[Logo omitted]
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
SEMI-ANNUAL REPORT JUNE 30, 2000
[bullet] PBHG LARGE CAP GROWTH PORTFOLIO
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
Dear Shareholder,
The PBHG LARGE CAP GROWTH PORTFOLIO returned +17.91% for the six months ended
June 30, 2000, compared to a -0.41% return for the S&P 500 Index. The
outperformance relative to the benchmark occurred primarily in the first
quarter, during which time the Portfolio appreciated +22.78%. The S&P declined a
mere -2.65% in the second quarter, however, this figure inadequately describes
the roller coaster investors had to withstand during the period.
The recent phenomenon of investors willing to pay lofty prices for Internet
companies with no current earnings but growing revenues seemed to have come to
an abrupt halt. As these "New Economy" companies' valuations grew, the scrutiny
increased with regard to all technology companies' price appreciation. At the
same time, "Old Economy" companies were being devalued by the stock market. The
divergence in these two segments reached a crescendo on March 10. Since then,
there has been a revision in valuations. Many New Economy issues
indiscriminately lost 30% of their value into the close of the first quarter of
2000. The slide continued into April and May, with the average NASDAQ issue off
40% from its 52-week high, and nearly 80% of the companies down at least 20%.
The second quarter was highly volatile, especially for those invested in
technology issues. But, just as the bears began to roar, the bulls charged
forward, with the NASDAQ rebounding +16.6% in June -- one of the largest
single-month gains ever for the Index.
Reminiscent of 1999, investors continued to favor technology stocks above all
others during the first six months of this year. Determining factors seemed to
be sustainable, above-average earnings and revenue growth rates in an
environment characterized by increased trading liquidity. Our investment style
continued to be in favor over the last six months. We continue to believe that
high quality, well managed, non-cyclical growth companies with sustainable
competitive advantages represent the most compelling investment opportunities.
Consistent with this view, technology issues continued to be our largest sector
representation, ending the six-month period at 51.9%. We remain steadfast in our
view that technology is likely to continue to be the fastest growing sector of
our economy with the best business momentum. For the six months ended June 30,
the Fund's holdings were divided among seven economic sectors: technology,
51.9%; consumer cyclicals, 12.1%; industrial, 10.8%; health care, 7.8%;
financial, 4.8%; services, 3.4%; and utilities, 2.9%.
We also experienced some disappointments in the first half. Deteriorating
fundamentals prompted the sale of a number of holdings, most ahead of their
share price deterioration and, unfortunately, a few after. While negative
surprises are a fact of life for investors, minimizing them helps to create
superior returns over time. We continue to work diligently to anticipate changes
in our companies' business fundamentals.
As we enter the second half of the year, the equity markets are in a period of
transition. The euphoria of the last quarter of 1999 and the first quarter of
2000 has abated, and the new mode is one of caution. Clearly the Federal Reserve
is no longer accommodative with respect to interest rates as they remove the
excess liquidity generated for Y2K. Valuations have been reined in, however, we
expect continued periods of extreme short-term volatility. In our opinion, the
odds are low for a major sustained downdraft in equity markets in the presence
of a vibrant U.S. economy and exceptional fundamental business dynamics. At
present, some of the market's "arrogance" that it could continue climbing
unabated has waned. In one sense, we are relieved that the ominous correction
everyone was anticipating for New Economy stocks has already occurred. While we
experienced some discomfort watching some of our "babies" get thrown out with
the "bath water", the subsequent rebound separated our "contenders" from the
"pretenders". The pullback also presented us with the opportunity to commit new
capital to our investments at lower prices, thereby, we believe strengthening
the Portfolio for the long-term.
Thank you for the confidence you've shown in Pilgrim Baxter & Associates, Ltd.
and for your continued participation in the PBHG Large Cap Growth Portfolio.
