SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The PBHG Funds, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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| | Fee paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by Exchange
Act rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or Schedule and the date of its filing.
<PAGE>
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DECEMBER 18, 2000
IMPORTANT NEWS FOR SHAREHOLDERS OF THE PBHG FUNDS, INC.
While we encourage you to read the full text of the enclosed Proxy
Statement, here is a brief overview of some matters affecting The PBHG Funds,
Inc. (the "Company") that require a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q. WHAT IS HAPPENING?
A. Old Mutual plc, an international financial services group based in
London ("Old Mutual"), has acquired United Asset Management Corporation
("UAM"), the parent company of the Company's investment adviser,
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"), and two of the
Company's investment sub-advisers, Pilgrim Baxter Value Investors, Inc.
and Murray Johnstone International Limited. This acquisition caused a
change in the control of Pilgrim Baxter and those sub-advisers,
resulting in the automatic termination of the advisory and sub-advisory
agreements for the separate portfolios of the Company (Each separate
portfolio is referred to as a "Fund"; collectively, the separate
portfolios are referred to as the "Funds"). The Company's Board of
Directors has approved, subject to shareholder approval, new investment
advisory agreements for all Funds, and new sub-advisory agreements for
those Funds having a sub-adviser.
The Board of Directors is also taking this opportunity to ask
shareholders to vote on certain other matters affecting the Funds. The
following pages give you additional information about Old Mutual, the
acquisition, and the matters on which you are being asked to vote. THE
DIRECTORS OF THE COMPANY, INCLUDING THOSE WHO ARE INDEPENDENT DIRECTORS
OF THE COMPANY, UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR EACH OF THESE
PROPOSALS.
Q. WHY DID YOU SEND ME THESE MATERIALS?
A. You are receiving these materials--a booklet that includes the Proxy
Statement and one or more proxy cards--because you have the right to
vote on the important proposals concerning your investment in one or
more of the Funds.
Q. WHY ARE MULTIPLE AUTHORIZATIONS ENCLOSED?
A. If you own shares of more than one of the Funds, you will receive a
proxy card for each Fund you own.
<PAGE>
Q. WHY AM I BEING ASKED TO VOTE ON A PROPOSED NEW ADVISORY AND
SUB-ADVISORY AGREEMENTS IN PROPOSALS NO. 1 AND 2?
A. Under the Investment Company Act of 1940 (which regulates investment
companies such as the Company), a change in control of an investment
company's adviser results in an automatic termination of all advisory
agreements between that investment company and the adviser and requires
the shareholders to approve new advisory agreements. Therefore, the
advisory agreement between the Company and Pilgrim Baxter terminated as
a result of UAM's acquisition by Old Mutual. In addition, all
sub-advisory agreements for those Funds having a sub-adviser have also
automatically terminated. Consequently, shareholder approval of new
advisory agreements between the Company and Pilgrim Baxter, and new
sub-advisory agreements among the Company, Pilgrim Baxter, and the
sub-advisers are now required. The former advisory and sub-advisory
agreements contained a provision limiting expenses previously required
by state securities laws. Those state securities laws were voided in
1996 by the Federal National Securities Markets Improvement Act, and
therefore, that provision has been deleted from the new advisory and
sub-advisory agreements. The new advisory and sub-advisory agreements
are identical in all material respects to the former advisory and
sub-advisory agreements including the fees paid under them.
Q. HOW WILL THE UAM/OLD MUTUAL TRANSACTION AFFECT ME?
A. Pilgrim Baxter and Old Mutual have assured the Board that there will be
no reduction in the nature or quality of its services to the Funds as a
result of the transaction, nor will there be any increase in fees or
expenses as a result of the transaction.
Q. WHAT OTHER ITEMS AM I BEING ASKED TO VOTE ON?
A. You are being asked to vote on proposals to standardize the various
fundamental investment policies of the Funds. Additionally, you are
being asked to vote on reorganizing the Company, which is currently a
Maryland corporation, into a Delaware business trust. THE BOARD OF
DIRECTORS OF THE COMPANY, INCLUDING THOSE WHO ARE INDEPENDENT DIRECTORS
OF THE COMPANY, UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THESE
PROPOSALS.
Q. WHOM DO I CALL FOR MORE INFORMATION OR TO PLACE MY VOTE?
A. You can vote easily and quickly at the proxy solicitors' web site,
WWW.PROXYVOTE.COM, by calling the toll-free telephone number printed on
your proxy card, by mail or in person. If you need more information on
how to vote, or if you have any questions, please call your financial
representative or the Company's information agent at 1-800-433-0051.
YOUR VOTE IS IMPORTANT AND WILL HELP AVOID THE ADDITIONAL EXPENSE OF
ANOTHER SOLICITATION.
THANK YOU FOR PROMPTLY RECORDING YOUR VOTE.
<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUND
PBHG EMERGING GROWTH FUND
PBHG LARGE CAP GROWTH FUND
PBHG SELECT EQUITY FUND
PBHG CORE GROWTH FUND
PBHG LIMITED FUND
PBHG LARGE CAP 20 FUND
PBHG NEW OPPORTUNITIES FUND
PBHG LARGE CAP VALUE FUND
PBHG MID-CAP VALUE FUND
PBHG SMALL CAP VALUE FUND
PBHG FOCUSED VALUE FUND
PBHG INTERNATIONAL FUND
PBHG CASH RESERVES FUND
PBHG TECHNOLOGY & COMMUNICATIONS FUND
PBHG STRATEGIC SMALL COMPANY FUND
PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND
P.O. Box 219534
Kansas City, MO 64121-9534
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON January 25, 2001
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of each series
portfolio (each, a "Fund") of The PBHG Funds, Inc. (the "Company"), will be held
at the Peninsula Hotel, Le Grande Salle Room, 700 Fifth Avenue in New York City
on January 25, 2001 at 10:00 AM for the following purposes:
1. To approve new investment advisory agreements for each Fund.
2. To approve new investment sub-advisory agreements:
a. With Pilgrim Baxter Value Investors, Inc. for PBHG Large Cap Value Fund,
PBHG Mid-Cap Value Fund, PBHG Small Cap Value Fund, PBHG Focused Value
Fund and PBHG Strategic Small Company Fund;
b. With Wellington Management Company, LLP for PBHG Cash Reserves Fund; and
c. With Murray Johnstone International Limited for PBHG International Fund.
3 To approve changes to each Fund's fundamental investment restrictions.
4. To approve reorganizing the Company as a Delaware business trust and
thereafter dissolving the existing Maryland corporation.
5. To transact any other business that may properly come before the meeting or
any adjournments thereof.
Shareholders of record at the close of business on November 17, 2000 are
entitled to notice of, and to vote at, the meeting or any adjournments thereof.
You are invited to attend the meeting, but if you cannot do so, please complete
and sign the enclosed proxy and return it in the accompanying envelope as
promptly as possible. Your vote is important no matter how many shares you own.
You can vote easily and quickly at the proxy solicitors' web site,
WWW.PROXYVOTE.COM, by calling the toll-free telephone number printed on your
proxy card, by mail, or in person. You may change your vote even though a proxy
has already been returned either by written notice to the Company, by mail,
submitting a subsequent proxy, or by voting in person at the meeting.
By Order of the Board of Directors of the Company.
/s/John M. Zerr
John M. Zerr
Secretary
Kansas City, MO
December 18, 2000
<PAGE>
THE PBHG FUNDS, INC.
P.O. BOX 219534
KANSAS CITY, MO 64121-9534
1-800-433-0051
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
THE PBHG FUNDS, INC
TO BE HELD ON JANUARY 25, 2001
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of The PBHG Funds, Inc. (the "Company"), for the
special meeting of shareholders of PBHG Growth Fund, PBHG Emerging Growth Fund,
PBHG Large Cap Growth Fund, PBHG Select Equity Fund, PBHG Core Growth Fund, PBHG
Limited Fund, PBHG Large Cap 20 Fund, PBHG New Opportunities Fund, PBHG Large
Cap Value Fund, PBHG Mid-Cap Value Fund, PBHG Small Cap Value Fund, PBHG Focused
Value Fund, PBHG International Fund, PBHG Cash Reserves Fund, PBHG Technology &
Communications Fund, PBHG Strategic Small Company Fund, and PBHG Global
Technology & Communications Fund (each a "Fund" and collectively, the "Funds"),
to be held at the Peninsula Hotel, La Grande Salle Room, 700 Fifth Avenue in New
York City on Thursday, January 25, 2001 at 10:00 A.M., and all adjournments
thereof (the "Meeting"). Shareholders of record at the close of business on
November 17, 2000 (the "Record Date") are entitled to notice of, and to vote at,
the Meeting. This proxy statement and the accompanying notice of meeting and
proxy card(s) are first being mailed to shareholders on or about December 18,
2000.
A director who is an interested person of the Company is referred to in
this proxy statement as an "Interested Director." A director may be an
interested person of the Company because he or she is affiliated with a Fund's
investment adviser, sub-adviser or the Company's distributor, SEI Investments
Distribution Co. ("SEI"). Directors who are not interested persons of the
Company are referred to in this proxy statement as "Independent Directors."
SHAREHOLDER VOTING
The Board intends to bring before the Meeting the matters set forth in
the foregoing notice. If you wish to participate in the Meeting you may submit
the proxy card(s) included with this proxy statement or attend in person. YOUR
VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. You can vote easily and
quickly at the proxy solicitors' web site, by toll-free telephone, by mail or in
person. You may change your vote even though a proxy has already been returned
either by written notice to the Company, by mail, submitting a subsequent proxy,
or by voting in person at the meeting. A more detailed description of the
various voting procedures is provided in the section SHAREHOLDER VOTING
PROCEDURES beginning on page 26 below.
SUMMARY OF PROPOSALS REQUIRING SHAREHOLDER VOTE
REQUIRED VOTE
The following table summarizes the proposals submitted at the Meeting,
the Fund shareholders entitled to vote on the proposals and the vote required
approving each proposal.
<PAGE>
<TABLE>
<CAPTION>
Proposal Proposal Description Fund Shareholders
Number Entitled to Vote
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<S> <C> <C>
1* To approve a new investment advisory agreement with
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") ALL FUNDS
--------------------------------------------------------------------------------------------------------
2 To approve new investment sub-advisory agreements SEE 2A, B AND C BELOW
--------------------------------------------------------------------------------------------------------
2A* TO APPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT PBHG LARGE CAP VALUE FUND
WITH PILGRIM BAXTER VALUE INVESTORS, INC. PBHG MID-CAP VALUE FUND
("VALUE INVESTORS") PBHG SMALL CAP VALUE FUND
PBHG FOCUSED VALUE FUND
PBHG STRATEGIC SMALL COMPANY
FUND (EACH A "VALUE FUND";
COLLECTIVELY, THE "VALUE FUNDS")
--------------------------------------------------------------------------------------------------------
2B* TO APPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT PBHG CASH RESERVES FUND
WITH WELLINGTON MANAGEMENT COMPANY, LLP
("WELLINGTON")
--------------------------------------------------------------------------------------------------------
2C* TO APPROVE A NEW INVESTMENT SUB-ADVISORY AGREEMENT PBHG INTERNATIONAL FUND
WITH MURRAY JOHNSTONE INTERNATIONAL LIMITED
("MURRAY JOHNSTONE")
--------------------------------------------------------------------------------------------------------
3 To adopt changes to the fundamental investment SEE 3A THROUGH 3M BELOW
restrictions for each Fund as listed below:
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3A* ISSUER DIVERSIFICATION ALL FUNDS EXCEPT
PBHG TECHNOLOGY &
COMMUNICATIONS FUND, PBHG
GLOBAL TECHNOLOGY &
COMMUNICATIONS FUND, PBHG
LARGE CAP 20 FUND, PBHG
CASH PBHG RESERVES FUND
AND PBHG FOCUSED VALUE FUND
--------------------------------------------------------------------------------------------------------
3B* BORROWING MONEY AND ISSUING SENIOR SECURITIES ALL FUNDS
--------------------------------------------------------------------------------------------------------
3C* UNDERWRITING SECURITIES ALL FUNDS
--------------------------------------------------------------------------------------------------------
3D* INDUSTRY CONCENTRATION ALL FUNDS EXCEPT PBHG
TECHNOLOGY & COMMUNICATIONS
FUND AND PBHG GLOBAL
TECHNOLOGY & COMMUNICATIONS
FUND
--------------------------------------------------------------------------------------------------------
3E* PURCHASING OR SELLING REAL ESTATE ALL FUNDS
--------------------------------------------------------------------------------------------------------
3F* PURCHASING OR SELLING COMMODITIES ALL FUNDS
--------------------------------------------------------------------------------------------------------
3G* MAKING LOANS ALL FUNDS
--------------------------------------------------------------------------------------------------------
3H* INVESTING ALL ASSETS IN AN OPEN END FUND ALL FUNDS
--------------------------------------------------------------------------------------------------------
3I* INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR ALL FUNDS EXCEPT
DEVELOPMENT PROGRAMS PBHG FOCUSED VALUE FUND
AND PBHG NEW OPPORTUNITIES
--------------------------------------------------------------------------------------------------------
3J* INVESTING IN COMPANIES FOR THE PURPOSE OF CONTROL ALL FUNDS EXCEPT PBHG GROWTH
FUND, PBHG FOCUSED VALUE FUND
AND PBHG NEW OPPORTUNITIES
FUND
--------------------------------------------------------------------------------------------------------
2
<PAGE>
--------------------------------------------------------------------------------------------------------
3K MAKING SHORT SALES OR MARGIN PURCHASES ALL FUNDS EXCEPT PBHG GROWTH
FUND, PBHG FOCUSED
VALUE FUND AND
PBHG NEW OPPORTUNITIES FUND
--------------------------------------------------------------------------------------------------------
3L* PLEDGING ASSETS ALL FUNDS EXCEPT PBHG FOCUSED
VALUE FUND AND
PBHG NEW OPPORTUNITIES FUND
--------------------------------------------------------------------------------------------------------
3M* INVESTING IN PUTS AND CALL PBHG GROWTH FUND
--------------------------------------------------------------------------------------------------------
4** TO REORGANIZE AS A DELAWARE BUSINESS TRUST ALL FUNDS
--------------------------------------------------------------------------------------------------------
<FN>
* Under the Investment Company Act of 1940, as amended (the "1940 Act"), approval of each of
these proposals requires the affirmative vote of the lesser of (a) 67% or more of the voting
securities of the particular Fund present at the meeting or represented by proxy if the
holders of more than 50% of the outstanding voting securities of that Fund are present or
represented by proxy or (b) more than 50% of the outstanding voting securities of the
particular Fund.
** Approval of this proposal requires a majority of all outstanding shares of the Company.
</FN>
</TABLE>
PROPOSAL 1: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
INTRODUCTION
ASSIGNMENT OF FORMER ADVISORY AGREEMENTS AND APPROVAL OF INTERIM
ADVISORY ARRANGEMENTS
Through a tender offer completed on September 26, 2000 and a merger
completed on October 5, 2000, Old Mutual plc, an English public limited company,
("Old Mutual"), acquired the outstanding common stock of United Asset Management
Corporation ("UAM"), the parent company of Pilgrim Baxter, Value Investors and
Murray Johnstone (the "Transaction").
Old Mutual is an international financial services group based in
London, with operations in life assurance, asset management, banking and general
insurance. Old Mutual's principal offices are located at 3rd Floor, Lansdowne
House, 57 Berkely Square, London, WIX 5DH, United Kingdom.
The consummation of the Transaction constituted an "assignment," as
that term is defined in the 1940 Act, of the Fund's Former Investment Advisory
and Sub-Advisory Agreements for the Funds. As required by the 1940 Act, these
Former Investment Advisory and Sub-Advisory Agreements (collectively, the
"Former Advisory Agreements") automatically terminated upon their assignment.
As an interim measure to avoid any lapse in investment advisory
services to the Funds as a consequence of these terminations, the Board has
continued the advisory services under an Interim Investment Advisory Agreement
between each Fund and Pilgrim Baxter, and Interim Investment Sub-Advisory
Agreements among the Value Funds, Pilgrim Baxter and Value Investors, among PBHG
International Fund, Pilgrim Baxter and Murray Johnstone, and among PBHG Cash
Reserves Fund, Pilgrim Baxter and Wellington (collectively, the "Interim
Advisory Agreements") (Wellington is not affiliated with Pilgrim Baxter, UAM or
Old Mutual).
All compensation earned by Pilgrim Baxter or by a sub-adviser under the
Interim Advisory Agreements is being held in interest-bearing escrow accounts
pending shareholder approval of proposed new investment advisory and
sub-advisory agreements for a period of up to 150 days from the termination of
the Former Advisory Agreements (see "New Advisory Agreements" below). If
shareholders approve the proposed new investment advisory and sub-advisory
agreements, the amount held in the escrow accounts, plus interest, will be paid
to Pilgrim Baxter, Value Investors, Murray Johnstone, and Wellington. If
shareholders do not approve any of the proposed new advisory agreements, Pilgrim
Baxter, Value Investors, Murray Johnstone, and Wellington, as applicable, will
each receive the lesser of the costs incurred in performing its services under
the applicable Interim Advisory Agreements or the total amount in the escrow
account, plus interest earned.
3
<PAGE>
All of the Funds are currently operating under these Interim Advisory
Agreements which became effective on September 26, 2000. None of the Interim
Advisory Agreements need to be voted upon by shareholders.
Shareholders of the PBHG International Fund should also know that
subsequent to September 26, 2000, the effective date of the Fund's Interim
Investment Sub-Advisory Agreement, Old Mutual announced it had reached an
agreement to sell Murray Johnstone to Aberdeen Asset Management plc. The
consummation of this sale would constitute an "assignment," as that term is
defined in the 1940 Act of the Fund's Interim Investment Sub-Advisory Agreement,
and as required by the 1940 Act this Interim Investment Sub-Advisory Agreement
would automatically terminate upon its assignment. As an interim measure to
avoid any lapse in the investment sub-advisory services to the PBHG
International Fund as a consequence of the termination of the Interim Investment
Sub-Advisory Agreement, the Board approved continuing the sub-advisory services
of Murray Johnstone under another interim agreement which would become effective
upon the termination of the Interim Investment Sub-Advisory Agreement. This
other interim investment advisory agreement does not need to be voted upon by
shareholders. As of the date this proxy statement was printed, the PBHG
International Fund was still operating under the Interim Investment Sub-Advisory
Agreement which became effective on September 26, 2000.
NEW ADVISORY ARRANGEMENTS
The Board has also approved, subject to shareholder approvals, a New
Investment Advisory Agreement between the Company on behalf of each Fund and
Pilgrim Baxter, and New Investment Sub-Advisory Agreements among the Company,
Pilgrim Baxter and Value Investors for the Value Funds, among the Company,
Pilgrim Baxter and Murray Johnstone for the PBHG International Fund, and among
the Company, Pilgrim Baxter and Wellington for PBHG Cash Reserves Fund
(collectively, the "New Advisory Agreements"). The New Advisory Agreements each
have an initial term of two years. THE NEW ADVISORY AGREEMENTS ARE BEING
SUBMITTED TO SHAREHOLDERS OF EACH FUND FOR APPROVAL.
TRANSFERS OF CONTROL OF AN INVESTMENT ADVISER UNDER THE 1940 ACT
Section 15(f) of the 1940 Act provides that an investment adviser to a
registered investment company, and the affiliates of such adviser, may receive
any amount or benefit in connection with a sale of any interest in such
investment adviser which results in an assignment of an investment advisory
contract if the following two conditions are satisfied: (1) for a period of
three years after such assignment, at least 75% of the board of directors of the
investment company cannot be "interested persons" (within the meaning of Section
2(a)(19) of the 1940 Act) of the new investment adviser or its predecessor, and
(2) an unfair burden may not be imposed on the investment company as a result of
the assignment or any express or implied terms, conditions or understandings
applicable thereto.
Consistent with the first condition of Section 15(f), Old Mutual agreed
as part of the Transaction that, for a period of three years after the closing
of the Transaction, it will not take or recommend any action that would cause
more than 25% of the Company's directors to be interested persons of any entity
affiliated with Pilgrim Baxter.
With respect to the second condition of Section 15(f), an unfair burden
on an investment company is defined in the 1940 Act to include any arrangement
during the two-year period after any such transaction occurs whereby the manager
or investment adviser or its predecessor or successor, or any interested person
of such adviser, predecessor or successor, receives or is entitled to receive
any compensation from the investment company of two types, either directly or
indirectly. The first type is compensation from any person in connection with
the purchase or sale of securities or other property to, from or on behalf of
the investment company, other than bona fide ordinary compensation as principal
underwriter for such company. The second type is compensation from the
investment company or its security holders for other than bona fide investment
advisory or other services.
Old Mutual has also agreed not to take or recommend any action that
would constitute an unfair burden on the Company or the Funds within the meaning
of Section 15(f). In this regard, Old Mutual and Pilgrim Baxter have represented
to the Company that they will maintain the Funds' existing expense limitation
agreements for a period of two years from the date of the consummation of the
Transaction. The expense limitation agreements are discussed in greater detail
below under "Description of New Investment Advisory Agreement - Expense
Limitations".
4
<PAGE>
DESCRIPTION OF THE NEW INVESTMENT ADVISORY AGREEMENT WITH PILGRIM BAXTER
THE NEW INVESTMENT ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL
RESPECTS TO THE COMPANY'S FORMER INVESTMENT ADVISORY AGREEMENT EXCEPT FOR THE
ELIMINATION OF THE EXPENSE LIMITATIONS PREVIOUSLY REQUIRED BY STATE SECURITIES
LAWS. EACH FUND'S ADVISORY FEE RATE WILL REMAIN UNCHANGED.
SERVICES AND EXPENSES
The Company and Pilgrim Baxter had previously entered into a Former
Investment Advisory Agreement with respect to each Fund. Both the Former
Investment Advisory Agreement and the New Investment Advisory Agreement obligate
Pilgrim Baxter to: (i) provide a program of continuous investment management for
the Fund in accordance with the Fund's investment objectives, policies and
limitations; (ii) make investment decisions for the Fund; and (iii) place orders
to purchase and sell securities for the Fund, subject to the supervision of the
Company's Board of Directors.
Both the Former and the New Investment Advisory Agreement
(collectively, the "Advisory Agreements") require Pilgrim Baxter to pay its
overhead and employee costs and the compensation and expenses of all its
directors, officers and employees who serve as officers and executive employees
of the Company. The Advisory Agreements provide that Pilgrim Baxter is not
responsible for other expenses of operating the Company (these expenses include,
but are not limited to, organization and certain offering expenses, legal
expenses, auditing and accounting expenses, interest expenses, taxes and
governmental fees and custodial expenses).
INVESTMENT ADVISORY FEES
For its services under the New Investment Advisory Agreement, Pilgrim
Baxter is entitled to a fee, which is calculated daily and paid monthly, at an
annual rate of: 0.85 % of each of PBHG Growth Fund's, PBHG Emerging Growth
Fund's, PBHG Select Equity Fund's, PBHG Core Growth Fund's, PBHG Large Cap 20
Fund's, PBHG Mid-Cap Value Fund's, PBHG Focused Value Fund's and PBHG Technology
& Communications Fund's average daily net assets; 0.75 % of the PBHG Large Cap
Growth Fund's average daily net assets; 0.65% of the PBHG Large Cap Value Fund's
average daily net assets; 1.00% of each of the PBHG Limited Fund's, PBHG New
Opportunities Fund's, PBHG Small Cap Value Fund's, PBHG International Fund's and
PBHG Strategic Small Company Funds' average daily net assets; 1.50% of the PBHG
Global Technology & Communications Fund's average daily net assets; and 0.30% of
the PBHG Cash Reserves Fund's average daily net assets. The investment advisory
fees paid by certain of the Funds are higher than those paid by most investment
companies, although Pilgrim Baxter believes the fees to be comparable to those
paid by investment companies with similar investment objectives and policies.
The same fees were payable under the Former Investment Advisory Agreement. A
schedule of the investment advisory fees received by Pilgrim Baxter (and any fee
waivers) from each of the Funds under the Former Investment Advisory Agreement
for the fiscal year ended March 31, 2000 is attached as SCHEDULE 1.
