Title: Vice President
Attest:
/s/ John M. Zerr
- ----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
PBHG FUND DISTRIBUTORS
By: /s/ Lee T. Cummings
-------------------------------
Name: Lee T. Cummings
Title: Vice President
Attest:
/s/ John M. Zerr
- ----------------------------------
Name: John M. Zerr
Title: General Counsel & Secretary
7
<PAGE>
SCHEDULE A
PBHG ADVISOR FUNDS, INC.
PBHG Advisor Funds, Inc. consists of the following Funds, each of which is
subject to this Agreement:
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
Dated: April 1, 1998
Exhibit 99.B6(d)
PBHG FUND DISTRIBUTORS
825 Duportail Road
Wayne, PA 19087
SELECTED DEALER AGREEMENT
FOR PBHG ADVISOR FUNDS, INC.
To the Undersigned Selected Dealer:
Gentlemen:
PBHG Fund Distributors, as the exclusive national distributor of the Class A,
Class B and Class I shares of the common stock (the "Shares") of each of the
portfolios (the "Funds") of PBHG Advisor Funds, Inc. (the "Company"),
understands that you are a member in good standing of the National Association
of Securities Dealers, Inc. ("NASD"), or, if a foreign dealer, that you agree to
abide by all of the rules and regulations of the NASD for purposes of this
Agreement (which you confirm by your signature below). In consideration of the
mutual covenants stated below, you and we hereby agree as follows:
1. Sales of Shares through you will be at the public offering price of such
Shares (the net asset value of the Shares plus any sales charge applicable
to such Shares), as determined in accordance with the then effective
prospectus used in connection with the offer and sale of Shares (the
"Prospectus"), which public offering price may reflect scheduled variations
in, or the elimination of, the sales charge on sales of the Funds' Shares
either generally to the public or in connection with special purchase plans,
as described in the Prospectus. You agree that you will apply any scheduled
variation in, or elimination of, the Sales Charge uniformly to all offerees
in the class specified in the Prospectus.
2. You agree to purchase Shares solely through us and only for the purpose of
covering purchase orders already received from customers or for your own
bona fide investment. You agree not to purchase for any other securities
dealer unless you have an agreement with such other dealer or broker to
handle clearing arrangements and then only in the ordinary course of
business for such purpose and only if such other dealer has executed a
Selected Dealer Agreement with us. You also agree not to withhold any
customer order so as to profit therefrom.
<PAGE>
3. The procedures relating to the handling of orders shall be subject to
instructions which we will forward from time to time to all selected dealers
with whom we have entered into a Selected Dealer Agreement. The minimum
initial order shall be specified in the Funds' then current prospectuses.
All purchase orders are subject to receipt of Shares by us from the Funds
concerned and to acceptance of such orders by us. We reserve the right in
our sole discretion to reject any order.
4. With respect to Class A Shares which are sold with a Sales Charge (the "Load
Funds"), you will be allowed the concessions from the public offering price
provided in the Prospectus. With respect to the Class B Shares and certain
large purchases of Class A Shares which are being sold with a contingent
deferred sales charge (the "CDSC Funds"), you will be paid a commission or
concession as disclosed in the CDSC Fund's then current Prospectus. With
respect to the Class I Shares and the Class A Shares of the PBHG Advisor
Cash Reserves Fund (the "No-Load Funds"), you will receive no compensation
from the Fund or the Distributor. For the purposes of this Agreement the
terms "Sales Charge" and "Dealer Concession" apply only to the Load Funds
and the CDSC Funds. All commissions and concessions are subject to change
without notice by us and will comply with any changes in regulatory
requirements. You agree that you will not combine customer orders to reach
breakpoints in commissions for any purpose whatsoever unless authorized by
the Prospectus or by us in writing.
5. You agree that your transactions in Shares will be limited to (a) the
purchase of Shares from us for resale to your customers at the public
offering price then in effect or for your own bona fide investment, (b)
exchanges of Shares between Portfolios as permitted by the then current
registration statement (which includes the Prospectus) and in accordance
with procedures as they may be modified by us from time to time, and (c)
transactions involving the redemption of Shares or the repurchase of Shares
by us as an accommodation to shareholders. Redemptions by a Fund and
repurchases by us will be effected in the manner and upon the terms
described in the Prospectus. We will, upon your request, assist you in
processing such orders for redemptions or repurchases. To facilitate prompt
payment following a redemption or repurchase of Shares, the owner's
signature shall appear as registered on the Funds' records and, as described
in the Prospectus, it may be required to be guaranteed by a commercial bank,
trust company or a member of a national securities exchange.
6. Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states and
jurisdictions in which the Shares are registered or qualified for sale, and
you agree to indemnify us and/or the Funds for any claim, liability, expense
or loss in any way arising out of a sale of
2
<PAGE>
Shares in any state or jurisdiction in which such Shares are not so
registered or qualified.
7. We shall accept orders only on the basis of the current offering price. You
agree to place orders in respect of Shares immediately upon the receipt of
orders from your customers for the same number of shares. Orders which you
receive from your customers shall be deemed to be placed with us when
received by us. Orders which you receive prior to the close of business, as
defined in the Prospectus, and placed with us within the time frame set
forth in the Prospectus shall be priced at the offering price next computed
after they are received by you. We will not accept from you a conditional
order on any basis. All orders shall be subject to confirmation by us.
8. Your customer will be entitled to a reduction in the Sales Charge on
purchases made under a Letter of Intent or Right of Accumulation described
in the Prospectus. In such case, your Dealer's Concession will be based upon
such reduced Sales Charge; however, in the case of a Letter of Intent signed
by your customer, an adjustment to a higher Dealer's Concession will
thereafter be made to reflect actual purchases by your customer if he should
fail to fulfill his Letter of Intent. When placing wire trades, you agree to
advise us of any Letter of Intent signed by your customer or of any Right of
Accumulation available to him of which he has made you aware. If you fail to
so advise us, you will be liable to us for the return of any commissions
plus interest thereon.
9. You and we agree to abide by the Conduct Rules applicable to NASD members
and all other federal and state rules and regulations that are now or may
become applicable to transactions hereunder. Your expulsion from the NASD
will automatically terminate this Agreement without notice. Your suspension
from the NASD or a violation by you of applicable state and federal laws and
rules and regulations of authorized regulatory agencies will terminate this
Agreement effective upon notice received by you from us. You agree that it
is your responsibility to determine the suitability of any Shares as
investments for your customers, and that PBHG Fund Distributors has no
responsibility for such determination.
10. With respect to the Load Funds and the CDSC Funds, and unless otherwise
agreed, settlement shall be made at the offices of the Funds' transfer agent
within three (3) business days after our acceptance of the order. With
respect to the No-Load Funds, settlement will be made only upon receipt by
the Fund of payment in the form of federal funds. If payment is not so
received or made within ten (10) business days of our acceptance of the
order, we reserve the right to cancel the sale or, at our option, to sell
the Shares to the Funds at the then prevailing net asset value. In this
event, or in the event that you cancel the trade for any reason, you agree
to be responsible for
3
<PAGE>
any loss resulting to the Funds or to us from your failure to make payments
as aforesaid. You shall not be entitled to any gains generated thereby.
11. If any Shares of any of the Load Funds sold to you under the terms of this
Agreement are redeemed by the Fund or repurchased for the account of the
Funds or are tendered to the Funds for redemption or repurchase within seven
(7) business days after the date of our confirmation to you of your original
purchase order therefore, you agree to pay up forthwith to us the full
amount of the concession allowed to you on the original sale and we agree to
pay such amount to the Fund when received by us. We also agree to pay to the
Fund the amount of our share of the Sales Charge on the original sale of
such Shares.
