SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934 (Amendment No. )
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MTB Group of Funds
(Variable Annuity Funds)
(Name of Registrant as Specified in Charter)
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MTB GROUP OF FUNDS
MTB Large Cap Value Fund
MTB Large Cap Value Fund II
5800 Corporate Drive
Pittsburgh, PA 15237-7010
August 31, 2005
Dear Shareholder,
This letter is being provided to notify the shareholders of MTB
Large Cap Value Fund and MTB Large Cap Value Fund II (Funds), each a
portfolio of MTB Group of Funds (Trust), of a "change of control" of the
Funds' investment sub-advisor, NWQ Investment Management Company LLC (NWQ).
This change of control caused the Funds' investment sub-advisory agreements
(Prior Agreements) to automatically terminate under the provisions of the
Investment Company Act of 1940, thereby requiring the Board of the Funds to
approve new sub-advisory agreements with NWQ which are substantially
identical to each Fund's Prior Agreement except for the dates of execution
and termination.
The Trust and MTB Investment Advisors, Inc. ("MTBIA") received an
exemptive order from the U.S. Securities and Exchange Commission that permits
MTBIA, as the Funds' investment advisor, to hire new sub-advisors or make
changes to the existing sub-advisory agreements with the approval of the
Trust's Board of Trustees, but without obtaining approval of the shareholders
of the affected Fund. As a condition of this exemptive order, MTBIA and the
Trust are required to furnish shareholders with information about the new
sub-advisors or sub-advisory agreements.
The enclosed "Information Statement" provides information
relating to the change of control of NWQ and the approval of the new
subadvisory agreements. The changes described in the "Information Statement"
do not require shareholder approval.
Please take a few minutes to review the attached materials and
thank you for your investment in MTB Group of Funds.
Sincerely,
Carl W. Jordan
President
MTB Group of Funds
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INFORMATION STATEMENT
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MTB GROUP OF FUNDS
MTB Large Cap Value Fund
MTB Large Cap Value Fund II
5800 Corporate Drive
Pittsburgh, PA 15237-7010
This Information Statement is being provided to shareholders of MTB
Large Cap Value Fund (Large Cap Value Fund) and MTB Large Cap Value Fund II
(Large Cap Value Fund II) (collectively, the Funds), each a portfolio of MTB
Group of Funds (Trust), to provide information regarding a change of control
of the Funds' investment sub-advisor, NWQ Investment Management Company LLC
(NWQ). This change of control caused the Funds' investment sub-advisory
agreements (Prior Agreements) to terminate under the provisions of the
Investment Company Act of 1940 (1940 Act), thereby requiring the Board of
Trustees of the Funds (Board) to approve new sub-advisory agreements with NWQ
which are substantially identical to each Fund's Prior Agreement except for
the dates of execution and termination. WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
Change of Control
NWQ is a 97%-owned subsidiary of Nuveen Investments, Inc. (Nuveen)
which, prior to the transactions described below, was, in turn, a 78%-owned
subsidiary of The St. Paul Travelers Companies (St. Paul Travelers). Through
a series of transactions (Transaction), the last of which occurred on July
28, 2005, St. Paul Travelers divested itself of its entire equity interest in
Nuveen, causing Nuveen to become an independent publicly-held company.
Accordingly, effective July 28, 2005, Nuveen succeeded St. Paul Travelers as
the controlling shareholder of NWQ.
The 1940 Act provides that a "change of control" of a fund's advisor or
subadvisor results in an "assignment," and a consequent automatic
termination, of the investment management agreement between the fund and the
advisor. Accordingly, as a result of the consummation, effective July 28,
2005, of the final stage of the Transaction, the Prior Agreements dated
December 7, 2004 among the Funds, MTB Investment Advisors, Inc., as the
Funds' investment advisor (MTBIA) and NWQ, terminated on that date. In
anticipation of pending termination of the Prior Agreements, the Board, at
its June 29-30, 2005 regular meeting, approved new subadvisory agreements
(New Agreements) with NWQ, having terms substantially identical to the terms
of the Prior Agreements except for the dates of execution and termination, to
take effect on the date of the termination of the Prior Agreements (i.e.,
July 28, 2005).
