<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[_] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
PACHOLDER FUND, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
PACHOLDER FUND, INC.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
PRELIMINARY COPY
USF&G PACHOLDER FUND, INC.
Bank One Towers, East Tower
8044 Montgomery Road, Suite 382
Cincinnati, Ohio 45236
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1996
---------------------
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of USF&G
Pacholder Fund, Inc. (the "Fund") will be held on Tuesday, June 4, 1996, at
2:00 o'clock p.m., Eastern time, at The Harley Hotel, 8020 Montgomery Road,
Cincinnati, Ohio 45236, for the following purposes:
1. To elect a Board of seven Directors to serve until the next annual
meeting and until their successors are elected and qualified;
2. To ratify or reject the selection of the firm of Deloitte & Touche LLP
as the Fund's independent accountants for the fiscal year ending December
31, 1996;
3. To approve or disapprove an administration agreement between the Fund
and Kenwood Administrative Management, Limited Partnership; and
4. To consider and act upon such other business as may properly come
before the meeting and any adjournments thereof.
James P. Shanahan, Jr.,
Secretary
Shareholders of record as of the close of business on April 12, 1996 are
entitled to notice of and to vote at the meeting.
April 15, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. YOUR
PROMPT RETURN OF THE PROXY WILL HELP ENSURE A QUORUM AT THE MEETING AND
AVOID THE EXPENSE TO THE FUND OF FURTHER SOLICITATION.
<PAGE>
USF&G PACHOLDER FUND, INC.
Bank One Towers, East Tower
8044 Montgomery Road, Suite 382
Cincinnati, Ohio 45236
---------------------
PROXY STATEMENT
---------------------
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of USF&G Pacholder Fund, Inc. (the
"Fund") for use at the annual meeting of shareholders to be held on June 4,
1996, and at any adjournments thereof. If the enclosed proxy is executed
properly and returned in time to be voted at the meeting, the shares
represented will be voted according to the instructions contained therein.
Executed proxies that are unmarked will be voted for the election of all
nominees for director and in favor of all other proposals. A proxy may be
revoked at any time prior to its exercise by filing with the Secretary of the
Fund a written notice of revocation, by delivering a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
The Fund's Annual Report to Shareholders, including audited financial
statements for the fiscal year ended December 31, 1995, has been previously
mailed to shareholders. This proxy statement was first mailed to shareholders
on or about April 15, 1996.
The Board of Directors has fixed the close of business on April 12, 1996 as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting and any adjournments thereof. As of the record
date, the Fund had outstanding shares of Common Stock, par value $.01
per share, and 1,650,000 shares of 6.95% Cumulative Preferred Stock, par value
$.01 per share, each share being entitled to one vote. As of such date, Cede &
Co., nominee for The Depository Trust Company, 55 Water Street, New York, New
York 10046, held of record (and not beneficially) % of the Fund's outstanding
common stock. According to information available to the Fund, as of the record
date, USF&G Corporation, 100 Light Street, Baltimore, Maryland 21202, and its
affiliates (including their employee benefit plans) were the beneficial owners
of % of the outstanding common stock of the Fund; and Principal Mutual Life
Insurance Company, 711 High Street, Des Moines, Iowa 50392, owned of record
all of the Fund's outstanding preferred stock. On the record date, the
directors and officers of the Fund as a group owned less than one percent of
the Fund's outstanding shares.
A majority of the shares of the Fund outstanding as of the record date must
be present in person or represented by proxy for the transaction of business
at the annual meeting. If a quorum is present at the meeting but sufficient
votes in favor of one or more proposals are not received, the persons named as
proxies 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 the shares present at the meeting or represented by
proxy. The persons named as proxies will vote in favor of such adjournment if
they determine that adjournment and additional solicitation is reasonable and
in the interests of shareholders of the Fund.
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ELECTION OF DIRECTORS
(Proposal 1)
The Board of Directors has nominated the seven persons listed below for
election as directors, each to hold office until the next annual meeting of
shareholders and until his successor is elected and qualified. Each of the
nominees is currently serving as a director of the Fund. Each director was
elected by the shareholders of the Fund at the annual meeting held on February
9, 1996. Each nominee has consented to being named in this proxy statement and
has agreed to serve as a director of the Fund if elected; however, should any
nominee become unable or unwilling to accept nomination or election, the
persons named in the proxy will exercise their voting power in favor of such
other person or persons as the Board of Directors of the Fund may recommend.
There are no family relationships among the nominees.
Under the Fund's charter, the holders of the outstanding shares of the
Fund's common stock, voting as a separate class, are entitled to elect two
directors; the holders of the outstanding shares of the Fund's preferred
stock, voting as a separate class, are entitled to elect two directors; and
the holders of the outstanding shares of common and preferred stock, voting
together as a single class, are entitled to elect the remaining three
directors of the Fund. The Board of Directors has nominated Messrs. Morgan and
Pacholder for election by the holders of the common stock and Messrs. Woodard
and Shanahan for election by the holders of the preferred stock. The directors
will be elected by a plurality of the votes cast at the meeting, provided that
a quorum is present.