12. Any order placed by you for the repurchase of Shares of a Fund is subject to
the timely receipt by the Fund's transfer agent 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, in which
case you agree to be responsible for any loss resulting to the Fund or to us
from such cancellation.
13. We reserve the right in our discretion without notice to you to suspend
sales or withdraw any offering of Shares entirely, to change the offering
prices as provided in the Prospectus or, upon notice to you, to amend or
cancel this Agreement. You agree that any order to purchase Shares of the
Funds placed by you after notice of any amendment to this Agreement has been
sent to you shall constitute your agreement to any such amendment.
14. In every transaction, we will act as agent for the Fund and you will act as
principal for your own account. You have no authority whatsoever to act as
our agent or as agent for the Company, the Funds, any other Selected Dealer
or the Funds' transfer agent and nothing in this Agreement shall serve to
appoint you as an agent of any of the foregoing in connection with
transactions with your customers or otherwise.
15. No person is authorized to make any representations concerning the Funds or
their Shares except those contained in the Prospectus and any such
information as may be released by us as information supplemental to the
Prospectus. If you should make such unauthorized representation, you agree
to indemnify the Funds and us from and against any and all claims,
liability, expense or loss in any way arising out of or in any way connected
with such representation.
16. We will supply you with copies of the Prospectuses and Statements of
Additional Information of the Funds (including any amendments thereto) in
reasonable quantities upon request. You will provide all customers with a
Prospectus prior to or at the time such customer purchases Shares. You will
provide any customer who so
4
<PAGE>
requests a copy of the Statement of Additional Information on file with the
U.S. Securities and Exchange Commission.
17. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers by
wire or telephone for purchases, exchanges or redemptions, and shall
indemnify us against any claims by your customers as a result of your
failure to properly transmit their instructions.
18. No advertising or sales literature, as such terms are defined by the NASD,
of any kind whatsoever will be used by you with respect to the Funds or us
unless first provided to you by us or unless you have obtained our prior
written approval.
19. All expenses incurred in connection with your activities under this
Agreement shall be borne by you.
20. This Agreement shall not be assignable by you. This Agreement shall be
construed in accordance with the laws of the Commonwealth of Pennsylvania
without reference to conflicts of law rules.
21. Any notice to you shall be duly given if mailed or telegraphed to you at
your address as registered from time to time with the NASD.
22. This Agreement constitutes the entire agreement between the undersigned and
supersedes all prior oral or written agreements between the parties hereto.
23. Notice is hereby given that, as provided by applicable law, the obligations
of or arising out of this Agreement are not binding upon any trustee,
shareholder, officer, employee or agent of the Distributor individually or
personally, but are binding only upon the assets and property of the
Distributor and that the trustees, shareholders, officers, employees and
agents of the Distributor shall be entitled, to the fullest extent permitted
by applicable law, to the same limitation on personal liability as
stockholders of private corporations for profit.
5
<PAGE>
PBHG FUND DISTRIBUTORS
Date: ___________________ By: X_____________________________________________
The undersigned accepts your invitation to become a Selected Dealer, agrees to
abide by the foregoing terms and conditions, and acknowledges receipt of
prospectuses for use in connection with offers and sales of the Shares.
Date: ___________________ By: X_____________________________________________
Signature
_____________________________________________
Print Name Title
_____________________________________________
Dealer's Name
_____________________________________________
Address
_____________________________________________
City State Zip
_____________________________________________
Telephone
Please sign both copies and return one copy of each to:
PBHG FUND DISTRIBUTORS
825 Duportail Road
Wayne, PA 19087
6
Exhibit 99.B6(e)
[PBHG FUND DISTRIBUTORS LETTERHEAD]
BANK ACTING AS AGENT FOR ITS CUSTOMERS
Agreement Relating to Shares of PBHG Advisor Funds, Inc.
PBHG Fund Distributors is the exclusive national distributor of Class A,
Class B and Class I shares (the "Shares") of each of the portfolios (the
"Funds") of PBHG Advisor Funds, Inc. (the "Company"). As exclusive agent for the
Company, we are offering to make available the Shares for purchase by your
customers on the following terms:
1. In all sales of Shares you shall act as agent for your customers, and in
no transaction shall you have any authority to act as agent for the Company, any
Fund or for us.
2. The customers in question are, for all purposes, your customers and not
customers of PBHG Fund Distributors in receiving orders from your customers who
purchase Shares. PBHG Fund Distributors is not soliciting such customers and,
therefore, has no responsibility for determining whether Shares are suitable
investments for such customers.
3. In all cases in which you place orders with us for the purchase of
Shares (a) you are acting as agent for the customer; (b) the transactions are
without recourse against you by the customer; (c) as between you and the
customer, the customer will have full beneficial ownership of the securities;
(d) each such transaction is initiated solely upon the order of the customer;
and (e) each such transaction is for the account of the customer and not for
your account.
4. Orders received from you will be accepted by us only at the public
offering price applicable to each order, as established by the then current
Registration Statement of the appropriate Fund, subject to the discounts
(defined below) provided in such Registration Statement. Following receipt from
you of any order to purchase Shares for the account of a customer, we shall
confirm such order to you in writing. Additional instructions may be forwarded
to you from time to time. All orders are subject to acceptance or rejection by
us in our sole discretion.
5. Members of the general public, including your customers, may purchase
Shares only at the public offering price determined in the manner described in
the current Registration Statement of the appropriate Fund. With
<PAGE>
respect to Class A Shares which are being sold with a sales charge (i.e., the
"Load Funds"), you will be allowed to retain an agency fee or concession from
the public offering price provided in such Load Funds' current Registration
Statement. With respect to the Class B Shares and certain large purchases of
Class A Shares which are being sold with a contingent deferred sales charge (the
"CDSC Funds"), you will be paid an agency fee or concession as disclosed in the
then current prospectus. With respect to the Class I Shares which are being sold
without a sales charge or a contingent deferred sales charge (i.e., the "No-Load
Funds"), you will not be allowed to retain any commission or concession. All
agency fees or concessions set forth in any of the Load Funds' or CDSC Funds'
Registration Statement are subject to change without notice by us and will
comply with any changes in regulatory requirements.
6. The table of sales charges and discounts set forth in the current
Registration Statement for the Class A Shares are applicable to all purchases
made at any one time by any "purchaser," as defined in the current Registration
Statement. For this purpose, a purchaser may aggregate concurrent purchases of
Class A Shares of any of the Funds.
7. Reduced sales charges may also be available as a result of quantity
discounts, rights of accumulation or letters of intent. Further information as
to such reduced sales charges, if any, is set forth in the appropriate Fund
Registration Statement. In such case, your discount will be based upon such
reduced sales charge; however, in the case of a letter of intent signed by your
customer, an adjustment to a higher discount will thereafter be made to reflect
actual purchases by your customer if he should fail to fulfill his letter of
intent. You agree to advise us promptly as to the amounts of any sales made by
you to your customers qualifying for reduced sales charges. If you fail to so
advise us of any letter of intent signed by your customer or of any right of
accumulation available to such customer of which such customer has made you
aware, you will be liable to us for the return of any discount plus interest
thereon.
8. By accepting this Agreement you agree:
(a) that you will purchase Shares only from us;
(b) that you will purchase Shares from us only to cover purchase
orders already received from your customers; and
(c) that you will not withhold placing with us orders received from
your customers so as to profit yourself as a result of such
withholdings.
2
<PAGE>
9. We will not accept from you a conditional order for Shares on any basis.
10. Payment for Shares ordered from us shall be in the form of a wire
transfer or a cashiers check mailed to us. Payment shall be made within three
(3) business days after our acceptance of the order placed on behalf of your
customer. Payment shall be equal to the public offering price less the discount
retained by you hereunder.