Under the terms of the New Agreements, NWQ makes investment decisions
for the assets of the relevant Fund allocated to it by MTBIA, and
continuously reviews, supervises and administers such Fund's investment
programs with respect to these assets.
The New Agreements do not require shareholder approval because the
Trust has received permission from the U.S. Securities and Exchange
Commission (SEC) to enter into new sub-advisory agreements without the delay
and expense of a shareholder vote. This special permission was made subject
to several conditions. One of the conditions, which has been satisfied, is
that the shareholders of each of the Funds must approve a policy to permit
the Trust's board and investment advisor to appoint and replace sub-advisors
for the Funds and to enter into and amend their sub-advisory contracts
without seeking shareholder approval. Another condition requires
shareholders to be notified of the details of any new sub-advisory agreements
entered into by the Trust by sending the shareholders an Information
Statement within 90 days of the hiring of the new subadvisor. Therefore, you
are receiving this Information Statement.
Details of Sub-Advisory Relationship
On December 7, 2004, the Board unanimously approved the recommendation
of MTBIA, 100 East Pratt Street, 17th floor, Baltimore, MD 21202, to hire NWQ
as a sub-advisor for the Funds. MTBIA and its predecessors or affiliates have
been the investment advisor to the Funds since their inception. MTBIA
continues to serve as such under two separate Investment Advisory Contracts
(collectively, the "Advisory Contract") that were last approved by Consents
of Sole Shareholder dated September 24, 1997 (Large Cap Value Fund) and May
1, 2002 (Large Cap Value Fund II). Under the Advisory Contract, MTBIA has the
overall responsibility, subject to the oversight of the Board, for providing
investment advisory services to the Trust. Also under the Advisory Contract,
MTBIA is permitted to hire sub-advisors to assist it in investing the Trust's
assets. MTBIA monitors and evaluates the performance of any sub-advisors and
makes recommendations to the Board regarding their hiring, termination and
replacement.
Section 15(f) of the 1940 Act
Section 15(f) of the 1940 Act provides that an investment
advisor/sub-advisor to a mutual fund (or its affiliates) may receive any
amount or benefit in connection with a sale of any interest in such advisor
which results in an assignment of an advisory contract if two conditions are
satisfied. One condition is that, for a period of three years after such
assignment, at least 75% of the board of directors or trustees of the fund
cannot be "interested persons" of the new advisor or its predecessor. The
second condition is that no "unfair burden" be imposed on the investment
company as a result of the assignment or any express or implied terms,
conditions or understandings applicable thereto.
In connection with the first condition of Section 15(f), the Trust
currently meets this condition and expects to be able to continue meeting
this condition. With respect to the second condition of Section 15(f), an
"unfair burden" on a fund is defined in the 1940 Act to include any
arrangement during the two-year period after any such transaction occurs
whereby the investment advisor or its predecessor, or any interested person
of such advisor, predecessor, or successor, receives or is entitled directly
or indirectly to receive any compensation of two types. The first type is
compensation from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the fund, other than
bona fide ordinary compensation as principal underwriter for such fund. The
second type is compensation from the fund or its security holders for other
than bona fide investment advisory or other services. Both NWQ and Nuveen
have represented to the Trust that they are not aware of any arrangement
whereby NWQ or any "interested person" of NWQ would impose an unfair burden
on the Funds within the meaning of Section 15(f).
