<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
[_] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PACHOLDER FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
________________________________________________________________________________
(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 the table below per Exchange Act Rules 14a-6(i)(1) 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:
_______________________________________________________________________
(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:
_______________________________________________________________________
<PAGE>
PACHOLDER FUND, INC.
8044 Montgomery Road, Suite 382
Cincinnati, OH 45236
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on November 16, 1999
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of
Pacholder Fund, Inc. (the "Fund") will be held on Tuesday, November 16, 1999, at
11 o'clock a.m., Eastern Time, at The Harley Hotel, 8020 Montgomery Road,
Cincinnati, Ohio, for the following purposes:
1. To elect a Board of four Directors to serve until the next annual
meeting and until their successors are elected and qualified;
2. To approve or disapprove an amendment to the Fund's charter to change
the name of the Fund;
3. To approve or disapprove an amendment to the Fund's investment advisory
agreement to change the index used as a measure of investment performance in
determining the advisory fee payable by the Fund;
4. To approve or disapprove an amendment to the Fund's investment advisory
agreement to define the Fund's net assets for the purpose of calculating the
amount of the advisory fee payable by the Fund;
5. 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,
1999; and
6. 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 October 12, 1999 are
entitled to notice of and to vote at the meeting.
October __, 1999
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>
PACHOLDER FUND, INC.
8044 Montgomery Road, Suite 382
Cincinnati, OH 45236
PROXY STATEMENT
This proxy statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Pacholder Fund, Inc. (the "Fund") for
use at the annual meeting of shareholders to be held on November 16, 1999, 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, including audited financial statements for the
fiscal year ended December 31, 1998, has been previously mailed to shareholders.
This proxy statement was first sent or given to shareholders on or about October
__, 1999.
The Board of Directors has fixed the close of business on October 12, 1999
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 [9,504,994] shares of Common Stock, par value $.01 per
share, and 3,500,000 shares of Cumulative Preferred Stock, par value $.01 per
share, comprised of 1,650,000 Series C shares, 800,000 Series D shares, and
1,050,000 Series E shares (collectively, the "Preferred Stock"). Each
outstanding share of the Fund's Common and Preferred Stock is entitled to one
vote. As of the record date, Cede & Co., nominee for The Depository Trust
Company, 55 Water Street, New York, NY 10046, held of record (and not
beneficially) [94.8]% of the Fund's outstanding Common Stock. According to
information available to the Fund, as of the record date, no person owned
beneficially 5% or more of the outstanding Common Stock of the Fund, and
Principal Life Insurance Company, 711 High Street, Des Moines, IA 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 beneficially 1.0% of the
Fund's outstanding Common Stock.
The presence in person or by proxy of the holders entitled to cast a
majority of all the votes entitled to be cast at the meeting will constitute a
quorum for the transaction of business at the annual meeting. Broker non-votes,
abstentions and withhold-authority votes all count for the purpose of
determining a quorum. 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
<PAGE>
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.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors has nominated the four 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 and was elected at the
annual meeting of shareholders held on June 30, 1998.
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 Common
Stock, voting as a separate class, are entitled to elect two directors; the
holders of the outstanding shares of Preferred Stock, voting as a separate
class, are entitled to elect two directors; and the holders of the outstanding
shares of Common Stock and Preferred Stock, voting together as a single class,
are entitled to elect the remaining directors of the Fund. The Board of
Directors has nominated Messrs. Grant and Morgan for election by holders of the
Common Stock and Messrs. Williamson and Woodard 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. Broker non-votes,
abstentions and withhold-authority votes will not be considered votes cast for
this purpose.
2
<PAGE>
<TABLE>
<CAPTION>
Year First Shares
Elected Beneficially
Position as a Principal Occupation Owned as of
Name Age with the Fund Director During Past Five Years 9/30/99/(1)/
- ---- --- ------------- -------- ---------------------- -------------
<S> <C> <C> <C> <C> <C>
William J. Morgan* 45 Chairman of 1988 President, Secretary and 44,010/(2)/
the Board, Director, Pacholder Associates,
Treasurer and Inc. Director, ICO, Inc. (oil
Director field services); Kaiser
Ventures, Inc. (environmental
services) and Smith-Corona
Corporation (office equipment
manufacturer).
Daniel A. Grant 55 Director 1992 President, Utility Management 2,115
Services.
John F. Williamson 61 Director 1991 Chairman and President, 4,429
Williamson Associates, Inc.
(investment advisor) (since
Jan. 1997); Executive Vice
President and Chief Financial
Officer, Asset Allocation
Concepts, Inc. (1995 to 1996);
Vice President and Senior
Portfolio Manager, American
Life & Casualty Insurance Co.
(1993 to 1994). Director, ICO,
Inc. (oil field services).