Sincerely,
/S/SIGNATURE
Michael S. Sutton, CFA
Portfolio Manager
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1 AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Annualized Annualized
Six-Month One Year Three Year Inception to
Return Return Return Date2
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Large Cap Growth Portfolio 17.91% 81.86% 40.78% 41.54%
----------------------------------------------------------------------------------------------------------
</TABLE>
COMPARISON OF CHANGE IN THE VALUE OF A
$10,000 INVESTMENT IN THE PBHG
LARGE CAP GROWTH PORTFOLIO,
VERSUS THE S&P 500 INDEX AND
THE LIPPER MULTI-CAP GROWTH
FUNDS AVERAGE
[Line graph omitted--plot points as follows:]
<TABLE>
<CAPTION>
PBHG Large Cap Growth Portfolio S&P 500 Index3 Lipper Multi-Cap Growth Funds Average4
<S> <C> <C> <C>
4/30/97 $10,000 $10,000 $10,000
5/31/97 $10,500 $10,608 $10,937
6/30/97 $10,780 $11,083 $11,339
7/31/97 $11,790 $11,965 $12,357
8/31/97 $11,430 $11,295 $12,114
9/30/97 $11,960 $11,914 $12,890
10/31/97 $11,520 $11,516 $12,302
11/30/97 $11,420 $12,049 $12,319
12/31/97 $11,820 $12,255 $12,439
1/31/98 $11,730 $12,391 $12,396
2/28/98 $12,960 $13,284 $13,430
3/31/98 $13,510 $13,964 $14,088
4/30/98 $13,600 $14,104 $14,252
5/31/98 $13,140 $13,862 $13,648
6/30/98 $14,110 $14,425 $14,327
7/31/98 $14,020 $14,272 $13,846
8/31/98 $11,690 $12,211 $11,395
9/30/98 $12,530 $12,993 $12,255
10/31/98 $12,750 $14,050 $12,910
11/30/98 $13,540 $14,901 $13,865
12/31/98 $15,440 $15,760 $15,444
1/31/99 $16,070 $16,419 $16,265
2/28/99 $15,190 $15,909 $15,367
3/31/99 $16,160 $16,545 $16,349
4/30/99 $16,120 $17,186 $16,815
5/31/99 $15,460 $16,780 $16,552
6/30/99 $16,540 $17,712 $17,757
7/31/99 $16,010 $17,159 $17,422
8/31/99 $16,140 $17,073 $17,465
9/30/99 $16,420 $16,605 $17,483
10/31/99 $17,930 $17,656 $18,806
11/30/99 $20,120 $18,015 $20,527
12/31/99 $25,510 $19,076 $23,957
1/31/2000 $26,030 $18,118 $23,454
2/29/2000 $32,400 $17,775 $27,378
3/31/2000 $31,320 $19,514 $27,315
4/30/2000 $27,910 $18,926 $25,012
5/31/2000 $25,420 $18,538 $23,339
6/30/2000 $30,080 $18,995 $25,738
</TABLE>
1 Performance is historical and not indicative of future results. The
favorable returns experienced by the technology sector in 1999 and the first
half of 2000 involved accepting the volatility and risk inherent in that
sector and that those returns cannot be consistently achieved. In addition,
the products of technology companies may be subject to severe competition
and rapid obsolescence. The investment return and principal value of an
investment will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
2 The PBHG Large Cap Growth Portfolio commenced operations on April 30, 1997.
3 The Standard & Poor's ("S&P") 500 Index is a capitalization-weighted index
of 500 stocks designed to measure performance of the broad domestic economy.
The Index is unmanaged and reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Portfolio's past or future performance.
4 The Lipper Multi-Cap Growth Funds Average represents the average performance
of all mutual funds classified by Lipper, Inc. in the Multi-Cap Growth
category. These performance figures are based on the changes in net asset
value of the Funds in the category with all capital gains distributions and
income dividends reinvested. The Average is not intended to imply the
Portfolio's past or future performance.
