[Logo omitted]
PBHG INSURANCE SERIES FUND, INC.
SEMI-ANNUAL REPORT JUNE 30, 2000
[BULLET] PBHG MID-CAP VALUE PORTFOLIO
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
Dear Shareholder,
OVERVIEW
Our goal is to achieve consistent market beating returns. Our process reflects
this goal by focusing our efforts on the most promising investment candidates
within each sector, industry and capitalization range. Our process relies
heavily on both quantitative and fundamental research to aid in identifying
investment candidates for purchase and sale. In building the portfolio, we
attempt to balance a company's long-term growth potential and near-term business
results with the valuation it commands in the market. The PBHG Mid-Cap Value
Portfolio is typically fully invested across a diversified portfolio of
companies. We strive to have an aggregate P/E ratio below the Portfolio's
benchmark, the S&P MidCap 400 Index, as well as significantly stronger current
business trends and comparable long-term growth expectations compared to those
of the companies which make up the Index.
PERFORMANCE
The PBHG Mid-Cap Value Portfolio returned +16.36% for the six months ended June
30, 2000. This compares favorably to the returns for the same period of the S&P
MidCap 400 Index +8.97% and the S&P Barra MidCap Value Index +3.45%. For the
year ended June 30, the Portfolio returned +26.40%, versus +16.97% for the S&P
MidCap 400 Index and +0.18% for the S&P Barra MidCap Value Index. Since
inception on November 30, 1998, the Portfolio has produced an average annual
return of +35.77%, compared to an average annual return of +23.74% for the S&P
MidCap 400 Index and +6.56% for the S&P Barra MidCap Value Index.
Energy and technology were the main contributors to the strong relative
performance of the Mid-Cap Value Portfolio for the six months ended June 30,
2000. In energy, we have continued to find great investment opportunities in
companies with exceptional near-term dynamics and modest valuations. The
Portfolio was overweighted in and also enjoyed exceptional returns within the
energy sector relative to its benchmarks during the second quarter. However, the
Portfolio had a difficult time in both the consumer cyclical and consumer
non-cyclical sectors, underperforming both the S&P MidCap 400 Index and S&P
Barra MidCap Value Index during the six month period ended June 30, 2000.
Over the past six months, we have maintained a relatively modest weight in
technology. For the six-month period, our technology stocks returned +17.07%
while that sector within the S&P MidCap 400 Index returned +19.14% and the S&P
Barra MidCap Value Index returned +0.95%. We would hope to use future market
volatility to add technology holdings at reasonable prices.
At June 30, 2000, the Portfolio's top five economic sector weightings were:
energy, 25.2%; technology, 15.6%; consumer cyclical, 12.9%; industrial, 9.9%;
and utilities, 7.8%.
<TABLE>
<CAPTION>
PERIOD ENDING JUNE 30, 2000 PBHG MID-CAP VALUE PORTFOLIO S&P MIDCAP 400 INDEX S&P BARRA MIDCAP VALUE INDEX
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Six Months 16.36% 8.97% 3.45%
One Year 26.40% 16.97% 0.18%
Since Inception*(11/30/98) 35.77% 23.74% 6.56%
</TABLE>
*ANNUALIZED
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
LOOKING FORWARD
Expect volatility. Although you are probably tired of hearing this from people
(or maybe just from us), it bears repeating. The summer months are typically
difficult ones for technology stocks and, although we expect fundamentals for
most technology stocks to be outstanding, the seasonal pattern of selling
technology stocks in the summer may provide us with future opportunities to own
great companies at a discount to their intrinsic worth. We will be monitoring
the rhetoric out of Washington. As our presidential hopefuls take their stabs at
fixing the budget, social security and healthcare costs, expect the market to
fixate on small details of both plans and use them as excuses to sell stocks. We
will be cognizant of the coming debates/proposals concerning drug costs and the
impact they will have on pharmaceutical companies with improving near-term
business dynamics and buy them when valuations seem attractive. The only
certainty in the market is that volatility provides great opportunities for
patient investors. We will seek to exploit those opportunities to the advantage
of our investors.
