[LOGO]
PBHG Insurance Series Fund, Inc.
Semi-Annual Report June 30, 1999
o PBHG Growth II Portfolio
o PBHG Technology & Communications Portfolio
o PBHG Select 20 Portfolio
o PBHG Large Cap Value Portfolio
o PBHG Small Cap Value Portfolio
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Growth II Portfolio
Dear Shareholder:
The PBHG Insurance Series Fund, Inc. - PBHG Growth II Portfolio returned 25.11%
for the six months ended June 30, 1999. This compares very favorably with the
Russell Midcap Growth Index's return of 14.19%. Favorable sector weightings and
stock selection were the two major factors that led to the large outperformance.
The Portfolio's most heavily weighted sector, at nearly 40%, is technology. For
the first half of the year, this sector contributed well over half of the
Portfolio's positive performance and there has been broad strength among the
holdings. Semiconductors, telecommunication equipment, internet services and
contract manufacturing companies all participated in this rally due to robust
expectations for first and second quarter earnings. The Portfolio's
representation in software is small, due primarily to concerns over Year 2000
demand imbalances. The consumer cyclical sector, which comprises mostly
retailers, was the next largest contributor to Portfolio performance in the
first half. No one stock drove the overall performance, but again, strength was
broad among holdings. Health care and business services were the only sectors to
produce negative returns during the first half although their effect was
minimal.
U.S. economic outlook continues to be positive by most measures. The GDP report
for the first quarter of 1999 surprised everyone when it came in at a healthy
4.5%. At 4.3%, unemployment remains near a 30-year low. Despite the continued
tight labor market, wage inflation does not appear to be a significant threat,
according to the employment cost index, and productivity remains high. After a
scare in May, the CPI number released in June was zero. At its June 30th Open
Market Committee meeting, the Federal Reserve raised interest rates one-quarter
point and adopted "a directive that included no predilection about near-term
policy action".
Although large capitalization stocks have surpassed their smaller brethren
year-to-date, the second quarter provided an environment in which small stocks
beat mid-size stocks which beat large caps. Growth stocks, other than having a
tough May, have led the market higher for the year across all capitalizations.
The business outlook for technology firms can change quickly. We believe that
investment managers need to be able to react quickly to, as well as anticipate,
the changing landscape of this sector. At no time is this more likely to be true
than in 1999, when Year 2000 issues are expected to cause more opportunities and
more disappointments than in a typical year. The Fund will continue to be
actively managed and repositioned as the evidence unfolds.
We continue to like the long-term prospects of the mid-cap growth companies we
own. Superior technologies, services, balance sheets, business models and
ability to execute are all characteristics commonly found in top quality growth
companies that we believe contribute to sustained, above-average growth rates.
Many investors have been anxiously waiting for the rebound in small/mid
capitalization stocks. We are encouraged with their recent outperformance and
there is much evidence to suggest their relative performance will continue to be
strong.
We thank you for your confidence in Pilgrim Baxter & Associates, Ltd. and in the
PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Jeffrey A. Wrona, CFA
- --------------------------
Jeffrey A. Wrona, CFA
Portfolio Manager
1
<PAGE>
PBHG Insurance Series Fund, Inc.
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PBHG Growth II Portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Annualized
Inception to
6 Months(2) One Year Date(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Growth II Portfolio 25.11% 22.89% 18.89%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of the Change in the Value of a $10,000 Investment in the
PBHG Growth II Portfolio, the Russell Midcap Growth Index and the
Lipper Mid-Cap Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
PBHG Growth II Portfolio Russell Midcap Growth Index(4) Lipper Mid-Cap Funds Average(5)
------------------------ ------------------------------ -------------------------------
<S> <C> <C> <C>
4/97 10000 10000 10000
6/97 10450 11198 11411
9/97 11440 12764 13053
12/97 10750 12412 12627
3/98 11710 13893 14161
6/98 11841 13886 13959
9/98 9320 11568 11453
12/98 11631 14631 14088
3/99 12461 15131 14109
6/99 14551 16708 15865
</TABLE>
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Growth II Portfolio commenced operations on April 30, 1997.
(4) The Russell Midcap Growth Index is an unmanaged index comprised of the 800
smallest securities in the Russell 1000 Index with a greater-than-average
growth orientation. The Index is not intended to imply the Portfolio's past
or future performance.
(5) The Lipper Mid-Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies with average market capitalizations and/or
revenues between $800 million and the average market capitalization of the
Wilshire 4500 Index. The performance figures are based on changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The Index is not intended to
imply the Portfolio's past or future performance.
2
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PBHG Insurance Series Fund, Inc.
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PBHG Technology & Communications Portfolio
Dear Shareholder,
The PBHG Insurance Series Fund, Inc. - PBHG Technology & Communications
Portfolio returned 47.38% for the six months ended June 30, 1999. This compares
very favorably with the Soundview Technology Index's return of 32.11%. Favorable
subsector weightings and stock selection are the two major factors that led to
the large outperformance.
The most significant subsector changes to the Portfolio during the first half
were large increases in the weightings of networking and telecommunication
equipment stocks, semiconductors and internet holdings. The strong growth of the
internet is driving both internet software and content companies, as well as
companies providing the infrastructure for the internet. In addition, many
semiconductor companies are benefiting from the growth of their
telecommunication equipment customers. Software, services and semiconductor
capital equipment companies declined as a percent of the Portfolio.
Semiconductors, at just under 25% weighting, remain the largest subsector in the
Portfolio.
By the end of the second quarter of 1999, the number of individual holdings in
the Portfolio had increased to approximately 56 stocks compared with 39 at the
end of the first quarter. While I normally prefer holding fewer stocks, this
change reflects two factors. First, there are fewer broad themes in the market
than there were in the first quarter. Although we are clearly still positive on
semiconductors, we have turned more negative on the semiconductor capital
equipment group due to lower DRAM prices. Internet stocks are now seeing
volatility in both directions, rather than just going straight up. There are
some smaller themes emerging, such as the growth in wireless communications and
fiber channel storage systems, but these are mostly niche industries. As a
result, we have broadened the Portfolio's exposure to different subsectors of
technology, resulting in an increase in the number of stocks held.
Secondly, we may be getting very close to the widely anticipated demand-driven
imbalances the Year 2000 could cause in the technology world. We think the third
quarter will likely capture much of this impact from a stock price perspective.
Therefore, we think it is prudent in this environment to spread that risk among
more stocks and be willing to change course quickly as the evidence unfolds.
We thank you for your confidence in Pilgrim Baxter & Associates, Ltd. and in the
PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Jeffrey A. Wrona, CFA
- ------------------------------
Jeffrey A. Wrona, CFA
Portfolio Manager
3
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PBHG Insurance Series Fund, Inc.
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PBHG Technology & Communications Portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Annualized
Inception to
6 Months(2) One Year Date(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Technology & Communications Portfolio 47.38% 73.51% 38.59%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of the Change in the Value of a $10,000 Investment in the
PBHG Technology & Communications Portfolio, the Soundview Technology
Index and the Lipper Science & Technology Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
PBHG Tech. & Communications Portfolio Soundview Technology Index(4) Lipper Science & Technology Funds Average(5)
------------------------------------- ----------------------------- --------------------------------------------
<S> <C> <C> <C>
4/97 10000 10000 10000
6/97 10320 11368.62 11449
9/97 12289 13895.36 13648
12/97 10409 11333.15 11822
3/98 11590 13051.64 13835
6/98 11690 13322.46 14295
9/98 10641 11570.39 12767
12/98 13761 16128.54 18091
3/99 17422 17821 21400
6/99 20282 21307 24413
</TABLE>
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Technology & Communications Portfolio commenced operations on April
30, 1997.
(4) The Soundview Technology Index is an equal dollar weighted index designed to
measure the performance of the technology industry. It is comprised of 100
major technology companies chosen by Soundview Financial Group. The Index
reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the
Portfolio's past or future performance.
(5) The Lipper Science & Technology Funds Average is an equally weighted
benchmark composed of mutual funds, each of which normally invests more than
65% of its equity portfolio in science and technology stocks. The
performance figures are based on changes in net asset value of the funds in
the category with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Portfolio's past or
future performance.
4
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PBHG Insurance Series Fund, Inc.
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PBHG Select 20 Portfolio
Dear Shareholder,
The PBHG Insurance Series Fund, Inc. - PBHG Select 20 Portfolio returned 9.63%
for the six months ended June 30, 1999, while the benchmark S&P 500 Index
returned 12.38%.
Market and Performance Overview
The Fund outperformed the benchmark by 5 percentage points in the first quarter
of 1999. Investors continued to favor large-cap growth stocks above all others
in that quarter, although daily volatility became more pervasive in all parts of
the equity market. This was evident in the monthly returns of the Portfolio,
which ranged from -6.7% to +8.6%. The Portfolio underperformed its benchmark
during April and May. In April, as the economic outlook for foreign economies
improved, the domestic equity market began to favor cyclical companies, such as
those in the basic materials, energy and transportation sectors. Typically,
these are not the sectors with the highest growth rates. Thus, we had little to
no exposure to them and our relative performance suffered and we underperformed
the benchmark by over 7 percentage points. In May, some of the technology stocks
that had served the Portfolio well in the past, such as Cisco Systems, faltered
as worries about internet valuations led the stocks of many well-known
technology companies down. While the Portfolio rebounded in June to outpace the
S&P 500, the increase was insufficient to push the Portfolio ahead of that Index
for the first half of the year. Nevertheless, we were encouraged by the market's
movement back to high-growth stocks toward the end of the period.
As we reiterate often, we do not try to limit sector exposure in the Portfolio.
Our primary goal is to invest in the best large-cap growth stocks we can
identify, regardless of sector. This goal naturally leads us to overweight the
technology sector, which consistently produces higher average expected growth
rates than any other sector. Our weighting now stands around 40%. Overall,
during the first six months of the year, the technology sector led the
Portfolio's performance, due to strong performance during the first quarter. We
are optimistic that this sector will continue to generate strong returns. The
end-markets for technology products, such as cellular phones, communications
equipment and internet access, should remain strong for the foreseeable future.
We recently added to positions in several telecommunications companies because
we believe they may be less effected than some other technology companies by
potential Y2K order disruptions later in the year.
Our returns in the consumer sector, our second largest Portfolio weighting, also
exceeded the returns of the benchmark. The strong performance was broad-based,
coming from a diverse grouping of companies in the retail, consumer products and
apparel industries. Though accounting for a weight of less than 10% in the
Portfolio, our industrial sector was the second best contributor to returns
year-to-date, due to a very strong performance by Applied Materials Inc. The
healthcare sector turned in disappointing returns for the period. Our two
holdings in this sector have experience disappointing stock performance in the
face of healthy business fundamentals. In the services sector, we were hurt by
our holding of Quintiles Transnational, a contract research organization that
came under market scrutiny after a recent acquisition.
5
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PBHG Insurance Series Fund, Inc.
