[GRAPHIC OMITTED]
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
TABLE OF CONTENTS
Message to Shareholders 1
Portfolio Highlights/
Statement of Net Assets
PBHG Growth Fund 3
PBHG Emerging Growth Fund 7
PBHG Core Growth Fund 10
PBHG Select Equity Fund 13
PBHG Large Cap Growth Fund 15
PBHG Technology &
Communications Fund 18
PBHG Limited Fund 21
PBHG International Fund 24
PBHG Cash Reserves Fund 27
Statements of Operations 30
Statements of Changes in Net Assets 32
Financial Highlights 34
Notes to Financial Statements 35
<PAGE>
MESSAGE TO SHAREHOLDERS
- ----------------------------------------------
October 14, 1996
DEAR FELLOW SHAREHOLDER:
We are pleased to send you the Semi-Annual Report for The PBHG Funds, Inc.
for the six months ended September 30, 1996. Once again, the past six months has
been a very active time for The PBHG Funds, Inc. New products, the start of PBHG
Fund Services, and the volatile market have all played a role in shaping the
last six months.
NEW FUNDS
On July 1, 1996, we launched the PBHG Limited Fund. This Fund was offered
only to existing PBHG Funds' shareholders and the demand for this product was
overwhelming. It opened and closed on the same day. As a result, some
shareholders were unable to make their initial investment in time. While this
was frustrating for some, we made a commitment to close the Fund once it reached
$100 million in order to preserve the Fund's investment integrity. For similar
reasons the PBHG Select Equity Fund was also closed to new investors on October
1, 1996. The recent success of this Fund caused cash flows to increase
significantly. As a result, Pilgrim Baxter & Associates sought Board approval to
close the Fund to new investors. Closing the Fund will slow cash flows down
considerably and allow the portfolio manager greater flexibility in fulfilling
the Funds' investment objective.
THREE OTHER NEW PRODUCTS ON THE WAY ARE:
[Bullet] THE PBHG LARGE CAP 20 FUND* -- Like the PBHG Select Equity Fund,
this Fund will concentrate on a relatively small number of positions (no more
than 20). However, the Select Equity Fund chooses from companies in all
capitalization ranges, whereas the Large Cap 20 Fund will select only from
companies with over $1 billion in market capitalization. This Fund should be
available for investment on December 2, 1996.
[Bullet] THE PBHG LARGE CAP VALUE FUND* -- This Fund will have a large cap
value approach, investing in companies with over $1 billion in market
capitalization. This Fund is expected to be available on January 2, 1997. In an
effort to provide our shareholders and clients with a broader range of invest-
ment products, Pilgrim Baxter & Associates recently formed an affiliation with
Newbold's Asset Management, a prominent institutional value manager with over $7
billion in assets under management. Newbold's expertise in the value arena is a
strong complement to Pilgrim Baxter's growth management approach. This
affiliation will not, however, affect the method in which the other existing
PBHG Funds are managed.
[Bullet] THE PBHG STRATEGIC SMALL COMPANY FUND* -- This Fund will be
co-managed by individuals at Pilgrim Baxter & Associates and Newbold's Asset
Management. In selecting companies for this portfolio, we will emphasize both
growth and value approaches depending on our view of the economic or market
conditions and our long-term investment outlook. Because of small company
capacity issues, this Fund will be closed once it reaches $250 million in
assets. This Fund is also expected to be available on January 2, 1997.
To receive a prospectus containing additional information about the PBHG
Large Cap Value Fund and PBHG Strategic Small Company Fund, please see the
enclosed announcement. You should have received a similar announcement regarding
the PBHG Large Cap 20 Fund with your September 30, 1996 Consolidated Statement.
PBHG FUNDS SERVICES
On July 1, 1996, PBHG Fund Services became administrator to the PBHG
Funds. This allows Pilgrim Baxter & Associates to exercise greater control over
operational and servicing complexities of the PBHG Funds. Already, intense
efforts have been made to reduce fund expenses while enhancing services to the
PBHG Funds. Immediate expense reduction came in the way of the administrative
fees being reduced by 25%, from 0.20% to 0.15%. We believe we can continue to
minimize the PBHG Funds' expense burden, while maximizing service levels for the
PBHG Funds and our shareholders.
1
<PAGE>
MESSAGE TO SHAREHOLDERS (CONTINUED)
- --------------------------------------------------------------------------------
INVESTMENT REVIEW
Against a backdrop of rising interest rates the equity markets continued
to perform reasonably well over the last six months. Albeit with a sharp, but
short, set back during the May through July period. The setback came in reaction
to fears of a hostile Federal Reserve and earnings stumbles from some
high-profile technology companies, notably Motorola and Hewlett-Packard.
As shown by the following Equity Style Portfolio Index** performance
published by Wilshire Associates, portfolios holding larger companies with
growth characteristics showed the best returns during the six months ended
September 30, 1996:
LARGE GROWTH LARGE VALUE MIDCAP GROWTH MIDCAP VALUE
+12.6% +3.1% +6.0% +1.6%
SMALL CAP GROWTH SMALL CAP VALUE
+5.4% +3.3%
Our Funds continued to perform well in this environment as detailed in the
Portfolio Highlights for each Fund, which can be found in the pages to follow.
Our persistent strategy of maintaining exposure to the most rapidly growing,
high quality companies once again was rewarding. Looking ahead, the economic
environment of moderate growth and low inflation, which has helped equities,
appears intact. Despite the skepticism of others regarding this bull market, we
remain convinced that our efforts are best spent continuing to build portfolios
of exceptional growth companies that we believe offer the opportunity for above
market returns. Once again we remind our shareholders, that this investment
strategy is considered high in risk and that short-term portfolio volatility
may be relatively high. Therefore, as always, we encourage patience and a
long-term horizon as you invest in the PBHG Funds.
Once again, thank you for choosing the PBHG Funds for your investment
portfolio. We very much appreciate your loyalty and look forward to continuing a
long-term relationship with you.
Sincerely,
[Sig Omitted] [Sig Omitted]
Harold J. Baxter Gary L. Pilgrim
Chairman President
The PBHG Funds, Inc. The PBHG Funds, Inc.
Picture Harold J. Baxter, Chairman of The PBHG Funds, Inc.
Picture Gary L. Pilgrim, President of The PBHG Funds, Inc.
[Pictures Omitted]
* Information contained herein concerning each Fund is subject to completion or
amendment. A registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. This shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities law of any such state.
** The six Wilshire Equity Style Portfolio Indices are derived from the
performance of the largest 2,500 securities contained in the Wilshire 5000 stock
index. The six individual style portfolios are created by screening these
securities by the size of the company and the characteristics of the style. Key
variables used to identify securities in the value portfolios include
price/earnings ratio, price-to-book and yield. Variables used to identify
securities in the growth portfolios include sales growth, return on equity and
dividend payout.
2
<PAGE>
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PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG GROWTH FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Growth Fund. The breakdown is as follows:
Technology: 30%, Consumer: 18%, Healthcare: 16%, Services: 20%, Financial: 2%,
Industrial: 2%, Energy: 3%, Cash: 9%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term capital appreciation
INVESTS IN -- Small to medium, high-growth companies in any field
STRATEGY -- While the Fund is currently making the majority of purchase
selections in the $500 million to $2.5 billion range, the weighted
average capitalization of the Fund has increased from a year ago.
This is attributable to the higher valuation levels of a rising
market, and our decision to maintain positions in some companies
exceeding $2 billion in market capitalization as long as they meet
our high-growth criteria. However, approximately 60% of the Fund's
investments have annual revenues of under $400 million, still
comfortably in the small company category.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
Legato Systems Medaphis
DSP Communications Macromedia
CDW Computer Centers Kent Electronics
Sitel Cidco
CompUSA American Oncology Resources
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 90.4%
APPAREL -- 2.4%
Nautica Enterprises* 2,194,400 $ 70,769
Tommy Hilfiger* 1,208,100 71,580
- --------------------------------------------------------------------------------
142,349
- --------------------------------------------------------------------------------
APPLICATION SOFTWARE & SERVICES -- 0.6%
Citrix Systems* 704,400 35,132
- --------------------------------------------------------------------------------
35,132
- --------------------------------------------------------------------------------
AUTOMATED SOFTWARE QUALITY -- 1.2%
Pure Atria* 1,883,819 71,114
- --------------------------------------------------------------------------------
71,114
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.0%
IDEXX Laboratories* 1,293,500 58,531
- --------------------------------------------------------------------------------
58,531
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
6 Months2 1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
PBHG Growth Fund-PBHG Class 11.54% 29.57% 31.76% 23.35%
- --------------------------------------------------------------------------------
PBHG Growth Fund-Trust Class3 11.50% 29.52% 31.75% 23.34%
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG GROWTH
FUND, VERSUS THE RUSSELL 2000 GROWTH INDEX, AND THE LIPPER CAPITAL APPRECIATION
FUNDS AVERAGE
[LINE GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Growth Fund
from December 31, 1985 through September 30, 1996 as compared with the growth of
$10,000 investments in the Russell 2000 Growth Index, and the Lipper Capital
Appreciation Funds Average over the same time period. The plot points are as
follows:
12/31/85 3/86 3/87 3/88 3/89 3/90
PBHG Growth Fund 10,000 11,510 16,870 14,665 15,249 19,383
Russell 2000 Growth Index 10,000 11,481 13,175 10,888 11,991 13,057
Lipper Capital Appreciation
Funds Average 10,000 11,594 13,858 12,397 14,009 16,009
3/91 3/92 3/93 3/94 3/95 3/96 9/96
PBHG Growth Fund 22,667 25,781 34,668 47,592 54,217 82,139 91,617
Russell 2000 Growth
Index 14,462 17,206 17,726 19,628 21,057 27,675 29,027
Lipper Capital
Appreciation
Funds Average 17,789 20,993 23,720 25,895 27,669 35,596 38,106
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The performance shown for the Trust Class prior to its inception on August 19,
1996, is based on the performance of the PBHG Class adjusted to reflect the
expenses specific to the Trust class.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. 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.