George D. Woodard 53 Director 1995 Realtor with A.S.K. Realty 10,000
(since 1999); Closely Held
Business Specialist, Henry &
Horne, P.L.C. (1996 to 1999);
Principal, George D. Woodard,
CPA (1995-1996); Vice
President, Rider Kenley &
Associates (1994 to 1995).
</TABLE>
___________________
* Nominee who is considered an "interested person" of the Fund (as defined in
the Investment Company Act of 1940) by reason of his affiliation with the
Fund's investment adviser.
(1) Each nominee owns less than 1% of the outstanding Common Stock.
(2) Includes 14,221 shares owned by a family company of which Mr. Morgan is an
officer, director and minority shareholder.
3
<PAGE>
The Board of Directors recommends election of the nominees listed above.
Mr. Morgan is a Manager of Pacholder & Company, LLC, the Fund's investment
adviser (the "Adviser"), and an officer, director and shareholder of Pacholder
Associates, Inc., a member of the Adviser.
Directors and officers of the Fund who are employed by the Adviser or a
corporate affiliate of the 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 Adviser or any corporate affiliate of the Adviser an annual fee
of $10,000 plus $1,500 or $1,000 for each meeting of the Board of Directors
attended in person or by telephone, respectively, and reimburses directors for
travel and other out-of-pocket expenses incurred by them in connection with
attending in-person meetings. The following table sets forth the information
concerning the compensation paid by the Fund to directors during the fiscal year
ended December 31, 1998.
Total Compensation
Name of Director from the Fund/(1)/
---------------- -------------------
William J. Morgan............................. None
Daniel A. Grant............................... $17,000
John F. Williamson............................ $17,000
George D. Woodard............................. $17,000
___________________
(1) The Fund does not offer any pension or retirement plan benefits to its
directors. The Fund is not part of a fund complex.
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 Audit Committee also reviews the
pricing of illiquid securities held in the Fund's portfolio. The members of the
Audit Committee are Daniel A. Grant, John F. Williamson and George D. Woodard.
The Board of Directors does not have a Nominating Committee.
During the fiscal year ended December 31, 1998, the Board of Directors met
five times. No director attended fewer than 75% of the board meetings. The Audit
Committee held two meetings during 1998 at which all committee members were in
attendance.
Information regarding the Fund's other executive officers is set forth
below. The address of each is 8044 Montgomery Road, Cincinnati, OH 45236.
4
<PAGE>
<TABLE>
<CAPTION>
Year First Shares
Elected Principal Beneficially
Position(s) as an Occupation During Owned as of
Name Age with the Fund Officer Past Five Years 9/30/99/(1)/
- ---- --- ------------- ---------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
James P. Shanahan, Jr. 38 Secretary 1988 Executive Vice 23,033
President and
General Counsel,
Pacholder
Associates, Inc.
Anthony L. Longi, Jr. 34 President and 1994 Executive Vice 5,369
Assistant President, Pacholder
Treasurer Associates, Inc.
James E. Gibson 34 Senior Vice 1995 Executive Vice 6,264
President President, Pacholder
Associates, Inc.
Mark H. Prenger 29 Assistant 1995 Vice President, 1,214
Treasurer Pacholder
Associates, Inc.
</TABLE>
_____________________
(1) Each person owns less than 1% of the outstanding Common Stock.
PROPOSAL 2: APPROVE OR DISAPPROVE AN AMENDMENT TO THE FUND'S CHARTER TO CHANGE
THE NAME OF THE FUND
The Board of Directors of the Fund recommends changing the Fund's name from
"Pacholder Fund, Inc." to "Pacholder High Yield Fund, Inc." To make this change
the Fund must amend its charter. The proposed amendment to the Fund's charter is
attached as Exhibit A to this proxy statement.
The Board of Directors believes that the proposed new name would better
reflect the Fund's investment objective, policies and strategy. The Board of
Directors believes that adding "high yield" to the name of the Fund will aid in
properly identifying the Fund in the marketplace to investors interested in
making an investment in a closed-end fund investing primarily in high yield
securities.
5
<PAGE>
Approval of an amendment to the Fund's charter requires the affirmative
vote of the holders of a majority of the total number of shares of the Fund
outstanding and entitled to vote on the matter. For this purpose, the holders of
the Preferred Stock and the Common Stock will vote together as one class.
Abstentions and broker non-votes will not be considered votes cast and will have
the same effect as votes cast against the proposal.
The Board of Directors recommends that shareholders vote FOR the proposal.
If the amendment is not approved, the Fund's charter will not be amended to
change its name.
PROPOSAL 3: APPROVE OR DISAPPROVE AN AMENDMENT TO THE FUND'S INVESTMENT
ADVISORY AGREEMENT TO CHANGE THE INDEX USED AS A MEASURE OF
INVESTMENT PERFORMANCE
Background
Pacholder & Company, LLC serves as the Fund's investment adviser pursuant
to an Investment Advisory Agreement dated August 20, 1998 (the "Agreement"),
between the Fund and the Adviser. Shareholders of the Fund approved the
Agreement at the annual meeting held on June 30, 1998. The Board of Directors
most recently approved renewal of the Agreement for another annual term on
May 24, 1999.