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PBHG Select 20 Portfolio
Investment Strategy
During the last six months, financial markets have spent a considerable amount
of time worrying about the economy - not because of bad news, but because of too
much good news. Unemployment is low, productivity is high, inflation is almost
non-existent and growth continues. In May, financial markets finally got some
bad news -- a high inflation report and the Federal Reserve's announced bias to
tighten interest rates. By June, analysts were hard-pressed to find any sign of
inflation and the Fed surprised (and pleased) many by adopting a neutral bias
toward raising interest rates after a one-quarter percentage point increase.
While a lot can happen in the second half of the year, the U.S. economy still
shows no willingness to halt its pattern of growth. At the end of last year, we
did not expect a major sustained downdraft in equity markets in the presence of
a low interest rate environment, a stable U.S. economy, and an accommodating
Federal Reserve. So far, that has been the case. If recent weeks are any
indication, we are facing a promising environment for an earnings-focused
investment strategy, such as ours. We also continue to believe that very high
growth rate companies are among the better opportunities in a highly valued
market.
On behalf of the Portfolio's management team, thank you for your confidence in
Pilgrim Baxter & Associates, Ltd. and in the PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Gary L. Pilgrim, CFA
- ---------------------------
Gary L. Pilgrim, CFA
Lead Portfolio Manager
6
<PAGE>
PBHG Insurance Series Fund, Inc.
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PBHG Select 20 Portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Inception to
6 Months(2) One Year Date(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Select 20 Portfolio 9.63% 35.90% 39.04%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of the Change in the Value of a $10,000 Investment in the
PBHG Select 20 Portfolio, the S&P 500 Index and the
Lipper Growth Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
PBHG Select 20 Portfolio S&P 500 Index(4) Lipper Growth Funds Average(5)
------------------------ ---------------- ------------------------------
<S> <C> <C> <C>
9/97 10000 10000 10000
12/97 10050 10287 9878
3/98 11993 11722 11149
6/98 13176 12109 11352
9/98 12625 11436 9857
12/98 16334 13872 12091
3/99 17967 13887 12665
6/99 17908 14866 13561
</TABLE>
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Select 20 Portfolio commenced operations on September 25, 1997.
(4) The Standard & Poor's ("S&P") 500 Index is a capitalization-weighted index
of 500 stocks designed to measure performance of the broad domestic economy.
The Index is unmanaged and reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Portfolio's past or future performance.
(5) The Lipper Growth Funds Average is an equally weighted benchmark composed of
mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Portfolio's past or future performance.
7
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
Dear Shareholder:
The stock market turned in a strong performance in the first half of 1999. The
PBHG Insurance Series Fund, Inc. - PBHG Large Cap Value Portfolio returned 9.25%
versus a total return of 12.38% for the S&P 500 Index.
Market Overview
The economy continued to hum along in the first half of the year. GDP is strong,
consumer confidence is high and unemployment is low. As a result, the consumer
continues to buy, buy, buy. Housing starts continue at a robust pace, auto sales
reached a new annualized high of 17 million vehicles and sales of luxury items
(boats, jewelry) are very good.
Stock price performance in the first half of 1999 can be characterized as a
"tale of two quarters". The first quarter was a continuation of "nifty fifty"
dominance as large-cap growth stocks handily outpaced value stocks and small-cap
stocks. As a result, the Portfolio underperformed the S&P 500 Index. But the
stronger-than-expected economy led to a change in market leadership in the
second quarter. Large-cap growth stocks passed the baton to the cyclical and
value stocks, as value outperformed growth by a comfortable margin. The second
quarter also brought a broadening in the market. In recent quarters, the largest
companies of the S&P 500 contributed the lion's share of the return to the
Index. This quarter, however, their contribution was much more muted. As a
result, large-cap managers' returns were competitive with the S&P 500 Index and
the Portfolio outperformed the S&P 500 Index. This second quarter
outperformance, however, was not enough to put us ahead of the S&P 500 Index for
the six months ended June 30, 1999.
The Portfolio's approach of focusing on value stocks with sound business
fundamentals directed us toward consumer cyclical stocks in the first half.
Auto, housing, retailing, and newspaper stocks all were trading at reasonable
valuations and had extremely strong business fundamentals. Many of our holdings
in these areas contributed nicely to the total return of your Portfolio.
Technology was another area that positively contributed to your Portfolio in the
second quarter. Reasonably priced technology stocks, such as Computer Associates
and Apple Computer, delivered better than expected earnings in the quarter,
fueling healthy price gains for these shares.
Finally, high valuations and poor fundamentals caused us to stay away from the
energy sector for the last twelve months. This underweighting was beneficial to
Portfolio returns for most of that time period as energy stocks languished.
However, in recent months energy stocks rebounded as oil prices rose.
Particularly in the last quarter, our underweighting in the sector was a drag on
performance.
8
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
Investment Strategy
In late June, the Federal Reserve raised the discount rate by 25 basis points
and adopted a neutral stance towards further interest rate changes. The market
cheered this decision and took the major market averages to new highs. Although
the Fed officially adopted a neutral stance, its commentary seemed to indicate
continued concerns about inflation.
While the party continues, it bears noting that the yield on the 30-year long
bond rose by over 80 basis points, from a low of 5.31% on February 17th to 6.16%
in late June. During that time, the S&P 500 has risen by almost 15%, taking the
averages and valuations to all-time highs. Interest rates and market averages
rarely move in the same direction for long periods of time. Without a more
constructive interest rate outlook, we believe it may be difficult for the
markets to move much higher from current levels.
We continue to be favorably disposed to the consumer cyclical area, as earnings
trends remain strong. Other areas with rising weights include energy, an area
with improving fundamentals, and consumer staples, an area where we believe many
companies are trading at attractive valuations.
In closing, we thank you for your confidence in Pilgrim Baxter Value Investors,
Inc. and in the PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Raymond J. McCaffrey, CFA
- --------------------------------
Raymond J. McCaffrey, CFA
Portfolio Manager
9
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Inception to
6 Months(2) One Year Date(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Large Cap Value Portfolio 9.25% 30.89% 31.08%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of the Change in the Value of a $10,000 Investment
in the PBHG Large Cap Value Portfolio, the S&P 500
Index and the Lipper Growth & Income Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
PBHG Large Cap Value Portfolio S&P 500 Index(4) Lipper Growth & Income Funds Average(5)
<S> <C> <C> <C>
10/97 10000 10000 10000
12/97 10441 10643 10444
3/98 11641 12127 11666
6/98 12021 12527 11694
9/98 11117 11281 10240
12/98 14406 13684 12061
3/99 14427 14368 12298
6/99 15739 15381 13409
</TABLE>
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Large Cap Value Portfolio commenced operations on October 28, 1997.
(4) The Standard & Poor's ("S&P") 500 Index is a capitalization weighted index
of 500 stocks designed to measure performance of the broad domestic economy.
The Index is unmanaged and reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Portfolio's past or future performance.
(5) The Lipper Growth & Income Funds Average is an equally weighted benchmark
composed of mutual funds, each of which combines growth of earnings with an
income requirement for level and/or rising dividends. The performance
figures are based on changes in net asset value of the Funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Portfolio's past or future performance.
10
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
Dear Shareholder:
The stock market turned in a strong performance in the first half of 1999. The
PBHG Insurance Series Fund, Inc. -- PBHG Small Cap Value Portfolio returned
3.10% versus a total return of 9.28% for the Russell 2000 Index.
The 1st quarter of 1999 continued many of the trends that began in the 4th
quarter of 1998. Large cap stocks outpaced smaller caps again with the S&P 500
returning +4.98% for the quarter vs. the Russell 2000 Index's return of (-5.43%)
and the S&P MidCap 400 return of (-6.39%). Additionally market leadership was
again provided by technology and internet companies. This was most pronounced in
the small cap area where the Russell 2000 Growth index returned (-1.68%) for the
quarter while the Russell 2000 Value Index lost (-9.69%) of its value during the
quarter. To put the internet phenomena into perspective, Prudential securities
calculated that internet companies represented 7.55% of the Russell 2000 Index
as of May 31, 1999. This represented 52 internet companies which had an AVERAGE
return in the first 5 months of the year of 61%. Some people find it difficult
to believe that internet focused day traders are actually making money trading
in and out of securities all day. We actually find it difficult to imagine
anyone not making money on internet investing during this time-frame. Almost
everything internet related went up -- regardless of quality, business plan or
profitability.
The second quarter offered value investors a little redemption for their
steadfast refusal to throw away all valuation parameters and invest in the "new
paradigm" defining internet stocks. The quarter started out looking like more of
the same as internet stocks continued to reach new highs, presumably based on
the positive quarter end results that were expected to be announced in
mid-April. As these results came in they were widely hailed as "meeting and
beating" expectations. Unfortunately, these expectations did not include
profitability for many of the highest fliers. Most internet stocks promptly gave
back the 30-50% returns they had garnered in the first two weeks of the quarter
in the subsequent two weeks.
The positive results of this seemingly fruitless exercise were twofold. First,
the market learned that we could have an internet valuation correction without
necessarily bringing down the broad market. The second outcome of the internet
correction in late April was the increased interest in smaller stocks,
especially those selling at more reasonable valuations. The Russell 2000 Value
Index benchmark outperformed the Russell 2000 Growth Index benchmark in April
and May (+12.5% vs. +10.6%). The last time the value benchmark had outperformed
the growth benchmark for two consecutive months was August and September of
1998, when both benchmarks were down over 20%.
The Russell Indexes were reconstituted as of June 30, 1999. This was a
bittersweet day for those of us benchmarking ourselves to the small-cap indexes
created by Russell. On one hand, many of the internet stocks became
mid/large-cap stocks and were no longer appropriate in a small-cap portfolio. On
the other hand, for those of us that endured the year-to-date performance of
such Russell 2000 Index contributors as CMGI (+328%), E-Trade (+241%) and Excite
(+216%), we lose the chance to gain back relative performance vs. the Russell
2000 Index if these popular internet names continue their valuation contraction.
In closing, we thank you for your confidence in Pilgrim Baxter Value Investors,
Inc. and in the PBHG Insurance Series Funds, Inc.
Sincerely,
/s/ Jerome J. Heppelmann, CFA
- -------------------------------
Jerome J. Heppelmann, CFA
Portfolio Manager
11
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF JUNE 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------
Inception to
6 Months(2) One Year Date(3)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Small Cap Value Portfolio 3.10% 4.05% 11.45%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Comparison of the Change in the Value of a $10,000 Investment in the
PBHG Small Cap Value Portfolio the Russell 2000 Index
and the Lipper Small Cap Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
PBHG Small Cap Value Portfolio Russell 2000 Index(4) Lipper Small Cap Funds Average(5)
------------------------------ --------------------- ---------------------------------
<S> <C> <C> <C>
10/97 10000 10000 10000
12/97 10427 10109 9940
3/98 11889 11125 11032
6/98 11462 10605 10579
9/98 9187 8470 8313
12/98 11568 9852 9904
3/99 10013 9318 9322
6/99 11926 10766 10773
</TABLE>
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Small Cap Value Portfolio commenced operations on October 28, 1997.
(4) The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
securities in the Russell 3000 Index. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Portfolio's past or future performance.
(5) The Lipper Small Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the Funds
in the Index with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Portfolio's past or
future performance.