11. If payment is not received within [ten (10)] business days of our
acceptance of the order, we reserve the right to cancel the sale or, at our
option, to sell Shares to the Fund at the then prevailing net asset value. In
this event you agree to be responsible for any loss resulting to the Fund from
the failure to make payment as aforesaid.
12. Shares sold hereunder shall be available only in book-entry form on the
books of the Funds' Transfer Agent.
13. No person is authorized to make any representations concerning Shares
of any Fund except those contained in the applicable current Registration
Statement and printed information subsequently issued by the appropriate Fund or
by us as information supplemental to such Registration Statement. You agree that
you will not make Shares available to your customers except under circumstances
that will result in compliance with the applicable Federal and State Securities
and Banking Laws and that you will not furnish to any person any information
contained in the then current Registration Statement or cause any advertisement
to be published in any newspaper or posted in any public place without our
consent and the consent of the appropriate Fund.
14. Sales and exchanges of Shares may only be made in those states and
jurisdictions where Shares are registered or qualified for sale to the public.
We agree to advise you currently of the identity of those states and
jurisdictions in which the Shares are registered or qualified for sales, and you
agree to indemnify us and/or the Funds for any claim, liability, expense or loss
in any way arising out of a sale of Shares in any state or jurisdiction not
identified by us as a state or jurisdiction in which such Shares are so
registered or qualified. We agree to indemnify you for any claim, liability,
expense or loss in any way arising out of a sale of Shares in any state or
jurisdiction identified by us as a state or jurisdiction in which Shares are so
registered or qualified.
15. You shall be solely responsible for the accuracy, timeliness and
completeness of any orders transmitted by you on behalf of your customers by
3
<PAGE>
wire or telephone for purchases, exchanges or redemptions, and shall indemnify
us against any claims by your customers as a result of your failure to properly
transmit their instructions.
16. All sales will be made subject to our receipt of Shares from the
Company. We reserve the right, in our discretion, without notice, to modify,
suspend or withdraw entirely the offering of any Shares and, upon notice to
change the sales charge or discount or to modify, cancel or change the terms of
this Agreement. You agree that any order to purchase Shares placed by you after
any notice of amendment to this Agreement has been sent to you shall constitute
your agreement to any such agreement.
17. The names of your customers shall remain your sole property and shall
not be used by us for any purpose except for servicing and information mailings
in the normal course of business to Fund Shareholders.
18. Your acceptance of this Agreement constitutes a representation that you
are a "Bank" as defined in Section 3(a)(6) of the Securities Exchange Act of
1934, as amended, and are duly authorized to engage in the transactions to be
performed hereunder.
19. Any notice to us or to you shall be duly given if mailed or telegraphed
to us or to you, as the case may be, at the address specified below or to such
other address as either of us shall have designated in writing to the other.
This Agreement shall be construed on accordance with the laws of the
Commonwealth of Pennsylvania.
20. Notice is hereby given that, as provided by applicable law, the
obligations of or arising out of this Agreement are not binding upon any
trustee, shareholder, officer, employee or agent of the Distributor individually
or personally, but are binding only upon the assets and property of the
Distributor and that the trustees, shareholders, officers, employees and agents
of the Distributor shall be
4
<PAGE>
entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as stockholders of private corporations for
profit.
PBHG FUND DISTRIBUTORS
Date: By:
---------------------------- -------------------------------
The undersigned agrees to abide by the foregoing terms and conditions.
Date: By:
---------------------------- -------------------------------
Signature
-------------------------------
Print Name Title
-------------------------------
Bank's Name
-------------------------------
Address
-------------------------------
City State Zip
Please sign both copies and return one copy of each to:
PBHG Fund Distributors
825 Duportail Road
Wayne, PA 19087
5
Exhibit 99.B6(f)
SHAREHOLDER SERVICE AGREEMENT
FOR SALE OF SHARES
OF PBHG ADVISOR FUNDS, INC.
This Shareholder Service Agreement (the "Agreement") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act")
by each of the series of the PBHG Advisor Funds, Inc. (or designated classes of
such funds) listed on Schedule A to this Agreement (the "Funds"), under a
Distribution Plan (the "Plan") adopted pursuant to said Rule. This Agreement,
being made between PBHG Fund Distributors (the "Distributor"), solely as agent
for the Funds, and the undersigned authorized dealer or financial institution,
defines the services to be provided by the authorized dealer or financial
institution for which it is to receive payments pursuant to the Plan adopted by
each of the Funds. The Plan and the Agreement have been approved by a majority
of the directors of each of the Funds, including a majority of the directors who
are not interested persons of such Funds, and who have no direct or indirect
financial interest in the operation of the Plan or related agreements (the
"Disinterested Directors"), by votes cast in person at a meeting called for the
purpose of voting on the Plan. Such approval included a determination that in
the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
such Fund and its shareholders.
1. To the extent that you provide continuing personal shareholder services to
customers who may, from time to time, directly or beneficially own shares
of the Funds, including but not limited to, distributing sales literature,
answering routine customer inquiries regarding the Funds, assisting
customers in changing dividend options, account designations and addresses,
and in enrolling into any of several special investment plans offered in
connection with the purchase of the Funds' shares, assisting in the
establishment and maintenance of customer accounts and records and in the
processing of purchase and redemption transactions, investing dividends and
capital gains distributions automatically in shares and providing such
other services as the Funds or the customer may reasonably request, we, as
agent for the Funds, shall pay you a fee periodically or arrange for such
fee to be paid to you.
2. The fee paid with respect to each Fund will be calculated at the end of
each payment period (as indicated in Schedule A) for each business day of
the Fund during such payment period at the annual rate set forth in
Schedule A as applied to the average net asset value of the shares of such
Fund purchased or acquired through exchange on or after the Plan
Calculation Date shown for such Fund on Schedule A. Fees calculated in this
manner
<PAGE>
shall be paid to you only if your firm is the dealer of record at the
close of business on the last business day of the applicable payment
period, for the account in which such shares are held (the "Subject
Shares"). In cases where the Distributor has advanced payment to you of
the first year's fee for shares sold at net asset value and subject to
a contingent deferred sales charge, no additional payments will be made
to you during the first year the Subject Shares are held.
3. The total of the fees calculated for all of the Funds listed on Schedule A
for any period with respect to which calculations are made shall be paid to
you within 45 days after the close of such period.
4. We reserve the right to withhold payment with respect to the Subject Shares
purchased by you and redeemed or repurchased by the Fund or by us as Agent
within seven (7) business days after the date of our confirmation of such
purchase. We reserve the right at anytime to impose minimum fee payment
requirements before any periodic payments will be made to you hereunder.
5. You shall furnish us and the Funds with such information as shall
reasonably be requested either by the directors of the Funds or by us with
respect to the fees paid to you pursuant to this Agreement.
6. We shall furnish the directors of the Funds, for their review on a
quarterly basis, a written report of the amounts expended under the Plan by
us and the purposes for which such expenditures were made.
7. Neither you nor any of your employees or agents are authorized to make any
representation concerning shares of the Funds except those contained in the
then current Prospectus for the Funds, and you shall have no authority to
act as agent for the Funds or for the Distributor.
8. We may enter into other similar Shareholder Service Agreements with any
other person without your consent.
9. This Agreement and Schedule A may be amended at any time without your
consent by the Distributor mailing a copy of an amendment to you at the
address set forth below. Such amendment shall become effective on the date
specified in such amendment unless you elect to terminate this Agreement
within thirty (30) days of your receipt of such amendment.