Under the Agreement, the Adviser manages the investment and reinvestment of
the Fund's assets and continuously reviews, supervises and administers the
Fund's investment program. As compensation for its services, the Adviser
receives an annual fee which increases or decreases from a "fulcrum fee" of
0.90% of the Fund's average net assets based on the total return investment
performance of the Fund for the prior 12-month period relative to the percentage
change in the Credit Suisse First Boston High Yield Index for the same period.
The advisory fee is paid quarterly at an annual rate which varies between
0.40% and 1.40% of the Fund's average net assets. The fee is structured so that
it will be 0.90% if the Fund's investment performance for the preceding 12
months (net of all fees and expenses, including the advisory fee) equals the
index return. The advisory fee increases or decreases from the 0.90% "fulcrum
fee" by 10% of the difference between the Fund's investment performance during
the preceding 12 months and the index return during that period, up to the
maximum fee of 1.40% as down to the minimum fee of 0.40%.
Change in Index
In January 1999, Credit Suisse First Boston renamed the High Yield Index
the Global High Yield Index (the "Global Index") and created several new high
yield indices related to specific sectors of the high yield bond market. The new
indices were created in response to the changes in recent years in the
composition of the global high yield bond markets. These changes include the
significant growth in the percentage of high yield bonds issued by companies
domiciled in Europe or in emerging markets. As of January 1999, the Domestic+
High Yield
6
<PAGE>
Index (the "Domestic Index") became a subsector of the Global Index. The
Domestic Index includes all domestic and G11 country issues that are U.S. dollar
denominated. The G11 countries include Canada, France, Germany, Italy, Japan,
the United Kingdom, The Netherlands, Sweden, Belgium, Switzerland and the United
States. The Domestic Index omits any emerging market issues. A general
description of the Global Index and the Domestic Index is set forth in the
Appendix to this proxy statement.
Emerging market issues currently comprise approximately 7% of the Global
Index and less than 0.2% of the Fund's portfolio. As a result of the significant
emerging markets component of the Global Index and the availability of the
Domestic Index, the Adviser determined that the Domestic Index would be a more
appropriate measure of the Fund's investment performance. The Adviser has
recommended, and the Board of Directors of the Fund has approved, a proposed
change in the Agreement to amend paragraph A of Section 3 to substitute the
Domestic Index for the Global Index. The proposed amendment is attached as
Exhibit B to this proxy statement.
If approved by shareholders at the annual meeting, the amendment will take
effect as of January 1, 2000. The amendment provides, as required by Securities
and Exchange Commission regulations, that the Adviser will receive the minimum
fee (0.40%) during the 12-month period following the effective date of the
amendment, at which time any balance due based on the Fund's investment
performance during that period will be paid by the Fund to the Adviser. For the
period January 1, 1999 through September 30, 1999, the aggregate fee payable by
the Fund to the Adviser was $_______. If the proposed amendment to the Agreement
had been in effect during the same period, the Adviser would have been entitled
to receive $_______. The proposed amendment may result in either an increase or
decrease in the fee payable to the Adviser for any particular future period.
Required Vote
Approval of the proposed amendment requires the affirmative vote of "a
majority of the outstanding voting securities" (as defined in the Investment
Company Act of 1940 (the "1940 Act")) of the Fund. Under the 1940 Act, the vote
of "a majority of the outstanding voting securities" means the vote (i) of 67%
or more of the shares present at the meeting, if the holders of more than 50% of
the shares are present or represented by proxy; or (ii) of more than 50% of the
shares, whichever is the less. For this purpose, the holders of the Preferred
Stock and the Common Stock will vote together as one class. Abstentions and
broker non-votes (i.e., shares held in the name of a broker or nominee for which
an executed proxy is received, but which have not been voted because the broker
or nominee does not have discretionary voting power and voting instructions have
not been received from the beneficial owner) will not be considered votes cast
and, for purposes of (i) above, will have the same effect as votes cast against
the proposal.
The Board of Directors recommends that shareholders vote FOR the amendment
to the Agreement to change the benchmark index to the Domestic Index. If the
proposal is not
7
<PAGE>
approved by shareholders, the Agreement will not be amended to change the
benchmark index and the advisory fee payable by the Fund under the Agreement
will continue to be based on the Fund's investment performance relative to the
Global Index.