Board Evaluation
In approving the New Agreements, the Board met at a regular meeting on
June 29-30, 2005 and carefully evaluated: (1) the nature, extent and quality
of the services expected to be rendered to the Fund by NWQ; (2) the distinct
investment objective and policies of the Fund; (3) the history,
organizational structure, financial condition and reputation of NWQ, and the
qualification and background of NWQ's personnel; (4) the practices and
policies of NWQ with respect to selecting brokers and executing trades; (5)
certification by NWQ of the existence and adequacy of an advisor compliance
program under the Investment Advisers Act of 1940; (6) any regulatory,
compliance or litigation matters; (7) business continuity and document
management programs; (8) the investment performance records of NWQ; (9) the
reasonableness of the fees to be paid to and the profits to be realized by
NWQ (including any benefits to be received by NWQ or its affiliates in
connection with soft dollar arrangements); (10) whether the fees to be paid
to NWQ were competitive with the fees they charge other clients that are
similarly managed; (11) how competitive forces in the market impacted the
ability to secure the services of NWQ and negotiate fees; (12) the extent to
which economies of scale would be realized as the Fund grows, and whether fee
levels reflect these economies of scale; (13) the reasonableness of the fees
that would be retained by MTBIA, before and after any voluntary waivers, and
that there would be no changes to the advisory fees charged to the Funds; and
(14) other factors deemed relevant. The Board relied upon MTBIA's report to
the Board that the nature of the services to be provided by, and the fees to
be paid to, NWQ are no less favorable to the Funds than are available from
other prospective sub-advisors, noting in that regard that all fees to NWQ
will be paid by MTBIA, and not by the Funds.
The Board's decision to approve the New Agreements reflects the
exercise of its business judgment on whether the proposed sub-advisory
arrangements would be in the best interest of each Fund. During the course of
its review of these agreements, the Board considered and relied upon many
factors, among the most material of which are those set forth above.
In particular, the Board relied upon the fact that MTBIA remains the
party primarily responsible for the performance of the Funds, through its
selection and retention (subject to approval of the Board) and continued
supervision of NWQ, and that MTBIA initially recommended to the Board the
engagement of NWQ after extensive research of numerous candidate firms. The
Board also relied upon the fact that MTBIA initially negotiated fee
arrangements with NWQ on an arms-length basis.
Finally, the Board based its decision on the following additional
material considerations: (1) the fact that the terms of the New Agreements
are substantially identical to the Prior Agreements, except for the dates of
execution and termination; (2) the receipt of the representation by NWQ and
Nuveen that they are not aware of any arrangement whereby NWQ or any
"interested person" of NWQ would impose an unfair burden on the Funds within
the meaning of Section 15(f) of the 1940 Act; and (3) the receipt of a
written representation by NWQ that there is no material change to the
information previously provided to the Board in connection with the Board's
initial approval of NWQ as subadvisor to the Funds at its December 2004
regular meeting, and that the consummation of the Transaction will not result
in any change in NWQ's relationship with the Funds, including any change in
the personnel or management of NWQ.
Compensation
Pursuant to the terms of the New Agreements, NWQ receives a
sub-advisory fee from MTBIA at the annual rate of 0.45% of the average daily
net assets of the Large Cap Value Fund and Large Cap Value Fund II that it
manages. The new sub-advisory arrangements will not affect the advisory fees
or total expenses payable by the Funds. All sub-advisory fees will be paid
by MTBIA out of its investment advisory fee. NWQ may voluntarily waive all
or a portion of its sub-advisory fee in its sole discretion.
Additional Information on NWQ
NWQ is a registered investment advisor that was founded in 1982 and
most recently reorganized in August 2002 as a Delaware limited liability
company. NWQ is an independently-managed, wholly-owned subsidiary of Nuveen,
except for a less-than-3% equity interest held by certain members of NWQ's
management and investment team. Nuveen is a publicly held company, whose
address is 385 Washington Street, Saint Paul, Minnesota 55102-1396. NWQ's
principal business address is 2049 Century Park East, Los Angeles, California
90067. As of December 31, 2004, NWQ managed approximately $30.9 billion in
assets.
Following is a list of the directors and principal executive officers
of NWQ and their principal occupation. Unless otherwise noted, the address
of each person listed is 2049 Century Park East, Los Angeles, California
90067.