<TABLE>
<CAPTION>
COMMON SHARES
YEAR FIRST BENEFICIALLY
POSITION WITH ELECTED AS PRINCIPAL OCCUPATION DURING OWNED AS OF
NAME AND ADDRESS THE FUND A DIRECTOR PAST FIVE YEARS AND AGE MARCH 31, 1996
---------------- ------------- ---------- --------------------------- --------------
<C> <S> <C> <C> <C>
Asher O. Pacholder* Chairman of the Board 1988 Chairman and Chief Executive 9,205
Bank One Towers Officer, Pacholder
8044 Montgomery Road Associates, Inc.; Chairman
Cincinnati, OH 45236 and Chief Financial Officer,
ICO, Inc. (since 1995).
Director, AM International,
Inc. (graphic arts equipment
& supplies), ICO, Inc. (oil
field services), Southland
Corp. (convenience food
stores) and Trump's Castle
Associates (casino). Age 59.
James P. Shanahan, Jr.* Secretary and Director 1988 Executive Vice President and 10,500
Bank One Towers General Counsel, Pacholder
8044 Montgomery Road Associates, Inc. Director,
Cincinnati, OH 45236 LaBarge, Inc. (electronic
components and devices). Age
34.
William J. Morgan* Executive Vice 1988 President and Secretary, 9,210
Bank One Towers President, Treasurer and Pacholder Associates, Inc.
8044 Montgomery Road Director Director, Duckwall--ALCO
Cincinnati, OH 45236 Stores, Inc. (variety &
discount stores), ICO, Inc.
(oil field services),
Munsingwear, Inc. (apparel
manufacturer) and Kaiser
Ventures, Inc. (sanitary
services). Age 41.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY
POSITION YEAR FIRST OWNED AS OF
WITH ELECTED AS PRINCIPAL OCCUPATION DURING MARCH
NAME AND ADDRESS THE FUND A DIRECTOR PAST FIVE YEARS AND AGE 31, 1996
---------------- -------- ---------- --------------------------- -------------
<C> <S> <C> <C> <C>
Daniel A. Grant Director 1992 President, Utility 1,272
5394 Royal Hills Drive Management Services (since
St. Louis, MO 63129 1991); Vice President and
Assistant Treasurer,
Community Federal Savings
and Loan Association for
more than five years prior
thereto. Age 51.
John C. Sweeney* Director 1992 Senior Vice President and 0
100 Light Street Chief Investment Officer,
Baltimore, MD 21202 USF&G Investment Management
Group, Inc. (since 1992);
Principal and Practice
Director, Towers Perrin
Asset Consulting Services
(1985 to 1992). Age 57.
John F. Williamson Director 1991 Financial Consultant (since 2,509
4740 Roanoke Parkway 1994); Vice President and
# 601 Senior Portfolio Manager,
Kansas City, MO 64112 American Life & Casualty
Insurance Co. (1993 to 1994);
Financial Consultant (1991
to 1992); Senior Vice
President and Treasurer,
Community Federal Savings
and Loan Association for
five years prior thereto.
Director, ICO, Inc. (oil
field services). Age 57.
George D. Woodard Director 1995 Vice President, Rider Kenley 2,000
13440 N. 13th Street & Associates (accounting and
Phoenix, AZ 85022 tax services) since 1994;
Principal, George D.
Woodard, C.P.A. for more
than five years prior
thereto. Age 49.
</TABLE>
- --------
* Nominees considered "interested persons" of the Fund (as defined in the
Investment Company Act of 1940) by reason of their affiliations with the
Fund's investment adviser.
Directors and officers of the Fund who are employed by the Fund's investment
adviser or a corporate affiliate of the investment adviser, or are retired
from such employment, serve without compensation from the Fund. The Fund pays
each director who is not an employee of the investment adviser or any
corporate affiliate of the investment adviser an annual fee of $10,000 plus
$1,000 for each meeting of the Board of Directors attended, and reimburses
directors for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. The following table provides
compensation information for the fiscal year ended
3
<PAGE>
December 31, 1995 for all of the Fund's directors and the highest-paid
executive officers who received compensation from the Fund in excess of
$60,000.
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED ANNUAL FROM FUND AND
NAME OF PERSON, COMPENSATION FROM ACCRUED AS PART OF BENEFITS UPON FUND COMPLEX PAID
POSITION FUND FUND EXPENSES RETIREMENT TO DIRECTORS
- --------------- ----------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Asher O. Pacholder, 0 0 0 0
Chairman of the Board
James P. Shanahan, Jr. 0 0 0 0
Secretary and Director
William J. Morgan, 0 0 0 0
Executive Vice
President, Treasurer and
Director
Daniel A. Grant, $18,000 0 0 $18,000
Director
John C. Sweeney, 0 0 0 0
Director
John F. Williamson, $18,000 0 0 $18,000
Director
George D. Woodard, $18,000 0 0 $18,000
Director
</TABLE>
- --------
For the fiscal year ended December 31, 1995, the directors of the Fund as a
group received aggregate remuneration from the Fund of $54,000.
The Board of Directors has an Audit Committee which makes recommendations to
the Board of Directors with respect to the engagement of the Fund's
independent accountants and reviews with the independent accountants the scope
and results of the audit engagement and matters having a material effect upon
the financial operations of the Fund. The members of the Audit Committee are
Daniel A. Grant, John F. Williamson and George D. Woodard. It is anticipated
that Messrs. Grant, Williamson and Woodard will comprise the Audit Committee
of the new Board of Directors. The Board of Directors does not have a
Nominating Committee.
During the fiscal year ended December 31, 1995, the Board of Directors met
eight times. Mr. Sweeney attended fewer than seventy-five percent of the board
meetings. The Audit Committee held one meeting during 1995 at which all
committee members were in attendance.