EXPENSE LIMITATIONS
In the interest of limiting the expenses of the Funds, Pilgrim Baxter
has voluntarily entered into expense limitation agreements with the Company
("Expense Limitation Agreements") on behalf of certain Funds pursuant to which
Pilgrim Baxter has agreed to waive or limit a portion of its fee and to assume
other expenses in an amount necessary to limit total annual operating expenses
(exclusive of fees and expenses incurred under the Fund's Service Plan,
interest, taxes, brokerage commissions, any expenditures that are capitalized in
accordance with generally accepted accounting principles and any extraordinary
expenses not incurred in the ordinary course of the Fund's business) for that
Fund to not more than 1.50% of the average daily net assets of each of the PBHG
Growth Fund, PBHG Core Growth Fund, PBHG Limited Fund, PBHG New Opportunities
Fund, PBHG Large Cap 20 Fund, PBHG Large Cap Value Fund, PBHG Mid-Cap Value
Fund, PBHG Small Cap Value Fund, PBHG Focused Value Fund and PBHG Strategic
Small Company Fund, to not more than 2.15% of the average daily net assets of
PBHG Global Technology & Communications Fund and to not more than 2.25% of the
average daily net assets of the PBHG International Fund. Reimbursement by these
Funds of the advisory fees waived or limited and other expenses paid by Pilgrim
Baxter pursuant to the Expense Limitation Agreements may be made at a later date
when the Funds have reached a
5
<PAGE>
sufficient asset size to permit reimbursement to be made without causing the
total annual expense rate of each Fund (exclusive of fees and expenses incurred
under the Fund's Service Plan, interest, taxes, brokerage commissions, any
expenditures that are capitalized in accordance with generally accepted
accounting principles and any extraordinary expenses not incurred in
the ordinary course of the Fund's business) to exceed 1.50% (or 2.15% for the
PBHG Global Technology & Communications Fund and 2.25% for the PBHG
International Fund). 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 (exclusive of fees and expenses incurred under the Fund's Service
Plan, interest, taxes, brokerage commissions, any expenditures that are
capitalized in accordance with generally accepted accounting principles and any
extraordinary expenses not incurred in the ordinary course of the Fund's
business) is less than 1.50% (or 2.15% for the PBHG Global Technology &
Communications Fund and 2.25% for the PBHG International Fund); and (iii) the
payment of such reimbursement was approved by the Board of Directors.
For purposes of calculating the extent to which advisory fees are
waived or limited or other expenses are reimbursed, the Company and Pilgrim
Baxter will look to compensation payable under the Former Investment Advisory
Agreement, the Interim Investment Advisory Agreement and the New Investment
Advisory Agreement.
The Former Investment Advisory Agreement contained a provision
previously required by state securities laws limiting expenses; those applicable
state securities laws have been voided by the Federal National Securities
Markets Improvement Act of 1996 ("NSMIA"), and therefore the provision has been
deleted from the New Investment Advisory Agreement.
LIMITATIONS ON LIABILITY
The Advisory Agreements provide certain limitations on Pilgrim Baxter's
liability, but also provide that Pilgrim Baxter shall not be protected against
any liability to the Company, the Funds or its shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations and duties thereunder.
CONTINUANCE AND RENEWALS
The continuance of the New Investment Advisory Agreement after the
first two years must be specifically approved at least annually (i) by the
Company's Board of Directors or by vote of a majority of the Fund's outstanding
voting securities and (ii) by the affirmative vote of a majority of the
Directors who are not parties to the agreement or interested persons of any such
party by votes cast in person at a meeting called for such purpose. The New
Investment Advisory Agreement may be terminated (i) at any time without penalty
by the Fund upon the vote of a majority of the directors or by vote of the
majority of the Fund's outstanding voting securities upon 60 days' written
notice to Pilgrim Baxter or (ii) by Pilgrim Baxter at any time without penalty
upon 60 days' written notice to the Fund. The New Investment Advisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act). The Former Investment Advisory Agreement contained identical
provisions.
INFORMATION ABOUT PILGRIM BAXTER
Pilgrim Baxter currently has discretionary management authority with
respect to approximately $20 billion in assets. In addition to advising the
Funds, Pilgrim Baxter provides advisory services to PBHG Insurance Series Fund,
Inc., pension and profit-sharing plans, charitable institutions, corporations,
trusts, and other investment companies. The principal business address of
Pilgrim Baxter is 825 Duportail Road, Wayne, Pennsylvania 19087. PBHG Fund
Services, the Company's administrator, shareholder servicing agent and web
services agent, is a wholly-owned subsidiary of Pilgrim Baxter. Value Investors,
sub-adviser to the Value Funds, is a wholly-owned subsidiary of Pilgrim Baxter.
A schedule of other investment companies with investment objectives similar to
the Funds for which Pilgrim Baxter serves as investment adviser or sub-adviser,
and related fees, is attached as SCHEDULE 2. The form of New Investment Advisory
Agreement is attached to this proxy statement as EXHIBIT A.
DIRECTORS CONSIDERATION AND RECOMMENDATION
At the April 4, 2000 and June 6, 2000 meetings of the Board of
Directors, Harold Baxter, Chairman of the Company's Board of Directors and Chief
Executive Officer of Pilgrim Baxter and
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Value Investors, informed the Independent Directors that UAM was engaged in
merger discussions that might result in the future acquisition of UAM. The
Independent Directors requested Mr. Baxter to keep them informed if any such
plans materialized. At the meeting on June 6, the Independent Directors retained
the firm of Kramer Levin Naftalis & Frankel, LLP ("Special Counsel") to advise
them in the event that UAM entered into an acquisition agreement that would
result in an assignment and termination of the Company's investment advisory and
sub-advisory agreements. On June 19, 2000, Old Mutual and UAM announced that
they had entered into a merger agreement whereby Old Mutual would acquire UAM,
subject to certain conditions.
Following the announcement, and after the details of the Transaction
had become clearer, the Board met by telephone on July 13, 2000 to review the
Transaction. At that meeting, the Independent Directors asked Special Counsel to
request from Old Mutual and Pilgrim Baxter information that would be necessary
and appropriate for them to consider with respect to the approval of new
investment advisory and sub-advisory agreements. On July 21, 2000, Special
Counsel, in a letter to Old Mutual and Pilgrim Baxter, requested that they
provide detailed information relating to the Transaction. The request indicated
that the information would be important to the Independent Directors in making
their decision on whether to approve the Interim Advisory Agreements and any New
Advisory Agreements.
On August 8, 2000, the Board, including all of the Independent
Directors, met by telephone to discuss the material received from Old Mutual in
response to Special Counsel's request. The Independent Directors requested that
Special Counsel provide them with a complete analysis of the material provided.
That analysis was provided to the Directors on August 28, 2000.
On September 6, 2000, the Board, including all of the Independent
Directors, again met by telephone to discuss in detail the information received
and Special Counsel's analysis. The Independent Directors also discussed with
Mr. Baxter how he expected the Transaction to affect Pilgrim Baxter and the
Company. Among other things, the Independent Directors determined that
additional information from Old Mutual was necessary to adequately reach a
conclusion on the Interim Advisory Agreements and New Advisory Agreements.
Special Counsel requested supplemental information, and it was considered by the
Independent Directors at their meeting on September 21, 2000.
The Board met in person on September 21, 2000 for the purpose of
considering the Interim Advisory Agreements. At the meeting, the Independent
Directors reviewed the following information and representations:
1. Information about Old Mutual, its corporate structure and general
information about the Transaction;
2. Information about how the Transaction would affect UAM, and Old
Mutual's plan with respect to the future operation of UAM;
3. Information about how the Transaction would affect Pilgrim Baxter,
and Old Mutual's plan with respect to the future operation of
Pilgrim Baxter;
4. Old Mutual's stated commitment to retain the existing Pilgrim Baxter
management team, including the portfolio managers for the Funds;
5. Old Mutual's representation that there were no current plans to
change any of the sub-advisory relationships in existence with the
Funds; and
6. The fact that there were no material differences between the Interim
Advisory Agreements and the Former Investment Advisory Agreements,
and that the advisory fees to be imposed under the Interim Advisory
Agreements would be identical to those that existed under the Former
Investment Advisory Agreements.
After reviewing all of this information and the representations
provided, and after the Independent Directors consulted with Special Counsel,
the Board, including the Independent Directors voting unanimously, approved the
Interim Advisory Agreements and requested that appropriate individuals
representing Old Mutual attend a meeting subsequently called for November 13,
2000 to consider the New Investment Advisory and Investment Sub-Advisory
Agreements.
At its meeting on November 13, 2000, the Directors met in person for
the purpose of considering New Investment Advisory and Investment Sub-Advisory
Agreements and for the purpose of considering
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another interim investment sub-advisory agreement with Murray Johnstone for the
PBHG International Fund in light of events that occurred subsequent to the Board
approving the Interim Advisory Agreements on September 21, 2000. At the November
13, 2000 meeting, the Directors reviewed and reconsidered all of the information
provided, including the information and representations considered at the
September 21, 2000 meeting, and the analysis of that information, as well as
information from Murray Johnstone and Old Mutual regarding Old Mutual's sale of
Murray Johnstone to Aberdeen Asset Manegement plc. In addition, the Directors
met with Dr. Kevin Carter, then Chairman and CEO of OM Asset Management (the
"Old Mutual Representative"). Further, with respect to the New Investment
Advisory Agreement between each Fund and Pilgrim Baxter, the Board particularly
considered the following factors: (1) the experience of Old Mutual in the asset
management business; (2) the financial strength of Old Mutual; (3) the stated
expectation that there would be no material change to the corporate structure of
Pilgrim Baxter; (4) Old Mutual's stated commitment to retain the existing
Pilgrim Baxter management team, including the portfolio managers for the Funds,
and the terms of new agreements among UAM, Pilgrim Baxter, Mr. Baxter and the
other Pilgrim Baxter principal and a proposed phantom stock plan for the
principals and other current and future key employees (see "Additional
Information--Certain Transactions"); (5) that there were no current plans to
materially change the Value Investors and Wellington sub-advisory relationships
that existed with the Funds; the Old Mutual Representative indicated, however,
that Old Mutual had agreed to sell its ownership interest in Murray Johnstone to
Aberdeen Asset Management plc but because of various contingencies to closing
this transaction, the closing date could not be presently determined; (6) that
the advisory fees imposed under the New Investment Advisory Agreement are
identical to those that existed under the Former Investment Advisory Agreement
and currently exist under the Interim Investment Advisory Agreement (and would
exist under the second interim investment advisory agreement for the PBHG
International Fund); (7) the fact that there will be no material difference in
the expense ratios of the Funds under the New Investment Advisory Agreement; (8)
the representation by Old Mutual and Pilgrim Baxter that they will maintain the
Funds' existing expense limitation agreements for a period of two years from the
date of the consummation of the Transaction; (9) that for a period of three
years from the date of the completion of the Transaction, at least 75% of the
Company's Board will be comprised of directors who are not "interested persons"
(as defined in the 1940 Act) of Pilgrim Baxter or any of the sub-advisers; (10)
that there is no "unfair burden", as that term is described in the 1940 Act,
imposed on the Company as a result of the Transaction and that Old Mutual has
agreed not to take or recommend any action that would constitute such an unfair
burden on the Company or the Funds; and (11) the fairness of the compensation
payable to Pilgrim Baxter under the New Investment Advisory Agreement in light
of the services to be provided and Pilgrim Baxter's past performance.
Based upon its review of all of the information provided, the
consideration of the factors described above and such other factors it
considered relevant, and after consulting with Special Counsel, the Board,
including all of the Independent Directors, (a) approved the second interim
investment sub-advisory agreement among the Company, on behalf of the PBHG
International Fund, Pilgrim Baxter and Murray Johnstone and (b) determined that
the New Investment Advisory Agreement between the Funds and Pilgrim Baxter is in
the best interests of the Funds and their shareholders. ACCORDINGLY, THE BOARD
OF DIRECTORS OF THE COMPANY, INCLUDING THE INDEPENDENT DIRECTORS BY UNANIMOUS
VOTE, APPROVED THE NEW INVESTMENT ADVISORY AGREEMENT AND RECOMMENDED THAT EACH
FUND'S SHAREHOLDERS VOTE FOR THE NEW INVESTMENT ADVISORY AGREEMENT.
PROPOSAL 2: APPROVAL OF NEW INVESTMENT SUB-ADVISORY AGREEMENTS
2A: VALUE INVESTORS
Prior to the closing of the Transaction, Sub-Advisory Agreements were
in effect with Value Investors for the Value Funds. As a result of the
Transaction, these Former Sub-Advisory Agreements terminated. Value Investors is
currently providing sub-advisory services to the Value Funds under an Interim
Investment Sub-Advisory Agreement. For more information, please refer to the
"Introduction" section under Proposal 1.
THE BOARD HAS APPROVED, SUBJECT TO SHAREHOLDER APPROVAL, A NEW
INVESTMENT SUB-ADVISORY AGREEMENT WITH VALUE INVESTORS FOR THE VALUE FUNDS. THE
NEW SUB-ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL RESPECTS TO THE
COMPANY'S FORMER SUB-ADVISORY AGREEMENT (COLLECTIVELY, THE "SUB-ADVISORY
AGREEMENTS"). EACH VALUE FUND'S ADVISORY FEE RATE WILL REMAIN UNCHANGED.
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SERVICES
The Sub-Advisory Agreements with Value Investors obligate Value
Investors to: (1) manage the investment operations of the relevant Value Fund
and the composition of the Value Funds' investment portfolio, including the
purchase, retention and disposition thereof in accordance with each Value Fund's
investment objective, policies and limitations; (ii) provide supervision of the
Value Funds' investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Value Funds and what
portion of the assets will be invested or held uninvested in cash; and (iii)
place orders with or through such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the Value Funds' Registration
Statement and Prospectus or as the Board of Directors or Pilgrim Baxter may
direct from time to time, in conformity with Federal securities laws.
INVESTMENT SUB-ADVISORY FEES
For the services provided pursuant to the New Investment Sub-Advisory
Agreement for each of PBHG Large Cap Value Fund, PBHG Mid-Cap Value Fund, PBHG
Small Cap Value Fund, PBHG Focused Value Fund and PBHG Strategic Small Company
Fund, Value Investors is entitled to receive from Pilgrim Baxter a sub-advisory
fee with respect to the average daily net assets of each Fund at annual rates of
0.50%, 0.50%, 0.50%, 0.40% and 0.50%, respectively, less 50% of any fee waivers
borne by Pilgrim Baxter. Value Investors does not receive any sub-advisory fee
directly from the Value Funds. The same fees were payable under the Former
Sub-Advisory Agreement. During the fiscal year ended March 31, 2000, Value
Investors received investment sub-advisory fees from Pilgrim Baxter under the
Former Sub-Advisory Agreement in the amounts of: $150,902 for PBHG Large Cap
Value Fund, $ 214,213 for PBHG Mid-Cap Value Fund, $ 419,013 for PBHG Small Cap
Value Fund, $ 21,572 for PBHG Focused Value Fund, and $ 153,778 for PBHG
Strategic Small Company Fund. During the fiscal year ended March 31, 2000, Value
Investors waived receipt of investment sub-advisory fees from Pilgrim Baxter
under the Former Sub-Advisory Agreement in the amounts of: $37,592 for PBHG
Small Cap Value Fund, $1,341 for PBHG Focused Value Fund and $7,361 for PBHG
Strategic Small Company Fund.
LIMITATIONS ON LIABILITY
The New Investment Sub-Advisory Agreement provides certain limitations
on Value Investors' liability, but also provides that Value Investors shall not
be protected against any liability to the Value Funds or their shareholders by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder or from a breach of fiduciary duty with respect to the receipt
of compensation for services thereunder. The same provision was included in the
Former Sub-Advisory Agreement.
CONTINUANCE AND RENEWAL
The continuance of the New Investment Sub-Advisory Agreement after the
first two years must be specifically approved for each PBHG Value Fund at least
annually (i) by the Company's Board of Directors or by vote of a majority of the
outstanding voting securities of the relevant Value Fund and (ii) by the
affirmative vote of a majority of the directors who are not parties to the
agreement or interested persons of any such party by votes cast in person at a
meeting called for such purpose. The New Investment Sub-Advisory Agreement may
be terminated (i) by the relevant Value Fund, without the payment of any
penalty, by the vote of a majority of the directors of the Company or by the
vote of a majority of the outstanding voting securities of the relevant Value
Fund, (ii) by Pilgrim Baxter at any time, without the payment of any penalty, on
not more than 60 days' nor less than 30 days' written notice to the other
parties, or (iii) by Value Investors at any time, without the payment of any
penalty, on 90 days' written notice to the other parties. The New Investment
Sub-Advisory Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act). The same provisions were included in
the Former Sub-Advisory Agreement.
INFORMATION ABOUT VALUE INVESTORS
Value Investors is a wholly-owned subsidiary of Pilgrim Baxter. Value
Investors currently has discretionary management authority with respect to $1
billion in assets. In addition to advising the Value Funds, Value Investors
provides advisory services to the PBHG Insurance Series Fund, Inc., pension and
profit-sharing plans, charitable institutions, corporations, trusts, and other
investment companies. The
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principal business address of Value Investors is 825 Duportail Road, Wayne,
Pennsylvania 19087. A schedule of other investment companies with investment
objectives similar to the Value Funds for which Value Investors serves as
investment adviser or sub-adviser, and related fees, is attached as SCHEDULE 3.
The form of the PBHG Value Funds' New Sub-Advisory Agreement is attached to this
proxy statement as EXHIBIT B.
2B: WELLINGTON
Prior to the closing of the Transaction, a Sub-Advisory agreement was
in effect with Wellington for the PBHG Cash Reserves Fund. While Wellington is
not affiliated with Pilgrim Baxter, UAM, or Old Mutual, its Sub-Advisory
Agreement terminated automatically upon the termination of Pilgrim Baxter's
agreements. Wellington is currently providing sub-advisory services to the PBHG
Cash Reserves Fund under an Interim Investment Sub-Advisory Agreement. For more
information, please refer to the "Introduction" section under Proposal 1.
THE BOARD HAS APPROVED, SUBJECT TO SHAREHOLDER APPROVAL, A NEW
INVESTMENT SUB-ADVISORY AGREEMENT WITH WELLINGTON FOR THE PBHG CASH RESERVES
FUND. THE NEW SUB-ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL RESPECTS
TO THE PBHG CASH RESERVES FUND'S FORMER SUB-ADVISORY AGREEMENT (COLLECTIVELY,
THE "SUB-ADVISORY AGREEMENTS"). SPECIFICALLY, THE PBHG CASH RESERVES FUND'S
ADVISORY FEE RATE WILL REMAIN UNCHANGED.
SERVICES
The Sub-Advisory Agreements obligate Wellington to: (i) manage the
investment operations of the PBHG Cash Reserves Fund and the composition of that
Fund's portfolio, including the purchase, retention and disposition thereof in
accordance with that Fund's investment objectives, policies and limitations;
(ii) provide supervision of that Fund's investments and determine from time to
time what investments and securities will be purchased, retained or sold by that
Fund, and what portion of the assets will be invested or held uninvested in
cash; and (iii) place orders with or through such persons, brokers or dealers to
carry out the policy with respect to brokerage set forth in that Fund's
Registration Statement and Prospectus or as the Board of Directors or Pilgrim
Baxter may direct from time to time, in conformity with Federal securities laws.
INVESTMENT SUB-ADVISORY FEES
For the services provided pursuant to the New Investment Sub-Advisory
Agreement, Wellington is entitled to receive a fee from Pilgrim Baxter at an
annual rate of 0.075% of that Fund's average daily net assets up to and
including $500 million, and 0.020% above $500 million, subject to a $50,000
minimum. Wellington receives no fees directly from the PBHG Cash Reserves Fund.
The same fees were payable under the Former Sub-Advisory Agreement. During the
fiscal year ended March 31, 2000, Wellington received investment sub-advisory
fees from Pilgrim Baxter under the Former Sub-Advisory Agreement in the amount
of $146,339 for the PBHG Cash Reserves Fund.
LIMITATIONS ON LIABILITY
The New Investment Sub-Advisory Agreement provides certain limitations
on Wellington's liability, but also provides that Wellington shall not be
protected against any liability to the PBHG Cash Reserves Fund 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 same
provision was included in the Former Sub-Advisory Agreement.
CONTINUANCE AND RENEWAL
The continuance of the New Investment Sub-Advisory Agreement after the
first two years must be specifically approved at least annually (i) by the
Company's Board of Directors or by vote of a majority of the PBHG Cash Reserves
Fund's outstanding voting securities and (ii) by the affirmative vote of a
majority of the directors who are not parties to the agreement or interested
persons of any such party by votes cast in person at a meeting called for such
purpose. The New Investment Sub-Advisory Agreement may be terminated (i) by the
PBHG Cash Reserves 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 vot-
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ing securities of that Fund, (ii) by Pilgrim Baxter at any time, without the
payment of any penalty, on not more than 60 days' nor less than 30 days' written
notice to the other parties, or (iii) by Wellington at any time, without the
payment of any penalty, on 90 days' written notice to the other parties. The New
Investment Sub-Advisory Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act). The same provisions were
included in the Former Sub-Advisory Agreement.
INFORMATION ABOUT WELLINGTON
Wellington is a Massachusetts limited liability partnership with
principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington is
a professional investment counseling firm which provides investment services to
investment companies, employee benefit plans, endowments, foundations and other
institutions. Wellington's predecessor organizations have provided investment
advisory services for over 70 years. As of September 30, 2000, Wellington
Management had investment management authority with respect to approximately
$266 billion in assets. A schedule of other investment companies with investment
objectives similar to the PBHG Cash Reserves Fund for which Wellington serves as
investment adviser or sub-adviser, and related fees, is attached as SCHEDULE 4.
The form of the PBHG Cash Reserves Fund's New Investment Sub-Advisory Agreement
is attached to this proxy statement as EXHIBIT C.
2C: MURRAY JOHNSTONE
Prior to the closing of the Transaction, a Sub-Advisory agreement was
in effect with Murray Johnstone for the PBHG International Fund. Murray
Johnstone is a wholly-owned subsidiary of Old Mutual. As a result of the
Transaction, the Former Sub-Advisory Agreement terminated. Murray Johnstone is
currently providing sub-advisory services to the PBHG International Fund under
an Interim Investment Sub-Advisory Agreement. For more information, please refer
to the "Introduction" section under Proposal 1.
Old Mutual has entered into an agreement to sell Murray Johnstone to
Aberdeen Asset Management plc. Also, the Company intends to propose to
shareholders of the PBHG International Fund that they approve the reorganization
of that Fund into the Company's PBHG Global Technology & Communications Fund. As
of the date of this proxy, a meeting to consider that reorganization proposal is
also scheduled for January 25, 2001.
THE COMPANY IS PROPOSING THAT THE PBHG INTERNATIONAL FUND SHAREHOLDERS
APPROVE, AT THE MEETING, A NEW INVESTMENT SUB-ADVISORY AGREEMENT FOR THE PBHG
INTERNATIONAL FUND, TO CONTINUE THE INVESTMENT ADVISORY SERVICES OF MURRAY
JOHNSTONE IN THE EVENT THAT THE CONTEMPLATED REORGANIZATION DOES NOT OCCUR. THE
BOARD HAS APPROVED THE NEW INVESTMENT SUB-ADVISORY AGREEMENT. THE NEW INVESTMENT
SUB-ADVISORY AGREEMENT WILL BE IDENTICAL IN ALL MATERIAL RESPECTS TO THE PBHG
INTERNATIONAL FUND'S FORMER SUB-ADVISORY AGREEMENT (COLLECTIVELY, THE
"SUB-ADVISORY AGREEMENTS"). SPECIFICALLY, THE PBHG INTERNATIONAL FUND'S ADVISORY
FEE RATE WILL REMAIN UNCHANGED.
SERVICES
The Sub-Advisory Agreements obligate Murray Johnstone to: (i) manage
the investment operations of the PBHG International Fund and the composition of
that Fund's portfolio, including the purchase, retention and disposition thereof
in accordance with that Fund's investment objectives, policies and limitations;
(ii) provide supervision of that Fund's investments and determine from time to
time what investments and securities will be purchased, retained or sold by that
Fund, and what portion of the assets will be invested or held uninvested in
cash; and (iii) place orders with or through such persons, brokers or dealers to
carry out the policy with respect to brokerage set forth in that Fund's
Registration Statement and Prospectus or as the Board of Directors or Pilgrim
Baxter may direct from time to time, in conformity with Federal securities laws.