12
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO -------------------------------------------------------------------------
PBHG Growth II Portfolio
STATEMENT OF NET ASSETS
As of June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- 86.6%
CONSUMER CYCLICAL -- 13.8%
AUDIO/VIDEO PRODUCTS -- 1.9%
Gemstar International Group* 8,400 $ 548
- --------------------------------------------------------------------
548
- --------------------------------------------------------------------
CABLE TELEVISION -- 0.8%
Adelphia Communications, Cl A* 3,500 223
- --------------------------------------------------------------------
223
- --------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 0.8%
Cinar, Cl B* 9,400 230
- --------------------------------------------------------------------
230
- --------------------------------------------------------------------
RESORTS/THEME PARKS -- 2.3%
Premier Parks* 18,700 687
- --------------------------------------------------------------------
687
- --------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 3.0%
American Eagle Outfitters* 12,800 582
Ann Taylor Stores* 6,900 311
- --------------------------------------------------------------------
893
- --------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 3.3%
Circuit City Stores 5,800 539
Tandy 8,900 435
- --------------------------------------------------------------------
974
- --------------------------------------------------------------------
RETAIL-JEWELRY -- 1.0%
Tiffany & Company 3,000 290
- --------------------------------------------------------------------
290
- --------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 0.7%
Staples* 6,211 192
- --------------------------------------------------------------------
192
- --------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $3,377) 4,037
- --------------------------------------------------------------------
ENERGY -- 1.6%
OIL & GAS DRILLING -- 1.6%
Diamond Offshore Drilling 16,800 477
- --------------------------------------------------------------------
477
- --------------------------------------------------------------------
TOTAL ENERGY (COST $490) 477
- --------------------------------------------------------------------
FINANCIAL -- 5.5%
FINANCE-CREDIT CARD -- 3.0%
Capital One Financial 9,900 552
Providian Financial 3,500 327
- --------------------------------------------------------------------
879
- --------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.0%
Schwab, Charles 2,550 280
- --------------------------------------------------------------------
280
- --------------------------------------------------------------------
FINANCE-OTHER SERVICES -- 1.5%
Heller Financial 15,800 439
- --------------------------------------------------------------------
439
- --------------------------------------------------------------------
TOTAL FINANCIAL (COST $1,339) 1,598
- --------------------------------------------------------------------
HEALTH CARE -- 8.2%
MEDICAL LASER SYSTEMS -- 1.9%
Visx* 6,900 546
- --------------------------------------------------------------------
546
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
MEDICAL PRODUCTS -- 2.0%
Minimed* 7,600 $ 585
- --------------------------------------------------------------------
585
- --------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.3%
Immunex* 3,000 382
- --------------------------------------------------------------------
382
- --------------------------------------------------------------------
MEDICAL-DRUGS -- 2.2%
Medimmune* 9,400 637
- --------------------------------------------------------------------
637
- --------------------------------------------------------------------
PHARMACY SERVICES -- 0.8%
Express Scripts, Cl A* 4,000 241
- --------------------------------------------------------------------
241
- --------------------------------------------------------------------
TOTAL HEALTH CARE (COST $2,263) 2,391
- --------------------------------------------------------------------
INDUSTRIAL -- 10.4%
CIRCUIT BOARDS -- 2.4%
Sanmina* 9,400 713
- --------------------------------------------------------------------
713
- --------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 1.9%
Corning 4,400 308
Danaher 4,300 250
- --------------------------------------------------------------------
558
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 1.8%
Gentex* 18,700 524
- --------------------------------------------------------------------
524
- --------------------------------------------------------------------
ELECTRONICS-MILITARY -- 2.2%
L-3 Communications* 13,300 643
- --------------------------------------------------------------------
643
- --------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 1.7%
Mettler-Toledo International* 20,200 501
- --------------------------------------------------------------------
501
- --------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.4%
Waters* 2,200 117
- --------------------------------------------------------------------
117
- --------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $2,752) 3,056
- --------------------------------------------------------------------
SERVICES -- 8.3%
ADVERTISING AGENCIES -- 2.2%
Omnicom Group 3,000 240
Snyder Communications* 12,800 419
- --------------------------------------------------------------------
659
- --------------------------------------------------------------------
ADVERTISING SALES -- 4.5%
Lamar Advertising* 12,800 525
Outdoor Systems* 22,200 810
- --------------------------------------------------------------------
1,335
- --------------------------------------------------------------------
COMPUTER SERVICES -- 0.6%
Sapient* 3,000 170
- --------------------------------------------------------------------
170
- --------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 1.0%
United Rentals* 9,500 280
- --------------------------------------------------------------------
280
- --------------------------------------------------------------------
TOTAL SERVICES (COST $2,311) 2,444
- --------------------------------------------------------------------
</TABLE>
13
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Growth II Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
TECHNOLOGY -- 38.8%
APPLICATIONS SOFTWARE -- 1.1%
I2 Technologies* 7,400 $ 318
- --------------------------------------------------------------------
318
- --------------------------------------------------------------------
CIRCUITS -- 1.6%
Celestica* 4,400 191
Maxim Integrated Products* 4,400 292
- --------------------------------------------------------------------
483
- --------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.9%
Check Point Software Technologies* 4,900 263
- --------------------------------------------------------------------
263
- --------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 2.0%
ASM Lithography Holdings* 9,900 588
- --------------------------------------------------------------------
588
- --------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.5%
Veritas Software* 1,500 142
- --------------------------------------------------------------------
142
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 12.7%
Atmel* 10,800 283
Broadcom, Cl A* 5,000 722
Conexant Systems* 6,400 372
LSI Logic* 11,300 521
MIPS Technologies, Cl A* 13,800 662
QLogic* 3,600 475
Xilinx* 12,300 704
- --------------------------------------------------------------------
3,739
- --------------------------------------------------------------------
FIBER OPTICS -- 1.6%
Ciena* 8,400 254
Metromedia Fiber Network, Cl A* 6,400 230
- --------------------------------------------------------------------
484
- --------------------------------------------------------------------
INTERNET CONTENT -- 4.6%
Infospace.com* 6,400 300
Inktomi* 5,700 750
Network Solutions* 3,900 309
- --------------------------------------------------------------------
1,359
- --------------------------------------------------------------------
INTERNET SOFTWARE -- 5.4%
Abovenet Communications* 7,900 319
Lycos* 5,400 496
PSINet* 9,900 433
Verio* 4,900 341
- --------------------------------------------------------------------
1,589
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Shares/
Face Market
Amount Value
Description (000) (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
NETWORK SOFTWARE -- 1.4%
Newbridge Networks* 14,300 $ 411
- --------------------------------------------------------------------
411
- --------------------------------------------------------------------
NETWORKING PRODUCTS -- 1.9%
Emulex* 4,900 545
- --------------------------------------------------------------------
545
- --------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 3.1%
Commscope* 9,400 289
Excel Switching* 13,300 398
General Instrument* 4,900 208
- --------------------------------------------------------------------
895
- --------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.1%
Qwest Communications* 9,400 311
- --------------------------------------------------------------------
311
- --------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.9%
Powerwave Technology* 7,900 255
- --------------------------------------------------------------------
255
- --------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $8,909) 11,382
- --------------------------------------------------------------------
TOTAL COMMON STOCK (COST $21,441) 25,385
- --------------------------------------------------------------------
REPURCHASE AGREEMENT -- 20.0%
Morgan Agency
4.73%, dated 06/30/99, matures 07/01/99,
repurchase price $5,858,844 (collateralized
by U.S. Government Obligations: total
market value $6,060,767)(A) $ 5,858 5,858
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $5,858) 5,858
- --------------------------------------------------------------------
TOTAL INVESTMENTS -- 106.6% (COST $27,299) 31,243
- --------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (6.6%)
Payable for securities purchased (2,289)
Other assets and liabilities 364
- --------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES, NET (1,925)
- --------------------------------------------------------------------
NET ASSETS
Paid-in-capital (authorized 500 million
shares -
$0.001 par value) based on 2,014,531
outstanding shares of common stock 23,071
Accumulated net investment loss (71)
Accumulated net realized gain on investments 2,374
Net unrealized appreciation on investments 3,944
- --------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 29,318
- --------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 14.55
- --------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO -------------------------------------------------------------------------
PBHG Technology & Communications Portfolio
STATEMENT OF NET ASSETS
As of June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- 92.3%
INDUSTRIAL -- 5.8%
CIRCUIT BOARDS -- 3.0%
Sanmina* 104,100 $ 7,899
- --------------------------------------------------------------------
7,899
- --------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 1.3%
Corning 50,200 3,520
- --------------------------------------------------------------------
3,520
- --------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.4%
Teradyne* 14,300 1,026
- --------------------------------------------------------------------
1,026
- --------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 1.1%
Uniphase* 18,000 2,988
- --------------------------------------------------------------------
2,988
- --------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $12,676) 15,433
- --------------------------------------------------------------------
SERVICES -- 2.7%
TELEPHONE-LONG DISTANCE -- 2.7%
MCI Worldcom* 84,600 7,281
- --------------------------------------------------------------------
7,281
- --------------------------------------------------------------------
TOTAL SERVICES (COST $7,327) 7,281
- --------------------------------------------------------------------
TECHNOLOGY -- 81.2%
CELLULAR TELECOMMUNICATIONS -- 1.1%
Nextel Communications, Cl A* 57,200 2,871
- --------------------------------------------------------------------
2,871
- --------------------------------------------------------------------
CIRCUITS -- 1.0%
Maxim Integrated Products* 41,600 2,766
- --------------------------------------------------------------------
2,766
- --------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.4%
Check Point Software Technologies* 70,100 3,759
- --------------------------------------------------------------------
3,759
- --------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.3%
Microsoft* 28,500 2,570
Oracle* 165,800 6,155
- --------------------------------------------------------------------
8,725
- --------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 2.0%
ASM Lithography Holdings* 91,500 5,433
- --------------------------------------------------------------------
5,433
- --------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 3.0%
EMC* 95,000 5,225
Veritas Software* 30,000 2,848
- --------------------------------------------------------------------
8,073
- -------------------------------------------------------------------
COMPUTERS-MICRO -- 4.0%
Hewlett Packard 36,300 3,648
IBM 54,100 6,992
- --------------------------------------------------------------------
10,640
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 24.8%
Broadcom, Cl A* 61,600 8,905
Conexant Systems* 30,500 1,771
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
Globespan Semiconductor* 16,700 $ 664
