[PBHG LOGO OMITTED] PBHG
INSURANCE SERIES FUND, INC.
PROSPECTUS MAY 1, 2000
[BULLET] PBHG GROWTH II PORTFOLIO
[BULLET] PBHG LARGE CAP GROWTH PORTFOLIO
[BULLET] PBHG SELECT VALUE PORTFOLIO
[BULLET] PBHG MID-CAP VALUE PORTFOLIO
[BULLET] PBHG SMALL CAP VALUE PORTFOLIO
[BULLET] PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
[BULLET] PBHG SELECT 20 PORTFOLIO
As with all mutual funds, the Securities & Exchange Commission has not approved
any Portfolio shares as an investment or determined whether this prospectus is
complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
=======================
INTRODUCTION
AN INTRODUCTION TO PBHG INSURANCE SERIES FUND AND THIS PROSPECTUS:
PBHG Insurance Series Fund, Inc. is a mutual fund that sells shares in its
separate investment Portfolios through variable annuity contracts ("VA
Contracts") and variable life insurance policies ("VLI Policies") offered by
separate accounts of certain insurance companies ("Participating Insurance
Companies").
Each Portfolio has its own investment goal and strategies for reaching that
goal. Before investing, make sure the Portfolio's goal matches your own. In
general, these Portfolios are designed for long-term investors, such as those
saving for retirement, or investors that want a fund that seeks to outperform
the market in which it invests over the long-term. These Portfolios may not be
suitable for investors who require regular income or stability of principal, or
who are pursuing a short-term investment goal, such as investing emergency
reserves.
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is the investment adviser
for each Portfolio. Pilgrim Baxter Value Investors, Inc. ("Value Investors"), a
wholly-owned subsidiary of Pilgrim Baxter, is the sub-adviser for the Small Cap
Value, Mid-Cap Value and Select Value Portfolios. Pilgrim Baxter and Value
Investors invest Portfolio assets in a way that they believe will help a
Portfolio achieve its goal. However, there is no guarantee that a Portfolio will
achieve its goal.
This Prospectus contains important information you should know before investing
in any Portfolio and as a shareholder in a Portfolio. This information is
arranged into different sections for easy reading and future reference. To
obtain more information about the Portfolios, please refer to the back cover of
this Prospectus.
PORTFOLIO SUMMARIES 2
PBHG Growth II Portfolio
PBHG Large Cap Growth Portfolio
PBHG Select Value Portfolio
PBHG Mid-Cap Value Portfolio
PBHG Small Cap Value Portfolio
PBHG Technology & Communications Portfolio
PBHG Select 20 Portfolio
MORE ABOUT THE PORTFOLIOS 16
THE INVESTMENT ADVISER AND SUB-ADVISER 22
YOUR INVESTMENT 24
Pricing Portfolio Shares
Buying and Selling Portfolio Shares
Distributions and Taxes
Potential Conflicts of Interest
FINANCIAL HIGHLIGHTS 26
1
<PAGE>
===============
PBHG GROWTH II PORTFOLIO
GOAL:
The Portfolio seeks to provide investors with capital appreciation.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in growth securities, such as common stocks, of small and medium sized
companies. These companies generally have market capitalizations or annual
revenues between $500 million and $10 billion. The growth securities in the
Portfolio are primarily common stocks that Pilgrim Baxter believes have strong
business momentum, earnings growth and capital appreciation potential. Pilgrim
Baxter uses its own fundamental research, computer models and proprietary
measures of growth and business momentum in managing this Portfolio. The
Portfolio may sell a security for a variety of reasons, such as a deterioration
in fundamentals or to invest in a company with more attractive growth prospects.
The Portfolio may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in the financial markets, the company's
individual situation, or industry changes. These risks are greater for companies
with smaller market capitalizations because they tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
The Portfolio emphasizes small and medium sized growth companies, so it is
likely to be more volatile than the stock market in general, as measured by the
S&P 500(R) Index. In addition, the growth securities in the Portfolio may never
reach what Pilgrim Baxter believes are their full earnings growth and capital
appreciation potential and may even go down in price.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of the Russell MidCap(TM)
Growth Index, a widely recognized, unmanaged index that tracks the performance
of the 800 smallest stocks in the Russell 1000 Index with greater-than-average
growth orientation. Both the chart and the table assume reinvestment of
dividends and distributions but do not reflect any additional charges or
expenses that may be imposed under the VA contracts or VLI policies. Of course,
the Portfolio's past performance does not indicate how it will perform in the
future.
[BAR CHART OMITTED]
1999 98.19%
1998 8.19%
BEST QUARTER
4th Quarter 1999 49.97%
WORST QUARTER
3rd Quarter 1998 -21.28%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (4/30/97)
- ------------------------------------------------------
Growth II Portfolio 98.19% 36.70%
Russell MidCap(TM)
Growth Index 51.30% 34.71%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
2
<PAGE>
=====================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- --------------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends (and Other Distributions) . . . . . . . . .None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . . .None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from portfolio assets)
- --------------------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . . . . 0.85%
Distribution and/or Services (12b-1) Fees . . . . . . . . . None
Other Expensess . . . . . . . . . . . . . . . . . . . . . . . 0.35%
Total Annual Fund Operating Expenses . . . . . . . . . . 1.20%*
* You should know that Pilgrim Baxter has contractually agreed to waive that
portion, if any, of the annual management fees payable by the Portfolio and to
pay certain expenses of the Portfolio to the extent necessary to ensure that the
total annual fund operating expenses do not exceed 1.20%. You should also know
that in any fiscal year in which the Portfolio's assets are greater than $75
million and its total annual fund operating expenses are less than 1.20%, the
Portfolio's Board of Directors may elect to reimburse Pilgrim Baxter for any
fees it waived or expenses it reimbursed on the Portfolio's behalf during the
previous two fiscal years. In 1999, the Board elected to reimburse $31,616 in
waived fees, which are included in the calculation of "Other Expenses" above. At
the time of the election, the Portfolio had total assets in excess of $128
million.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes four assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; and
4) the Portfolio's operating expenses remain the same for the time periods
shown. The example is hypothetical. Your actual costs and returns may be higher
or lower. In addition, this example does not reflect any additional charges or
expenses that may be imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $122
3 YEARS $381
5 YEARS $660
10 YEARS $1,455
3
<PAGE>
===================
PBHG LARGE CAP GROWTH PORTFOLIO
GOAL:
The Portfolio seeks to provide investors with long-term growth of capital.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in growth securities, such as common stocks, of large capitalization
companies. These companies generally have market capitalizations over $1
billion. The growth securities in the Portfolio are primarily common stocks that
Pilgrim Baxter believes have strong business momentum, earnings growth and
capital appreciation potential. Pilgrim Baxter uses its own fundamental
research, computer models and proprietary measures of growth and business
momentum in managing this Portfolio. The Portfolio may sell a security for a
variety of reasons, such as a deterioration in fundamentals or to invest in a
company with more attractive growth prospects.
The Portfolio also may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which
means you could lose money, but you also have the potential to make money.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in financial markets, the company's
individual situation or industry changes.
While the growth securities in the Portfolio may never reach what Pilgrim Baxter
believes are their full earnings growth and capital appreciation potential and
may even go down in price, the Portfolio's emphasis on large company securities
may limit some of the risk associated with growth investing because large
company securities tend to be less volatile than smaller company securities.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of the S&P 500(R) Index,
a widely recognized, unmanaged index that measures the performance of large cap
stocks across all major industries. Both the chart and the table assume
reinvestment of dividends and distributions but do not reflect any additional
charges or expenses that may be imposed under the VA contracts or VLI policies.