4
<PAGE>
The names and business addresses of the Fund's executive officers who are
not directors, and their principal occupations during the past five years, are
set forth below.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME AND ADDRESS POSITION WITH THE FUND DURING PAST FIVE YEARS
- ---------------- ---------------------- ----------------------
<S> <C> <C>
Anthony L. Longi, Jr. President Executive Vice President,
Bank One Towers Pacholder Associates, Inc. for
8044 Montgomery Road more than five years.
Cincinnati, Ohio 45236
James E. Gibson Senior Vice President Senior Vice President,
Bank One Towers Pacholder Associates, Inc. for
8044 Montgomery Road more than five years.
Cincinnati, OH 45236
Mark H. Prenger Assistant Treasurer Assistant Vice President,
Bank One Towers Pacholder Associates, Inc.
8044 Montgomery Road (since June 1994); full-time
Cincinnati, OH 45236 university student prior
thereto.
</TABLE>
According to information furnished to the Fund, Messrs. Pacholder, Morgan
and Shanahan did not file with the Securities and Exchange Commission, within
ten days after the end of the month in which they acquired shares in the
Fund's 1995 common stock rights offering, as required, statements of changes
in beneficial ownership of securities on Form 4.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(Proposal 2)
The Board of Directors, including all of the directors who are not
"interested persons" of the Fund (as defined in the Investment Company Act of
1940), has selected the firm of Deloitte & Touche LLP as the Fund's
independent accountants for the fiscal year ending December 31, 1996. The
employment is conditioned on the right of the Fund to terminate the employment
without penalty by vote of a "majority of the outstanding securities" of the
Fund (as defined in the Investment Company Act of 1940). Deloitte & Touche LLP
currently serves as the Fund's independent accountants and the Fund's
financial statements for the fiscal year ended December 31, 1995 have been
audited by Deloitte & Touche LLP, which expressed an unqualified opinion on
such financial statements. A representative of Deloitte & Touche LLP is
expected to be present at the meeting and will be available to respond to
appropriate questions raised at the meeting and to make a statement if he
wishes to do so.
Ratification of the selection of the firm of Deloitte & Touche LLP requires
the affirmative vote of a majority of all the votes cast at the meeting. For
this purpose, abstentions will be treated as shares present at the meeting but
not voting and will have the same effect as votes cast against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR RATIFICATION OF
THE SELECTION OF DELOITTE & TOUCHE LLP. If the selection of Deloitte & Touche
LLP is not ratified by shareholders, the firm will not serve as the Fund's
independent accountants for the fiscal year ending December 31, 1996 and the
Board of Directors will be required to select new independent accountants.
5
<PAGE>
APPROVAL OF ADMINISTRATION AGREEMENT BETWEEN THE FUND AND
KENWOOD ADMINISTRATIVE MANAGEMENT, LIMITED PARTNERSHIP
(Proposal 3)
Investment Company Capital Corp., a wholly-owned subsidiary of Alex. Brown &
Sons Incorporated, currently serves as administrator of the Fund. At a meeting
held on March 13, 1996, the Board of Directors of the Fund determined that
Kenwood Administrative Management, Limited Partnership ("KAM"), an affiliate
of the Fund's investment adviser, should become the new administrator of the
Fund. In connection with this determination, the Board of Directors considered
and approved an Administration Agreement between the Fund and KAM (the
"Agreement"), and directed that the Agreement be submitted to shareholders of
the Fund for their approval. A copy of the Agreement is set forth as Exhibit A
to this proxy statement.
KAM is an Ohio limited partnership whose general and limited partners are
wholly-owned subsidiaries of Pacholder Associates, Inc. Pacholder Associates,
Inc. is an investment advisory firm which holds a fifty-percent partnership
interest in Pacholder & Company, the Fund's investment adviser. Additional
information concerning Pacholder & Company and Pacholder Associates, Inc. is
set forth under "Investment Adviser" below. KAM is a newly-organized entity
and has no prior experience in providing administrative services to registered
investment companies. However, James E. Gibson, William J. Morgan, James P.
Shanahan, Jr. and Mark H. Prenger, officers and/or directors of the Fund, are
also officers of the corporate general partner of KAM. Messrs. Gibson, Morgan,
Shanahan and Prenger are thoroughly familiar with the operation of the
business and affairs of the Fund and are the principal personnel of KAM who
will be providing services to the Fund under the Agreement.
Under the Agreement, KAM, subject to the supervision of the Board of
Directors, will perform (or supervise the performance by others), and will
provide facilities, equipment and personnel to carry out, certain
administrative services for the operation of the business and affairs of the
Fund. These services are substantially the same as those required to be
provided to the Fund under the administration agreement between the Fund and
Investment Company Capital Corp. and include the following: (i) assisting the
Fund's legal counsel in maintaining the corporate records of the Fund and in
preparing and filing prospectuses, proxy statements, shareholder reports and
other documents with the Securities and Exchange Commission and other
regulatory authorities; (ii) providing individuals to serve as officers or
directors of the Fund; (iii) obtaining and keeping in effect fidelity bonds
and other insurance for the Fund in accordance with the Investment Company Act
of 1940; (iv) preparing and disseminating materials for meetings of the Board
of Directors and shareholders; (v) providing reviews and quarterly compliance
reports to the Board of Directors regarding all applicable regulatory and
operating requirements; (vi) supervising the declaration of dividends and
other distributions to shareholders and distributing appropriate notices of
such dividends and distributions; (vii) computing the Fund's yield, total
return, expense ratio and portfolio turnover rate for dissemination to
information services; (viii) administering the Fund's contracts with its
investment adviser, custodian and transfer agent; (ix) calculating the Fund's
contractual expenses and controlling all disbursements for the Fund; (x)
preparing and filing the Fund's federal and state tax returns; (xi) developing
and preparing communications to shareholders and coordinating the mailing of
notices, proxy statements and other materials; (xii) answering correspondence
and inquiries from shareholders, securities broker-dealers and others relating
to the Fund; and (xiii) advising the Fund and its Board of Directors on
matters concerning the Fund and its affairs.