Investment Adviser
Pacholder & Company, LLC, 8044 Montgomery Road, Suite 382, Cincinnati, OH
45236, is the Fund's investment adviser. The Adviser is an Ohio limited
liability company organized in June 1998. Pacholder Associates, Inc. ("Pacholder
Associates") owns 51% of the equity interest in the Adviser, and Banc One
Investment Advisors Corporation ("Banc One Investment Advisors") owns the
remaining 49%. Pacholder Associates was a general partner of the Fund's previous
investment adviser, Pacholder & Company, which served as the Fund's investment
adviser from the time the Fund commenced operations in 1988 until August 1998.
The Fund is the only client of the Adviser.
Pacholder Associates is an investment advisory firm formed in 1983 which
specializes in high yield fixed income securities. Pacholder Associates
currently manages in excess of $750 million for institutional clients and
provides research and consulting services to those clients and others.
Approximately $670 million of the accounts currently managed by Pacholder
Associates are dedicated to investing in securities similar to those eligible
for purchase by the Fund. Asher O. Pacholder and Sylvia A. Pacholder own a
majority of Pacholder Associates' outstanding stock. Employees of Pacholder
Associates own the remaining outstanding stock. William J. Morgan, James P.
Shanahan, Jr., Anthony L. Longi, Jr., James E. Gibson and Mark H. Prenger,
directors, and/or officers of the Fund, are shareholders, officers and/or
directors of Pacholder Associates.
Banc One Investment Advisors is an indirect wholly-owned subsidiary of BANK
ONE CORPORTION, a bank holding company located in the state of Illinois. As of
June 30, 1999, Banc One Investment Advisors managed over $126 billion in assets.
BANK ONE CORPORATION has affiliated banking organizations in 34 states and has
several affiliates that engage in data processing, venture capital, investment
and merchant banking, and other diversified services including trust management,
investment management, brokerage, equipment leasing, mortgage banking, consumer
finance, and insurance. On a consolidated basis, BANK ONE CORPORATION had assets
of over $256 billion as of June 30, 1999.
Banc One Investment Advisors represents a consolidation of the investment
advisory staffs of a number of bank affiliates of BANK ONE CORPORATION, which
have considerable experience in the management of open-end management investment
company portfolios, including One Group Mutual Funds(R), an open-end management
investment company which offers units of beneficial interest in 50 separate
funds.
8
<PAGE>
PROPOSAL 4: APPROVE OR DISAPPROVE AN AMENDMENT TO THE FUND'S INVESTMENT
ADVISORY AGREEMENT TO DEFINE THE FUND'S NET ASSETS FOR THE PURPOSE
OF CALCULATING THE AMOUNT OF THE ADVISORY FEE
Background
Under the Agreement, the advisory fee payable to the Adviser is calculated
based on the applicable percentage of the average net assets of the Fund. The
Agreement currently provides that, for the purpose of calculating the amount of
the advisory fee, the Fund's average net assets "shall be determined by taking
the average of all determinations of such net assets during the applicable 12-
month period." The Agreement does not currently specify how the Fund's net
assets are to be determined.
1997 Change in Leverage Policy
In 1997, the Board of Directors and shareholders of the Fund approved a
change in the Fund's fundamental policy on borrowing and issuance of senior
securities. This change enables the Fund to implement a leveraged capital
structure by issuing either debt securities or preferred stock, or any
combination of the two, provided that the asset coverage for the aggregate of
all such senior securities is at least 200%.
Unlike preferred stock, the principal amount of any outstanding debt
securities issued by the Fund may be excluded from the Fund's net assets for
financial accounting purposes. Nevertheless, the Adviser is responsible for
managing those assets along with the Fund's other capital, including assets
attributable to the outstanding shares of preferred and common stock.
The Adviser has recommended, and the Board of Directors of the Fund has
approved, a proposed change in the Agreement to amend paragraph A.(i) of Section
3 to include a definition of net assets which makes it clear that Fund assets
attributable to the principal amount of any outstanding senior securities
representing indebtedness (within the meaning of Section 18 of the 1940 Act)
issued by the Fund are not excluded in determining the Fund's net assets for
purposes of calculating the amount of the advisory fee. The proposed amendment
is attached as Exhibit B to this proxy statement.
Required Vote
Approval of the amendment to the Agreement requires the affirmative vote of
"a majority of the outstanding voting securities" (as defined in the 1940 Act)
of the Fund. Under the 1940 Act, the vote of "a majority of the outstanding
voting securities" means the vote (i) of 67% or more of the shares present at
the meeting, if the holders of more than 50% of the shares are present or
represented by proxy; or (ii) of more than 50% of the shares, whichever is the
less. For this purpose, the holders of the Preferred Stock and the Common Stock
will vote together as one class. Abstentions and broker non-votes (i.e., shares
held in the name of a broker or nominee for which an executed proxy is received,
but which have not been voted because the broker or nominee does not have
discretionary voting power and voting instructions have not been
9
<PAGE>
received from the beneficial owner) will not be considered votes cast and, for
purposes of (i) above, will have the same effect as votes cast against the
proposal.