INVESTMENT SUB-ADVISORY FEES
For the services provided pursuant to the New Investment Sub-Advisory
Agreement, Murray Johnstone is entitled to receive a fee from Pilgrim Baxter at
an annual rate of 0.50% of PBHG International Fund's average daily net assets,
less 50% of any fee waivers borne by Pilgrim Baxter. Murray Johnstone receives
no fees directly from the PBHG International Fund. The same fee was payable
under the Former Sub-Advisory Agreement. During the fiscal year ended March 31,
2000, Murray Johnstone received investment sub-advisory fees from Pilgrim Baxter
under the Former Sub-Advisory Agreement in the amount of $58,343 for the PBHG
International Fund.
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LIMITATIONS ON LIABILITY
The New Investment Sub-Advisory Agreement provides certain limitations
on Murray Johnstone's liability, but also provides that Murray Johnstone shall
not be protected against any liability to the PBHG International Fund 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 same
provision was included in the Former Sub-Advisory Agreement.
CONTINUANCE AND RENEWAL
The continuance of the New Investment Sub-Advisory Agreement after the
first two years must be specifically approved at least annually (i) by the
Company's Board of Directors or by vote of a majority of the PBHG International
Fund's outstanding voting securities and (ii) by the affirmative vote of a
majority of the directors who are not parties to the agreement or interested
persons of any such party by votes cast in person at a meeting called for such
purpose. The New Investment Sub-Advisory Agreement may be terminated (i) by that
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 that Fund, (ii) by Pilgrim Baxter at any time, without the
payment of any penalty, on not more than 60 days' nor less than 30 days' written
notice to the other parties, or (iii) by Murray Johnstone at any time, without
the payment of any penalty, on 90 days' written notice to the other parties. The
New Investment Sub-Advisory Agreement will also terminate automatically in the
event of its assignment (as defined in the 1940 Act). The same provisions were
included in the Former Sub-Advisory Agreement.
INFORMATION ABOUT MURRAY JOHNSTONE
Murray Johnstone is an wholly-owned subsidiary of Old Mutual which Old
Mutual has agreed to sell to Aberdeen Asset Management plc. Murray Johnstone
currently has discretionary management authority with respect to approximately
$5.9 billion in assets. In addition to advising the PBHG International Fund,
Murray Johnstone provides advisory services to the pension and profit-sharing
plans, charitable institutions, corporations, trusts and estates, and other
investment companies. The principal business address of Murray Johnstone in the
United States is John Hancock Center, 875 North Michigan Avenue, Chicago, IL
60611. A schedule of other investment companies with investment objectives
similar to the PBHG International Fund for which Murray Johnstone serves as
investment adviser or sub-adviser, and related fees, is attached as SCHEDULE 5.
The form of the PBHG International Fund's New Sub-Advisory Agreement is attached
to this proxy statement as EXHIBIT D.
DIRECTORS CONSIDERATION AND RECOMMENDATION
In considering whether to recommend that the New Investment
Sub-Advisory Agreements be approved by shareholders, the Board of Directors
considered, among other things, the qualifications of each sub-adviser's
professional staff and information related to each sub-adviser's past
performance. In addition, the Board considered the importance of maintaining
continuity of management in light of Old Mutual's acquisition of UAM, and the
relationship each sub-adviser has had with Pilgrim Baxter and the Funds over the
years. Moreover, the Board noted that the fee to be paid under the New
Investment Sub-Advisory Agreements would remain the same as they had been under
the Former Investment Sub-Advisory Agreements and currently are under the
Interim Investment Sub-Advisory Agreements and would be under the second interim
investment sub-advisory agreement with Murray Johnstone for the PBHG
International Fund. Finally, the Board considered the fact that there would be
no material changes to the New Investment Sub-Advisory Agreements from the
Former Investment Sub-Advisory Agreements.
The Board gave particular consideration to the Old Mutual's agreement
to sell Murray Johnstone to Aberdeen Asset Management plc. The Board also
specifically considered that, subject to shareholder approval, the PBHG
International Fund would be reorganized into the PBHG Global Technology &
Communications Fund. The Board concluded that it would be in the best interest
of the shareholders of the PBHG International Fund to approve the New Investment
Sub-Advisory Agreement with Murray Johnstone in order to maintain continuity of
management until such time as the plans for the PBHG International Fund become
more clear.
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Based upon its review of all of the information provided, the
consideration of the factors described above and such other factors it
considered relevant, the Board has determined that the New Investment
Sub-Advisory Agreements are in the best interests of the applicable Funds and
their shareholders. ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY,
INCLUDING THE INDEPENDENT DIRECTORS BY UNANIMOUS VOTE, APPROVED THE NEW
INVESTMENT SUB-ADVISORY AGREEMENTS AND RECOMMENDED THAT THE SHAREHOLDERS OF THE
VALUE FUNDS VOTE FOR THE NEW INVESTMENT SUB-ADVISORY AGREEMENT WITH VALUE
INVESTORS, THAT THE SHAREHOLDERS OF PBHG CASH RESERVES FUND VOTE FOR THE NEW
INVESTMENT SUB-ADVISORY AGREEMENT WITH WELLINGTON AND THAT THE SHAREHOLDERS OF
PBHG INTERNATIONAL FUND VOTE FOR THE NEW INVESTMENT SUB-ADVISORY AGREEMENT WITH
MURRAY JOHNSTONE.
PROPOSAL 3: CHANGES TO THE FUNDS' FUNDAMENTAL INVESTMENT
RESTRICTIONS
INTRODUCTION
We are proposing to change the Funds' fundamental investment
restrictions because they are outdated and reflect regulatory, business or
industry conditions that are no longer applicable or are unnecessary.
(Fundamental investment restrictions are those restrictions that under the 1940
Act may be changed only by a vote of a majority of a Fund's outstanding voting
securities as defined under the 1940 Act.) The proposed changes will NOT affect
any Fund's investment objective.
We believe that there are several factors that have caused the Funds'
fundamental investment restrictions to become outdated. For example, certain
fundamental investment restrictions imposed by the various state "Blue Sky" laws
and regulations were preempted by NSMIA and, therefore, are no longer applicable
to the Funds. In addition, although some of the Funds' investment restrictions
reflect current federal regulatory requirements, they are not required to be
fundamental. Also, as new series portfolios of the Company have been created in
recent years, substantially similar fundamental investment restrictions have
been phrased differently resulting in unintended differences in interpretation.
The Funds are expected to benefit from these changes. First, the
proposed changes will provide each Fund with as much investment flexibility as
is permitted under current law. The proposed changes are designed to provide
flexibility to respond to future legal, regulatory and market changes. In
addition, standardizing the fundamental investment restrictions among the Funds
will enhance the Funds' and Pilgrim Baxter's ability to efficiently and
effectively manage the Funds' assets in changing regulatory and investment
environments. Finally, minimizing the number of investment restrictions that may
only be changed by a shareholder vote will reduce the costs and delays
associated with holding future shareholder meetings to revise fundamental
investment restrictions that have become outdated or inappropriate.
ALTHOUGH THE PROPOSED CHANGES IN FUNDAMENTAL INVESTMENT RESTRICTIONS
WILL GIVE THE FUNDS GREATER FLEXIBILITY TO RESPOND TO FUTURE INVESTMENT
OPPORTUNITIES, THE CHANGES, INDIVIDUALLY AND IN THE AGGREGATE, ARE NOT
ANTICIPATED TO RESULT IN A MATERIAL CHANGE IN THE LEVEL OF INVESTMENT RISK
ASSOCIATED WITH ANY FUND. IN ADDITION, THE PROPOSED CHANGES WILL NOT MATERIALLY
AFFECT THE MANNER IN WHICH ANY FUND IS CURRENTLY MANAGED.
Moreover, even though the Funds will have increased investment
flexibility if these proposed changes are approved, the Board has approved
several new non-fundamental investment restrictions (which function as internal
guidelines) which the Funds must follow in complying with the new fundamental
investment restrictions. Of course, if circumstances change, the Board of
Directors may change or eliminate any non-fundamental investment restriction in
the future without shareholder approval.
The proposed changes are set forth below in sub-proposals. Each Fund's
current fundamental investment restrictions are set forth in SCHEDULE 6. You are
asked to vote separately on each sub-proposal. If any sub-proposal is not
approved by a Fund, the fundamental investment restriction in that sub-proposal
will remain unchanged. If approved, the sub-proposals will become effective as
soon as the Fund's updated Prospectus and/or Statement of Additional Information
reflect these changes.
Several of the proposed fundamental investment restrictions include the
defined term "1940 Act Laws, Interpretations and Exemptions." This term means:
the Investment Company Act of 1940, as amended, and the rules and regulations
promulgated thereunder, as such statute, rule and regulations are
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amended from time to time or are interpreted from time to time by the staff of
the Securities and Exchange Commission ("SEC") and any exemptive order or
similar relief granted to a Fund.
3A: ISSUER DIVERSIFICATION (all Funds except PBHG Technology &
Communications Fund, PBHG Global Technology & Communications Fund, PBHG
Large Cap 20 Fund, PBHG Cash Reserves Fund and PBHG Focused Value Fund)
We want to restate each PBHG Fund's policy on issuer diversification.
The proposed policy will provide these Funds with greater flexibility to respond
to future 1940 Act rules, regulations, interpretations, exemptions, orders or
similar relief relating to issuer diversification. The proposed policy will not
have any material impact on any Fund's current investment operations.
If approved, each Fund's fundamental investment restriction will be
restated to read as follows:
The Fund is a "diversified company" as defined in the 1940 Act. This
means that the Fund will not purchase the securities of any issuer if,
as a result, the Fund would fail to be a diversified company within the
meaning of the 1940 Act Laws, Interpretations and Exemptions. This
restriction does not prevent the Fund from purchasing the securities of
other investment companies to the extent permitted by the 1940 Act
Laws, Interpretations and Exemptions.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:
In complying with the Fund's fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets, purchase securities of any issuer (other than securities issued
or guaranteed by the U.S. government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the Fund's
total assets would be invested in the securities of that issuer, or
(ii) the Fund would hold more than 10% of the outstanding voting
securities of that issuer. The Fund may (i) purchase securities of
other investment companies as permitted by Section 12(d)(1) of the 1940
Act and (ii) invest its assets in securities of other money market
funds and lend money to other investment companies and their series
portfolios that have Pilgrim Baxter & Associates Ltd. or an affiliate
of Pilgrim Baxter as an investment advisor (a "Pilgrim Baxter Advised
Fund"), subject to the terms and conditions of any exemptive orders
issued by the SEC.
Because each of PBHG Cash Reserves Fund, PBHG Focused Value Fund, PBHG
Global Technology & Communications Fund, PBHG Large Cap 20 Fund and PBHG
Technology & Communications Fund is non-diversified, the foregoing restrictions
do not apply to it.
3B: BORROWING MONEY AND ISSUING SENIOR SECURITIES (all Funds)
We want to change each Fund's policy on borrowing money and issuing
senior securities. Currently, each Fund's policy on borrowings is more
restrictive than required by the 1940 Act. The proposed policy will provide each
Fund with the maximum flexibility for future contingencies. Also, the proposed
policy will standardize the policy on borrowing money and issuing senior
securities among all Funds. Standardized policies will assist each Fund and
Pilgrim Baxter in maintaining compliance with the various investment
restrictions to which the Funds are subject. The proposed policy will not have a
material impact on any Fund's current investment operations.
If approved, each Fund's fundamental investment restrictions on
borrowing money and issuing senior securities will be changed to read as
follows:
The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:
In complying with the Fund's fundamental investment restriction
regarding borrowing money and issuing senior securities, the Fund may
borrow money in an amount not exceeding 33 1/3 % of the total assets
(including the amount borrowed) less liabilities (other than
borrowings). The Fund may borrow from banks, broker dealers or a
Pilgrim Baxter Advised Fund. The Fund may not borrow for leveraging,
but may borrow for temporary or emergency purposes, in anticipation
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of or in response to adverse market conditions, or for cash management
purposes. The Fund may not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets.
3C: UNDERWRITING SECURITIES (all Funds)
We want to restate each Fund's policy on underwriting securities. The
proposed policy will clarify the types of transactions in which each Fund may
engage, even if it may be considered to be an underwriter. Also, the proposed
policy will eliminate minor differences in the wording among the Funds' current
policies on underwriting securities. The proposed policy will not have any
material impact on any Fund's current investment operations.
If approved, each Fund's fundamental investment restriction will be
restated to read as follows:
The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
3D: INDUSTRY CONCENTRATION (all Funds except PBHG Technology &
Communications Fund and PBHG Global Technology & Communications Fund)
We want to restate each Fund's policy on industry concentration to
provide flexibility to respond to future laws, interpretations and exemptions.
If approved, each Fund's fundamental investment restriction will be
restated to read as follows:
The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940
Act Laws, Interpretations and Exemptions), of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the Funds' investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, (ii) tax-exempt obligations issued by governments or
political subdivisions of governments or (iii) repurchase agreements
collateralized by such obligations and does not limit PBHG Cash
Reserves Fund's investment in domestic bank obligations. In complying
with this restriction, the Funds will not consider a bank-issued
guaranty or financial guaranty insurance as a separate security.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for each Fund:
In complying with the Fund's fundamental investment restriction
regarding industry concentration, the Fund may invest up to 25% of its
total assets in the securities of issuers whose principal business
activities are in the same industry.
Because PBHG Technology & Communications Portfolio has an investment
policy to concentrate its investments in specific industries, this proposed
change does not apply to that Fund.
3E: PURCHASING OR SELLING REAL ESTATE (all Funds)
We propose changing each Fund's policy on purchasing or selling real
estate. The proposed policy would eliminate inconsistencies in the wording among
the Funds' current policies on purchasing or selling real estate and clarify the
types of real estate related securities that are permissible investments for
each Fund. Standardized policies will assist each Fund and Pilgrim Baxter in
maintaining compliance with the various investment restrictions to which the
Funds are subject. Also, the proposed policy includes an exception that permits
the Funds to hold real estate acquired as a result of ownership of securities or
other instruments. None of the Funds has a current intention of purchasing or
selling real estate and therefore, the proposed policy will not have a material
impact on any Fund's current investment operations.
If approved, each Fund's fundamental investment restriction on
purchasing or selling real estate will be changed to read as follows:
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The Fund may not purchase or sell real estate unless acquired as a
result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that
invest, deal or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
3F: PURCHASING OR SELLING COMMODITIES (all Funds)
We propose changing each Fund's policy on purchasing or selling
commodities. The purpose of the proposed policy is three-fold. First, it will
eliminate inconsistencies in the wording among the Funds' current policies on
purchasing or selling commodities. Standardized policies will assist each Fund
and Pilgrim Baxter in maintaining compliance with the various investment
restrictions to which the Funds are subject. Second, it will give each Fund the
maximum flexibility to enter into hedging and other transactions utilizing
financial contracts and derivative products. Finally, the proposed policy will
allow each Fund to respond to the rapid and continuing development of derivative
products. None of the Funds has a current intention of purchasing or selling
commodities, and therefore, the proposed policy will not have a material impact
on any Fund's current investment operations.
If approved, each Fund's fundamental investment restriction on
purchasing or selling commodities will be changed to read as follows:
The Fund may not purchase or sell physical commodities unless acquired
as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from engaging in transactions
involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
3G: MAKING LOANS (all Funds)
We propose changing each Fund's policy on making loans. The proposed
policy will standardize the policy on making loans for all Funds. Standardized
policies will assist the Funds and Pilgrim Baxter in maintaining compliance with
the various fundamental investment restrictions to which the Funds are subject.
In addition, it will broaden the potential circumstances under which the Funds
could make loans and will permit all Funds to lend their securities. For PBHG
Growth Fund, the proposed policy will also eliminate a restriction on investing
in illiquid securities. This restriction is already a non-fundamental policy of
PBHG Growth Fund and is not required to be fundamental. The proposed policy also
clarifies the types of debt instruments that are not considered a loan. The
proposed policy will not have a material impact on any Fund's current investment
operations.
If approved, each Fund's fundamental investment restriction on making
loans will be changed to read as follows:
The Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the
extent permitted by the 1940 Act Laws, Interpretations or Exemptions.
This restriction does not prevent the Fund from, among other things,
purchasing debt obligations, entering repurchase agreements, loaning
its assets to broker-dealers or institutional investors or investing in
loans, including assignments and participation interests.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for your Fund:
In complying with the Fund's fundamental investment restriction
regarding making loans, the Fund may lend up to 33 1/3 % of its total
assets and may lend money to another Pilgrim Baxter Advised Fund, on
such terms and conditions as the SEC may require in an exemptive order.
3H: INVESTING ALL ASSETS IN AN OPEN-END FUND (ALL FUNDS)
We want to change each Fund's policy on investing in securities of
other investment companies so that each Fund may invest all of its assets in
another open-end fund. At present the Board has not considered any specific
proposal to authorize a Fund to invest all of its assets in this fashion. The
Board will authorize investing a Fund's assets in another open-end fund only if
the Board first determines that is in the best interests of such Fund and its
shareholders.
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The purpose of this proposal is to enhance the flexibility of each Fund
and permit it to take advantage of potential efficiencies in the future
available through investment in another open-end fund. This structure allows
several funds with different distribution pricing structures, but the same
investment objective, policies and limitations, to combine their investments in
a pooled fund instead of managing them separately. This could lower the costs of
obtaining portfolio execution, custodial, investment advisory and other services
for the Fund and could assist in portfolio management to the extent the cash
flows of each investment vehicle offset each other or provide for less volatile
asset changes. Of course, such benefits may not occur.
At present, the fundamental investment restrictions of each Fund may
prevent it from investing all of its assets in another registered investment
company and would require a vote of Fund shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that you vote to permit all of the assets of your
Fund to be invested in an open-end fund, without a further vote of shareholders,
but only if the Board subsequently determines that such action is in the best
interests of your Fund and its shareholders. If you approve this proposal, the
fundamental restrictions of your Fund would be modified to permit such
investment.
A Fund's methods of operation and shareholder services would not be
materially affected by its investment in an open-end fund, except that the
assets of the Fund might be managed as part of a larger pool. If a Fund invested
all of its assets in an open-end fund, it would hold only investment securities
issued by the open-end fund, and the open-end fund would invest directly in
individual securities of other issuers. The Fund otherwise would continue its
normal operations. The Board would retain the right to withdraw the Fund's
investments from the open-end fund, and the Fund then would resume investing
directly in individual securities of other issuers as it does currently.
Pilgrim Baxter may benefit from the use of this structure if, as a
result, overall assets under management are increased (since management fees are
based on assets). Also, Pilgrim Baxter's expense of providing investment and
other services to the Funds may be reduced.
If approved, the fundamental investment restriction of each Fund (other
than PBHG Focused Value Fund and PBHG New Opportunities Fund) on investing in
securities of other investment companies will be changed, and PBHG New
Opportunities Fund will add a new fundamental investment restriction, to read as
follows:
The Fund may, notwithstanding any other fundamental investment policy
or restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies and restrictions as the
Fund.
If you approve the proposed restriction, your Fund will have the
ability to invest all of its assets in another open-end investment company.
Because your Fund does not currently intend to do so, the following
non-fundamental investment restriction will become effective for your Fund:
Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
restrictions as the Fund.
3I: INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR
DEVELOPMENT PROGRAMS (all Funds except PBHG Focused Value
Fund and PBHG New Opportunities Fund)
We want to eliminate each Fund's policy on investing in oil, gas or
other mineral exploration or development programs. The 1940 Act does not require
a Fund to have a fundamental investment restriction on investing in oil, gas or
other mineral exploration or development programs. This restriction was
originally adopted to address state "blue sky" requirements in connection with
the registration of shares of a Fund for sale in certain states. Under NSMIA,
this restriction no longer applies to any Fund. In addition, although the Funds
have no current intention of making any such investments, eliminating this
restriction will increase a Fund's flexibility when choosing investments in the
future.
PBHG Focused Value Fund and PBHG New Opportunities Fund do not have a
fundamental investment restriction on investing in oil, gas or other mineral
exploration or development programs.
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3J: INVESTING IN COMPANIES FOR THE PURPOSE OF CONTROL (all Funds
except PBHG Growth Fund, PBHG Focused Value Fund and PBHG New
Opportunities Fund)
We propose eliminating each Fund's policy on investing in companies for
the purpose of control. There is no legal requirement that a Fund have a
fundamental investment restriction on investing in companies for the purpose of
control. Eliminating this restriction will standardize all Funds on this matter.
Standardized policies will assist a Fund and Pilgrim Baxter in maintaining
compliance with the various investment restrictions to which the Funds are
subject. In addition, although the Funds do not currently intend to become
involved in directing or administering the day-to-day operations of any company,
eliminating this restriction would clarify each Fund's ability to freely
exercise its rights in the companies in which it invests. Pilgrims Baxter
believes that it should be able communicate a Fund's views as a shareholder on
important matters of policy to a company when Pilgrim Baxter believes the value
of a Fund's investment may be significantly affected. Pilgrim Baxter believes
that each Fund currently may communicate its views without necessarily violating
this restriction. Nevertheless, the existence of this fundamental investment
restriction might give rise to a claim that communicating a Fund's views
constituted investing for control or management.
PBHG Growth Fund, PBHG Focused Value Fund and PBHG New Opportunities
Fund do not have a fundamental investment restriction on investing in companies
for the purpose of control.
3K: MAKING SHORT SALES OR MARGIN PURCHASES (all Funds except
PBHG Growth Fund, PBHG Focused Value Fund and PBHG New
Opportunities Fund)
We propose eliminating each Fund's policy on making short sales and
margin purchases. There is no legal requirement that a Fund have a fundamental
investment restriction on making short sales and margin purchases of securities,
and therefore, each Fund should be provided with the maximum flexibility to
pursue its investment objectives. In addition, eliminating this restriction will
standardize all Funds on this matter. Standardized policies will assist the
Funds and Pilgrim Baxter in maintaining compliance with the various investment
restrictions to which the Funds are subject. You should also know that current
regulations prohibit a Fund from making margin purchases. In addition, none of
the Funds has a current intention of making short sales.
PBHG Growth Fund, PBHG Focused Value Fund and PBHG New Opportunities
Fund do not have a fundamental investment restriction making short sales or
margin purchases.
3L: PLEDGING ASSETS (all Funds except PBHG Focused Value Fund and
PBHG New Opportunities Fund)
We want to eliminate each Fund's policy that limits its ability to
pledge its assets. The 1940 Act does not require a Fund to have a fundamental
investment restriction on pledging assets. Eliminating this restriction will
eliminate any uncertainties regarding whether certain types of transactions that
require the segregation of assets will result in the pledging of assets. In
addition, although each Fund has no current intention of pledging its assets,
eliminating this restriction will provide each Fund with greater flexibility in
entering into transactions that may require the pledge of assets.
PBHG Focused Value Fund and PBHG New Opportunities Fund do not have a
fundamental investment restriction on pledging assets.
3M: INVESTING IN PUTS AND CALLS (PBHG Growth Fund)
We want to eliminate PBHG Growth Fund's policy that limits its ability
to purchase or write puts, calls or combinations thereof. The 1940 Act does not
require a Fund to have a fundamental investment restriction on purchasing or
writing puts and calls. This restriction was originally adopted to address state
"blue sky" requirements in connection with the registration of share of the Fund
for sale in certain states. Under NSMIA, this restriction no longer applies to
the Fund. In addition, although the Fund has no current intention of purchasing
or writing puts, calls or combinations thereof, eliminating this restriction
will provide the Fund with greater flexibility in entering into these types of
transactions.
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The other PBHG Funds do not have a fundamental investment restriction
on investing in puts and calls.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH SUB-PROPOSAL OF PROPOSAL 3.
PROPOSAL 4 - REORGANIZATION AS A DELAWARE BUSINESS TRUST
The Board of Directors has approved a plan to reorganize the Company
into a Delaware business trust. THE PURPOSE OF THE REORGANIZATION IS TO PROVIDE
INCREASED FLEXIBILITY IN THE BUSINESS STRUCTURE OF THE COMPANY. To proceed with
the reorganization, we need shareholder approval of the plan of reorganization,
which includes the dissolution of the current legal entity after the
reorganization occurs. The next few pages of this proxy statement discuss
important details of the reorganization plan.