SECTOR WEIGHTINGS - AT JUNE 30, 2000
Consumer Cyclical 12%
Financial 5%
Health Care 8%
Industrial 11%
Services 3%
Technology 52%
Utilities 3%
Cash 6%
& of Total Portfolio Investments
TOP TEN HOLDINGS - JUNE 30, 2000
Nortel Networks 2.8%
Siebel Systems 2.6%
Juniper Networks 2.4%
Citigroup 2.2%
General Electric 2.0%
Clear Channel Communications 1.9%
Calpine 1.9%
Microsoft 1.9%
Infospace 1.9%
JDS Uniphase 1.8%
-------------------------------------------------------
% of Total Portfolio Investments 21.4%
2
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
STATEMENT OF NET ASSETS
AS OF JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
COMMON STOCK -- 96.2%
CONSUMER CYCLICAL -- 12.4%
AUDIO/VIDEO PRODUCTS -- 3.0%
Gemstar International* 11,500 $ 706
Polycom* 9,900 932
--------------------------------------------------------------------------------
1,638
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 3.3%
AT&T - Liberty Media, Cl A* 30,200 732
Clear Channel Communications* 14,200 1,065
--------------------------------------------------------------------------------
1,797
--------------------------------------------------------------------------------
RADIO -- 0.8%
Hispanic Broadcasting* 12,700 421
--------------------------------------------------------------------------------
421
--------------------------------------------------------------------------------
RETAIL-BEDDING -- 1.0%
Bed Bath & Beyond* 15,900 576
--------------------------------------------------------------------------------
576
--------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 0.9%
Home Depot 9,950 497
--------------------------------------------------------------------------------
497
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.6%
Best Buy* 4,800 304
--------------------------------------------------------------------------------
304
--------------------------------------------------------------------------------
RETAIL-JEWELRY -- 0.5%
Tiffany & Company 3,900 263
--------------------------------------------------------------------------------
263
--------------------------------------------------------------------------------
RETAIL-REGIONAL DEPARTMENT STORE -- 0.8%
Kohl's* 7,800 434
--------------------------------------------------------------------------------
434
--------------------------------------------------------------------------------
TELEVISION -- 1.5%
Univision Communication* 7,900 818
--------------------------------------------------------------------------------
818
--------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $6,120) 6,748
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FINANCIAL -- 4.9%
COMMERCIAL BANKS-WESTERN U.S. -- 1.4%
Zions Bancorporation 16,700 766
--------------------------------------------------------------------------------
766
--------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.2%
Citigroup 20,300 1,223
--------------------------------------------------------------------------------
1,223
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.3%
Schwab, Charles 20,000 $ 673
--------------------------------------------------------------------------------
673
--------------------------------------------------------------------------------
TOTAL FINANCIAL (COST $2,569) 2,662
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HEALTH CARE -- 8.0%
MEDICAL-BIOMEDICAL/GENETIC -- 2.3%
Biogen* 7,000 452
Genentech* 4,700 808
--------------------------------------------------------------------------------
1,260
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 4.6%
Forest Labs* 5,000 505
Medimmune* 10,200 755
Pfizer 11,500 552
Shire Pharmaceuticals ADR* 13,437 697
--------------------------------------------------------------------------------
2,509
--------------------------------------------------------------------------------
THERAPEUTICS -- 1.1%
Gilead Sciences* 7,900 562
--------------------------------------------------------------------------------
562
--------------------------------------------------------------------------------
TOTAL HEALTH CARE (COST $3,065) 4,331
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 11.1%
CIRCUIT BOARDS -- 0.8%
Jabil Circuit* 8,400 417
--------------------------------------------------------------------------------
417
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 3.8%
General Electric 20,700 1,097
Tyco International Limited 20,900 990
--------------------------------------------------------------------------------
2,087
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 2.7%
Celestica* 10,000 496
Flextronics International* 14,020 963
--------------------------------------------------------------------------------
1,459
--------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.0%
Tektronix 7,400 548
--------------------------------------------------------------------------------
548
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 1.5%
PE Corp-PE Biosystems Group 12,700 837
--------------------------------------------------------------------------------
837
--------------------------------------------------------------------------------
POWER CONVERSION/SUPPLY EQUIPMENT -- 1.3%
Capstone Turbine* 15,400 694
--------------------------------------------------------------------------------
694
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $4,737) 6,042
--------------------------------------------------------------------------------
3
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
--------------------------------------------------------------------------------
Market
Description Shares Value (000)
--------------------------------------------------------------------------------
SERVICES -- 3.5%
ADVERTISING AGENCIES -- 0.9%
Omnicom Group 5,400 $ 481
--------------------------------------------------------------------------------
481
--------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.4%
Digitas* 15,500 253
DST Systems* 6,700 510
--------------------------------------------------------------------------------
763
--------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 1.2%
Telefonos De Mexico ADR 11,800 674
--------------------------------------------------------------------------------