Of course, the Portfolio's past performance does not indicate how it will
perform in the future.
[BAR CHART OMITTED]
1999 65.22%
1998 30.63%
BEST QUARTER
4th Quarter 1999 55.36%
WORST QUARTER
3rd Quarter 1998 -11.20%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (4/30/97)
- -------------------------------------------
Large Cap
Growth Portfolio 65.22% 41.99%
S&P 500(R) Index 21.04% 27.40%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
4
<PAGE>
=======================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- --------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . .None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from portfolio assets)
- --------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . .0.75%
Distribution and/or Services (12b-1) Fees . . . . . . .None
Other Expenses . . . . . . . . . . . . . . . . . . . . 0.42%
Total Annual Fund Operating Expenses . . . . . .. . . .1.17%
Less: Fee Waiver (and/or Expense Reimbursement). . .. 0.07%
Net Expenses . . . . . . . . . . . . . . . . . . . . . 1.10%*
* This is the actual total fund operating expense you would have paid as an
investor in this Portfolio for the fiscal year ended December 31, 1999. That's
because Pilgrim Baxter has contractually agreed to waive that portion, if any,
of the annual management fees payable by the Portfolio and to pay certain
expenses of the Portfolio to the extent necessary to ensure that the total
annual fund operating expenses do not exceed 1.10%. You should know that in any
fiscal year in which the Portfolio's assets are greater than $75 million and its
total annual fund operating expenses are less than 1.10%, the Portfolio's Board
of Directors may elect to reimburse Pilgrim Baxter for any fees it waived or
expenses it reimbursed on the Portfolio's behalf during the previous two fiscal
years. To date, the Board has made no reimbursement election.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes five assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; 4)
the Portfolio's operating expenses remain the same for the time periods shown
and; 5) the expense cap is in place only for one year. The example is
hypothetical. Your actual costs and returns may be higher or lower. In addition,
this example does not reflect any additional charges or expenses that may be
imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $112
3 YEARS $365
5 YEARS $637
10 YEARS $1414
5
<PAGE>
===================
PBHG SELECT VALUE PORTFOLIO
GOAL:
The Portfolio seeks to provide investors long-term growth of capital and income.
Current income is a secondary objective.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in value securities, such as common stocks, of no more than 30 companies
with large market capitalizations. These companies generally have market
capitalizations greater than $1 billion. The securities in the Portfolio are
primarily common stocks that Pilgrim Baxter and Value Investors believe are
currently underpriced using certain financial measurements, such as their
price-to-earnings ratios. Pilgrim Baxter and Value Investors use their own
fundamental research, computer models and proprietary measures of value in
managing this Portfolio. The Portfolio may sell a security for a variety of
reasons, such as when it becomes overvalued or shows deteriorating fundamentals.
The Portfolio may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The Portfolio invests in a limited number of stocks in order to achieve a
potentially greater investment return than a more widely diversified fund. As a
result, the price change of a single security, positive or negative, has a
greater impact on the Portfolio's net asset value and will cause its shares to
fluctuate more than it would in a more widely diversified fund.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in the financial markets, the company's
individual situation, or industry changes.
While the value securities in the Portfolio may never reach what Pilgrim Baxter
and Value Investors believe are their full worth and may even go down in price,
the Portfolio's emphasis on large company securities may limit some of the risk
associated with value investing because large company securities tend to be less
volatile than smaller company securities.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of the S&P 500(R) Index,
a widely recognized, unmanaged index that measures the performance of large cap
stocks across all major industries. Both the chart and the table assume
reinvestment of dividends and distributions but do not reflect any additional
charges or expenses that may be imposed under the VA contracts or VLI policies.
Of course, the Portfolio's past performance does not indicate how it will
perform in the future.
[BAR CHART OMITTED]
1999 8.89%
1998 37.96%
BEST QUARTER
4th Quarter 1998 29.59%
WORST QUARTER
3rd Quarter 1998 -7.54%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (10/28/97)
- --------------------------------------------
Select
Value Portfolio 8.89% 22.93%
S&P 500(R)Index 21.04% 26.23%
Prior to May 1, 2000, the Portfolio was named the PBHG Large Cap Value Portfolio
and was not limited in the number of stocks it could hold. Therefore, the
Portfolio's performance prior to May 1, 2000 may not be indicative of how it
will perform in the future.
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
6
<PAGE>
=========================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- ---------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . .None
Maximum Deferred Sales Charge (Load). . . . . . . . . . .None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from portfolio assets)
- ---------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . .0.65%
Distribution and/or Services (12b-1) Fees . . . . . . . None
Other Expenses . . . . . . . . . . . . . . . . . . . . . 0.30%
Total Annual Fund Operating Expenses . . . . . . . . . . 0.95%*
* You should know that Pilgrim Baxter has contractually agreed to waive that
portion, if any, of the annual management fees payable by the Portfolio and to
pay certain expenses of the Portfolio to the extent necessary to ensure that the
total annual fund operating expenses do not exceed 1.00%. You should also know
that in any fiscal year in which the Portfolio's assets are greater than $75
million and its total annual fund operating expenses are less than 1.00%, the
Portfolio's Board of Directors may elect to reimburse Pilgrim Baxter for any
fees it waived or expenses it reimbursed on the Portfolio's behalf during the
previous two fiscal years. To date, the Board has made no reimbursement
election.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes four assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; and
4) the Portfolio's operating expenses remain the same for the time periods
shown. The example is hypothetical. Your actual costs and returns may be higher
or lower. In addition, this example does not reflect any additional charges or
expenses that may be imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $97
3 YEARS $303
5 YEARS $525
10 YEARS $1,166
7
<PAGE>
=======================
PBHG MID-CAP VALUE PORTFOLIO
GOAL:
The Portfolio seeks to provide investors with above-average total return over a
3 to 5 year market cycle, consistent with reasonable risk.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
market capitalizations within the range of the S&P MidCap(R) 400 Index. The
securities in the Portfolio are primarily common stocks that Pilgrim Baxter and
Value Investors believe are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios. Pilgrim Baxter and Value
Investors use their own fundamental research, computer models and proprietary
measures of value in managing this Portfolio. The Portfolio may sell a security
for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals.
The Portfolio may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in the financial markets, the company's
individual situation, or industry changes. These risks are greater for companies
with smaller market capitalizations because they tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
The Portfolio emphasizes value securities of medium sized companies, so it is
likely to be more volatile than the stock market in general, as measured by the
S&P 500 Index. In addition, the value securities in the Portfolio may never
reach what Pilgrim Baxter and Value Investors believe are their full worth and
may even go down in price.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and performance table below illustrate the risks and volatility of
an investment in the Portfolio. The bar chart shows you how the Portfolio's
performance has varied from year to year. The performance table compares the
Portfolio's performance over time to that of its benchmark, the S&P MidCap(R)
400 Index, a widely recognized, unmanaged index that tracks the performance of
400 mid-cap stocks, and the S&P Barra Midcap Value Index, a widely recognized,
unmanaged index that tracks the performance of those S&P MidCap 400 companies
with lower price-to-book ratios and forecasted growth rates. Both the chart and
the table assume reinvestment of dividends and distributions but do not reflect
any additional charges or expenses that may be imposed under the VA contracts or
VLI policies. Of course, the Portfolio's past performance does not indicate how
it will perform in the future.