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Name Principal Occupation
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Mendez, Michael C. President and Chief Executive Officer
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Bosse, Jon D. Chief Investment Officer, Executive
Committee Member
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Friedel, E. C. (Ted) Managing Director, Executive Committee
Member
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Iben, David B. Managing Director
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Thomas, Phyllis G. Managing Director
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Katerndahl, Carl M. Managing Director
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Galbreath, James H. Managing Director
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Slaven, Mary-Gene Managing Director
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Sternal, Ronald R. Managing Director
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Carne, Michael J. Senior Vice President
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Frankel, Kenneth Senior Vice President
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Goshtigian, Patrick G. Senior Vice President, Director of
Administration & Institutional Services
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Hechmer, Paul J. Senior Vice President
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Morris, Mark A. Senior Vice President
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Patterson, Mark R. Senior Vice President
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Severson, John E. Senior Vice President
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Stumpf, David M. Senior Vice President
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Tenser, Gregg S. Senior Vice President
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Urban, Raymond J. Senior Vice President
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Wheeler, Gerald W. Senior Vice President, Chief
Compliance Officer, General Counsel
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NWQ currently serves as subadvisor (but not investment advisor) to
several other mutual funds with similar objectives to the Large Cap Value
Fund and Large Cap Value Fund II. The following chart contains a description
of these funds and the compensation paid to NWQ for its sub-advisory services:
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Name of Fund Approximate Subadvisory Fee Waiver of
Total Fund (annually, as % of Subadvisory
Assets as of average daily net Fee
December 31, assets)
2004
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HSBC Investor Value $64.88 million 0.35% up to $500 None
Fund million; 0.30% over
$500 million, up to
$1 billion; 0.25% in
excess of $1 billion
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HSBC MM U.S. Value $3.22 million 0.35% of average net None
Equity Pooled assets
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Integra Mutual Funds $57.87 million 0.80% on first $5 None
- - NWQ U.S. Large Cap million; 0.60% on
Value Fund next $15 million;
0.50% over $20
million
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MD PIM U.S. Equity $162 million 0.50% on first $100 None
Pool million; 0.40% on
next $100 million;
0.35% over $200
million
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Merrill Lynch Global $32.43 million 0.50% on first $150 None
Selects Portfolios, million; 0.40% for
plc ("Fund) - North $150 million to $250
American Large Cap million; 0.30% for
Value I ("Sub-Fund") $250 million to $1
billion; 0.25% for
over $1 billion
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Additional Information on the Funds
The annual report for Large Cap Value Fund, which includes audited
financial statements for its fiscal year ended April 30, 2005, was mailed to
shareholders on or about June 29, 2005. The annual report for the Large Cap
Value Fund II, which includes audited financial statements for its fiscal
year ended December 31, 2004, was mailed to shareholders on or about February
28, 2005, and the semi-annual report for Large Cap Value Fund II, which
includes unaudited financial statements for the period ended June 30, 2005,
was mailed to shareholders on or about August 29, 2005. The Funds will
promptly provide, without charge and upon request, a copy of the Funds'
annual report and/or semi-annual reports. Requests for annual reports or
semi-annual reports for the Funds may be made by writing to the Funds'
principal executive offices located at 5800 Corporate Drive, Pittsburgh,
Pennsylvania 15237-7010 or by calling the Funds toll-free at 1-800-836-2211.
The Funds' distributor is Edgewood Services, Inc., 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-5829.
The co-administrators for the Funds are M&T Securities, Inc., One M&T
Plaza, Buffalo, NY 14203; and Federated Services Company, Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
August 31, 2005
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IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
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In an effort to reduce costs and avoid duplicate mailings, the Funds intend
to deliver a single copy of certain documents to each household in which more
than one shareholder of the Funds resides (so-called "householding"), as
permitted by applicable rules. The Funds' "householding" program covers their
Prospectuses and Statements of Additional Information, and supplements to
each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies
or information statements. Shareholders must give their written consent to
participate in the "householding" program. The Funds are also permitted to
treat a shareholder as having given consent ("implied consent") if (i)
shareholders with the same last name, or believed to be members of the same
family, reside at the same street address or receive mail at the same post
office box, (ii) the Funds give notice of their intent to "household" at
least sixty (60) days before they begin "householding" and (iii) none of the
shareholders in the household have notified the Funds or their agent of the
desire to "opt out" of "householding." Shareholders who have granted written
consent, or have been deemed to have granted implied consent, can revoke that
consent and opt out of "householding" at any time: shareholders who purchased
shares through an intermediary should contact their representative; other
shareholders may call the Funds at 1-800-836-2211.
Edgewood Services, Inc., Distributor
Cusip 55376T684
Cusip 55376T676
Cusip 55376T668
Cusip 55376T650
33398 (08/05)