Expenses not expressly assumed by KAM under the Agreement will be paid by
the Fund. The Fund currently pays expenses not expressly assumed by Investment
Company Capital Corp. under its agreement with
6
<PAGE>
the Fund. In each case, expenses borne by the Fund include, without
limitation, all fees and charges of its investment adviser and its accounting
and pricing agent; the cost of custodial and transfer-agent services; expenses
for legal and auditing services; the expenses of preparing (including
typesetting), printing and mailing reports, prospectuses and proxy materials
to existing shareholders; all expenses incurred in connection with issuing and
redeeming shares of its capital stock; the cost of registration of the Fund's
shares under federal and state securities laws and of listing such shares on
any securities exchange; fees and out-of-pocket expenses of directors who are
not affiliated persons of the Fund's investment adviser or administrator, or
any affiliated person of the investment adviser or administrator; taxes;
insurance premiums; interest; brokerage costs; trade association dues; and
litigation and other extraordinary or nonrecurring expenses.
Both the Agreement and the current agreement between the Fund and Investment
Company Capital Corp. provide that the administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which the agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under the Agreement. The Agreement with KAM also
provides that the Fund will indemnify KAM and its partners, employees and
agents from and against any and all losses, claims, damages or liabilities to
which they may become subject, insofar as such losses, claims, damages or
liabilities arise out of or are based upon the performance by KAM of its
duties under the Agreement, and will reimburse, as incurred, KAM and its
partners, employees and agents for any legal or other expenses reasonably
incurred in connection with investigating or defending against any alleged
loss, claim, damage or liability; provided that KAM and any such partner,
employee or agent has acted in good faith without negligence.
For the services to be rendered, the facilities furnished and the expenses
assumed by KAM pursuant to the Agreement, the Fund will pay to KAM a fee at
the annual rate of 0.10% of the Fund's average weekly net assets. The Fund
currently pays Investment Company Capital Corp. a fee at the annual rate of
0.20% of the first $50 million of the Fund's average weekly net assets, 0.15%
of the next $50 million of such net assets and 0.10% of such net assets over
$100 million. Assuming that the Fund's average weekly net assets remain at
their current level and that the Fund is able to obtain new fidelity bond and
other liability insurance coverage at the premiums anticipated, the Agreement
is expected to result in a net annual reduction in Fund expenses of
approximately $55,000.
The Agreement will take effect upon its approval by shareholders of the
Fund. Unless sooner terminated in accordance with its terms, the Agreement
will continue in effect for an initial period of two years and thereafter may
be continued for successive periods of one year, but only so long as each such
continuance is specifically approved at least annually (i) by the Board of
Directors of the Fund or by vote of a "majority of the outstanding voting
securities" of the Fund (as defined in the Investment Company Act of 1940),
and (ii) by the vote of a majority of the directors of the Fund, who are not
parties to the Agreement or "interested persons" (as defined in the Investment
Company Act of 1940) of any such party, cast in person at a meeting called for
the purpose of voting on such approval.
The Agreement will terminate automatically if assigned and may be terminated
at any time, without payment of any penalty, by the Board of Directors of the
Fund or by vote of a majority of the outstanding voting securities of the Fund
on 60 days' written notice to KAM, or by KAM on 60 days' written notice to the
Fund.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors of the Fund, including all of the directors who are
not "interested persons" of the Fund or KAM (as defined in the Investment
Company Act of 1940), has approved the Agreement and directed
7
<PAGE>
that the Agreement be submitted to shareholders for their approval. In
determining whether to recommend approval of the Agreement to shareholders,
the Board of Directors considered, among other factors, the anticipated
quality of the services to be provided to the Fund by KAM under the Agreement,
the personnel who will be providing such services, the fees paid and payable
by the Fund for administrative services, and the fees charged by other
organizations for comparable services. In reaching the decision to recommend
that shareholders vote to approve the Agreement, the Board of Directors
specifically determined that the Agreement is in the best interests of the
Fund and its shareholders, that the services to be performed pursuant to the
Agreement are services required for the operation of the Fund, that KAM can
provide services the nature and quality of which are at least equal to those
provided by others offering the same or similar services, and that the fees
for such services are fair and reasonable in light of the usual and customary
charges made by others for services of the same nature and quality.