INTRODUCTION
The Company currently is organized as a Maryland corporation. The Board
has approved an Agreement and Plan of Reorganization (the "Plan"), which
provides for a series of transactions to convert each Fund of the Company (each,
a "Current Fund") to a corresponding series (each, a "New Fund") of a newly
created open-end, management investment company organized as a business trust
(the "Trust") under the Delaware Business Trust Act. Under the Plan, each
Current Fund will transfer all its assets to a corresponding New Fund in
exchange solely for voting shares of beneficial interest in the New Fund and the
New Fund's assumption of all the Current Fund's liabilities (collectively, the
"Reorganization"). A form of the Plan relating to the proposed Reorganization is
in EXHIBIT E. If Proposal 4 is not approved by the Company's shareholders, the
Company will continue to operate as a Maryland corporation.
The Reorganization is being proposed primarily to provide the Company
with greater flexibility in conducting its business operations. The operations
of each New Fund following the Reorganization will be substantially similar to
those of its predecessor Current Fund. The fundamental investment restrictions
for all of the New Funds will conform to the changes proposed in Proposal 3, to
the extent that Proposal 3 is approved. Finally, as described below, the Trust's
Agreement and Declaration of Trust will differ from the Company's Charter in
certain respects that are expected to improve the Company's and each New Fund's
operations.
REASONS FOR THE REORGANIZATION
The Company's Board of Directors and Pilgrim Baxter believe that the
Delaware business trust organizational form offers a number of advantages over
the Maryland corporate organizational form. As a result of these advantages, the
Delaware business trust organizational form has been increasingly used by other
investment companies.
The Delaware business trust organizational form offers greater
flexibility than the Maryland corporate form. A Maryland corporation is governed
by the detailed requirements imposed by Maryland corporate law and by the terms
of its Charter. A Delaware business trust is subject to fewer statutory
requirements. The Trust will be governed primarily by the terms of an Agreement
and Declaration of Trust ("Trust Agreement") and Bylaws (collectively, the
"Governing Instruments"). In particular, the Trust will have greater flexibility
to conduct business without the necessity of engaging in expensive proxy
solicitations of shareholders. For example, under Maryland corporation law,
amendments to the Company's Charter would typically require shareholder
approval. Under Delaware law, unless the Trust Agreement of a Delaware business
trust provides otherwise, amendments to it may be made without first obtaining
shareholder approval. In addition, unlike Maryland corporation law, which
restricts the delegation of a board of directors' functions, Delaware law
permits the board of trustees of a Delaware business trust to delegate certain
of its responsibilities. For example, the board of trustees of a Delaware
business trust may delegate the responsibility of declaring dividends to duly
empowered committees of the board or to appropriate officers. Finally, Delaware
law permits the Trustees to adapt a Delaware business trust to future
contingencies. For example, the Trustees may, without a shareholder vote, change
a Delaware business trust's domicile or organizational form. In contrast, under
Maryland corporation law, a Company's board of directors would be required to
obtain shareholder approval prior to changing domicile or organizational form.
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The Reorganization will also have certain other effects on the Company,
its shareholders and management, which are described below under the heading
"How the Trust Will Compare to the Company".
WHAT THE PROPOSED REORGANIZATION WILL INVOLVE
To accomplish the Reorganization, the Trust has been formed as a
Delaware business trust pursuant to its Trust Agreement, and each New Fund has
been established as a series of the Trust. On the closing date, each Current
Fund will transfer all of its assets to the corresponding classes of the New
Fund in exchange solely for a number of full and fractional shares of the PBHG
Class and Advisor Class shares of the New Fund equal to the number of full and
fractional shares of common stock of the corresponding classes of the Current
Fund then outstanding and the New Fund's assumption of the Current Fund's
liabilities. Immediately thereafter, each Current Fund will distribute those New
Fund shares to its shareholders in complete liquidation and will, as soon as
practicable thereafter, be terminated. Upon completion of the Reorganization,
each shareholder of each Current Fund will be the owner of full and fractional
shares of the corresponding New Fund equal in number and aggregate net asset
value to the shares he or she held in the Current Fund. After completion of the
Reorganization, the Company will be dissolved as a Maryland corporation. A vote
to approve the Reorganization will be deemed to be a vote to approve the
dissolution of the Company.
The obligations of the Company and the Trust under the Plan are subject
to various conditions stated therein. To provide against unforeseen events, the
Plan may be terminated or amended at any time prior to the closing of the
Reorganization by action of the Board, notwithstanding the approval of the Plan
by the shareholders of the Company. However, no amendments may be made that
would materially adversely affect the interests of shareholders of any Current
Fund. The Company and the Trust may at any time waive compliance with any
condition contained in the Plan, provided that the waiver does not materially
adversely affect the interests of shareholders of any Current Fund.
The Plan authorizes the Company to acquire one share of each class of
each New Fund and, as the sole shareholder of the Trust prior to the
Reorganization, to do each of the following:
o Approve with respect to each New Fund a new investment advisory
and, if applicable, sub-advisory agreement that will be
substantially identical to that described in Proposals 1 and 2.
o Approve a new distribution agreement with PBHG Fund Distributors,
an affiliate of Pilgrim Baxter, which will be substantially
identical to the current distribution agreement between the
Company's and its current distributor, SEI,
o Approve a new distribution plan pursuant to Rule 12b-1 under the
1940 Act with respect to the Advisor Class of shares of each New
Fund other than the PBHG International Fund and the PBHG Cash
Reserves Fund that will contain the same financial terms as the
existing distribution plan for that Advisor Class.
o Approve with respect to PBHG International Fund and PBHG Global
Technology & Communications Fund a custodian agreement with
Northern Trust, with respect to every other New Fund a custodian
agreement with First Union National Bank and with respect to each
new Fund a transfer agency and servicing agreement with DST
Systems, Inc., each of which currently provides such services to
the corresponding Current Fund, and a multiple class plan
pursuant to Rule 18f-3 of the 1940 Act which will be
substantially identical to the multiple class plan that exists
for the corresponding Current Fund.
o Elect the directors of the Company as the trustees of the Trust
to serve without limit in time, except as they may resign or be
removed by action of the Trust's trustees or shareholders.
o Ratify the selection of PricewaterhouseCoopers LLP, the
accountants for the Company, as the independent public
accountants for the Trust.
o Approve such other agreements and plans as are necessary for each
New Fund's operation as a series of an open-end, management
investment company.
The Trust's transfer agent will establish for each shareholder an
account containing the appropriate number of shares of each class of each New
Fund. Such accounts will be identical in all
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respects to the accounts currently maintained by the Company's transfer agent
for each shareholder of the Current Funds. Shares held in the Current Fund
accounts will automatically be designated as shares of the New Funds.
Certificates for Current Fund shares issued before their organization will
represent shares of the corresponding New Fund after their organization. The
Trust, however, will not normally issue share certificates. Any account options
or privileges on accounts of shareholders of the Current Funds will be
replicated on their New Fund account.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Company and the Trust will receive an opinion of Ballard Spahr
Andrews & Ingersoll, LLP to the effect that the Reorganization will constitute a
tax-free reorganization under section 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended. Accordingly, the Current Funds, the New Funds and the
shareholders of the New Funds will recognize no gain or loss for federal income
tax purposes as a result of the Reorganization. Shareholders of the Current
Funds should consult their tax advisers regarding the effect, if any, of the
Reorganization in light of their individual circumstances and as to state and
local consequences, if any.
APPRAISAL RIGHTS
Appraisal rights are not available to shareholders. However,
shareholders retain the right to redeem their shares of the Current Funds or the
New Funds, as the case may be, at any time before or after the Reorganization.
HOW THE TRUST WILL COMPARE WITH THE COMPANY
STRUCTURE OF THE TRUST
The Trust has been established under the laws of the State of Delaware
by the filing of a certificate of trust in the office of the Secretary of State
of Delaware. The Trust has established series corresponding to and having
identical designations as the series portfolios of the Company. The Trust has
also established an Advisor Class of shares for each New Fund other than the
PBHG International Fund and the PBHG Cash Reserves Fund corresponding to and
having identical designations as the Advisor Class of the corresponding Current
Fund. Each New Fund will have the same investment objectives, policies, and
restrictions as its predecessor Current Fund, except that the New Funds'
fundamental restrictions will conform to the changes proposed in Proposal 3
(assuming approval of each of item in Proposal 3 by the shareholders). If any of
the items in Proposal 3 is not approved by shareholders, the New Funds affected
by the non-approval will continue to be subject to the corresponding Current
Funds' existing fundamental restrictions. The Trust's fiscal year is the same as
that of the Company. The Trust will not have any operations prior to the
Reorganization. Initially, the Company will be the sole shareholder of the
Trust.
As a Delaware business trust, the Trust's operations are governed by
its Governing Instruments and applicable Delaware law rather than by the
Company's Charter and Amended and Restated Bylaws and applicable Maryland law.
Certain differences between the two domiciles and organizational forms are
summarized below. The operations of the Trust will continue to be subject to the
provisions of the 1940 Act and the rules and regulations thereunder.
TRUSTEES AND OFFICERS OF THE TRUST
Subject to the provisions of the Governing Instruments, the business of
the Trust will be managed by its Trustees, who serve indefinite terms and who
have all powers necessary or convenient to carry out their responsibilities. The
responsibilities, powers, and fiduciary duties of the Trustees are substantially
the same as those of the Directors of the Company.
The Trustees of the Trust would be those persons who currently serve as
Directors of the Company. The current officers of the Company will be elected to
serve as officers of the Trust and the current officers of the Company will
perform the same functions on behalf of the Trust following the Reorganization
that they now perform on behalf of the Company.
SHARES OF THE TRUST
The beneficial interests in the New Funds will be represented by
transferable shares, par value
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$0.001 per share. Shareholders do not have the right to demand or require the
Trust to issue share certificates, although the Trust, in its sole discretion,
may issue them. The Trustees have the power under the Trust Instrument to
establish new series and classes of shares; the Company's Directors currently
have a similar right. The Governing Instruments permit the Trustees to issue an
unlimited number of shares of each class and series. The Company is authorized
to issue only the number of shares specified in the Charter and may issue
additional shares only with Board approval and after payment of a fee to the
State of Maryland on any additional shares authorized.
Only the current PBHG Growth Fund offers two classes of shares: the
PBHG Class and the Advisor Class. The Trust has established for each New Fund
the classes that currently exist for its predecessor Current Fund. Except as
discussed in this proxy statement, shares of each class of the New Funds will
have rights, privileges, and terms substantially similar to those of the
corresponding class of the Current Funds.
SHAREHOLDER MEETING REQUIREMENTS
Maryland law provides that a special meeting of shareholders shall be
called upon the written request of shareholders holding 25% of the Company's
shares. The Trust's Bylaws provide that a special meeting of shareholders for
the purpose of voting on the removal of any trustee may be called by the holders
of 10% or more of the outstanding shares of the Trust.
The Trust, like the Company, will operate as an open-end, management
investment Company registered with the SEC under the 1940 Act. As permitted by
SEC rules, the Trust will adopt as its own the registration statement of the
Company. Shareholders of the New Funds therefore will have the power to vote at
special meetings with respect to, among other things, changes in any fundamental
investment objectives and the fundamental restrictions and policies of the New
Funds; approval of certain changes to investment advisory contracts and plans of
distribution; and additional matters relating to the Trust as required by the
1940 Act.
SHAREHOLDER VOTING RIGHTS
Under Maryland law, shareholders of the Company have the right to vote
on the following matters: the substantive amendment or complete restatement of
the Company's Charter; generally, a consolidation, merger, or share exchange
involving the Company or a transfer of the Company's assets not in the ordinary
course of business; and the voluntary or, in some cases, involuntary dissolution
of the Company.
Shareholders of the Trust will have only those voting rights that are
explicitly set forth in the Governing Instruments. Under the Governing
Instruments, shareholders of the Trust have the right to vote on the following
matters: the election or removal of Trustees, provided that a meeting of
shareholders has been called for that purpose; the termination of the Trust or
any Fund or class, provided that a meeting of shareholders has been called for
that purpose and unless there are fewer than 100 holders of record of the Trust
or such terminating Fund or class; the sale of all or substantially all of the
assets of the Trust or any Fund or class, unless the primary purpose of such
sale is to change the Trust's domicile or organizational form; under certain
circumstances, the merger or consolidation of the Trust or any Fund or class
with and into another company or with and into another Fund or class of the
Trust; and the amendment of the section of the Trust Agreement that governs
shareholders' voting rights.
DOLLAR BASED VOTING
After the Reorganization your voting rights will become "dollar-based,"
which will ensure that shareholders' voting rights remain proportionate to their
economic interests. Currently, Current Fund shareholders are entitled to one
vote for each share that they own. However this "share-based" system is
inequitable if all of the shares of a particular Current Fund do not have the
same share price. This occurs when the Company offers more than one series of
shares or more than one class of shares. The share prices of the Company's
Current Funds inevitably diverge over time due to their different investment
programs. Similarly, the share prices of a Current Fund's different share
classes will deviate over time because of their different expense structures. As
a result, when issues are voted at the Current Fund level, the owners of
lower-priced shares have more votes per dollar than the owners of higher-priced
shares. Although only the Current Growth Fund offers two classes of shares,
dollar-based voting rights
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would apply to any additional share classes that the remaining Current Funds
might offer in the future. Dollar-based voting rights would also apply to any
additional portfolios the Company might offer in the future.
REMOVAL OF DIRECTORS AND TRUSTEES
The Company's Charter permits removal of a Director prior to the
expiration of his or her term of office for cause, and not otherwise, by the
affirmative vote of a majority of all votes entitled to be cast for the election
of directors. Under the Trust Agreement, a Trustee may be removed by a written
instrument, signed by at least two-thirds of the number of Trustees prior to
such removal, or by the affirmative vote of holders of two-thirds of the Trust's
outstanding shares at a special meeting called for that purpose.
SHAREHOLDERS' RIGHTS OF INSPECTION
Maryland law provides generally that persons who have been shareholders
of record for six months or more and who own of record at least 5% of a Current
Fund's outstanding shares of any class may inspect that Current Fund's books of
account and stock ledger. Under the Trust's Governing Instruments, New Fund
shareholders who have held shares of record for at least six months and who hold
at least 5% of the outstanding shares of any class of a New Fund are permitted,
upon written request, to inspect a list of the shareholders of that Fund.
SHAREHOLDER LIABILITY
Maryland law provides that a shareholder is not obligated to the
Company with respect to the stock held therein, except to the extent that: (1)
the subscription price or other agreed consideration for the stock has not been
paid (subject to limited exceptions); (2) the shareholder knowingly accepted an
illegal distribution; or (3) the shareholder is subject to any liability imposed
by law upon the dissolution, voluntary or involuntary, of the Company.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations; however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Governing Instruments provide for indemnification
out of the property of a New Fund for all losses and expenses of any shareholder
of such New Fund held liable on account of being or having been a shareholder.
Thus, the risk of a shareholder incurring financial loss due to shareholder
liability is limited to circumstances in which a New Fund would be unable to
meet its obligations and the complaining party was held not to be bound by the
liability disclaimer.
LIABILITY OF DIRECTORS AND TRUSTEES
Under its Charter, the Company limits the liability of and indemnifies
its present and past directors and officers to the maximum extent permitted by
Maryland law and the 1940 Act. Directors may be personally liable to the Company
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of their duties or by reason of reckless disregard of their duties
as directors. In the event of any litigation or other proceeding against a
director or officer of the Company, Maryland law permits the Company to
indemnify the director or officer for certain expenses and to advance money for
such expenses unless (a) it is established that the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
the act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; (b) the director or officer actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe the
act or omission was unlawful. The Governing Instruments provide indemnification
for current and former trustees, officers, employees and agents of the Trust to
the fullest extent permitted by Delaware law and other applicable law. Trustees
of the Trust may be personally liable to the Trust and its shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties or by reason of reckless disregard of their duties as trustees.
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AMENDMENT OF CHARTER AND TRUST AGREEMENT
Under the Company's Charter and Maryland law, the Charter may be
amended upon (a) adoption by the Board of a resolution setting forth the
proposed amendment and declaring that such amendment is advisable and (b)
approval of such resolution by the holders of a majority of the Company's
outstanding shares. The Trust Agreement may be amended by a majority of the
Trustees without any shareholder vote, except that the shareholders will have
the right to vote on any amendment that affects their voting rights, that
reduces the indemnification provided to shareholders or former shareholders,
that is required to have shareholder approval by law or by the Trust's
registration statement, or that is submitted to the shareholders by the
Trustees.
The foregoing is only a summary of certain differences between and
among the Company's Charter and Bylaws and Maryland law and the Trust's Trust
Agreement and Bylaws and Delaware law. It is not a complete list of the
differences. Shareholders should refer to the provisions of these documents and
state law directly for a more thorough comparison. Copies of the Charter and
Bylaws of the Company, and of the Trust's Trust Agreement and the Bylaws are
available to shareholders without charge upon written request to the Company or
the Trust at P.O. Box 219534, Kansas City, Missouri, 64121-9534.
WHEN THE REORGANIZATION WILL BE IMPLEMENTED
Assuming shareholder approval of Proposal 4, the Company currently
contemplates that the Reorganization will close on or about April 1, 2001.
However, the Reorganization may close on another date if circumstances warrant.
THE BOARD OF DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 4.
ADDITIONAL INFORMATION
PBHG Fund Services is the Company's administrator, shareholder
servicing agent and web servicing agent. PBHG Fund Services also serves as
administrator to PBHG Insurance Series Fund, Inc., an investment company also
managed by Pilgrim Baxter. PBHG Fund Services is located at 825 Duportail Road,
Wayne, Pennsylvania 19087.
SEI, the Fund's Distributor, is located at One Freedom Valley Road,
Oaks, Pennsylvania 19456.
SCHEDULE 7 lists other material payments by the Funds to Pilgrim
Baxter, or other affiliated persons of Pilgrim Baxter for the fiscal year ended
March 31, 2000.
SCHEDULE 8 lists Officers and Directors of Pilgrim Baxter and Value
Investors.
SCHEDULE 9 lists the General Partners and Senior Vice Presidents of
Wellington Management.
SCHEDULE 10 lists Officers and Directors of Murray Johnstone.
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BROKERAGE COMMISSIONS
Pilgrim Baxter or the sub-advisers are authorized to select brokers and
dealers to effect securities transactions for the Funds. Pilgrim Baxter or the
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 Pilgrim Baxter or the sub-advisers generally seek reasonably
competitive spreads or commissions, the Fund will not necessarily be paying the
lowest spread or commission available. Pilgrim Baxter or the sub-advisers seek
to select brokers or dealers that offer the Funds best price and execution or
other services that are of benefit to the Funds. Certain brokers or dealers
assist their clients in the purchase of shares from the SEI and charge a fee for
this service in addition to a Fund's public offering price. In the case of
securities traded in the over-the-counter market, Pilgrim Baxter or the
sub-advisers expect normally to seek to select primary market makers.
Pilgrim Baxter or the sub-advisers may, consistent with the interests
of the Funds, select brokers on the basis of the research services they provide
to Pilgrim Baxter or the 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 Pilgrim Baxter or the
sub-advisers will be in addition to and not in lieu of the services required to
be performed by the Adviser under the New Investment Advisory Agreement or any
Sub-Adviser under the New Investment Sub-Advisory Agreement. If, in the judgment
of Pilgrim Baxter or the sub-adviser, a Fund or other accounts managed by
Pilgrim Baxter or the sub-adviser will be benefited by supplemental research
services, Pilgrim Baxter or the 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 Pilgrim
Baxter or the 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 Pilgrim Baxter or the sub-advisers will find all of
such services of value in advising the Funds.
It is expected that the Funds may execute brokerage or other agency
transactions through the SEI, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules promulgated by the SEC. Under these provisions, the SEI is
permitted to receive and retain compensation for effecting portfolio
transactions for the Funds on an exchange if a written contract is in effect
between the SEI and the Fund expressly permitting the SEI to receive and retain
such compensation. These rules further require that commissions paid to the SEI
by the Fund for exchange transactions not exceed "usual and customary" brokerage
commissions. The rules define "usual and customary" commissions to include
amounts which are "reasonable and fair compared to the commission, fee or other
remuneration received or to be received by other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
a securities exchange during a comparable period of time." In addition, the
Pilgrim Baxter or sub-advisers may direct commission business to one or more
designated broker-dealers, including the SEI, in connection with such
broker-dealer's payment of certain of the Fund's or the Fund's expenses. In
addition, the Pilgrim Baxter or sub-adviser may place orders for the purchase or
sale of portfolio securities with qualified broker-dealers that refer
prospective shareholders to the Funds. The Directors, including those who are
not "interested persons" of the Fund, have adopted procedures for evaluating the
reasonableness of commissions paid to the SEI and will review these procedures
periodically. SCHEDULE 11 lists the commissions paid to SEI in the last fiscal
year. These commissions were paid to the SEI in connection with repurchase
agreement transactions.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD") and subject to seeking best execution and such
other policies as the Board of Directors may determine, Pilgrim Baxter or the
sub-advisers may consider sales of the Fund's shares as a factor in the
selection of broker-dealers to execute portfolio transactions for the Fund.
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SHAREHOLDER VOTING PROCEDURES
The Company expects that the solicitation of proxies from shareholders
will be made by mail, but solicitation also may be made by telephone
communications from officers or employees of Pilgrim Baxter or its affiliates.
These officers and employees will not receive any special compensation for their
assistance in the solicitation of proxies from the Company.
The Company has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in soliciting proxies for the meeting. The
Company estimates that the aggregate cost of SCC's services will be
approximately $902,900. The Company will not bear the cost of soliciting proxies
that will be paid by Pilgrim Baxter or its affiliates. The Company expects to
solicit proxies principally by mail, but either the company or SCC may also
solicit proxies by telephone, facsimile, the Internet or personal interview. The
Company may also reimburse certain firms and others for their expenses in
forwarding solicitation materials to the beneficial owners of shares of the
Funds.
As the Meeting date approaches, certain shareholders of the Company may
receive a telephone call if their votes have not yet been received. Shareholders
of the Company may authorize a telephone solicitor to execute proxies by
telephonically transmitted instructions. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The directors believe that these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the telephone
solicitor will ask for each shareholder's full name, address, social security or
taxpayer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned.
The telephone solicitor will also confirm that the shareholder has received the
Proxy Statement and proxy card in the mail. If the information provided by the
shareholder agrees with the record information, the telephone solicitor will
explain the process, read the proposals listed on the proxy card, and ask for
the shareholder's instructions on each proposal. The telephone solicitor,
although permitted to answer questions about the process, is not permitted to
recommend to the shareholder how to vote, other than to read any recommendation
set forth in the Proxy Statement. The telephone solicitor will record the
shareholder's instructions on the card. Within 72 hours, the telephone solicitor
will send the shareholder a letter or mailgram to confirm his or her vote and
ask the shareholder to call the telephone solicitor immediately if his or her
instructions are not correctly reflected in the confirmation.
If you wish to participate in the Meeting, but do not wish to give your
proxy by any of the methods outlined above, you may still submit the proxy card
originally sent with the Proxy Statement or attend in person. Should you require
additional information regarding the Proxy or replacement proxy cards, you may
contact the Company at 1-800-433-0051. You may revoke an executed proxy by (i) a
written instrument received by the Secretary of the Company at any time before
they are exercised; (ii) delivery of a later-dated proxy; or (iii) attendance at
the Meeting and voting in person.
All proxy cards solicited that are properly executed and received in
time to be voted at the Meeting will be voted at the Meeting or any adjournment
thereof according to the instructions on the proxy card. IF NO SPECIFICATION IS
MADE ON A PROXY CARD, IT WILL BE VOTED FOR EACH OF THE MATTERS SPECIFIED ON THE
PROXY CARD. For purposes of determining the presence of a quorum, abstentions,
broker non-votes or withheld votes will be counted as present; however, they
will have no effect on the outcome of the vote to approve any Proposal requiring
a vote based on the percentage of shares actually voted. You should note that
while votes to ABSTAIN will count toward establishing a quorum, passage of any
Proposal being considered at the Meeting will occur only if a sufficient number
of votes are cast FOR the Proposal. Accordingly, votes to ABSTAIN and votes
AGAINST will have the same effect in determining whether the Proposal is
approved.