674
--------------------------------------------------------------------------------
TOTAL SERVICES (COST $2,037) 1,918
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 53.3%
APPLICATIONS SOFTWARE -- 4.6%
Microsoft* 13,200 1,056
Siebel Systems* 9,000 1,472
--------------------------------------------------------------------------------
2,528
--------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATION -- 1.0%
AT&T Wireless Group* 19,400 541
--------------------------------------------------------------------------------
541
--------------------------------------------------------------------------------
CIRCUITS -- 1.0%
Linear Technology 8,900 569
--------------------------------------------------------------------------------
569
--------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 0.4%
Entrust Technologies* 2,500 207
--------------------------------------------------------------------------------
207
--------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 1.1%
Brocade Communications Systems* 3,200 587
--------------------------------------------------------------------------------
587
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.8%
EMC* 11,200 861
Veritas Software* 6,050 684
--------------------------------------------------------------------------------
1,545
--------------------------------------------------------------------------------
COMPUTERS-MICRO -- 1.2%
Sun Microsystems* 7,000 637
--------------------------------------------------------------------------------
637
--------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.7%
Integrated Circuit System* 23,400 401
--------------------------------------------------------------------------------
401
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.8%
Fiserv* 10,000 433
--------------------------------------------------------------------------------
433
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount(000) Value (000)
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 9.1%
Applied Materials* 7,200 $ 653
Broadcom* 3,900 854
Fairchild Semiconductor
International, Cl A* 5,100 207
Intel 3,800 508
Marvel Technology Group* 8,200 467
Novellus Systems* 10,800 611
Texas Instruments 13,200 906
Xilinx* 8,900 735
--------------------------------------------------------------------------------
4,941
--------------------------------------------------------------------------------
FIBER OPTICS -- 6.7%
Corning 3,500 945
E-Tek Dynamics* 1,500 396
JDS Uniphase* 8,400 1,007
SDL* 2,200 627
Sycamore Networks* 6,000 662
--------------------------------------------------------------------------------
3,637
--------------------------------------------------------------------------------
INTERNET CONTENT -- 1.9%
Infospace* 18,900 1,044
--------------------------------------------------------------------------------
1,044
--------------------------------------------------------------------------------
INTERNET SOFTWARE -- 3.8%
Alteon Websystems* 4,400 440
Ariba* 6,200 608
Register.com* 10,800 330
Verisign* 3,870 683
--------------------------------------------------------------------------------
2,061
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 8.4%
Cisco Systems* 15,300 973
Foundry Networks* 7,200 792
Juniper Networks* 9,200 1,339
Network Appliance* 8,000 644
Oracle* 10,100 849
--------------------------------------------------------------------------------
4,597
--------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 0.7%
China Unicom ADR* 17,400 370
--------------------------------------------------------------------------------
370
--------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 8.2%
ADC Telecommunications* 9,600 805
Comverse Technology* 5,000 465
Ditech Communications* 5,500 520
Lucent Technologies 7,400 438
Nokia ADR, Cl A 12,600 629
Nortel Networks+ 23,300 1,590
--------------------------------------------------------------------------------
4,447
--------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.9%
Nextel Partners, Cl A* 14,600 475
--------------------------------------------------------------------------------
475
--------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $18,977) 29,020
--------------------------------------------------------------------------------
4
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
--------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
--------------------------------------------------------------------------------
UTILITIES -- 3.0%
ELECTRIC-GENERATION -- 1.0%
AES* 12,600 $ 575
--------------------------------------------------------------------------------
575
--------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER -- 2.0%
Calpine* 16,200 1,064
--------------------------------------------------------------------------------
1,064
--------------------------------------------------------------------------------
TOTAL UTILITIES (COST $965) 1,639
--------------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $38,470) 52,360
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.5%
Morgan Stanley
6.70%, dated 06/30/00, matures 07/03/00,
Repurchase price $3,522,531 (collateralized by
U.S. Government Agency Instruments:
total market value $3,614,859) (A)$3,521 3,521
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $3,521) 3,521
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 102.7% (COST $41,991) 55,881
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.7%)
TOTAL OTHER ASSETS AND LIABILITIES, NET (1,476)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET ASSETS:
Paid-in-capital (authorized
500 million shares - $0.001 par value)
based on 1,808,507 outstanding shares
of common stock 36,045
Accumulated net investment loss (62)
Accumulated net realized gain on investments 4,532
Net unrealized appreciation on investments 13,890
--------------------------------------------------------------------------------
TOTAL NET ASSETS-- 100.0% $ 54,405
--------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $30.08
--------------------------------------------------------------------------------
* Non-income producing security
+ The Portfolio held Canadian securities as of June 30, 2000.
The total market value of investments is $1,590,225 and represents
2.9% of the Portfolio.
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS (000)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
INVESTMENT INCOME:
Dividends.................................................... $ 21
Interest..................................................... 117
-------
Total Investment Income................................... 138
-------
EXPENSES:
Investment Advisory Fees..................................... 151
Administrative Fees.......................................... 30
Custodian Fees............................................... 3
Transfer Agent Fees.......................................... 12
Printing Fees................................................ 2
Directors' Fees.............................................. 1
Amortization of Deferred Organizational Costs................ 1
-------
Total Expenses............................................ 200
-------
NET INVESTMENT LOSS .............................................. (62)
-------
Net Realized Gain from Security Transactions...................... 2,798
Net Change in Unrealized Appreciation on Investments............ 3,110
-------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 5,908
-------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. $5,846
-------
-------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (000)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
01/01/00 01/01/99
to to
06/30/00 12/31/99
---------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Loss....................................................... $ (62) $ (63)
Net Realized Gain from Security Transactions.............................. 2,798 2,199
Net Change in Unrealized Appreciation on Investments ..................... 3,110 7,768
--------- ---------
Net Increase in Net Assets Resulting from Operations...................... 5,846 9,904
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income..................................................... -- --
Net Realized Gains from Security Transactions............................. -- --
--------- ---------
Total Distributions....................................................... -- --
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Shares Issued............................................................. 24,950 8,804
Shares Issued upon Reinvestment of Distributions.......................... -- --
Shares Redeemed........................................................... (3,686) (4,011)
--------- ---------
Increase in Net Assets Derived from Capital Share Transactions............ 21,264 4,793
--------- ---------
Total Increase in Net Assets.............................................. 27,110 14,697
--------- ---------
NET ASSETS:
Beginning of Period....................................................... 27,295 12,598
--------- ---------
End of Period............................................................. $54,405 $27,295
--------- ---------
--------- ---------
SHARES ISSUED AND REDEEMED:
Shares Issued............................................................. 877 502
Shares Issued upon Reinvestment of Distributions.......................... -- --
Shares Redeemed........................................................... (138) (248)
--------- ---------
Net Increase in Shares Outstanding........................................ 739 254
--------- ---------
--------- ---------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH FISCAL YEAR OR PERIOD
<TABLE>
<CAPTION>
Net Realized and Net
Asset Net Unrealized Distributions Distributions Asset
Value Investment Gains or from Net from Value
Beginning Income Losses Investment Capital End Total
of Period (Loss) on Securities Income Gains of Period Return
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 ** $25.51 -- $4.57 -- -- $30.08 17.91%+
1999 15.44 $(0.05) 10.12 -- -- 25.51 65.22%
1998 11.82 (0.02) 3.64 -- -- 15.44 30.63%
1997(1) 10.00 -- 1.82 -- -- 11.82 18.20%+
<CAPTION>
Ratio
of Net
Ratio Ratio Investment
Net of Net of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (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>
2000 ** $54,405 0.99%* (0.31)%* 0.99%* (0.31)%* 68.46%+
1999 27,295 1.10% (0.41)% 1.17% (0.48)% 157.04%
1998 12,598 1.10% (0.19)% 1.53% (0.62)% 41.51%
1997(1) 4,916 1.10%* 0.00%* 5.21%* (4.11)%* 37.42%+
<FN>
* ANNUALIZED.
** FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED).
+ TOTAL RETURN AND PORTFOLIO TURNOVER HAVE NOT BEEN ANNUALIZED.