5 The Lipper Capital Appreciation Funds Average is an equally weighted benchmark
composed of mutual funds with the investment objective of maximum capital
appreciation. The performance figures are based on changes in net asset value
of the funds in the Index with all capital gains distributions and income
dividends reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CLIENT/SERVER SOFTWARE -- 4.0%
Arbor Software* 563,500 $ 24,090
Clarify* 390,800 24,230
Legato Systems* 880,400 41,819
Peoplesoft* 1,201,300 100,008
Remedy* 542,300 43,384
- --------------------------------------------------------------------------------
233,531
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.8%
Checkpoint Systems* 540,300 14,318
PMT Services* 1,485,550 30,082
- --------------------------------------------------------------------------------
44,400
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 0.2%
TCA Cable TV 515,100 13,264
- --------------------------------------------------------------------------------
13,264
- --------------------------------------------------------------------------------
3
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CONSUMER FINANCE -- 0.7%
ContiFinancial* 1,433,500 $ 40,855
- --------------------------------------------------------------------------------
40,855
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS--MISCELLANEOUS -- 1.3%
Oakley* 1,172,800 49,844
USA Detergents* 651,100 25,881
- --------------------------------------------------------------------------------
75,725
- --------------------------------------------------------------------------------
CONTRACT MANUFACTURING -- 0.6%
Sanmina* 809,300 32,574
- --------------------------------------------------------------------------------
32,574
- --------------------------------------------------------------------------------
CONTRACT RESEARCH -- 0.9%
Quintiles Transnational* 762,400 55,846
- --------------------------------------------------------------------------------
55,846
- --------------------------------------------------------------------------------
CORRECTIONAL SERVICES -- 1.6%
Corrections Corp. of America* 2,924,600 91,394
- --------------------------------------------------------------------------------
91,394
- --------------------------------------------------------------------------------
DATA COMMUNICATIONS -- 3.1%
PictureTel* 1,640,500 57,828
US Robotics* 1,885,200 121,831
- --------------------------------------------------------------------------------
179,659
- --------------------------------------------------------------------------------
DESIGN AUTOMATION/GRAPHICS -- 1.1%
Cadence Design Systems* 1,842,000 65,851
- --------------------------------------------------------------------------------
65,851
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 1.3%
Parametric Technology* 1,496,900 73,909
- --------------------------------------------------------------------------------
73,909
- --------------------------------------------------------------------------------
DRUGS -- 1.6%
Dura Pharmaceuticals* 1,292,400 47,657
Watson Pharmaceuticals* 1,194,500 44,794
- --------------------------------------------------------------------------------
92,451
- --------------------------------------------------------------------------------
EDUCATIONAL SERVICES -- 1.2%
Apollo Group, Cl A* 1,814,375 48,535
DeVRY* 442,100 20,116
- --------------------------------------------------------------------------------
68,651
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES -- 1.8%
AccuStaff* 2,134,400 55,228
Career Horizons* 620,500 24,122
Interim Services* 652,500 27,894
- --------------------------------------------------------------------------------
107,244
- --------------------------------------------------------------------------------
ENERGY--PRODUCERS -- 1.9%
Chesapeake Energy* 1,772,450 111,000
- --------------------------------------------------------------------------------
111,000
- --------------------------------------------------------------------------------
ENERGY--SERVICE/EQUIPMENT -- 0.8%
Input/Output* 1,595,700 47,472
- --------------------------------------------------------------------------------
47,472
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 0.3%
Regal Cinemas* 762,550 19,064
- --------------------------------------------------------------------------------
19,064
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
ENVIRONMENTAL -- 3.8%
Ionics* 955,800 $ 45,042
United Waste Systems* 1,496,200 51,993
US Filter* 2,124,900 72,512
USA Waste Services* 1,721,780 54,236
- --------------------------------------------------------------------------------
223,783
- --------------------------------------------------------------------------------
GRAPHICS/IMAGE PROCESSING -- 1.3%
Electronics for Imaging* 1,108,000 79,499
- --------------------------------------------------------------------------------
79,499
- --------------------------------------------------------------------------------
HEALTH CARE-INFORMATION SYSTEMS -- 1.4%
HCIA* 387,300 23,238
Medic Computer Systems* 1,582,200 57,552
- --------------------------------------------------------------------------------
80,790
- --------------------------------------------------------------------------------
HEALTH CARE--MANAGEMENT SERVICES -- 0.6%
Access Health* 659,100 37,074
- --------------------------------------------------------------------------------
37,074
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 1.1%
Gartner Group, Cl A* 1,858,500 63,189
- --------------------------------------------------------------------------------
63,189
- --------------------------------------------------------------------------------
INFORMATION/FINANCIAL SERVICES -- 1.7%
Fair, Isaac & Company 597,500 23,153
Kronos* 546,150 16,794
Transaction Systems Architects* 1,356,200 57,299
- --------------------------------------------------------------------------------
97,246
- --------------------------------------------------------------------------------
INSURANCE -- 1.3%
HCC Insurance Holdings 1,404,300 40,549
Vesta Insurance Group 930,050 35,691
- --------------------------------------------------------------------------------
76,240
- --------------------------------------------------------------------------------
LEISURE -- 0.9%
Callaway Golf 1,601,700 54,658
- --------------------------------------------------------------------------------
54,658
- --------------------------------------------------------------------------------
LODGING -- 2.4%
Doubletree 1,009,300 40,246
HFS* 922,000 61,659
Prime Hospitality* 2,279,800 37,617
- --------------------------------------------------------------------------------
139,522
- --------------------------------------------------------------------------------
MANAGED CARE--DENTAL -- 0.8%
Compdent* 359,600 13,575
Orthodontic Centers of America* 1,541,200 31,402
- --------------------------------------------------------------------------------
44,977
- --------------------------------------------------------------------------------
MARKETING INFORMATION SERVICES -- 0.8%
Catalina Marketing* 935,500 49,815
- --------------------------------------------------------------------------------
49,815
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 1.2%
Target Therapeutics* 814,100 34,803
Thermo Cardiosystems* 960,200 35,167
- --------------------------------------------------------------------------------
69,970
- --------------------------------------------------------------------------------
4
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
MEDICAL EQUIPMENT -- 1.5%
Coherent* 597,900 $ 21,076
Hologic* 392,500 10,990
Lunar* 676,300 21,642
Steris* 1,059,890 35,904
- --------------------------------------------------------------------------------
89,612
- --------------------------------------------------------------------------------
NETWORKING -- 8.5%
Ascend Communications* 2,075,000 137,209
Cascade Communications* 1,418,200 115,583
FORE Systems* 2,808,600 116,206
Premisys Communications* 1,226,100 45,059
Shiva* 1,520,000 87,210
- --------------------------------------------------------------------------------
501,267
- --------------------------------------------------------------------------------
NETWORKING SECURITY -- 0.6%
Security Dynamics Technologies* 475,300 34,103
- --------------------------------------------------------------------------------
34,103
- --------------------------------------------------------------------------------
NETWORKING SOFTWARE -- 1.5%
McAfee Associates* 1,264,925 87,280
- --------------------------------------------------------------------------------
87,280
- --------------------------------------------------------------------------------
NON-DURABLES -- 1.0%
Blyth Industries* 1,238,300 60,058
- --------------------------------------------------------------------------------
60,058
- --------------------------------------------------------------------------------
PATIENT CARE--HEALTH PLAN -- 0.2%
Oxford Health Plans* 245,700 12,224
- --------------------------------------------------------------------------------
12,224
- --------------------------------------------------------------------------------
PATIENT CARE--HOME -- 0.9%
American Medical Response* 1,400,400 50,414
- --------------------------------------------------------------------------------
50,414
- --------------------------------------------------------------------------------
PATIENT CARE--HOSPITAL -- 1.1%
Health Management Associates, Cl A* 2,508,850 62,408
- --------------------------------------------------------------------------------
62,408
- --------------------------------------------------------------------------------
PATIENT CARE--LONG TERM -- 0.4%
Multicare* 1,031,000 22,424
- --------------------------------------------------------------------------------
22,424
- --------------------------------------------------------------------------------
PHARMACEUTICAL SERVICES -- 1.3%
Express Scripts* 713,800 25,875
Omnicare 1,740,400 53,082
- --------------------------------------------------------------------------------
78,957
- --------------------------------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT -- 3.3%
American Oncology Resources* 1,623,000 18,259
OccuSystems* 917,000 27,510
Pediatrix Medical Group* 493,100 24,470
PhyCor* 2,247,112 85,531
Physicians Reliance Network* 2,444,200 37,274
- --------------------------------------------------------------------------------
193,044
- --------------------------------------------------------------------------------
RADIO/TELEVISION -- 2.1%
Clear Channel Communications* 1,102,850 97,602
Emmis Broadcasting* 607,400 28,092
- --------------------------------------------------------------------------------
125,694
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
RESTAURANTS -- 1.5%
Boston Chicken* 525,100 $ 18,510
Landry's Seafood Restaurants* 1,243,000 31,075
Papa John's International* 714,650 37,519
- --------------------------------------------------------------------------------
87,104
- --------------------------------------------------------------------------------
RETAIL--CATALOG -- 2.3%
CDW Computer Centers* 940,050 64,158
Global DirectMail* 719,200 34,342
MSC Industrial Direct* 1,080,200 38,482
- --------------------------------------------------------------------------------
136,982
- --------------------------------------------------------------------------------
RETAIL--GENERAL -- 0.5%
Proffitt's* 798,800 31,553
- --------------------------------------------------------------------------------
31,553
- --------------------------------------------------------------------------------
RETAIL--HOME FURNISHINGS -- 0.9%
Bed Bath & Beyond* 1,993,500 54,572
- --------------------------------------------------------------------------------
54,572
- --------------------------------------------------------------------------------
RETAIL--OFFICE PRODUCTS -- 1.6%
Corporate Express* 1,351,000 52,520
US Office Products* 1,145,500 41,095
- --------------------------------------------------------------------------------
93,615
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 2.7%
CompUSA* 1,856,600 100,256
PETsMART* 2,233,300 57,787
- --------------------------------------------------------------------------------
158,043
- --------------------------------------------------------------------------------
RETAIL--SUPERMARKET/DRUG -- 0.2%
Whole Foods Market* 371,300 9,839
- --------------------------------------------------------------------------------
9,839
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT -- 0.5%
Etec Systems* 875,300 29,760
- --------------------------------------------------------------------------------
29,760
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR MANUFACTURING -- 2.7%
Altera* 1,077,000 54,523
DSP Communications* 790,700 44,180
Microchip Technology* 1,600,900 59,834
- --------------------------------------------------------------------------------
158,537
- --------------------------------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED RESELLERS -- 1.0%
Cambridge Technology Partners* 2,028,200 61,353
- --------------------------------------------------------------------------------
61,353
- --------------------------------------------------------------------------------
TECHNOLOGY--COMPONENTS -- 0.3%
Teltrend* 350,100 14,879
- --------------------------------------------------------------------------------
14,879
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.1%
ADC Telecommunications* 370,000 23,680
Adtran* 761,200 38,250
- --------------------------------------------------------------------------------
61,930
- --------------------------------------------------------------------------------
TELEMARKETING -- 1.9%
APAC Teleservices* 1,412,000 72,365
Sitel* 917,200 40,815
- --------------------------------------------------------------------------------
113,180
- --------------------------------------------------------------------------------
5
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
SHARES/FACE MARKET
DESCRIPTION AMOUNT(000) VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
TRANSACTION PROCESSING -- 2.3%
Concord EFS* 2,469,625 $ 63,593
National Data 1,614,000 70,411
- --------------------------------------------------------------------------------
134,004
- --------------------------------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING -- 2.8%
Aspect Telecommunications* 907,400 56,486
Comverse Technology* 1,157,500 44,998
Octel Communications* 2,256,100 65,427
- --------------------------------------------------------------------------------
166,911
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $3,891,814) 5,306,526
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 11.1%
UBS
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $502,941,752
(collateralized by FHLMC obligations,
total par value $295,615,558,
0.00%-9.50%, 03/15/08-09/01/26;
FNMA obligations, total par value
$336,758,086, 6.00%-8.50%,
02/01/09-04/01/26:
total market value $514,842,832) (A) $502,861 502,861
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $152,307,035
(collateralized
by FNMA obligations, total par value
$462,732,247, 6.50%-11.00%,
06/01/97-01/01/25: total market value
$155,331,733) (A) 152,283 152,283
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $655,144) 655,144
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.5%
(COST $4,546,958) $5,961,670
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.5%)
Other Assets and Liabilities, Net (89,515)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 208,090,033
outstanding shares of common stock 4,544,022
Fund Shares of Trust Class (authorized 200 million
shares -- $0.001 par value) based on 7,644 outstanding
shares of common stock 198
Accumulated net investment loss (13,390)
Accumulated net realized loss on investments (73,387)
Net unrealized appreciation on investments 1,414,712
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $5,872,155
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE -- PBHG CLASS $28.22
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE -- TRUST CLASS $28.21
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
6
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG EMERGING GROWTH FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Emerging Growth Fund. The breakdown is as follows:
Technology: 39%, Consumer: 10%, Healthcare: 20%, Services: 9%,
Transportation: 2%, Industrial: 1%, Cash: 19%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term growth of capital
INVESTS IN -- Small rapidly growing companies in any field
STRATEGY -- The Fund's strategy is to invest in young, rapidly growing
companies with prospects for continued growth. The Fund will
typically target the following sectors: technology, healthcare,
consumer and service. The Fund will remain diversified over a
large number of securities, with no one security accounting for
more than 3% of the portfolio.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
Legato Systems Microcom
DSP Communications Astea
Veritas Software Pete's Brewing Company
Greenwich Air Services CONMED
Pure Atria Manhattan Bagel
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 80.1%
AUTOMATED DATA COLLECTION -- 0.5%
Trident International* 462,200 $ 7,800
- --------------------------------------------------------------------------------
7,800
- --------------------------------------------------------------------------------
AUTOMATED SOFTWARE QUALITY -- 1.5%
Pure Atria* 570,994 21,555
- --------------------------------------------------------------------------------
21,555
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.9%
Meridian Diagnostics 292,300 3,910
Serologicals* 253,500 8,809
- --------------------------------------------------------------------------------
12,719
- --------------------------------------------------------------------------------
CLIENT/SERVER SOFTWARE -- 11.3%
Advent Software* 250,900 7,496
Applix* 461,100 12,104
Arbor Software* 339,600 14,518
Aspect Development* 31,000 1,054
Clarify* 309,800 19,208
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
Annualized Inception
6 Months2 1 Year to Date3
- --------------------------------------------------------------------------------
PBHG Emerging Growth Fund 14.17% 32.58% 39.56%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG EMERGING
GROWTH FUND, VERSUS THE RUSSELL 2000 GROWTH INDEX, AND THE LIPPER SMALL
COMPANY FUNDS AVERAGE
[LINE GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Emerging
Growth Fund from June 30, 1993 through September 30, 1996 as compared with the
growth of $10,000 investments in the Russell 2000 Growth Index, and the Lipper
Small Company Funds Average over the same time period. The plot points are as
follows:
6/30/93 3/94 3/95 3/96 9/96
PBHG Emerging Growth Fund 10,000 13,100 17,290 25,963 29,642
Russell 2000 Growth Index 10,000 10,763 11,547 15,176 15,917
Lipper Small Company
Funds Average 10,000 10,815 11,652 15,293 16,783
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Emerging Growth Fund commenced operations on June 15, 1993.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. 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.