If a quorum is not present at the Meeting, or if a quorum is present at
the Meeting but sufficient votes to approve one or more of the proposed items
are not received, or if one or more Funds require additional votes on a selected
item, or if other matters arise requiring shareholder attention, the persons
named as proxy agents may propose one or more adjournments of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of those shares present at the Meeting or
represented by proxy. A shareholder vote may be taken on one or more of the
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items in this Proxy Statement prior to such adjournment if sufficient votes have
been received and it is otherwise appropriate. The persons named as proxies will
vote those proxies that they are entitled to vote FOR any such proposal, in
favor of such an adjournment, and will vote those proxies required to be voted
AGAINST any such proposal, against any such adjournment.
PAYMENT OF EXPENSES
Pilgrim Baxter or its affiliates will pay the expenses relating to the
holding of this meeting of shareholders including the preparation, printing and
mailing of this proxy statement and its enclosures and of all solicitations,
including telephone or internet voting.
BENEFICIAL OWNERSHIP OF SHARES
SCHEDULE 12 lists the beneficial owners of five percent or more of each
Fund's outstanding shares as of November 17, 2000. On that date, the directors
and officers of the Funds, together as a group, beneficially owned less than one
percent of each Fund's outstanding shares.
SCHEDULE 13 contains information on the total number of outstanding
shares of each Fund as of November 17, 2000.
The term "beneficial ownership" is as defined under Section 13(d) of
the Securities and Exchange Act of 1934. The information as to beneficial
ownership is based on statements furnished to each Fund by the existing
directors and officers of the Company and/or on the records of the Company's
transfer agent.
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS
FOR A FREE COPY OF THE COMPANY'S MOST RECENT ANNUAL REPORT (AND MOST
RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL REPORT, IF ANY) SHAREHOLDERS OF
THE FUNDS MAY CALL 800-433-0051 OR WRITE TO THE COMPANY AT PO BOX 219081, KANSAS
CITY, MO 64121.
CERTAIN TRANSACTIONS
Since the beginning of the most recently completed fiscal year, Harold
J. Baxter, Chairman of the Board of Directors of the Company held warrants and
options and a related UAM promissory note to purchase 1,246,274 shares of common
stock of UAM. In connection with Old Mutual's acquisition of UAM by means of a
tender offer completed on September 26, 2000 and a merger completed on October
5, 2000, Mr. Baxter received net proceeds of approximately $21 million in
respect of his UAM warrants, options and related promissory note (based upon the
transaction price of $25 per share paid to all UAM common stockholders).
Effective as of November 20, 2000, Mr. Baxter and the other principal
of Pilgrim Baxter entered into certain agreements with Pilgrim Baxter, UAM and
Old Mutual. To help ensure the continued services of Mr. Baxter and the other
principal of Pilgrim Baxter in the future, the two Pilgrim Baxter principals
entered into new long-term employment contracts with Pilgrim Baxter. To help
ensure continued management incentives, Pilgrim Baxter established a phantom
stock plan in which existing key employees of Pilgrim Baxter received or will
receive phantom stock rights equal to 13.8% of Pilgrim Baxter's equity and
phantom stock rights equal to an additional 3.7% of Pilgrim Baxter's equity have
been earmarked for new employees to provide incentives in the context of the
future expansion of the firm. Under this plan, each of Mr. Baxter and the other
Pilgrim Baxter principal received phantom stock rights equal to 3.75% of Pilgrim
Baxter's equity. In addition, in consideration for Mr. Baxter and the other
Pilgrim Baxter principal agreeing to amend their revenue sharing agreement with
Pilgrim Baxter and UAM to reduce their revenue sharing interests by 52%
effective January 1, 2001, entering into the new employment and extended
non-compete agreements and relinquishing certain other rights, Old Mutual, UAM
and Pilgrim Baxter agreed to pay each of the two principals $110 million. Of
this amount, 50% was paid in November and 50% will be paid after shareholder
approval of Proposals 1 and 2 described above. The Pilgrim Baxter principals
also granted Old Mutual, UAM and Pilgrim Baxter an option to purchase the
remaining 48% of the revenue sharing interests held by the Pilgrim Baxter
principals from January 2002 for $420 million payable in six equal annual
installments beginning in April 2002.
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SHAREHOLDER PROPOSALS
As a general matter, the Funds do not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a Fund, you should send such proposal to the Company at the
address set forth on the first page of this Proxy Statement. To be considered
for presentation at a shareholder's meeting, the Company must receive proposals
a reasonable time before proxy materials are prepared relating to that meeting.
Mere submission of a shareholder proposal does not guarantee the inclusion of
the proposal in the proxy statement or presentation of the proposal at the
meeting since inclusion and presentation are subject to compliance with certain
Federal regulations.
OTHER BUSINESS
The Board does not intend to present any other business at the Meeting.
Other matters will be considered if notice is given within a reasonable amount
of time prior to the meeting. If any other matter may properly come before the
meeting, or any adjournment thereof, the persons named in the accompanying proxy
card(s) intend to vote, act, or consent thereunder in accordance with their best
judgment at that time with respect to such matters.
THE DIRECTORS, INCLUDING THE INDEPENDENT DIRECTORS, RECOMMEND APPROVAL
OF EACH PROPOSAL. ANY UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL
BE VOTED IN FAVOR OF APPROVAL OF EACH PROPOSAL.
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EXHIBIT A -- NEW INVESTMENT ADVISORY AGREEMENT (PILGRIM BAXTER)
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, entered into as of this ____day of __________,
between Pilgrim Baxter & Associates, Ltd. (the "Adviser") and PBHG Insurance
Series Fund, Inc. (the "Fund").
WHEREAS, the Fund is a Maryland corporation, and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company;
WHEREAS, the Fund wishes to retain the Adviser to render
investment advisory services to the Fund and the Adviser is willing to furnish
such services to the portfolios listed on Schedule A hereto (the "Portfolios");
and
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act").
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed between the Fund and the Adviser as
follows:
1. APPOINTMENT. The Fund hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. INVESTMENT ADVISORY DUTIES. Subject to the supervision of the Directors of
the Fund, the Adviser will, (a) provide a program of continuous investment
management for the Portfolios in accordance with the Portfolios' investment
objectives, policies and limitations as stated in each Portfolio's Prospectus
and Statement of Additional Information included as part of the Fund's
Registration Statement filed with the Securities and Exchange Commission, as
they may be amended from time to time, copies of which shall be provided to the
Adviser by the Fund; (b) make investment decisions for the Portfolios; and (c)
place orders to purchase and sell securities for the Portfolios.
In performing its investment management services to the Portfolios
hereunder, the Adviser will provide the Portfolios with ongoing investment
guidance and policy direction, including oral and written research, analysis,
advice, statistical and economic data, and judgments regarding individual
investments, general economic conditions and trends and long-range investment
policy. The Adviser will determine the securities, instruments, repurchase
agreements, options, futures and other investments and techniques that the
Portfolios will purchase, sell, enter into or use, and will provide an ongoing
evaluation of the Portfolios' investments. The Adviser will determine what
portion of the Portfolios' investments shall be invested in securities and other
assets, and what portion, if any, should be held uninvested. The Adviser shall
furnish to the Fund adequate (i) office space, which may be space within the
offices of the Adviser or in such other places as may be agreed upon from time
to time, and (ii) office furnishings, facilities and equipment as may be
reasonably required for managing the corporate affairs and conducting the
business of the Fund, including complying with the corporate reporting
requirements of the various states in which the Fund does business, and
conducting correspondence and other communications with the stockholders of the
Fund. The Adviser shall employ or provide and compensate the executive,
secretarial and clerical personnel necessary to provide such services. Subject
to the approval of the Fund's Board of Directors (including a majority of the
Directors who are not "interested persons" of the Fund as defined in the 1940
Act) and of the shareholders of the Fund, the Adviser may delegate to a
sub-adviser its duties enumerated in Section 2 hereof. The Adviser shall
continue to supervise the performance of any such sub-adviser and shall report
regularly thereon to the Fund's Board of Directors. The Adviser further agrees
that, in performing its duties hereunder, it will:
(a) comply with the 1940 Act and all rules and regulations thereunder,
the Advisers Act, the Internal Revenue Code (the "Code"), and all other
applicable federal and state laws and regulations, and with any applicable
procedures adopted by the Directors;
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(b) use reasonable efforts to manage each Portfolio so that it will
qualify, and continue to qualify, as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for each
Portfolio directly with the issuer, or with any broker or dealer, in accordance
with applicable policies expressed in each Portfolio's Prospectus and/or
Statement of Additional Information and in accordance with applicable legal
requirements;
(d) furnish to the Fund whatever statistical information the Fund may
reasonably request with respect to each Portfolio's assets or contemplated
investments. In addition, the Adviser will keep the Fund and the Directors
informed of developments materially affecting each Portfolio's investments and
shall, on the Adviser's own initiative, furnish to the Fund from time to time
whatever information the Adviser believes appropriate for this purpose;
(e) make available to the Fund, promptly upon its request, such copies
of the Adviser's investment records and ledgers with respect to the Portfolios
as may be required to assist the Fund in its compliance with applicable laws and
regulations. The Adviser will furnish the Directors with such periodic and
special reports regarding each Portfolio as they may reasonably request; and
(f) immediately notify the Fund in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees to
notify the Fund immediately of any material fact known to the Adviser respecting
or relating to the Adviser that is not contained in the Fund's Registration
Statement, or any amendment or supplement thereto, but that is required to be
disclosed therein, and of any -statement contained therein that becomes untrue
in any material respect.
3. ADDITIONAL SERVICES. If the Fund so requests, the Adviser shall also maintain
all internal bookkeeping, accounting and auditing services and records in
connection with maintaining the Fund's financial books and records, and shall
calculate each Portfolio's daily net asset value. For these services, each
Portfolio shall pay to the Adviser a monthly fee, which shall be in addition to
the fees payable pursuant to Section 5 hereof, to reimburse the Adviser for its
costs, without profit, for performing such services.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically provided
in this Section 4, the Adviser shall pay the compensation and expenses of all
its directors, officers and employees who serve as officers and executive
employees of the Fund (including the Fund's share of payroll taxes for such
persons), and the Adviser shall make available, without expense to the Fund, the
service of its directors, officers and employees who may be duly-elected
officers of the Fund, subject to their individual consent to serve and to any
limitations imposed by law.
The Adviser shall not be required to pay any expenses of the Fund other
than those specifically allocated to the Adviser in this Section 4. In
particular, but without limiting the generality of the foregoing, the Adviser
shall not be responsible, except to the extent of the reasonable compensation of
such of the Fund's employees as are officers or employees of the Adviser whose
services may be involved, for the following expenses of the Fund: organization
and certain offering expenses of the Fund (including out-of-pocket expenses, but
not including the Adviser's overhead and employee costs); fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses; auditing
and accounting expenses; interest expenses, telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by or with respect to the Fund in connection with membership
in investment company trade organizations; costs of insurance relating to
fidelity coverage for the -Fund's officers and employees; fees and expenses of
the Fund's custodian, any sub-custodian, transfer -agent, registrar, or dividend
disbursing agent; payments to the Adviser for maintaining the Fund's financial
books and records and calculating the daily net asset value pursuant to Section
3 hereof; other payments for -portfolio pricing or valuation services to pricing
agents, accountants,
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bankers and other specialists, if any; expenses of preparing share certificates;
other expenses in connection with the issuance, offering, distribution, sale or
redemption of securities issued by the Fund; expenses relating to investor and
public relations; expenses of registering and qualifying shares of the Fund for
sale, freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; brokerage commissions or other costs of
acquiring or disposing of any portfolio securities or other assets of the Fund,
or of entering into other transactions or engaging in any investment practices
with respect to the Fund; expenses of printing and distributing Prospectuses,
Statements of Additional Information, reports, notices and dividends to
stockholders; costs of stationery; any litigation expenses; costs of
stockholders' meetings; the compensation and all expenses (specifically
including travel expenses relating to the Fund's business) of officers,
directors and employees of the Fund who are not interested persons of the
Adviser; and travel expenses (or an appropriate portion thereof) of officers or
directors of the Fund who are officers, directors or employees of the Adviser to
the extent that such expenses relate to attendance at meetings of the Board of
Directors of the Fund with respect to matters concerning the Fund, or any
committees thereof or advisers thereto.
5. COMPENSATION. As compensation for the services provided and expenses assumed
by the Adviser under this Agreement, except for any additional services provided
by the Adviser pursuant to Section 3 hereof, each Portfolio will pay the Adviser
at the end of each calendar month an advisory fee as set forth in Schedule A
hereto. The advisory fee is computed daily as a percentage of each portfolio's
average daily net assets. The "average daily net assets" of a Portfolio shall
mean the average of the values placed on the Portfolio's net assets as of 4:00
p.m. (Eastern time) on each day on which the net asset value of the Portfolio is
determined consistent with the provisions of Rule 22c-1 under the 1940 Act or,
if the Portfolio lawfully determines the value of its net assets as of some
other time on each business day, as of such other time. The value of net assets
of the Portfolio shall always be determined pursuant to the applicable
provisions of the Fund's Articles of Incorporation and the Registration
Statement. If, pursuant to such provisions, the determination of net asset value
is suspended for any particular business day, then for the purposes of this
Section 5, the value of the net assets of the Portfolio as last determined shall
be deemed to be the value of -its net assets as of the close of regular trading
on the New York Stock Exchange, or as of such other time as the value of the net
assets of the Portfolio's securities may lawfully be determined, on that day. If
the determination of the net asset value of the shares of a Portfolio has been
so suspended for a period including any month and when the Adviser's
compensation is payable at the end of such month, then such value shall be
computed on the basis of the value of the net assets of the Portfolio as last
determined (whether during or prior to such month). If the Portfolio determines
the value of the net assets more than once on any day, then the last such
determination thereof on that day shall be deemed to be the sole determination
thereof on that day for the purposes of this Section 5.
6. BOOKS AND RECORDS. The Adviser agrees to maintain such books and records with
respect to its services to the Fund as are required by Section 31 under the 1940
Act, and rules adopted thereunder, and by other applicable legal provisions, and
to preserve such records for the periods and in the manner required by that
Section, and those rules and legal provisions. The Adviser also agrees that
records it maintains and preserves pursuant to Rules 31a-1 and 31a-2 under the
1940 Act and otherwise in connection with its services hereunder are the
property of the Fund and will be surrendered promptly to the Fund upon its
request. And the Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority, any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable law and regulations.
7. STANDARD OF CARE AND LIMITATION OF LIABILITY. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund or the holders of the Fund's shares in connection
with the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Adviser against
any liability to the Fund or to the holders of the Fund's shares to which the
Adviser would otherwise be subject by reason of willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement. As used in this Section 7, the term "Adviser" shall include any
officers, directors, employees or other affiliates of the Adviser performing
services with respect to the Fund.
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8. SERVICES NOT EXCLUSIVE. It is understood that the services of the Adviser are
not exclusive, and that nothing in this Agreement shall prevent the Adviser from
providing similar services to other investment companies or to other series of
investment companies, or from engaging in other activities, provided such other
services and activities do not, during the term of the Agreement, interfere in a
material manner with the Adviser's ability to meet its obligations to the Fund
hereunder. When the Adviser recommends the purchase or sale of the same security
for a Portfolio, it is understood that in light of its fiduciary duty to the
Portfolio, such transactions will be executed on a basis that is fair and
equitable to the Portfolio. In connection with purchases or sales of portfolio
securities for the account of a Portfolio, neither the Adviser nor any of its
directors, officers, or employees shall act as principal or agent or receive any
commission provided that portfolio transactions for a Portfolio may be executed
through firms affiliated with the Adviser, in accordance with applicable legal
requirements. If the Adviser provides any advice to its clients concerning the
shares of the Fund, the Adviser shall act solely as investment counsel for such
clients and not in any way on behalf of the Fund.
9. DURATION AND TERMINATION. This Agreement shall continue until __________, and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Directors
or (ii) a vote of a "majority" (as defined in the 1940 Act) of each Portfolio's
outstanding voting securities (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the Directors who
are not "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing, this Agreement may be
terminated as to a Portfolio (a) at any time without penalty by the Fund upon
the vote of a majority of the Directors or by vote of the majority of the
Portfolio's outstanding voting securities, upon sixty (60) days' written notice
to the Adviser or (b) by the Adviser at any time without penalty, upon sixty
(60) days' written notice to the Fund. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).
10. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including a
majority of Directors who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
11. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Maryland, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser as an
agent of the Fund.
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IN WITNESS WHEREFORE, the parties hereto have caused this
Agreement to be executed by their officers designated below as of __________.
THE PBHG FUNDS, INC PILGRIM BAXTER & ASSOCIATES, LTD.
By: _________________________ By: _______________________________
Title: _______________________ Title: ______________________________
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INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
Pursuant to Section 5 of this Agreement, each Portfolio shall pay the
Adviser, at the end of each calendar month, compensation computed daily at an
annual rate of the Portfolio's average daily net assets as follows:
The PBHG Funds, Inc.
PBHG Growth Fund 0.85%
PBHG Emerging Growth Fund 0.85%
PBHG Large Cap Growth Fund 0.75%
PBHG Select Equity Fund 0.85%
PBHG Cash Reserves Fund 0.30%
PBHG International Fund 1.00%
PBHG Technology & Communications Fund 0.85%
PBHG Core Growth Fund 0.85%
PBHG Limited Fund 1.00%
PBHG Large Cap 20 Fund 0.85%
PBHG Large Cap Value Fund 0.65%
PBHG Mid-Cap Value Fund 0.85%
PBHG Strategic Small Company Fund 1.00%
PBHG Small Cap Value Fund 1.00%
PBHG Focused Value Fund 0.85%
PBHG New Opportunities Fund 1.00%
PBHG Global Technology & Communications Fund 1.50%
PBHG Wireless & Telecom Fund 1.25%
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<PAGE>
EXHIBIT B --NEW INVESTMENT SUB-ADVISORY AGREEMENT
(VALUE INVESTORS)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this _____ day of _______, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Pilgrim Baxter Value Investors, Inc.
(the "Sub-Adviser"), and The PBHG 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");
WHEREAS, pursuant to the Investment Advisory Agreement dated
_______________ and Schedule A dated _______________ (as such Schedule may be
amended from time to time to add or delete new portfolios) between the Adviser
and the Company, the Adviser will act as investment adviser to the separate
portfolios of the Company (the "Portfolios") specified in Schedule A; and
WHEREAS, the Adviser and the Company each desire to retain the
Sub-Adviser to provide investment advisory services to the Company in connection
with the management of the Portfolios, and the Sub-Adviser is willing to render
such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the
Portfolios and the composition of the Portfolios' investment portfolios,
including the purchase, retention and disposition thereof, in accordance with
the Portfolios' investment objectives, policies and restrictions as stated in
such Portfolios' Prospectus (such Prospectus and Statement of Additional
Information as currently in effect and as amended or supplemented from time to
time, being herein called the "Prospectus"), and subject to the following
understandings:
(1) The Sub-Adviser shall provide supervision of the
Portfolios' investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Portfolios, and what
portion of the assets will be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity with the Company's
Articles of Incorporation and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Directors and will conform and
comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended, and all other applicable federal and state laws and regulations, as
each is amended from time to time.
(3) The Sub-Adviser shall determine the securities to be
purchased or sold by the Portfolios and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in such Portfolios' Registration Statement (as defined herein) and
Prospectus or as the Board of Directors or the Adviser may direct from time to
time, in conformity with federal securities laws. In providing the Portfolios
with investment supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the framework
of this policy, the Sub-Adviser may consider the financial responsibility,
research and investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for the Portfolios that the Sub-Advisor have
access to supplemental investment and market research and security and economic
analysis provided by brokers who may execute brokerage transactions at a higher
cost to the Portfolios than may result when allocating brokerage to other
brokers on the basis of seeking the most favorable price and efficient
execution. Therefore, the Sub-Adviser is authorized to place orders for the
purchase and sale of securities for the Portfolios with brokers, subject to
review by the Company's Board of Directors from time to time with respect to the
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<PAGE>
extent and continuation of this practice. It is understood that the services
provided by such brokers may be useful to the Sub-Adviser in connection with the
Sub-Adviser's services to other clients.
On occasions when the Sub-Adviser deems the purchase or sale
of a security to be in the best interest of a Portfolio as well as other clients
of the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio in question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with
respect to the Portfolios' portfolio transactions required by subparagraphs
(b)(5), (6), (7), (9), (10) and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act and shall render to the Company's Board of Directors such periodic and
special reports as the Company's Board of Directors may reasonably request.
(5) The Sub-Adviser shall provide the Portfolios' Custodian on
each business day with information relating to all transactions concerning the
Portfolios' assets and shall provide the Adviser with such information upon
request of the Adviser.
(6) (a) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed exclusive and the
Sub-Adviser shall be free to render similar services to others, as long as such
services do not impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under
this Agreement may be furnished through the medium of any of the Sub-Adviser's
officers or employees. It is understood that the Sub-Adviser may obtain certain
administrative services, including, without limitation, services relating to
trade reconciliation and the production of client reports, from its parent
company in carrying out its obligations under this Agreement.
(c) The Sub-Adviser shall keep the Portfolios' books and
records required to be maintained by the Sub-Adviser pursuant to paragraph 1(a)
of this Agreement and shall timely furnish to the Adviser all information
relating to the Sub-Adviser's services under this Agreement needed by the
Adviser to keep the other books and records of the Portfolios required by Rule
31a-1 under the 1940 Act. The Sub-Adviser agrees that all records that it
maintains on behalf of the Portfolios are property of the Portfolios and the
Sub-Adviser will surrender promptly to a Portfolio any of such records upon that
Portfolio's request; provided, however, that the Sub-Adviser may retain a copy
of such records. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any such records as are required to
be maintained by it pursuant to paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolios pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Secretary of State of
Maryland (such Articles of Incorporation as in effect on the date of this
Agreement, and as amended from time to time, are herein called the "Articles of
Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"By-Laws");
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<PAGE>
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Sub-Adviser and approving the form of this
Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Portfolios
and shares of the Portfolios' beneficial shares, and all amendments thereto;
(e) Notification of Registration of the Portfolios under the 1940 Act
on Form N-8A as filed with the Commission, and all amendments thereto; and
(f) Prospectus of the Portfolios.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolios, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate specified in Schedule A. This fee will be paid
to the Sub-Adviser from the Adviser's advisory fee for such Portfolios.
5. The Sub-Adviser shall not be liable for any error of judgment or for any loss
suffered by a Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act provided, however, that this
Agreement may be terminated (a) by a Portfolio at any time, without the payment
of any penalty, by the vote of a majority of Directors of the Company or by the
vote of a majority of the outstanding voting securities of a Portfolio, (b) by
the Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolios, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed upon) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Adviser agrees to use its reasonable best efforts
to ensure that materials prepared by its employees or agents or its affiliates
that refer to the Sub-Adviser or its clients in any way are consistent with
those materials previously approved by the Sub-Adviser as referenced in the
first sentence of this paragraph. Sales literature may be furnished to the
Sub-Adviser by first-class or overnight mail, facsimile transmission equipment
or hand delivery.
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9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of a Portfolio.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
To the Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Sub-Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Company or a Portfolio at:
825 Duportail Road
Wayne, PA 19087
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: ________________________________ By: _______________________________
Title: _______________________________ Title: _____________________________
PILGRIM BAXTER VALUE INVESTORS, INC.
By: ________________________________
Title: _______________________________
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<PAGE>
SCHEDULE A
SUB-ADVISED PORTFOLIOS
THE PBHG FUNDS, INC. FEE
-------------------- ---
PBHG Large Cap Value Fund 0.50%
PBHG Mid-Cap Value Fund 0.50%
PBHG Strategic Small Company Fund 0.50%
PBHG Small Cap Value Fund 0.50%
PBHG Focused Value Fund 0.40%
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<PAGE>
EXHIBIT C -- NEW INVESTMENT AGREEMENT SUB-ADVISORY AGREEMENT
(WELLINGTON)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this _____ day of _______, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Wellington Management Company, LLP
(the "Sub-Adviser"), and The PBHG 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");
WHEREAS, pursuant to the Investment Advisory Agreement dated
_______________ and Schedule A dated _______________ between the Adviser and the
Company, the Adviser will act as investment adviser to PBHG Cash Reserves Fund
("the Portfolio"); 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 Portfolio, and the Sub-Adviser is willing to render
such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the
Portfolio and the composition of the Portfolio's investment portfolio, including
the purchase, retention and disposition thereof, in accordance with the
Portfolio's investment objectives, policies and restrictions as stated in such
Portfolio'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 the
Portfolio's investments and determine from time to time what investments and
securities will be purchased, retained or sold by the Portfolio and what portion
of the assets will be invested or held uninvested in cash.