(1) THE PBHG LARGE CAP GROWTH PORTFOLIO COMMENCED OPERATIONS ON APRIL 30, 1997.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
1. ORGANIZATION
The PBHG Large Cap Growth Portfolio (the "Portfolio") is a series of the PBHG
Insurance Series Fund, Inc. (the "Fund"), a Maryland corporation. The Fund is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund consists of the Portfolio and six
others: the PBHG Growth II Portfolio (the "Growth II Portfolio"), the PBHG
Technology & Communications Portfolio (the "Technology & Communications
Portfolio"), the PBHG Small Cap Value Portfolio (the "Small Cap Value
Portfolio"), the PBHG Select Value Portfolio (the "Select Value Portfolio",
formerly 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") (collectively, the "Portfolios"). Each Portfolio of the Fund 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 Growth II Portfolio, the
Technology & Communications Portfolio, the Small Cap Value Portfolio, the Select
Value Portfolio, the Select 20 Portfolio, or the Mid-Cap Value Portfolio whose
financial statements are presented separately. The Portfolio's prospectus
provides a description of the Portfolio's investment objectives, policies and
strategies. The assets of the Portfolio are segregated, and a shareholder's
interest is limited to the Portfolio in which shares are held. The Fund is
intended to be a funding vehicle for variable annuity contracts and variable
life insurance policies to be offered by the separate accounts of life insurance
companies. At June 30, 2000, 88% and 11%, respectively of the outstanding shares
of the Portfolio were held by the separate accounts of two participating
Insurance Companies, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolio.
SECURITY VALUATION --Investment securities of the Portfolio 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 New York
Stock 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 most recent bid price. Short-term
investments may be valued at amortized cost which approximates market value.
Foreign securities are valued based upon quotations from the primary market in
which they are traded, and are translated from the local currency into U.S.
dollars using current exchange rates. In addition, if quotations are not readily
available, or if the values have been materially affected by events occurring
after the closing of a foreign market, assets may be valued by another method
that the Board of Directors believes accurately reflects fair value.
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 are declared annually, if
available. Distributions of net realized capital gains 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.
FEDERAL INCOME TAXES -- It is the 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") require that the market value of the collateral including accrued
interest thereon, is sufficient in the event of default by the
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PBHG Insurance Series Fund, Inc.
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PBHG LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
counterparty. If the counterparty defaults and the value of the collateral
declines, or if the counterparty enters into insolvency proceedings, realization
of the collateral by a Portfolio may be delayed or limited.
OTHER -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets.
All organizational costs incurred in connection with the start up of the Fund
have been equally allocated to each Portfolio, except the Mid-Cap Value
Portfolio, and are being amortized on a straight line basis over a period of
sixty months 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 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 0.75% of the average daily net assets of
the Portfolio. In the interest of limiting expenses of the Portfolio, the
Adviser has entered into an expense limitation agreement with the Fund ("Expense
Limitation Agreement"). With respect to the Portfolio, the Adviser has agreed to
waive or limit its fees and to assume other expenses of the 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 1.10%. 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 the Portfolio to exceed 1.10%.
Consequently, no reimbursement by the Portfolio will be made unless: (i) the
Portfolio's net assets exceed $75 million; (ii) the Portfolio's total annual
expense ratio is less than 1.10%, and (iii) the payment of such reimbursement is
approved by the Board of Directors on a quarterly basis. At June 30, 2000, the
amount of advisory fee waiver and reimbursement of third party expenses by the
Adviser subject to possible reimbursement was $45,732.
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 the 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
0.040% with respect to 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 0.020% of the average daily net assets of each Portfolio in the PBHG
Fund Family in excess of $10 billion.
The Fund has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Fund. For its services SEI
Investments received $1,095 for the period ended June 30, 2000.
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.
Effective January 2, 1998, the Fund entered into a shareholder servicing
agreement with PBHG Fund Services to provide
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PBHG Insurance Series Fund, Inc.
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PBHG LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
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 Portfolio. For the period ended June 30, 2000, PBHG Fund
Services was paid $4,200 by the Portfolio for shareholder services. Certain
officers and directors of the Fund who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
from the Fund for such services.
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Portfolio for the six months ended June 30,
2000, amounted to $46,613,689 and $25,388,270, respectively.
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolio for federal income tax purposes at June 30, 2000, amounted to
$15,439,024 and $1,549,662, respectively. The total cost of securities and the
net realized gains or losses on securities sold for Federal income tax purposes
at June 30, 2000 was not materially different from amounts reported for
financial reporting purposes.
5. LINE OF CREDIT
The Portfolio may borrow, an amount up to its prospectus defined limitations,
from a $500,000,000 committed line of credit available to certain 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 0.10% 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. The Portfolio had no outstanding borrowing at June 30, 2000,
or at any time during the period ended June 30, 2000.
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[Logo omitted]
PBHG Insurance Series Fund, Inc.
INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd.
DISTRIBUTOR
SEI Investments Distribution, Co.
Oaks, PA