[BAR CHART OMITTED]
1999 25.66%
BEST QUARTER
4th Quarter 1999 16.07%
WORST QUARTER
3rd Quarter 1999 -6.41%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (11/30/98)
- --------------------------------------------------
Mid-Cap
Value Portfolio 25.66% 35.90%
S&P MidCap
400 Index 14.77% 26.12%
S&P Midcap 400/BARRA
Value Index 2.32% 6.34%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
8
<PAGE>
====================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- ----------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . .None
Maximum Deferred Sales Charge (Load) . . . . . . . . . . None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from portfolio assets)
- ----------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . .0.85%
Distribution and/or Services (12b-1) Fees . . . . . . . .None
Other Expenses . . . . . . . . . . . . . . . . . . . . . 5.04%
Total Annual Fund Operating Expenses . . . . . . . . . . 5.89%
Less: Fee Waiver (and/or Expense Reimbursement). . . . 4.69%
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 1.20%*
* This is the actual total fund operating expense you would have paid as an
investor in this Portfolio for the fiscal year ended December 31, 1999. That's
because Pilgrim Baxter has contractually agreed to waive that portion, if any,
of the annual management fees payable by the Portfolio and to pay certain
expenses of the Portfolio to the extent necessary to ensure that the total
annual fund operating expenses do not exceed 1.20%. You should know that in any
fiscal year in which the Portfolio's assets are greater than $75 million and its
total annual fund operating expenses are less than 1.20%, the Portfolio's Board
of Directors may elect to reimburse Pilgrim Baxter for any fees it waived or
expenses it reimbursed on the Portfolio's behalf during the previous two fiscal
years. To date, the Board has made no reimbursement election.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes five assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; 4)
the Portfolio's operating expenses remain the same for the time periods shown
and; 5) the expense cap is in place only for one year. The example is
hypothetical. Your actual costs and returns may be higher or lower. In addition,
this example does not reflect any additional charges or expenses that may be
imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $122
3 YEARS $1,334
5 YEARS $2,525
10 YEARS $5,409
9
<PAGE>
=======================
PBHG SMALL CAP VALUE PORTFOLIO
GOAL:
The Portfolio seeks to provide investors with above-average total return over a
3 to 5 year market cycle, consistent with reasonable risk.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
market capitalizations within the range of the Russell 2000(R) Index. The value
securities in the Portfolio are primarily common stocks that Pilgrim Baxter and
Value Investors believe are currently underpriced using certain financial
measurements, such as their price-to-earnings ratios. Pilgrim Baxter and Value
Investors use their own fundamental research, computer models and proprietary
measures of value in managing this Portfolio. The Portfolio may sell a security
for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals.
The Portfolio also may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in the financial markets, a company's
individual situation, or industry changes. These risks are greater for companies
with smaller market capitalizations because they tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
The Portfolio emphasizes value securities of smaller sized companies, so it is
likely to be more volatile than the stock market in general, as measured by the
S&P 500(R) Index. In addition, the value securities in the Portfolio may never
reach what Pilgrim Baxter and Value Investors believe are their full worth and
may even go down in price.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of its benchmark, the
Russell 2000(R) Index, a widely recognized, unmanaged index that tracks the
performance of 2000 small cap stocks, and the Russell 2000(R) Value Index, a
widely-recognized, unmanaged index that tracks the performance of those Russell
2000 companies with lower price-to-book ratios and forecasted growth values.
Both the chart and the table assume reinvestment of dividends and distributions
but do not reflect any additional charges or expenses that may be imposed under
the VA contracts or VLI policies. Of course, the Portfolio's past performance
does not indicate how it will perform in the future.
[BAR CHART OMITTED]
1999 15.93%
1998 10.94%
BEST QUARTER
4th Quarter 1998 25.92%
WORST QUARTER
3rd Quarter 1998 -19.85%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (10/28/97)
- ------------------------------------------------------
Small Cap
Value Portfolio 15.93% 14.71%
Russell 2000(R)Index 21.26% 8.55%
Russell 2000(R) Value Index -1.49% -1.71%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
10
<PAGE>
========================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- -------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . . . None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . . . .None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . . None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
- -------------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . . . 1.00%
Distribution and/or Services (12b-1) Fees . . . . . . . . . None
Other Expenses . . . . . . . . . . . . . . . . . . . . . . .0.29%
Total Annual Fund Operating Expenses . . . . . . . . . . . 1.29%
Less: Fee Waiver (and/or Expense Reimbursement) . . . . . 0.09%
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . 1.20%*
* This is the actual total fund operating expense you would have paid as an
investor in this Portfolio for the fiscal year ended December 31, 1999. That's
because Pilgrim Baxter has contractually agreed to waive that portion, if any,
of the annual management fees payable by the Portfolio and to pay certain
expenses of the Portfolio to the extent necessary to ensure that the total
annual fund operating expenses do not exceed 1.20%. You should know that in any
fiscal year in which the Portfolio's assets are greater than $75 million and its
total annual fund operating expenses are less than 1.20%, the Portfolio's Board
of Directors may elect to reimburse Pilgrim Baxter for any fees it waived or
expenses it reimbursed on the Portfolio's behalf during the previous two fiscal
years. To date, the Board has made no reimbursement election.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes five assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; 4)
the Portfolio's operating expenses remain the same for the time periods shown
and; 5) the expense cap is in place only for one year. The example is
hypothetical. Your actual costs and returns may be higher or lower. In addition,
this example does not reflect any additional charges or expenses that may be
imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $122
3 YEARS $400
5 YEARS $699
10 YEARS $1,549
11
<PAGE>
====================
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
GOAL:
The Portfolio seeks to provide investors with long-term growth of capital.
Current income is incidental to the Portfolio's goal.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio, a non-diversified fund, will
invest at least 65% of its total assets in common stocks of companies doing
business in the technology and communications sectors of the market. In
addition, the Portfolio is concentrated which means it will invest 25% or more
of its total assets in one or more of the industries within these sectors. These
industries may include computer software and hardware, network and cable
broadcasting, semiconductors, defense and data storage and retrieval, and
biotechnology. The Portfolio offers investors significant growth potential
because it invests in companies that may be responsible for breakthrough
products or technologies or positioned to take advantage of cutting-edge
developments. The Portfolio's holdings may range from smaller companies
developing new technologies or pursuing scientific breakthroughs to large, blue
chip firms with established track records in developing, using or marketing
scientific advances. The Portfolio may sell a security for a variety of reasons,
such as a deterioration in fundamentals or to invest in a company with more
attractive growth prospects. The Portfolio may use options and futures contracts
for hedging and risk management.
MAIN INVESTMENT RISKS:
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The Portfolio is non-diversified which means, as compared to a diversified fund,
it invests a higher percentage of its assets in a limited number of stocks in
order to achieve a potentially greater investment return than a more diversified
fund. As a result, the price change of a single security, positive or negative,
has a greater impact on the Portfolio's net asset value and will cause its
shares to fluctuate in value more than it would in a more widely diversified
fund.