5 The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by prospectus
or portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the funds
in the Index with all capital gains distributions and income dividends
reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CLIENT/SERVER SOFTWARE -- CONTINUED
Datastream Systems* 329,300 $ 9,961
Documentum* 9,500 302
Legato Systems* 665,400 31,607
Pegasystems* 171,800 4,467
Project Software & Development* 467,650 19,758
Scopus Technology* 348,400 10,539
Unison Software* 261,500 6,734
Vantive* 372,400 24,113
- --------------------------------------------------------------------------------
161,861
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS--MISCELLANEOUS -- 0.8%
USA Detergents* 302,200 12,013
- --------------------------------------------------------------------------------
12,013
- --------------------------------------------------------------------------------
CONSUMER SERVICES -- 0.7%
Veterinary Centers of America* 452,800 9,933
- --------------------------------------------------------------------------------
9,933
- --------------------------------------------------------------------------------
7
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CONTRACT RESEARCH -- 2.7%
Parexel International* 286,400 $ 18,043
Pharmaceutical Product Development* 385,200 10,400
Quintiles Transnational* 144,400 10,577
- --------------------------------------------------------------------------------
39,020
- --------------------------------------------------------------------------------
DATA COMMUNICATIONS -- 1.7%
Brooktrout Technology* 535,825 19,558
P-COM* 216,300 5,354
- --------------------------------------------------------------------------------
24,912
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 3.5%
Cooper & Chyan Technology* 295,200 7,232
EPIC Design Technology* 428,200 10,705
LeCroy* 318,200 8,273
Mechanical Dynamics* 36,900 646
Wind River Systems* 525,500 23,253
- --------------------------------------------------------------------------------
50,109
- --------------------------------------------------------------------------------
DIGITAL MEDIA -- 1.6%
VideoServer* 681,100 23,668
- --------------------------------------------------------------------------------
23,668
- --------------------------------------------------------------------------------
EDUCATIONAL SERVICES -- 0.5%
Apollo Group, Cl A* 278,550 7,451
- --------------------------------------------------------------------------------
7,451
- --------------------------------------------------------------------------------
EMBEDDED SYSTEMS -- 0.7%
RadiSys* 206,400 10,217
- --------------------------------------------------------------------------------
10,217
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES -- 3.4%
Alternative Resources* 375,800 10,569
On Assignment* 284,500 9,744
Right Management Consultants* 161,100 3,907
Romac International* 586,600 17,891
The Vincam Group* 158,100 6,047
- --------------------------------------------------------------------------------
48,158
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 0.6%
Superior Services* 215,000 3,440
Tetra Tech* 215,625 5,121
- --------------------------------------------------------------------------------
8,561
- --------------------------------------------------------------------------------
HEALTH CARE--INFORMATION SYSTEMS -- 1.7%
Amisys Managed Care Systems* 348,200 8,313
HCIA* 165,000 9,900
Imnet Systems* 315,600 6,154
- --------------------------------------------------------------------------------
24,367
- --------------------------------------------------------------------------------
HEALTH CARE SERVICES -- 3.1%
ABR Information Services* 364,200 26,222
Access Health* 271,400 15,266
IMPATH* 233,500 2,860
- --------------------------------------------------------------------------------
44,348
- --------------------------------------------------------------------------------
HEALTH CARE--SUPPLIES -- 1.6%
Gulf South Medical Supply* 423,600 10,908
Physician Sales & Service* 514,100 12,081
- --------------------------------------------------------------------------------
22,989
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
INFORMATION TECHNOLOGY SERVICES -- 1.9%
Ciber* 103,600 $ 3,937
Claremont Technology Group* 89,200 3,211
META Group* 336,100 9,327
Whittman-Hart* 220,300 10,409
- --------------------------------------------------------------------------------
26,884
- --------------------------------------------------------------------------------
INFORMATION/FINANCIAL SERVICES -- 0.7%
Fair, Isaac & Company 273,800 10,610
- --------------------------------------------------------------------------------
10,610
- --------------------------------------------------------------------------------
INTERNET -- 0.7%
Spyglass* 523,600 9,883
- --------------------------------------------------------------------------------
9,883
- --------------------------------------------------------------------------------
LOGISTICS -- 1.7%
Eagle USA Airfreight* 919,900 23,917
- --------------------------------------------------------------------------------
23,917
- --------------------------------------------------------------------------------
MACHINERY/EQUIPMENT -- 1.1%
Greenwich Air Services, Cl A 231,100 6,471
Greenwich Air Services, Cl B* 472,400 9,802
- --------------------------------------------------------------------------------
16,273
- --------------------------------------------------------------------------------
MANAGED CARE-DENTAL -- 2.2%
Compdent* 169,600 6,402
First Commonwealth* 233,500 5,195
Orthodontic Centers of America* 968,800 19,739
- --------------------------------------------------------------------------------
31,336
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 2.0%
CNS* 407,600 7,235
Target Therapeutics* 506,000 21,632
- --------------------------------------------------------------------------------
28,867
- --------------------------------------------------------------------------------
MEDICAL EQUIPMENT -- 0.4%
Hologic* 228,900 6,409
- --------------------------------------------------------------------------------
6,409
- --------------------------------------------------------------------------------
NETWORKING SECURITY -- 1.3%
Security Dynamics Technologies* 262,000 18,799
- --------------------------------------------------------------------------------
18,799
- --------------------------------------------------------------------------------
PATIENT CARE--HOME -- 1.5%
American HomePatient* 281,500 6,263
Pediatric Services of America* 306,700 5,674
Rural/Metro* 268,200 9,789
- --------------------------------------------------------------------------------
21,726
- --------------------------------------------------------------------------------
PATIENT CARE--LONG TERM -- 0.4%
TheraTx* 438,700 5,210
- --------------------------------------------------------------------------------
5,210
- --------------------------------------------------------------------------------
PATIENT CARE--SPECIALTY -- 1.8%
National Surgery Centers* 299,900 8,397
Renal Treatment Centers* 532,200 17,696
- --------------------------------------------------------------------------------
26,093
- --------------------------------------------------------------------------------
PHARMACEUTICAL SERVICES -- 1.2%
NCS HealthCare* 559,200 17,545
- --------------------------------------------------------------------------------
17,545
- --------------------------------------------------------------------------------
8
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
PHYSICIAN PRACTICE MANAGEMENT -- 0.7%
OccuSystems* 335,600 $ 10,068
- --------------------------------------------------------------------------------
10,068
- --------------------------------------------------------------------------------
RESTAURANTS -- 2.5%
Logan's Roadhouse* 410,350 8,258
Longhorn Steaks* 149,000 2,272
Papa John's International* 492,400 25,851
- --------------------------------------------------------------------------------
36,381
- --------------------------------------------------------------------------------
RETAIL--CATALOG -- 1.0%
Wilmar Industries* 635,500 14,458
- --------------------------------------------------------------------------------
14,458
- --------------------------------------------------------------------------------
RETAIL--OFFICE PRODUCTS -- 1.9%
US Office Products* 757,000 27,157
- --------------------------------------------------------------------------------
27,157
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 2.1%
Garden Ridge* 306,500 5,249
Just For Feet* 173,375 8,690
West Marine* 482,800 15,932
- --------------------------------------------------------------------------------
29,871
- --------------------------------------------------------------------------------
RETAIL--SUPERMARKET/DRUG -- 0.7%
Whole Foods Market* 386,900 10,253
- --------------------------------------------------------------------------------
10,253
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT -- 0.9%
IKOS Systems* 433,900 8,624
Integrated Measurement Systems* 251,500 4,150
- --------------------------------------------------------------------------------
12,774
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR MANUFACTURING -- 1.2%
DSP Communications* 310,400 17,344
- --------------------------------------------------------------------------------
17,344
- --------------------------------------------------------------------------------
SOFTWARE--GENERAL -- 7.0%
Aspen Technology* 393,600 26,666
Desktop Data* 371,425 10,771
Inso* 474,200 25,725
Systemsoft* 46,400 1,589
Veritas Software* 271,200 19,187
Visio* 367,900 16,740
- --------------------------------------------------------------------------------
100,678
- --------------------------------------------------------------------------------
TECHNOLOGY--COMPONENTS -- 2.3%
Centennial Technologies* 215,800 9,253
Equinox Systems* 237,400 3,116
II-VI* 500,600 10,388
Proxim* 240,600 6,917
WPI Group* 476,400 3,454
- --------------------------------------------------------------------------------
33,128
- --------------------------------------------------------------------------------
TECHNOLOGY--MISCELLANEOUS -- 1.3%
Del Global Technologies* 103,000 876
Encad* 216,300 9,058
Ultrak* 64,800 1,782
Zoltek* 170,400 6,475
- --------------------------------------------------------------------------------
18,191
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.8%
Sawtek* 599,000 15,574
Uniphase* 226,200 9,557
- --------------------------------------------------------------------------------
25,131
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
TELEMARKETING -- 1.8%
Sitel* 343,400 $ 15,281
Sykes Enterprises* 211,800 10,219
- --------------------------------------------------------------------------------
25,500
- --------------------------------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING -- 1.2%
Natural Microsystems* 371,900 17,898
- --------------------------------------------------------------------------------
17,898
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $817,409) 1,152,065
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 21.0%
JP Morgan
5.76%, dated 09/30/96, matures 10/01/96,
repurchase price $89,871,415
(collateralized by GNMA obligations,
total par value $95,601,746, 7.00%,
01/01/00-05/15/26: total
market value $91,677,759) (A) $ 89,857 89,857
Prudential
5.76%, dated 09/30/96, matures 10/01/96,
repurchase price $51,736,847
(collateralized by FNMA obligations,
total par value $54,373,522,
6.50%-10.00%, 10/01/06-07/01/26;
U.S. Treasury Note, par value $102,000,
6.625%, 03/31/97: total market value:
$53,764,138) (A) 51,729 51,729
Greenwich
5.76%, dated 09/30/96, matures 10/01/96,
repurchase price $160,108,494
(collateralized by
FNMA obligations, total par value
$194,412,402, 4.50%-9.50%,
01/01/04-10/01/26: total market value
$163,287,870) (A) 160,083 160,083
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $301,669) 301,669
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.1%
(COST $1,119,078) 1,453,734
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.1%)
Other Assets and Liabilities, Net (15,953)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400
million share -- $0.001 par value)
based on 54,577,139 outstanding shares
of common stock 1,096,867
Accumulated net investment loss (1,520)
Accumulated net realized gain on investments 7,778
Net unrealized appreciation on investments 334,656
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $1,437,781
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $26.34
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
9
<PAGE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG CORE GROWTH FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Core Growth Fund. The breakdown is as follows:
Technology: 28%, Consumer: 14%, Healthcare: 17%, Services: 23%,
Transportation: 2%, Industrial: 3%, Energy: 2%, Financial: 3%, Cash: 8%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term capital appreciation
INVESTS IN -- A diversified portfolio of small, mid-size and large
capitalization companies in all fields that offer attractive
capital appreciation opportunities
STRATEGY -- The Fund's holdings currently range from roughly $200 million to
$50 billion in market capitalization, with an average size of $4
billion. While future changes in holdings will create some
variability, we do not expect the company size features of the
Fund to differ substantially from what they are presently. Stock
selection is exclusively "bottom up", focusing on individual
companies and the strength of their fundamental business
characteristics. Sector exposure is not predetermined, but follows
from the selection of the most attractive individual stocks.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
CDW Computer Centers Fritz Companies
TeleTech Holdings Sunglass Hut International
McAfee Associates Target Therapeutics
ADC Telecommunications Healthsource
US Filter Gulf South Medical Supply
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 90.3%
APPAREL -- 1.6%
Donna Karan International* 169,700 $ 3,882
Tommy Hilfiger* 57,600 3,413
- --------------------------------------------------------------------------------
7,295
- --------------------------------------------------------------------------------
AUTO-RELATED -- 1.6%
Harley-Davidson 167,300 7,194
- --------------------------------------------------------------------------------
7,194
- --------------------------------------------------------------------------------