(2) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity with the Company's
Articles of Incorporation and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Directors and will conform and
comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended, and all other applicable federal and state laws and regulations, as
each is amended from time to time.
(3) The Sub-Adviser shall determine the securities to be
purchased or sold by the Portfolio 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 Portfolio'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 Portfolio
with investment supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the framework
of this policy, the Sub-Adviser may consider the financial responsibility,
research and investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for the Portfolio 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 Portfolio 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 Portfolio with brokers, subject
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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 Portfolio as well as other clients of
the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be so purchased or sold in order to obtain the most favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Portfolio in question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to the Portfolio'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 Portfolio's Custodian on each
business day with information relating to all transactions concerning the
Portfolio's assets and shall provide the Adviser with such information upon
request of the Adviser.
(6) (a) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as long as such services do not
impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of the Sub-Adviser's
officers or employees.
(c) The Sub-Adviser shall keep the Portfolio'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 Portfolio required by Rule 31a-1 under the
1940 Act. The Sub-Adviser agrees that all records that it maintains on behalf of
the Portfolio are property of the Portfolio and the Sub-Adviser will surrender
promptly to a Portfolio any of such records upon that Portfolio's request;
provided, however, that the Sub-Adviser may retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act any such records as are required to be maintained by it
pursuant to paragraph 1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the Portfolio pursuant to the Advisory Agreement and shall oversee
and review the Sub-Adviser's performance of its duties under this Agreement.
3. The Adviser has delivered to the Sub-Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation, as filed with the Secretary of
State of Maryland (such Articles of Incorporation as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the
date of this Agreement, and as amended from time to time, are herein called the
"By-Laws");
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Sub-Adviser and approving the form of this
Agreement;
(d) Registration Statement under the 1940 Act and the
Securities Act of 1933, as
C-2
<PAGE>
amended on Form N-1A (the "Registration Statement"), as filed with the
Securities and Exchange Commission (the "Commission") relating to the Portfolio
and shares of the Portfolio's beneficial shares, and all amendments thereto;
(e) Notification of Registration of the Portfolio under the
1940 Act on Form N-8A as filed with the Commission, and all amendments thereto;
and
(f) Prospectus of the Portfolio.
4. For the services to be provided by the Sub-Adviser pursuant to this Agreement
for the Portfolio, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate equal to 0.075% of the Portfolio's average
daily net assets up to and including $500 million and 0.020% of the Portfolio's
average daily net assets over $500 million, but subject to a minimum annual
sub-advisory fee of $50,000. This fee will be paid to the Sub-Adviser from the
Adviser's advisory fee for such Portfolio. 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 a Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act provided, however, that this
Agreement may be terminated (a) by the Portfolio at any time, without the
payment of any penalty, by the vote of a majority of Directors of the Company or
by the vote of a majority of the outstanding voting securities of a Portfolio,
(b) by the Adviser at any time, without the payment of any penalty, on not more
than 60 days' nor less than 30 days' written notice to the other parties, or (c)
by the Sub-Adviser at any time, without the payment of any penalty, on 90 days'
written notice to the other parties. This Agreement shall terminate
automatically and immediately in the event of its assignment. As used in this
Section 6, the terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the respective meanings set forth in the 1940 Act
and the rules and regulations thereunder, subject to such exceptions as may be
granted by the Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's 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 its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Portfolio, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed upon) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Adviser agrees to use its reasonable best efforts
to ensure that materials prepared by its employees or agents or its affiliates
that refer to the Sub-Adviser or its clients in any way are consistent with
those materials previously approved by the Sub-Adviser as referenced in the
first sentence of this paragraph. Sales literature may be furnished to the
Sub-Adviser by first-class or overnight mail, facsimile transmission equipment
or hand delivery.
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<PAGE>
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 Portfolio.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original; all 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:
To the Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Sub-Adviser at:
75 State Street
Boston, MA 02109
Attn: Regulatory Affairs
To the Company or a Portfolio at:
825 Duportail Road
Wayne, PA 19087
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: ________________________________ By: _______________________________
Title: _______________________________ Title: _____________________________
WELLINGTON MANAGEMENT COMPANY, LLP
By: ________________________________
Title: _______________________________
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<PAGE>
EXHIBIT D -- NEW INVESTMENT SUB-ADVISORY AGREEMENT (MURRAY JOHNSTONE)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this _____ day of _______, by and among Pilgrim
Baxter & Associates, Ltd. (the "Adviser"), Murray Johnstone International Ltd.
(the "Sub-Adviser"), and The PBHG 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");
WHEREAS, pursuant to the Investment Advisory Agreement dated
_______________ and Schedule A dated _______________ (as such Schedule may be
amended from time to time to add or delete new portfolios) between the Adviser
and the Company, the Adviser will act as investment adviser to the PBHG
International Fund (the "Fund"); 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 Fund, and the Sub-Adviser is willing to render such
investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1 (a). Subject to supervision by the Adviser and the Company's Board of
Directors, the Sub-Adviser shall manage the investment operations of the Fund
and the composition of the Fund's investment portfolios, including the purchase,
retention and disposition thereof, in accordance with the 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 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.
(2) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity with the Company's
Articles of Incorporation and the Prospectus and with the instructions and
directions of the Adviser and of the Board of Directors and will conform and
comply with the requirements of the 1940 Act, the Internal Revenue Code of 1986,
as amended, and all other applicable federal and state laws and regulations, as
each is amended from time to time.
(3) The Sub-Adviser shall determine the securities to be
purchased or sold by the 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 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 supervision, the Sub-Adviser will give primary consideration to
securing the most favorable price and efficient execution. Within the framework
of this policy, the Sub-Adviser may consider the financial responsibility,
research and investment information and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which the Sub-Adviser's other clients may be a party. It is
understood that it is desirable for the 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 the 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 prac-
D-1
<PAGE>
tice. It is understood that the services provided by such brokers may be useful
to the Sub-Adviser in connection with the Sub-Adviser's services to other
clients.
On occasions when the Sub-Adviser deems the purchase or sale
of a security to be in the best interest of a Portfolio as well as other clients
of the Sub-Adviser, the Sub-Adviser, to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Sub-Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio in question and to such other clients.
(4) The Sub-Adviser shall maintain all books and records with respect
to the 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 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) (a) The investment management services provided by the Sub-Adviser
under this Agreement are not to be deemed exclusive and the Sub-Adviser shall be
free to render similar services to others, as long as such services do not
impair the services rendered to the Adviser or the Company.
(b) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of the Sub-Adviser's
officers or employees. It is understood that the Sub-Adviser may obtain certain
administrative services, including, without limitation, services relating to
trade reconciliation and the production of client reports, from its parent
company in carrying out its obligations under this Agreement.
(c) The Sub-Adviser shall keep the 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 a
Portfolio any of such records upon that Portfolio's request; provided, however,
that the Sub-Adviser may retain a copy of such records. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by it pursuant to paragraph
1(a) of this Agreement.
2. The Adviser shall continue to have responsibility for all services to be
provided to the 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 Secretary of
State of Maryland (such Articles of Incorporation as in effect on the date of
this Agreement, and as amended from time to time, are herein called the
"Articles of Incorporation");
(b) By-Laws of the Company (such By-Laws, as in effect on the
date of this Agreement, and as amended from time to time, are herein called the
"By-Laws");
(c) Certified resolutions of the Company's Board of Directors
authorizing the appointment of the Sub-Adviser and approving the form of this
Agreement;
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<PAGE>
(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 beneficial shares, and all amendments
thereto;
(e) Notification of Registration of the Fund 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
for the Fund, the Adviser will pay to the Sub-Adviser as full compensation
therefor a fee at an annual rate equal to 0.50% of the Fund's average daily net
assets. This 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 Portfolio or the Adviser in connection with performance of its
obligations under this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services (in
which case any award of damages shall be limited to the period and the amount
set forth in Section 36(b)(3) of the 1940 Act), or a loss resulting from willful
misfeasance, bad faith or gross negligence on the Sub-Adviser's part in the
performance of its duties or from reckless disregard of its obligations and
duties under this Agreement, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or modified hereby.
6. This Agreement shall continue in effect for a period of more than two years
from the date hereof only so long as continuance is specifically approved at
least annually in conformance with the 1940 Act provided, however, that this
Agreement may be terminated (a) by a Portfolio at any time, without the payment
of any penalty, by the vote of a majority of Directors of the Company or by the
vote of a majority of the outstanding voting securities of a Portfolio, (b) by
the Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the other parties, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on 90 days' written
notice to the other parties. This Agreement shall terminate automatically and
immediately in the event of its assignment. As used in this Section 6, the terms
"assignment" and "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exceptions as may be granted by the
Commission under the 1940 Act.
7. Nothing in this Agreement shall limit or restrict the right of any of the
Sub-Adviser's directors, officers, or employees to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any business, whether of a similar or dissimilar nature, nor limit or
restrict the Sub-Adviser's right to engage in any other business or to render
services of any kind to any other corporation, firm, individual or association.
8. During the term of this Agreement, the Adviser agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other materials prepared for distribution
to shareholders of the Fund, the Company or the public that refers to the
Sub-Adviser or its clients in any way prior to use thereof and not to use
material if the Sub-Adviser reasonably objects in writing within five business
days (or such other period as may be mutually agreed upon) after receipt
thereof. The Sub-Adviser's right to object to such materials is limited to the
portions of such materials that expressly relate to the Sub-Adviser, its
services and its clients. The Adviser agrees to use its reasonable best efforts
to ensure that materials prepared by its employees or agents or its affiliates
that refer to the Sub-Adviser or its clients in any way are consistent with
those materials previously approved by the Sub-Adviser as referenced in the
first sentence of this paragraph. Sales literature may be furnished to the
Sub-Adviser by first-class or overnight mail, facsimile transmission equipment
or hand delivery.
D-3
<PAGE>
9. No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no amendment of this Agreement shall be effective until approved by
the vote of the majority of the outstanding voting securities of a Portfolio.
10. This Agreement shall be governed by the laws of the state of Maryland;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
11. This Agreement embodies the entire agreement and understanding among the
parties hereto, and supersedes all prior agreements and understandings relating
to this Agreement's subject matter. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
12. Should any part of this Agreement be held invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
13. Any notice, advice or report to be given pursuant to this Agreement shall be
delivered or mailed:
To the Adviser at:
825 Duportail Road
Wayne, PA 19087
To the Sub-Adviser at:
11 West Nile Street
Glasgow, Scotland
To the Company or a Portfolio at:
825 Duportail Road
Wayne, PA 19087
14. Where the effect of a requirement of the 1940 Act reflected in any provision
of this Agreement is altered by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
D-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
PILGRIM BAXTER & ASSOCIATES, LTD. THE PBHG FUNDS, INC.
By: ________________________________ By: _______________________________
Title: _______________________________ Title: _____________________________
MURRAY JOHNSTONE INTERNATIONAL LTD.
By: ________________________________
Title: _______________________________
D-5
<PAGE>
EXHIBIT E -- PLAN OF REORGANIZATION
THE PBHG FUNDS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
October __, 2000, is entered into by and between The PBHG Funds, Inc., a
Maryland corporation (the "Company"), acting on its own behalf and on behalf of
each of its series portfolios, all of which are identified on Schedule A to this
Agreement, and PBHG Funds, a Delaware business trust (the "Trust"), acting on
its own behalf and on behalf of each of its series portfolios, all of which are
identified on Schedule A to this Agreement.
BACKGROUND
The Company is organized as a series management investment company and
is registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Company currently publicly offers shares of common
stock representing interests in seventeen separate series portfolios. Each of
these series portfolios is listed on Schedule A and is referred to in this
Agreement as a "Current Fund."
The Board of Directors of the Company has designated multiple classes
of common stock that represent interests in each Current Fund. Each of these
classes is listed on Schedule B and is referred to in this Agreement as a
"Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization (the
"Reorganization"), the Board of Trustees of the Trust has established seventeen
series portfolios corresponding to the Current Funds (each a "New Fund"), and
has designated multiple classes of shares of beneficial interest in each New
Fund corresponding to the Current Fund Classes (each a "New Fund Class").
Schedule A lists the New Funds and Schedule B lists the New Fund Classes.
The Reorganization will occur through the transfer of all of the assets
of each Current Fund to the corresponding New Fund. In consideration of its
receipt of these assets, each New Fund will assume all of the liabilities of the
corresponding Current Fund, and will issue to the Current Fund shares of
beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares
received by the Current Fund will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Current Fund immediately prior to
the Reorganization (the "Current Fund Shares"). The Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
The Reorganization is subject to, and shall be effected in accordance
with, the terms of this Agreement. This Agreement is intended to be and is
adopted by the Company, on its own behalf and on behalf of the Current Funds,
and by the Trust, on its own behalf and on behalf of the New Funds, as a Plan of
Reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background of this Agreement. In addition,
the following terms shall have the following meanings:
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<PAGE>
1.1. "ASSETS" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.
1.2. "CLOSING" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.4. "CURRENT FUND" shall mean each of the Company's series
portfolios listed on Schedule A.
1.5. "CURRENT FUND CLASS" shall mean each class of common stock of the
Company representing an interest in a Current Fund as listed on Schedule B.
1.6. "CURRENT FUND SHARES" shall mean the shares of the Current Funds
outstanding immediately prior to the Reorganization.
1.7. "EFFECTIVE TIME" shall have the meaning set forth in Section 3.1.
1.8. "LIABILITIES" shall mean all liabilities of a Current Fund
including, without limitation, all debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not determinable at the Effective Time, and whether or not specifically referred
to herein.
1.9. "NEW FUND" shall mean each of the series portfolios of the Trust,
each of which shall correspond to one of the Current Funds as shown on Schedule
A.
1.10. "NEW FUND CLASs" shall mean each class representing an interest
in a New Fund, each of which shall correspond to one of the Current Fund Classes
as shown on Schedule B.
1.11. "NEW FUND SHARES" shall mean those shares of beneficial interest
in a New Fund, issued to a Current Fund in consideration of the New Fund's
receipt of the Current Fund's Assets.
1.12. "REGISTRATION STATEMENT" shall have the meaning set forth in
Section 5.4.
1.13. "RIC" shall mean a regulated investment company under Subchapter
M of the Code.
1.14. "SEC" shall mean the Securities and Exchange Commission.
1.15. "SHAREHOLDER(S)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.
1.16. "SHAREHOLDERS MEETING" shall have the meaning set forth in
Section 5.1.
1.17. "TRANSFER AGENt" shall have the meaning set forth in Section
2.2.
1.18. "1940 ACT" shall mean the Investment Company Act of 1940, as
amended.
2. PLAN OF REORGANIZATION
2.1 The Company agrees, on behalf of each Current Fund, to assign,
sell, convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of each New Fund, agrees in
exchange therefor:
(a) to issue and deliver to the Current Fund the number of
full and fractional (rounded to the third decimal place) New Fund Shares for
each New Fund Class designated in Schedule
E-2
<PAGE>
B equal to the number of full and fractional Current Fund Shares for each
corresponding Current Fund Class designated in Schedule B that are issued and
outstanding immediately prior to the Effective Time; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to paragraph 5.2 shall be
redeemed by each New Fund for $1.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to paragraph 2.1 to the Current
Fund's Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New Fund
Shares of each New Fund Class due that Shareholder. All outstanding Current Fund
Shares, including those represented by certificates, if any, shall
simultaneously be deemed to have been redeemed by the Company. The Trust shall
not issue certificates representing the New Fund Shares in connection with the
Reorganization. However, certificates representing Current Fund Shares shall
represent New Fund Shares after the Reorganization.
2.3 As soon as reasonably practicable after distribution of the New
Fund Shares pursuant to paragraph 2.2, the Company shall dissolve its existence
as a corporation under Maryland law.
2.4 Any transfer taxes payable on the issuance of New Fund Shares in a
name other than that of the registered holder of the Current Fund Shares
exchanged therefor shall be paid by the person to whom such New Fund Shares are
to be issued, as a condition of such transfer.
2.5 Any reporting responsibility of the Company or each Current Fund to
a public authority is, and shall remain, its responsibility up to and including
the date on which it is terminated.
3. CLOSING
3.1 The Closing shall occur at the principal office of the Company on
March 31, 2001, or on such other date and at such other place upon which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Company's and the Trust's close of business on
the date of the Closing or at such other time as the parties may agree (the
"Effective Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust
at the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or a
provision for payment has been made.
3.3 The Company's transfer agent shall deliver to the Trust's transfer
agent at the Closing a list of the names and addresses of each Shareholder of
each Current Fund and the number of outstanding Current Fund Shares of the
Current Fund Class owned by each Shareholder, all as of the Effective Time,
certified by the Company's Secretary or Assistant Secretary. The Trust shall
cause the Transfer Agent to deliver at the Closing a certificate as to the
opening on each New Fund's share transfer books of accounts in the Shareholders'
names. The Trust shall issue and deliver a confirmation to the Company
evidencing the New Fund Shares to be credited to each corresponding Current Fund
at the Effective
E-3
<PAGE>
Time or provide evidence satisfactory to the Company that such shares have been
credited to each Current Fund's account on such books. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts, or other documents as the other party or its counsel may
reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company represents and warrants on its own behalf and on
behalf of each Current Fund as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter is on
file with the Maryland Department of Assessments and Taxation;
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full force
and effect;
(c) Each Current Fund is a duly established and designated
series of the Company;
(d) At the Closing, each Current Fund will have good and
marketable title to its Assets and full right, power, and authority to sell,
assign, transfer, and deliver its Assets free of any liens or other
encumbrances; and upon delivery and payment for the Assets, the corresponding
New Fund will acquire good and marketable title to the Assets;
(e) The New Fund Shares are not being acquired for the purpose
of making any distribution thereof, other than in accordance with the terms
hereof;
(f) Each Current Fund is a "fund" as defined in Section
851(g)(2) of the Code; each Current Fund qualified for treatment as a RIC for
each past taxable year since it commenced operations and will continue to meet
all the requirements for such qualification for its current taxable year (and
the Assets will be invested at all times through the Effective Time in a manner
that ensures compliance with the foregoing); each Current Fund has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it; and each Current Fund has made all
distributions for each such past taxable year that are necessary to avoid the
imposition of federal excise tax or has paid or provided for the payment of any
excise tax imposed for any such year;
(g) There is no plan or intention of the Shareholders who
individually own 5% or more of any Current Fund Shares and, to the best of the
Company's knowledge, there is no plan or intention of the remaining Shareholders
to redeem or otherwise dispose of any New Fund Shares to be received by them in
the Reorganization. The Company does not anticipate dispositions of those shares
at the time of or soon after the Reorganization to exceed the usual rate and
frequency of redemptions of shares of the Current Fund as a series of an
open-end investment company. Consequently, the Company is not aware of any plan
that would cause the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization to be one
percent (1%) or more of the shares of the Current Fund outstanding as of the
Effective Time;
(h) The Liabilities were incurred by the Current Funds in the
ordinary course of their business and are associated with the Assets;
(i) The total adjusted basis of the Assets of each Current
Fund transferred to each New Fund will equal or exceed the sum of the
Liabilities to be assumed by each New Fund, plus the amount of Liabilities, if
any, to which the transferred Assets are subject;
E-4
<PAGE>
(j) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within the
meaning of Section 368(a)(3)(A) of the Code;
(k) As of the Effective Time, no Current Fund will have
outstanding any warrants, options, convertible securities, or any other type of
rights pursuant to which any person could acquire Current Fund Shares except for
the right of investors to acquire its shares at net asset value in the normal
course of its business as an open-end diversified management investment company
operating under the 1940 Act;
(l) At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by the Company's
shareholders;
(m) Throughout the five-year period ending on the date of the
Closing, each Current Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code in a
substantially unchanged manner;
(n) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of the
Liabilities assumed by the New Fund plus the amount of Liabilities, if any, to
which the transferred Assets are subject; and
(o) Each Current Fund will pay its respective expenses, if
any, incurred in connection with the Reorganization.
4.2 The Trust represents and warrants on its own behalf, and on
behalf of each New Fund, as follows:
(a) The Trust is a business trust duly organized, validly
existing, and in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of State
of Delaware;
(b) At the Effective Time, the Trust will succeed to the
Company's registration statement filed under the 1940 Act with the SEC and thus
will become duly registered as an open-end management investment company under
the 1940 Act;
(c) At the Effective Time, each New Fund will be a duly
established and designated series of the Trust;
(d) No New Fund has commenced operations nor will any New Fund
commence operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the Trust
on behalf of any New Fund, except as provided in paragraph 5.2;
(f) The New Fund Shares to be issued and delivered to the
corresponding Current Fund hereunder will, at the Effective Time, have been duly
authorized and, when issued and delivered as provided herein, will be duly and
validly issued and outstanding shares of the New Fund, fully paid and
non-assessable;
(g) Each New Fund will be a "fund" as defined in section
851(g)(2) of the Code and will meet all the requirements to qualify for
treatment as a RIC for its taxable year in which the Reorganization occurs;
(h) The Trust, on behalf of the New Funds, has no plan or
intention to issue additional New Fund Shares following the Reorganization
except for shares issued in the ordinary course of its business as a series of
an open-end investment company; nor does the Trust, on behalf of the New
E-5
<PAGE>
Funds, have any plan or intention to redeem or otherwise reacquire any New Fund
Shares issued pursuant to the Reorganization, other than in the ordinary course
of its business or to the extent necessary to comply with its legal obligation
under Section 22(e) of the 1940 Act;
(i) Each New Fund will actively continue the corresponding
Current Fund's business in substantially the same manner that the Current Fund
conducted that business immediately before the Reorganization; and no New Fund
has any plan or intention to sell or otherwise dispose of any of the Assets,
except for dispositions made in the ordinary course of its business or
dispositions necessary to maintain its qualification as a RIC, although in the
ordinary course of its business the New Fund will continuously review its
investment portfolio (as each Current Fund did before the Reorganization) to
determine whether to retain or dispose of particular stocks or securities,
including those included in the Assets;
(j) There is no plan or intention for any of the New Funds to
be dissolved or merged into another corporation or business trust or "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization; and
(k) Each New Fund will pay its respective expenses, if any,
incurred in connection with the Reorganization.
4.3 Each of the Company and the Trust, on its own behalf and on
behalf of each Current Fund or each New Fund, as appropriate, represents and
warrants as follows:
(a) The fair market value of the New Fund Shares of each New
Fund received by each Shareholder will be approximately equal to the fair market
value of the Current Fund Shares of the corresponding Current Fund surrendered
in exchange therefor;
(b) Immediately following consummation of the Reorganization,
the Shareholders will own all the New Fund Shares of each New Fund and will own
such shares solely by reason of their ownership of the Current Fund Shares of
the corresponding Current Fund immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
(d) There is no intercompany indebtedness between a Current
Fund and a New Fund that was issued or acquired, or will be settled, at a
discount;
(e) Immediately following consummation of the Reorganization,
each New Fund will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization, and be subject to the
same liabilities that the corresponding Current Fund held or was subject to
immediately prior to the Reorganization. Assets used to pay (i) expenses, (ii)
all redemptions (other than redemptions at the usual rate and frequency of the
Current Fund as a series of an open-end investment company), and (iii)
distributions (other than regular, normal distributions), made by a Current Fund
after the date of this Agreement will, in the aggregate, constitute less than
one percent (1%) of its net assets; and
(f) No consideration other than New Fund Shares (and the New
Fund's assumption of the Liabilities) will be issued in exchange for the Assets
and no consideration other than New Fund Shares will be received by the
Shareholders in connection with the Reorganization.
5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the
Company shall call a meeting of its Shareholders (the "Shareholders Meeting") to
consider and act on this Agreement. The Board of Directors of the Company shall
recommend that Shareholders approve this Agreement and the transactions
contemplated by this Agreement. Approval by Shareholders of this Agreement will
authorize the Company, and the Company hereby agrees, to vote on the matters
referred to in Sections 5.2 and 5.3.
E-6
<PAGE>
5.2 The Trust's trustees shall authorize the issuance of, and each New
Fund shall issue, prior to the Closing, one New Fund Share in each New Fund
Class of each New Fund that corresponds to a Current Fund Class to the Company
in consideration of the payment of $1.00 per share for the purpose of enabling
the Company to elect the Company's directors as the Trust's trustees (to serve
without limit in time, except as they may resign or be removed by action of the
Trust's trustees or shareholders), to ratify the selection of the Trust's
independent accountants, and to vote on the matters referred to in Section 5.3.
5.3 Prior to the Closing, the Trust (on its own behalf of and with
respect to each New Fund or each New Fund Class, as appropriate) shall enter
into an Investment Advisory Agreement, one or more Sub-Advisory Agreements, an
Administrative Services Agreement, Shareholder Services Agreement,
Sub-Shareholder Services Agreement, Shareholder Web Services Agreement,
Sub-Administrative Services Agreement, Distribution Agreement, Custodian
Agreements, and an Agency Agreement; shall adopt service plans pursuant to Rule
12b-1 of the 1940 Act, a multiple class plan pursuant to Rule 18f-3 of the 1940
Act and shall enter into or adopt, as appropriate, such other agreements and
plans as are necessary for each New Fund's operation as a series of an open-end
investment company. Each such agreement and plan shall have been approved by the
Trust's trustees and, to the extent required by law, by such of those trustees
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
by the Company as the sole shareholder of each New Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC
one or more post-effective amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which contain such amendments to
such Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own, and shall use its
best efforts to have such post-effective amendment or amendments to the
Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated hereby, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, and (c) the further
conditions that, at or before the Effective Time:
6.1 The Shareholders of the Company shall have approved this Agreement
and the transactions contemplated by this Agreement in accordance with
applicable law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions.
6.3 Each of the Company and the Trust shall have received an opinion
from Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax
consequences mentioned below. In rendering such opinion, such counsel may rely
as to factual matters, exclusively and without independent verification, on the
representations made in this Agreement (and in separate letters of
representation that the Company and the Trust shall use their best efforts to
deliver to such counsel upon request) and the certificates delivered pursuant to
Section 3.4. Such opinion shall be substantially to the effect that, based on
E-7
<PAGE>
the facts and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Agreement, for federal income tax
purposes:
(a) The transfer of the Assets of each Current Fund to the
corresponding New Fund pursuant to the Reorganization will constitute a
reorganization within the meaning of section 368(a) of the Code, and each
Current Fund and each New Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on
the transfer of the Assets to the corresponding New Fund in exchange solely for
New Fund Shares and the New Fund's assumption of the Liabilities or on the
subsequent distribution of New Fund Shares to the Shareholders, in constructive
exchange for their Current Fund Shares, in liquidation of the Current Fund;
(c) No gain or loss will be recognized to a New Fund on its
receipt of the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;
(d) Each New Fund's basis for the Assets will be the same as
the basis thereof in the corresponding Current Fund's hands immediately before
the Reorganization, and the New Fund's holding period for the Assets will
include the Current Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the
constructive exchange of Current Fund Shares solely for New Fund Shares pursuant
to the Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New
Fund to be received in the Reorganization will be the same as the basis for the
Current Fund Shares of the corresponding Current Fund to be constructively
surrendered in exchange for such New Fund Shares, and a Shareholder's holding
period for such New Fund Shares will include its holding period for the Current
Fund Shares constructively surrendered, provided that the New Fund Shares are
held as capital assets by the Shareholder at the Effective Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions
(except those set forth in Section 6.1) may be waived by the directors/trustees
of either the Company or the Trust if, in their judgment, such waiver will not
have a material adverse effect on the interests of the Current Fund's
shareholders.
7. EXPENSES
Except as otherwise provided in Section 4.3(c), all expenses incurred
in connection with the transactions contemplated by this Agreement (regardless
of whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT
Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties.
9. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's Shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
E-8
<PAGE>
10. TERMINATION
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by the Company's Shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
August 31, 2001; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized
by the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the New Funds, as provided in the Trust's Agreement and
Declaration of Trust.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
Attest: THE PBHG FUNDS, INC.,
on behalf of each of its series
listed in Schedule A to this
Agreement
________________________________ By:____________________________________
Title:___________________________________
PBHG FUNDS
Attest: on behalf of each of its series
listed in Schedule A to this
Agreement
________________________________ By:____________________________________
Title:___________________________________
E-9
<PAGE>
SCHEDULE A
SERIES OF THE PBHG FUNDS, INC. CORRESPONDING SERIES OF
(each a "Current Fund") PBHG FUNDS
(each a "New Fund")
PBHG Growth Fund PBHG Growth Fund
PBHG Emerging Growth Fund PBHG Emerging Growth Fund
PBHG New Opportunities Fund PBHG New Opportunities Fund
PBHG Large Cap Growth Fund PBHG Large Cap Growth Fund
PBHG Select Equity Fund PBHG Select Equity Fund
PBHG Core Growth Fund PBHG Core Growth Fund
PBHG Limited Fund PBHG Limited Fund
PBHG Large Cap 20 Fund PBHG Large Cap 20 Fund
PBHG Large Cap Value Fund PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund PBHG Small Cap Value Fund
PBHG Focused Value Fund PBHG Focused Value Fund
PBHG International Fund PBHG International Fund
PBHG Cash Reserves Fund PBHG Cash Reserves Fund
PBHG Technology & Communications Fund PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund PBHG Strategic Small Company Fund
PBHG Global Technology & PBHG Global Technology &
Communications Fund Communications Fund
PBHG Wireless & Telecom Fund* PBHG Wireless & Telecom Fund
* Shares of this Current Fund are or will
be registered with the SEC shortly.
E-10
<PAGE>
SCHEDULE B CORRESPONDING CLASSES OF
CLASSES OF EACH CURRENT FUND EACH NEW FUND
PBHG Growth Fund PBHG Growth Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Emerging Growth Fund PBHG Emerging Growth Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG New Opportunities Fund PBHG New Opportunities Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Large Cap Growth Fund PBHG Large Cap Growth Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Select Equity Fund PBHG Select Equity Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Core Growth Fund PBHG Core Growth Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Limited Fund PBHG Limited Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Large Cap 20 Fund PBHG Large Cap 20 Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Large Cap Value Fund PBHG Large Cap Value Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Mid-Cap Value Fund PBHG Mid-Cap Value Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Small Cap Value Fund PBHG Small Cap Value Fun
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Focused Value Fund PBHG Focused Value Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG International Fund PBHG International Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Cash Reserves Fund PBHG Cash Reserves Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Technology & Communications Fund PBHG Technology & Communications Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
E-11
<PAGE>
CLASSES OF EACH CURRENT FUND CORRESPONDING CLASSES OF
EACH NEW FUND
PBHG Strategic Small Company Fund PBHG Strategic Small Company Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Global Technology & Communications PBHG Global Technology & Communications
Fund Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
PBHG Wireless & Telecom Fund PBHG Wireless & Telecom Fund
PBHG Class PBHG Class
Advisor Class Advisor Class
E-12
<PAGE>
SCHEDULE 1
ADVISORY FEES PAID AND ADVISORY FEES WAIVED
Under THE FORMER INVESTMENT ADVISORY AGREEMENT
for FISCAL YEAR ENDED MARCH 31, 2000
The amount of advisory fees paid by each Fund to Pilgrim Baxter &
Associates, Ltd. under the Former Investment Advisory Agreement for the fiscal
year ended March 31, 2000 is set forth below under the column "Advisory Fees
Paid." The amount of advisory fees waived for each Fund by Pilgrim Baxter &
Associates, Ltd. under the expense limitation agreements for the fiscal year
ended March 31, 2000 is set forth below under the column "Advisory Fees Waived."
Note: No advisory fees paid or waived are listed for PBHG Global Technology &
Communications Fund because it had not commenced operations as of March 31,
2000.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Advisory Fees Advisory Fees
Fund Paid Waived
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PBHG Growth $ 32,748,339 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth $ 7,263,497 $0
-------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities $ 1,418,924 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth $ 1,148,240 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Select Equity $ 4,326,181 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Core Growth $ 941,429 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Limited $ 1,142,585 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20 $ 5,274,451 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value $ 245,217 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value $ 364,163 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value $ 702,546 $57,833
-------------------------------------------------------------------------------------------------------------------
PBHG Focused Value $ 48,688 $2,849
-------------------------------------------------------------------------------------------------------------------
PBHG International $ 116,700 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Cash Reserves $ 582,869 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Technology & Communications $ 12,141,268 $0
-------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company $ 537,130 $24,537
-------------------------------------------------------------------------------------------------------------------
</TABLE>
S-1
<PAGE>
SCHEDULE 2 - OTHER INVESTMENT COMPANIES ADVISED BY PILGRIM BAXTER
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS EXPENSE LIMITATION/
INVESTMENT ($ MIL) AS OF FEE RATE PAID
FUND OBJECTIVE 10/31/00 FEE AFTER WAIVER
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Growth II Growth $ 482,162,608 0.85% 1.20%
Portfolio 0.85%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Large Cap Growth $ 81,312,386 0.75% 1.10%
Growth Portfolio 0.68%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Select Value Large Cap Value $ 73,440,367 0.65% 1.00%
Portfolio 0.65%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Select 20 Portfolio Growth $ 922,330,865 0.85% 1.20%
0.85%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value Mid-Cap Value $ 851,794 0.85% 1.20%
Portfolio 0.00%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value Small Cap Value $ 225,833,641 1.00% 1.20%
Portfolio 0.91%
------------------------------------------------------------------------------------------------------------------------------------
PBHG Technology & Technology $1,949,144,495 0.85% 1.20%
Communications Portfolio 0.85%
------------------------------------------------------------------------------------------------------------------------------------
WRL PB Mid Cap Growth Mid Cap Growth $ 265,457,054 0.50% to No expense
(Sub-adviser) $100 million; limitation on
0.40% above receipt of
$100 million sub-advisory
fees
------------------------------------------------------------------------------------------------------------------------------------
DEX PB Mid Cap Growth Mid Cap Growth $ 147,604,939 0.50% to No expense
(Sub-adviser) $100 million; limitation on
0.40% above receipt of
$100 million sub-advisory
fees
------------------------------------------------------------------------------------------------------------------------------------
Ohio National Fund Growth $ 45,284,286 0.75% to No expense
Inc (Sub-adviser) $50 million; limitation on
0.70% above receipt of
$50 million sub-advisory
to $150 fees
million; 0.50%
above $150
million
------------------------------------------------------------------------------------------------------------------------------------
ONE Fund, Inc Growth $ 7,911,774 0.75% to No expense
(Sub-adviser) $50 million; limitation on
0.70% above receipt of
$50 million sub-advisory
to $150 fees
million; 0.50%
above $150
million
------------------------------------------------------------------------------------------------------------------------------------
IDEX PB Technology Technology $ 87,153,157 0.55% to No expense
(Sub-adviser) $100 million; limitation on
0.50% above receipt of
$100 million sub-advisory
fees
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-2
<PAGE>
SCHEDULE 3 - OTHER INVESTMENT COMPANIES ADVISED BY VALUE INVESTORS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
INVESTMENT ($ MIL) AS OF EXPENSE
FUND OBJECTIVE 10/31/00 FEE LIMITATION
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Select Large Cap Value $ 73,440,367 0.40% No expense
Value Portfolio limitation
agreement with
the Portfolio
------------------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Mid-Cap Value $ 851,794 0.50% No expense
Value Portfolio limitation
agreement with
the Portfolio
------------------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Small Cap Value $225,833,641 0.65% No expense
Value Portfolio limitation
agreement with
the Portfolio
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-3
<PAGE>
SCHEDULE 4 - OTHER INVESTMENT COMPANIES ADVISED BY WELLINGTON
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ADVISORY
INVESTMENT ($ MIL) AS OF FEE
FUND OBJECTIVE 10/31/00 FEE WAIVER
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SEI Daily Money Market $1,160 0.075% to $500 From time to
Income Trust-- million; 0.02% time, a voluntary
Money Market* above $500 fee waiver may
million apply
------------------------------------------------------------------------------------------------------------------------------------
SEI Daily Money Market $4,547 0.075% to $500 From time to
Income Trust-- million; 0.02% time, a voluntary
Prime Obligation* above $500 fee waiver may
million apply
------------------------------------------------------------------------------------------------------------------------------------
SEI Daily Money Market $4,547 0.075% to $500 From time to
Income Trust-- million; 0.02% time, a voluntary
Prime Obligation* above $500 fee waiver may
million apply
------------------------------------------------------------------------------------------------------------------------------------
SEI Liquid Asset Money Market $1,471 0.075% to $500 From time to
Trust- Prime million; 0.02% time, a voluntary
Obligation * above $500 fee waiver may
million apply
------------------------------------------------------------------------------------------------------------------------------------
SEI Insurance Money Market $5 0.075% to $500 No waiver
Products Trust- million; 0.02%
VP Prime above $500
Obligation million
------------------------------------------------------------------------------------------------------------------------------------
Bishop Street- Money Market $313 0.075% to $500 No waiver
Money Market million; 0.02%
Fund above $500
million
------------------------------------------------------------------------------------------------------------------------------------
Golden Oak Money Market $127 0.075% to $500 No waiver
Prime Obligation million; 0.02%
Portfolio* above $500
million
------------------------------------------------------------------------------------------------------------------------------------
OVB Prime Money Market $64 0.075% to $500 No waiver
Obligations million; 0.02%
Portfolio* above $500
million
------------------------------------------------------------------------------------------------------------------------------------
Anchor Series Money Market $61 0.075% to $500 No waiver
Trust million; 0.02%
above $500
million
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Fee schedule is applied to aggregate 2a-7 assets within the trust.
S-4
<PAGE>
SCHEDULE 5 - OTHER INVESTMENT COMPANIES ADVISED BY MURRAY JOHNSTONE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS ADVISORY FEE
INVESTMENT ($ MIL) AS OF RATE PAID
FUND OBJECTIVE 10/31/00 FEE AFTER WAIVER
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Calvert World International $ 259 0.45% to $250 N/A
Values (sub- (Social Values) million; 0.425%
adviser) above $250
million
------------------------------------------------------------------------------------------------------------------------------------
UAM MJI Fund International $ 36,7 0.75% 0.74%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-5
<PAGE>
SCHEDULE 6 - CURRENT FUNDAMENTAL RESTRICTIONS
PBHG Growth Fund may not:
1. Make loans, except that the Portfolio, in accordance with its
investment objective and policies, may (i) purchase debt
instruments, and (ii) enter into repurchase agreements, provided
that the Portfolio 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 Portfolio,
would exceed 15% of the value of its net assets.
2. Act as an underwriter of securities of other issuers, except as it
may be deemed an underwriter under the 1933 Act in connection with
the sale of portfolio securities.
3. Purchase or sell commodities or commodity contracts, except that the
Portfolio, in accordance with its investment objective and policies,
may enter into futures contracts and options thereon.
4. Purchase or sell real estate, or real estate investment
partnerships.
5. Issue senior securities (as defined in the 1940 Act) except as
permitted in connection with the Portfolio's policies on borrowing
and pledging, or as permitted by rule, regulation or order of the
SEC.
6. Purchase more than 10% of the voting securities of any one issuer or
purchase securities of any one issuer if, at the time of purchase,
more than 5% of its total assets will be invested in that issuer,
except with respect to the Portfolio, up to 25% of its assets may be
invested without regard to these limits.
7. Pledge any of its assets, except that the Portfolio may pledge
assets having a value of not more than 10% of its total assets in
order to (i) secure permitted borrowings, or (ii) as may be
necessary in connection with the Portfolio's use of options and
futures contracts.
8. Purchase securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations thereunder.
9. Invest in interests in oil, gas or other mineral exploration or
development programs.
10. Purchase or write puts, calls or combinations thereof, except that
the Portfolio may invest in and commit its assets to writing and
purchasing only put and call options that are listed on a national
securities exchange and issued by the Options Clearing Corporation
to the extent permitted by the Prospectus and this Statement of
Additional Information. In order to comply with the securities laws
of several states, the Portfolio (as a matter of operating policy)
will not write a covered call option if, as a result, the aggregate
market value of all portfolio securities covering call options or
subject to put options for that Portfolio exceeds 25% of the market
value of that Portfolio's net assets.
11. Invest 25% or more of its total assets at the time of purchase in
securities of issuers (other than obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations) whose
principal business activities are in the same industry. For purposes
of this investment limitation, state and municipal governments and
their agencies and authorities are not deemed to be industries;
utility companies will be divided according to their services (e.g.,
gas, gas transmission, electric, electric and gas, and telephone)
and financial service companies will be classified according to end
use of their service (e.g., automobile finance, bank finance, and
diversified finance).
12. Borrow money (other than pursuant to reverse repurchase agreements)
except for temporary or emergency purposes and then only in amounts
up to 33 1/3% of the total assets of the
S-6
<PAGE>
PBHG Growth Fund. The temporary borrowing will include, for example,
borrowing to facilitate the orderly sale of portfolio securities to
accommodate substantial redemption requests if they should occur, to
facilitate the settlement of securities transactions, and is not for
investment purposes. All borrowings in excess of 5% of the
Portfolio's total assets will be repaid before making additional
investments.
Each of PBHG Emerging Growth Fund, PBHG Large Cap Growth Fund, PBHG Select
Equity Fund, PBHG Core Growth Fund, PBHG Limited Fund, PBHG Large Cap 20 Fund,
PBHG Large Cap Value Fund, PBHG Mid-Cap Value Fund, PBHG Small Cap Value Fund,
PBHG International Fund, PBHG Cash Reserves Fund, PBHG Technology &
Communications Fund, PBHG Strategic Small Company Fund and PBHG Global
Technology & Communications Fund may not:
1. Make loans, except that each Portfolio, in accordance with that
Portfolio's investment objectives and policies, may (i) purchase or
hold debt instruments, and (ii) enter into repurchase agreements. In
addition, the PBHG Limited Fund, the PBHG Large Cap 20 Fund, the
PBHG Large Cap Value Fund, the PBHG Mid-Cap Value Fund, the PBHG
Small Cap Value Fund, the PBHG International Fund, PBHG Strategic
Small Company Fund and the PBHG Global Technology & Communications
Fund may each lend its portfolio securities in an amount not
exceeding one-third the value of its total assets.
2. Act as an underwriter of securities of other issuers except as it
may be deemed an underwriter under the 1933 Act in connection with
the purchase and sale of portfolio securities.
3. Purchase or sell commodities or commodity contracts, except that a
Portfolio, in accordance with its objectives and policies, may: (i)
invest in readily marketable securities of issuers which invest or
engage in such activities; and (ii) enter into futures contracts and
options thereon.
4. Purchase or sell real estate or real estate partnership interests,
except that this limitation shall not prevent a Portfolio from
investing directly or indirectly in readily marketable securities of
issuers which can invest in real estate, institutions that issue
mortgages, or real estate investment trusts that deal with real
estate or interests therein.
5. Issue senior securities (as defined in the 1940 Act) except as
permitted in connection with the Portfolio's policies on borrowing
and pledging, or as permitted by rule, regulation or order of the
SEC.
6. Purchase more than 10% of the voting securities of any one issuer or
purchase securities of any one issuer if, at the time of purchase,
more than 5% of its total assets will be invested in that issuer,
except with respect to the Portfolio, up to 25% of its assets may be
invested without regard to these limits. This limitation does not
apply to the PBHG Large Cap 20 Fund, the PBHG Technology &
Communications Fund, PBHG Global Technology & Communications Fund or
the PBHG Cash Reserves Fund.
In addition, for purposes of this investment limitation, the term
"issuer" does not include obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities and repurchase
agreements collateralized by such obligations.
7. Invest 25% or more of its total assets at the time of purchase in
securities of one or more issuers (other than obligations issued or
guaranteed by the U.S. Government or its agencies and
instrumentalities and repurchase agreements collateralized by such
obligations) whose principal business activities are in the same
industry. For purposes of this limitation, supranational
organizations are deemed to be issuers conducting their principal
business activities in the same industry; state and municipal
governments and their agencies and authorities are not deemed to be
industries; utility companies will be divided according to their
services, for
S-7
<PAGE>
example, gas distribution, gas transmission, electric and telephone
will each be considered a separate industry; and financial service
companies will be classified according to the end users of their
services (e.g. automobile finance, bank finance and diversified
finance).
With respect to the PBHG Technology & Communications Fund and the
PBHG Global Technology & Communications Fund, up to 50% of the
Fund's assets may be invested without regard to these limits.
8. Borrow money except for temporary or emergency purposes and then
only in an amount not exceeding 10% of the value of total assets
(except not exceeding 33 1/3% of the value of total assets with
respect to the PBHG Mid-Cap Value Fund and the PBHG Small Cap Value
Fund). This borrowing provision is included solely to facilitate the
orderly sale of portfolio securities to accommodate substantial
redemption requests if they should occur and is not for investment
purposes. All borrowings in excess of 5% of the Portfolio's total
assets will be repaid before making investments.
9. Invest in companies for the purpose of exercising control.
10. Pledge, mortgage or hypothecate assets, except: (i) to secure
temporary borrowings permitted by each Portfolio's limitation on
permitted borrowings; or (ii) in connection with permitted
transactions regarding options and futures contracts and, except for
the PBHG Mid-Cap Value Fund and the PBHG Small Cap Value Fund, in
aggregate amounts not to exceed 10% of total assets taken at current
value at the time of the occurrence of such pledge, mortgage or
hypothecation.
11. Make short sales of securities, maintain a short position or
purchase securities on margin, except that each Portfolio may: (i)
obtain short-term credits as necessary for the clearance of security
transactions; and (ii) establish margin accounts as may be necessary
in connection with the Portfolio's use of options and futures
contracts.
12. Purchase securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations thereunder.
13. Invest in interests in oil, gas or other mineral exploration or
development programs and, except for the PBHG Mid-Cap Value Fund and
the PBHG Small Cap Value Fund, invest in oil, gas or mineral leases.
Each of PBHG Focused Value Fund and PBHG New Opportunities Fund may not:
1. Make loans except that each such Portfolio, in accordance with its
investment objective and policies, may (i) purchase debt
obligations, (ii) enter into repurchase agreements and (iii) lend
its portfolio securities.
2. Act as an underwriter of securities of other issuers, except as it
may be deemed to be an underwriter under the 1933 Act in connection
with the purchase and sale of portfolio securities.
3. Purchase or sell commodities or commodity contracts, except that
each such Portfolio, in accordance with its investment objective and
policies, may: (i) invest in readily marketable securities of
issuers which invest or engage in such activities; and (ii) enter
into forward contracts, futures contracts and options thereon.
4. Purchase or sell real estate, or real estate partnership interests,
except that this limitation shall not prevent any such Portfolio
from investing directly or indirectly in readily marketable
securities of issuers which can invest in real estate, institutions
that issue mortgages, or real estate investment trusts which deal
with real estate or interests therein.
S-8
<PAGE>
5. Issue senior securities (as defined in the 1940 Act) except as
permitted in connection with the Portfolio's policies on borrowing
and pledging, or as permitted by rule, regulation or order of the
SEC.
6. Purchase more than 10% of the voting securities of any one issuer or
purchase securities of any one issuer if, at the time of purchase,
more than 5% of its total assets will be invested in that issuer,
except that up to 25% of its assets may be invested without regard
to these limits.
This limitation does not apply to the PBHG Focused Value Fund. For
purposes of this investment limitation, the term "issuer" does not
include obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements
collateralized by such obligations.
7. Invest 25% or more of its total assets at the time of purchase in
securities of issuers (other than obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities and
repurchase agreements collateralized by such obligations) whose
principal business activities are in the same industry. For purposes
of this investment limitation, state and municipal governments and
their agencies and authorities are not deemed to be industries;
utility companies will be divided according to their services (e.g.,
gas, gas transmission, electric, electric and gas, and telephone)
and financial service companies will be classified according to end
use of their service (e.g., automobile finance, bank finance, and
diversified finance).
8. Borrow money (other than pursuant to reverse repurchase agreements)
except for temporary or emergency purposes and then only in amounts
up to 33 1/3% of the total assets of the PBHG Focused Value Fund and
the PBHG New Opportunities Fund. The temporary borrowing will
include, for example, borrowing to facilitate the orderly sale of
portfolio securities to accommodate substantial redemption requests
if they should occur, to facilitate the settlement of securities
transactions, and is not for investment purposes. All borrowings in
excess of 5% of a Portfolio's total assets will be repaid before
making additional investments.