LSI Logic* 280,900 12,957
MIPS Technologies, Cl A* 65,700 3,149
Motorola 122,300 11,588
QLogic* 30,600 4,039
STMicroelectronics* 37,400 2,595
Texas Instruments 28,500 4,133
Transwitch* 43,200 2,047
Xilinx* 255,200 14,609
- --------------------------------------------------------------------
66,457
- --------------------------------------------------------------------
FIBER OPTICS -- 1.7%
Ciena* 154,400 4,661
- --------------------------------------------------------------------
4,661
- --------------------------------------------------------------------
INTERNET CONTENT -- 5.7%
Infospace.com* 67,500 3,173
Inktomi* 55,500 7,298
Network Solutions* 44,000 3,482
Yahoo* 7,500 1,292
- --------------------------------------------------------------------
15,245
- --------------------------------------------------------------------
INTERNET SOFTWARE -- 10.9%
Abovenet Communications* 71,700 2,895
America Online* 33,600 3,713
Concentric Network* 82,600 3,283
Lycos* 66,700 6,128
PSINet* 122,700 5,368
USinternetworking* 35,000 1,470
Verio* 90,600 6,297
- --------------------------------------------------------------------
29,154
- --------------------------------------------------------------------
NETWORK SOFTWARE -- 2.6%
Newbridge Networks* 239,900 6,897
- --------------------------------------------------------------------
6,897
- --------------------------------------------------------------------
NETWORKING PRODUCTS -- 6.1%
Cisco Systems* 146,900 9,465
Emulex* 62,800 6,983
- --------------------------------------------------------------------
16,448
- --------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 9.9%
ADC Telecommunications* 29,900 1,362
Audiocodes Limited* 40,000 1,080
Excel Switching* 52,700 1,578
General Instrument* 57,500 2,444
Lucent Technologies 52,700 3,554
Nokia ADR, Cl A 29,200 2,674
Nortel Networks 42,900 3,724
Qualcomm* 46,400 6,658
Tellabs* 53,100 3,588
- --------------------------------------------------------------------
26,662
- --------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.7%
Amdocs Limited* 101,400 2,307
Global Crossing Limited* 16,374 698
Level 3 Communications* 49,300 2,961
Qwest Communications International* 118,000 3,901
- --------------------------------------------------------------------
9,867
- --------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $174,463) 217,658
- --------------------------------------------------------------------
</TABLE>
15
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] ------------------------------------------------------------------------
PBHG Technology & Communications Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Shares/
Face Market
Amount Value
Description (000) (000)
- --------------------------------------------------------------------
COMMON STOCK -- CONCLUDED
UTILITIES -- 2.6%
TELEPHONE-INTEGRATED -- 2.6%
AT&T 125,400 $ 6,999
- --------------------------------------------------------------------
6,999
- --------------------------------------------------------------------
TOTAL UTILITIES (COST $7,510) 6,999
- --------------------------------------------------------------------
TOTAL COMMON STOCK (COST $201,976) 247,371
- --------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.1%
Morgan Agency
4.73%, dated 06/30/99, matures 07/01/99,
repurchase price $27,106,741
(collateralized by
U.S. Government Obligations: total market
value $28,105,200)(A) $27,103 27,103
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $27,103) 27,103
- --------------------------------------------------------------------
TOTAL INVESTMENTS -- 102.3% (COST $229,079) 274,474
- --------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.3%)
Other Assets and Liabilities, Net (6,317)
- --------------------------------------------------------------------
NET ASSETS
Paid-in-capital (authorized 500 million
shares -
$0.001 par value) based on 13,224,436
outstanding shares of common stock 216,796
Accumulated net investment loss (298)
Accumulated net realized gain on
investments 6,264
Net unrealized appreciation on investments 45,395
- --------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 268,157
- --------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 20.28
- --------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] ------------------------------------------------------------------------
PBHG Select 20 Portfolio
STATEMENT OF NET ASSETS
As of June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- 84.7%
CONSUMER CYCLICAL -- 25.1%
AUDIO/VIDEO PRODUCTS -- 5.6%
Gemstar International Group* 354,300 $ 23,118
- --------------------------------------------------------------------
23,118
- --------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 6.3%
Clear Channel Communications* 274,400 18,916
Fox Entertainment Group, Cl A* 260,700 7,023
- --------------------------------------------------------------------
25,939
- --------------------------------------------------------------------
CRUISE LINES -- 3.9%
Carnival 333,400 16,170
- --------------------------------------------------------------------
16,170
- --------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 4.3%
Home Depot 276,500 17,817
- --------------------------------------------------------------------
17,817
- --------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 5.0%
Staples* 675,750 20,906
- --------------------------------------------------------------------
20,906
- --------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $81,097) 103,950
- --------------------------------------------------------------------
HEALTH CARE -- 7.6%
MEDICAL INSTRUMENTS -- 3.5%
Guidant 281,500 14,480
- --------------------------------------------------------------------
14,480
- --------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION -- 4.1%
Cardinal Health 262,500 16,832
- --------------------------------------------------------------------
16,832
- --------------------------------------------------------------------
TOTAL HEALTH CARE (COST $27,534) 31,312
- --------------------------------------------------------------------
INDUSTRIAL -- 8.4%
LASERS-SYSTEMS/COMPONENTS -- 4.1%
Uniphase* 102,300 16,982
- --------------------------------------------------------------------
16,982
- --------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 4.3%
Applied Materials* 241,100 17,811
- --------------------------------------------------------------------
17,811
- --------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $29,772) 34,793
- --------------------------------------------------------------------
SERVICES -- 8.3%
COMMERCIAL SERVICES -- 3.8%
Quintiles Transnational* 372,000 15,624
- --------------------------------------------------------------------
15,624
- --------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 4.5%
MCI Worldcom* 215,900 18,581
- --------------------------------------------------------------------
18,581
- --------------------------------------------------------------------
TOTAL SERVICES (COST $26,921) 34,205
- --------------------------------------------------------------------
TECHNOLOGY -- 35.3%
COMPUTER SOFTWARE -- 7.3%
Compuware* 411,000 13,075
<CAPTION>
- --------------------------------------------------------------------
Shares/
Face Market
Amount Value
Description (000) (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
Microsoft* 191,100 $ 17,235
- --------------------------------------------------------------------
30,310
- --------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 3.1%
EMC* 235,800 12,969
- --------------------------------------------------------------------
12,969
- --------------------------------------------------------------------
COMPUTERS-MICRO -- 3.6%
Sun Microsystems* 218,200 15,029
- --------------------------------------------------------------------
15,029
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 3.0%
Motorola* 132,900 12,592
- --------------------------------------------------------------------
12,592
- --------------------------------------------------------------------
INTERNET -- 2.7%
America Online* 102,900 11,370
- --------------------------------------------------------------------
11,370
- --------------------------------------------------------------------
NETWORKING PRODUCTS -- 6.4%
Cisco Systems* 409,800 26,406
- --------------------------------------------------------------------
26,406
- --------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 5.1%
Lucent Technologies 122,700 8,275
Nokia ADR, Cl A 141,400 12,947
- --------------------------------------------------------------------
21,222
- --------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 4.1%
Frontier 140,300 8,278
Global Crossing Limited* 202,366 8,626
- --------------------------------------------------------------------
16,904
- --------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $103,517) 146,802
- --------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $268,841) 351,062
- --------------------------------------------------------------------
REPURCHASE AGREEMENT -- 14.4%
Greenwich Agency
4.78%, dated 06/30/99, matures 07/01/99,
repurchase price $18,002,357
(collateralized by U.S. Government
Obligations: total market value
$18,363,004)(A) $ 18,000 18,000
JP Morgan
4.78%, dated 06/30/99, matures 07/01/99,
repurchase price $18,229,806
(collateralized by U.S. Government
Obligations: total market value
$18,591,968)(A) 18,228 18,228
Morgan Agency
4.78%, dated 06/30/99, matures 07/01/99,
repurchase price $18,002,357
(collateralized by U.S. Government
Obligations: total market value
$18,381,109)(A) 18,000 18,000
Lehman
4.78%, dated 06/30/99, matures 07/01/99,
repurchase price $5,261,859
(collateralized by U.S. Government
Obligations: total market value
$5,382,486)(A) 5,261 5,261
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $59,489) 59,489
- --------------------------------------------------------------------
</TABLE>
17
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Select 20 Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description (000)
- --------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.1% (COST $328,330) 410,551
- --------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.9%
Other Assets and Liabilities, Net 3,911
- --------------------------------------------------------------------
NET ASSETS
Fund shares of PBHG class (authorized 500
million shares -- $0.001 par value) based
on 23,196,018 outstanding shares of common
stock 315,198
Accumulated net investment loss (834)
Accumulated net realized gain on investments 17,877
Net unrealized appreciation on investments 82,221
- --------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 414,462
- --------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 17.87
- --------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] ------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
SCHEDULE OF INVESTMENTS
As of June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- 98.0%
BASIC MATERIALS -- 1.0%
PAPER & RELATED PRODUCTS -- 1.0%
Willamette Industries 9,400 $ 433
- --------------------------------------------------------------------
433
- --------------------------------------------------------------------
TOTAL BASIC MATERIALS (COST $419) 433
- --------------------------------------------------------------------
CONSUMER CYCLICAL -- 12.5%
AUTO-CARS/LIGHT TRUCKS -- 6.2%
Ford Motor 20,600 1,163
General Motors 24,700 1,630
- --------------------------------------------------------------------
2,793
- --------------------------------------------------------------------
CASINO HOTELS -- 2.3%
Harrah's Entertainment* 26,700 587
Mandalay Resort Group* 21,100 446
- --------------------------------------------------------------------
1,033
- --------------------------------------------------------------------
MULTIMEDIA -- 1.0%
Gannett 6,400 457
- --------------------------------------------------------------------
457
- --------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.3%
Knight Ridder 2,100 115
- --------------------------------------------------------------------
115
- --------------------------------------------------------------------
RETAIL-RESTAURANTS -- 2.7%
Tricon Global Restaurants* 22,400 1,213
- --------------------------------------------------------------------
1,213
- --------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $5,400) 5,611
- --------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 15.5%
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.0%
Clorox 4,400 470
- --------------------------------------------------------------------
470
- --------------------------------------------------------------------
COSMETICS & TOILETRIES -- 1.5%
Kimberly-Clark 11,500 656
- --------------------------------------------------------------------
656
- --------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 7.0%
Bestfoods 17,800 881
Heinz H J 7,500 376
Kellogg 57,800 1,907
- --------------------------------------------------------------------
3,164
- --------------------------------------------------------------------
FOOD-RETAIL -- 3.5%
Kroger* 31,600 883
Safeway* 14,100 698
- --------------------------------------------------------------------
1,581
- --------------------------------------------------------------------
TOBACCO -- 2.5%
Philip Morris 27,700 1,113
- --------------------------------------------------------------------
1,113
- --------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $6,872) 6,984
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
ENERGY -- 6.7%
OIL COMPANIES-INTEGRATED -- 6.7%
BP Amoco PLC ADR 8,100 $ 879
Royal Dutch Petroleum 14,900 898
Unocal 31,100 1,232
- --------------------------------------------------------------------
3,009
- --------------------------------------------------------------------
TOTAL ENERGY (COST $3,048) 3,009
- --------------------------------------------------------------------
FINANCIAL -- 19.0%
COMMERCIAL BANKS-SOUTHERN US -- 2.0%
Amsouth Bancorporation 38,100 883
- --------------------------------------------------------------------
883
- --------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.0%
Citigroup 19,000 903
- --------------------------------------------------------------------
903
- --------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 5.3%
Fannie Mae 16,900 1,155
Federal Home Loan Mortgage Company 21,200 1,230
- --------------------------------------------------------------------
2,385
- --------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 2.6%
Hartford Life, Cl A 9,400 494
Jefferson-Pilot 10,300 682
- --------------------------------------------------------------------
1,176
- --------------------------------------------------------------------
MONEY CENTER BANKS -- 5.3%
Bank of America 3,800 279
Chase Manhattan 21,200 1,836
Morgan J.P. & Company 2,100 295
- --------------------------------------------------------------------
2,410
- --------------------------------------------------------------------
MULTI-LINE INSURANCE -- 0.3%
American International Group 1,100 129
- --------------------------------------------------------------------
129
- --------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 1.5%
Bank One 11,600 691
- --------------------------------------------------------------------
691
- --------------------------------------------------------------------
TOTAL FINANCIAL (COST $8,117) 8,577
- --------------------------------------------------------------------
HEALTH CARE -- 5.8%
DISPOSABLE MEDICAL PRODUCTS -- 1.5%
Bard C.R. 14,600 698
- --------------------------------------------------------------------
698
- --------------------------------------------------------------------
MEDICAL PRODUCTS -- 2.6%
Johnson & Johnson 11,800 1,156
- --------------------------------------------------------------------
1,156
- --------------------------------------------------------------------
MEDICAL-DRUGS -- 0.7%
Schering-Plough 5,900 313
- --------------------------------------------------------------------
313
- --------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION -- 1.0%
Amerisource Health, Cl A* 17,200 439
- --------------------------------------------------------------------
439
- --------------------------------------------------------------------
TOTAL HEALTH CARE (COST $2,527) 2,606
- --------------------------------------------------------------------
</TABLE>
19
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
INDUSTRIAL -- 9.5%
AEROSPACE/DEFENSE-EQUIPMENT -- 2.9%
General Dynamics 19,300 $1,322
- --------------------------------------------------------------------
1,322
- --------------------------------------------------------------------
BUILDING PRODUCERS-AIR & HEATING -- 0.9%
American Standard* 8,900 427
- --------------------------------------------------------------------
427
- --------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS -- 3.9%
Tenneco 36,300 867
Textron 10,700 881
- --------------------------------------------------------------------
1,748
- --------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 1.8%
Waste Management 15,000 806
- --------------------------------------------------------------------
806
- --------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $4,497) 4,303
- --------------------------------------------------------------------
SERVICES -- 3.3%
RENTAL AUTO/EQUIPMENT -- 1.1%
Hertz, CL A 7,800 484
- --------------------------------------------------------------------
484
- --------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 2.2%
MCI Worldcom* 11,800 1,015
- --------------------------------------------------------------------
1,015
- --------------------------------------------------------------------
TOTAL SERVICES (COST $1,506) 1,499
- --------------------------------------------------------------------
TECHNOLOGY -- 9.0%
COMPUTERS-MICRO -- 4.2%
Hewlett Packard 8,900 895
IBM 7,500 969
- --------------------------------------------------------------------
1,864
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 1.5%
Intel 11,600 690
- --------------------------------------------------------------------
690
- --------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 3.3%
General Instrument* 35,000 1,488
- --------------------------------------------------------------------
1,488
- --------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $3,718) 4,042
- --------------------------------------------------------------------
TRANSPORTATION -- 0.5%
TRANSPORTATION-AIR FREIGHT -- 0.5%
FDX* 4,100 221
- --------------------------------------------------------------------
221
- --------------------------------------------------------------------
TOTAL TRANSPORTATION (COST $203) 221
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Shares/
Face Market
Amount Value
Description (000) (000)
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
UTILITIES -- 15.2%
ELECTRIC-INTEGRATED -- 4.6%
Duke Energy 19,800 $1,077
Florida Progress 8,200 339
Peco Energy 15,500 649
- --------------------------------------------------------------------
2,065
- --------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 6.6%
Centurytel 38,900 1,546
GTE 9,300 704
SBC Communications 12,200 708
- --------------------------------------------------------------------
2,958
- --------------------------------------------------------------------
TELEPHONE-LOCAL -- 4.0%
Bellsouth 19,900 933
US West Communications 15,000 881
- --------------------------------------------------------------------
1,814
- --------------------------------------------------------------------
TOTAL UTILITIES (COST $6,713) 6,837
- --------------------------------------------------------------------
TOTAL COMMON STOCK (COST $43,020) 44,122
- --------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
Morgan Treasury
4.50%, dated 06/30/99, matures 07/01/99
repurchase price $1,476,186 (collateralized
by U.S. Government Obligations: total
market value:
$1,513,051)(A) $1,476 1,476
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $1,476) 1,476
- --------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.3% (COST $44,496) 45,598
- --------------------------------------------------------------------
</TABLE>
Percentages indicated are based on net assets of $45,006,110
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
STATEMENT OF NET ASSETS
As of June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- 97.6%
BASIC MATERIALS -- 4.8%
CHEMICALS-PLASTICS -- 2.5%
GEON 22,700 $ 732
Hanna 31,300 514
- --------------------------------------------------------------------
1,246
- --------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 1.3%
Cytec Industries* 13,400 427
W.R. Grace & Company* 12,100 222
- --------------------------------------------------------------------
649
- --------------------------------------------------------------------
METAL-ALUMINUM -- 0.2%
Commonwealth Industries 8,700 109
- --------------------------------------------------------------------
109
- --------------------------------------------------------------------
PAPER & RELATED PRODUCTS -- 0.8%
Caraustar Industries 11,000 272
Wausau-Mosinee Paper 7,500 135
- --------------------------------------------------------------------
407
- --------------------------------------------------------------------
TOTAL BASIC MATERIALS (COST $2,363) 2,411
- --------------------------------------------------------------------
CONSUMER CYCLICAL -- 13.1%
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.6%
Delco Remy International* 18,400 201
Tower Automotive* 3,800 97
- --------------------------------------------------------------------
298
- --------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT -- 0.3%
Standard Motor Products 5,800 142
- --------------------------------------------------------------------
142
- --------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 0.5%
Pulte 10,700 247
- --------------------------------------------------------------------
247
- --------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.7%
Owens & Minor Holdings 32,600 359
- --------------------------------------------------------------------
359
- --------------------------------------------------------------------
ENTERTAINMENT SOFTWARE -- 0.4%
Acclaim Entertainment* 28,500 182
- --------------------------------------------------------------------
182
- --------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 2.1%
Stride Rite 100,000 1,031
- --------------------------------------------------------------------
1,031
- --------------------------------------------------------------------
PUBLISHING-BOOKS -- 1.2%
Scholastic 12,000 608
- --------------------------------------------------------------------
608
- --------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.1%
J Baker & Company* 6,900 60
- --------------------------------------------------------------------
60
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
RETAIL-CONSUMER ELECTRONICS -- 1.8%
Tweeter Home Entertainment Group* 23,400 $ 918
- --------------------------------------------------------------------
918
- --------------------------------------------------------------------
RETAIL-CONVENIENCE STORES -- 0.8%
Casey's General Stores 28,000 420
- --------------------------------------------------------------------
420
- --------------------------------------------------------------------
RETAIL-HOME FURNISHINGS -- 0.8%
Pier 1 Imports 34,400 387
- --------------------------------------------------------------------
387
- --------------------------------------------------------------------
RETAIL-JEWELRY -- 0.1%
Friedman's, Cl A 3,400 30
- --------------------------------------------------------------------
30
- --------------------------------------------------------------------
RETAIL-MAIL ORDER -- 1.1%
Micro Warehouse* 30,300 542
- --------------------------------------------------------------------
542
- --------------------------------------------------------------------
RETAIL-PET FOOD -- 0.5%
Petco Animal Supplies* 17,000 268
- --------------------------------------------------------------------
268
- --------------------------------------------------------------------
RETAIL-RESTAURANTS -- 2.1%
Buffets* 40,300 463
Ruby Tuesday 30,000 569
- --------------------------------------------------------------------
1,032
- --------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $6,011) 6,524
- --------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 9.5%
BEVERAGES-WINE/SPIRITS -- 0.6%
Beringer Wines Estates, Cl B* 7,200 301
- --------------------------------------------------------------------
301
- --------------------------------------------------------------------
BREWERY -- 2.4%
Coors Adolph, Cl B 23,600 1,168
- --------------------------------------------------------------------
1,168
- --------------------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.1%
Playtex Products* 35,300 549
- --------------------------------------------------------------------
549
- --------------------------------------------------------------------
COSMETICS & TOILETRIES -- 0.6%
Alberto-Culver, Cl B 11,000 293
- --------------------------------------------------------------------
293
- --------------------------------------------------------------------
FOOD-BAKING -- 0.6%
Earthgrains 12,100 312
- --------------------------------------------------------------------
312
- --------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 4.2%
Aurora Foods* 72,600 1,271
International Home Foods* 31,400 579
Universal Foods 11,400 241
- --------------------------------------------------------------------
2,091
- --------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $4,407) 4,714
- --------------------------------------------------------------------
</TABLE>
21
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
ENERGY -- 4.2%
OIL & GAS DRILLING -- 0.5%
Marine Drilling* 18,000 $ 246
- --------------------------------------------------------------------
246
- --------------------------------------------------------------------
OIL COMPANIES-EXPLORATION & PRODUCTION -- 1.9%
Devon Energy 9,300 332
Evergreen Resources* 10,600 267
Newfield Exploration* 12,500 355
- --------------------------------------------------------------------
954
- --------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.5%
Core Labs N.V.* 18,000 251
- --------------------------------------------------------------------
251
- --------------------------------------------------------------------
PIPELINES -- 1.3%
K N Energy 50,000 669
- --------------------------------------------------------------------
669
- --------------------------------------------------------------------
TOTAL ENERGY (COST $1,984) 2,120
- --------------------------------------------------------------------
FINANCIAL -- 15.5%
COMMERCIAL BANKS-EASTERN US -- 0.7%
Commercial Bank of New York 6,600 81
Valley National Bancorp 9,345 269
- --------------------------------------------------------------------
350
- --------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 1.3%
Southwest Bancorp of Texas* 36,200 652
- --------------------------------------------------------------------
652
- --------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 3.4%
Bancwest 22,600 839
Pacific Bank 19,000 362
Pacific Century Financial 6,100 132
Westamerica Bancorporation 10,000 365
- --------------------------------------------------------------------
1,698
- --------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.1%
Legg Mason 12,200 470
National Discount Brokers* 10,000 580
- --------------------------------------------------------------------
1,050
- --------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 1.5%
Financial Securities Assurance 14,600 759
- --------------------------------------------------------------------
759
- --------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE -- 0.8%
Affiliated Managers Group* 3,900 118
Federated Investors, Cl B 14,000 251
- --------------------------------------------------------------------
369
- --------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.9%
ESG RE Limited 9,600 144
Reinsurance Group of America 8,200 289
- --------------------------------------------------------------------
433
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
REITS-APARTMENTS -- 0.2%
Pennsylvania Real Estate Investment Trust 5,000 $ 105
- --------------------------------------------------------------------
105
- --------------------------------------------------------------------
REITS-DIVERSIFIED -- 0.3%
Duke Realty Investments 7,200 162
- --------------------------------------------------------------------
162
- --------------------------------------------------------------------
REITS-HOTEL/RESTAURANT -- 0.4%
Hospitality Properties Trust 7,100 193
- --------------------------------------------------------------------
193
- --------------------------------------------------------------------
REITS-OFFICE PROPERTY -- 0.6%
Mack-Cali Realty 9,900 306
- --------------------------------------------------------------------
306
- --------------------------------------------------------------------
REITS-REGIONAL MALLS -- 1.3%
CBL & Associates Properties 19,000 501
Taubman Centers 10,100 133
- --------------------------------------------------------------------
634
- --------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 1.2%
Federal Realty Investment Trust 1,800 41
Glimcher Realty Trust 5,100 83
JP Realty 22,600 465
- --------------------------------------------------------------------
589
- --------------------------------------------------------------------
REITS-WAREHOUSE/INDUSTRIAL -- 0.2%
Prologis Trust 5,000 101
- --------------------------------------------------------------------
101
- --------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 0.6%
Roslyn Bancorp 16,400 282
- --------------------------------------------------------------------
282
- --------------------------------------------------------------------
TOTAL FINANCIAL (COST $7,279) 7,683
- --------------------------------------------------------------------
HEALTH CARE -- 8.3%
MEDICAL-DRUGS -- 0.5%
Dura Pharmaceuticals* 22,800 272
- --------------------------------------------------------------------
272
- --------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION -- 5.6%
Amerisource Health, Cl A* 70,700 1,803
Bindly Western Industries 25,467 587
Syncor International* 11,000 396
- --------------------------------------------------------------------
2,786
- --------------------------------------------------------------------
OPTICAL SUPPLIES -- 0.5%
Wesley Jessen Visioncare* 7,000 227
- --------------------------------------------------------------------
227
- --------------------------------------------------------------------
THERAPEUTICS -- 0.8%
United Therapeutics* 32,000 380
- --------------------------------------------------------------------
380
- --------------------------------------------------------------------
</TABLE>
22
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
VETERINARY DIAGNOSTICS -- 0.9%
Veterinary Centers of America* 34,000 $ 461
- --------------------------------------------------------------------
461
- --------------------------------------------------------------------
TOTAL HEALTH CARE (COST $4,536) 4,126
- --------------------------------------------------------------------
INDUSTRIAL -- 11.4%
BUILDING & CONSTRUCTION PRODUCTS-
MISCELLANEOUS -- 2.8%
Dal-Tile International* 22,300 254
Johns Manville 47,000 610
NCI Building Systems* 24,600 526
- --------------------------------------------------------------------
1,390
- --------------------------------------------------------------------
BUILDING PRODUCTS AIR & HEATING -- 2.2%
York International 25,100 1,075
- --------------------------------------------------------------------
1,075
- --------------------------------------------------------------------
BUILDING-HEAVY CONSTRUCTION -- 0.1%
Granite Construction 2,200 64
- --------------------------------------------------------------------
64
- --------------------------------------------------------------------
ELECTRIC PRODUCTS -- MISCELLANEOUS -- 1.7%
Ametek 15,300 352
C-Cube Microsystems* 15,300 485
- --------------------------------------------------------------------
837
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 1.5%
Benchmark Electronics* 13,900 500
Kent Electronics* 11,400 226
- --------------------------------------------------------------------
726
- --------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.3%
Vishay Intertechnology* 32,000 672
- --------------------------------------------------------------------
672
- --------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 1.1%
Albany International, Cl A 26,100 542
- --------------------------------------------------------------------
542
- --------------------------------------------------------------------
TRANSPORTATION-EQUIPMENT & LEASING -- 0.7%
Greenbrier Companies 9,900 104
Willis Lease Finance* 14,000 228
- --------------------------------------------------------------------
332
- --------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $5,375) 5,638
- --------------------------------------------------------------------
SERVICES -- 6.0%
COMMERCIAL SERVICES -- 1.6%
Central Parking 16,300 558
Plexus* 7,000 211
- --------------------------------------------------------------------
769
- --------------------------------------------------------------------
COMMERCIAL SERVICES-FINANCE -- 1.1%
Arctrade International* 43,000 551
- --------------------------------------------------------------------
551
- --------------------------------------------------------------------
HUMAN RESOURCES -- 2.9%
Personnel Group of America* 116,700 1,167
RCM Technologies* 19,000 252
- --------------------------------------------------------------------
1,419
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Market
Value
Description Shares (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
SECURITY SERVICES -- 0.4%
Kroll-O'Gara* 10,000 $ 221
- --------------------------------------------------------------------
221
- --------------------------------------------------------------------
TOTAL SERVICES (COST $2,561) 2,960
- --------------------------------------------------------------------
TECHNOLOGY -- 20.6%
APPLICATIONS SOFTWARE -- 0.4%
IMRglobal* 10,400 200
- --------------------------------------------------------------------
200
- --------------------------------------------------------------------
CIRCUITS -- 0.7%
Hadco* 8,200 326
- --------------------------------------------------------------------
326
- --------------------------------------------------------------------
COMPUTER GRAPHICS -- 1.2%
Nvidia* 31,700 606
- --------------------------------------------------------------------
606
- --------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.1%
Ansys* 15,000 149
Parametric Technology* 63,500 881
- --------------------------------------------------------------------
1,030
- --------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 3.8%
Mentor Graphics* 98,200 1,258
Saville Systems ADR* 45,000 653
- --------------------------------------------------------------------
1,911
- --------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.5%
Hutchinson Technology* 8,300 230
- --------------------------------------------------------------------
230
- --------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.9%
Informix* 20,000 171
Reynolds & Reynolds, Cl A 13,500 315
Sterling Software* 16,700 446
- --------------------------------------------------------------------
932
- --------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 3.0%
Cypress Semiconductor* 17,500 289
Lattice Semiconductor* 4,600 286
Novellus Systems* 5,000 341
Zoran* 35,000 586
- --------------------------------------------------------------------
1,502
- --------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 0.6%
Splash Technology* 40,000 281
- --------------------------------------------------------------------
281
- --------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 4.9%
Advanced Fibre Communication* 41,200 644
Antec* 15,700 503
Excel Switching* 4,000 120
Plantronics* 13,000 847
Tekelec* 27,500 335
- --------------------------------------------------------------------
2,449
- --------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.1%
IDT* 25,400 565
- -------------------------------------------------------------------
565
- --------------------------------------------------------------------
</TABLE>
23
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
PBHG Small Cap Value Portfolio
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
<S> <C> <C>
Market
Value
Description Shares (000)
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
WIRELESS EQUIPMENT -- 0.4%
Powerwave Technology* 5,400 $ 174
- --------------------------------------------------------------------
174
- --------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $8,950) 10,206
- --------------------------------------------------------------------
TRANSPORTATION -- 3.3%
AIRLINES -- 2.2%
Mesaba Holdings* 24,200 309
Midway Airlines* 35,800 367
Skywest 16,000 399
- --------------------------------------------------------------------
1,075
- --------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 1.1%
Landstar System* 3,500 126
Yellow* 24,700 438
- --------------------------------------------------------------------
564
- --------------------------------------------------------------------
TOTAL TRANSPORTATION (COST $1,947) 1,639
- --------------------------------------------------------------------
UTILITIES -- 0.9%
ELECTRIC-INTEGRATED -- 0.9%
Central Hudson Gas & Electric 900 38
Idacorp 5,700 180
Puget Sound Energy 9,100 218
- --------------------------------------------------------------------
436
- --------------------------------------------------------------------
TOTAL UTILITIES (COST $455) 436
- --------------------------------------------------------------------
TOTAL COMMON STOCK (COST $45,868) 48,457
- --------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------
Face Market
Amount Value
Description (000) (000)
<S> <C> <C>
- --------------------------------------------------------------------
COMMON STOCK -- CONTINUED
REPURCHASE AGREEMENT -- 3.8%
Morgan Agency
4.73%, dated 06/30/99, matures 07/01/99,
repurchase price $1,885,905
(collateralized
by U.S. Government Obligations:
total market value $1,944,781)(A) $1,886 $ 1,886
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $1,886) 1,886
- --------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.4% (COST $47,754) 50,343
- --------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.4%)
Other Assets and Liabilities, Net (710)
- --------------------------------------------------------------------
NET ASSETS
Paid-in-capital (authorized 500 million
shares -- $0.001 par value) based on
4,146,726 outstanding shares of common
stock 45,065
Accumulated net investment loss (23)
Accumulated net realized gain on
investments 2,002
Net unrealized appreciation on investments 2,589
- --------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 49,633
- --------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 11.97
- --------------------------------------------------------------------
</TABLE>
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (000)
June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PBHG
LARGE CAP VALUE
PORTFOLIO
---------------
<S> <C>
ASSETS:
Investment securities (Cost $44,496) at market value............................................. $45,598
Receivable for investments sold.................................................................. 16,099
Receivable for capital shares sold............................................................... 14
Dividends and interest receivable................................................................ 18
-------
Total assets..................................................................................... 61,729
-------
LIABILITIES:
Payable for investment securities purchased...................................................... (16,606)
Payable for fund shares redeemed................................................................. (85)
Accrued Expenses................................................................................. (32)
-------
Total liabilities................................................................................ (16,723)
-------
NET ASSETS:
Paid-in-capital (authorized 500 million shares -- $0.001 par value based on 2,886,916 outstanding
shares of common stock......................................................................... 37,896
Undistributed net investment income.............................................................. 107
Accumulated net realized gain on investments..................................................... 5,901
Net unrealized appreciation on investments....................................................... 1,102
-------
Net assets....................................................................................... $45,006
=======
Net Asset Value, Offering Price and Redemption Price Per Share................................... $ 15.59
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
STATEMENT OF OPERATIONS (000)
For the six month period ended June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
PBHG PBHG
PBHG TECHNOLOGY & PBHG LARGE CAP
GROWTH II COMMUNICATIONS SELECT 20 VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- -------------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends..................................................... $ 9 $ 74 $ 206 $ 232
Interest...................................................... 43 363 1,073 50
------- -------- ------- -------
Total Investment Income..................................... 52 437 1,279 282
------- -------- ------- -------
EXPENSES:
Investment Advisory Fees...................................... 87 571 1,677 115
Administrative Fees........................................... 15 101 296 27
Custodian Fees................................................ 5 6 6 8
Professional Fees............................................. 4 9 30 3
Transfer Agent Fees........................................... 13 13 11 13
Printing Fees................................................. 4 11 37 4
Directors' Fees............................................... 1 7 27 3
Amortization of Deferred Organizational Costs................. 1 1 1 1
Insurance and Other Expenses.................................. 1 2 -- 2
------- -------- ------- -------
Total Expenses.............................................. 131 721 2,085 176
------- -------- ------- -------
Waiver of Investment Advisory Fees............................ (8) -- -- (1)
------- -------- ------- -------
Advisory Fee Recaptured....................................... -- 14 28 --
------- -------- ------- -------
Net Expenses................................................ 123 735 2,113 175
------- -------- ------- -------
NET INVESTMENT INCOME (LOSS).................................... (71) (298) (834) 107
------- -------- ------- -------
Net Realized Gain from Security Transactions.................. 3,915 8,091 26,892 5,126
Net Change in Unrealized Appreciation (Depreciation) on
Investments................................................. 1,011 37,708 7,941 (1,500)
------- -------- ------- -------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 4,926 45,799 34,833 3,626
------- -------- ------- -------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 4,855 $ 45,501 $33,999 $ 3,733
======= ======== ======= =======
<CAPTION>
PBHG
SMALL CAP
VALUE
PORTFOLIO
---------
<S> <C>
INVESTMENT INCOME:
Dividends..................................................... $ 172
Interest...................................................... 44
-------
Total Investment Income..................................... 216
-------
EXPENSES:
Investment Advisory Fees...................................... 199
Administrative Fees........................................... 30
Custodian Fees................................................ 6
Professional Fees............................................. 4
Transfer Agent Fees........................................... 13
Printing Fees................................................. 4
Directors' Fees............................................... 2
Amortization of Deferred Organizational Costs................. 1
Insurance and Other Expenses.................................. 2
-------
Total Expenses.............................................. 261
-------
Waiver of Investment Advisory Fees............................ (22)
-------
Advisory Fee Recaptured....................................... --
-------
Net Expenses................................................ 239
-------
NET INVESTMENT INCOME (LOSS).................................... (23)
-------
Net Realized Gain from Security Transactions.................. 3,052
Net Change in Unrealized Appreciation (Depreciation) on
Investments................................................. (1,448)
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................. 1,604
-------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................ $ 1,581
=======
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (000)
For the six month period ended June 30, 1999 (unaudited) and the period ended
December 31, 1998
<TABLE>
<CAPTION>
PBHG
PBHG LARGE
PBHG TECHNOLOGY & PBHG CAP
GROWTH II COMMUNICATIONS SELECT 20 VALUE
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- -------------------- -------------------- --------
01/01/99 01/01/98 01/01/99 01/01/98 01/01/99 01/01/98 01/01/99
TO TO TO TO TO TO TO
06/30/99 12/31/98 06/30/99 12/31/98 06/30/99 12/31/98 06/30/99
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (Loss)............. $ (71) $ (93) $ (298) $ (95) $ (834) $ (204) $ 107
Net Realized Gain (Loss) from Security
Transactions........................... 3,915 (1,254) 8,091 (1,742) 26,892 (8,960) 5,126
Net Change in Unrealized Appreciation
(Depreciation) on Investments.......... 1,011 2,680 37,708 7,707 7,941 74,080 (1,500)
-------- -------- -------- -------- -------- -------- --------
Net Increase in Net Assets Resulting
from Operations...................... 4,855 1,333 45,501 5,870 33,999 64,916 3,733
-------- -------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income.................... -- -- -- (3) -- (3) --
Net Realized Gains from Security
Transactions........................... -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Total Distributions.................... -- -- -- (3) -- (3) --
-------- -------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS (A):
Shares Issued............................ 15,060 18,276 206,254 31,082 123,477 294,062 25,389
Shares Issued upon Reinvestment of
Distributions.......................... -- -- -- 3 -- 3 --
Shares Redeemed.......................... (8,918) (11,524) (16,091) (13,576) (60,940) (48,669) (6,402)
-------- -------- -------- -------- -------- -------- --------
Increase in Net Assets Derived from
Capital Share Transactions............. 6,142 6,752 190,163 17,509 62,537 245,396 18,987
-------- -------- -------- -------- -------- -------- --------
Total Increase in Net Assets........... 10,997 8,085 235,664 23,376 96,536 310,309 22,720
-------- -------- -------- -------- -------- -------- --------
NET ASSETS:
Beginning of Period...................... 18,321 10,236 32,493 9,117 317,926 7,617 22,286
-------- -------- -------- -------- -------- -------- --------
End of Period............................ $ 29,318 $ 18,321 $268,157 $ 32,493 $414,462 $317,926 $ 45,006
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
(A): SHARES ISSUED AND REDEEMED
Shares Issued............................ 1,156 1,725 11,804 2,749 7,274 22,732 1,761
Shares Issued upon Reinvestment of
Distributions.......................... -- -- -- -- -- -- --
Shares Redeemed.......................... (716) (1,102) (942) (1,263) (3,586) (3,983) (435)
-------- -------- -------- -------- -------- -------- --------
Net Increase in Shares Outstanding....... 440 623 10,862 1,486 3,688 18,749 1,326
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
<CAPTION>
PBHG
SMALL CAP VALUE
PORTFOLIO
--------------------
01/01/98 01/01/99 01/01/98
TO TO TO
12/31/98 06/30/99 12/31/98
-------- -------- --------
<S> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (Loss)............. $ 53 $ (23) $ (47)
Net Realized Gain (Loss) from Security
Transactions........................... 905 3,052 (1,047)
Net Change in Unrealized Appreciation
(Depreciation) on Investments.......... 2,553 (1,448) 3,853
-------- -------- --------
Net Increase in Net Assets Resulting
from Operations...................... 3,511 1,581 2,759
-------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income.................... (56) -- (7)
Net Realized Gains from Security
Transactions........................... (117) -- (44)
-------- -------- --------
Total Distributions.................... (173) -- (51)
-------- -------- --------
CAPITAL SHARE TRANSACTIONS (A):
Shares Issued............................ 22,710 18,666 48,005
Shares Issued upon Reinvestment of
Distributions.......................... 173 -- 51
Shares Redeemed.......................... (5,495) (14,654) (16,045)
-------- -------- --------
Increase in Net Assets Derived from
Capital Share Transactions............. 17,388 4,012 32,011
-------- -------- --------
Total Increase in Net Assets........... 20,726 5,593 34,719
-------- -------- --------
NET ASSETS:
Beginning of Period...................... 1,560 44,040 9,321
-------- -------- --------
End of Period............................ $ 22,286 $ 49,633 $ 44,040
-------- -------- --------
-------- -------- --------
(A): SHARES ISSUED AND REDEEMED
Shares Issued............................ 1,853 1,689 4,363
Shares Issued upon Reinvestment of
Distributions.......................... 12 -- 5
Shares Redeemed.......................... (453) (1,335) (1,464)
-------- -------- --------
Net Increase in Shares Outstanding....... 1,412 354 2,904
-------- -------- --------
-------- -------- --------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the six month period ended June 30, 1999 (unaudited)
For a Share Outstanding Throughout Each Fiscal Year or Period
<TABLE>
<CAPTION>
Net Net
Asset Realized and Distributions Distributions Asset
Value Net Unrealized from Net from Value
Beginning Investment Gains or Losses Investment Capital End Total
of Period Income (Loss) on Securities Income Gains of Period Return
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------
PBHG Growth II Portfolio
- ------------------------
1999**............ $ 11.63 ($0.02) $2.94 -- -- $14.55 25.11%+
1998.............. 10.75 (0.06) 0.94 -- -- 11.63 8.19%
1997(1)........... 10.00 -- 0.75 -- -- 10.75 7.50%+
- ------------------------------------------
PBHG Technology & Communications Portfolio
- ------------------------------------------
1999(4)**......... $ 13.76 ($0.04) $6.56 -- -- $20.28 47.38%+
1998.............. $ 10.41 (0.04) 3.39 -- -- 13.76 32.20%
1997(1)........... 10.00 -- 0.41 -- -- 10.41 4.10%+
- ------------------------
PBHG Select 20 Portfolio
- ------------------------
1999**............ $ 16.30 ($0.03) $1.60 -- -- $17.87 9.63%+
1998.............. 10.03 (0.01) 6.28 -- -- 16.30 62.52%
1997(2)........... 10.00 -- 0.03 -- -- 10.03 0.30%+
- ------------------------------
PBHG Large Cap Value Portfolio
- ------------------------------
1999**............ $ 14.27 $0.04 $1.28 -- -- $15.59 9.25%+
1998.............. 10.43 (0.02) 3.98 $ (0.04) $ (0.08) 14.27 37.96%
1997(3)........... 10.00 0.02 0.41 -- -- 10.43 4.30%+
- ------------------------------
PBHG Small Cap Value Portfolio
- ------------------------------
1999**............ $ 11.61 -- $0.36 -- -- $11.97 3.10%+
1998.............. 10.48 ($0.02) 1.16 -- $ (0.01) 11.61 10.94%
1997(3)........... 10.00 0.01 0.47 -- -- 10.48 4.80%+
<CAPTION>
Ratio Ratio of Net
Net of Expenses Income (loss)
Assets Ratio Ratio of Net to Average to Average
End of Expenses Income (Loss) Net Assets Net Assets Portfolio
of Period to Average to Average (Excluding (Excluding Turnover
(000) Net Assets Net Assets Waivers) Waivers) Rate
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------
PBHG Growth II Portfolio
- ------------------------
1999**............ $ 29,318 1.20%* (0.69)%* 1.28%* (0.77)%* 195.53%
1998.............. 18,321 1.20% (0.64)% 1.54% (0.98)% 228.09%
1997(1)........... 10,236 1.20%* (0.11)%* 4.38%* (3.29)%* 44.57%
- ------------------------------------------
PBHG Technology & Communications Portfolio
- ------------------------------------------
1999(4)**......... $ 268,157 1.09%* (0.44)%* 1.09%* (0.44)%* 120.46%
1998.............. 32,493 1.20% (0.55)% 1.56% (0.91)% 264.58%
1997(1)........... 9,117 1.20%* 0.37%* 5.09%* (3.52)%* 69.34%
- ------------------------
PBHG Select 20 Portfolio
- ------------------------
1999**............ $ 414,462 1.07%* (0.42)%* 1.07%* (0.42)%* 67.31%
1998.............. 317,926 1.20% (0.18)% 1.21% (0.19)% 48.79%
1997(2)........... 7,617 1.20%* 0.51%* 3.36%* (1.65)%* 18.53%
- ------------------------------
PBHG Large Cap Value Portfolio
- ------------------------------
1999**............ $ 45,006 0.99%* 0.61%* 1.00%* 0.60%* 509.34%
1998.............. 22,286 1.00% 0.67% 1.47% 0.20% 635.10%
1997(3)........... 1,560 1.00%* 1.91%* 8.04%* (5.13)%* 68.93%
- ------------------------------
PBHG Small Cap Value Portfolio
- ------------------------------
1999**............ $ 49,633 1.20%* (0.11)%* 1.31%* (0.22)%* 148.80%
1998.............. 44,040 1.20% (0.15)% 1.46% (0.41)% 293.90%
1997(3)........... 9,321 1.20%* 1.40%* 3.63%* (1.03)%* 41.14%
</TABLE>
<TABLE>
<C> <S>
* Annualized.
** For the six month period ended June 30, 1999.
+ Total return has not been annualized.
(1) The PBHG Growth II and the PBHG Technology & Communications Portfolios commenced operations on April 30, 1997.
(2) The PBHG Select 20 Portfolio commenced operations on September 25, 1997.
(3) The PBHG Large Cap Value and the PBHG Small Cap Value Portfolios commenced operations on October 28, 1997.
(4) Per share calculations were performed using average shares for the period.
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
As of June 30, 1999 (unaudited)
1. ORGANIZATION
The PBHG Insurance Series Fund, Inc. (the "Fund"), a Maryland corporation is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund consists of seven Portfolios: the PBHG
Growth II Portfolio (the "Growth II Portfolio"), the PBHG Large Cap Growth
Portfolio (the "Large Cap Growth Portfolio"), the PBHG Technology &
Communications Portfolio (the "Technology & Communications Portfolio"), the PBHG
Select 20 Portfolio (the "Select 20 Portfolio"), the PBHG Large Cap Value
Portfolio (the "Large Cap Value Portfolio"), the PBHG Small Cap Value Portfolio
(the "Small Cap Value Portfolio"), and the PBHG Mid-Cap Value Portfolio (the
"Mid-Cap Value Portfolio") (each a "Portfolio" and, collectively, the
"Portfolios"). Each Portfolio is classified as a diversified management
investment company, with the exception of the Select 20 Portfolio which is
classified as a non-diversified management investment company. The financial
statements presented herein do not include the Large Cap Growth Portfolio or the
Mid-Cap Value Portfolio, which are presented separately. Each Portfolio's
prospectus provides a description of the Portfolio's investment objectives,
policies and strategies. The assets of each Portfolio are segregated, and a
shareholder's interest is limited to the Portfolio in which shares are held. The
Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies to be offered by the separate accounts of life
insurance companies. At June 30, 1999, the following percentage of outstanding
shares of the Portfolios were held by the separate accounts of the number of
participating insurance companies listed below:
<TABLE>
<CAPTION>
Percentage of Number of
Portfolio Outstanding Shares Insurance Companies
- ------------------------- ------------------- -------------------
<S> <C> <C>
Growth II Portfolio 50%, 36% 2
Technology &
Communications Portfolio 86% 1
Select 20 Portfolio 91% 1
Large Cap Value Portfolio 91% 1
Small Cap Value Portfolio 94% 1
</TABLE>
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION -- Investment securities of the Portfolios that are listed on
a securities exchange, and for which market quotations are readily available,
are valued at the last quoted sales price at the close of trading on the primary
exchange (currently 4:00 p.m., Eastern time). If there is no such reported sale,
these securities and unlisted securities for which market quotations are not
readily available, are valued at the last bid price.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during the respective
holding periods.
DIVIDENDS -- Dividends from net investment income of each Portfolio are declared
annually, if available. Distributions of net realized capital gains, of each
Portfolio, are generally made to shareholders annually, if available. Dividends
from net investment income and distributions from net realized capital gains are
determined in accordance with U.S. Federal income tax regulations, which may
differ from those amounts determined under generally accepted accounting
principles. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, they are charged or
credited to paid-in-capital, net investment income or accumulated net realized
gain, as appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of December 31, 1998, primarily attributable
to certain net operating losses which, for tax purposes, are not available to
offset future income or have been used to offset net short-term capital gains,
have been reclassified to the following accounts:
<TABLE>
<CAPTION>
Paid-In-Capital
---------------
<S> <C>
Growth II Portfolio $ 93,106
Technology & Communications Portfolio $ 95,178
Select 20 Portfolio $203,690
Small Cap Value Portfolio $ 46,830
</TABLE>
These reclassifications have no effect on net assets or net asset value per
share.
FEDERAL INCOME TAXES -- It is each Portfolio's intention to continue to qualify
as a regulated investment company for Federal income tax purposes and to
distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated each
business day by dividing the total value of the Portfolio's assets, less
liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by a third party custodian bank until the respective
agreements mature. Provisions of the repurchase agreements and procedures
adopted by the Fund and followed by Pilgrim Baxter & Associates, Ltd. (the
"Adviser") ensure that the market value of the collateral including accrued
interest thereon, is sufficient in the event of default by the counterparty. If
the counterparty defaults and the value of the collateral declines, or if the
counterparty enters into insolvency proceedings, realization of the collateral
by a Portfolio may be delayed or limited.
OTHER -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets.
All organizational costs incurred in connection with the start up of the Fund
have been equally allocated to each Portfolio, except the Mid-Cap Value
Portfolio and are being amortized on a straight line basis over a period of
sixty months. In the event that any of the initial shares of each Portfolio are
redeemed by any holder thereof during the period that each Portfolio is
amortizing its organizational costs, the redemption proceeds payable to the
holder thereof will be reduced by the unamortized organizational costs in the
same ratio as the number of initial shares being redeemed bears to the number of
initial shares outstanding at the time of redemption.
29
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The preparation
of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
The Fund and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
paid a monthly fee at an annual rate of 0.85% of the average daily net assets of
the Growth II, Technology & Communications and Select 20 Portfolios' average
daily net assets, 0.65% of the Large Cap Value Portfolio's average daily net
assets, and 1.00% of the Small Cap Value Portfolio's average daily net assets.
In the interest of limiting expenses of the Portfolios, the Adviser has entered
into an expense limitation agreement with the Fund ("Expense Limitation
Agreement"). The Adviser has agreed to waive or limit its fees and to assume
other expenses of each Portfolio to the extent necessary to limit the total
annual operating expenses (expressed as a percentage of the Portfolio's average
daily net assets) to 1.20% of the average daily net assets of the Growth II,
Technology & Communications, Select 20 and Small Cap Value Portfolios and to not
more than 1.00% of the average daily net assets of the Large Cap Value
Portfolio. Reimbursement by the Portfolio of the advisory fees waived or limited
and other expenses paid by the Adviser pursuant to the Expense Limitation
Agreement during any of the two previous fiscal years may be made at a later
date when the Portfolio has reached a sufficient asset size to permit
reimbursement to be made without causing the total annual expense ratio of each
Portfolio to exceed the total operating expense percentages described above.
Consequently, no reimbursement by the Portfolio will be made unless: (i) a
Portfolio's net assets exceed $75 million; (ii) a Portfolio's total annual
expense ratio is less than that listed above, and (iii) the payment of such
reimbursement is approved by the Board of Directors on a quarterly basis. At
June 30, 1999, the amount of advisory fee waiver and reimbursement of third
party expenses by the Adviser subject to possible reimbursement were as follows:
Growth II Portfolio $142,464
Technology & Communications
Portfolio $ 79,519
Large Cap Value Portfolio $ 48,818
Small Cap Value Portfolio $113,797
Pilgrim Baxter Value Investors, Inc., a wholly-owned subsidiary of the Adviser,
serves as the sub-advisor to the Large Cap Value Portfolio and the Small Cap
Value Portfolio. For its services provided pursuant to its Investment
Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim Baxter Value
Investors receives a fee from the Adviser at an annual rate of 0.40%, and 0.65%,
respectively, of the average daily net assets of the Large Cap Value Portfolio
and the Small Cap Value Portfolio. Pilgrim Baxter Value Investors, Inc. receives
no fees directly from the Large Cap Value Portfolio or the Small Cap Value
Portfolio.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of each Portfolio.
SEI Investments Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in SEI Investments
Mutual Funds Services (the "Sub-Administrator"). The Sub-Administrator is an
affiliate of the Fund's distributor and assists the Administrator in providing
administrative services to the Fund. For acting in this capacity, the
Administrator pays the Sub-Administrator a fee equal to the greater of $35,000
per Portfolio and $5,000 per additional class of shares or at the annual rate of
0.04% of the first $2.5 billion of the average daily net assets of (i) the Fund,
and (ii) The PBHG Funds, Inc., another fund family managed by the Adviser
(collectively known as the "PBHG Fund Family"), 0.025% of the next $7.5 billion
of the average daily net assets of each portfolio in the PBHG Fund Family, and
0.02% of the average daily net assets of each portfolio in the PBHG Fund Family
in excess of $10 billion.
The Fund has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. For its services the
Liquidity Desk received $16,732 for the six months ended June 30, 1999.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent of
the Fund. First Union National Bank, serves as the custodian for the Fund.
The Fund has entered into a shareholder servicing agreement with PBHG Fund
Services to provide shareholder support and other shareholder account-related
services. PBHG Fund Services has, in turn, contracted with UAM Shareholder
Service Center, Inc. ("UAMSSC") to assist in the provision of these services.
UAMSSC receives no fees directly from the Portfolios. For the six months ended
June 30, 1999, PBHG Fund Services was paid $4,200 each by the Growth II,
Technology & Communications, Select 20, Large Cap Value and Small Cap Value
Portfolios for shareholder services.
Certain officers and directors of the Fund who are or were officers of the
Adviser, Administrator, Sub-Administrator and the Distributor received no
compensation from the Fund for such services.
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for each Portfolio for the six months ended June
30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
(000) (000)
--------- -------
<S> <C> <C>
Growth II Portfolio 40,325 37,827
Technology & Communications Portfolio 324,330 153,613
Select 20 Portfolio 267,754 234,079
Large Cap Value Portfolio 191,019 171,468
Small Cap Value Portfolio 64,750 59,196
</TABLE>
30
<PAGE>
PBHG Insurance Series Fund, Inc.
[LOGO] -------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
At June 30, 1999 the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes was not materially
different from amounts reported for financial reporting purposes. The aggregate
gross unrealized appreciation and depreciation of securities held by each
Portfolio at June 30, 1999 are as follows:
<TABLE>
<CAPTION>
Net
Unrealized
Unrealized Unrealized Appreciation/
Appreciation Depreciation (Depreciation)
(000) (000) (000)
------------ ------------ --------------
<S> <C> <C> <C>
Growth II Portfolio 4,385 441 3,944
Technology &
Communications Portfolio 49,350 3,955 45,395
Select 20 Portfolio 84,940 2,719 82,221
Large Cap Value Portfolio 1,858 756 1,102
Small Cap Value Portfolio 4,827 2,238 2,589
</TABLE>
The following Portfolios had capital loss carryforwards at December 31, 1998,
that can be used to offset future capital gains:
<TABLE>
<CAPTION>
Capital Loss Capital Loss
Carryforward Carryforward
Expires Expires
12/31/2005 12/31/2006
------------- -------------
<S> <C> <C>
Growth II Portfolio 267,017 1,186,723
Technology & Communications
Portfolio 21,241 1,670,958
Select 20 Portfolio 55,142 8,729,157
Small Cap Value Portfolio -- 565,282
</TABLE>
5. LINE OF CREDIT
Each Portfolio may borrow, an amount up to its prospectus defined limitations,
from a $250,000,000 committed line of credit available to (i) the Fund, and (ii)
The PBHG Funds, Inc. Borrowings from the line of credit will bear interest at
the Federal Funds Rate plus 0.50%. No Portfolio had an outstanding borrowing at
June 30, 1999. Listed below is the fund which had an outstanding balance during
the six months ended June 30, 1999:
<TABLE>
<CAPTION>
Maximum Average Daily Weighted
Amount Outstanding Average
Borrowed Balance Interest Rate
-------- ----------- --------------
<S> <C> <C> <C>
Large Cap Value Portfolio $300,000 $ 6,077 5.06%
</TABLE>
31
<PAGE>
[LOGO]
PBHG Insurance Series Fund, Inc.
Investment Adviser
Pilgrim Baxter & Associates, Ltd.
Distributor
SEI Investments Distribution, Co.