2
<PAGE>
10. This Agreement may be terminated with respect to any Fund at any time
without payment of any penalty by the vote of a majority of the directors
of such Fund who are Disinterested Directors or by a vote of a majority of
the Fund's outstanding shares, on sixty (60) days' written notice. It will
be terminated by any act which terminates either the Selected Dealer
Agreement or Agency Agreement, as the case may be, between your firm and us
or the Fund's Distribution Plan, and in any event, it shall terminate
automatically in the event of its assignment as that phrase is used in Rule
12b-1 under the 1940 Act.
11. The provisions of the Distribution Agreement between any Fund and us,
insofar as they relate to the Plan, are incorporated herein by reference.
This Agreement shall become effective upon execution and delivery hereof
and shall continue in full force and effect as long as the continuance of
the Plan and this Agreement and agreements related to the Plan are approved
at least annually by a vote of the directors, including a majority of the
Disinterested Directors, cast in person at a meeting called for the purpose
of voting thereon. All communications to us should be sent to the address
of the Distributor as shown at the bottom of this Agreement. Any notice to
you shall be duly given if mailed or telegraphed to you at the address
specified by you below.
12. You represent that you provide to your customers who own shares of the
Funds personal services as defined from time to time in applicable
regulations of the National Association of Securities Dealers, Inc., and
that you will continue to accept payments under this Agreement only so long
as you provide such services.
3
<PAGE>
13. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
PBHG ADVISOR FUNDS, INC.
By: PBHG FUND DISTRIBUTORS
Date: ______________________ By:________________________________
The undersigned agrees to abide by the foregoing terms and conditions:
Date:_______________________ By:____________________________________________
Signature
-----------------------------------------------
Print Name Title
-----------------------------------------------
Dealer's or Financial Institution's Name
-----------------------------------------------
Address
-----------------------------------------------
City State Zip
-----------------------------------------------
Telephone
Please sign both copies and return one copy of each to:
PBHG FUND DISTRIBUTORS
825 Duportail Road
Wayne, PA 19087
4
Exhibit 99.B8
CUSTODIAN AGREEMENT
This Agreement, dated as of the ____ day of _________________, 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
<PAGE>
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:
------------------------------------
Title:
---------------------------------
Attest:
--------------------------------
CORESTATES BANK N.A.
By:
-----------------------------------
Title:
--------------------------------
Attest:
-------------------------------
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:
----------------
<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 99.B9(a)
ADMINISTRATIVE SERVICES AGREEMENT
PBHG ADVISOR FUNDS, INC.
ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") made as of the 1st day
of April, 1998 by and between PBHG Advisor Funds, Inc., a Maryland corporation
(the "Company"), and PBHG Fund Services, a Pennsylvania business trust (the
"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 registered as such under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Administrator to provide
administrative services to the Company and each of its several series which are
identified in Schedule A hereto (the "Funds"), in the manner and on the terms
and conditions hereinafter set forth; and
WHEREAS, the Company and the Administrator propose to engage a
sub-administrator (the "Sub-Administrator") to provide certain administrative
services to the Company and the Funds, subject to the approval of the Company's
Board of Directors;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. DUTIES AND RESPONSIBILITIES OF THE ADMINISTRATOR.
The Administrator shall oversee the administration of the Company's and
each Fund's business and affairs as set forth herein and shall provide certain
services required for effective administration of the Company and the Funds. In
connection therewith, the Administrator shall:
1.1. OFFICE AND OTHER FACILITIES. Furnish, without cost to the Company,
or provide and pay the cost of, such office facilities, furnishings, and office
equipment as are necessary for the performance of the Administrator's duties to
the Company under this Agreement.
1.2. PERSONNEL. Provide, without additional remuneration from or other
cost to the Company, the services of individuals competent to perform all of the
Administrator's obligations under this Agreement.
<PAGE>
1.3. AGENTS. Assist the Company in selecting, coordinating the
activities of, supervising and acting as liaison with any other person or agent
engaged by the Company, including the Company's depository agent or custodian,
consultants, transfer agent, sub-transfer agents, intermediaries with respect to
mutual fund alliance programs, dividend disbursing agent, Sub-Administrator,
independent accountants, and independent legal counsel. The Administrator shall
also monitor the functions of such persons and agents, including without
limitation the compliance of the Company and the Company's custodians with Rule
17f-5 under the 1940 Act, if appropriate.
1.4. DIRECTORS AND OFFICERS. Authorize and permit the Administrator's
directors, officers, and employees that may be elected or appointee as directors
or officers of the Company to serve in such capacities, without remuneration
from or additional cost to the Company.
1.5. BOOKS AND RECORDS. Maintain customary records, on behalf of the
Company, in connection with the performance of the Administrator's duties under
this Agreement. The Administrator also will monitor and oversee the performance
of the agents specified in Section 1.3. above, to ensure that all financial,
accounting, corporate, and other records required to be maintained and preserved
by the Company or on its behalf will be maintained in accordance with applicable
laws and regulations.
1.6. COST OVERSIGHT. Monitor and review activities and procedures of
the Company and its agents identified in Section 1.3. above, in order to
identify and seek to obtain possible service improvements and cost reductions.
In connection therewith, the Administrator shall, on a quarterly basis, prepare
and submit to the Company a pro forma budget or similar document concerning the
estimated costs of providing the services to the Company and shall monitor and
periodically report to the Company's Board of Directors information and analysis
about the actual expenses incurred in providing such services.
1.7. ACCOUNTING AND COMPLIANCE POLICIES AND PROCEDURES. Assist in
developing, reviewing, maintaining, and monitoring the effectiveness of Company
accounting and compliance policies and procedures, including portfolio valuation
procedures, expense allocation procedures, and personal trading procedures, and
the Company's Code of Ethics. The Administrator also will assist and coordinate
participation by the Company and its agents in any audit by its outside auditors
or any examination by federal or state regulatory authorities or any
self-regulatory organization. The Administrator also will oversee and coordinate
the activities of Company accountants, outside counsel, and other experts in
these audits or examinations.
1.8. SYSTEMS. Assist in developing, implementing, and monitoring the
Company's use of automated systems for the purchase, sale, redemption and
transfer of Company shares and the payment of Rule 12b-1 service fees to
broker-dealers and others that
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<PAGE>
provide personal services, distribution support services, and/or account
maintenance services to shareholders, and for recording and tracking such
transactions and/or payments. The Administrator also will 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.
1.9. REPORTS TO THE COMPANY. Furnish to or place at the disposal of the
Company such information, reports, evaluations, analysis, and opinions relating
to its administrative functions and the administrative functions performed by
the Sub-Administrator, as the Company may, at any time or from time to time,
reasonably request or as the Administrator may deem helpful to the Company. The
Administrator also will assist in the preparation of agendas and other materials
for meetings of the Company's Board of Directors and will attend such meetings.
1.10. REPORTS AND FILINGS. Provide appropriate assistance in the
development and/or preparation 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
securities law.
1.11. 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 Administrator. If any such
inquiry or communication would be more properly answered by one of the agents
listed in Section 1.3. above, the Administrator will coordinate, as needed, the
provision of their response.
2. ALLOCATION OF EXPENSES.
2.1. EXPENSES PAID BY THE ADMINISTRATOR.
2.1.1. IN GENERAL. The Administrator shall bear all of its own
expenses in connection with the performance of its duties under this Agreement.
2.1.2. SALARIES AND FEES OF DIRECTORS AND OFFICERS. The
Administrator shall pay all salaries, expenses, and fees, if any, of the
directors, officers, and employees of the Administrator who are directors,
officers, or employees of the Company.