The Board of Directors recommends that shareholders vote FOR the amendment
to the Agreement to define the Fund's net assets for the purpose of calculating
the amount of the advisory fee. If the proposal is not approved by shareholders,
the Agreement will not be amended to define net assets for the purpose of
calculating the amount of the advisory fee payable by the Fund.
PROPOSAL 5: RATIFICATION OF SELECTION OF THE FUND'S
INDEPENDENT ACCOUNTANTS
Shareholders are requested to ratify the selection by the Board of
Directors, including all of the directors who are not "interested persons" (as
defined in the 1940 Act) of the Fund, of the firm of Deloitte & Touche LLP as
the Fund's independent accountants for the fiscal year ending December 31, 1999.
In addition to the normal audit services, Deloitte & Touche LLP provides
services in connection with the preparation and review of federal and state tax
returns for the Fund. Deloitte & Touche LLP has served as the Fund's independent
accountants since 1988 and has advised the Fund that it has no material direct
or indirect financial interest in the Fund or its affiliates. The Fund's Audit
Committee recommended that Deloitte & Touche LLP be selected as the Fund's
independent accountants for the current fiscal year. The employment is
conditioned on the right of the Fund to terminate the employment forthwith
without any penalty. A representative of Deloitte & Touche LLP is not expected
to attend the annual meeting of shareholders.
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.
Abstentions and broker non-votes will not be considered votes cast for this
purpose.
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, 1999, and the
Board of Directors will be required to select new independent accountants.
ADMINISTRATIVE AND OTHER SERVICES
Administrator
Kenwood Administrative Management, Inc. (the "Administrator"), 8044
Montgomery Road, Suite 382, Cincinnati, OH 45236, an affiliate of Pacholder
Associates, serves as administrator of the Fund. The Administrator monitors the
Fund's compliance with various regulatory requirements, coordinates and monitors
the activities of the Fund's other service
10
<PAGE>
providers, handles various public and shareholder relations matters, and assists
in the preparation of financial and other reports.
Accounting and Pricing Agent
Pacholder Associates, an affiliate of the Adviser, serves as accounting and
pricing agent for the Fund and is responsible for (i) accounting relating 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,
including dividends and distributions and stock splits, in respect of securities
held in the Fund's portfolio.
Year 2000 Issue
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other investment companies, businesses and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000, and do not distinguish between the year 2000 and the
year 1900. The Fund has asked its mission-critical service providers whether
they expect to have their computer systems adjusted for the year 2000
transition, and has sought and received assurances from such service providers
that they are devoting significant resources to prevent material adverse
consequences to the Fund. While such assurances have been received, the Fund and
its shareholders may experience losses if these assurances prove to be incorrect
or as a result of year 2000 computer difficulties experienced by issuers of
portfolio securities or third parties, such as custodians, banks, broker-dealers
or others with which the Fund does business.
SOLICITATION OF PROXIES
In addition to solicitation by mail, solicitations on behalf of the Board
of Directors may 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, NY 10004, has been
retained at an estimated cost of $3,500 plus out-of-pocket expenses to perform
various proxy advisory and solicitation services. Shareholder Communications
Corporation will utilize approximately 16 persons 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.
11
<PAGE>
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, the proposal must be
submitted in writing and received by the Secretary of the Fund on or before
_____________.
ANNUAL REPORT
The Fund's Annual Report for the fiscal year ended December 31, 1998 may be
obtained without charge by writing to Pacholder Fund, Inc., 8044 Montgomery
Road, Suite 382, Cincinnati, OH 45236, or by calling the Fund toll free at
1-800-637-7549.
12
<PAGE>
APPENDIX
CREDIT SUISSE FIRST BOSTON GLOBAL HIGH YIELD INDEX
Overview
- --------
The Credit Suisse First Boston Global High Yield Index ("CSFB Global HY" or
"Index") is an unmanaged, trader priced portfolio constructed to mirror the high
yield debt market (revisions to the Index are effected monthly). The Index has
been maintained since January 1986 on a monthly basis and since January 1994 on
a weekly basis.
The Index has several modules representing different sectors of the high yield
market including a cash paying module, a zerofix module, a pay-in-kind module,
and a defaulted module. The CSFB Global HY Index is divided into other
categories including industry, rating, seniority, liquidity, market value,
security price range, yield range and other sector divisions. There are a total
of approximately 250 sorts which can be generated by the CSFB Global HY Index.
The CSFB Global HY Index is priced and run weekly, however monthly returns are
typically used for performance attribution. Index returns and levels can be
accessed through Bloomberg pages FBHY and CSHY (Index).
Revision Rules:
The Index includes all fixed income, non-convertible, U.S. dollar denominated
securities meeting the following inclusion criteria.