The Portfolio is concentrated which means, compared to a non-concentrated fund,
it invests a higher percentage of its assets in specific industries within the
technology and communications sectors of the market in order to achieve a
potentially greater investment return. As a result, the economic, political and
regulatory developments in a particular industry, positive or negative, have a
greater impact on the Portfolio's net asset value and will cause its shares to
fluctuate more than if the Portfolio did not concentrate its investments.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in the financial markets, the company's
individual situation, or industry changes. These risks are greater for companies
with smaller market capitalizations because they tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
Securities of technology companies are strongly affected by worldwide scientific
and technological developments and governmental policies and, therefore, are
generally more volatile than securities of companies not dependent upon or
associated with technology issues.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of the Soundview
Technology Index, a widely recognized, unmanaged index that measures the
performance of 100 major technology stocks, as chosen by Soundview Financial
Group. Both the chart and the table assume reinvestment of dividends and
distributions but do not reflect any additional charges or expenses that may be
imposed under the VA contracts or VLI policies. Of course, the Portfolio's past
performance does not indicate how it will perform in the future.
[BAR CHART OMITTED]
1999 234.38%
1998 32.20%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
12
<PAGE>
=========================
PORTFOLIO
BEST QUARTER
4th Quarter 1999 108.57%
WORST QUARTER
3rd Quarter 1998 -8.97%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (4/30/97)
- ---------------------------------------------------
Technology &
Communications Portfolio 234.38% 77.08%
Soundview
Technology Index 129.79% 63.44%
Prior to November 2, 1999, the Portfolio was diversified and did not concentrate
its investments. Therefore, the Portfolio's performance prior to November 2,
1999 may not be indicative of how it will perform in the future.
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- -----------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . . . None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . .None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . .None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM PORTFOLIO ASSETS)
- -----------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . . 0.85%
Distribution and/or Services (12b-1) Fees . . . . . . . . None
Other Expenses . . . . . . . . . . . . . . . . . . . . . .0.24%
Total Annual Fund Operating Expenses . . . . . . . . . . 1.09%*
* You should know that Pilgrim Baxter has contractually agreed to waive that
portion, if any, of the annual management fees payable by the Portfolio and to
pay certain expenses of the Portfolio to the extent necessary to ensure that the
total annual fund operating expenses do not exceed 1.20%. You should also know
that in any fiscal year in which the Portfolio's assets are greater than $75
million and its total annual fund operating expenses are less than 1.20%, the
Portfolio's Board of Directors may elect to reimburse Pilgrim Baxter for any
fees it waived or expenses it reimbursed on the Portfolio's behalf during the
previous two fiscal years. In 1999, the Board elected to reimburse $93,603 in
waived fees, which are included in the calculation of "Other Expenses" above. At
the time of the election, the Portfolio had total assets in excess of $204
million.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes four assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; and
4) the Portfolio's operating expenses remain the same for the time periods
shown. The example is hypothetical. Your actual costs and returns may be higher
or lower. In addition, this example does not reflect any additional charges or
expenses that may be imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $111
3 YEARS $347
5 YEARS $601
10 YEARS $1,329
13
<PAGE>
====================
PBHG SELECT 20 PORTFOLIO
GOAL:
The Portfolio, a non-diversified fund, seeks to provide investors with long-term
growth of capital.
MAIN INVESTMENT STRATEGIES:
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in growth securities, such as common stocks, of no more than 20
large capitalization companies. These companies generally have market
capitalizations over $1 billion. The growth securities in the Portfolio are
primarily common stocks that Pilgrim Baxter believes have strong business
momentum, earnings growth and capital appreciation potential. Pilgrim Baxter
uses its own fundamental research, computer models and proprietary measures of
growth and business momentum in managing this Portfolio. The Portfolio may sell
a security for a variety of reasons, such as a deterioration in fundamentals or
to invest in a company with more attractive growth prospects.
The Portfolio may use options and futures contracts for hedging and risk
management.
MAIN INVESTMENT RISKS:
The Portfolio is non-diversified which means, as compared to a diversified fund,
it invests a higher percentage of its assets in a limited number of stocks in
order to achieve a potentially greater investment return. As a result, the price
change of a single security, positive or negative, has a greater impact on the
Portfolio's net asset value than it would in a diversified fund.
The value of your investment in the Portfolio will go up and down, which means
you could lose money, but you also have the potential to make money.
The price of the securities in the Portfolio will fluctuate. These price
movements may occur because of changes in financial markets, the company's
individual situation, or industry changes.
While the growth securities in the Portfolio may never reach what Pilgrim Baxter
believes are their full earnings growth and capital appreciation potential and
may even go down in price, the Portfolio's emphasis on large company securities
may limit some of the risks associated with growth investing because large
company securities tend to be less volatile than smaller company securities.
The Portfolio's use of options and futures contracts may reduce returns or
increase volatility.
Although the Portfolio strives to achieve its goal, it cannot offer guaranteed
results.
Your investment in the Portfolio is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
PERFORMANCE INFORMATION:
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Portfolio. The bar chart shows you how the
Portfolio's performance has varied from year to year. The performance table
compares the Portfolio's performance over time to that of the S&P 500(R) Index,
a widely recognized, unmanaged index that measures the performance of large cap
stocks across all major industries. Both the chart and the table assume
reinvestment of dividends and distributions but do not reflect any additional
charges or expenses that may be imposed under the VA contracts or VLI policies.
Of course, the Portfolio's past performance does not indicate how it will
perform in the future.
[BAR CHART OMITTED]
1999 100.61%
1998 62.52%
BEST QUARTER
4th Quarter 1999 74.31%
WORST QUARTER
3rd Quarter 1998 -4.18%
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
PAST SINCE INCEPTION
1 YEAR (9/25/97)
- ----------------------------------------------
Select 20 Portfolio 100.61% 68.69%
S&P 500(R) Index 21.04% 23.27%
FOR MORE INFORMATION ON THIS PORTFOLIO'S INVESTMENT STRATEGIES AND ASSOCIATED
RISKS, PLEASE REFER TO THE MORE ABOUT THE PORTFOLIOS SECTION BEGINNING ON PAGE
16.
14
<PAGE>
=======================
FEES AND EXPENSES:
This table summarizes the shareholder transaction fees and annual operating
expenses you would pay as an investor in the Portfolio. Shareholder transaction
fees are paid from your investment. Annual operating expenses are paid out of
the Portfolio's assets, so their effect is included in the share price. The
expenses listed below are based on the Portfolio's last fiscal year.
FEES AND EXPENSES TABLE
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
- ------------------------------------------------------------------------
Maximum Sales Charge (Load)
Imposed on Purchases . . . . . . . . . . . . . . None
Maximum Deferred Sales Charge (Load) . . . . . . . . . . None
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends and Other Distributions . . . . . . . . . . . . None
Redemption Fee . . . . . . . . . . . . . . . . . . . . . .None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . .None
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from portfolio assets)
- -----------------------------------------------------------------------
Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . .0.85%
Distribution and/or Services(12b-1) Fees . . . . . . . . . . . . None
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 0.20%
Total Annual Fund Operating Expenses . . . . . . . . . . . . . 1.05%*
* You should know that Pilgrim Baxter has contractually agreed to waive that
portion, if any, of the annual management fees payable by the Portfolio and to
pay certain expenses of the Portfolio to the extent necessary to ensure that the
total annual fund operating expenses do not exceed 1.20%. You should also know
that in any fiscal year in which the Portfolio's assets are greater than $75
million and its total annual fund operating expenses are less than 1.20%, the
Portfolio's Board of Directors may elect to reimburse Pilgrim Baxter for any
fees it waived or expenses it reimbursed on the Portfolio's behalf during the
previous two fiscal years. In 1999, the Board elected to reimburse $27,776 in
waived fees, which are included in the calculation of "Other Expenses" above. At
the time of the election, the Portfolio had total assets in excess of $394
million.