2.1.3. WAIVER OR ASSUMPTION AND REIMBURSEMENT OF COMPANY
EXPENSES BY THE ADMINISTRATOR. The waiver or assumption and reimbursement by the
Administrator of any expense of the Company that the Administrator is not
required by this Agreement to waive, or assume or reimburse, shall not obligate
the Administrator to waive, assume, or reimburse the same or any similar expense
of the
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<PAGE>
Company on any subsequent occasion, unless so required pursuant to a separate
agreement between the Company and the 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 as provided in this Agreement or any
other agreement between the Company and the 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 Administrator, the Company shall pay the Administrator a fee
per Fund at the annual rate of .15% of the average daily net assets of each
Fund.
3.2. METHOD OF COMPUTATION. The Administrator's fee shall accrue on
each calendar day and the sum of the daily fee accruals shall be paid monthly to
the 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.
4. ADMINISTRATOR'S USE OF THE SERVICES OF OTHERS.
The Administrator may at its own cost employ, retain, or otherwise
avail itself of the services or facilities of other persons or organizations for
the purpose of providing the Administrator or the Company with such information,
advice, or assistance as the Administrator may deem necessary, appropriate, or
convenient for the discharge of its obligations hereunder or otherwise helpful
to the Administrator, including consulting, monitoring, and evaluation services
concerning the Company and the Funds.
4
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5. OWNERSHIP AND CONFIDENTIALITY OF RECORDS.
All records required to be maintained and preserved by the Company,
pursuant to rules or regulations of the Securities and Exchange Commission under
Section 31(a) of the 1940 Act, and maintained and preserved by the Administrator
on behalf of the Company, are the property of the Company and shall be
surrendered by the Administrator promptly on request by the Company. The
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 Administrator shall keep
confidential any information obtained in connection with its duties hereunder
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 ADMINISTRATOR.
The Company shall furnish or otherwise make available to the
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 Administrator may, at any time or
from time to time, reasonably require in order to discharge its obligations
under this Agreement.
7. SERVICES TO OTHER CLIENTS.
Nothing herein contained shall limit the freedom of the Administrator
or any affiliated person of the Administrator to render corporate administrative
services to other investment companies or to engage in other business
activities; however, so long as this Agreement or any extension, renewal, or
amendment hereof shall remain in effect or until the Administrator shall
otherwise consent, the Administrator shall be the only administrator to the
Company .
8. LIMITATION OF LIABILITY OF THE ADMINISTRATOR AND INDEMNIFICATION BY THE
COMPANY.
8.1. LIMITATION OF LIABILITY.
8.1.1. Neither the Administrator nor any of its directors,
officers, employees or agents performing services for the Company, at the
direction or request of the Administrator in connection with the Administrator's
discharge of its obligations undertaken or reasonably assumed with respect to
this Agreement, shall be liable for any act or omission in the course of or in
connection with the Administrator's services hereunder, including any error of
judgment or mistake of law or for any loss suffered by the Company, in
connection with the matters to which this Agreement relates; provided, that
nothing herein contained
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shall be construed to protect the Administrator or any such person against any
liability to the Company or its shareholders to which the Administrator or such
person 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.
8.1.2. The Administrator's directors, officers, employees and
agents performing services for the Company shall be covered errors and omissions
and directors and officers liability insurance, as appropriate, under a policy
maintained by the Administrator or an affiliate of the Administrator.
8.1.3. The Administrator may apply to the Board of Directors
of the Company at any time for instructions and may consult counsel for the
Company or its own counsel and with accountants and other experts with respect
to any matter arising in connection with the Administrator's duties, and the
Administrator shall not be liable or accountable for any act on taken or omitted
by it in good faith in accordance with such instruction or with the opinion of
such counsel, accountants, or other experts.
8.1.4. The Administrator shall at all times have the right to
mitigate or cure any and all losses, damages, costs, charges, fees,
disbursements, payments and liabilities to the Company and its shareholders.
8.2. INDEMNIFICATION BY THE COMPANY.
8.2.1 As long as the Administrator acts in good faith and with
due diligence and without negligence, the Company shall indemnify the
Administrator and hold it 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 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
may be asked to indemnify or hold the Administrator harmless, the Board of
Directors of the Company shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
the Administrator will use all reasonable care to identify and notify the Board
of Directors of the Company promptly concerning any situation which presents or
appears likely to present the probability
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of such a claim for indemnification against the Company, but failure to do so in
good faith shall not affect the rights hereunder.
8.2.3. The Administrator shall secure and maintain a fidelity
bond, or be covered by an affiliate's blanket fidelity bond, in at least the
amount required by Rule 17g-1 under the 1940 Act for joint insurance bonds of
investment companies.
9. INDEMNIFICATION BY THE ADMINISTRATOR.
9.1. The Administrator shall indemnify the Company, its officers and
directors 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 hereunder and arising or based upon the willful misfeasance, bad
faith, or negligence of the Administrator, its directors, officers, employees,
and agents in the performance of its or their duties on behalf of the Company.
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 Administrator may be
asked to indemnify or hold the Company, its officers, and directors harmless,
the Administrator shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood that the
Company will use all reasonable care to identify and notify the Administrator
promptly concerning any situation which presents or appears likely to present
the probability of such a claim for indemnification against the Administrator,
but failure to do so in good faith shall not affect the rights hereunder.
10. FORCE MAJEURE.
In the event the 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 of the causes
reasonably beyond its control, the Administrator shall not be liable for any and
all 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 the Administrator from being liable to the Company for any and all
losses, damages, costs,
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charges, counsel fees, payments and expenses incurred by the Company due to the
non-performance or delay in performance by the Administrator of its duties and
obligation under this Agreement if such non-performance or delay in performance
could have been reasonably been prevented by the Administrator through back-up
systems and other procedures commonly employed by other administrators in the
mutual fund industry, provided that the Administrator 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.
11. RETENTION OF SUB-ADMINISTRATOR.
The Administrator may retain a Sub-Administrator to perform corporate
administrative services to the Company. The retention of a Sub-Administrator
shall be at the cost and expense of the Administrator. The Administrator shall
pay and shall be solely responsible for the payment of the fees of the
Sub-Administrator for the performance of its services for the Company.
12. 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, 1999.
Thereafter, this Agreement shall continue in effect from year to year, subject
to the termination provisions and all other terms and conditions hereof. The
Administrator shall furnish to the Company, promptly upon its request, such
information as may be reasonably necessary to evaluate the terms of this
Agreement or any extension, renewal, or amendment thereof.
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 respective 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 other parties; provided, that this Agreement
shall not terminate if such material breach is cured within such thirty (30) day
period.
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(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
Administrator, such termination shall not be effective until the Company and the
Administrator shall have contracted with one or more persons to serve as
successor Administrator(s) for the Company and such person(s) shall have assumed
such position.
14. 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 resolution of the Board of Directors of the Company or by 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 a vote of majority of the
outstanding voting securities of such Fund.
15. MISCELLANEOUS.
15.1. NOTICES. Any notice under this Agreement shall be given in
writing, addressed and delivered, or mailed postpaid, (i) if to the
Administrator, to PBHG Fund Services, 825 Duportail Road, Wayne, PA 19087,
Attention: Brian Bereznak, and (ii) if to the Company, to PBHG Advisor Funds,
Inc., 825 Duportail Road, Wayne, PA 19087, Attention: Michael Harrington.
15.2. 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.
15.3. 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.
15.4. 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
9
<PAGE>
controlling decision of any such court by rules, regulations, or orders of the
Securities and Exchange Commission 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
Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation, or order.
15.5. 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.
15.6. 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto 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.
/s/ John M. Zerr By: /s/ Lee T. Cummings
- ------------------------------------ ---------------------------------
Title: General Counsel & Secretary Title: Vice President
ATTEST: PBHG FUND SERVICES
/s/ John M. Zerr By: /s/ Brian F. Bereznak
- ------------------------------------ ---------------------------------
Title: General Counsel & Secretary Title: President
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SCHEDULE A
PBHG ADVISOR FUNDS, INC.
PBHG Advisor Funds, Inc. consists of the following Funds, each of which
is subject to this Agreement:
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
Dated: April 1, 1998
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Exhibit 99.B9(b)
PBHG ADVISOR FUNDS, INC.
SUB-ADMINISTRATIVE SERVICES AGREEMENT
SUB-ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") made as of the _____
day of __________, 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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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
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<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.
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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
6
<PAGE>
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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<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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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<PAGE>
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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<PAGE>
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 99.B9(c)
EXPENSE LIMITATION AGREEMENT
PBHG ADVISOR FUNDS, INC.
EXPENSE LIMITATION AGREEMENT, effective as of April 1, 1998, by and
between Pilgrim Baxter & Associates, Ltd. (the "Adviser") and PBHG Advisor
Funds, Inc. (the "Company"), on behalf of each portfolio of the Company set
forth in Schedule A (each a "Fund", and collectively, the "Funds").
WHEREAS, the Company is a Maryland corporation organized under Articles
of Incorporation dated January 8, 1998 (the "Articles"), and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company; and
WHEREAS, the Company and the Adviser have entered into an Investment
Advisory Agreement (the "Advisory Agreement"), pursuant to which the Adviser
will render investment advisory services to each Fund for compensation based on
the value of the average daily net assets of each such Fund; and
WHEREAS, the Company and the Adviser have determined that it is
appropriate and in the best interests of each Fund and its shareholders to
maintain certain expenses of each Fund at a level below the level to which each
such Fund would normally be subject during its start-up period.
NOW, THEREFORE, the parties hereto agree as follows:
1. EXPENSE LIMITATION.
1.1 APPLICABLE EXPENSE LIMIT. To the extent that the aggregate expenses
incurred by a Fund in any fiscal year which are not specifically allocated to a
class of shares of a Fund under the Company's 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 Company's 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 such Fund's
business) ("Fund Operating Expenses"), exceed the Operating Expense Limit, as
defined in Section 1.2 below, such excess amount (the "Excess Amount") shall be
the liability of the Adviser.
<PAGE>
1.2 OPERATING EXPENSE LIMIT. The Operating Expense Limit in any year
shall be as set forth in Schedule A as to each Fund, or such other rate as may
be agreed to in writing by the parties.
1.3 METHOD OF COMPUTATION. To determine the Adviser's liability with
respect to the Excess Amount, each month the Fund Operating Expenses for each
Fund shall be annualized as of the last day of the month. If the annualized Fund
Operating Expenses for any month of a Fund exceed the Operating Expense Limit of
such Fund, the Adviser shall first waive or reduce its investment management fee
for such month by an amount sufficient to reduce the annualized Fund Operating
Expenses to an amount no higher than the Operating Expense Limit. If the amount
of the waived or reduced investment advisory fee for any such month is
insufficient to pay the Excess Amount, the Adviser may also remit to the
appropriate Fund or Funds an amount that, together with the waived or reduced
advisory fee, is sufficient to pay such Excess Amount.
1.4 YEAR-END ADJUSTMENT. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the amount of the advisory fees waived or
reduced and other payments remitted by the Adviser to the Fund or Funds with
respect to the previous fiscal year shall equal the Excess Amount.
2. REIMBURSEMENT OF FEE WAIVERS AND EXPENSE REIMBURSEMENTS.
2.1 REIMBURSEMENT. If in any year during which the total assets of a
Fund are greater than $75 million and in which the Advisory Agreement is still
in effect, the estimated aggregate Fund Operating Expenses of such Fund for the
fiscal year are less than the Operating Expense Limit for that year, subject to
quarterly approval by the Company's Board of Directors as provided in Section
2.2 below, the Adviser shall be entitled to reimbursement by such Fund, in whole
or in part as provided below, of the advisory fees waived or reduced and other
payments remitted by the Adviser to such Fund pursuant to Section 1 hereof. The
total amount of reimbursement to which the Adviser may be entitled (the
"Reimbursement Amount") 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, pursuant to Section 1 hereof, during any of
the previous two (2) fiscal years, less any reimbursement previously paid by
such Fund to the Adviser, pursuant to Sections 2.2 or 2.3 hereof, with respect
to such waivers, reductions, and payments. The Reimbursement Amount shall not
include any additional charges or fees whatsoever, including, e.g., interest
accruable on the Reimbursement Amount.
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<PAGE>
2.2 BOARD APPROVAL. No reimbursement shall be paid to the Adviser
pursuant to this provision in any fiscal quarter, unless the Company's Board of
Directors has determined that the payment of such reimbursement is in the best
interests of the Fund or Funds and their shareholders. The Company's Board of
Directors shall determine quarterly in advance whether any reimbursement may be
paid to the Adviser in such quarter.
2.3 METHOD OF COMPUTATION. To determine each Fund's payments, if any,
to reimburse the Adviser for the Reimbursement Amount, each month the Fund
Operating Expenses of each Fund shall be annualized as of the last day of the
month. If the annualized Fund Operating Expenses of a Fund for any month are
less than the Operating Expense Limit of such Fund, such Fund, only with the
prior approval of the Board, shall pay to the Adviser an amount sufficient to
increase the annualized Fund Operating Expenses of that Fund to an amount no
greater than the Operating Expense Limit of that Fund, provided that such amount
paid to the Adviser will in no event exceed the total Reimbursement Amount.
2.4 YEAR-END ADJUSTMENT. If necessary, on or before the last day of the
first month of each fiscal year, an adjustment payment shall be made by the
appropriate party in order that the actual Fund Operating Expenses of a Fund for
the prior fiscal year (including any reimbursement payments hereunder with
respect to such fiscal year) do not exceed the Operating Expense Limit.
3. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall continue in effect for a period of one year from
the date of its execution and from year to year thereafter provided such
continuance is specifically approved by a majority of the Directors of the
Company who (i) are not "interested persons" of the Company or any other party
to this Agreement, as defined in the 1940 Act, and (ii) have no direct or
indirect financial interest in the operation of this Agreement ("Non-Interested
Directors"). Nevertheless, this Agreement may be terminated by either party
hereto, without payment of any penalty, upon 90 days' prior written notice to
the other party at its principal place of business; provided that, in the case
of termination by the Company, such action shall be authorized by resolution of
a majority of the Non-Interested Directors of the Company or by a vote of a
majority of the outstanding voting securities of the Company.
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<PAGE>
4. MISCELLANEOUS.
4.1 CAPTIONS. The captions in this Agreement are included for
convenience of reference only and in no other way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
4.2 INTERPRETATION. This Agreement shall be construed in accordance
with the laws of the Commonwealth of Pennsylvania without reference to conflicts
of law rules. Nothing herein contained shall be deemed to require the Company or
any Fund to take any action contrary to the Company's Articles 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 Company's Board of Directors of
its responsibility for and control of the conduct of the affairs of the Company
or the Funds.
4.3 DEFINITIONS. Any questions of interpretation of any term or
provision of this Agreement, including but not limited to the investment
advisory fee, the computations of net asset values, and the allocation of
expenses, having a counterpart in or otherwise derived from the terms and
provisions of the Advisory Agreement or the 1940 Act, shall have the same
meaning as and be resolved by reference to such Advisory Agreement or the 1940
Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto 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.
ON BEHALF OF EACH OF ITS FUNDS
/s/ John M. Zerr By: /s/ Brian F. Bereznak
- --------------------------- -------------------------------
Secretary
ATTEST: PILGRIM BAXTER & ASSOCIATES,
LTD.