Approval of the Agreement requires the vote of a "majority of the
outstanding voting securities" of the Fund (as defined in the Investment
Company Act of 1940), which means the vote of (i) sixty-seven percent or more
of the shares present at the meeting, if the holders of more than fifty
percent of the shares entitled to vote are present or represented by proxy; or
(ii) more than fifty percent of the shares entitled to vote, whichever is the
less. For this purpose, abstentions and "broker non-votes" will be treated as
shares present at the meeting but not voting and will have the same effect as
votes cast against the proposal. "Broker non-votes" are shares held in the
name of a broker or nominee for which an executed proxy is received by the
Fund, but which are not voted on the proposal because voting instructions have
not been received from the beneficial owner.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE
AGREEMENT. If the Agreement is not approved, it will not take effect and
Investment Company Capital Corp. will continue to serve as administrator
pursuant to its administration agreement with the Fund.
INVESTMENT ADVISER
Pacholder & Company, Bank One Towers, East Tower, 8044 Montgomery Road,
Suite 382, Cincinnati, Ohio 45236, serves as investment adviser to the Fund
pursuant to an Investment Advisory Agreement dated November 16, 1988, as
amended. Pacholder & Company is a general partnership between Pacholder
Associates, Inc. and USF&G Marketing Services Co., which each have a fifty-
percent partnership interest. USF&G Marketing Services Co. is an indirect
wholly-owned subsidiary of USF&G Corporation. Asher O. Pacholder, William J.
Morgan and James P. Shanahan, Jr., officers and directors of the Fund, are
shareholders, officers and directors of Pacholder Associates, Inc. James E.
Gibson, Mark H. Prenger and Anthony L. Longi, Jr., officers of the Fund, are
officers of Pacholder Associates, Inc. John C. Sweeney, a director of the
Fund, is an officer of USF&G Corporation.
ADMINISTRATIVE AND ACCOUNTING SERVICES
Investment Company Capital Corp. serves as administrator of the Fund
pursuant to an Administrative Agreement dated October 24, 1988, as amended.
Investment Company Capital Corp. is a wholly-owned subsidiary of Alex. Brown &
Sons Incorporated and is located at 135 East Baltimore Street, Baltimore,
Maryland 21202.
8
<PAGE>
Pursuant to an Accounting Services Agreement with the Fund, Pacholder
Associates, Inc. is responsible for (i) accounting relating to the Fund and
its investment transactions, (ii) determining the net asset value per share of
the Fund, (iii) maintaining the Fund's books of account, and (iv) monitoring,
in conjunction with the Fund's custodian, all corporate actions taken in
respect of securities held by the Fund. Pacholder Associates, Inc. is a
general partner of the Fund's investment adviser and is located at Bank One
Towers, East Tower, 8044 Montgomery Road, Suite 382, Cincinnati, Ohio 45236.
SOLICITATION OF PROXIES
In addition to solicitation by mail, solicitations on behalf of the Board of
Directors may also be made by personal interview, telegram and telephone.
Certain officers and regular agents of the Fund, who will receive no
additional compensation for their services, may use their efforts, by
telephone or otherwise, to request the return of proxies. In addition,
Shareholder Communications Corporation, 17 State Street, New York, New York
10004, has been retained at an approximate cost of $3,500 plus out-of-pocket
expenses to perform various proxy advisory and solicitation services.
Approximately 32 persons will be utilized by Shareholder Communications
Corporation in its solicitation efforts. The costs of preparing, assembling,
mailing and transmitting proxy materials and of soliciting proxies on behalf
of the Board of Directors (including the fees and expenses of Shareholder
Communications Corporation) will be borne by the Fund. The Fund will
reimburse, upon request, broker-dealers and other custodians, nominees and
fiduciaries for their reasonable expenses of sending proxy soliciting material
to beneficial owners.
OTHER BUSINESS
The management of the Fund knows of no other business that may come before
the annual meeting. If any additional matters are properly presented at the
meeting, the persons named in the enclosed proxy, or their substitutes, will
vote such proxy in accordance with their best judgment on such matters.
SHAREHOLDER PROPOSALS
If a shareholder wishes to present a proposal for inclusion in the proxy
statement for the next annual meeting of shareholders, such proposal must be
submitted in writing and received by the Secretary of the Fund on or before
November 30, 1996.
ANNUAL REPORT
The Fund's annual report for the fiscal year ended December 31, 1995 is
available at no charge by writing to the Fund at Bank One Towers, East Tower
8044 Montgomery Road, Suite 382, Cincinnati, Ohio 45236, or by calling 1-800-
426-5523.
9
<PAGE>
EXHIBIT A
ADMINISTRATION AGREEMENT
This AGREEMENT made as of this day of June, 1996, by and between Kenwood
Administrative Management, Limited Partnership, an Ohio limited partnership
(the "Administrator"), and USF&G Pacholder Fund, Inc., a Maryland corporation
(the "Fund").
WITNESSTH:
WHEREAS, the Fund is a closed-end diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund desires to retain the Administrator to provide
administrative services to the Fund, and the Administrator is willing to
render such services on the terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. APPOINTMENT OF ADMINISTRATOR. The Fund hereby retains the Administrator
to act as the administrator of the Fund and to furnish the Fund with the
administrative services described in Section 2 below. The Administrator hereby
accepts such employment and agrees to perform the services described in
Section 2.