EXAMPLE:
This example translates the "Total Annual Fund Operating Expenses" shown in the
preceding table into dollar amounts. With this information, you can more easily
compare the cost of investing in the Portfolio to the cost of investing in other
mutual funds. This example makes four assumptions: 1) you invest $10,000 in the
Portfolio for the time periods shown; 2) you redeem all your shares at the end
of those time periods; 3) you earn a 5% return on your investment each year; and
4) the Portfolio's operating expenses remain the same for the time periods
shown. The example is hypothetical. Your actual costs and returns may be higher
or lower. In addition, this example does not reflect any additional charges or
expenses that may be imposed under the VA contracts or VLI policies.
YOUR COST
1 YEAR $107
3 YEARS $334
5 YEARS $579
10 YEARS $1,283
15
<PAGE>
==========================
MORE ABOUT THE PORTFOLIOS
RISKS & REWARDS:
This section takes a closer look at the investment strategies that make up each
Portfolio's risk and reward characteristics.
In addition to the main investment strategies described in the Portfolio
Summaries section of this Prospectus, each Portfolio may make other types of
investments that have different risk/reward characteristics. These investments,
the Portfolios' main investment strategies and their risk/reward characteristics
are described in the table set forth below. From time to time, a Portfolio may
make investments and pursue strategies different from those described in this
Prospectus. Those investments and strategies are described in the Statement of
Additional Information. The back cover of this Prospectus explains how you can
get a copy of the Statement of Additional Information.
================================================================================
SECURITIES
================================================================================
Shares representing ownership in a corporation. Each Portfolio may invest in the
following types of equity securities: common and preferred stocks, convertible
securities, warrants and rights.
POTENTIAL RISKS:
o Security prices fluctuate over time.
o Security prices may fall as a result of factors that relate to the
company, such as management decisions or lower demand for the company's
products or services.
o Security prices may fall because of factors affecting companies in a number
of industries, such as production costs. o Security prices may fall
because of changes in the financial markets, such as interest rates or
currency exchange rate changes.
POTENTIAL REWARDS:
o Securities have generally outperformed more stable investments (such as bonds
and cash equivalents) over the long term.
POLICIES TO BALANCE RISKS & REWARDS:
o Pilgrim Baxter and Value Investors maintain a long-term investment approach
and focus on securities they believe can appreciate over an extended time
frame, regardless of interim fluctuations. o Under normal circumstances, each
Portfolio intends to remain fully invested, with at least 65% of its total
assets in securities.
o Pilgrim Baxter and Value Investors focus their active management on securities
selection, the area they believe their commitment to fundamental research can
most enhance a Portfolio's performance.
16
<PAGE>
================================================================================
GROWTH SECURITIES
================================================================================
Securities that Pilgrim Baxter believes have or are expected to have strong
sales and earnings growth and capital appreciation potential and will grow
faster than the economy as a whole.
POTENTIAL RISKS:
o See securities.
o Growth securities may be more sensitive to changes in business momentum and
earnings than other securities because they typically trade at higher earnings
multiples.
o The growth securities in the Portfolio may never reach what Pilgrim Baxter
believes are their full value and may even go down in price.
POTENTIAL REWARDS:
o See Securities
o Growth securities may appreciate faster than non-growth securities
POLICIES TO BALANCE RISKS & REWARDS:
o See securities.
o In managing a Portfolio, Pilgrim Baxter uses its own software and research
models which incorporate important attributes of successful growth. Pilgrim
Baxter believes a key attribute of successful growth is positive business
momentum as demonstrated by earnings or revenue and sales growth, among other
factors. Pilgrim Baxter's investment process is extremely focused on companies
which exhibit positive business momentum.
o Pilgrim Baxter considers selling a security when its anticipated appreciation
is no longer probable, alternative investments offer more superior
appreciation prospects or the risk of a decline in its market price is too
great.
================================================================================
VALUE SECURITIES
================================================================================
Securities that Value Investors believes are currently underpriced using certain
financial measurements, such as their price-to-earnings ratio, earnings power,
dividend income potential, and competitive advantages.
Potential Risks:
o See securities.
o Value companies may have experienced adverse business developments or may be
subject to special risks that have caused their securities to be out of favor.
o The value securities in the Portfolio may never reach what Value Investors
believes are their full value and may even go down in price.
POTENTIAL REWARDS:
o See securities.
o Value securities may produce significant capital appreciation as the market
recognizes their full value.
POLICIES TO BALANCE RISKS & REWARDS:
o See securities.
o In managing a Portfolio, Value Investors uses its own research, computer
models and measures of value.
o Value Investors considers selling a security when it becomes overvalued
relative to the market, shows deteriorating fundamentals or falls short of
Value Investors' expectations.
17
<PAGE>
================================================================================
SMALL & MEDIUM SIZED COMPANY SECURITIES:
================================================================================
POTENTIAL RISKS:
o Smaller company securities involve greater risk and price volatility than
larger, more established companies because they tend to have more limited
product lines, markets and financial resources and may be dependent on a
smaller management group.
POTENTIAL REWARDS:
o Smaller company securities may appreciate faster than those of larger, more
established companies for many reasons. For example, smaller companies tend to
have younger product lines whose distribution and revenues are still maturing.
POLICIES TO BALANCE RISKS & REWARDS:
o Pilgrim Baxter and Value Investors focus on smaller companies with strong
balance sheets that they expect to exceed consensus earnings expectations.
================================================================================
TECHNOLOGY COMPANY SECURITIES:
================================================================================
Securities of companies that rely extensively on technology in their product
development or operations, are expected to benefit from technological advances
and improvements, or may be experiencing exceptional growth in sales and
earnings driven by technology or communications related products and services.
POTENTIAL RISKS:
o Technology company securities are strongly affected by worldwide scientific
and technological developments and governmental policies, and, therefore, are
generally more volatile than companies not dependent upon or associated with
technology issues.
POTENTIAL REWARDS:
o Technology company securities offer investors significant growth potential
because they may be responsible for break through products or technologies or
may be positioned to take advantage of cutting-edge, technology related
developments.
POLICIES TO BALANCE RISKS & REWARDS:
o With the exception of the Technology & Communications Portfolio, each
Portfolio seeks to strike a balance among the industries in which it invests
so that no one industry dominates the Portfolio's investments.
o Although the Technology & Communi-cations Portfolio will invest 25% or more of
its total assets in one or more of the industries within the technology and
communications sectors, the Portfolio seeks to strike a balance among the
industries in which it invests in an effort to lessen the impact of negative
developments in the technology and communications sectors.
18
<PAGE>
================================================================================
FUTURES & OPTIONS:
================================================================================
A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on changes in the value of a securities index. An option contract is the
right to buy or sell a set quantity of an underlying instrument at a
pre-determined price.
POTENTIAL RISKS:
o A futures or option contract used to hedge the Portfolio or specific
securities may not fully offset the underlying position.
o A futures or option contract used for risk management may not have the
intended effects and may result in losses or missed investment opportunities.
o The counterparty to a futures or option contract could default.
POTENTIAL REWARDS:
o A futures or option contract that correlates well with the underlying position
can reduce or eliminate losses at low cost. o A Portfolio could make money and
protect against losses if Pilgrim Baxter's or Value Investors' analysis proves
correct.