Sincerely,
/s/signature
Jerome J. Heppelmann, CFA
Portfolio Manager
2
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO (UNAUDITED)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1 AS OF JUNE 30, 2000
--------------------------------------------------------------------------------
Annualized
Six-Month One Year Inception to
Return Return Date2
--------------------------------------------------------------------------------
PBHG Mid-Cap Value Portfolio 16.36% 26.40% 35.77%
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG
MID-CAP VALUE PORTFOLIO, VERSUS THE S&P MIDCAP 400 INDEX,
THE S&P BARRA MIDCAP VALUE INDEX AND THE LIPPER MID-CAP
VALUE FUNDS AVERAGE
[line graph omitted - plot points follow]
<TABLE>
<CAPTION>
PBHG Mid-Cap Value Portfolio S&P MidCap 400 Index3 S&P Barra MidCap Value Index4 Lipper Mid-Cap Value Funds Average5
<S> <C> <C> <C> <C>
11/30/98 $10000 $10000 $10000 $10000
12/31/98 11100 11208 10446 10462
1/31/99 11300 10772 9900 10333
2/28/99 10640 10208 9427 9855
3/31/99 11180 10493 9605 10121
4/30/99 11420 11321 10534 10978
5/31/99 12010 11370 10706 11147
6/30/99 12840 11979 11039 11559
7/31/99 12650 11724 10892 11327
8/31/99 12190 11322 10479 10878
9/30/99 12017 10972 9963 10587
10/31/99 12110 11532 10163 10742
11/30/99 12556 12137 10367 11046
12/31/99 13948 12858 10688 11696
1/31/2000 13363 12496 10226 11206
2/29/2000 14007 13371 9851 11422
3/31/2000 16066 14489 11359 12435
4/30/2000 15703 13984 11255 12206
5/31/2000 16347 13809 11580 12196
6/30/2000 16230 14012 11057 12264
</TABLE>
1 Performance is historical and not indicative of future results. 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 Mid-Cap Value Portfolio commenced operations on November 30, 1998.
3 The S&P MidCap 400 Index is an unmanaged capitalization-weighted index that
measures the performance of the mid-range sector of the U.S. stock market.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the Fund's
past or future performance.
4 The S&P Barra MidCap Value Index is an unmanaged capitalization-weighted
index that consists of those securities in the S&P MidCap 400 Index with
lower price-to-book ratios. The Index reflects the reinvestments of income
dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing. The Index is
not intended to imply the Portfolio's past or future performance.
5 The Lipper Mid-Cap Value Funds Average represents the average performance of
all mutual funds classified by Lipper, Inc. in the Mid-Cap Value category.
The 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
Basic Materials 5%
Consumer Cyclical 13%
Consumer Non-Cyclical 4%
Energy 25%
Financial 6%
Health Care 7%
Industrial 10%
Services 3%
Technology 16%
Utilities 8%
Cash 3%
% of Total Portfolio Investments
TOP TEN HOLDINGS - JUNE 30, 2000
Medimmune 2.7%
Alza 2.2%
Crompton 2.1%
EOG Resources 2.0%
Parametric Technology 2.0%
Constellation Energy Group 2.0%
Block (H & R) 2.0%
Advanced Micro Devices 1.9%
DTE Energy 1.9%
Grant Prideco 1.8%
-------------------------------------------------------
% OF TOTAL PORTFOLIO INVESTMENTS 20.6%
3
<PAGE>
PBHG Insurance Series Fund, Inc.