2. ADMINISTRATIVE SERVICES. (a) As administrator, and subject to the
supervision and control of the Board of Directors of the Fund, the
Administrator will perform (or supervise the performance by others) and will
provide facilities, equipment and personnel to carry out the following
administrative services for operation of the business and affairs of the Fund:
(i) with the assistance of the Fund's legal counsel, prepare, file and
maintain the Fund's governing documents and corporate records, including
its charter, bylaws, and minutes of the meetings of the stockholders, the
Board of Directors and any committees thereof;
(ii) assist the Fund's legal counsel in the preparation and filing with
the Securities and Exchange Commission (the "Commission") and the
appropriate state securities authorities of the registration statements for
the Fund and its shares of capital stock and all amendments thereto,
reports to regulatory authorities and shareholders, prospectuses, proxy
statements and such other documents as may be necessary or convenient to
enable the Fund to offer its shares from time to time;
(iii) assist with and coordinate the layout and printing of all publicly
disseminated prospectuses and reports;
(iv) provide individuals reasonably acceptable to the Board of Directors
of the Fund for nomination, appointment or election as officers or
directors of the Fund, who will be responsible for the management of
certain of the Fund's affairs as determined by the Board of Directors;
(v) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund in accordance
with the requirements of Rules 17g-1 and 17d-1(d)(7) under the 1940 Act, as
such bonds and policies are approved by the Board of Directors of the Fund;
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(vi) with the approval of the Fund's counsel and cooperation of its
investment adviser and other relevant parties, prepare and disseminate
materials for meetings of the Board of Directors of the Fund;
(vii) prepare such reports relating to the business and affairs of the
Fund (not otherwise appropriately prepared by the Fund's investment
adviser, legal counsel or auditors) as the Board of Directors of the Fund
may from time to time reasonably request in connection with the performance
of its duties;
(viii) provide reviews and quarterly compliance reports to the Board of
Directors regarding all applicable regulatory and operating requirements;
(ix) supervise the declaration of dividends and other distributions to
shareholders of the Fund and prepare and distribute to appropriate parties
notices announcing the declaration of such dividends and other
distributions;
(x) compute the Fund's yield, total return, expense ratio and portfolio
turnover rate for dissemination to information services covering the
investment company industry and for other appropriate purposes;
(xi) administer contracts on behalf of the Fund with, among others, the
Fund's investment adviser, custodian and transfer agent;
(xii) calculate contractual Fund expenses and control all disbursements
for the Fund;
(xiii) arrange for and supervise independent auditors as appropriate and
take all reasonable action in the performance of its obligations under this
Agreement to ensure that the necessary information is made available to
such accountants for the expression of their opinion as such may be
required by the Fund from time to time;
(xiv) monitor and advise the Fund on its status as a regulated investment
company under the Internal Revenue Code of 1986, as amended;
(xv) prepare and file the Fund's federal and state tax returns;
(xvi) develop and prepare communications to shareholders, including the
annual report to shareholders, coordinate the mailing of notices, proxy
statements and other materials to shareholders, and supervise and
facilitate the solicitation of proxies solicited by the Fund for all
shareholder meetings, including the tabulation process for shareholder
meetings;
(xvii) answer correspondence and inquiries from shareholders, securities
broker-dealers and others relating to the Fund;
(xviii) provide internal legal and administrative services as reasonably
requested by the Fund from time to time; and
(xix) advise the Fund and its Board of Directors on matters concerning
the Fund and its affairs.
(b) The Administrator may perform such other services for the Fund as agreed
from time to time, at the request of the Board of Directors. The services
provided by the Administrator to the Fund hereunder shall not include any
duties, functions or services to be performed for the Fund by its investment
adviser, custodian, transfer agent, or accounting and pricing agent pursuant
to their respective agreements with the Fund.
3. RECORDS. The Administrator shall maintain customary records in connection
with its duties as specified in this Agreement. Any records required to be
maintained and preserved pursuant to Rules 31a-1 and 31a-2 under the 1940 Act
which are prepared or maintained by the Administrator on behalf of the Fund
shall be prepared and maintained at the expense of the Administrator, but
shall be the property of the Fund and will be made available
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or surrendered to the Fund promptly on request. In case of any request or
demand for the inspection of such records by another party, the Administrator
shall notify the Fund and follow the Fund's instructions as to permitting or
refusing such inspection; provided, however, that the Administrator may
exhibit such records to any person in any case where it is advised by its
counsel that it may be held liable for failure to do so, unless (in cases
involving potential exposure only to civil liability) the Fund has agreed to
indemnify the Administrator against such liability.
4. EXPENSES. The Administrator shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide administrative services to the Fund, including the
compensation of employees of the Administrator who serve as officers or
directors of the Fund. The Fund assumes and shall pay or cause to be paid all
other expenses of the Fund not otherwise allocated herein, including, without
limitation, all fees and charges of its investment adviser and its accounting
and pricing agent; the cost of custodial and transfer-agent services; expenses
for legal and auditing services; the expenses of preparing (including
typesetting), printing and mailing reports, prospectuses and proxy materials
to existing shareholders; all expenses incurred in connection with issuing and
redeeming shares of its capital stock; the cost of registration of the Fund's
shares under federal and state securities laws and of listing such shares on
any securities exchange; fees and out-of-pocket expenses of directors who are
not affiliated persons of the Administrator or the Fund's investment adviser,
or any affiliated person of the Administrator or investment adviser; taxes;
insurance premiums; interest; brokerage costs; trade association dues; and
litigation and other extraordinary or nonrecurring expenses.
5. COMPENSATION. For the services to be rendered, the facilities furnished
and the expenses assumed by the Administrator pursuant to this Agreement, the
Fund shall pay to the Administrator a fee at the annual rate of 0.10% of the
Fund's average weekly net assets. Such fee shall be computed and accrued
weekly and paid monthly as soon as practicable after the end of each month.