POLICIES TO BALANCE RISKS & REWARDS:
o Each Portfolio may use futures and options contracts for hedging and risk
management, i.e., to establish or adjust exposure to particular securities,
markets or currencies; to manage a Portfolio's exposure relative to its
benchmark; or to equitize cash.
o Each Portfolio only establishes hedges that it expects will be highly
correlated with underlying securities positions.
o No Portfolio considers using futures or options contracts unless it would be
cost-effective.
o Each Portfolio maintains assets sufficient to meet its obligations
under the contract in a segregated margin account with a custodian bank.
================================================================================
OTC SECURITIES:
================================================================================
Securities not listed and traded on an organized exchange, but bought and sold
through a computer network.
POTENTIAL RISKS:
o OTC securities are not traded as often as securities listed on an exchange.
So, if the Portfolio were to sell an OTC security, it might have to offer the
security at a discount or sell it in smaller share lots over an extended
period of time.
POTENTIAL REWARDS:
o Increases the number of potential investments for a Portfolio.
o OTC securities may appreciate faster than exchange-traded securities because
they are typically securities of younger, growing companies.
POLICIES TO BALANCE RISKS & REWARDS:
o Pilgrim Baxter and Value Investors use a highly disciplined investment process
that seeks to, among other things, identify quality investments that will
enhance a Portfolio's performance.
19
<PAGE>
================================================================================
FOREIGN SECURITIES:
================================================================================
Equity securities of foreign issuers, including ADRs. ADRs are certificates
issued by a U.S. bank that represent a stated number of shares of a foreign
corporation that the bank holds in its vault. An ADR is bought and sold in the
same manner as U.S. securities.
POTENTIAL RISKS:
o Foreign security prices may fall due to political instability, changes in
currency exchange rates, foreign economic conditions or inadequate regulatory
and accounting standards.
POTENTIAL REWARDS:
o Favorable exchange rate movements could generate gains or reduce losses.
o Foreign investments,which represent a major portion of the world's securities,
offer attractive potential performance and opportunities for diversification.
POLICIES TO BALANCE RISKS & REWARDS:
o Each Portfolio limits the amount of total assets it invests in foreign
securities as follows: Large Cap Growth/Technology & Communications/Select
20: 10% and Growth II/Small Cap Value/ Mid-Cap Value/Select Value: 15%.
ADRs are not included in these limits.
================================================================================
ILLIQUID SECURITIES:
================================================================================
Securities that do not have a ready market and cannot be easily sold, if at all,
at approximately the price that the Portfolio has valued them.
POTENTIAL RISKS:
o A Portfolio may have difficulty valuing these securities precisely.
o A Portfolio may be unable to sell these securities at the time or price it
desires.
POTENTIAL REWARDS:
o Illiquid securities may offer more attractive yields or potential growth than
comparable widely traded securities.
POLICIES TO BALANCE RISKS & REWARDS:
o Each Portfolio may not invest more than 15% of its net assets in illiquid
securities.
================================================================================
RESTRICTED SECURITIES:
================================================================================
Privately placed securities whose resale is restricted under securities law.
POTENTIAL RISKS:
o Restricted securities may be difficult to value because market quotations may
not be readily available.
o Because of the restrictions in resale of these securities, a Portfolio may not
be able to find a qualified buyer or may not be able to sell these securities
at the time or price it desires.
POTENTIAL REWARDS:
o Restricted securities may offer more future growth potential than publicly
traded securities
POLICIES TO BALANCE RISKS & REWARDS:
o Each Portfolio limits the amount of total assets it invests in restricted
securities as follows: Large Cap Growth/Technology & Communications/ Select
20: 10% and Small Cap Value/Mid-Cap Value/Select Value: 15%. The Growth II
Portfolio is not currently permitted to invest in restricted securities.
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WHEN ISSUED AND DELAYED-DELIVERY SECURITIES:
================================================================================
Securities subject to settlement on a future date.
POTENTIAL RISKS:
o When a Portfolio buys these securities, it could be exposed to leverage risk
if it does not use segregated accounts.
POTENTIAL REWARDS:
o A Portfolio can take advantage of attractive investment opportunities.
POLICIES TO BALANCE RISKS & REWARDS:
o Only the Small Cap Value, Mid-Cap Value and Select Value Portfolios are
permitted to invest in these securities. These Portfolios use segregated
accounts to offset leverage risk.
Each Portfolio may invest 100% of its total assets in cash or U.S.
dollar-denominated high quality short-term instruments for temporary defensive
purposes, to maintain liquidity or when economic or market conditions are
unfavorable for profitable investing. These types of investments typically have
a lower yield than other longer-term investments and lack the capital
appreciation potential of equity securities, like stocks. In addition, while
these investments are generally designed to limit a Portfolio's losses, they can
prevent a Portfolio from achieving its investment goal.
Each Portfolio is actively managed, which means a Portfolio's manager may
frequently buy and sell securities. Frequent trading increases a Portfolio's
turnover rate and may increase transaction costs, such as brokerage commissions.
Increased transaction costs could detract from a Portfolio's performance. In
addition, the sale of Portfolio securities may generate capital gains which,
when distributed, may be taxable to you.
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THE INVESTMENT ADVISER and Sub-Adviser
THE INVESTMENT ADVISER:
Pilgrim Baxter & Associates, Ltd., 825 Duportail Road, Wayne, Pa 19087, is the
investment adviser for each Portfolio. Founded in 1982, Pilgrim Baxter currently
manages approximately $25 billion in assets for pension and profit-sharing
plans, charitable institutions, corporations, trusts, estates and other
investment companies.
Pilgrim Baxter believes that discipline and consistency are important to
long-term investment success. This belief is reflected in its investment
process. Pilgrim Baxter uses a quantitative and fundamental investment process
that is extremely focused on business momentum, as demonstrated by such things
as earnings or revenues and sales growth.
Pilgrim Baxter begins its investment process by creating a universe of rapidly
growing companies that possess certain growth characteristics. That universe is
continually updated. Pilgrim Baxter then ranks each company in its universe
using propriety software and research models that incorporate attributes of
successful growth like positive earnings surprises, upward earnings estimate
revisions, and accelerating sales and earnings growth. Finally, using its own
fundamental research and a bottom-up approach to investing, Pilgrim Baxter
evaluates each company's business momentum, earnings quality and whether the
company can sustain its current growth trend. Pilgrim Baxter believes that
through this highly disciplined investment process, it is able to construct a
portfolio of investments with strong growth characteristics.
Pilgrim Baxter's decision to sell a security depends on many factors. Generally
speaking, however, Pilgrim Baxter considers selling a security when its
anticipated appreciation is no longer probable, alternative investments offer
more superior appreciation prospects, the risk of a decline in its market price
is too great or deterioration in business fundamentals occurs or is expected to
occur.
As investment adviser, Pilgrim Baxter makes investment decisions for the Growth
II, Large Cap Growth, Technology & Communications and Select 20 Portfolios and
oversees the investment decisions made by Value Investors as sub-adviser for the
Small Cap Value, Mid-Cap Value and Select Value Portfolios. The Portfolios'
Board of Directors supervises Pilgrim Baxter and Value Investors and establishes
policies that Pilgrim Baxter and Value Investors must follow as investment
adviser and sub-adviser.
THE SUB-ADVISER:
Pilgrim Baxter Value Investors, Inc., 825 Duportail Road, Wayne, PA 19087, is a
wholly-owned subsidiary of Pilgrim Baxter. Founded in 1940, Value Investors
currently manages $534 million for pension and profit sharing plans, charitable
institutions, trusts, estates and other investment companies.
Value Investors' investment process, like that of Pilgrim Baxter, is both
quantitative and fundamental. In seeking to identify attractive investment
opportunities for the Small Cap Value, Mid-Cap Value and Select Value
Portfolios, Value Investors first creates a universe of more than 8,000
companies whose current share price seems lower than its current or future
worth. Then, using its own computer models and measures of value, Value
Investors creates a sub-universe of statistically attractive value companies.
Value Investors considers factors like a company's earnings power vs. its
current stock price, its dividend income potential, its price-to-earnings ratio
vs. similar companies, its competitive advantages, like brand or trade name or
market niche, its management team and its current and future business prospects.
Lastly, using its own fundamental research and a bottom-up approach to
investing, Value Investors identifies those companies which are currently out of
market favor but have the potential to achieve significant appreciation as the
marketplace recognizes their fundamental value.
Value Investors' decision to sell a security depends on many factors. Generally
speaking, however, Value Investors considers selling a security when it becomes
overvalued relative to the market, shows deteriorating fundamentals or falls
short of Value Investors' expectations.
For the fiscal year ended December 31, 1999, Pilgrim Baxter waived a portion of
its fee so that the effective management fee paid by each of the following
Portfolios was as follows:
Large-Cap Growth Portfolio 0.68%
Mid-Cap Value Portfolio 0.00%
Small Cap Value Portfolio 0.91%
As sub-adviser to the Small Cap Value, Mid-Cap Value and Select Value
Portfolios, Value Investors is entitled to receive a fee from Pilgrim Baxter
equal to a percentage of the daily net assets of each of these Portfolios.
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LARGE CAP GROWTH PORTFOLIO/SELECT 20 PORTFOLIO:
Michael S. Sutton, CFA, has managed the PBHG Large Cap Growth and Select 20
Portfolios since November, 1999. Mr. Sutton joined Pilgrim Baxter in October
1999, from Loomis, Sayles & Co., where he worked for seven years as a portfolio
manager of mid-to large cap growth portfolios. Prior to that, Mr. Sutton was a
large cap growth portfolio manager with Stein, Roe & Farnham.
SELECT VALUE PORTFOLIO
Raymond J. McCaffrey, CFA, has managed the PBHG Select Value Portfolio since
June, 1999. He joined Value Investors as a portfolio manager and analyst in
1997. Prior to joining Value Investors, Mr. McCaffrey worked for two years as a
portfolio manager and analyst at Pitcairn Trust Company. His ten years of
investment experience also include positions at Cypress Capital Management,
Independence Capital Management and Fidelity Bank.
SMALL CAP VALUE PORTFOLIO/MID-CAP VALUE PORTFOLIO
Jerome J. Heppelmann, CFA, has managed the PBHG Small Cap Value and Mid-Cap
Value Portfolios since June, 1999. He joined Pilgrim Baxter in 1994 as a Vice
President of Marketing/Client Service and since 1997 has been a member of Value
Investors Equity team. Prior to joining Pilgrim Baxter, Mr. Heppelmann worked in
the Investment Advisory Group for SEI Investments.
GROWTH II PORTFOLIO/TECHNOLOGY & COMMUNICATIONS PORTFOLIO:
Jeffrey Wrona, CFA, has managed the Growth II Portfolio since January, 1998. He
has managed the Technology & Communications Portfolio since May, 1998. Mr. Wrona
joined Pilgrim Baxter in 1997 after seven years as a senior portfolio manager
with Munder Capital Management and today manages several other funds at Pilgrim
Baxter.
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YOUR INVESTMENT
PRICING PORTFOLIO SHARES:
The price of a Portfolio's shares is based on that Portfolio's net asset value
(NAV). A Portfolio's NAV equals the value of its assets, less its liabilities,
divided by the number of its outstanding shares. Portfolio shares are priced
every day at the close of regular trading on the New York Stock Exchange.
Portfolio shares are not priced on days that the New York Stock Exchange is
closed.
A Portfolio prices its investments for which market quotations are readily
available at market value. It prices short-term investments at amortized cost,
which approximates market value. It prices all other investments at fair value
as determined in good faith by the Portfolios' Board of Directors. If a
Portfolio holds securities quoted in foreign currencies, it translates that
price into U.S. dollars at current exchange rates. Because foreign markets may
be open at different times than the New York Stock Exchange, the price of a
Portfolio's shares may change on days when its shares are not available for
purchase or sale.
BUYING & SELLING PORTFOLIO SHARES:
You may only buy and sell Portfolio shares through VA Contracts and VLI Policies
offered by separate accounts of Participating Insurance Companies. The
prospectus for these separate accounts explains how to purchase and redeem a VA
Contract or VLI Policy.
You may buy Portfolio shares at NAV any day the New York Stock Exchange is open.
The Participating Insurance Company must receive your completed buy order before
the close of regular trading on the New York Stock Exchange for your Portfolio
shares to be bought at that day's NAV. The Participating Insurance Company is
responsible for sending your buy order to the Portfolio. A Portfolio may
periodically close to new purchases or refuse a buy order if the Portfolio
determines that doing so would be in the best interests of the Portfolio and its
shareholders.
You may sell Portfolio shares at NAV any day the New York Stock Exchange is
open. The Participating Insurance Company must receive your sell order before
the close of regular trading on the New York Stock Exchange for you to receive
that day's NAV. The Participating Insurance Company is responsible for sending
your sell order to the Portfolio. The Portfolio generally sends payment for your
shares to the Participating Insurance Company the business day after your sell
order is received. Under unusual circumstances, the Portfolio may suspend
redemptions or postpone payment for up to seven days as permitted by federal
securities law.
DISTRIBUTIONS AND TAXES:
Each Portfolio distributes its net investment income and net realized capital
gains to shareholders at least once a year. These distributions will be
reinvested in the Portfolio unless the Participating Insurance Company instructs
the Portfolio otherwise. There are no fees on reinvestments.
VA Contracts and VLI Policies are currently tax-deferred investments. Therefore,
Portfolio distributions are exempt from current taxation if left to accumulate
in your VA Contract or VLI Policy. In addition, exchanges among the Portfolios
are currently not taxable. The prospectus for the Participating Insurance
Company separate account discusses the tax status of VA Contracts and VLI
Policies in greater detail. The tax status of a Portfolio's distributions for
each calendar year will be detailed in the Participating Insurance Company's
annual tax statement from that Portfolio. Because everyone's tax situation is
unique, always consult your tax professional about federal, state and local tax
consequences.
POTENTIAL CONFLICTS OF INTEREST:
Participating Insurance Companies may be affiliated with one another. In
addition, the interests of VA Contact and VLI Policy holders may conflict due to
differences in tax treatment and other considerations. The Portfolios' Board of
Directors monitors each Portfolio for material conflicts and determines what
action, if any, should be taken. For example, the Board may require a
Participating Insurance Company to sell its investments in a Portfolio. As a
result, the Portfolio may be forced to sell securities. In addition, the Board
may refuse to sell shares of a Portfolio to a particular VA Contract of VLI
Policy or may suspend or terminate sales of Portfolio shares if required by law
or regulatory authority or if the action is in the best interests of the
Portfolio and its shareholders.