AUTOMATED SOFTWARE QUALITY -- 0.6%
Pure Atria* 76,200 2,877
- --------------------------------------------------------------------------------
2,877
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.2%
Amgen* 106,700 6,735
IDEXX Laboratories* 171,700 7,769
- --------------------------------------------------------------------------------
14,504
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN1
- --------------------------------------------------------------------------------
6 Months2 Since Inception3
- --------------------------------------------------------------------------------
PBHG Core Growth Fund 20.14% 42.00%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG CORE
GROWTH FUND, VERSUS THE RUSSELL 3000 INDEX, AND THE LIPPER GROWTH FUNDS AVERAGE
[LINE GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Core Growth
Fund from December 31, 1995 through September 30, 1996 as compared with the
growth of $10,000 investments in the Russell 3000 Index and the Lipper Growth
Funds Average over the same time period. The plot points are as follows:
12/31/95 1/96 2/96 3/96 4/96 5/96
PBHG Core Growth Fund 10,000 10,590 11,450 11,820 13,310 14,230
Russell 3000 Index 10,000 10,292 10,508 10,542 10,873 11,272
Lipper Growth Funds
Average 10,000 10,215 10,445 10,538 10,888 11,179
6/96 7/96 8/96 9/96
PBHG Core Growth Fund 13,800 12,041 13,000 14,200
Russell 3000 Index 11,206 10,476 10,795 11,557
Lipper Growth Funds
Average 11,015 10,362 10,728 11,336
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 Total return has not been annualized. The PBHG Core Growth Fund commenced
operations on January 2, 1996.
4 The Russell 3000 Index is an unmanaged index comprised of the 3000 largest
U.S. securities as determined by total market capitalization and represents
approximately 98% of the investable U.S. equity 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.
5 The Lipper Growth Funds Average is an equally weighted bench-mark composed of
mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the Index
with all capital gains distributions and income dividends reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CLIENT/SERVER SOFTWARE -- 3.8%
Datastream Systems* 83,000 $ 2,511
Forte Software* 63,700 2,500
HNC Software* 61,400 2,456
Peoplesoft* 81,200 6,760
Remedy* 36,800 2,944
- --------------------------------------------------------------------------------
17,171
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 3.6%
Computer Sciences* 76,500 5,881
DST Systems* 129,100 4,131
First Data 78,700 6,424
- --------------------------------------------------------------------------------
16,436
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 1.2%
LCI International* 172,700 5,440
- --------------------------------------------------------------------------------
5,440
- --------------------------------------------------------------------------------
10
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CONSUMER FINANCE -- 3.0%
Associates First Capital 152,700 $ 6,261
Money Store (The) 286,225 7,585
- --------------------------------------------------------------------------------
13,846
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS--MISCELLANEOUS -- 1.6%
Oakley* 171,600 7,293
- --------------------------------------------------------------------------------
7,293
- --------------------------------------------------------------------------------
CONTRACT RESEARCH -- 1.2%
Quintiles Transnational* 72,900 5,340
- --------------------------------------------------------------------------------
5,340
- --------------------------------------------------------------------------------
CORRECTIONAL SERVICES -- 1.5%
Corrections Corp. of America* 217,500 6,797
- --------------------------------------------------------------------------------
6,797
- --------------------------------------------------------------------------------
DATA COMMUNICATIONS -- 2.8%
PictureTel* 168,900 5,954
US Robotics* 103,300 6,676
- --------------------------------------------------------------------------------
12,630
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 4.4%
EPIC Design Technology* 81,500 2,038
Integrated Systems* 127,700 4,214
Parametric Technology* 137,600 6,794
Synopsys* 152,700 7,043
- --------------------------------------------------------------------------------
20,089
- --------------------------------------------------------------------------------
DISTRIBUTION SOFTWARE/HARDWARE & PERIPHERALS -- 1.1%
Dell Computer* 62,500 4,859
- --------------------------------------------------------------------------------
4,859
- --------------------------------------------------------------------------------
DIGITAL MEDIA -- 1.1%
VideoServer* 149,200 5,185
- --------------------------------------------------------------------------------
5,185
- --------------------------------------------------------------------------------
DRUGS -- 1.9%
Dura Pharmaceuticals* 153,800 5,671
Pfizer 35,600 2,817
- --------------------------------------------------------------------------------
8,488
- --------------------------------------------------------------------------------
ENERGY--SERVICE/EQUIPMENT -- 1.7%
Input/Output* 166,000 4,939
Varco International* 155,600 2,742
- --------------------------------------------------------------------------------
7,681
- --------------------------------------------------------------------------------
ENTERTAINMENT -- 1.1%
Regal Cinemas* 196,550 4,914
- --------------------------------------------------------------------------------
4,914
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 6.1%
Thermo Electron* 137,550 5,571
United Waste Systems* 188,800 6,561
US Filter* 266,400 9,091
USA Waste Services* 206,570 6,507
- --------------------------------------------------------------------------------
27,730
- --------------------------------------------------------------------------------
GRAPHICS/IMAGE PROCESSING -- 0.3%
Electronics for Imaging* 16,600 1,191
- --------------------------------------------------------------------------------
1,191
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
HEALTH CARE--INFORMATION SYSTEMS -- 1.0%
HBO & Company 71,200 $ 4,753
- --------------------------------------------------------------------------------
4,753
- --------------------------------------------------------------------------------
HEALTH CARE--MANAGEMENT SERVICES -- 0.5%
Access Health* 41,100 2,312
- --------------------------------------------------------------------------------
2,312
- --------------------------------------------------------------------------------
HEALTH CARE--SUPPLIES -- 2.4%
Gulf South Medical Supply* 143,300 3,690
Physician Sales & Service* 312,300 7,339
- --------------------------------------------------------------------------------
11,029
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 1.3%
Gartner Group, Cl A* 178,100 6,055
- --------------------------------------------------------------------------------
6,055
- --------------------------------------------------------------------------------
INFORMATION/FINANCIAL SERVICES -- 1.7%
Paychex 137,700 7,987
- --------------------------------------------------------------------------------
7,987
- --------------------------------------------------------------------------------
LODGING -- 1.8%
HFS* 122,200 8,172
- --------------------------------------------------------------------------------
8,172
- --------------------------------------------------------------------------------
LOGISTICS -- 0.5%
Eagle USA Airfreight* 94,200 2,449
- --------------------------------------------------------------------------------
2,449
- --------------------------------------------------------------------------------
MANAGED CARE-DENTAL -- 1.2%
Compdent* 91,900 3,469
Orthodontic Centers of America* 106,800 2,176
- --------------------------------------------------------------------------------
5,645
- --------------------------------------------------------------------------------
NETWORKING -- 8.9%
Ascend Communications* 100,100 6,619
Cascade Communications* 98,400 8,020
Cisco Systems* 132,100 8,198
FORE Systems* 186,700 7,725
Premisys Communications* 134,000 4,924
Shiva* 92,100 5,284
- --------------------------------------------------------------------------------
40,770
- --------------------------------------------------------------------------------
NETWORKING SECURITY -- 0.2%
Security Dynamics Technologies* 15,300 1,098
- --------------------------------------------------------------------------------
1,098
- --------------------------------------------------------------------------------
NETWORKING SOFTWARE -- 1.1%
McAfee Associates* 74,300 5,127
- --------------------------------------------------------------------------------
5,127
- --------------------------------------------------------------------------------
NON-DURABLES -- 1.4%
Blyth Industries* 136,500 6,620
- --------------------------------------------------------------------------------
6,620
- --------------------------------------------------------------------------------
PATIENT CARE-SPECIALTY -- 1.4%
HEALTHSOUTH* 170,600 6,547
- --------------------------------------------------------------------------------
6,547
- --------------------------------------------------------------------------------
PHARMACEUTICAL SERVICES -- 1.3%
Omnicare 199,000 6,069
- --------------------------------------------------------------------------------
6,069
- --------------------------------------------------------------------------------
11
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
PHYSICIAN PRACTICE MANAGEMENT -- 2.6%
Pediatrix Medical Group* 15,000 $ 744
PhyCor* 186,100 7,083
Physician Reliance Network* 255,400 3,895
- --------------------------------------------------------------------------------
11,722
- --------------------------------------------------------------------------------
PROCESS TECHNOLOGY -- 0.8%
Thermedics* 136,800 3,608
- --------------------------------------------------------------------------------
3,608
- --------------------------------------------------------------------------------
RADIO/TELEVISION -- 1.3%
Clear Channel Communications* 67,400 5,965
- --------------------------------------------------------------------------------
5,965
- --------------------------------------------------------------------------------
RESTAURANTS -- 1.1%
Boston Chicken* 140,300 4,946
- --------------------------------------------------------------------------------
4,946
- --------------------------------------------------------------------------------
RETAIL--CATALOG -- 1.1%
CDW Computer Centers* 71,949 4,911
- --------------------------------------------------------------------------------
4,911
- --------------------------------------------------------------------------------
RETAIL--OFFICE PRODUCTS -- 1.7%
Corporate Express* 200,800 7,806
- --------------------------------------------------------------------------------
7,806
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 2.2%
Just For Feet* 96,500 4,837
West Marine* 154,400 5,095
- --------------------------------------------------------------------------------
9,932
- --------------------------------------------------------------------------------
SOFTWARE--GENERAL -- 2.2%
Aspen Technologies* 93,300 6,321
Harbinger* 153,000 3,825
- --------------------------------------------------------------------------------
10,146
- --------------------------------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED RESELLERS -- 1.2%
Cambridge Technology Partners* 178,800 5,409
- --------------------------------------------------------------------------------
5,409
- --------------------------------------------------------------------------------
TECHNOLOGY--COMPONENTS -- 0.2%
Proxim* 25,000 719
- --------------------------------------------------------------------------------
719
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.6%
ADC Telecommunications* 115,400 7,386
- --------------------------------------------------------------------------------
7,386
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
TELEMARKETING -- 4.9%
APAC Teleservices* 166,800 $ 8,548
Sitel 111,200 4,948
TeleTech Holdings* 239,600 8,745
- --------------------------------------------------------------------------------
22,241
- --------------------------------------------------------------------------------
TRANSPORTATION--AIR -- 1.3%
Atlas Air* 140,400 6,002
- --------------------------------------------------------------------------------
6,002
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $375,191) 412,386
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 13.0%
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $59,456,914
(collateralized by FNMA obligations,
total par value $105,565,236,
6.50%-8.00%, 10/01/07-07/01/24:
total market value $60,638,360) (A) $ 59,447 59,447
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $59,447) 59,447
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 103.3%
(COST $434,638) 471,833
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (3.3%)
Payable for Securities Purchased (24,516)
Other Assets and Liabilities 9,319
- --------------------------------------------------------------------------------
Total Other Assets and Liabilities, Net (15,197)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value)
based on 32,160,210 outstanding shares
of common stock 428,206
Accumulated net investment loss (692)
Accumulated net realized loss on investments (8,073)
Net unrealized appreciation on investments 37,195
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $456,636
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $14.20
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
12
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG SELECT EQUITY FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Select Equity Fund. The breakdown is as follows:
Technology: 39%, Consumer: 14%, Healthcare: 16%, Services: 13%,
Transportation: 2%, Cash: 16%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term growth of capital
INVESTS IN -- 25 to 30 companies of all sizes -- selected from many fields and
sectors -- that show outstanding promise
STRATEGY -- The Fund concentrates its investments in what we view as the best
opportunities in our universe of approximately 1000 companies. At
the end of the period, the Fund held the maximum number of 30
stocks ranging in size from $680 million (Visio) to $36.9 billion
(Cisco Systems). The mean market capitalization was $2.8 billion.
The Fund's size characteristics may vary dramatically from one
time period to another, reflecting the inherent sensitivity to
changes in holdings of a highly concentrated portfolio.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
McAfee Associates Thermo Cardiosystems
Clear Channel Communications Pediatrix Medical Group
Cascade Communications Money Store (The)
Paychex Boston Chicken
Peoplesoft Cognex
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 83.9%
APPAREL -- 3.4%
Tommy Hilfiger* 387,500 $ 22,960
- --------------------------------------------------------------------------------
22,960
- --------------------------------------------------------------------------------
CLIENT/SERVER SOFTWARE -- 4.6%
Peoplesoft* 253,300 21,087
Remedy* 122,000 9,760
- --------------------------------------------------------------------------------
30,847
- --------------------------------------------------------------------------------
CONTRACT RESEARCH -- 3.6%
Quintiles Transnational* 332,600 24,363
- --------------------------------------------------------------------------------
24,363
- --------------------------------------------------------------------------------
CORRECTIONAL SERVICES -- 2.2%
Corrections Corp. of America* 471,100 14,722
- --------------------------------------------------------------------------------
14,722
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
Annualized Inception
6 Months2 1 Year to Date3
- --------------------------------------------------------------------------------
PBHG Select Equity Fund 21.89% 45.20% 67.61%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG SELECT
EQUITY FUND, VERSUS THE RUSSELL 3000 INDEX, AND THE LIPPER CAPITAL APPRECIATION
FUNDS AVERAGE
[LINE GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Select Equity
Fund from April 30, 1995 through September 30, 1996 as compared with the
growth of $10,000 investments in the Russell 3000 Index, and the Lipper Capital
Appreciation Funds Average over the same time period. The plot points are as
follows:
4/30/95 6/95 9/95 12/95 3/96 6/96 9/96
PBHG Select Equity Fund 10,000 11,686 14,546 15,512 17,329 19,606 21,121
Russell 3000 Index 10,000 10,757 11,758 12,256 12,919 13,734 14,164
Lipper Capital
Appreciation
Funds Average 10,000 10,737 11,750 12,029 12,720 13,366 13,628
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Select Equity Fund commenced operations on April 5, 1995.
4 The Russell 3000 Index is an unmanaged index comprised of the 3000 largest
U.S. securities as determined by total market capitalization and represents
approximately 98% of the investable U.S. equity 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.
5 The Lipper Capital Appreciation Funds Average is an equally weighted benchmark
composed of mutual funds with the investment objective of maximum capital
appreciation. The performance figures are based on changes in net asset value
of the funds in the Index with all capital gains distributions and income
dividends reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
DATA COMMUNICATIONS -- 4.9%
PairGain Technologies* 210,000 $ 16,406
US Robotics* 253,700 16,395
- --------------------------------------------------------------------------------
32,801
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 1.9%
Parametric Technology* 256,600 12,670
- --------------------------------------------------------------------------------
12,670
- --------------------------------------------------------------------------------
DISTRIBUTION SOFTWARE--HARDWARE & PERIPHERALS -- 3.6%
Dell Computer* 317,300 24,670
- --------------------------------------------------------------------------------
24,670
- --------------------------------------------------------------------------------
DRUGS -- 2.5%
Dura Pharmaceuticals* 467,400 17,235
- --------------------------------------------------------------------------------
17,235
- --------------------------------------------------------------------------------
13
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
EMPLOYMENT SERVICES -- 2.7%
AccuStaff* 716,500 $ 18,540
- --------------------------------------------------------------------------------
18,540
- --------------------------------------------------------------------------------
HEALTH CARE--INFORMATION SYSTEMS -- 3.2%
HBO & Company 322,600 21,534
- --------------------------------------------------------------------------------
21,534
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 2.8%
Gartner Group, Cl A* 556,700 18,928
- --------------------------------------------------------------------------------
18,928
- --------------------------------------------------------------------------------
INFORMATION/FINANCIAL SERVICES -- 1.6%
Paychex 192,150 11,145
- --------------------------------------------------------------------------------
11,145
- --------------------------------------------------------------------------------
LODGING -- 3.6%
HFS* 362,500 24,242
- --------------------------------------------------------------------------------
24,242
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 1.6%
Thermo Cardiosystems* 289,150 10,590
- --------------------------------------------------------------------------------
10,590
- --------------------------------------------------------------------------------
NETWORKING -- 17.9%
Ascend Communications* 379,100 25,068
Cascade Communications* 304,800 24,841
Cisco Systems* 356,700 22,138
FORE Systems* 641,000 26,521
Shiva* 389,000 22,319
- --------------------------------------------------------------------------------
120,887
- --------------------------------------------------------------------------------
NETWORKING SOFTWARE -- 3.3%
McAfee Associates* 324,150 22,366
- --------------------------------------------------------------------------------
22,366
- --------------------------------------------------------------------------------
PATIENT CARE--HEALTH PLAN -- 3.4%
Oxford Health Plans* 464,400 23,104
- --------------------------------------------------------------------------------
23,104
- --------------------------------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT -- 2.1%
Pediatrix Medical Group* 286,300 14,208
- --------------------------------------------------------------------------------
14,208
- --------------------------------------------------------------------------------
RADIO/TELEVISION -- 2.8%
Clear Channel Communications* 213,200 18,868
- --------------------------------------------------------------------------------
18,868
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 6.2%
CompUSA* 420,300 22,696
Just For Feet* 382,950 19,195
- --------------------------------------------------------------------------------
41,891
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
SOFTWARE--GENERAL -- 2.0%
Visio* 294,900 $ 13,418
- --------------------------------------------------------------------------------
13,418
- --------------------------------------------------------------------------------
SYSTEM SOFTWARE -- 2.2%
Computer Associates International 246,200 14,711
- --------------------------------------------------------------------------------
14,711
- --------------------------------------------------------------------------------
TRANSPORTATION--AIR -- 1.8%
Atlas Air* 285,500 12,205
- --------------------------------------------------------------------------------
12,205
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $484,172) 566,905
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 16.2%
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $72,436,971
(collateralized by FHLMC obligations,
total par value $497,788,093,
0.00%-14.00%, 11/01/97-09/01/26:
total market value: $73,874,106) (A) $ 72,425 72,425
Prudential Securities
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $37,353,288
(collateralized by FNMA obligations,
total par value $64,330,664,
7.00%-8.50%, 12/01/99-02/01/25:
total market value $38,094,249) (A) 37,347 37,347
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $109,772) 109,772
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $593,944) 676,677
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.1%)
Other Assets and Liabilities, Net (733)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 32,105,786 outstanding
shares of common stock 585,292
Accumulated net investment loss (1,015)
Accumulated net realized gain on investments 8,934
Net unrealized appreciation on investments 82,733
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $675,944
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $21.05
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
14
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG LARGE CAP GROWTH FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
Large Cap Growth Fund. The breakdown is as follows:
Technology: 30%, Consumer: 15%, Healthcare: 20%, Services: 15%, Energy: 2%,
Financial: 5%, Industrial: 3%, Cash: 10%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term growth of capital
INVESTS IN -- High-growth companies, with above $1 billion market
capitalization, offering attractive capital
appreciation opportunities
STRATEGY -- The Fund's larger company focus is intended to provide reduced
short-term volatility while still generating superior returns. As
currently constructed, the Fund's 69 holdings range from roughly
$1 billion to $85 billion in market capitalization, with an
average capitalization of $11.7 billion. The stock selection
approach remains focused on the fundamental analysis of individual
companies, the strength of their products and/or services and
their competitive positioning. Sector exposure is determined
solely by the selection of the most attractive individual stocks.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
ADC Telecommunications Fritz Companies
Cascade Communications Sunglass Hut International
Clear Channel Communications Micro Warehouse
Nike Healthsource
Paychex Informix
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 90.0%
APPAREL -- 3.3%
Jones Apparel Group* 23,000 $ 1,466
Nike, Cl B 10,900 1,324
Tommy Hilfiger* 32,400 1,920
- --------------------------------------------------------------------------------
4,710
- --------------------------------------------------------------------------------
AUTO-RELATED -- 1.6%
Harley-Davidson 53,100 2,283
- --------------------------------------------------------------------------------
2,283
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 3.1%
Amgen* 36,000 2,273
IDEXX Laboratories* 47,300 2,140
- --------------------------------------------------------------------------------
4,413
- --------------------------------------------------------------------------------
CLIENT/SERVER SOFTWARE -- 1.6%
Peoplesoft* 28,200 2,348
- --------------------------------------------------------------------------------
2,348
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
Annualized Inception
6 Months2 1 Year to Date3
- --------------------------------------------------------------------------------
PBHG Large Cap Growth Fund 12.53% 28.19% 42.12%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG LARGE CAP
GROWTH FUND, VERSUS THE RUSSELL 1000 GROWTH INDEX, AND THE LIPPER GROWTH FUNDS
AVERAGE
[LINE GRAPHIC OMITTED]
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Large Cap
Growth Fund from April 30, 1995 through September 30, 1996 as compared with the
growth of $10,000 investments in the Russell 1000 Growth Index, and the Lipper
Growth Funds Average over the same time period. The plot points are as follows:
4/30/95 6/95 9/95 12/95 3/96 6/96 9/96
PBHG Large Cap Growth
Fund 10,000 10,920 13,160 13,382 14,992 16,158 16,871
Russell 1000 Growth
Index 10,000 10,748 11,724 12,259 12,917 13,739 14,234
Lipper Growth Funds
Average 10,000 10,738 11,664 11,945 12,587 13,153 13,535
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
4 The Russell 1000 Growth Index is an unmanaged index comprised of those
securities in the Russell 3000 Index with a greater-than-average growth
orientation. 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.