The Fund shall also reimburse the Administrator for its reasonable out-of-
pocket expenses.
6. LIMITATION OF LIABILITY. (a) The Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund
in connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement. The duties of the Administrator
shall be confined to those expressly set forth herein, and no implied duties
are assumed by or may be asserted against the Administrator hereunder.
(b) Any person, even though also a partner, employee or agent of the
Administrator, who may be or become an officer, employee or agent of the Fund,
shall be deemed when rendering services to the Fund or acting on any business
of the Fund (other than services or business in connection with the duties of
the Administrator hereunder) to be rendering such services to or acting solely
for the Fund and not as a partner, director, employee or agent or one under
the control or direction of the Administrator, even though paid by the
Administrator.
(c) The Administrator may apply to the Fund at any time for instructions and
may consult counsel for the Fund or its own counsel and with accountants and
other experts with respect to any matter arising in connection with its duties
and obligations hereunder, and the Administrator shall not be liable or
accountable for any action taken or omitted by it in good faith in accordance
with such instruction or the opinion of such counsel, accountants or other
experts.
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7. INDEMNIFICATION. (a) The Fund agrees to indemnify and hold harmless the
Administrator and its partners, employees and agents from and against any and
all losses, claims, damages or liabilities to which the Administrator or any
of its partners, employees or agents may become subject, insofar as such
losses, claims, damages or liabilities (or any actions in respect thereof)
arise out of or are based upon the performance by the Administrator of its
duties hereunder, and to reimburse, as incurred, the Administrator and its
partners, employees and agents for any legal or other expenses reasonably
incurred in connection with investigating or defending against any alleged
loss, claim, damage or liability; provided, that the Administrator and any
such partner, employee or agent has acted in good faith without negligence.
(b) A party seeking indemnification under this Section 7 in respect of any
claim or other assertion of liability shall give the Fund written notice of
such claim or other assertion of liability promptly after the indemnified
party receives notice thereof. Failure of an indemnified party to give such
notice promptly shall not be deemed a waiver of any right to indemnification
it may have under this Agreement, except to the extent any such failure shall
have damaged the Fund. In case any action is brought against any indemnified
party, the Fund shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel satisfactory to
the indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the Fund and the indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to it or other indemnified parties which are different from
or additional to those available to the Fund, the Fund shall not have the
right to direct the defense of such action on behalf of the indemnified party
or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on their behalf. After notice
from the Fund to an indemnified party of its election so to assume the defense
of any such action and approval by such indemnified party of counsel appointed
in connection therewith, the Fund shall not be liable to the indemnified party
hereunder for any legal or other expense, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in the manner provided for herein or (ii) the Fund has
authorized the employment of counsel for the indemnified party at its expense.
After notice from the Fund to an indemnified party, the Fund shall not be
liable for the costs and expenses of any settlement of such action effected by
such indemnified party without the consent of the Fund, unless the Fund waived
its rights hereunder in which case the indemnified party may effect such a
settlement without such consent.
(c) The Fund agrees to notify the Administrator promptly of the commencement
of any litigation or proceeding against the Fund or any of its officers or
directors related to the services provided by the Administrator under this
Agreement.
8. ACTIVITIES OF ADMINISTRATOR. (a) The services furnished by the
Administrator to the Fund hereunder are not to be deemed exclusive, and the
Administrator and its affiliates shall be free to render services to others
and engage in other activities; provided, however, that any such other
services and activities do not, during the term of this Agreement, interfere,
in a material manner, with the Administrator's ability to meet all of its
obligations to the Fund hereunder.
(b) Subject to and in accordance with the charter and bylaws of the Fund,
the 1940 Act and the rules thereunder, it is understood that directors,
officers, agents and shareholders of the Fund are or may be interested in the
Administrator or its affiliated persons as directors, officers, agents,
partners, shareholders or otherwise; that directors, officers, agents,
partners and shareholders of the Administrator or its affiliated persons are
or may be interested in the Fund as directors, officers, agents, shareholders
or otherwise; that the Administrator or its affiliated persons may be
interested in the Fund as a shareholder or otherwise; and that the effect of
any such interests shall be governed by the charter and bylaws of the Fund and
the 1940 Act and the rules thereunder.
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9. EFFECTIVE DATE; TERM. This Agreement shall become effective as of the
date hereof. Unless sooner terminated as hereinafter provided, this Agreement
shall continue in effect for an initial period of two years and thereafter may
be continued for successive periods of one year, but only so long as each such
continuance is specifically approved at least annually (i) by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund, and (ii) by the vote of a majority of the directors of
the Fund, who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval.
10. TERMINATION. Notwithstanding any provision of this Agreement, it may be
terminated at any time, without payment of any penalty, by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Administrator, or by
the Administrator on 60 days' written notice to the Fund. This Agreement shall
terminate automatically in the event of its assignment. The indemnity and
defense provisions set forth in Section 7 shall indefinitely survive the
termination of this Agreement.
11. AMENDMENT. This Agreement may be amended at any time by agreement of the
parties, provided that the amendment shall be approved both by the vote of a
majority of the directors of the Fund, who are not parties to this Agreement
or interested persons of any such party, cast in person at a meeting called
for that purpose, and where required by the 1940 Act by a majority of the
outstanding voting securities of the Fund.