Inclusion Criteria:
-------------------
Issues rated BB and below by either rating agency, Moody's or S&P. (Split
BBB rated securities are also included.)
New issues (public and private "Registered 144A") with par amounts greater
than $75 million are automatically added to the Index at the time of
issuance. There is a maximum of two issues per issuer added to the Index.
If an issuer has additional outstanding issues greater than $500 million in
size, these securities will be included in the CSFB Global HY Index.
Preferred issues with par amounts greater than $75 million are
automatically added to the Index as the time of issuance. There is no more
than one preferred issue of any one issuer.
<PAGE>
Foreign issues (emerging market debt) which is U.S. dollar denominated with
par amounts greater than $150 million are automatically added to the Index
as the time of issuance. Sovereign debt is not included.
Fallen angels with market values greater than $75 million are added to the
Index two months after being down-graded.
If the security falls into the Split BBB rating category (investment grade
rating by one agency and high yield rating by another agency) for any of
the inclusion criteria mentioned above, the security has to have a market
value greater than $125 million.
Defaulted issues are included into this module 30 days after a company
misses an interest and/or principal payment and defaults on its obligation,
or when one or both rating agencies (Moody's and/or S&P) issue a "D" rating
on an issue.
Exclusion Criteria:
-------------------
Called, retired, exchanged or upgraded issues from the high yield market
are deleted from the Index at the end of the month in which the event took
place.
Defaulted issues are deleted from the Index when the market value of the
issue falls below $20 million for six consecutive months.
Non-defaulted issues are deleted from the Index when the market value of
the issue falls below $50 million for six consecutive months.
A number of characteristics are provided on a monthly basis. Some of these
characteristics and a brief description follows:
Yield to Worst: The Yield to Worst is the minimum of the yield to every
call date in the call schedule for a security. The YTW for the Index is the
market weighted YTW of the constituents for the Index at that period.
Spread to Treasury: The YTW spread to comparable maturity treasury, market
weighted for the issues in the Index.
Market Value: The sum of the product of the amount outstanding of each
issue by its market price.
Total Return Components:
------------------------
-ii-
<PAGE>
Principal Change: The price change component of the total return for each
security market weighted. That series is related to the change in the
average price of a security.
Interest Component: The change in total return due to coupon and accrued
interest, market weighted.
Cumulative Return: A geometric progression of returns with the
relationship:
R =((1 +r)*(1 +r//2//)*(1+r//3//) - 1)
Price Volatility: The market weighted eight month price volatility
annualized.
Return Volatility: The standard deviation of monthly return for a specified
period.
Rating Tiers:
-------------
Upper Tier: Split BBB issues, those with one BBB and one BB rating, are in
this tier, as are BB issues and Split BB issues (one BB and one B rating).
Middle Tier: Single B and split Single B issues (one single B and one CCC
rating) are in this tier.
Lower Tier: All issues rated CCC and below, including Defaulted securities.
-iii-
<PAGE>
CREDIT SUISSE FIRST BOSTON DOMESTIC+ HIGH YIELD INDEX
Overview
- --------
The Credit Suisse First Boston Domestic+ High Yield Index ("CSFB Domestic+ HY"
or "Index") is an unmanaged, trader priced portfolio constructed to mirror the
high yield debt market (revisions to the Index are effected monthly). The
inception of the Index: January 1999 (there will be no historical data prior to
the inception date).
The Index has several modules representing different sectors of the high yield
market including a cash paying module, a zerofix module, a pay-in-kind module,
and a defaulted module. The CSFB Domestic+ HY Index is divided into other
categories including industry, rating, seniority, liquidity, market value,
security price range, yield range and other sector divisions. There are a total
of approximately 250 sorts which can be generated by the CSFB Domestic+ HY
Index.
The CSFB Domestic+ HY Index is priced and run weekly, however monthly returns
are typically used for performance attribution.
Revision Rules:
The Index includes all fixed income, non-convertible, U.S. dollar denominated
securities meeting the following inclusion criteria.
Inclusion Criteria:
-------------------
Issues rated BB and below by either rating agency, Moody's or S&P. (Split
BBB rated securities are also included.)
New issues (public and private "Registered 144A") with par amounts greater
than $75 million are automatically added to the Index at the time of
issuance. There is a maximum of two issues per issuer added to the Index.
If an issuer has additional outstanding issues greater than $500 million in
size, these securities will be included in the CSFB Global HY Index.
Preferred issues with par amounts greater than $75 million are
automatically added to the Index as the time of issuance. There is no more
than one preferred issue of any one issuer.
Foreign issues (emerging market debt) is excluded from this Index.
-----------
-iv-
<PAGE>
Fallen angels with market values greater than $75 million are added to the
Index two months after being down-graded.
If the security falls into the Split BBB rating category (investment grade
rating by one agency and high yield rating by another agency) for any of
the inclusion criteria mentioned above, the security has to have a market
value greater than $125 million.