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FINANCIAL HIGHLIGHTS
A Portfolio's financial highlights help you understand its recent financial
performance. The total returns represent the rate that you would have earned or
lost on an investment in the Portfolio, assuming you reinvested all Portfolio
distributions. PricewaterhouseCoopers LLP has audited the information contained
in these financial highlights. Its report and the Portfolio's financial
statements are included in the Portfolio's Annual Report to Shareholders, which
is available, free of charge, upon request.
FOR THE PERIOD ENDED DECEMBER 31, 1999
FOR A SHARE OUTSTANDING THROUGHOUT EACH FISCAL YEAR OR PERIOD
<TABLE>
<CAPTION>
Net Net Net
Asset Realized and Distributions Distribution Asset Assets Ratio
Value Net Unrealized from Net from Value End of Expenses
Beginning Investment Gains or Losses Investment Capital End Total of Period to Average
of Period Income (Loss) on Securities Income Gains of Period Return (000) Net Assets
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBHG GROWTH II PORTFOLIO
1999(5) $11.63 $(0.04) $11.46 -- -- $23.05 98.19% $178,602 1.20%
1998 10.75 (0.06) 0.94 -- -- 11.63 8.19% 18,321 1.20%
1997(1) 10.00 -- 0.75 -- -- 10.75 7.50%** 10,236 1.20%*
PBHG LARGE CAP GROWTH PORTFOLIO
1999 $15.44 $(0.05) $10.12 -- -- $25.51 65.22% $27,295 1.10%
1998 11.82 (0.02) 3.64 -- -- 15.44 30.63% 12,598 1.10%
1997(1) 10.00 -- 1.82 -- -- 11.82 18.20%** 4,916 1.10%*
PBHG SELECT VALUE PORTFOLIO=
1999 $14.27 $0.13 $1.13 -- $(0.34) $15.19 8.89% $39,972 0.95%
1998 10.43 (0.02) 3.98 $(0.04) (0.08) 14.27 37.96% 22,286 1.00%
1997(2) 10.00 0.02 0.41 -- -- 10.43 4.30%** 1,560 1.00%*
PBHG MID-CAP VALUE PORTFOLIO
1999 $11.10 $0.02 $2.75 -- $(1.95) $11.92 25.66% $697 1.20%
1998(3) 10.00 -- 1.10 -- -- 11.10 11.00%** 555 1.20%*
PBHG SMALL CAP VALUE PORTFOLIO
1999 $11.61 $(0.03) $1.88 -- -- $13.46 15.93% $43,484 1.20%
1998 10.48 (0.02) 1.16 -- $(0.01) 11.61 10.94% 44,040 1.20%
1997(2) 10.00 0.01 0.47 -- -- 10.48 4.80%** 9,321 1.20%*
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
1999(5) $13.76 $(0.13) $32.38 -- -- $46.01 234.38% $1,635,448 1.09%
1998 10.41 (0.04) 3.39 -- -- 13.76 32.20% 32,493 1.20%
1997(1) 10.00 -- 0.41 -- -- 10.41 4.10%** 9,117 1.20%*
PBHG SELECT 20 PORTFOLIO
1999 $16.30 $(0.08) $16.48 -- -- $32.70 100.61% $753,572 1.05%
1998 10.03 (0.01) 6.28 -- -- 16.30 62.52% 317,926 1.20%
1997(4) 10.00 -- 0.03 -- -- 10.03 0.30%** 7,617 1.20%*
Ratio Ratio of Net
of Expenses Income (Loss)
Ratio of Net to Average to Average
Income (Loss) Net Assets Net Assets Portfolio
to Average (Excluding (Excluding Turnover
Net Assets Waivers) Waivers) Rate
PBHG GROWTH II PORTFOLIO
1999(5) (0.38)% 1.20% (0.38)% 236.82%
1998 (0.64)% 1.54% (0.98)% 228.09%
1997(1) (0.11)%* 4.38%* (3.29)%* 44.57%**
PBHG LARGE CAP GROWTH PORTFOLIO
1999 (0.41)% 1.17% (0.48)% 157.04%
1998 (0.19)% 1.53% (0.62%) 41.51%
1997(1) 0.00%* 5.21%* (4.11)%* 37.42%**
PBHG SELECT VALUE PORTFOLIO=
1999 0.84% 0.95% 0.84% 927.02%
1998 0.67% 1.47% 0.20% 635.10%
1997(2) 1.91%* 8.04%* (5.13)%* 68.93%**
PBHG MID-CAP VALUE PORTFOLIO
1999 0.15% 5.89% (4.54)% 906.69%
1998(3) 0.26%* 4.13%* (2.67)%* 72.32%**
PBHG SMALL CAP VALUE PORTFOLIO
1999 (0.20)% 1.29% (0.29)% 277.95%
1998 (0.15)% 1.46% (0.41)% 293.90%
1997(2) 1.40%* 3.63%* (1.03)%* 41.14%**
PBHG TECHNOLOGY & COMMUNICATIONS PORTFOLIO
1999(5) (0.64)% 1.09% (0.64)% 273.76%
1998 (0.55)% 1.56% (0.91)% 264.58%
1997(1) 0.37%* 5.09%* (3.52)%* 69.34%**
PBHG SELECT 20 PORTFOLIO
1999 (0.46)% 139.05%
1998 (0.19)% 48.79%
1997(4) (1.65)%* 18.53%**
<FN>
* Annualized.
** Total return and portfolio turnover have not been annualized.
= Prior to May 1, 2000, the PBHG Select Value Portfolio was named the PBHG Large Cap Value Portfolio.
(1) The PBHG Growth II, Large Cap Growth and PBHG Technology & Communication Portfolios commenced operations on
April 30, 1997.
(2) The PBHG Select Value and PBHG Small Cap Value Portfolios commenced operations on October 28, 1997.
(3) The PBHG Mid-Cap Value Portfolio commenced operations on November 30, 1998.
(4) The PBHG Select 20 Portfolio commenced operations on September 25, 1997.
(5) Per share calculations were performed using average shares for the period.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
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FOR MORE INFORMATION
For investors who want more information about the Portfolios, the following
documents are available free upon request:
STATEMENT OF ADDITIONAL
INFORMATION (SAI):
Provides more information about the Portfolios and is incorporated into this
Prospectus by reference.
ANNUAL/SEMI-ANNUAL REPORTS:
Provides financial and performance information about the Portfolios and their
investments and a discussion of the market conditions and investment strategies
that significantly affected the Portfolios' performance during the last fiscal
year or half-year.
Copies of the current versions of these documents, along with other information
about the Portfolios, may be obtained by contacting:
PBHG INSURANCE SERIES FUND, INC.
P.O. BOX 419229
KANSAS CITY, MO 64141-6229
TELEPHONE:
1-800-347-9256
You may also contact the Participating Insurance Company for copies of these
documents.
These reports and other information about the PBHG Insurance Series Fund, Inc.
are available on the EDGAR database on the SEC's Internet site at
http://www.sec.gov, or by visiting the SEC's Public Reference Room in
Washington, D.C. (1-202-942-8090). Copies of this information may be obtained,
for a duplicating fee, by sending your written request to the SEC's Public
Reference Section, Washington, D.C. 20549-0102, or by electronic request at
[email protected]. PBHG Insurance Series Fund, Inc.'s Investment Company Act
file number is 811-08009.
PBHG-ISF Prospectus 5/2000