/s/ John M. Zerr By: /s/ Eric C. Schneider
- --------------------------- -------------------------------
Secretary
4
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SCHEDULE A
Operating
Expense
Limit
---------
This Agreement relates to the following Funds of the Company:
PBHG Advisor Core Value Fund 0.82%
PBHG Advisor Value Opportunities Fund 1.07%
PBHG Advisor New Contrarian Fund 0.82%
PBHG Advisor REIT Fund 0.97%
PBHG Advisor Blue Chip Growth Fund 0.82%
PBHG Advisor Growth Opportunities Fund 0.87%
PBHG Advisor Enhanced Equity Fund 0.82%
PBHG Advisor Trend Fund 0.87%
PBHG Advisor Large Cap Concentrated Fund 1.07%
PBHG Advisor Growth II Fund 1.07%
PBHG Advisor New Opportunities Fund 0.97%
PBHG Advisor Global Technology & Communications Fund 1.07%
PBHG Advisor Master Fixed Income Fund 0.67%
PBHG Advisor High Yield Fund 0.72%
PBHG Advisor Cash Reserves Fund 0.52%
PBHG Advisor Short-Term Government Fund 0.52%
Exhibit 99.B11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We 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. 1 to the Registration Statement under the Securities
Act of 1933 on Form N1-A for the PBHG Advisor Funds, Inc.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 5, 1998
Exhibit 99.B11(b)
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
CONSENT OF COUNSEL
PBHG Advisor Funds, Inc.
We hereby consent to the use of our name and to the reference to our
firm under the caption "Counsel and Independent Accountants" in the Prospectus
for PBHG Advisor Funds, Inc. (the "Company"), which is included in Pre-Effective
Amendment No. 1 to the Registration Statement under the Securities Act of 1933
(Reg. No. 333-44193) and Amendment No. 1 under the Investment Company Act of
1940 (Reg. No. 811-08605) on Form N-1A of the Company.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
March 6, 1998
Exhibit 99.B13
STOCK SUBSCRIPTION AGREEMENT
___________, 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; 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:
---------------------
Gary L. Pilgrim,
President
3
Exhibit 99.B15(a)
DISTRIBUTION PLAN
OF
PBHG ADVISOR FUNDS, INC.
(Class A Shares)
SECTION 1. PBHG ADVISOR FUNDS, INC. (the "Company") on behalf of the
shares of common stock of the portfolios set forth in Schedule A to this Plan
(the "Portfolios" and each individually, a "Portfolio") may pay for distribution
of the Class A shares of such Portfolios (the "Shares") which the Company issues
from time to time, pursuant to Rule 12b-1 under the Investment Company Act of
1940 (the "1940 Act"), according to the terms of this Distribution Plan (the
"Plan").
SECTION 2. The Company may make payments to PBHG Fund Distributors (the
"Distributor"), in the form of fees or reimbursements, to compensate the
Distributor for services provided and expenses incurred by it for purposes of
promoting the sale of Shares, reducing redemptions of Shares, or maintaining or
improving services provided to holders of Shares by the Distributor and
investment dealers. The amount of such payments shall be determined by the
Disinterested Directors (as defined below). Payments under this Plan shall not
exceed in any fiscal year the annual rate of 0.35% of the average net asset
value of the Shares of each Portfolio, as determined at the close of each
business day during the year.
SECTION 3. This Plan shall not take effect until it has been approved
by votes of the majority of both (a) the Board of Directors of the Company and
(b) those directors of the Company who are not "interested persons" of the
Company (as defined in the 1940 Act) and have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it (the
"Disinterested Directors"), cast in person at a meeting called for the purpose
of voting on this Plan.
SECTION 4. Unless sooner terminated pursuant to Section 6, this Plan
shall continue in effect until April 1, 1999 and thereafter shall continue in
effect so long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in Section 3.
SECTION 5. The Distributor shall provide to the Company's Board of
Directors and the Board of Directors shall review, at least quarterly, a written
report of the amounts expended for promoting the sales of Shares and the
purposes for which such expenditures were made.
1
<PAGE>
SECTION 6. This Plan may be terminated with respect to the Shares of
any Portfolio at any time by vote of a majority of the Disinterested Directors,
or by vote of a majority of the outstanding Shares of such Portfolio, and may be
terminated with respect to all Shares at any time by a vote of a majority of the
Disinterested Directors, or by a vote of a majority of the outstanding Shares of
the Company.
SECTION 7. Any agreement related to this Plan shall be made in writing,
and shall provide:
(a) that such agreement may be terminated with respect to the
Shares of any or all Portfolios at any time, without payment of any penalty, by
vote of a majority of the Disinterested Directors or by a vote of the
outstanding Shares of such Portfolio, on not more than sixty (60) days' written
notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
SECTION 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 unless such amendment
is approved by a vote of at least a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the affected Portfolio, and no
material amendment to this Plan shall be made unless approved in the manner
provided for in Section 3.
SECTION 9. The provisions of this Plan are severable for each Portfolio
of the Company and if the provisions of this Plan applicable to a particular
Portfolio are terminated, the remainder of the Plan provisions applicable to the
remaining Portfolios shall not be invalidated thereby and shall be given full
force and effect.
PBHG ADVISOR FUNDS, INC.
(on behalf of the Class A Shares of the
Portfolios)
Dated as of: April 1, 1998 By: /s/ Gary L. Pilgrim
---------------------------
President
2
Exhibit 99.B15(b)
DISTRIBUTION PLAN
OF
PBHG ADVISOR FUNDS, INC.
("Class B" Shares)
Section 1. PBHG Advisor Funds, Inc. (the "Company"), on behalf of the
shares of common stock of the portfolios set forth in Schedule A to this plan
(the "Portfolios" and each individually, a "Portfolio"), may pay for
distribution of the Class B shares of each such Portfolio (the "Shares") which
the Company issues from time to time, pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"), according to the terms of this
Distribution Plan (the "Plan").
Section 2. The Company shall pay to PBHG Fund Distributors and each
successor distributor of the Shares (each thereof a "Distributor") a monthly fee
at the annual aggregate rate of 1.00% of the average net asset value of the
Shares of each Portfolio, as determined at the close of each business day during
the month of which, (i) 0.75% is to compensate the Distributor for services
provided and expenses incurred by it in connection with the offering and sale of
the Shares, which may include, without limitation, the payment by the
Distributor to investment dealers of commissions on the sale of the Shares, as
set forth in the then current prospectus or statement of additional information
with respect to the Shares and interest and other financing costs (such portion
the "Distribution Fee") and (ii) 0.25% is for the payment of a service fee for
maintaining or improving services provided to shareholders by the Distributor
and investment dealers, financial institutions and 401(k) plan service providers
(such portion, the "Service Fee"). Such fees shall be payable for each month
within 15 days after the close of such month, subject to any applicable
limitations imposed by Rule 2830 of the Conduct Rules of NASD Regulation, Inc.
in effect from to time (the "Conduct Rules"). No provision of this Plan shall be
interpreted to prohibit any payments by the Company with respect to the Shares
of a Portfolio during periods when the sale of the Shares of such Portfolio have
been suspended or otherwise limited.
(a) The underwriting agreement or distribution contract between the
Company and the Distributor relating to the Shares (the "Distributor's
Contract") shall provide that: (i) the Distributor will be deemed to have
performed all services required to be performed in order to be entitled to
receive its Allocable Portion (as hereinafter defined) of the Distribution Fees
payable in respect of
<PAGE>
Shares (including Reinvested Shares, Exchange Shares and Free Appreciation
Shares and any other Shares that derive from a Commission Share as such terms
are defined in the Allocation Schedule attached as Schedule B to the
Distributor's Contract) upon the settlement of each sale of a Commission Share
taken into account in determining the Distributor's Allocable Portion of such
Distribution Fees; (ii) the Company's obligation to pay the Distributor its
Allocable Portion of the Distribution Fees payable in respect of the Shares of a
Portfolio shall not be terminated or modified for any reason (including a
termination of the Distributor's Contract between the Distributor and the
Company) except to the extent required by a change in the 1940 Act or the
Conduct Rules, in each case enacted or promulgated after February __, 1998, or
in connection with a Complete Termination (as hereinafter defined) of this Plan;
(iii) the Company will not take any action to waive or change any contingent
deferred sales charge that shall be subtracted from gross redemption proceeds
upon redemption of the Shares as set forth in the then current prospectus or
statement of additional information with respect to Shares (the "CDSC"), except
as provided in such prospectus or statement of additional information, without
the consent of the Distributor or its Transferees (as hereinafter defined); (iv)
neither the termination of the Distributor's role as principal distributor of
the Shares, nor the termination of the Distributor's Contract nor the
termination of this Plan will terminate the Distributor's right to its
Distributor's Allocable CDSC (as defined in the Distributor's Contract); and (v)
such Distributor may assign, sell or pledge (collectively, "Transfer") its
rights to its Allocable Portion of the Distribution Fees and the Distributor's
Allocable CDSC of a Portfolio (but not the Distributor's obligations to the
Company under the Distributor's Contract) in order to raise funds to make the
expenditures related to the distribution of Shares of the Portfolio and in
connection therewith, upon receipt of notice of such Transfer, the Company shall
pay to the assignee, purchaser or pledgee (collectively with their subsequent
transferees, "Transferees"), as third party beneficiaries, such portion of such
Distributor's Allocable Portion of the Distribution Fees or the Distributor's
Allocable CDSC in respect of the Shares of such Portfolio so sold or pledged,
and except as provided in (ii) above and notwithstanding anything to the
contrary set forth in this Plan or in the Distributor's Contract, to the extent
the Distributor has transferred its rights as aforesaid, the Company's
obligation to pay the Distributor's Allocable Portion of the Distribution Fees
and the Distributor's Allocable CDSC payable in respect of the Shares of such
Portfolio shall be absolute and unconditional and shall not be subject to
dispute, offset, counterclaim or any defense whatsoever, at law or equity,
including, without limitation, any of the foregoing based on the insolvency or
bankruptcy of the Distributor (it being understood that such provision is not a
waiver of the Company's right to pursue the Distributor and enforce such claims
against the assets of the Distributor other than its right to the Allocable
Portion of the Distribution Fees and the Distributor's Allocable CDSC in respect
of the Shares
2
<PAGE>
of any Portfolio transferred in connection with such Transfer). For purposes of
this Plan, the term Allocable Portion of the Distribution Fees payable in
respect of the Shares of any Portfolio as applied to the Distributor shall mean
the portion of such Distribution Fees payable in respect of such Portfolio
allocated to the Distributor in accordance with the Allocation Schedule
(attached to the Distributor's Contract) as it relates to the Shares of the
Portfolio. For purposes of this Plan, the term Complete Termination in respect
of any Shares of a Portfolio means a termination of this Plan involving the
complete cessation of the payment of Distribution Fees in respect of all Shares
of a Portfolio, and the complete cessation of the payment of Distribution Fees
in respect of the Shares of a Portfolio and of shares of any successor fund or
any fund acquiring a substantial portion of the assets of the Portfolio and for
every future class of shares which has substantially similar characteristics to
the Shares of such Portfolio taking into account the manner of payment and
amount of sales charge, contingent deferred sales charge or other similar
charges borne directly or indirectly by the holders of such shares.
Section 3. This Plan shall not take effect until (a) it has been
approved, together with any related agreements, by votes of the majority of both
(i) the Board of Directors of the Company and (ii) those directors of the
Company who are not "interested persons" of the Company (as defined in the 1940
Act) and have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Disinterested Directors"), cast in
person at a meeting called for the purpose of voting on this Plan or such
agreements and (b) the execution by the Company and the Distributor of a
Distribution Agreement in respect of the Shares.
Section 4. Unless sooner terminated pursuant to Section 6, this Plan
shall continue in effect until April 1, 1999 and thereafter shall continue in
effect so long as such continuance is specifically approved at least annually in
the manner provided for approval of this Plan in Section 3.
Section 5.The Distributor shall provide to the Company's Board of
Directors and the Board of Directors shall review, at least quarterly, a written
report of the amounts expended for distribution of the Shares and the purposes
for which expenditures were made.
Section 6. This Plan may be terminated with respect to the Shares of
any Portfolio at any time by vote of a majority of the Disinterested Directors,
or by vote of a majority of the outstanding Shares of such Portfolio, and may be
terminated with respect to all Shares at any time by a vote of a majority of the
Disinterested Directors, or by a vote of a majority of the outstanding Shares of
the Company.
3
<PAGE>
Section 7. Any agreement related to this Plan shall be made in writing,
and shall provide:
(a) that such agreement may be terminated with respect to the
Shares of any or all Portfolios at any time, without payment of any penalty, by
vote of a majority of the Disinterested Directors or by a vote of the majority
of the outstanding Shares of such Portfolio, on not more than sixty (60) days'
written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
Section 8. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 unless such amendment
is approved by a vote of at least a "majority of the outstanding voting
securities" (as defined in the 1940 Act) of the Shares, and no material
amendment to this Plan shall be made unless approved in the manner provided for
in Section 3.
Section 9. The provisions of this Plan are severable for each Portfolio
of the Company and if the provisions of this Plan applicable to a particular
Portfolio are terminated, the remainder of the Plan provisions applicable to the
remaining Portfolios shall not be invalidated thereby and shall be given full
force and effect.
PBHG ADVISOR FUNDS, INC.
(on behalf of the Class B Shares
of the Portfolios)
Dated as of: April 1, 1998 By: /s/ Gary L. Pilgrim
-----------------------------
President
4
Exhibit 99.B18
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. Class A Shares - shall mean those Shares designated as Class A Shares in
the Company's organizing documents.
f. Class B Shares - shall mean those Shares designated as Class B Shares in
the Company's organizing documents.
g. Class I Shares - shall mean those Shares designated as Class I Shares in
the Company's organizing documents.
h. Company - PBHG Advisor Funds, Inc.
i. Directors - the directors of the Company.
j. Distribution Expenses - expenses incurred in activities that are
primarily intended to result in the distribution and sale of Shares as
defined in a Distribution Plan and/or agreements implementing the Plan.
k. Distribution Fee - a fee paid by the Company to the Distributor to
compensate the Distributor for Distribution Expenses.
l. Distributor - PBHG Fund Distributors, a Pennsylvania business trust.
<PAGE>
m. Plan of Distribution - any plan adopted by the Company under Rule 12b-1
under the Act with respect to payment of a Distribution Fee.
n. Portfolio - a series of the Shares of the Company constituting a separate
investment portfolio of the Company.
o. 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.
p. 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.
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.
2
<PAGE>
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 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.
3
<PAGE>
c. Method of Calculation. The CDSC shall be assessed on an amount equal to
the lesser of the then current market value or the cost 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,
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.
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
4
<PAGE>
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. 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 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.
10. 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 9 above.
11. Periodic Review. The Directors of the Company must periodically review this
plan for continued appropriateness.
PBHG ADVISOR FUNDS, INC.
Dated as of: April 1, 1998 By: /s/ Gary L. Pilgrim
---------------------
President
5
Exhibit 99.B24(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 99.B24(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