S-9
<PAGE>
SCHEDULE 7 - OTHER MATERIAL PAYMENTS
The following chart sets forth the fees paid during the fiscal year
ended March 31, 2000 by each Fund to PBHG Fund Services, a wholly-owned
subsidiary of Pilgrim Baxter, for administrative services and shareholder
services. These services will continue to be provided by PBHG Fund Services if
the New Investment Advisory Contract with Pilgrim Baxter is approved. Note: No
fees are listed for PBHG Global Technology & Communications Fund because it had
not commenced operations as of March 31, 2000.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
ADMINISTRATIVE AND
SHAREHOLDER SERVICES
FEES PAID TO PBHG
FUND FUND SERVICES
--------------------------------------------------------------------------------
<S> <C>
PBHG Growth Fund $ 7,176,371
--------------------------------------------------------------------------------
PBHG Emerging Growth Fund $ 1,737,835
--------------------------------------------------------------------------------
PBHG Large Cap Growth Fund $ 345,689
--------------------------------------------------------------------------------
PBHG Select Equity Fund $ 987,750
--------------------------------------------------------------------------------
PBHG Core Growth Fund $ 278,812
--------------------------------------------------------------------------------
PBHG Limited Fund $ 235,776
--------------------------------------------------------------------------------
PBHG Large Cap 20 Fund $ 1,252,693
--------------------------------------------------------------------------------
PBHG New Opportunities Fund $ 248,714
--------------------------------------------------------------------------------
PBHG Large Cap Value Fund $ 108,567
--------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund $ 100,613
--------------------------------------------------------------------------------
PBHG Small Cap Value Fund $ 139,712
--------------------------------------------------------------------------------
PBHG Focused Value Fund $ 15,287
--------------------------------------------------------------------------------
PBHG International Fund $ 41,701
--------------------------------------------------------------------------------
PBHG Cash Reserves Fund $ 396,619
--------------------------------------------------------------------------------
PBHG Technology & Communications Fund $ 2,662,687
--------------------------------------------------------------------------------
PBHG Strategic Small Company Fund $ 123,251
--------------------------------------------------------------------------------
</TABLE>
S-10
<PAGE>
SCHEDULE 8
PRINCIPAL EXECUTIVE OFFICER & DIRECTORS
OF PILGRIM BAXTER AND VALUE INVESTORS
OFFICERS & DIRECTORS OF THE PBHG FUNDS, INC. WHO ARE OFFICERS, EMPLOYEES,
DIRECTORS OF PILGRIM BAXTER AND VALUE INVESTORS
The following table provides information with respect to the principal
executive officer and the directors of Pilgrim Baxter and Value Investors and
officers and directors of The PBHG Funds, Inc., all of whose business address is
825 Duportail Road, Wayne, Pennsylvania 19087.
PILGRIM BAXTER (*)
------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Position with
Name Pilgrim Baxter Principal Occupation
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Harold J. Baxter Director, Chairman of Same
the Board and Chief
Executive Officer
------------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim Director, President and Same
Chief Investment
Officer
------------------------------------------------------------------------------------------------------------------------------------
VALUE INVESTORS
---------------
------------------------------------------------------------------------------------------------------------------------------------
Position with
Name Pilgrim Baxter Principal Occupation
------------------------------------------------------------------------------------------------------------------------------------
Harold J. Baxter Director, Chairman of Same
the Board and Chief
Executive Officer
------------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim Director, President and Same
Chief Investment Officer
------------------------------------------------------------------------------------------------------------------------------------
Eric C. Schneider Treasurer, Chief Financial Same
Officer, Controller
------------------------------------------------------------------------------------------------------------------------------------
THE PBHG FUNDS, INC.
--------------------
------------------------------------------------------------------------------------------------------------------------------------
Position with Position with Position with
Name The PBHG Funds, Inc. Pilgrim Baxter Value Investors
------------------------------------------------------------------------------------------------------------------------------------
Harold J. Baxter Chairman/Director Director/CEO Director/CEO
Chairman Chairman
------------------------------------------------------------------------------------------------------------------------------------
Gary L. Pilgrim President Director/President CIO Director/President
------------------------------------------------------------------------------------------------------------------------------------
John M. Zerr Vice President/ General Counsel/ General Counsel/
Secretary Secretary Secretary
------------------------------------------------------------------------------------------------------------------------------------
Meghan M. Mahon Vice President/ Counsel/ Counsel/
Assistant Secretary Assistant Secretary Assistant Secretary
------------------------------------------------------------------------------------------------------------------------------------
Matthew R. DiClemente Assistant Secretary Legal Assistant Legal Assistant
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(*) Effective January 1, 2001, the number of directors on Pilgrim Baxter's Board of Directors will be increased from two to
seven. As of the date of this proxy, the names of the individuals to fill the five newly created director seats have not
been finalized, although it is expected that 4 representatives from Old Mutual and 1 representative from Pilgrim Baxter
will fill these newly created seats.
</FN>
</TABLE>
S-11
<PAGE>
SCHEDULE 9 - PRINCIPAL EXECUTIVE OFFICERS AND PARTNERS OF WELLINGTON
The following table provides information with respect to the principal executive
officers and partners of Wellington, all of whose business address is Wellington
Management Company, 75 State Street, Boston, MA 02109
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
Name Position with Wellington Principal Occupation
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kenneth L. Abrams General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Nicholas C. Adams General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Rand L. Alexander General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Deborah L. Allinson General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
James H. Averill General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Karl E. Bandtel General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Mark J. Beckwith General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Marie-Claude Bernal General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
William N. Booth General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Paul Braverman General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Robert A. Bruno General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Maryann E. Carroll General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Pamela Dippel General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Robert L. Evans General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Lisa d. Finkel General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Charles T. Freeman General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Laurie A. Gabriel Managing General Partner Same
-------------------------------------------------------------------------------------------------------------------------------
John H. Gooch General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Greville General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Paul Hamel General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Lucius T. Hill, III General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Paul D. Kaplan General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
John C. Keogh General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
George C. Lodge, Jr. General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Nancy T. Lukitsh General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Mark T. Lynch General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Christine S. Manfredi General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Patrick J. McCloskey General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Earl E. McEvoy General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Duncan M. McFarland Managing General Partner Same
-------------------------------------------------------------------------------------------------------------------------------
Paul M. Mecray III General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Matthew E. Megargel General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
James N. Mordy General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Diane C. Nordin General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Stephen T. O'Brien General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Edward P. Owens General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Saul J. Pannell General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Thomas L. Pappas General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Jonathan M. Payson General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
S-12
<PAGE>
Philip H. Perelmuter General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Robert D. Rands General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Eugene E. Record, Jr. General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
James A. Rullo General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
John R. Ryan Managing General Partner Same
-------------------------------------------------------------------------------------------------------------------------------
Joseph H. Schwartz General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Theodore E. Shasta General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Binkley C. Shorts General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Trond Skramstad General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Catherine A. Smith General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Stephen A. Soderberg General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Eric Stromquist General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Brendan J. Swords General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Harriett Tee Taggart General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Perry M. Traquina General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Gene R. Tremblay General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Michael A. Tyler General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Mary Ann Tynan General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Clare Villari General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Ernst H. von Metzsch General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
James L. Walters General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Kim Williams General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
Francis V. Wisneski General Partner & Senior Vice President Same
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-13
<PAGE>
SCHEDULE 10 - PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF
MURRAY JOHNSTONE
The following table provides information with respect to the principal executive
officer and directors of Murray Johnstone, all of whose business address is John
Hancock Center, 875 No. Michigan Avenue, Suite 3640, Chicago, Illinois 60611.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name Position with Murray Johnstone Principal Occupation
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
C. Giles H. Weaver Director, Executive Chairman Same
-------------------------------------------------------------------------------------------------------------------
A. David MacLellan Managing Director Same
-------------------------------------------------------------------------------------------------------------------
</TABLE>
S-14
<PAGE>
SCHEDULE 11 - BROKERAGE COMMISSIONS PAID TO SEI INVESTMENTS
DISTRIBUTION CO. FOR THE FISCAL YEAR ENDED MARCH 31, 2000
The following chart sets forth the aggregate amount of brokerage
commissions paid by each Fund to SEI Investments Distribution Co., distributor
for The PBHG Funds, Inc. for the fiscal year ended March 31, 2000 and the
percentage of each Fund's aggregate brokerage commissions paid to SEI
Investments Distribution Co. for the fiscal year ended March 31, 2000. These
commissions were paid to SEI Investments Distribution Co. in connection with
repurchase agreement transactions. Note: No commission information is listed for
PBHG Global Technology & Communications Fund because it had not commenced
operations as of March 31, 2000.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF PERCENT OF AGGREGATE
BROKERAGE COMMISSIONS BROKERAGE COMMISSIONS
PAID TO SEI INVESTMENTS PAID TO SEI INVESTMENTS
FUND DISTRIBUTION CO. DISTRIBUTION CO.
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PBHG Growth $ 113,877 7%
-------------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth $ 38,328 7%
-------------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities $ 2,596 1%
-------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth $ 3,174 1%
-------------------------------------------------------------------------------------------------------------------------
PBHG Select Equity $ 23,035 5%
-------------------------------------------------------------------------------------------------------------------------
PBHG Core Growth $ 2,359 1%
-------------------------------------------------------------------------------------------------------------------------
PBHG Limited $ 5,926 17%
-------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20 $ 20,174 3%
-------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value $ 891 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value $ 1,007 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value $ 1,639 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG Focused Value $ 233 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG International N/A 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG Cash Reserves N/A 0%
-------------------------------------------------------------------------------------------------------------------------
PBHG Technology & Communications $ 29,620 1%
-------------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company $ 1,023 0%
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
S-15
<PAGE>
SCHEDULE 12 - BENEFICIAL OWNERS OF 5% OR MORE OF EACH FUNDS SHARES
AS OF NOVEMBER 17, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Fund 5% of More Beneficial Owners
-------------------------------------------------------------------------------------------------------------------
PBHG Growth Fund
PBHG Class:
<S> <C>
Fidelity Investments Institutional Operations Co 15.63%
As Agent for Certain Employee Benefit Plans
100 Magellan Way
Covington, Kentucky 4105-1999
Charles Schwab & Co Inc. 11.12%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94194-4122
Connecticut General Life Insurance 8.18%
401 K Plan M-110
350 Church Street
PO Box 2975
Hartford, Connecticut 06104-2975
National Financial Services Corp. 6.06%
For the Exclusive Benefit of Our Cust
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Advisor Class:
The Travellers Insurance Company 82.48%
Attn Roger Ferland 5MS (4L)
1 Tower Sq
Hartford, Connecticut 06183-0002
Wilmington Trust Company 16.35%
FBO Allied Waste 401(k) Plan
A/C 44607-6
U/A 2/1/98
PO Box 8971
Wilmington, Delaware 19899-8971
PBHG Emerging Growth Fund
Fidelity Investments Institutional Operations Co 15.10%
As Agent for Certain Employee Benefit Plans
100 Magellan Way
Covington, Kentucky 41015-1999
S-16
<PAGE>
Putnam Fiduciary Trust Company 10.90%
FBO TRW Employee Stock Ownership
& Savings Plan
Putnam Investments DCPA-Location 40
PO Box 9740
Providence, Rhode Island 02940-9740
Charles Schwab & Co Inc. 10.32%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
Chase Manhattan Bank Tr 10.23%
NY State Deferred Compensation Plan
Attn Gladstone Stephenson
4 New York Plz FL 2
New York, New York 10004-2413
National Financial Services Corp 7.68%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
PBHG New Opportunities Fund
National Financial Services Corp 10.23%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 7.03%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Large Cap Growth Fund
National Financial Services Corp 15.63%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
S-17
<PAGE>
Charles Schwab & Co Inc. 36.78%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Select Equity Fund
National Financial Services Corp 23.90%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 27.11%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Core Growth Fund
National Financial Services Corp 13.76%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 16.33%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Limited Fund
Charles Schwab & Co Inc. 10.09%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Large Cap 20 Fund
National Financial Services Corp 15.56%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
S-18
<PAGE>
Charles Schwab & Co Inc. 30.85%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
PBHG Large Cap Value Fund
National Financial Services Corp 19.53%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 32.84%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Investor Services Corp 5.91%
For Exclusive Benefit of Customers
55 Water Street FL 32
New York, New York 10041-3299
PBHG Mid-Cap Value Fund
National Financial Services Corp 18.33%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 33.54%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Investor Services Corp 5.70%
For Exclusive Benefit of Customers
55 Water Street FL 32
New York, New York 10041-3299
Donaldson Lufkin & Jenrette 9.61%
Transfer Department 5th Floor
PO Box 2052
Jersey City, NJ 07303-2052
S-19
<PAGE>
PBHG Small Cap Value Fund
National Financial Services Corp 13.06%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 20.46%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
Northern Trust Co FBO 33.51%
Arthur Andersen
LLP US Profit Sharing and 401(K) TR
PO Box 92956
Chicago, Illinois 60675-2956
PBHG Focused Value Fund
National Financial Services Corp 20.77%
For the Exclusive Benefit of Our Cust
PO Box 3908
Church Street Station
New York, New York 10008-3908
Charles Schwab & Co Inc. 23.62%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
FTC & Co 8.85%
Attn Datalynx-House Account
PO Box 173736
Denver, Colorado 80217-3736
PBHG International Fund
Charles Schwab & Co Inc. 10.25%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp 8.04%
For the Exclusive Ben of Our Cust
1055 Franklin Ave Ste 100
Garden City, New York 11530-2903
PBHG Cash Reserves Fund
S-20
<PAGE>
Investec Ernst & Company 22.28%
088-21923-21
Attn Mutual Funds
One Battery Park Plaza
New York, New York 10004-1405
Strategic Investors LLC 5.05%
C/O Securities Trading Group
4111 E. 37th St N
Wichita, Kansas, 67220-3203
PBHG Technology & Communications Fund
Charles Schwab & Co Inc. 23.50%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp 24.64%
For the Exclusive Ben of Our Cust
1055 Franklin Ave Ste 100
Garden City, New York 11530-2903
PBHG Strategic Small Company Fund
Charles Schwab & Co Inc. 16.50%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp 25.34%
For the Exclusive Ben of Our Cust
1055 Franklin Ave Ste 100
Garden City, New York 11530-2903
PBHG Global Technology & Communications Fund
Charles Schwab & Co Inc. 11.05%
Reinvest Account
Attn Mutual Fund Department
101 Montgomery Street
San Francisco, California 94104-4122
National Financial Services Corp 15.60%
For the Exclusive Ben of Our Cust
1055 Franklin Ave Ste 100
Garden City, New York 11530-2903
</TABLE>
S-21
<PAGE>
SCHEDULE 13 -- OUTSTANDING SHARES OF THE COMPANY AS OF
NOVEMBER 17, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Name of Fund Number of Shares Outstanding
-------------------------------------------------------------------------------------------------------------------
<S> <C>
PBHG Growth Fund
PBHG Class 109,617,947.52
Advisor Class 2,544,266.99
-------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth Fund
PBHG Class 30,808,211.32
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth Fund
PBHG Class 13,099,278.93
-------------------------------------------------------------------------------------------------------------------
PBHG Select Equity Fund
PBHG Class 27,593,907.27
-------------------------------------------------------------------------------------------------------------------
PBHG Core Growth Fund
PBHG Class 5,698,846.65
-------------------------------------------------------------------------------------------------------------------
PBHG Limited Fund
PBHG Class 6,184,185.50
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20 Fund
PBHG Class 27,309,378.03
-------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities Fund
PBHG Class 1,915,534.88
-------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value Fund
PBHG Class 7,279,937.80
-------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund
PBHG Class 8,697,997.04
-------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value Fund
PBHG Class 10,685,366.57
-------------------------------------------------------------------------------------------------------------------
PBHG Focused Value Fund
PBHG Class 2,756,927.92
-------------------------------------------------------------------------------------------------------------------
PBHG International Fund
PBHG Class 791,873.67
-------------------------------------------------------------------------------------------------------------------
PBHG Cash Reserves Fund
PBHG Class 883,104,295.57
-------------------------------------------------------------------------------------------------------------------
PBHG Technology & Communications Fund
PBHG Class 43,154,238.55
-------------------------------------------------------------------------------------------------------------------
PBHG Global Technology & Communications Fund
PBHG Class 9,432,784.59
-------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company Fund
PBHG Class 4,871,363.74
-------------------------------------------------------------------------------------------------------------------
</TABLE>
S-22
<PAGE>
The PBHG Funds, Inc.
PBHG Growth Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Growth Fund, with Pilgrim Baxter & Associates,
Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
3
<PAGE>
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) THIS ITEM IS NOT APPLICABLE.
(k) THIS ITEM IS NOT APPLICABLE.
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Puts and Calls [ ] [ ] [ ]
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE>
The PBHG Funds, Inc.
PBHG Emerging Growth Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Emerging Growth Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Large Cap Growth Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Large Cap Growth Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. This item is not applicable.
(a) This item is not applicable.
(b) This item is not applicable.
(c) This item is not applicable.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) This item is not applicable.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Select Equity Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Select Equity Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Core Growth Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Core Growth Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Limited Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Limited Fund, with Pilgrim Baxter & Associates,
Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Large Cap 20 Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Large Cap 20 Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) THIS ITEM IS NOT APPLICABLE.
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG New Opportunities Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG New Opportunities Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) THIS ITEM IS NOT APPLICABLE.
(j) THIS ITEM IS NOT APPLICABLE.
(k) THIS ITEM IS NOT APPLICABLE.
(l) THIS ITEM IS NOT APPLICABLE.
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Mid-Cap Value Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Mid-Cap Value Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Mid-Cap Value
Fund with:
(a) Pilgrim Baxter Value Investors, Inc. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's
fundamental investment restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Small Cap Value Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE INDEPENDENT,
RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Small Cap Value Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Small Cap
Value Fund with:
(a) Pilgrim Baxter Value Investors, Inc. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Focused Value Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Focused Value Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Focused Value
Fund with:
(a) Pilgrim Baxter Value Investors, Inc. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) THIS ITEM IS NOT APPLICABLE.
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) THIS ITEM IS NOT APPLICABLE.
(j) THIS ITEM IS NOT APPLICABLE.
(k) THIS ITEM IS NOT APPLICABLE.
(l) THIS ITEM IS NOT APPLICABLE.
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG International Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds, Inc.,
on behalf of PBHG International Fund, with Pilgrim Baxter & Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG International
Fund with:
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) Murray Johnstone International Ltd. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Cash Reserves Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Cash Reserves Fund, with Pilgrim Baxter &
Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Cash Reserves
Fund with:
(a) THIS ITEM IS NOT APPLICABLE.
(b) Wellington Management Company, Ltd. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) THIS ITEM IS NOT APPLICABLE.
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Technology & Communications Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Technology & Communications Fund, with Pilgrim
Baxter & Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) THIS ITEM IS NOT APPLICABLE.
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) THIS ITEM IS NOT APPLICABLE.
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Strategic Small Company Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Strategic Small Company Fund, with Pilgrim
Baxter & Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Strategic
Small Company Fund with:
(a) Pilgrim Baxter Value Investors, Inc. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Global Technology & Communications Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds,
Inc., on behalf of PBHG Global Technology & Communications Fund, with
Pilgrim Baxter & Associates, Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. THIS ITEM IS NOT APPLICABLE.
(a) THIS ITEM IS NOT APPLICABLE.
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) THIS ITEM IS NOT APPLICABLE.
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) THIS ITEM IS NOT APPLICABLE.
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
The PBHG Funds, Inc.
PBHG Large Cap Value Fund
1-800-433-0051
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 25, 2001
The undersigned hereby appoints Lee T. Cummings and John M. Zerr and each of
them as proxies with full powers of substitution and revocation, to represent
and to vote on behalf of the undersigned, all shares of the Fund referenced
hereon (the "Fund"), which the undersigned is entitled to vote at a Special
Meeting of Shareholders of the Fund to be held at the Peninsula Hotel, Le Grande
Salle Room, 700 Fifth Avenue, New York, New York on January 25, 2001, at 10:00
A.M. and any adjournments thereof (the "Meeting"). The undersigned acknowledges
receipt of the Notice of Meeting and Proxy Statement, and hereby instructs said
proxies to vote said shares as indicated hereon. Unless indicated to the
contrary, this proxy shall be voted "For" all proposals relating to the Fund.
The proxies are hereby authorized to vote in their discretion on any matter that
may properly come before the meeting or any adjournment thereof. The undersigned
hereby revokes any proxy previously given.
Note: Please sign exactly as your name appears on
this proxy. If joint owners, both should sign this
proxy. An authorized individual should sign corporate
or partnership proxies in full corporate or
partnership name. When signing as attorney, executor,
administrator, trustee, guardian, or corporate
officer, please give your full title.
DATE_____________________________
_____________________________
_____________________________
Signature(s) and Title(s), If Applicable
THE BOARD OF DIRECTORS, INCLUDING THOSE DIRECTORS WHO ARE
INDEPENDENT, RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY PROMPTLY TO ENSURE THAT A QUORUM IS
PRESENT AT THE SPECIAL MEETING. YOU CAN VOTE YOUR SHARES AT THE PROXY
SOLICITORS' WEB SITE, BY TOLL-FREE TELEPHONE, BY MAIL, OR IN PERSON. A
SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE, IF YOU
CHOOSE TO VOTE BY MAIL.
<PAGE>
You may also vote your shares through the Internet at WWW.PROXYVOTE.COM or by
touch-tone phone by calling 1-800-690-6903.
2
<PAGE>
This proxy will be voted as specified below with respect to the action to be
taken on the following proposals. In the absence of any specification, this
proxy will be voted IN FAVOR of the proposals. Please mark your vote below in
blue or black ink. Do not use red ink.
1. To approve the Investment Advisory Agreement between The PBHG Funds, Inc.,
on behalf of PBHG Large Cap Value Fund, with Pilgrim Baxter & Associates,
Ltd.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. To approve the Investment Sub-Advisory Agreement for the PBHG Large Cap
Value Fund with:
(a) Pilgrim Baxter Value Investors, Inc. FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) THIS ITEM IS NOT APPLICABLE.
(c) THIS ITEM IS NOT APPLICABLE.
3. To approve the proposed changes to the Fund's fundamental investment
restrictions.
(a) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Issuer Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Borrowing Money and Issuing Senior [ ] [ ] [ ]
Securities
(c) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Underwriting Securities [ ] [ ] [ ]
(d) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Industry Concentration [ ] [ ] [ ]
(e) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Real Estate [ ] [ ] [ ]
(f) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Purchasing or Selling Commodities [ ] [ ] [ ]
3
<PAGE>
(g) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Loans [ ] [ ] [ ]
(h) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing all Assets in an Open End [ ] [ ] [ ]
Fund
(i) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Oil, Gas or Other Mineral [ ] [ ] [ ]
Exploration or Development Programs
(j) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Investing in Companies for the Purpose [ ] [ ] [ ]
of Control
(k) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Making Short Sales or Margin Purchases [ ] [ ] [ ]
(l) Change to Fundamental Restriction FOR AGAINST ABSTAIN
on Pledging Assets [ ] [ ] [ ]
(m) THIS ITEM IS NOT APPLICABLE.
4. To approve the Agreement and Plan of Reorganization and subsequent
dissolution of the Maryland corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4
<PAGE>
THE PBHG FUNDS, INC.
C/O PILGRIM BAXTER & ASSOCIATES, LTD.
825 DUPORTAIL ROAD
WAYNE, PA 19087
December 13, 2000
VIA EDGAR
---------
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street NW
Washington, DC 20549
Re: The PBHG Funds, Inc. (Securities Act File No.2-99810)
(Investment Company Act File No. 811-04391).
--------------------------------------------
Dear Ladies and Gentlemen:
Filed herewith electronically via EDGAR are definitive proxy materials
for The PBHG Funds, Inc., a registered open-end management investment company.
Definitive proxy materials are expected to be mailed to shareholders on or about
December 18, 2000. The Special Meeting of Shareholders to which the proxy
materials relates is to be held on January 25, 2000.
Please direct any questions or comments to these definitive proxy
materials to the undersigned at (610) 578-1207.
Sincerely,
/S/ MEGHAN M. MAHON
---------------
Meghan M. Mahon
Counsel