Defaulted issues are included into this module 30 days after a company
misses an interest and/or principal payment and defaults on its obligation,
or when one or both rating agencies (Moody's and/or S&P) issue a "D" rating
on an issue.
Exclusion Criteria:
-------------------
Called, retired, exchanged or upgraded issues from the high yield market
are deleted from the Index at the end of the month in which the event took
place.
Defaulted issues are deleted from the Index when the market value of the
issue falls below $20 million for six consecutive months.
Non-defaulted issues are deleted from the Index when the market value of
the issue falls below $50 million for six consecutive months.
A number of characteristics are provided on a monthly basis. Some of these
characteristics and a brief description follows:
Yield to Worst: The Yield to Worst is the minimum of the yield to every
call date in the call schedule for a security. The YTW for the Index is the
market weighted YTW of the constituents for the Index at that period.
Spread to Treasury: The YTW spread to comparable maturity treasury, market
weighted for the issues in the Index.
Market Value: The sum of the product of the amount outstanding of each
issue by its market price.
Total Return Components:
------------------------
Principal Change: The price change component of the total return for each
security market weighted. That series is related to the change in the
average price of a security.
Interest Component: The change in total return due to coupon and accrued
interest, market weighted.
-v-
<PAGE>
Cumulative Return: A geometric progression of returns with the
relationship:
R = ((1 +r)*(1 +r//2//)*(1+r//3//) - 1)
Price Volatility: The market weighted eight month price volatility
annualized.
Return Volatility: The standard deviation of monthly return for a specified
period.
Rating Tiers:
-------------
Upper Tier: Split BBB issues, those with one BBB and one BB rating, are in
this tier, as are BB issues and Split BB issues (one BB and one B rating).
Middle Tier: Single B and split Single B issues (one single B and one CCC
rating) are in this tier.
Lower Tier: All issues rated CCC and below, including Defaulted securities.
-vi-
<PAGE>
Exhibit A
ARTICLES OF AMENDMENT
Pacholder Fund, Inc., a Maryland corporation having its principal office in
Baltimore City, Maryland (which is hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation that:
FIRST: Article SECOND of the Charter of the Corporation is hereby amended
in its entirety to read as follows:
"SECOND: The name of the Corporation (which is hereinafter called
the "Corporation") is: Pacholder High Yield Fund, Inc."
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation has been
advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, the Corporation has caused these presents to be signed
in its name and on its behalf by its President and witnessed by its Secretary on
_______ __, 1999.
WITNESS: PACHOLDER FUND, INC.
(Changing its name to Pacholder High Yield
Fund, Inc.)
__________________________ ______________________________________
James P. Shanahan, Jr. Anthony L. Longi, Jr.
Secretary President
A-1
<PAGE>
THE UNDERSIGNED, President of Pacholder Fund, Inc., who executed on
behalf of the Corporation the foregoing Articles of Amendment of which this
certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles of Amendment to be the corporate act of
said Corporation and hereby certifies that to the best of his knowledge,
information, and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
__________________________________
Anthony L. Longi, Jr.
President
A-2
<PAGE>
Exhibit B
AMENDMENT NO. 1 TO INVESTMENT
ADVISORY AGREEMENT
This Amendment No. 1 is made and entered into as of the 1st day of January
2000, between Pacholder Fund, Inc., a Maryland corporation (the "Fund"), and
Pacholder & Company, LLC, an Ohio limited liability company (the "Adviser").
WHEREAS, the Fund and the Adviser have entered into an Investment Advisory
Agreement dated August 20, 1998 (the "Agreement"); and
WHEREAS, the Fund and the Adviser desire to amend the Agreement with respect
to the investment advisory fee;
NOW, THEREFORE, the parties agree as follows:
1. Section 3 of the Agreement is hereby amended to read as follows:
3. Compensation.
------------
A. Fulcrum Fee. As full compensation for the services provided,
-----------
facilities furnished and expenses paid by the Adviser under this Agreement,
the Fund agrees to pay the Adviser an annual investment advisory fee, which
increases and decreases proportionately based on the investment performance
of the Fund in relation to the investment record of the Credit Suisse First
Boston U.S. Domestic+ High Yield Index (the "Index"). The advisory fee shall
be accrued at least weekly and paid quarterly as soon as practicable after
the end of each calendar quarter, as follows:
(i) If the Fund's investment performance for the 12 months
immediately preceding the end of the quarter is equivalent to the
investment record of the Index for the same 12-month period, then the
advisory fee shall be computed at the annual rate of 0.90% of the
Fund's average net assets. The rate at which the advisory fee is
computed shall be increased or decreased from the 0.90% fulcrum fee by
10% of the amount by which the investment performance of the Fund
exceeds or is less than the investment record of the Index, up to a
maximum of 1.40% and down to a minimum of 0.40%. For purposes of
calculating the amount of the advisory fee, the Fund's average net
assets shall be determined by taking the average of all determinations
of such net assets during the applicable 12-month period and the
Fund's net assets shall mean the total assets of the Fund minus
accrued liabilities of the Fund (other than the principal
B-1
<PAGE>
amount of any outstanding senior securities representing indebtedness
(within the meaning of Section 18 the 1940 Act). The investment
performance of the Fund and the investment record of the Index shall
be determined in accordance with the Advisers Act and the rules and
regulations promulgated thereunder.
(ii) The compensation payable to the Adviser after the end
of each quarter shall be equal to the amount of the annual advisory
fee calculated as provided in sub-paragraph (i) above reduced by the
compensation previously paid by the Fund to the Adviser in respect of
the applicable 12-month period. In the event that such prior payments
should exceed the amount of the annual advisory fee payable hereunder,
the Adviser shall remit to the Fund such excess as soon as practicable
after the end of the quarter.
B. Proration. If the Adviser shall serve for less than the whole of
---------
any quarter, the investment advisory fee shall be prorated on the basis of
the 12-month period immediately preceding the date of termination of this
Agreement.
2. Notwithstanding the foregoing, during the 12-month period immediately
following the date on which this Amendment takes effect, the Fund shall pay the
Adviser the minimum fee payable under the Agreement and any balance due based on
the Fund's investment performance during the period shall be paid to the Adviser
upon completion of such period.
3. The Fund and the Adviser hereby ratify and confirm all of the other
terms, conditions and provisions of the Agreement, as remaining, in full force
and effect.
IN WITNESS WHEREOF, the parties to the Agreement have caused this Amendment
to be executed on their behalf by their duly authorized officers as of the day
and year first above written.
PACHOLDER FUND, INC.
By: ____________________
PACHOLDER & COMPANY, LLC
By: ____________________
B-2
<PAGE>
Pacholder Fund, Inc.
Common Stock, $.01 Par Value
This proxy is solicited on behalf of the Board of Directors
The undersigned 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 of
this card, all the shares of Common Stock, par value $.01 per share, of
Pacholder Fund, Inc. which the undersigned is entitled to vote at the annual
meeting of shareholders to be held on November 16, 1999, 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, 3, 4 and
5. 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?
__________________________________ _________________________________
__________________________________ _________________________________
__________________________________ _________________________________
<TABLE>
<CAPTION>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<S> <C> <C> <C> <C>
1.) Election of Directors. With- For All For Against Abstain
For hold Except 3.) With respect to amendment [_] [_] [_]
[_] [_] [_] of the Fund's investment advisory
agreement to change the benchmark
index.
William J. Morgan
Daniel A. Grant
For Against Abstain
Instruction: To withhold authority to vote for any individual 4.) With respect to amendment of [_] [_] [_]
nominee, mark the "For All Except" box and strike a line the Fund's investment advisory
through the nominee(s) name. Your shares will be voted for agreement to define the Fund's
the remaining nominee(s). net assets.
For Against Abstain For Against Abstain
2.) With respect to amendment [_] [_] [_] 5.) With respect to ratification of [_] [_] [_]
of the Fund's charter to the selection of Deloitte &
change the name of the Fund Touche LLP as independent
accountant.
Please be sure to sign and date this Proxy Date_____________ Mark box at right if comments or address change [_]
have been noted on the reverse side of this card.
__________________________ __________________________
Shareholder sign here Co-owner sign here RECORD DATE SHARES
- -------------------------------------------------------------
</TABLE>
<PAGE>
PROXY
PACHOLDER FUND, INC.
Cumulative Preferred Stock, $.01 Par Value,
Series C, Series D and Series E
This proxy is solicited on behalf of the Board of Directors.
The undersigned 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 Series C, Series D and Series E Cumulative Preferred Stock, par
value $.01 per share, of Pacholder Fund, Inc. which the undersigned is entitled
to vote at the annual meeting of shareholders to be held on November 16, 1999,
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,
3, 4 and 5. 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
John F. Williamson
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 amendment of the Fund's
charter to change the name of the Fund.
[_] [_] [_]
3. FOR AGAINST ABSTAIN with respect to the amendment to the Fund's
investment advisory agreement to change the
benchmark index.
[_] [_] [_]
4. FOR AGAINST ABSTAIN with respect to the amendment to the Fund's
investment advisory agreement to define the
Fund's net assets.
[_] [_] [_]
5. FOR AGAINST ABSTAIN with respect to ratification of the
selection of Deloitte & Touche LLP as
independent accountant.
PRINCIPAL LIFE INSURANCE COMPANY
By:_______________________________
Name:
Title:
PRINCIPAL LIFE INSURANCE COMPANY
(For the Benefit of [__________])
By:_______________________________
Name:
Title:
Dated:__________________