12. NOTICES. Any notices required to be given hereunder shall be in writing
and shall be deemed effective, if mailed, five business days after being
deposited in the mails with proper postage affixed thereto or, if delivered by
hand or courier service or in the form of a facsimile transmission, when
received, in each case addressed or directed as follows:
If to the Fund:
If to the Administrator:
Either party may change its address and/or facsimile number for the purpose
of all notices or communications required or permitted to be given pursuant to
this Agreement by notice to the other party.
13. CERTAIN TERMS. The terms "affiliated person", "assignment", "interested
person" and "vote of a majority of the outstanding voting securities", when
used in this Agreement, shall have the respective meanings set forth in the
1940 Act and the rules and regulations thereunder, subject to any applicable
orders of exemption issued by the Commission.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio without giving effect to the
choice of law provisions thereof and, to the extent applicable, the federal
law of the United States. To the extent applicable Ohio law or any of the
provisions of this Agreement conflict with applicable provisions of the 1940
Act or other applicable federal laws and regulations, the latter shall
control.
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15. MISCELLANEOUS. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder shall
not be affected thereby. The title of this Agreement and the headings to the
sections herein are for convenience of the parties only, and are not intended
to be part of or affect the meaning or interpretation of this Agreement. This
Agreement constitutes the entire agreement of the parties hereto with respect
to the matters referred to herein, and no other agreement, verbal or otherwise,
shall be binding as between the parties. No failure or delay on the part of any
party hereto in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Any waiver granted hereunder must
be in writing and shall be valid only in the specific instance in which given.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original and all of which, when taken together, shall constitute one
original instrument.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of the
undersigned as of the day and year first above written.
USF&G PACHOLDER FUND, INC.
By:
--------------------------------
KENWOOD ADMINISTRATIVE
MANAGEMENT, LIMITED PARTNERSHIP
By: Kenwood Administrative
Management, Inc., its general
partner
By:
-------------------------------
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USF&G PACHOLDER FUND, INC.
6.95% Cumulative Preferred Stock, $.01 Par Value
This proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all proxies previously given, hereby appoints
Anthony L. Longi, Jr. and James P. Shanahan, Jr., and each of them, as proxies
with power of substitution, and hereby authorizes each of them to represent and
to vote as designated below, all the shares of 6.95% Cumulative Preferred Stock,
par value $.01 per share, of USF&G Pacholder Fund, Inc. which the undersigned is
entitled to vote at the annual meeting of shareholders to be held on June 4,
1996, and at any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy
will be voted "FOR" the election of all nominees for Director and "FOR"
Proposals 2 and 3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
1. Election of Directors: [_] FOR [_] WITHHOLD [_] FOR ALL EXCEPT
Daniel A. Grant, James P. Shanahan, Jr., John C. Sweeney, John F.
Williamson and George D. Woodard
Instruction: To withhold authority to vote for any individual nominee,
-----------
mark the "For All Except" box and strike a line through the nominee(s)
name. Your shares will be voted for the remaining nominee(s).
2. FOR [_] AGAINST [_] ABSTAIN [_] with respect to ratification of the
selection of Deloitte & Touche LLP as
independent accountants.
3. FOR [_] AGAINST [_] ABSTAIN [_] with respect to approval of the
administration agreement with Kenwood
Administrative Management, Limited
Partnership.
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
By: _____________________________________
Name:
Title:
Dated:________________________
<PAGE>
PROXY
USF&G PACHOLDER FUND, INC.
Common Stock, $.01 Par Value
This proxy is solicited on behalf of the Board of Directors.
The undersigned, revoking all proxies previously given, hereby appoints
Anthony L. Longi, Jr. and James P. Shanahan, Jr., and each of them, as proxies
with power of substitution, and hereby authorizes each of them to represent and
to vote as designated on the reverse side of this card, all the shares of Common
Stock, par value $.01 per share, of USF&G Pacholder Fund, Inc. which the
undersigned is entitled to vote at the annual meeting of shareholders to be held
on June 4, 1996, and at any adjournments thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy
will be voted "FOR" the election of all nominees for Director and "FOR"
Proposals 2 and 3. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on this proxy. An
executor, administrator, trustee or guardian should sign as such. If more than
one trustee, all should sign. ALL JOINT OWNERS MUST SIGN. If a corporation,
please provide the full name of the corporation and the name of the authorized
officer signing on its behalf.
Has Your Address Changed? Do You Have Any Comments?
____________________________ ___________________________________
____________________________ ___________________________________
____________________________ ___________________________________
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
With- For All
For hold Except
1. Election of Directors [_] [_] [_]
Daniel A. Grant, William J. Morgan, Asher O.
Pacholder John C. Sweeney and John F. Williamson
Instruction: To withhold authority to vote for any
-----------
individual nominee, mark the "For All Except" box and
strike a line through the nominee(s) name. Your shares
will be voted for the remaining nominee(s).
For Against Abstain
2. With respect to ratification of the selection of [_] [_] [_]
Deloitte & Touche LLP as independent accountants
For Against Abstain
3. With respect to approval of the administration [_] [_] [_]
agreement with Kenwood Administrative Management,
Limited Partnership.
Please be sure to sign and date this Proxy. Date:________________
____________________________________________
Shareholder sign here Co-owner sign here
Mark box at right if comments or address change
have been noted on the reverse side of this card [_]
RECORD DATE SHARES:
