[LOGO]
PBHG Insurance Series Fund, Inc.
Annual Report December 31, 1999
o PBHG Growth II Portfolio
o PBHG Large Cap Value Portfolio
o PBHG Select 20 Portfolio
o PBHG Small Cap Value Portfolio
o PBHG Technology & Communications Portfolio
<PAGE>
LOGO PBHG Insurance Series Fund, Inc.
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PBHG Growth II Portfolio
Dear Shareholder,
The PBHG Insurance Series Fund, Inc. - PBHG Growth II Portfolio returned 49.97%
for the fourth quarter and 98.19% for the full year, 1999. This compares with
the Russell Midcap Growth Index return of 39.48% and 51.31% for the fourth
quarter and year, respectively.
The key factors that led to the favorable results in the fourth quarter were
evident throughout the year. First, growth stocks significantly outperformed
value stocks across all capitalizations. This is evidenced by the full year,
1999 return of the Russell Midcap Growth Index of 51.31% vs. -0.10% for the
Russell Midcap Value Index. Second, we overweighted the technology sector when
technology had, by far, the best returns in the market. And third, the
individual stocks in each major sector of the Portfolio outperformed the stocks
held in the benchmark. This was especially true in the technology sector, where
the Portfolio's technology holdings significantly outperformed those technology
stocks represented in the Russell Midcap Growth Index. Of course, the favorable
returns experienced by the technology sector in 1999 involved accepting the
volatility and risk inherent in that sector and we do not believe those returns
can be consistently achieved. In addition, the returns of the Portfolio's
holdings in the consumer, healthcare, industrial and services sectors well
exceeded those of the benchmark.
Top Five Holdings as of December 31, 1999 Top Five Sectors
- ----------------------------------------- ---------------------------------
Infospace.com 2.9% Technology 49.6%
Verisign 2.8% Consumer Cyclical 13.5%
Emulex 2.6% Healthcare 8.5%
Medimmune 2.6% Services 8.2%
JDS Uniphase 2.6% Industrial 4.9%
Although equity mutual funds overall experienced net inflows for 1999, small-cap
funds actually experienced net outflows for the year. However, L. Keith Mullins
of Salomon Smith Barney predicts a "significant rotation by institutional
capital" into small- and mid-cap stocks. If institutional investors begin to
rotate more assets out of large-caps and retail investors continue their shift
to small- and mid-caps, we believe small- and mid-cap stocks could enjoy a
second year of strong performance.
In closing, we thank you for your confidence in Pilgrim Baxter & Associates,
Ltd. and in the PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Jeffrey A. Wrona
- ---------------------
Jeffrey A. Wrona, CFA
Portfolio Manager
1
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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Growth II Portfolio
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Annualized
One Year Inception to
Return Date(2)
- --------------------------------------------------------------------------------
PBHG Growth II Portfolio 98.19% 36.70%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in the
PBHG Growth II Portfolio versus the Russell Midcap Growth Index
and the Lipper Mid-Cap Growth Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PBHG Russell Lipper
Growth II Midcap Growth Mid-Cap Growth
Portfolio Index(3) Funds Average(4)
--------- ------------- ----------------
4/30/97 $10000 $10000 $10000
10090 10896 11209
6/30/97 10450 11198 11687
11300 12269 12639
10960 12150 12602
9/30/97 11440 12765 13554
10830 12125 12830
10580 12252 12620
12/31/97 10750 12413 12715
10380 12189 12513
11250 13335 13627
3/31/98 11710 13894 14323
12140 14083 14461
11240 13504 13650
6/30/98 11840 13886 14299
10950 13291 13517
8430 10754 10754
9/30/98 9320 11568 11537
9720 12419 12064
10240 13257 13025
12/31/98 11630 14630 14636
12620 15069 15230
11490 14332 14155
3/31/99 12460 15130 15215
13380 15820 15824
13190 15616 15783
6/30/99 14550 16706 17040
14550 16175 16781
15170 16006 16763
9/30/99 15370 15870 17100
16850 17098 18574
18550 18868 20812
12/31/99 23050 22135 24587
- ----------
(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 PBHG Growth II Portfolio commenced operations on April 30, 1997.
(3) 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.
(4) The Lipper Mid-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Mid-Cap Growth category.
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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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Large Cap Value Portfolio
Dear Shareholder,
In 1992, Bill Clinton rallied voters with the slogan, "It's the economy,
stupid!" In 1999, the stock market rallied on the slogan, "It's the earnings (or
lack of them), stupid!" A Merrill Lynch study found that, on the New York Stock
Exchange, stocks with no earnings were up 52% in 1999, while stocks with
earnings actually declined 2% for the year. This type of market created a very
difficult year for value managers, as is evidenced by the disparate returns of
growth and value.
The S&P 500 Index rose 7.70% and the Russell 1000 Growth Index rose 20.54%,
however, the Russell 1000 Value Index declined 4.90% for the six months ended
December 31, 1999. For the full year 1999, the S&P 500 climbed 21.03% and the
Russell 1000 Growth Index soared 33.14%, while the Russell 1000 Value Index rose
7.34%. Remarkably, the S&P 500 has risen by more than 20% per annum for a record
five straight years.
We believe the reason for the disparity lies almost entirely in the stock
market's intense interest in the technology sector. Many technology stocks with
strong revenue and earnings growth have risen very dramatically this year. The
Nasdaq Composite Index, with its heavy concentration of technology stocks, rose
an amazing 48.27% for the fourth quarter of 1999 alone.
This narrow market, which focused on highly valued technology stocks and stocks
without earnings, challenged the resolve of even the most stalwart value
investors. For the six months ending December 31, 1999, the Large Cap Value
Portfolio returned -0.33%, underperforming the S&P 500 Index by 8.03%, but
outperforming the Russell 1000 Value Index by 4.57%. For the twelve months ended
December 31, 1999, the Portfolio returned 8.89%, underperforming its benchmark,
the S&P 500 Index by 12.14%, but outpacing the Russell 1000 Value by 1.55%. Our
underweighted position in technology, and our overweighted positions in both the
pharmaceutical sector and the telecommunications services sector were the major
reasons why we trailed the S&P 500 in the second half of 1999.
While a Federal Reserve interest rate increase is almost certain in early 2000,
inflation should remain under control, allowing for an upward bias for the
equity markets throughout the year. While we continue to invest in reasonably
priced technology companies, we are also finding companies with strong earnings
prospects and reasonable valuations in many other sectors of the economy,
namely, pharmaceuticals, telecommunications services, financials, and foods.
This abundance of attractively priced groups offers hope that value investing
will return in 2000.
Thank you for your confidence in Pilgrim Baxter Value Investors, Inc. and in the
PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Raymond J. McCaffrey
- ---------------------------------
Raymond J. McCaffrey, CFA
Portfolio Manager
3
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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Large Cap Value Portfolio
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
One Year Inception to
Return Date(2)
- --------------------------------------------------------------------------------
PBHG Large Cap Value Portfolio 8.89% 22.93%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in the
PBHG Large Cap Value Portfolio versus the Lipper
Multi-Cap Value Funds Average and the S&P 500 Index.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PBHG Lipper
Large Cap Multi-Cap Value S&P 500
Value Potfolio Funds Average(3) Index(4)
-------------- ---------------- -------
10/28/97 $10000 $10000 $10000
10200 10214 10463
12/31/97 10440 10383 10642
10440 10328 10760
11111 11044 11535
3/31/98 11642 11517 12125
11862 11568 12247
11862 11310 12037
6/30/98 12022 11339 12526
11956 10947 12393
10284 9312 10603
9/30/98 11115 9743 11282
12387 12200 10507
13298 10984 12940
12/31/98 14403 11333 13365
14656 11367 14258
14060 11021 13814
3/31/99 14424 11311 14367
14827 12171 14924
14898 12122 14571
6/30/99 15736 12547 15380
15403 12176 14900
15140 11803 14826
9/31/99 14950 11338 14419
15714 11744 15332
15983 11823 15643
12/31/99 15683 12192 16565
- ----------
(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 PBHG Large Cap Value Portfolio commenced operations on October 28, 1997.
(3) The Lipper Multi-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Value category.
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) The 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.
4
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[LOGO] 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 74.31%
for the quarter ended December 31, 1999. This compares favorably to the returns
for the quarter of the Portfolio's benchmark, the S&P 500 Index at 14.88% and
the Russell 1000 Growth Index at 25.1%. The outperformance for the quarter was
provided by a strong showing in December when the Portfolio returned 31.6%,
compared to 5.9% for the S&P 500 Index and 10.4% for the Russell 1000 Growth
Index. For the full year 1999, the Portfolio returned 100.61%, versus 21.0% for
the S&P 500 Index and 33.1% for the Russell 1000 Growth Index. Since inception
on September 25, 1997, the Portfolio has produced an annualized return of 68.7%,
compared to an annualized return of 23.8% for the S&P 500 Index for the same
time period.
The fourth quarter of 1999 was clearly an extraordinary period for technology
stocks. The Portfolio was well positioned for this move in the market.
Technology companies comprised the largest sector concentration of the Select 20
Portfolio and, once again, it was the biggest contributor to performance. The
top five performers in the fourth quarter were all technology stocks, and
interestingly, they all returned over 100% for the quarter. Of course, the
favorable returns experienced by the technology sector in 1999 involved
accepting the volatility and risk inherent in that sector and we do not believe
those returns can be consistently achieved.
At December 31, 1999, the Portfolio's holdings were divided among five economic
sectors: technology, 68.1%; consumer, 16.3%; healthcare, 4.0%; industrial, 3.2%;
financial, 2.5%. The technology weighting in the Portfolio increased
sequentially by 200 basis points primarily due to price appreciation.
Clearly, investors favored large-cap growth and technology stocks in 1999.
Determining factors seemed to be sustainable, above-average growth rates in an
expanding economic environment and trading liquidity that allowed investors to
react quickly if deemed necessary. In addition to the strong business
fundamentals evidenced by the companies in which we invested, we think these two
factors also contributed to the Portfolio's performance over the course of 1999.
The market is currently factoring in a 0.25% rate hike by the Federal Reserve
during their meeting in early February. More than likely, the Federal Reserve
will adopt a tightening bias towards future interest rate hikes. The Fed had
provided substantial liquidity in preparation for Y2K that now needs to be
removed. The labor market continues to remain very tight by historical standards
and compensation growth is showing signs of accelerating in response. On the
other hand, productivity growth could continue to move higher, which should take
some needed pressure off this tight labor situation. A rising interest rate
environment generally creates a stiff wind against equity market performance.
However, whatever the economic environment, we remain steadfast in our belief
that focusing on companies with strong revenue and earnings growth prospects
continues to be the most profitable long-term investment strategy.
Thank you for the confidence you've shown in Pilgrim Baxter & Associates, Ltd.
and in your continued investment in the PBHG Select 20 Portfolio.
Sincerely,
/s/ Michael S. Sutton
- ----------------------
Michael S. Sutton, CFA
Portfolio Manager
5
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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Select 20 Portfolio
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
One Year Inception to
Return Date(2)
- --------------------------------------------------------------------------------
PBHG Select 20 Portfolio 100.61% 68.69%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in
the PBHG Select 20 Portfolio versus the S&P 500 Index
and the Lipper Large-Cap Growth Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PBHG Lipper
Select 20 S&P 500 Large-Cap Growth
Portfolio Index(3) Funds Average(4)
--------- -------- -----------------
9/25/97 $10000 $10000 $10000
9629 9666 9644
9679 10113 9886
12/31/97 10050 10287 9998
10220 10401 10165
11353 11150 10975
3/31/98 11994 11721 11492
12234 11839 11681
11964 11636 11407
6/30/98 13176 12108 12130
13247 11979 12061
11042 10249 10083
9/30/98 12626 10906 10801
12876 11793 11513
13778 12508 12345
12/31/98 16333 13229 13677
17726 13782 14621
16543 13354 14024
3/31/99 17966 13888 14864
17305 14426 14881
16734 14085 14376
6/30/99 17906 14867 15420
17445 14403 14951
18187 14331 14985
9/30/99 18798 13939 14851
20862 14820 15929
24890 15122 16824
12/31/99 32766 16012 18792
- ----------
(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 PBHG Select 20 Portfolio commenced operations on September 25, 1997.
(3) The S&P 500 Index is a capitalization-weighted index of 500 stocks designed
to measure performance of the broad domestic equity markets. 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.
(4) The Lipper Large-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Large-Cap Growth category.
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.
6
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Small Cap Value Portfolio
Dear Shareholder,
Pilgrim Baxter's value process looks beyond those companies whose sole attribute
is traditional low valuation (so called 'deep discount' which are often
securities found in the Russell 2000 Value Index). Likewise, our value process
excludes those companies with high valuations that have discounted perfect
operational execution (there are many of these out there and are not limited to
a particular benchmark). With the goal of outperforming the Portfolio's
benchmark, the Russell 2000 Index, as well as the Russell 2000 Value Index over
a three to five year market cycle, while remaining competitive on a quarterly
basis, we do invest in small companies that we perceive to have value beyond
that discounted in the current market price.
Performance
The following table summarizes the PBHG Insurance Series Fund, Inc. - PBHG Small
Cap Value Portfolio's performance versus that of its benchmark, the Russell 2000
Index as well as the Russell 2000 Value Index for the fourth quarter and the
year ended December 31, 1999.
----------------------------------------------------
Total Return
Period Ending
12/31/99
Q4:99 1999
----------------------------------------------------
PBHG Small Cap Value 14.2% 15.9%
Portfolio
Russell 2000 Index 18.5% 21.3%
Russell 2000 Value Index 1.5% (1.5)%
----------------------------------------------------
Market and Sector Impacts
During the fourth quarter, the market environment continued to narrow in focus
and, in our opinion, quality. Despite the market's limited focus, we continued
to follow our discipline of owning a diversified portfolio of those companies
possessing solid long-term growth prospects, improving business fundamentals and
reasonable valuations.
As it was for all of 1999, technology was "the place to be" during the fourth
quarter. As a result, the sector was a major factor in our performance relative
to the Russell 2000 and Russell 2000 Value Indices. The technology sector
returned 56.1% for the Portfolio compared with the Russell 2000's technology
sector return of 65.8% and the Russell 2000 Value's technology sector return of
48.3%. At year end, the Portfolio held 23.6% of its assets in the technology
sector, while the Russell 2000 and the Russell 2000 Value ended the year with
weightings in the technology sector of 32.3% and 10.6%, respectively. Of course,
the favorable returns experienced by the technology sector in 1999 involved
accepting the volatility and risk inherent in that sector and we do not believe
those returns can be consistently achieved. We also believe that the technology
sector's current valuations already reflect its great growth potential and
superb business dynamics. According to our discipline, this has led us to reduce
the Portfolio's technology weighting. This is all part of consistently applying
our process of investing in companies that provide an attractive combination of
long-term growth prospects, near-term business dynamics and reasonable
valuations.
We have continued to underweight the financial sector, holding 14.9% at year end
compared with 16.6% and 29.3% for the Russell 2000 and Russell 2000 Value
benchmarks, respectively. Decelerating growth and deteriorating business
dynamics due to rising interest rates keeps us cautious on the majority of the
financial stocks. In addition to correctly minimizing exposure to this
poor-performing sector (the Russell 2000 and Russell 2000 Value financial
sectors returned -1.1% and -3.3%, respectively), the Portfolio benefited from
very good stock selection within the sector, returning 7.0% for the fourth
quarter.
7
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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Small Cap Value Portfolio
Relative to our benchmark, the portfolio was over-weighted in the consumer
staples and energy sectors. Although the stocks in these sectors exhibited all
of the attributes we look for, the market continued to ignore quality companies
selling at a discount to their intrinsic value. Exposure to these sectors
detracted from performance; however, we are confident that we hold the right
companies in these sectors. Over time, we expect these stocks to outperform as
market turbulence and continued Fed rate hikes reduce some market excesses.
Looking Forward
For the equity markets in 2000, we believe that volatility will be the symptom
and that discipline should be the prescription. The market has, and will most
likely continue to, set new volatility records. More than ever, the hallmark of
successful investing will be discipline displayed in both up and down market
swings. Although we disagree that domestic markets are experiencing a
speculative "bubble"; we do note that market pullbacks are normal in the course
of any bull market. Regardless of future market action, we continue to believe
our process will deliver incremental returns and risk diversification for our
investors.
Thank you for your confidence in Pilgrim Baxter Value Investors, Inc. and in the
PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Jermoe J. Heppelmann
- -------------------------
Jerome J. Heppelmann, CFA
Portfolio Manager
8
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Small Cap Value Portfolio
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
One Year Inception to
Return Date(2)
- --------------------------------------------------------------------------------
PBHG Small Cap Value Portfolio 15.93% 14.71%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in the
PBHG Small Cap Value Portfolio versus the Russell 2000 Index
and the Lipper Small-Cap Value Funds Average
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PBHG Russell Lipper Russell
Small Cap 2000 Small-Cap Value 2000
Value Portfolio Index(3) Funds Average(4) Value Index(5)
--------------- -------- ---------------- --------------
10/28/97 $10000 $10000 $10000 $10000
10010 9561 9615 9728
12/31/97 10428 9499 9821 9835
10577 9665 9983 10168
11194 9513 9930 9984
3/31/98 11891 10216 10619 10588
12169 10637 11074 11017
11532 10696 11122 11072
6/30/98 11463 10120 10874 10680
10940 10141 10902 10620
8768 9320 10525 9788
9/30/98 9187 7510 8954 8255
10014 8098 9368 8721
10751 8428 10103 8980
12/31/98 11568 8870 10562 9223
11229 9419 10896 9512
10373 9544 10929 9296
3/31/99 10014 8771 10597 8682
10701 8908 10875 8590
11389 9706 11702 9374
6/30/99 11927 9848 11655 9683
12066 10294 12064 10013
11847 10011 11707 9775
9/30/99 11748 9641 11349 9418
11469 9643 11902 9229
12037 9682 11292 9045
12/31/99 13412 10260 11368 9091
- ----------
(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 PBHG Small Cap Value Portfolio commenced operations on October 28, 1997.
(3) 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.
(4) The Lipper Small-Cap Value Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Small-Cap Value category.
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.
(5) The Russell 2000 Value Index is an unmanaged index that measures the
performance of those securities in the Russell 2000 Index with lower
price-to-book ratios and lower forecasted growth values.
9
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[LOGO] 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 108.57% for the fourth quarter and 234.38% for the full year,
1999. This compares with the Soundview Technology Index return of 63.29% and
134.27% for the fourth quarter and year, respectively.
The year's results were driven by strong returns from the telecommunications
equipment (both wireless and wireline), semiconductor, semiconductor capital
equipment, Internet infrastructure and Internet content provider sub-sectors.
However, the business-to-business (B2B) software sub-sector was one of the clear
leaders for the Portfolio during the past three months. While the
business-to-consumer (B2C) e-commerce opportunity has garnered much of the
attention from investors since the early days of the Internet, 1999 has emerged
as the year where business-to-business e-commerce opportunities stepped into the
forefront and gained some of the spotlight. In our opinion, the opportunities
are enormous when one considers how the Internet enables companies to more
efficiently and cost-effectively manage their supply chains (such as
procurement).
While the semiconductor and semiconductor capital equipment sub-sectors showed
strong returns, we reduced the Portfolio's overall exposure in these areas late
in the third quarter and during the fourth quarter. The primary driver to the
reduction was concern regarding inventory build-ups by customers and in the
channel (contract manufacturers) due to Y2K concerns. In addition, some service
providers and many enterprises implemented purchasing lock-downs prior to and
after Y2K.
<TABLE>
<CAPTION>
Subsector Weightings Top Five Holdings as of December 31, 1999
- -------------------------------------------- -------------------------------------------
<S> <C> <C> <C>
Software 31.4% Infospace.com 11.3%
Networking/Telecom Equip. 22.2% JDS Uniphase 4.2%
Internet 19.5% QUALCOMM 3.7%
Semiconductors 14.3% Verisign 3.6%
Services 12.3% Emulex 3.6%
Semi. Capital Equipment 0.5%
Systems/Hardware 0.0%
</TABLE>
We remain strong believers that demand for bandwidth continues to accelerate.
That means more capacity is required on both the local and long haul networks.
With the progression of many new state-of-the-art fiber builds domestically and
internationally, we believe the demand for next generation telecommunications
equipment to light these networks should remain robust. Therefore, we continue
to be focused on those companies that not only provide the equipment but also
provide the optical components to these equipment vendors.
While there were many concerns leading into Y2K, the economy appears to be left
essentially unscathed from the millennium bug. This is a credit to the amount of
preparation and resources spent by companies to address the issue. However, the
economy still could feel a near-term impact as it is not apparent what affects
inventory building and spending lock-downs prior to Y2K will have on near-term
financial results. With that said, although we remain cautious on the
semiconductor industry due to these concerns, we believe the long-term
fundamentals in this sub-sector remain favorable.
10
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[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Technology & Communications Portfolio
Currently, we anticipate that Internet and e-commerce companies will continue to
have significant weightings in the Portfolio. As we mentioned above, the
business-to-business opportunities remain enormous, as companies continue to
automate and improve their supply chains. Finally, continuing on the Internet,
we remain bullish on the companies that are helping to build or improve what we
consider the Internet today. These include companies that provide website
management and hosting services, content delivery solutions, as well as
application service providers. Of course, the favorable returns experienced by
the technology sector in 1999 involved accepting the volatility and risk
inherent in that sector and we do not believe those returns can be consistently
achieved.
In closing, we thank you for your confidence in Pilgrim Baxter & Associates,
Ltd. and in the PBHG Insurance Series Fund, Inc.
Sincerely,
/s/ Jeffrey A. Wrona
- ----------------------------------
Jeffrey A. Wrona, CFA
Portfolio Manager
11
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
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PBHG Technology & Communications Portfolio
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1) AS OF DECEMBER 31, 1999
- --------------------------------------------------------------------------------
Annualized
One Year Inception to
Return Date(2)
- --------------------------------------------------------------------------------
PBHG Technology & Communications Portfolio 234.38% 77.08%
- --------------------------------------------------------------------------------
Comparison of Change in the Value of a $10,000 Investment in the PBHG
Technology & Communications Portfolio versus the Lipper Science & Technology
Funds Average and the Soundview Technology Index
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
PBHG Lipper Science Soundview
Technology & & Technology Technology
Communications Portfolio Funds Average(3) Index(4)
------------------------ ---------------- ----------
4/30/97 $10000 $10000 $10000
9990 11352 11342
6/30/97 10320 11504 11369
11550 12979 13164
11490 12966 13567
9/30/97 12290 13631 13895
10790 12449 12286
10550 12339 12152
12/31/97 10410 12040 11333
10040 12345 11611
11150 13759 13111
3/31/98 11590 14169 13051
11860 14718 13946
10840 13671 12635
6/30/98 11690 14725 13322
11082 14494 13042
9331 11588 10055
9/30/98 10642 13108 11570
10812 14040 12713
12032 15925 14099
12/31/98 13762 18512 16129
16613 21448 18666
14832 19604 16407
3/31/99 17423 21821 17820
18543 22519 18319
17773 22197 18903
6/30/99 20283 24856 21307
19973 24578 21357
21573 25898 22653
9/30/99 22063 26807 23138
26494 29710 25652
31475 34957 30241
12/31/99 46017 43993 37779
- ----------
(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 PBHG Technology & Communications Portfolio commenced operations on April
30, 1997.
(3) The Lipper Science & Technology Funds Average represents the average
performance of all mutual funds classified by Lipper, Inc. in the Science &
Technology category. 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) 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.
12
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
PBHG Growth II Portfolio
STATEMENT OF NET ASSETS
As of December 31, 1999
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 89.7%
CONSUMER CYCLICAL -- 13.5%
AUDIO/VIDEO PRODUCTS -- 0.9%
Gemstar International* 22,800 $1,625
- --------------------------------------------------------------------------------
1,625
- --------------------------------------------------------------------------------
RADIO -- 1.6%
Infinity Broadcasting* 80,525 2,914
- --------------------------------------------------------------------------------
2,914
- --------------------------------------------------------------------------------
RESORTS/THEME PARKS -- 0.8%
Premier Parks* 47,500 1,372
- --------------------------------------------------------------------------------
1,372
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 2.0%
American Eagle Outfitters* 80,000 3,600
- --------------------------------------------------------------------------------
3,600
- --------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 0.9%
Insight Enterprises* 40,000 1,625
- --------------------------------------------------------------------------------
1,625
- --------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 2.2%
Circuit City Stores 39,100 1,762
Tandy 45,000 2,213
- --------------------------------------------------------------------------------
3,975
- --------------------------------------------------------------------------------
RETAIL-JEWELRY -- 4.2%
Tiffany & Company 40,000 3,570
Zales* 79,300 3,836
- --------------------------------------------------------------------------------
7,406
- --------------------------------------------------------------------------------
TELEVISION -- 0.9%
Univision Communications, Cl A* 15,600 1,594
- --------------------------------------------------------------------------------
1,594
- --------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $21,758) 24,111
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.5%
FOOD-RETAIL -- 0.5%
Whole Foods Market* 17,700 821
- --------------------------------------------------------------------------------
821
- --------------------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $748) 821
- --------------------------------------------------------------------------------
ENERGY -- 2.8%
OIL & GAS DRILLING -- 0.9%
Diamond Offshore Drilling 50,400 1,540
- --------------------------------------------------------------------------------
1,540
- --------------------------------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 0.5%
EOG Resources 50,000 878
- --------------------------------------------------------------------------------
878
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.4%
Cooper Cameron* 52,500 2,569
- --------------------------------------------------------------------------------
2,569
- --------------------------------------------------------------------------------
TOTAL ENERGY (COST $4,927) 4,987
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONTINUED
FINANCIAL -- 1.7%
FINANCIAL-INVESTMENT BANKER/BROKER -- 1.7%
Ameritrade, Cl A* 55,100 $ 1,195
E*Trade Group* 73,300 1,915
- --------------------------------------------------------------------------------
3,110
- --------------------------------------------------------------------------------
TOTAL FINANCIAL (COST $3,815) 3,110
- --------------------------------------------------------------------------------
HEALTH CARE -- 8.5%
DIAGNOSTIC EQUIPMENT -- 0.8%
CYTYC* 22,200 1,356
- --------------------------------------------------------------------------------
1,356
- --------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 1.4%
Allscripts Pharmaceutical* 58,500 2,574
- --------------------------------------------------------------------------------
2,574
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 6.3%
Celgene* 24,700 1,729
Medicis Pharmaceutical, Cl A* 50,200 2,137
Medimmune* 27,800 4,611
Teva Pharmaceutical ADR 37,600 2,695
- --------------------------------------------------------------------------------
11,172
- --------------------------------------------------------------------------------
TOTAL HEALTHCARE (COST $12,090) 15,102
- --------------------------------------------------------------------------------
INDUSTRIAL -- 4.9%
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 0.8%
Flextronics International* 33,600 1,546
- --------------------------------------------------------------------------------
1,546
- --------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 2.6%
Mettler-Toledo International* 93,100 3,556
Microchip Technology* 15,800 1,081
- --------------------------------------------------------------------------------
4,637
- --------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 1.5%
PE Corp-PE Biosystems Group 13,400 1,612
Perkinelmer 24,200 1,009
- --------------------------------------------------------------------------------
2,621
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $6,890) 8,804
- --------------------------------------------------------------------------------
SERVICES -- 8.2%
ADVERTISING AGENCIES -- 1.9%
Omnicom Group 34,700 3,470
- --------------------------------------------------------------------------------
3,470
- --------------------------------------------------------------------------------
ADVERTISING SALES -- 2.1%
Lamar Advertising* 60,500 3,664
- --------------------------------------------------------------------------------
3,664
- --------------------------------------------------------------------------------
ADVERTISING SERVICES -- 2.2%
Getty Images* 79,900 3,905
- --------------------------------------------------------------------------------
3,905
- --------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.7%
USWeb* 68,700 3,053
- --------------------------------------------------------------------------------
3,053
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 0.3%
United Rentals* 30,200 517
- --------------------------------------------------------------------------------
517
- --------------------------------------------------------------------------------
TOTAL SERVICES (COST $12,126) 14,609
- --------------------------------------------------------------------------------
13
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
PBHG Growth II Portfolio
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONTINUED
TECHNOLOGY -- 49.6%
APPLICATIONS SOFTWARE -- 0.2%
Intertrust Technologies* 2,600 $ 306
- --------------------------------------------------------------------------------
306
- --------------------------------------------------------------------------------
CIRCUITS -- 0.5%
Integrated Device Technology* 29,200 847
- --------------------------------------------------------------------------------
847
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 4.3%
Check Point Software Technologies* 13,900 2,763
Verisign* 26,200 5,002
- --------------------------------------------------------------------------------
7,765
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 5.1%
Active Software* 10,900 1,003
Broadbase Software* 7,000 787
Informatica* 20,800 2,213
Microstrategy* 17,800 3,738
VA Linux Systems* 6,600 1,364
- --------------------------------------------------------------------------------
9,105
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.8%
Redback Networks* 18,300 3,248
- --------------------------------------------------------------------------------
3,248
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 1.2%
Veritas Software* 15,650 2,240
- --------------------------------------------------------------------------------
2,240
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 6.2%
Atmel* 53,400 1,579
Cypress Semiconductor* 49,900 1,615
Fairchild Semicon International, Cl A* 35,700 1,062
LSI Logic* 20,400 1,377
QLogic* 7,400 1,183
Triquint Semiconductor* 38,700 4,305
- --------------------------------------------------------------------------------
11,121
- --------------------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICES -- 2.0%
BEA Systems* 23,800 1,664
Broadvision* 10,900 1,854
- --------------------------------------------------------------------------------
3,518
- --------------------------------------------------------------------------------
FIBER OPTICS -- 6.2%
C-Cor.net 15,800 1,211
Ciena* 23,300 1,340
Finisar* 3,600 323
JDS Uniphase* 28,400 4,581
MRV Communications* 31,800 1,999
Sycamore Networks* 5,100 1,571
- --------------------------------------------------------------------------------
11,025
- --------------------------------------------------------------------------------
INTERNET CONTENT -- 4.0%
Infospace.com* 23,700 5,072
Rare Medium Group* 59,100 2,017
- --------------------------------------------------------------------------------
7,089
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Face Market
Amount Value
Description (000) (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONTINUED
INTERNET SOFTWARE -- 13.0%
Akamai Technologies* 4,100 $ 1,343
Ariba* 19,800 3,512
Art Technology* 20,800 2,665
Commerce One* 12,000 2,358
Exodus Communications* 34,700 3,082
F5 Networks* 10,500 1,197
Lycos* 43,100 3,429
Verio* 30,700 1,418
Viant* 14,000 1,386
Vignette* 17,400 2,836
- --------------------------------------------------------------------------------
23,226
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 3.4%
Emulex* 41,000 4,613
Juniper Networks* 4,400 1,496
- --------------------------------------------------------------------------------
6,109
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.2%
Commscope* 27,300 1,100
Ditech Communications* 11,900 1,113
- --------------------------------------------------------------------------------
2,213
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.5%
Powerwave Technology* 14,300 835
- --------------------------------------------------------------------------------
835
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $53,072) 88,647
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $115,426) 160,191
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 9.6%
Morgan Stanley
2.95%, dated 12/31/99, matures 01/03/00,
repurchase price $17,105,798
(collateralized by U.S. Agency
Obligations: total market value
$17,531,512) (A) $ 17,101 $17,101
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $17,101) 17,101
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.3%
(COST $132,527) 177,292
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.7%
Other Assets and Liabilities, Net 1,310
- --------------------------------------------------------------------------------
NET ASSETS
Paid-in-capital (authorized 500 million
shares - $0.001 par value) based on
7,746,802 outstanding shares of common
stock 125,374
Accumulated net realized gain on
investments 8,463
Net unrealized appreciation on investments 44,765
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 178,602
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 23.05
- --------------------------------------------------------------------------------
* 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.
14
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
SCHEDULE OF INVESTMENTS
As of December 31, 1999
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.5%
CONSUMER CYCLICAL -- 3.1%
ATHLETIC FOOTWARE -- 1.4%
Nike, Cl B 11,600 $ 575
- --------------------------------------------------------------------------------
575
- --------------------------------------------------------------------------------
AUTO-CARS/LIGHT TRUCKS -- 0.7%
Ford Motor Company 5,000 267
- --------------------------------------------------------------------------------
267
- --------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.0%
McDonald's 9,700 391
- --------------------------------------------------------------------------------
391
- --------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $1,180) 1,233
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 16.8%
BEVERAGES-NON-ALCOHOLIC -- 1.2%
Pepsico 13,400 472
- --------------------------------------------------------------------------------
472
- --------------------------------------------------------------------------------
BREWERY -- 2.1%
Anheuser Busch 12,000 851
- --------------------------------------------------------------------------------
851
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.0%
Dial 15,600 379
- --------------------------------------------------------------------------------
379
- --------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 12.5%
Bestfoods 24,400 1,282
General Mills 24,200 865
Kellogg 5,700 176
Quaker Oats 16,700 1,096
Ralston-Purina Group 28,900 806
Sara Lee 35,600 785
- --------------------------------------------------------------------------------
5,010
- --------------------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $6,704) 6,712
- --------------------------------------------------------------------------------
ENERGY -- 7.9%
OIL COMPANIES-INTEGRATED -- 5.5%
Atlantic Richfield 4,600 398
Exxon Mobil 12,319 992
Royal Dutch Petroleum 7,300 441
Texaco 2,200 119
USX-Marathon Group 11,200 277
- --------------------------------------------------------------------------------
2,227
- --------------------------------------------------------------------------------
PIPELINES -- 2.4%
Columbia Energy Group 15,000 949
- --------------------------------------------------------------------------------
949
- --------------------------------------------------------------------------------
TOTAL ENERGY (COST $3,121) 3,176
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONTINUED
FINANCIAL -- 16.4%
DIVERSIFIED FINANCIAL SERVICES -- 2.6%
Citigroup 18,500 $ 1,028
- --------------------------------------------------------------------------------
1,028
- --------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 9.8%
Federal National Mortgage 31,800 1,985
Federal Home Loan Mortgage 41,300 1,944
- --------------------------------------------------------------------------------
3,929
- --------------------------------------------------------------------------------
MONEY CENTER BANKS -- 2.0%
Chase Manhattan 10,400 808
- --------------------------------------------------------------------------------
808
- --------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-U.S. -- 2.0%
PNC Bank 4,600 205
Wells Fargo 14,600 590
- --------------------------------------------------------------------------------
795
- --------------------------------------------------------------------------------
TOTAL FINANCIAL (COST $6,380) 6,560
- --------------------------------------------------------------------------------
HEALTH CARE -- 20.9%
MEDICAL-DRUGS -- 20.9%
American Home Products 40,100 1,582
Bristol-Myers Squibb 24,200 1,553
Lilly (Eli) & Co. 12,000 798
Merck 19,300 1,294
Pfizer 11,800 383
Pharmacia & Upjohn 17,500 788
Schering-Plough 46,700 1,970
- --------------------------------------------------------------------------------
8,368
- --------------------------------------------------------------------------------
TOTAL HEALTH CARE (COST $8,984) 8,368
- --------------------------------------------------------------------------------
INDUSTRIAL -- 2.7%
ELECTRIC PRODUCTS-MISCELLANEOUS -- 1.0%
Emerson Electric 6,900 396
- --------------------------------------------------------------------------------
396
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 1.7%
Vishay Intertechnology* 21,000 664
- --------------------------------------------------------------------------------
664
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $1,022) 1,060
- --------------------------------------------------------------------------------
SERVICES -- 19.5%
COMPUTER SERVICES -- 1.6%
Unisys* 19,700 629
- --------------------------------------------------------------------------------
629
- --------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 8.9%
AT&T 11,000 559
GTE 27,000 1,905
SBC Communications 22,500 1,097
- --------------------------------------------------------------------------------
3,561
- --------------------------------------------------------------------------------
TELEPHONE-LOCAL -- 9.0%
Bell Atlantic 24,800 1,527
Bellsouth 44,700 2,092
- --------------------------------------------------------------------------------
3,619
- --------------------------------------------------------------------------------
TOTAL SERVICES (COST $7,881) 7,809
- --------------------------------------------------------------------------------
15
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
PBHG Large Cap Value Portfolio
- --------------------------------------------------------------------------------
Shares/
Face Market
Amount Value
Description (000) (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONCLUDED
TECHNOLOGY -- 11.2%
COMPUTER SOFTWARE -- 2.3%
Computer Associates International 13,100 $ 916
- --------------------------------------------------------------------------------
916
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 2.1%
Synopsys* 12,400 828
- --------------------------------------------------------------------------------
828
- --------------------------------------------------------------------------------
COMPUTERS-MICRO -- 2.5%
IBM 9,200 994
- --------------------------------------------------------------------------------
994
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 3.3%
First Data 26,600 1,312
- --------------------------------------------------------------------------------
1,312
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 1.0%
Electronics for Imaging* 7,200 418
- --------------------------------------------------------------------------------
418
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $4,070) 4,468
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $39,342) 39,386
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.2%
Morgan Treasury
5.25%, dated 12/31/99, matures 01/03/00,
repurchase price $1,276,806 (collateralized by
U.S. Treasury Instruments: total market value
$1,314,239)(A) $ 1,276 1,276
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,276) 1,276
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.7%
(COST $40,618) $40,662
- --------------------------------------------------------------------------------
Percentages based on net assets of $39,972,170
* Non-income producing security
(A) -- Tri Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
PBHG Select 20 Portfolio
STATEMENT OF NET ASSETS
As of December 31, 1999
- --------------------------------------------------------------------------------
Market
Value
Description Shares (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 94.1%
CONSUMER CYCLICAL -- 16.3%
AUDIO/VIDEO PRODUCTS -- 7.5%
Gemstar International* 797,800 56,843
- --------------------------------------------------------------------------------
56,843
- --------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 3.3%
Clear Channel Communications* 281,900 25,160
- --------------------------------------------------------------------------------
25,160
- --------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 3.6%
Home Depot 389,400 26,698
- --------------------------------------------------------------------------------
26,698
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 1.9%
Wal-Mart Stores 207,800 14,364
- --------------------------------------------------------------------------------
14,364
- --------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $61,019) 123,065
- --------------------------------------------------------------------------------
FINANCIAL -- 2.5%
DIVERSIFIED FINANCIAL SERVICES -- 2.5%
Citigroup 338,900 18,830
- --------------------------------------------------------------------------------
18,830
- --------------------------------------------------------------------------------
TOTAL FINANCIAL (COST $19,144) 18,830
- --------------------------------------------------------------------------------
HEALTH CARE -- 4.0%
MEDICAL-BIOMEDICAL/GENETIC -- 4.0%
Genentech* 223,000 29,994
- --------------------------------------------------------------------------------
29,994
- --------------------------------------------------------------------------------
TOTAL HEALTH CARE (COST $15,859) 29,994
- --------------------------------------------------------------------------------
INDUSTRIAL -- 3.2%
ELECTRONIC MEASURING INSTRUMENTS -- 3.2%
Agilent Technologies* 306,200 23,673
- --------------------------------------------------------------------------------
23,673
- --------------------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $11,566) 23,673
- --------------------------------------------------------------------------------
TECHNOLOGY -- 68.1%
COMPUTER SOFTWARE -- 3.9%
Microsoft* 252,700 29,503
- --------------------------------------------------------------------------------
29,503
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 8.4%
EMC* 307,000 33,540
Veritas Software* 208,550 29,848
- --------------------------------------------------------------------------------
63,388
- --------------------------------------------------------------------------------
COMPUTERS-MICRO -- 5.2%
Sun Microsystems* 508,400 39,369
- --------------------------------------------------------------------------------
39,369
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 12.0%
Applied Materials* 180,100 22,816
Broadcom, Cl A* 152,700 41,592
Conexant Systems* 392,200 26,032
- --------------------------------------------------------------------------------
90,440
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares/Face Market
Amount Value
Description (000) (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- CONTINUED
FIBER OPTICS -- 9.6%
JDS Uniphase* 445,200 $ 71,816
- --------------------------------------------------------------------------------
71,816
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 4.2%
America Online* 421,500 31,797
- --------------------------------------------------------------------------------
31,797
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.9%
Cisco Systems* 415,800 44,543
- --------------------------------------------------------------------------------
44,543
- --------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 18.9%
Nokia ADR 177,000 33,630
Nortel Networks 285,619 28,848
QUALCOMM* 454,400 80,031
- --------------------------------------------------------------------------------
142,509
- --------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $225,875) 513,365
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $333,463) 708,927
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 6.5%
JP Morgan
3.10%, dated 12/31/99, matures 01/03/00,
repurchase price $20,006,652
(collateralized by U.S. Agency
Obligations: total market value
$20,629,794) (A) $ 20,002 20,002
Morgan Stanley
3.10%, dated 12/31/99, matures 01/03/00,
repurchase price $29,417,568
(collateralized by U.S. Agency
Obligations: total market value
$29,998,423) (A) $ 29,410 29,410
- --------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $49,412) 49,412
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.6% (COST $382,875) 758,339
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.6%)
Other Assets and Liabilities, Net (4,767)
- --------------------------------------------------------------------------------
NET ASSETS
Paid-in-capital (authorized 500 million
shares - $0.001 par value) based on
23,044,433 outstanding shares of common stock 328,191
Accumulated net realized gain on
investments 49,917
Net unrealized appreciation on investments 375,464
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $753,572
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 32.70
- --------------------------------------------------------------------------------
* 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.
17
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Small Cap Value Portfolio
SCHEDULE OF INVESTMENTS
As of December 31, 1999
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- 92.5%
BASIC MATERIALS -- 5.7%
CHEMICAL PLASTICS -- 1.5%
Geon 16,800 546
Hanna 9,100 100
- ----------------------------------------------------------------------
646
- ----------------------------------------------------------------------
CHEMICALS-SPECIALTY -- 3.9%
C.K. Witco 77,100 1,031
Cytec Industries* 21,900 506
Grace (W.R.) & Company* 10,300 143
- ----------------------------------------------------------------------
1,680
- ----------------------------------------------------------------------
METAL-ALUMINUM -- 0.3%
Commonwealth Industries 8,700 113
- ----------------------------------------------------------------------
113
- ----------------------------------------------------------------------
TOTAL BASIC MATERIALS (COST $2,226) 2,439
- ----------------------------------------------------------------------
CONSUMER CYCLICAL -- 13.8%
APPAREL MANUFACTURERS -- 0.1%
Donna Karan International* 8,800 58
- ----------------------------------------------------------------------
58
- ----------------------------------------------------------------------
AUDIO/VIDEO PRODUCTS -- 1.2%
Harman International 9,600 539
- ----------------------------------------------------------------------
539
- ----------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 0.5%
Delco Remy International* 21,200 175
Tower Automotive* 3,800 58
- ----------------------------------------------------------------------
233
- ----------------------------------------------------------------------
CASINO HOTELS -- 0.7%
Station Casinos* 13,900 312
- ----------------------------------------------------------------------
312
- ----------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 0.2%
Stride Rite 11,700 76
- ----------------------------------------------------------------------
76
- ----------------------------------------------------------------------
HOME FURNISHINGS -- 2.2%
Ethan Allen Interiors 3,600 115
Furniture Brands International* 38,800 853
- ----------------------------------------------------------------------
968
- ----------------------------------------------------------------------
RADIO -- 0.5%
Cumulus Media, Cl A* 3,800 193
- ----------------------------------------------------------------------
193
- ----------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.2%
MSC Industrial Direct* 7,600 101
- ----------------------------------------------------------------------
101
- ----------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 2.7%
Tweeter Home Entertainment* 33,400 1,186
- ----------------------------------------------------------------------
1,186
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
RETAIL-INTERNET -- 0.4%
Fatbrain.com* 6,500 $ 163
- ----------------------------------------------------------------------
163
- ----------------------------------------------------------------------
RETAIL-JEWELRY -- 2.4%
Friedman's, Cl A 26,600 200
Zales* 17,200 832
- ----------------------------------------------------------------------
1,032
- ----------------------------------------------------------------------
RETAIL-MAIL ORDER -- 1.0%
Micro Warehouse* 8,000 148
The Right Start* 6,400 134
Wilmar Industries* 9,400 163
- ----------------------------------------------------------------------
445
- ----------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.0%
Buffets* 14,800 148
Jack in the Box* 14,100 292
- ----------------------------------------------------------------------
440
- ----------------------------------------------------------------------
RETAIL-SUNGLASSES -- 0.4%
Sunglass Hut International* 14,100 159
- ----------------------------------------------------------------------
159
- ----------------------------------------------------------------------
TELEVISION -- 0.3%
Paxson Communications* 10,600 126
- ----------------------------------------------------------------------
126
- ----------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $4,825) 6,031
- ----------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 5.6%
BREWERY -- 0.9%
Coors Adolph, Cl B 7,800 410
- ----------------------------------------------------------------------
410
- ----------------------------------------------------------------------
COSMETICS & TOILETRIES -- 0.6%
Alberto-Culver, Cl B 9,500 245
- ----------------------------------------------------------------------
245
- ----------------------------------------------------------------------
FOOD-BAKING -- 0.5%
Earthgrains 12,100 195
- ----------------------------------------------------------------------
195
- ----------------------------------------------------------------------
FOOD-CANNED -- 0.6%
Del Monte Foods* 22,800 281
- ----------------------------------------------------------------------
281
- ----------------------------------------------------------------------
FOOD-DAIRY PRODUCTS -- 0.6%
Suiza Foods* 6,800 269
- ----------------------------------------------------------------------
269
- ----------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 2.4%
Aurora Foods* 75,000 698
Dean Foods 8,600 342
- ----------------------------------------------------------------------
1,040
- ----------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $2,733) 2,440
- ----------------------------------------------------------------------
ENERGY -- 10.7%
COAL -- 0.2%
Alliance Resource Partners* 7,600 93
- ----------------------------------------------------------------------
93
- ----------------------------------------------------------------------
18
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Small Cap Value Portfolio
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
OIL & GAS DRILLING -- 0.4%
Key Energy Services* 36,400 $189
- ----------------------------------------------------------------------
189
- ----------------------------------------------------------------------
OIL EXPLORATION & PRODUCTION -- 7.9%
Devon Energy 13,900 457
EOG Resources 61,400 1,078
Forest Oil* 25,200 332
Louis Dreyfus Natural Gas* 14,600 265
Newfield Exploration* 8,200 220
Noble Affiliates 4,200 90
Santa Fe Snyder* 85,900 687
Vintage Petroleum 26,600 321
- ----------------------------------------------------------------------
3,450
- ----------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.6%
Cooper Cameron* 5,300 259
- ----------------------------------------------------------------------
259
- ----------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.6%
Core Laboratories N.V.* 12,400 249
- ----------------------------------------------------------------------
249
- ----------------------------------------------------------------------
PIPELINES -- 1.0%
Kinder Morgan 20,300 410
- ----------------------------------------------------------------------
410
- ----------------------------------------------------------------------
TOTAL ENERGY (COST $4,668) 4,650
- ----------------------------------------------------------------------
FINANCIAL -- 13.0%
COMMERCIAL BANKS-EASTERN U.S. -- 0.9%
Commercial Bank of New York 6,400 71
Valley National Bancorp 9,345 262
Woronoco Bancorp* 7,200 70
- ----------------------------------------------------------------------
403
- ----------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN U.S. -- 1.3%
Hibernia, Cl A 7,800 83
Southwest Bancorp of Texas* 24,200 479
- ----------------------------------------------------------------------
562
- ----------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN U.S. -- 2.8%
Bancwest 36,000 702
Pacific Bank 19,000 526
- ----------------------------------------------------------------------
1,228
- ----------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 0.7%
Financial Security Assurance 6,000 313
- ----------------------------------------------------------------------
313
- ----------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE -- 2.4%
Affiliated Managers Group* 20,200 817
Federated Investors 11,200 225
- ----------------------------------------------------------------------
1,042
- ----------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 1.5%
MONY Group 21,700 633
- ----------------------------------------------------------------------
633
- ----------------------------------------------------------------------
REITS-APARTMENTS -- 0.0%
Pennsylvania Real Estate Investment Trust 1,100 16
- ----------------------------------------------------------------------
16
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
REITS-REGIONAL MALLS -- 0.9%
CBL & Associates 19,000 $ 392
- ----------------------------------------------------------------------
392
- ----------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.8%
JP Realty 22,600 353
- ----------------------------------------------------------------------
353
- ----------------------------------------------------------------------
S&L/THRIFTS-EASTERN U.S. -- 1.7%
Roslyn Bancorp 28,800 533
Sovereign Bancorp 26,100 194
- ----------------------------------------------------------------------
727
- ----------------------------------------------------------------------
TOTAL FINANCIAL (COST $5,348) 5,669
- ----------------------------------------------------------------------
HEALTH CARE -- 6.1%
MEDICAL PRODUCTS -- 0.3%
PSS World Medical* 11,900 112
- ----------------------------------------------------------------------
112
- ----------------------------------------------------------------------
MEDICAL-DRUGS -- 0.9%
Cima Labs* 11,300 148
Dura Pharmaceuticals* 18,800 262
- ----------------------------------------------------------------------
410
- ----------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.7%
Alpharma 10,300 317
- ----------------------------------------------------------------------
317
- ----------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.1%
Triad Hospitals* 3,600 54
- ----------------------------------------------------------------------
54
- ----------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.6%
Lincare Holdings* 7,800 270
- ----------------------------------------------------------------------
270
- ----------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION -- 0.5%
Syncor International* 6,900 201
- ----------------------------------------------------------------------
201
- ----------------------------------------------------------------------
THERAPEUTICS -- 2.1%
CV Therapeutics* 3,100 81
Tularik* 6,100 197
United Therapeutics* 14,100 649
- ----------------------------------------------------------------------
927
- ----------------------------------------------------------------------
VETERINARY DIAGNOSTICS -- 0.9%
Veterinary Centers of America* 29,200 376
- ----------------------------------------------------------------------
376
- ----------------------------------------------------------------------
TOTAL HEALTH CARE (COST $1,863) 2,667
- ----------------------------------------------------------------------
INDUSTRIAL -- 9.3%
AEROSPACE/DEFENSE-EQUIPMENT -- 3.4%
BE Aerospace* 30,400 256
Orbital Sciences* 67,100 1,246
- ----------------------------------------------------------------------
1,502
- ----------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISC. -- 0.6%
Dal-Tile International* 10,800 109
Johns Manville 11,500 161
- ----------------------------------------------------------------------
270
- ----------------------------------------------------------------------
19
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Small Cap Value Portfolio
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
BUILDING PRODUCTS-CEMENT/AGGREGATE -- 0.7%
Lafarge 10,300 $ 285
- ----------------------------------------------------------------------
285
- ----------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS -- 0.7%
Vishay Intertechnology* 9,300 294
- ----------------------------------------------------------------------
294
- ----------------------------------------------------------------------
ELECTRONIC CONNECTORS -- 0.5%
Amphenol* 3,100 206
- ----------------------------------------------------------------------
206
- ----------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.3%
Tektronix 3,000 117
- ----------------------------------------------------------------------
117
- ----------------------------------------------------------------------
ELECTRONICS-MILITARY -- 1.1%
Aeroflex* 27,700 287
L-3 Communications* 4,300 179
- ----------------------------------------------------------------------
466
- ----------------------------------------------------------------------
HAZARDOUS WASTE DISPOSAL -- 0.3%
Stericycle* 7,100 134
- ----------------------------------------------------------------------
134
- ----------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.1%
Speedfam-Ipec* 2,600 34
- ----------------------------------------------------------------------
34
- ----------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 1.2%
Republic Services* 37,500 539
- ----------------------------------------------------------------------
539
- ----------------------------------------------------------------------
WIRE & CABLE PRODUCTS -- 0.4%
Cable Design Technologies* 7,700 177
- ----------------------------------------------------------------------
177
- ----------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $3,380) 4,024
- ----------------------------------------------------------------------
SERVICES -- 3.0%
COMMERCIAL SERVICES -- 1.1%
Acnielsen* 6,600 163
Plexus* 6,700 295
- ----------------------------------------------------------------------
458
- ----------------------------------------------------------------------
COMPUTER SERVICES -- 0.5%
CACI International* 5,100 115
Cotelligent Group* 13,500 73
McAfee.com* 900 40
- ----------------------------------------------------------------------
228
- ----------------------------------------------------------------------
CONSULTING SERVICES -- 0.7%
First Consulting Group* 19,400 301
- ----------------------------------------------------------------------
301
- ----------------------------------------------------------------------
HUMAN RESOURCES -- 0.7%
Careerbuilder* 7,800 50
Personnel Group of America* 24,100 244
- ----------------------------------------------------------------------
294
- ----------------------------------------------------------------------
TOTAL SERVICES (COST $1,007) 1,281
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
TECHNOLOGY -- 22.1%
APPLICATIONS SOFTWARE -- 1.0%
Sonic Foundry* 18,100 $ 429
- ----------------------------------------------------------------------
429
- ----------------------------------------------------------------------
CIRCUITS -- 0.9%
Hadco* 3,800 194
Integrated Device Technology* 7,600 220
- ----------------------------------------------------------------------
414
- ----------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.0%
Axent Technologies* 20,800 437
- ----------------------------------------------------------------------
437
- ----------------------------------------------------------------------
COMPUTER GRAPHICS -- 0.3%
Visio* 3,000 142
- ----------------------------------------------------------------------
142
- ----------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.8%
Cambridge Technology* 6,700 176
Informatica* 1,500 160
- ----------------------------------------------------------------------
336
- ----------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.6%
Hutchinson Technology* 8,900 189
Sandisk* 700 67
- ----------------------------------------------------------------------
256
- ----------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 4.9%
Best Software* 19,100 563
Deltek Systems* 38,600 521
Documentum* 2,600 156
Informix* 45,400 519
Object Design* 25,800 374
- ----------------------------------------------------------------------
2,133
- ----------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 2.7%
Cirrus Logic* 8,000 107
Cypress Semiconductor* 12,300 398
Zoran* 11,800 658
- ----------------------------------------------------------------------
1,163
- ----------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 1.5%
Hyperion Solutions* 9,200 400
Symantec* 4,100 240
- ----------------------------------------------------------------------
640
- ----------------------------------------------------------------------
INTERNET CONTENT -- 0.7%
S1* 3,976 311
- ----------------------------------------------------------------------
311
- ----------------------------------------------------------------------
INTERNET SOFTWARE -- 0.5%
Onemain.com* 6,800 102
Verio* 2,300 106
- ----------------------------------------------------------------------
208
- ----------------------------------------------------------------------
PRINTER & RELATED PRODUCTS -- 0.8%
Splash Technologies* 40,000 353
- ----------------------------------------------------------------------
353
- ----------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.3%
Globecomm Systems* 5,100 129
- ----------------------------------------------------------------------
129
- ----------------------------------------------------------------------
20
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Small Cap Value Portfolio
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
TELECOMMUNICATION EQUIPMENT -- 1.7%
Antec* 4,500 $ 164
Com21* 12,600 283
Tekelec* 13,000 292
- ----------------------------------------------------------------------
739
- ----------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.3%
GST Telecommunications* 62,400 566
- ----------------------------------------------------------------------
566
- ----------------------------------------------------------------------
WIRELESS EQUIPMENT -- 3.1%
Glenayre Technologies* 49,300 558
Spectrian* 28,500 805
- ----------------------------------------------------------------------
1,363
- ----------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $7,145) 9,619
- ----------------------------------------------------------------------
TRANSPORTATION --2.7%
AIRLINES --1.2%
Mesaba Holdings* 14,400 165
Midway Airlines* 59,200 366
- ----------------------------------------------------------------------
531
- ----------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 1.5%
US Xpress Enterprises* 38,500 284
Yellow* 22,800 383
- ----------------------------------------------------------------------
667
- ----------------------------------------------------------------------
TOTAL TRANSPORTATION (COST $1,639) 1,198
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
UTILITIES -- 0.5%
ELECTRIC-INTEGRATED -- 0.1%
CH Energy Group 900 $ 30
- ----------------------------------------------------------------------
30
- ----------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.4%
UGI 9,100 186
- ----------------------------------------------------------------------
186
- ----------------------------------------------------------------------
TOTAL UTILITIES (COST $227) 216
- ----------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $35,061) 40,234
- ----------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.7%
Morgan Stanley
5.25%, dated 12/31/99, matures 01/03/00,
repurchase price $1,161,325 (collateralized
by U.S. Treasury Instruments: total market
value $1,195,372)(A) $1,161 1,161
- ----------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(COST $1,161) 1,161
- ----------------------------------------------------------------------
TOTAL INVESTMENTS -- 95.2%
(COST $36,222) $41,395
- ----------------------------------------------------------------------
Percentages indicated are based on net assets of $43,483,937
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Technology & Communications Portfolio
STATEMENT OF NET ASSETS
As of December 31, 1999
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- 98.5%
CONSUMER CYCLICAL -- 0.4%
AUDIO/VIDEO PRODUCTS -- 0.4%
Gemstar International* 92,000 $ 6,555
- ----------------------------------------------------------------------
6,555
- ----------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $3,118) 6,555
- ----------------------------------------------------------------------
FINANCIAL -- 2.9%
FINANCE-INVESTMENT BANKER/BROKER -- 2.9%
Ameritrade, Cl A* 661,700 14,351
E*Trade Group* 536,100 14,006
Charles Schwab 501,700 19,253
- ----------------------------------------------------------------------
47,610
- ----------------------------------------------------------------------
TOTAL FINANCIAL (COST $55,382) 47,610
- ----------------------------------------------------------------------
INDUSTRIAL -- 0.4%
INSTRUMENTS-CONTROLS -- 0.4%
Microchip Technology* 97,200 6,652
- ----------------------------------------------------------------------
6,652
- ----------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $5,444) 6,652
- ----------------------------------------------------------------------
SERVICES -- 3.2%
ADVERTISING SERVICES -- 1.4%
Getty Images* 470,800 23,010
- ----------------------------------------------------------------------
23,010
- ----------------------------------------------------------------------
CONSULTING SERVICES -- 1.2%
USWeb* 419,800 18,655
- ----------------------------------------------------------------------
18,655
- ----------------------------------------------------------------------
DIRECT MARKETING -- 0.2%
Valuevision International, Cl A* 63,600 3,645
- ----------------------------------------------------------------------
3,645
- ----------------------------------------------------------------------
HUMAN RESOURCES -- 0.4%
Hotjobs.com* 162,300 7,090
- ----------------------------------------------------------------------
7,090
- ----------------------------------------------------------------------
TOTAL SERVICES (COST $46,457) 52,400
- ----------------------------------------------------------------------
TECHNOLOGY -- 91.6%
APPLICATIONS SOFTWARE -- 1.6%
Intertrust Technologies* 96,500 11,351
Quest Software* 97,300 9,924
Rational Software* 98,700 4,849
- ----------------------------------------------------------------------
26,124
- ----------------------------------------------------------------------
CIRCUITS -- 0.3%
Integrated Device Technology* 188,000 5,452
- ----------------------------------------------------------------------
5,452
- ----------------------------------------------------------------------
COMPUTER DATA SECURITY -- 4.7%
Check Point Software Technologies* 90,100 17,907
Verisign* 308,900 58,981
- ----------------------------------------------------------------------
76,888
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONTINUED
COMPUTER SOFTWARE -- 8.6%
Informatica* 245,100 $ 26,073
Macromedia* 78,000 5,704
Mercury Interactive* 141,000 15,219
Microstrategy* 272,800 57,288
Tibco Software* 49,100 7,512
VA Linux Systems* 141,600 29,258
- ----------------------------------------------------------------------
141,054
- ----------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 3.0%
ASM Lithography* 64,500 7,337
Redback Networks* 231,700 41,127
- ----------------------------------------------------------------------
48,464
- ----------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.3%
Veritas Software* 267,700 38,315
- ----------------------------------------------------------------------
38,315
- ----------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 5.2%
Applied Micro Circuits* 59,200 7,533
Broadcom, Cl A* 21,800 5,938
Conexant Systems* 93,100 6,180
Cypress Semiconductor* 572,500 18,535
LSI Logic* 136,300 9,200
SDL* 58,400 12,731
Transwitch* 83,100 6,030
Triquint Semiconductor* 170,000 18,912
- ----------------------------------------------------------------------
85,059
- ----------------------------------------------------------------------
ENTERPRISE SOFTWARE/SERVICE -- 2.2%
BEA Systems* 387,000 27,066
Broadvision* 53,100 9,030
- ----------------------------------------------------------------------
36,096
- ----------------------------------------------------------------------
FIBER OPTICS -- 11.0%
C-Cor.net 66,300 5,080
Ciena* 243,000 13,973
JDS Uniphase* 427,400 68,945
Metromedia Fiber Network, Cl A* 327,100 15,680
MRV Communications* 387,200 24,345
Sycamore Networks* 168,400 51,867
- ----------------------------------------------------------------------
179,890
- ----------------------------------------------------------------------
INTERNET CONTENT -- 17.4%
Doubleclick* 185,600 46,968
Go2net* 191,500 16,661
Infospace.com* 856,200 183,227
Network Solutions* 27,000 5,874
Rare Medium Group* 912,400 31,136
- ----------------------------------------------------------------------
283,866
- ----------------------------------------------------------------------
22
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
---------------------------------------------------------------
PBHG Technology & Communications Portfolio
- ----------------------------------------------------------------------
Market
Value
Description Shares (000)
- ----------------------------------------------------------------------
COMMON STOCK -- CONCLUDED
INTERNET SOFTWARE -- 22.3%
Agile Software* 141,600 $ 30,760
Akamai Technologies* 75,300 24,670
Allaire* 97,600 14,280
America Online* 248,600 18,754
Ariba* 267,400 47,430
Art Technology* 274,300 35,145
Commerce One* 235,100 46,197
Exodus Communications* 391,200 34,743
F5 Networks* 132,400 15,094
Internap Network Services* 102,500 17,732
Lycos* 352,700 28,062
Verio* 327,400 15,122
Vignette* 229,200 37,360
- ----------------------------------------------------------------------
365,349
- ----------------------------------------------------------------------
NETWORKING PRODUCTS -- 7.3%
Emulex* 520,500 58,556
Foundry Networks* 23,800 7,180
Juniper Networks* 156,700 53,278
- ----------------------------------------------------------------------
119,014
- ----------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 4.6%
Audiocodes* 82,200 7,562
Ditech Communications* 71,600 6,694
QUALCOMM* 344,000 60,587
- ----------------------------------------------------------------------
74,843
- ----------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 1.1%
Korea Thrunet Limited, Cl A* 67,400 4,575
Level 3 Communications* 163,900 13,419
- ----------------------------------------------------------------------
17,994
- ----------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $868,057) 1,498,408
- ----------------------------------------------------------------------
TOTAL COMMON STOCK
(COST $978,458) 1,611,625
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Face Market
Amount Value
Description (000) (000)
- ----------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.5%
Morgan Stanley
2.95%, dated 12/31/99, matures 01/03/00,
repurchase price $56,745,711 (collateralized
by U.S. Agency Obligations: total market
value $58,156,706)(A) $56,732 $ 56,732
- ----------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $56,732) 56,732
- ----------------------------------------------------------------------
TOTAL INVESTMENTS -- 102.0%
(COST $1,035,190) 1,668,357
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.0%)
Other Assets and Liabilities, Net (32,909)
- ----------------------------------------------------------------------
NET ASSETS
Paid-in Capital (Authorized 500 million shares -
$0.001 par vale) based on 35,545,256
outstanding shares of common stock 843,929
Accumulated net realized gain on investments 158,352
Net unrealized appreciation on investments 633,167
- ----------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% 1,635,448
- ----------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $ 46.01
- ----------------------------------------------------------------------
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES (000)
December 31, 1999
<TABLE>
<CAPTION>
PBHG PBHG
LARGE CAP VALUE SMALL CAP VALUE
PORTFOLIO PORTFOLIO
--------------- ---------------
<S> <C> <C>
ASSETS:
Investment securities (Cost $40,618 and $36,222) at market
value................................................... $40,662 $41,395
Receivable for investment securities sold................. 2,260 1,880
Receivable for capital shares sold........................ 15 1,199
Dividends and interest receivable......................... 53 17
------- -------
Total assets.............................................. 42,990 44,491
------- -------
LIABILITIES:
Payable for investment securities purchased............... 2,960 966
Payable for capital shares redeemed....................... 29 --
Accrued Expenses.......................................... 29 41
------- -------
Total liabilities......................................... 3,018 1,007
------- -------
NET ASSETS:
Paid-in-capital (authorized 500 million shares -- $0.001
par value based on 2,631,412 and 3,230,257 outstanding
shares of common stock.................................. 33,965 34,255
Undistributed net investment income....................... 332 --
Accumulated net realized gain on investments.............. 5,631 4,056
Net unrealized appreciation on investments................ 44 5,173
------- -------
Net Assets................................................ $39,972 $43,484
======= =======
Net Asset Value, Offering Price and Redemption Price Per
Share................................................... $ 15.19 $ 13.46
======= =======
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
STATEMENT OF OPERATIONS (000)
For the year ended December 31, 1999
<TABLE>
<CAPTION>
PBHG PBHG PBHG
PBHG LARGE CAP PBHG SMALL CAP TECHNOLOGY &
GROWTH II VALUE SELECT 20 VALUE COMMUNICATIONS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends.............................................. $ 50 $ 595 $ 249 $ 344 $ 102
Interest............................................... 324 113 2,295 70 1,658
------- ------ -------- ------ --------
Total Investment Income.............................. 374 708 2,544 414 1,760
------- ------ -------- ------ --------
EXPENSES:
Investment Advisory Fees............................... 389 256 3,646 416 3,281
Administrative Fees.................................... 69 59 643 62 579
Custodian Fees......................................... 11 15 13 14 19
Professional Fees...................................... 8 6 57 6 79
Transfer Agent Fees.................................... 22 22 21 22 23
Printing Fees.......................................... 10 8 53 5 96
Directors' Fees........................................ 4 4 44 4 30
Amortization of Deferred Organizational Costs.......... 2 2 2 2 2
Interest Expense....................................... -- -- -- 1 --
Insurance and Other Expenses........................... 2 3 17 5 16
------- ------ -------- ------ --------
Total Expenses....................................... 517 375 4,496 537 4,125
------- ------ -------- ------ --------
Waiver of Investment Advisory Fees..................... -- -- -- (38) --
Advisory Fee Recaptured................................ 32 -- 27 -- 94
------- ------ -------- ------ --------
Net Expenses......................................... 549 375 4,523 499 4,219
------- ------ -------- ------ --------
NET INVESTMENT INCOME (LOSS)............................. (175) 333 (1,979) (85) (2,459)
------- ------ -------- ------ --------
Net Realized Gain from Security Transactions........... 10,179 5,838 60,911 5,191 162,638
Net Change in Unrealized Appreciation (Depreciation) on
Investments.......................................... 41,832 (2,558) 301,184 1,136 625,480
------- ------ -------- ------ --------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.......... 52,011 3,280 362,095 6,327 788,118
------- ------ -------- ------ --------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS......... $51,836 $3,613 $360,116 $6,242 $785,659
======= ====== ======== ====== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (000)
<TABLE>
<CAPTION>
PBHG PBHG PBHG PBHG
GROWTH II LARGE CAP VALUE SELECT 20 SMALL CAP 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 01/01/98
TO TO TO TO TO TO TO TO
12/31/99 12/31/98 12/31/99 12/31/98 12/31/99 12/31/98 12/31/99 12/31/98
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (Loss)............ $ (175) $ (93) $ 333 $ 53 $ (1,979) $ (204) $ (85) $ (47)
Net Realized Gain (Loss) from Security
Transactions.......................... 10,179 (1,254) 5,838 905 60,911 (8,960) 5,191 (1,047)
Net Change in Unrealized Appreciation
(Depreciation) on Investments......... 41,832 2,680 (2,558) 2,553 301,184 74,080 1,136 3,853
-------- ------- ------- ------- -------- -------- -------- -------
Net Increase in Net Assets Resulting
from Operations..................... 51,836 1,333 3,613 3,511 360,116 64,916 6,242 2,759
-------- ------- ------- ------- -------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income................... -- -- (1) (56) -- (3) -- (7)
Net Realized Gains from Security
Transactions.......................... -- -- (982) (117) -- -- -- (44)
-------- ------- ------- ------- -------- -------- -------- -------
Total Distributions................... -- -- (983) (173) -- (3) -- (51)
-------- ------- ------- ------- -------- -------- -------- -------
CAPITAL SHARE TRANSACTIONS (A):
Shares Issued........................... 126,363 18,276 30,700 22,710 191,978 294,062 25,034 48,005
Shares Issued upon Reinvestment of
Distributions......................... -- -- 983 173 -- 3 -- 51
Shares Redeemed......................... (17,918) (11,524) (16,627) (5,495) (116,448) (48,669) (31,832) (16,045)
-------- ------- ------- ------- -------- -------- -------- -------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions.......................... 108,445 6,752 15,056 17,388 75,530 245,396 (6,798) 32,011
-------- ------- ------- ------- -------- -------- -------- -------
Total Increase (Decrease) in Net
Assets.............................. 160,281 8,085 17,686 20,726 435,646 310,309 (556) 34,719
-------- ------- ------- ------- -------- -------- -------- -------
NET ASSETS:
Beginning of Period..................... 18,321 10,236 22,286 1,560 317,926 7,617 44,040 9,321
-------- ------- ------- ------- -------- -------- -------- -------
End of Period........................... $178,602 $18,321 $39,972 $22,286 $753,572 $317,926 $ 43,484 $44,040
======== ======= ======= ======= ======== ======== ======== =======
(A) SHARES ISSUED AND REDEEMED:
Shares Issued........................... 7,432 1,725 2,112 1,853 10,077 22,732 2,202 4,363
Shares Issued upon Reinvestment of
Distributions......................... -- -- 66 12 -- -- -- 5
Shares Redeemed......................... (1,260) (1,102) (1,108) (453) (6,541) (3,983) (2,765) (1,464)
-------- ------- ------- ------- -------- -------- -------- -------
Net Increase (Decrease) in Shares
Outstanding........................... 6,172 623 1,070 1,412 3,536 18,749 (563) 2,904
======== ======= ======= ======= ======== ======== ======== =======
<CAPTION>
PBHG
TECHNOLOGY &
COMMUNICATIONS
PORTFOLIO
---------------------
01/01/99 01/01/98
TO TO
12/31/99 12/31/98
---------- --------
<S> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income (Loss)............ $ (2,459) $ (95)
Net Realized Gain (Loss) from Security
Transactions.......................... 162,638 (1,742)
Net Change in Unrealized Appreciation
(Depreciation) on Investments......... 625,480 7,707
---------- -------
Net Increase in Net Assets Resulting
from Operations..................... 785,659 5,870
---------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income................... -- (3)
Net Realized Gains from Security
Transactions.......................... -- --
---------- -------
Total Distributions................... -- (3)
---------- -------
CAPITAL SHARE TRANSACTIONS (A):
Shares Issued........................... 847,733 31,082
Shares Issued upon Reinvestment of
Distributions......................... -- 3
Shares Redeemed......................... (30,437) (13,576)
---------- -------
Increase (Decrease) in Net Assets
Derived from Capital Share
Transactions.......................... 817,296 17,509
---------- -------
Total Increase (Decrease) in Net
Assets.............................. 1,602,955 23,376
---------- -------
NET ASSETS:
Beginning of Period..................... 32,493 9,117
---------- -------
End of Period........................... $1,635,448 $32,493
========== =======
(A) SHARES ISSUED AND REDEEMED:
Shares Issued........................... 34,740 2,749
Shares Issued upon Reinvestment of
Distributions......................... -- --
Shares Redeemed......................... (1,557) (1,263)
---------- -------
Net Increase (Decrease) in Shares
Outstanding........................... 33,183 1,486
========== =======
</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>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the period ended December 31, 1999
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(4).............. $11.63 $(0.04) $11.46 -- -- $23.05 98.19%
1998................. 10.75 (0.06) 0.94 -- -- 11.63 8.19%
1997(1).............. 10.00 -- 0.75 -- -- 10.75 7.50%+
- ------------------------------
PBHG Large Cap Value Portfolio
- ------------------------------
1999................. $14.27 $ 0.13 $ 1.13 -- $(0.34) $15.19 8.89%
1998................. 10.43 (0.02) 3.98 $(0.04) (0.08) 14.27 37.96%
1997(2).............. 10.00 0.02 0.41 -- -- 10.43 4.30%+
- ------------------------
PBHG Select 20 Portfolio
- ------------------------
1999................. $16.30 $(0.08) $16.48 -- -- $32.70 100.61%
1998................. 10.03 (0.01) 6.28 -- -- 16.30 62.52%
1997(3).............. 10.00 -- 0.03 -- -- 10.03 0.30%+
- ------------------------------
PBHG Small Cap Value Portfolio
- ------------------------------
1999................. $11.61 $(0.03) $ 1.88 -- -- $13.46 15.93%
1998................. 10.48 (0.02) 1.16 -- $(0.01) 11.61 10.94%
1997(2).............. 10.00 0.01 0.47 -- -- 10.48 4.80%+
- ------------------------------------------
PBHG Technology & Communications Portfolio
- ------------------------------------------
1999(4). $13.76 $(0.13) $32.38 -- -- $46.01 234.38%
1998................. 10.41 (0.04) 3.39 -- -- 13.76 32.20%
1997(1).............. 10.00 -- 0.41 -- -- 10.41 4.10%+
<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(4).............. $ 178,602 1.20% (0.38)% 1.20% (0.38)% 236.82%
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 Large Cap Value Portfolio
- ------------------------------
1999................. $ 39,972 0.95% 0.84 % 0.95% 0.84 % 927.02%
1998................. 22,286 1.00% 0.67 % 1.47% 0.20 % 635.10%
1997(2).............. 1,560 1.00%* 1.91 %* 8.04%* (5.13)%* 68.93%+
- ------------------------
PBHG Select 20 Portfolio
- ------------------------
1999................. $ 753,572 1.05% (0.46)% 1.05% (0.46)% 139.05%
1998................. 317,926 1.20% (0.18)% 1.21% (0.19)% 48.79%
1997(3).............. 7,617 1.20%* 0.51 %* 3.36%* (1.65)%* 18.53%+
- ------------------------------
PBHG Small Cap Value Portfolio
- ------------------------------
1999................. $ 43,484 1.20% (0.20)% 1.29% (0.29)% 277.95%
1998................. 44,040 1.20% (0.15)% 1.46% (0.41)% 293.90%
1997(2).............. 9,321 1.20%* 1.40 %* 3.63%* (1.03)%* 41.14%+
- ------------------------------------------
PBHG Technology & Communications Portfolio
- ------------------------------------------
1999(4).............. $1,635,448 1.09% (0.64)% 1.09% (0.64)% 273.76%
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%+
</TABLE>
- ----------
* Annualized.
+ Total return and portfolio turnover have not been annualized.
(1) The PBHG Growth II and PBHG Technology & Communications Portfolios commenced
operations on April 30, 1997.
(2) The PBHG Large Cap Value and the PBHG Small Cap Value Portfolios commenced
operations on October 28, 1997.
(3) The PBHG Select 20 Portfolio commenced operations on September 25, 1997.
(4) Per share calculations were performed using average shares for the period.
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>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1999
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
Small Cap Value Portfolio (the "Small Cap Value Portfolio"), the PBHG Large Cap
Value Portfolio (the "Large Cap Value Portfolio"), the PBHG Select 20 Portfolio
(the "Select 20 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 and the Technology & Communications
Portfolio which are classified as non-diversified management investment
companies. The financial statements presented herein do not include the Large
Cap Growth Portfolio or the Mid-Cap Value Portfolio, whose financial statements
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 December 31,
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:
Percentage of Number of
Portfolio Outstanding Shares Insurance Companies
- --------------------------- ------------------ -------------------
Growth II Portfolio 77%, 19% 2
Large Cap Value Portfolio 100% 1
Select 20 Portfolio 99% 1
Small Cap Value Portfolio 100% 1
Technology &
Communications Portfolio 97% 1
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, undistributed 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, 1999,
primarily attributable to certain net operating losses which, for tax purposes,
have been used to offset net short-term capital gains, have been reclassified to
the accumulated net realized gains:
Growth II Portfolio $ 175,497
Select 20 Portfolio $1,978,701
Small Cap Value $ 84,751
Technology & Communications Portfolio $2,459,442
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") requires 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 which commenced operations on December 1, 1998, and are being
amortized on a straight line basis over a period of sixty months from
commencement of operations. 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
28
<PAGE>
[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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.
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, if any, 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, Select 20 and Technology & Communications 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,
Select 20 Small Cap Value and Technology & Communications 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
December 31, 1999, the amount of advisory fees waived and reimbursement of third
party expenses by the Adviser subject to possible reimbursement were as follows:
Growth II Portfolio $ 50,092
Large Cap Value Portfolio $ 38,297
Small Cap Value Portfolio $117,350
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 Distribution Co. (the "Distributor") a wholly-owned subsidiary
of SEI, and the Company are parties to a distribution agreement (the
"Distribution Agreement") dated April 1, 1997, pursuant to which the Distributor
serves as principal underwriter for the Company. The Distributor receives no
compensation for serving in such capacity.
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 Adviser has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. Listed below are the amounts
the Liquidity Desk received for its services from each portfolio for the year
ended December 31, 1999.
Growth II Portfolio $ 3,168
Large Cap Value Portfolio $ 1,147
Select 20 Portfolio $23,014
Small Cap Value Portfolio $ 733
Technology & Communications
Portfolio $16,280
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 year ended
December 31, 1999, PBHG Fund Services was paid $8,400 each by the Growth II,
Large Cap Value, Select 20, Small Cap Value and Technology & Communications
Portfolios for shareholder services.
29
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[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
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 year ended December 31,
1999 were as follows:
Purchases Sales
(000) (000)
--------- ---------
Growth II Portfolio 195,179 104,961
Large Cap Value Portfolio 348,513 333,377
Select 20 Portfolio 608,324 544,045
Small Cap Value Portfolio 111,825 119,217
Technology & Communications Portfolio 1,870,952 1,078,301
At December 31, 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.
During 1999 the following Portfolios utilized capital loss carryforwards to
offset capital gains.
Growth II Portfolio 1,453,740
Select 20 Portfolio 8,784,299
Small Cap Value Portfolio 565,282
Technology & Communications Portfolio 1,692,199
As of December 31, 1999 there were no temporary or permanent differences.
The aggregate gross unrealized appreciation and depreciation of securities held
by each Portfolio at December 31, 1999 were as follows:
Net
Unrealized
Unrealized Unrealized Appreciation/
Appreciation Depreciation (Depreciation)
(000) (000) (000)
------------ ------------ --------------
Growth II Portfolio 47,245 2,480 44,765
Large Cap Value Portfolio 1,161 1,117 44
Select 20 Portfolio 376,086 622 375,464
Small Cap Value Portfolio 7,220 2,047 5,173
Technology &
Communications Portfolio 650,562 17,395 633,167
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 certain of the funds
in the PBHG Fund Family. Borrowings from the line of credit will bear interest
at the Federal Funds Rate plus 0.50%. The PBHG Fund Family pays an annual
commitment fee of .08% of the outstanding committed amount. Each Portfolio is
allocated a portion of this fee based on its net assets relative to the net
assets of the PBHG Fund Family. No Portfolio had an outstanding borrowing at
December 31, 1999. Listed below are the Portfolios which had an outstanding
balance during the year ended December 31, 1999:
Weighted
Maximum Average Daily Weighted
Amount Outstanding Average
Borrowed Balance Interest Rate
-------- ----------- --------------
Large Cap Value Portfolio $300,000 $ 3,014 5.06%
Small Cap Value Portfolio $900,000 $18,904 5.79%
30
<PAGE>
PBHG Insurance Series Fund, Inc.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF THE PBHG INSURANCE SERIES FUND, INC.:
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments of PBHG Small Cap Value Portfolio and PBHG Large
Cap Value Portfolio, and the statements of net assets of PBHG Growth II
Portfolio, PBHG Technology & Communications Portfolio, and PBHG Select 20
Portfolio (five of the portfolios, each hereafter referred to as a Fund,
constituting the PBHG Insurance Series Fund Inc.,) and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each of the Funds at
December 31, 1999, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 4, 2000
31
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[LOGO] PBHG Insurance Series Fund, Inc.
-------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS (unaudited)
For shareholders that do not have a December 31, 1999 taxable year end, this
notice is for informational purposes only.
For shareholders with a December 31, 1999 taxable year end, please consult your
tax adviser as to the pertinence of this notice.
For the fiscal year ended December 31, 1999, the Portfolios are designating net
capital gains and qualifying dividends with regard to distributions paid during
the year as follows:
<TABLE>
<CAPTION>
(A) (B) (C) (D)
NET ORDINARY
CAPITAL GAINS INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS QUALIFYING
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS) DIVIDENDS(1)
- ---- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Growth II Portfolio.......................... 0% 0% 0% 0%
Large Cap Value Portfolio.................... 0% 100% 100% 5%
Select 20 Portfolio.......................... 0% 0% 0% 0%
Small Cap Value Portfolio.................... 0% 0% 0% 0%
Technology & Communications Portfolio........ 0% 0% 0% 0%
</TABLE>
1 Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of each Portfolio's
distributions.
** Item (D) is based on a percentage of ordinary income distributions of each
Portfolio.
None of the Portfolios qualify in California, Connecticut, or New York to pass
through exempt interest dividends from U.S. government obligations.
- --------------------------------------------------------------------------------
SHAREHOLDER MEETINGS
A special meeting of the shareholders of the PBHG Technology &
Communications Portfolio (the "Technology & Communications Portfolio"), a series
of the PBHG Insurance Series Fund, Inc. (the "Fund") was held on November 2,
1999 to vote on the following matters:
1. To amend the fundamental investment restrictions of the Portfolio to
change the Portfolio's sub-classification under the Investment Company Act of
1940, as amended (the "1940 Act"), from a diversified investment company to a
non-diversified investment company ("Proposal 1"). With respect to Proposal 1,
of the number of shares voted, 93.75% voted for the proposal, 2.92% voted
against the proposal, and 3.33% abstained.
2. To amend the fundamental investment restrictions of the Portfolio to
permit the Portfolio to concentrate its investments in an industry or group of
industries in the technology & communications sectors of the markets ("Proposal
2"). With respect to Proposal 2, of the number of shares voted, 94.66% voted for
the proposal, 2.33% voted against the proposal, and 3.01% abstained.
32
<PAGE>
[LOGO]
PBHG Insurance Series Fund, Inc.
Investment Adviser
Pilgrim Baxter & Associates, Ltd.
Distributor
SEI Investments Distribution, Co.
Oaks, PA