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PBHG MID-CAP VALUE PORTFOLIO
STATEMENT OF NET ASSETS
AS OF JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
Market
Description Shares Value
--------------------------------------------------------------------------------
COMMON STOCK -- 98.2%
BASIC MATERIALS -- 5.0%
CHEMICALS-SPECIALTY -- 2.4%
Crompton 1,400 $ 17,150
Cytec Industries* 100 2,468
--------------------------------------------------------------------------------
19,618
--------------------------------------------------------------------------------
FERTILIZERS -- 0.5%
IMC Global 300 3,900
--------------------------------------------------------------------------------
3,900
--------------------------------------------------------------------------------
METAL-DIVERSIFIED -- 1.5%
Inco Limited 800 12,300
--------------------------------------------------------------------------------
12,300
--------------------------------------------------------------------------------
PAPER & RELATED PRODUCTS -- 0.6%
Mead 200 5,050
--------------------------------------------------------------------------------
5,050
--------------------------------------------------------------------------------
TOTAL BASIC MATERIALS (COST $42,895) 40,868
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 13.2%
APPAREL MANUFACTURERS -- 0.2%
Tommy Hilfiger* 200 1,500
--------------------------------------------------------------------------------
1,500
--------------------------------------------------------------------------------
APPLIANCES -- 1.8%
Maytag 400 14,750
--------------------------------------------------------------------------------
14,750
--------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL-- 1.5%
Delphi Automotive Systems 700 10,194
Lear* 100 2,000
--------------------------------------------------------------------------------
12,194
--------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 0.6%
Unitedglobalcom, Cl A* 100 4,675
--------------------------------------------------------------------------------
4,675
--------------------------------------------------------------------------------
CABLE TV -- 1.7%
Cablevision Systems, Cl A* 200 13,575
--------------------------------------------------------------------------------
13,575
--------------------------------------------------------------------------------
CASINO HOTELS -- 1.8%
Harrah's Entertainment* 700 14,656
--------------------------------------------------------------------------------
14,656
--------------------------------------------------------------------------------
HOTELS & MOTELS -- 1.6%
Starwood Hotels & Resorts* 400 13,025
--------------------------------------------------------------------------------
13,025
--------------------------------------------------------------------------------
MULTIMEDIA -- 1.8%
Scripps (E.W.), Cl A 300 14,775
--------------------------------------------------------------------------------
14,775
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Market
Description Shares Value
--------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 0.9%
Tribune 200 $ 7,000
--------------------------------------------------------------------------------
7,000
--------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.4%
Circuit City Stores 100 3,319
--------------------------------------------------------------------------------
3,319
--------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.9%
Wendys International 400 7,124
--------------------------------------------------------------------------------
7,124
--------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $110,059) 106,593
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 4.2%
BEVERAGES-WINE/SPIRITS -- 0.4%
Diageo PLC ADR 100 3,556
--------------------------------------------------------------------------------
3,556
--------------------------------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.7%
Fortune Brands 600 13,837
--------------------------------------------------------------------------------
13,837
--------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 2.1%
Conagra 500 9,531
Sara Lee 400 7,725
--------------------------------------------------------------------------------
17,256
--------------------------------------------------------------------------------
TOTAL CONSUMER NON-CYCLICAL (COST $34,008) 34,649
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ENERGY -- 25.6%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 10.2%
Apache 100 5,881
Devon Energy 200 11,238
EOG Resources 500 16,750
Forest Oil* 600 9,563
Louis Dreyfus Natural Gas* 200 6,263
Ocean Energy* 500 7,094
Santa Fe Snyder* 1,000 11,374
Union Pacific Resources 300 6,600
Vastar Resources 100 8,212
--------------------------------------------------------------------------------
82,975
--------------------------------------------------------------------------------
OIL COMPANIES-INTEGRATED -- 0.8%
Unocal 200 6,625
--------------------------------------------------------------------------------
6,625
--------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 4.1%
Cooper Cameron* 100 6,600
Grant Prideco* 600 15,000
Weatherford International* 300 11,944
--------------------------------------------------------------------------------
33,544
--------------------------------------------------------------------------------
OIL & GAS DRILLING -- 4.0%
Ensco International 200 7,163
Global Marine* 300 8,456
Nabors Industries* 200 8,313
Noble Drilling* 200 8,237
--------------------------------------------------------------------------------
32,169
--------------------------------------------------------------------------------
4
<PAGE>
PBHG Insurance Series Fund, Inc.
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PBHG MID-CAP VALUE PORTFOLIO
--------------------------------------------------------------------------------
Market
Description Shares Value
--------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 3.6%
Baker Hughes 400 $ 12,800
BJ Services* 200 12,500
Hanover Compressor* 100 3,800
--------------------------------------------------------------------------------
29,100
--------------------------------------------------------------------------------
PIPELINES -- 2.9%
Columbia Energy Group 200 13,124
Kinder Morgan 300 10,369
--------------------------------------------------------------------------------
23,493
--------------------------------------------------------------------------------
TOTAL ENERGY (COST $156,512) 207,906
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FINANCIAL -- 5.9%
COMMERCIAL BANKS-EASTERN U.S. -- 0.7%
Mercantile 200 5,963
--------------------------------------------------------------------------------
5,963
--------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN U.S. -- 0.3%
Southtrust 100 2,263
--------------------------------------------------------------------------------
2,263
--------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 0.6%
Paine Webber Group 100 4,550
--------------------------------------------------------------------------------
4,550
--------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 0.6%
MGIC Investment 100 4,550
--------------------------------------------------------------------------------
4,550
--------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 1.0%
Jefferson Pilot 100 5,644
Torchmark 100 2,469
--------------------------------------------------------------------------------
8,113
--------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 1.3%
XL Capital Limited, Cl A 200 10,824
--------------------------------------------------------------------------------
10,824
--------------------------------------------------------------------------------
S & L/THRIFTS-CENTRAL U.S. -- 1.4%
Charter One Financial 500 11,500
--------------------------------------------------------------------------------
11,500
--------------------------------------------------------------------------------
TOTAL FINANCIAL (COST $45,746) 47,763
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
HEALTH CARE -- 7.4%
DISPOSABLE MEDICAL PRODUCTS -- 0.6%
Bard (C.R.) 100 4,813
--------------------------------------------------------------------------------
4,813
--------------------------------------------------------------------------------
DRUG DELIVERY SYSTEMS -- 2.2%
Alza* 300 17,738
--------------------------------------------------------------------------------
17,738
--------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETICS -- 0.6%
Aclara Biosciences* 100 5,094
--------------------------------------------------------------------------------
5,094
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Market
Description Shares Value
--------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.7%
Medimmune* 300 $ 22,200
--------------------------------------------------------------------------------
22,200
--------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.7%
Mylan Labs 300 5,475
--------------------------------------------------------------------------------
5,475
--------------------------------------------------------------------------------
MEDICAL-HMO -- 0.6%
Trigon Healthcare* 100 5,156
--------------------------------------------------------------------------------
5,156
--------------------------------------------------------------------------------
TOTAL HEALTH CARE (COST $34,739) 60,476
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
INDUSTRIAL -- 10.0%
AEROSPACE/DEFENSE -- 1.0%
Litton Industries* 200 8,400
--------------------------------------------------------------------------------
8,400
--------------------------------------------------------------------------------
CIRCUIT BOARDS -- 1.2%
Jabil Circuit* 200 9,925
--------------------------------------------------------------------------------
9,925
--------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 4.1%
Eaton 100 6,700
ITT Industries 400 12,150
Pentair 100 3,550
Textron 200 10,863
--------------------------------------------------------------------------------
33,263
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 2.9%
Flextronics International* 200 13,738
Vishay Intertechnology* 250 9,484
--------------------------------------------------------------------------------
23,222
--------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.8%
Perkinelmer 100 6,612
--------------------------------------------------------------------------------
6,612
--------------------------------------------------------------------------------
TOTAL INDUSTRIAL (COST $77,576) 81,422
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SERVICES -- 3.0%
COMMERCIAL SERVICES-FINANCE -- 2.0%
Block (H&R) 500 16,187
--------------------------------------------------------------------------------
16,187
--------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 1.0%
Hertz, Cl A 300 8,419
--------------------------------------------------------------------------------
8,419
--------------------------------------------------------------------------------
TOTAL SERVICES (COST $30,778) 24,606
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TECHNOLOGY -- 15.9%
APPLICATIONS SOFTWARE -- 3.0%
Intuit* 200 8,275
Parametric Technology* 1,500 16,500
--------------------------------------------------------------------------------
24,775
--------------------------------------------------------------------------------
5
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
--------------------------------------------------------------------------------
Market
Description Shares Value
--------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.8%
Sandisk* 100 $ 6,119
--------------------------------------------------------------------------------
6,119
--------------------------------------------------------------------------------
COMPUTERS-MICRO -- 0.5%
Micron Electronics* 300 3,750
--------------------------------------------------------------------------------
3,750
--------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.3%
Acxiom* 100 2,725
--------------------------------------------------------------------------------
2,725
--------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 6.2%
Advanced Micro Devices* 200 15,450
Atmel* 200 7,375
Chartered Semiconductor ADR* 100 9,000
Cypress Semiconductor* 300 12,675
National Semiconductor* 100 5,675
--------------------------------------------------------------------------------
50,175
--------------------------------------------------------------------------------
FIBER OPTICS -- 1.1%
Exfo Electro-Optical Engineering* 200 8,775
--------------------------------------------------------------------------------
8,775
--------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.3%
Networks Associates* 500 10,188
--------------------------------------------------------------------------------
10,188
--------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.6%
Cabletron Systems* 200 5,050
--------------------------------------------------------------------------------
5,050
--------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 2.1%
Antec* 100 4,156
Harris 300 9,825
Westell Technology* 200 3,000
--------------------------------------------------------------------------------
16,981
--------------------------------------------------------------------------------
TOTAL TECHNOLOGY (COST $122,831) 128,538
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UTILITIES -- 8.0%
ELECTRIC-INTEGRATED -- 7.2%
CMS Energy 100 2,213
Conectiv 300 4,669
Constellation Energy Group 500 16,281
DQE 200 7,900
DTE Energy 500 15,281
Minnesota Power 700 12,119
--------------------------------------------------------------------------------
58,463
--------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.8%
UGI 300 6,150
--------------------------------------------------------------------------------
6,150
--------------------------------------------------------------------------------
TOTAL UTILITIES (COST $65,785) 64,613
--------------------------------------------------------------------------------
TOTAL COMMON STOCK (COST $720,929) 797,434
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Face Market
Description Amount Value
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.3%
Morgan Stanley
6.30%, dated 06/30/00, matures
07/03/00, repurchase price $26,968
(collateralized by U.S. Government
Treasury Instruments: total
market value $27,575) (A) $26,954 $ 26,954
--------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT (COST $26,954) 26,954
--------------------------------------------------------------------------------
TOTAL INVESTMENTS-- 101.5% (COST $747,883) 824,388
--------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.5%)
TOTAL OTHER ASSETS AND LIABILITIES, NET (12,622)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET ASSETS:
Paid-in-capital (authorized
500 million shares - $0.001 par value
based on 58,519 outstanding shares of
common stock 600,439
Undistributed net investment income 1,443
Accumulated net realized gain on investments 133,379
Net unrealized appreciation on investments 76,505
--------------------------------------------------------------------------------
TOTAL NET ASSETS-- 100.0% $ 811,766
--------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE $13.87
--------------------------------------------------------------------------------
* Non-income producing security
(A) - Tri-party repurchase agreement
ADR - American Depository Receipt
Cl - Class
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED)
INVESTMENT INCOME:
Dividends.....................................................$ 4,352
Interest...................................................... 679
---------
Total Investment Income.................................... 5,031
---------
EXPENSES:
Investment Advisory Fees...................................... 3,188
Administrative Fees........................................... 563
Custodian Fees................................................ 2,156
Professional Fees............................................. (23)
Transfer Agent Fees........................................... 5,484
Printing Fees................................................. 408
Directors' Fees............................................... 11
Insurance and Other Expenses.................................. 184
---------
Total Expenses............................................. 11,971
---------
Waiver of Investment Advisory Fees............................ (3,188)
Waiver of Administrative Fees................................. (563)
Reimbursement of Other Expenses by Adviser.................... (3,755)
---------
Net Expenses............................................... 4,465
---------
NET INVESTMENT INCOME.............................................. 566
---------
Net Realized Gain from Security Transactions....................... 102,597
Net Change in Unrealized Appreciation on Investments............... 10,841
---------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.................... 113,438
---------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $114,004
---------
---------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
PBHG Insurance Series Fund, Inc.
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PBHG MID-CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
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 Income.................................................................... $ 566 $ 880
Net Realized Gain from Security Transactions............................................. 102,597 109,158
Net Change in Unrealized Appreciation on Investments .................................... 10,841 32,580
--------- ---------
Net Increase in Net Assets Resulting from Operations..................................... 114,004 142,618
--------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income.................................................................... -- (115)
Net Realized Gains from Security Transactions............................................ -- (100,224)
--------- ---------
Total Distributions...................................................................... -- (100,339)
--------- ---------
CAPITAL SHARE TRANSACTIONS:
Shares Issued............................................................................ -- --
Shares Issued upon Reinvestment of Distributions......................................... -- 100,339
Shares Redeemed.......................................................................... -- --
--------- ---------
Increase in Net Assets Derived from Capital Share Transactions........................... -- 100,339
--------- ---------
Total Increase in Net Assets............................................................. 114,004 142,618
--------- ---------
NET ASSETS:
Beginning of Period...................................................................... 697,762 555,144
--------- ---------
End of Period............................................................................ $811,766 $697,762
--------- ---------
--------- ---------
SHARES ISSUED AND REDEEMED:
Shares Issued............................................................................ -- --
Shares Issued upon Reinvestment of Distributions......................................... -- 8,509
Shares Redeemed.......................................................................... -- --
--------- ---------
Net Increase in Shares Outstanding....................................................... -- 8,509
--------- ---------
--------- ---------
</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 MID-CAP VALUE 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> <C>
2000 ** $11.92 $0.01 $1.94 -- -- $13.87 16.36%+
1999 11.10 0.02 2.75 -- $(1.95) 11.92 25.66%
1998(1) 10.00 -- 1.10 -- -- 11.10 11.00%+
</TABLE>
<TABLE>
<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 ** $811,766 1.19%* 0.15%* 3.18%* (1.84)%* 158.49%+
1999 697,762 1.20% 0.15% 5.89% (4.54)% 906.69%
1998(1) 555,144 1.20%* 0.26%* 4.13%* (2.67)%* 72.32%+
<FN>
*ANNUALIZED.
** FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2000 (UNAUDITED).
+ TOTAL RETURN AND PORTFOLIO TURNOVER HAVE NOT BEEN ANNUALIZED.
(1) THE PBHG MID-CAP VALUE PORTFOLIO COMMENCED OPERATIONS ON NOVEMBER 30, 1998.
</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.
9
<PAGE>
PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2000 (UNAUDITED)
1. ORGANIZATION
The PBHG Mid-Cap Value 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 Large
Cap Growth Portfolio (the "Large Cap Growth Portfolio") the PBHG Technology &
Communications Portfolio (the "Technology & Communications Portfolio"), the PBHG
Small Cap Value Portfolio (the "Small Cap Value Portfolio"), the PBHG Select
Value Portfolio (the "Select Value Portfolio", formerly the Large Cap Value
Portfolio), and the PBHG Select 20 Portfolio (the "Select 20 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 Large Cap Growth
Portfolio, the Technology & Communications Portfolio, the Small Cap Value
Portfolio, the Select Value Portfolio, or the Select 20 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, 100% of the outstanding shares of the Portfolio
were held by Pilgrim Baxter & Associates, Ltd. (the "Adviser").
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 pm, 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 the Adviser require that the market value of
the collateral including accrued interest thereon, is sufficient in the event of
default by the counterparty. If the counterparty defaults and the value of the
collateral declines, or if the counterparty enters into insolvency proceedings,
realization of the collateral by the 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.
10
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PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
All organizational costs incurred in connection with the start up of the Fund
have been equally allocated to each Portfolio, except the Mid-Cap Value
Portfolio, which commenced operations on November 30, 1998 and are being
amortized on a straight line basis over a period of sixty months from the
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 0.85% 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 1.20%. 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 1.20%.
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 1.20%, 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 $36,003.
Pilgrim Baxter Value Investors, Inc., a wholly-owned subsidiary of the Adviser,
serves as the sub-adviser to the Portfolio. For its services provided pursuant
to its Investment Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim
Baxter Value Investors receives a fee from the Adviser at an annual rate of
0.40% of the average daily net assets of the Portfolio. Pilgrim Baxter Value
Investors, Inc. receives no fees directly from the Portfolio.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of 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 Adviser has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Fund. For its services SEI
Investments received $6 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 share-
11
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PBHG Insurance Series Fund, Inc.
--------------------------------------------------------------------------------
PBHG MID-CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(CONCLUDED)
holder 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 year ended June 30, 2000, PBHG Fund
Services did not receive any fees from 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 $1,157,945 and $1,157,286, 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
$113,887 and $37,382, 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.
12
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[Logo omitted]
PBHG Insurance Series Fund, Inc.
INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd.
DISTRIBUTOR
SEI Investments Distribution, Co.
Oaks, PA