5 The Lipper Growth Funds Average is an equally weighted bench-mark composed of
mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the Index
with all capital gains distributions and income dividends reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
COMMERCIAL SERVICES -- 2.3%
DST Systems* 43,400 $ 1,389
First Data 23,100 1,886
- --------------------------------------------------------------------------------
3,275
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 1.2%
LCI International* 53,100 1,673
- --------------------------------------------------------------------------------
1,673
- --------------------------------------------------------------------------------
CONSUMER FINANCE -- 2.2%
Associates First Capital 55,100 2,259
Money Store (The) 35,100 930
- --------------------------------------------------------------------------------
3,189
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS--MISCELLANEOUS -- 1.4%
Gillette 27,600 1,991
- --------------------------------------------------------------------------------
1,991
- --------------------------------------------------------------------------------
15
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CONSUMER SERVICES -- 1.0%
Service Corp. International 46,000 $ 1,392
- --------------------------------------------------------------------------------
1,392
- --------------------------------------------------------------------------------
CONTRACT RESEARCH -- 1.5%
Quintiles Transnational* 28,400 2,080
- --------------------------------------------------------------------------------
2,080
- --------------------------------------------------------------------------------
CORRECTIONAL SERVICES -- 0.8%
Corrections Corp. of America* 37,600 1,175
- --------------------------------------------------------------------------------
1,175
- --------------------------------------------------------------------------------
DATA COMMUNICATIONS -- 2.5%
PictureTel* 58,100 2,048
US Robotics* 24,300 1,570
- --------------------------------------------------------------------------------
3,618
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 3.2%
Parametric Technology* 46,600 2,301
Synopsys* 48,100 2,219
- --------------------------------------------------------------------------------
4,520
- --------------------------------------------------------------------------------
DISTRIBUTION SOFTWARE--HARDWARE & PERIPHERALS -- 4.3%
Dell Computer* 35,700 2,776
Hewlett-Packard 45,400 2,213
Sun Microsystems* 17,400 1,081
- --------------------------------------------------------------------------------
6,070
- --------------------------------------------------------------------------------
DRUGS -- 2.0%
Merck 21,300 1,499
Pfizer 17,400 1,377
- --------------------------------------------------------------------------------
2,876
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES -- 2.1%
AccuStaff* 76,100 1,969
Manpower 32,000 1,064
- --------------------------------------------------------------------------------
3,033
- --------------------------------------------------------------------------------
ENERGY--SERVICE/EQUIPMENT -- 2.2%
Input/Output* 64,200 1,910
Tidewater 32,400 1,211
- --------------------------------------------------------------------------------
3,121
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 1.2%
Thermo Electron* 43,100 1,746
- --------------------------------------------------------------------------------
1,746
- --------------------------------------------------------------------------------
FINANCIAL--MISCELLANEOUS -- 1.4%
First USA 34,800 1,927
- --------------------------------------------------------------------------------
1,927
- --------------------------------------------------------------------------------
HEALTH CARE--INFORMATION SYSTEMS -- 1.3%
HBO & Company 26,800 1,789
- --------------------------------------------------------------------------------
1,789
- --------------------------------------------------------------------------------
HEALTH CARE--SUPPLIES -- 1.5%
Johnson & Johnson 40,688 2,085
- --------------------------------------------------------------------------------
2,085
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
INFORMATION TECHNOLOGY -- 2.7%
Computer Sciences* 23,900 $ 1,837
Gartner Group, Cl A* 59,600 2,026
- --------------------------------------------------------------------------------
3,863
- --------------------------------------------------------------------------------
INFORMATION/FINANCIAL SERVICES -- 1.8%
Paychex 44,800 2,598
- --------------------------------------------------------------------------------
2,598
- --------------------------------------------------------------------------------
LODGING -- 1.8%
HFS* 38,800 2,595
- --------------------------------------------------------------------------------
2,595
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 2.9%
Boston Scientific* 39,600 2,277
Medtronic 28,300 1,815
- --------------------------------------------------------------------------------
4,092
- --------------------------------------------------------------------------------
MORTGAGE RELATED -- 1.3%
MGIC Investment 26,900 1,812
- --------------------------------------------------------------------------------
1,812
- --------------------------------------------------------------------------------
MULTI-INDUSTRY -- 1.3%
Danaher 13,500 559
Fastenal 26,200 1,297
- --------------------------------------------------------------------------------
1,856
- --------------------------------------------------------------------------------
NETWORKING -- 8.2%
Ascend Communications* 31,400 2,076
Cascade Communications* 32,600 2,657
Cisco Systems* 49,400 3,066
FORE Systems* 61,800 2,557
Shiva* 24,300 1,394
- --------------------------------------------------------------------------------
11,750
- --------------------------------------------------------------------------------
PATIENT CARE--HEALTH PLAN -- 1.4%
Oxford Health Plans* 38,800 1,930
- --------------------------------------------------------------------------------
1,930
- --------------------------------------------------------------------------------
PATIENT CARE--HOSPITAL -- 1.7%
Health Management Associates, Cl A* 97,800 2,433
- --------------------------------------------------------------------------------
2,433
- --------------------------------------------------------------------------------
PATIENT CARE--SPECIALTY -- 1.5%
HEALTHSOUTH* 57,500 2,207
- --------------------------------------------------------------------------------
2,207
- --------------------------------------------------------------------------------
PHARMACEUTICAL SERVICES -- 1.7%
Omnicare 78,100 2,382
- --------------------------------------------------------------------------------
2,382
- --------------------------------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT -- 1.6%
PhyCor* 61,550 2,343
- --------------------------------------------------------------------------------
2,343
- --------------------------------------------------------------------------------
RADIO/TELEVISION -- 1.7%
Clear Channel Communications* 27,900 2,469
- --------------------------------------------------------------------------------
2,469
- --------------------------------------------------------------------------------
16
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
RESTAURANTS -- 1.4%
Boston Chicken* 58,600 $ 2,066
- --------------------------------------------------------------------------------
2,066
- --------------------------------------------------------------------------------
RETAIL--CATALOG -- 1.0%
Viking Office Products* 48,100 1,443
- --------------------------------------------------------------------------------
1,443
- --------------------------------------------------------------------------------
RETAIL--GENERAL -- 1.0%
Dollar General 44,000 1,369
- --------------------------------------------------------------------------------
1,369
- --------------------------------------------------------------------------------
RETAIL--OFFICE PRODUCTS -- 2.6%
Corporate Express* 52,600 2,045
Staples* 77,800 1,726
- --------------------------------------------------------------------------------
3,771
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 1.6%
CompUSA* 43,000 2,322
- --------------------------------------------------------------------------------
2,322
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR MANUFACTURING -- 3.2%
Altera* 24,200 1,225
Atmel* 19,000 587
Intel 19,000 1,813
Linear Technology 25,500 940
- --------------------------------------------------------------------------------
4,565
- --------------------------------------------------------------------------------
SOFTWARE--GENERAL -- 1.2%
Microsoft* 13,300 1,754
- --------------------------------------------------------------------------------
1,754
- --------------------------------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED RESELLERS -- 0.9%
Cambridge Technology Partners* 44,600 1,349
- --------------------------------------------------------------------------------
1,349
- --------------------------------------------------------------------------------
SYSTEM SOFTWARE -- 3.0%
BMC Software* 26,100 2,075
Computer Associates International 35,700 2,133
- --------------------------------------------------------------------------------
4,208
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.8%
ADC Telecommunications* 35,800 2,291
Tellabs* 24,200 1,709
- --------------------------------------------------------------------------------
4,000
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $110,130) 128,491
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 12.8%
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $18,282,064
(collateralized by FNMA obligations,
total par value $28,582,046,
6.50%-10.00%, 01/01/03-08/01/25:
total market value $18,648,028) (A) $ 18,279 $ 18,279
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $18,279) 18,279
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 102.8%
(COST $128,410) 146,770
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.8%)
Other Assets and Liabilities, Net (3,988)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 8,732,485 outstanding
shares of common stock 128,225
Accumulated net investment loss (159)
Accumulated net realized loss on investments (3,644)
Net unrealized appreciation on investments 18,360
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $142,782
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $16.35
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
17
<PAGE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG TECHNOLOGY & COMMUNICATIONS FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Technology & Communications Fund. The breakdown is as follows:
Technology: 68%, Healthcare: 4%, Services: 15%, Industrial: 2%, Energy: 1%,
Cash: 10%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term growth of capital
INVESTS IN -- Companies in all fields that could create or benefit from advances
in scientific or technological areas
STRATEGY -- The Fund's strategy is to be invested in technology and
technology related companies exhibiting extraordinary rates of
growth in earnings and revenues with high profitability levels.
Stock selection emphasizes a combination of quantitative and
fundamental "bottom up" disciplines. The average company in the
portfolio has grown earnings 59% over the past twelve months with
a 25.0% return on equity and a $2.5 billion market capitalization.
- -------------------- -----------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
Viasoft California Amplifier
Claremont Technology Group Astea
Ciber Hyperion Software
McAfee Associates Microcom
Systemsoft Dialogic
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 89.9%
AUTO-RELATED -- 0.4%
Gentex* 70,900 $ 1,613
- --------------------------------------------------------------------------------
1,613
- --------------------------------------------------------------------------------
AUTOMATED DATA COLLECTION -- 0.6%
Trident International* 119,800 2,022
- --------------------------------------------------------------------------------
2,022
- --------------------------------------------------------------------------------
AUTOMATED SOFTWARE QUALITY -- 2.4%
Pure Atria* 79,400 2,997
Rational Software* 168,200 5,740
- --------------------------------------------------------------------------------
8,737
- --------------------------------------------------------------------------------
CLIENT/SERVER SOFTWARE -- 5.7%
Applix* 128,500 3,373
Documentum* 22,700 721
Peoplesoft* 75,800 6,310
Project Software & Development* 42,900 1,813
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
Annualized Inception
6 Months2 to Date3
- --------------------------------------------------------------------------------
PBHG Technology & Communications Fund 33.33% 66.20%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG TECHNOLOGY
& COMMUNICATIONS FUND, VERSUS THE PACIFIC STOCK EXCHANGE HIGH TECHNOLOGY INDEX,
AND THE LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Technology &
Communications Fund from September 30, 1995 through September 30, 1996 as
compared with the growth of $10,000 investments in the Pacific Stock Exchange
High Technology Index and the Lipper Science & Technology Funds Average over
the same time period. The plot points are as follows:
9/30/95 12/95 3/96 6/96 9/96
PBHG Technology &
Communications Fund 10,000 11,602 12,481 14,973 16,644
Pacific Stock Exchange
High Technology Index 10,000 9,919 9,899 10,245 10,946
Lipper Science & Technology
Funds Average 10,000 9,430 9,484 10,172 10,743
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG Technology & Communications Fund commenced operations on October 2,
1995.
4 The Pacific Stock Exchange High Technology Index is a price-weighted index of
the top 100 U.S. technology stocks. 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.
5 The Lipper Science & Technology Funds Average is an equally weighted benchmark
composed of mutual funds, each of which normally invests more than 65% of its
equity portfolio in science and technology stocks. The performance figures are
based on changes in net asset value of the funds in the Index with all capital
gains distributions and income dividends reinvested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
CLIENT/SERVER SOFTWARE -- CONTINUED
Scopus Technology* 97,100 $ 2,937
Unison Software* 219,100 5,642
- --------------------------------------------------------------------------------
20,796
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.5%
Consolidated Graphics* 226,100 5,483
- --------------------------------------------------------------------------------
5,483
- --------------------------------------------------------------------------------
COMMUNICATION SERVICES -- 0.9%
LCI International* 100,000 3,150
- --------------------------------------------------------------------------------
3,150
- --------------------------------------------------------------------------------
CONTRACT MANUFACTURING -- 0.7%
Sanmina* 61,400 2,471
- --------------------------------------------------------------------------------
2,471
- --------------------------------------------------------------------------------
18
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
DATA COMMUNICATIONS -- 3.4%
P-COM* 45,000 $ 1,114
PairGain Technologies* 35,000 2,734
TCSI* 76,300 1,011
Teledata Communication Limited* 81,700 1,501
US Robotics* 95,000 6,139
- --------------------------------------------------------------------------------
12,499
- --------------------------------------------------------------------------------
DATABASE SOFTWARE -- 2.6%
Cognos* 221,200 7,217
Informix* 80,000 2,230
- --------------------------------------------------------------------------------
9,447
- --------------------------------------------------------------------------------
DESIGN AUTOMATION/GRAPHICS -- 1.6%
Cadence Design Systems* 159,200 5,691
- --------------------------------------------------------------------------------
5,691
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 8.2%
Integrated Systems* 99,800 3,293
LeCroy 219,300 5,702
Mechanical Dynamics* 58,400 1,022
Parametric Technology* 280,900 13,870
Technomatix Technologies Limited* 201,700 3,505
Wind River Systems* 53,650 2,374
- --------------------------------------------------------------------------------
29,766
- --------------------------------------------------------------------------------
DIGITAL MEDIA -- 0.2%
VideoServer* 25,000 869
- --------------------------------------------------------------------------------
869
- --------------------------------------------------------------------------------
DISTRIBUTION SOFTWARE-HARDWARE & PERIPHERALS -- 4.1%
Dell Computer* 20,000 1,555
Sun Microsystems* 212,800 13,220
- --------------------------------------------------------------------------------
14,775
- --------------------------------------------------------------------------------
DRUGS -- 0.8%
Dura Pharmaceuticals* 81,800 3,016
- --------------------------------------------------------------------------------
3,016
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES -- 2.0%
AccuStaff* 179,800 4,652
Alternative Resources* 98,100 2,759
- --------------------------------------------------------------------------------
7,411
- --------------------------------------------------------------------------------
ENERGY--SERVICE/EQUIPMENT -- 0.3%
Input/Output* 40,000 1,190
- --------------------------------------------------------------------------------
1,190
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 0.6%
Tetra Tech* 95,845 2,276
- --------------------------------------------------------------------------------
2,276
- --------------------------------------------------------------------------------
GRAPHICS/IMAGE PROCESSING -- 1.1%
Electronics for Imaging* 57,900 4,154
- --------------------------------------------------------------------------------
4,154
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
HEALTH CARE--INFORMATION SYSTEMS -- 2.1%
HBO & Company 85,000 $ 5,674
MDL Information Systems* 62,500 1,977
- --------------------------------------------------------------------------------
7,651
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 2.6%
Computer Management Sciences* 79,362 1,885
Gartner Group, Cl A* 178,600 6,072
Whittman-Hart* 35,700 1,687
- --------------------------------------------------------------------------------
9,644
- --------------------------------------------------------------------------------
MARKETING INFORMATION SERVICES -- 1.6%
May & Speh* 296,100 5,922
- --------------------------------------------------------------------------------
5,922
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 0.9%
ESC Medical Systems Limited* 98,800 3,162
- --------------------------------------------------------------------------------
3,162
- --------------------------------------------------------------------------------
MEDICAL EQUIPMENT -- 0.3%
Lunar* 32,200 1,030
- --------------------------------------------------------------------------------
1,030
- --------------------------------------------------------------------------------
NETWORKING -- 11.2%
3Com* 57,900 3,478
ACT Networks* 124,700 3,492
Ascend Communications* 92,500 6,117
Cisco Systems* 199,600 12,388
FORE Systems* 190,500 7,882
Premisys Communications* 78,700 2,892
Shiva* 79,700 4,573
- --------------------------------------------------------------------------------
40,822
- --------------------------------------------------------------------------------
NETWORKING SOFTWARE -- 2.2%
McAfee Associates* 113,650 7,842
- --------------------------------------------------------------------------------
7,842
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT -- 0.7%
Etec Systems* 71,900 2,445
- --------------------------------------------------------------------------------
2,445
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR MANUFACTURING -- 3.6%
Altera* 128,200 6,490
Chips & Technologies* 147,300 2,007
Linear Technology 89,200 3,289
Microchip Technology* 34,700 1,297
- --------------------------------------------------------------------------------
13,083
- --------------------------------------------------------------------------------
SOFTWARE--GENERAL -- 5.3%
Aspen Technologies* 86,500 5,860
Inso* 53,700 2,913
JDA Software Group* 93,100 2,560
Systemsoft* 43,800 1,500
Viasoft* 102,600 4,309
Visio* 50,300 2,289
- --------------------------------------------------------------------------------
19,431
- --------------------------------------------------------------------------------
19
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
SYSTEM INTEGRATORS/VALUE ADDED RESELLERS -- 4.0%
Cambridge Technology Partners* 196,400 $ 5,941
Ciber* 117,300 4,457
Claremont Technology Group* 60,000 2,160
Renaissance Solutions* 48,500 2,055
- --------------------------------------------------------------------------------
14,613
- --------------------------------------------------------------------------------
SYSTEM SOFTWARE -- 3.4%
Computer Associates International 206,450 12,335
- --------------------------------------------------------------------------------
12,335
- --------------------------------------------------------------------------------
TECHNOLOGY--COMPONENTS -- 0.9%
Adaptec* 51,900 3,114
- --------------------------------------------------------------------------------
3,114
- --------------------------------------------------------------------------------
TECHNOLOGY--CONNECTORS -- 3.1%
Cable Design Technologies* 284,150 11,366
- --------------------------------------------------------------------------------
11,366
- --------------------------------------------------------------------------------
TECHNOLOGY--MISCELLANEOUS -- 2.4%
Encad* 51,400 2,152
Saville Systems ADR* 134,000 4,724
Ultrak* 66,000 1,815
- --------------------------------------------------------------------------------
8,691
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.9%
ADC Telecommunications* 50,000 3,200
LCC International* 92,700 1,727
Tellabs* 115,000 8,122
Uniphase* 30,300 1,280
- --------------------------------------------------------------------------------
14,329
- --------------------------------------------------------------------------------
TRANSACTION PROCESSING -- 2.6%
Concord EFS* 179,900 4,632
National Data 107,500 4,690
- --------------------------------------------------------------------------------
9,322
- --------------------------------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING -- 2.0%
Aspect Telecommunications* 39,100 2,434
Comverse Technology* 123,800 4,813
- --------------------------------------------------------------------------------
7,247
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $289,811) 327,415
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 15.9%
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $57,779,597
(collateralized by FHLMC obligations,
total par value $35,509,531,
8.50%-11.00%, 03/01/18-07/01/21;
FNMA ARM, total par value $40,713,738,
6.06%-7.55%, 05/01/18-06/01/29:
total market value
$58,929,211) (A) $ 57,770 $ 57,770
- --------------------------------------------------------------------------------
Total Repurchase Agreement
(Cost $57,770) 57,770
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 105.8%
(COST $347,581) 385,185
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (5.8%)
Other Assets and Liabilities, Net (21,200)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 21,872,776 outstanding
shares of common stock 320,314
Accumulated net investment loss (391)
Accumulated net realized gain on investments 6,458
Net unrealized appreciation on investments 37,604
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $363,985
================================================================================
NET ASSETS VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $16.64
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
ADR -- AMERICAN DESPOSITORY RECEIPT
ARM -- ADJUSTABLE RATE MORTGAGE
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
20
<PAGE>
PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG LIMITED FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Limited Fund. The breakdown is as follows:
Technology: 37%, Healthcare: 17%, Services: 15%, Industrial: 1%, Consumer: 8%,
Cash: 22%.
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term growth of capital
INVESTS IN -- Some of the smallest, rapidly growing companies in any field.
STRATEGY -- The Fund invests in companies under $250 million in market
capitalization or annual revenues. The fund is currently closed
to additional investment by new or existing shareholders in order
to protect its investment objective.
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- 78.1%
APPAREL -- 2.0%
Donnkenny* 62,600 $1,072
Kenneth Cole Productions* 104,900 1,980
Vans* 54,900 1,050
- --------------------------------------------------------------------------------
4,102
- --------------------------------------------------------------------------------
AUTOMATED DATA COLLECTION -- 1.9%
Etron International* 69,700 2,257
Trident International* 104,000 1,755
- --------------------------------------------------------------------------------
4,012
- --------------------------------------------------------------------------------
AUTOMATED SOFTWARE QUALITY -- 1.4%
SQA* 104,100 2,811
- --------------------------------------------------------------------------------
2,811
- --------------------------------------------------------------------------------
AGGREGATE TOTAL RETURN1
- --------------------------------------------------------------------------------
Since Inception2
- --------------------------------------------------------------------------------
PBHG Limited Fund 10.10%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG LIMITED
FUND, VERSUS THE RUSSELL 2000 GROWTH INDEX, AND THE LIPPER SMALL COMPANY FUNDS
AVERAGE
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG Limited Fund
from June 30, 1996 through September 30, 1996 as compared with the growth of
$10,000 investments in the Russell 2000 Growth Index, and the Lipper Small
Company Funds Average over the same time period. The plot points are as follows:
6/30/96 7/96 8/96 9/96
PBHG Limited Fund 10,000 9,950 10,320 11,011
Russell 2000 Growth Index 10,000 8,779 9,429 9,914
Lipper Small Company
Funds Average 10,000 9,138 9,690 10,182
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 Total return has not been annualized. The PBHG Limited Fund commenced
operations on July 1, 1996.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. 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.
4 The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by prospectus
or portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the Funds
in the Index with all capital gains distributions and income dividends
revinested.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
BIOTECHNOLOGY -- 1.4%
Meridian Diagnostics 111,600 $ 1,493
Serologicals* 42,200 1,466
- --------------------------------------------------------------------------------
2,959
- --------------------------------------------------------------------------------
CLIENT/SERVER SOFTWARE -- 7.7%
Advent Software* 48,600 1,452
Aspect Development* 93,100 3,165
Inference, Cl A* 53,500 950
Interlink Computer Sciences* 202,800 1,901
OpenVision Technologies* 213,000 1,970
Pegasystems* 37,500 975
Scopus Technology* 82,400 2,493
Unison Software* 117,000 3,013
- --------------------------------------------------------------------------------
15,919
- --------------------------------------------------------------------------------
21
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
COMMERCIAL SERVICES -- 4.7%
Abacus Direct* 73,000 $ 1,533
Checkmate Electronics* 146,200 2,193
Consolidated Graphics* 104,300 2,529
Quickresponse Services* 50,900 1,896
TESSCO Technologies* 40,000 1,670
- --------------------------------------------------------------------------------
9,821
- --------------------------------------------------------------------------------
DATABASE SOFTWARE -- 0.4%
Logic Works* 106,300 850
- --------------------------------------------------------------------------------
850
- --------------------------------------------------------------------------------
DESIGN AUTOMATION/GRAPHICS -- 1.2%
MetaTools* 121,400 2,549
- --------------------------------------------------------------------------------
2,549
- --------------------------------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION -- 3.5%
Cooper & Chyan Technology* 80,000 1,960
LeCroy* 70,400 1,830
Mechanical Dynamics* 76,600 1,341
Perceptron* 83,200 2,101
- --------------------------------------------------------------------------------
7,232
- --------------------------------------------------------------------------------
DRUGS -- 0.8%
Medicis Pharmaceutical, Cl A* 35,700 1,723
- --------------------------------------------------------------------------------
1,723
- --------------------------------------------------------------------------------
EDUCATIONAL SERVICES -- 1.0%
Computer Learning Centers* 69,900 1,957
- --------------------------------------------------------------------------------
1,957
- --------------------------------------------------------------------------------
EMBEDDED SYSTEMS -- 1.2%
RadiSys* 50,500 2,500
- --------------------------------------------------------------------------------
2,500
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES -- 3.5%
On Assignment* 61,600 2,110
Romac International* 85,700 2,614
The Vincam Group* 65,300 2,498
- --------------------------------------------------------------------------------
7,222
- --------------------------------------------------------------------------------
ENVIRONMENTAL -- 0.8%
Superior Services* 98,000 1,568
- --------------------------------------------------------------------------------
1,568
- --------------------------------------------------------------------------------
FOOD & BEVERAGE -- 1.2%
Worthington Foods 100,200 2,505
- --------------------------------------------------------------------------------
2,505
- --------------------------------------------------------------------------------
GRAPHICS/IMAGE PROCESSING -- 0.3%
Raster Graphics* 65,900 593
- --------------------------------------------------------------------------------
593
- --------------------------------------------------------------------------------
HEALTH CARE--INFORMATION SYSTEMS -- 4.3%
Amisys Managed Care Systems* 105,200 2,512
Enterprise Systems* 40,700 1,048
Imnet Systems* 60,700 1,184
MDL Information Systems* 62,800 1,986
Mecon* 87,100 2,177
- --------------------------------------------------------------------------------
8,907
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
HEALTH CARE SERVICES -- 1.7%
Diagnostic Health Services* 222,000 $ 1,859
IMPATH* 142,000 1,740
- --------------------------------------------------------------------------------
3,599
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 5.0%
Ciber* 94,300 3,583
Claremont Technology Group* 13,300 479
Computer Management Sciences* 800 19
META Group* 60,600 1,682
Renaissance Solutions* 57,500 2,437
Whittman-Hart* 47,500 2,244
- --------------------------------------------------------------------------------
10,444
- --------------------------------------------------------------------------------
INTERNET -- 0.8%
Spyglass* 92,500 1,746
- --------------------------------------------------------------------------------
1,746
- --------------------------------------------------------------------------------
MANAGED CARE--DENTAL -- 1.7%
First Commonwealth* 74,400 1,655
United Dental Care* 51,100 1,846
- --------------------------------------------------------------------------------
3,501
- --------------------------------------------------------------------------------
MEDICAL DEVICES -- 1.0%
ResMed* 101,400 2,003
- --------------------------------------------------------------------------------
2,003
- --------------------------------------------------------------------------------
MEDICAL EQUIPMENT -- 0.4%
Hologic* 30,700 860
- --------------------------------------------------------------------------------
860
- --------------------------------------------------------------------------------
NETWORKING -- 1.1%
ACT Networks* 79,400 2,223
- --------------------------------------------------------------------------------
2,223
- --------------------------------------------------------------------------------
PATIENT CARE--HOME -- 3.4%
American HomePatient* 104,200 2,318
Lifeline Systems* 142,300 2,668
Pediatric Services of America* 112,800 2,087
- --------------------------------------------------------------------------------
7,073
- --------------------------------------------------------------------------------
PATIENT CARE--SPECIALTY -- 0.6%
National Surgery Centers* 46,600 1,305
- --------------------------------------------------------------------------------
1,305
- --------------------------------------------------------------------------------
PHARMACEUTICAL SERVICES -- 0.8%
NCS HealthCare* 51,800 1,625
- --------------------------------------------------------------------------------
1,625
- --------------------------------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT -- 1.0%
FPA Medical Management* 76,600 2,020
- --------------------------------------------------------------------------------
2,020
- --------------------------------------------------------------------------------
RESTAURANTS -- 1.4%
Logan's Roadhouse* 92,900 1,870
Longhorn Steaks* 72,800 1,110
- --------------------------------------------------------------------------------
2,980
- --------------------------------------------------------------------------------
RETAIL--CATALOG -- 2.4%
Insight Enterprises* 76,100 2,844
Wilmar Industries* 92,800 2,111
- --------------------------------------------------------------------------------
4,955
- --------------------------------------------------------------------------------
22
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCKS -- CONTINUED
RETAIL--OFFICE PRODUCTS -- 0.9%
Daisytek International* 44,700 $ 1,933
- --------------------------------------------------------------------------------
1,933
- --------------------------------------------------------------------------------
RETAIL--SPECIALTY -- 0.4%
Urban Outfitters* 31,000 721
- --------------------------------------------------------------------------------
721
- --------------------------------------------------------------------------------
SEMI-CONDUCTOR EQUIPMENT -- 1.4%
IKOS Systems* 52,500 1,043
Integrated Measurement Systems* 114,300 1,886
- --------------------------------------------------------------------------------
2,929
- --------------------------------------------------------------------------------
SOFTWARE--GENERAL -- 3.6%
Applied Microsystems* 127,700 2,698
Desktop Data* 78,850 2,287
JDA Software Group* 89,000 2,447
- --------------------------------------------------------------------------------
7,432
- --------------------------------------------------------------------------------
TECHNOLOGY--COMPONENTS -- 4.2%
Centennial Technologies* 65,600 2,813
Equinox Systems* 110,100 1,445
II-VI* 77,000 1,598
Proxim* 78,300 2,251
WPI Group* 72,000 522
- --------------------------------------------------------------------------------
8,629
- --------------------------------------------------------------------------------
TECHNOLOGY--MISCELLANEOUS -- 3.4%
Encad* 64,800 2,713
Engineering Animation* 85,400 2,050
Ultrak* 81,700 2,247
- --------------------------------------------------------------------------------
7,010
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.1%
Metro One Telecommunications* 12,400 167
Periphonics* 60,800 2,371
Spectralink* 118,700 816
Tollgrade Communications* 44,600 1,003
- --------------------------------------------------------------------------------
4,357
- --------------------------------------------------------------------------------
TELEMARKETING -- 0.6%
Sykes Enterprises* 25,000 1,206
- --------------------------------------------------------------------------------
1,206
- --------------------------------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING -- 2.9%
Brooktrout Technology* 85,400 3,117
Natural Microsystems 58,700 2,825
- --------------------------------------------------------------------------------
5,942
- --------------------------------------------------------------------------------
Total Common Stocks
(Cost $142,185) 161,723
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES/FACE MARKET
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 26.6%
Greenwich
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $46,179,642
(collateralized by FHLMC obligations,
total par value $47,014,627,
7.00-7.50%, 04/01/03-09/01/03:
total market value $47,098,412) (A) $ 46,172 $ 46,172
JP Morgan
5.77%, dated 09/30/96, matures 10/01/96,
repurchase price $9,001,442
(collateralized by GNMA obligations,
total par value $9,542,016,
7.00%, 01/15/26-05/15/26:
total market value $9,188,360) (A) 9,000 9,000
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $55,172) 55,172
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 104.7%
(COST $197,357) 216,895
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (4.7%)
Other Assets and Liabilities, Net (9,706)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200
million shares -- $0.001 par value)
based on 18,824,720 outstanding
shares of common stock 188,129
Undistributed net investment income 847
Accumulated net realized loss on investments (1,325)
Net unrealized appreciation on investments 19,538
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $207,189
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $11.01
================================================================================
*NON INCOME PRODUCING SECURITY
(A) -- TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
GNMA -- GENERAL NATIONAL MORTGAGE ASSOCIATION
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
23
<PAGE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG INTERNATIONAL FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG International Fund. The breakdown is as follows:
Japan: 15%, United Kingdom: 19%, France: 6%, Hong Kong: 7%, Spain: 5%,
Malaysia: 4%, Singapore: 6%, Australia: 4%, Germany: 7%, Mexico: 4%, Other: 23%
- --------------------------------------------------------------------------------
OBJECTIVE -- Long-term capital appreciation
INVESTS IN -- Non-U.S. companies of all sizes in developed and emerging
countries
STRATEGY -- After being appointed as sub-adviser to the Fund in June 1995,
Murray Johnstone made various changes to the portfolio to raise
the exposure to larger and more liquid securities and reduce the
country spread and number of holdings. Some smaller companies
held in the portfolio, prior to Murray Johnstone's appointment
as sub-adviser, have been retained.
- ------------------------------------- ----------------------------
TOP FIVE PERFORMERS* BOTTOM FIVE PERFORMERS*
Parmalat Finanziaria Italy Mori Seiki Japan
BRE Poland Genting Malaysia
Glaxo Wellcome Great Britain Singapore Land Singapore
Telecom Italia Mobile Italy Nippon Sanso Japan
British Petroleum Great Britain Newscorp Australia
*DURING THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- 96.7%
ARGENTINA -- 2.1%
Banco Frances del Rio ADS 7,000 $ 183
Disco* 9,500 186
- --------------------------------------------------------------------------------
369
- --------------------------------------------------------------------------------
AUSTRALIA -- 3.9%
Australia & New Zealand 70,000 401
Newscorp 50,000 262
- --------------------------------------------------------------------------------
663
- --------------------------------------------------------------------------------
CHILE -- 2.3%
Quimica Minera ADR 7,000 391
- --------------------------------------------------------------------------------
391
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN1
- --------------------------------------------------------------------------------
Annualized Inception
6 Months2 1 Year to Date3
- --------------------------------------------------------------------------------
PBHG International Fund 1.90% 11.75% 3.39%
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE
PBHG INTERNATIONAL FUND, VERSUS THE F.T. ACTUARIES WORLD INDEX,
NON-U.S., IN U.S. DOLLARS
A line graph depicting the total growth (including reinvestment of dividends and
capital gains) of a hypothetical investment of $10,000 in the PBHG International
Fund from June 30, 1994 through September 30, 1996 as compared with the growth
of a $10,000 investment in the F.T. Actuaries World Index, Non-U.S. Dollars over
the same time period. The plot points are as follows:
6/30/94 3/95 3/96 9/96
PBHG International Fund 10,000 9,203 10,634 10,836
F.T. Actuaries World Index
Non-U.S. Dollars 10,000 10,007 11,274 11,498
1 Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
2 The six month return has not been annualized.
3 The PBHG International Fund commenced operations on June 14, 1994.
4 The F.T. Actuaries World Index, Non-U.S., in U.S. Dollars consists of 1,749 of
the largest international companies which have been selected based on market
capitalization, ability to be purchased by international investors and the
degree to which the companies reflect the weightings of industries within
their respective countries. The returns of the Index reflect the reinvestment
of income dividends and capital gains distributions.
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- CONTINUED
FRANCE -- 5.8%
AXA 3,576 $ 214
Bancaire 1,930 201
Lyonnaise des Eaux 991 89
Michelin, Cl B 2,323 119
SGS-Thomson Microelectronics* 4,700 225
Total, Cl B 2,000 157
- --------------------------------------------------------------------------------
1,005
- --------------------------------------------------------------------------------
GERMANY -- 5.8%
Allianz 85 150
BMW 390 223
Continental 8,430 154
Mannesmann 650 243
Volkswagen 620 231
- --------------------------------------------------------------------------------
1,001
- --------------------------------------------------------------------------------
24
<PAGE>
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- CONTINUED
HONG KONG -- 7.3%
Amoy Properties 200,000 $ 233
Cheung Kong Holdings 30,000 231
Hutchison Whampoa 40,000 269
Peregrine Investment Holdings 165,000 261
Peregrine Investment Holdings Warrants* 16,500 3
Swire Pacific, Cl A 30,000 269
- --------------------------------------------------------------------------------
1,266
- --------------------------------------------------------------------------------
IRELAND -- 1.5%
Allied Irish Bank 29,900 177
Framlington Maghreb Fund 7,500 75
Framlington Maghreb Fund Warrants* 1,500 3
- --------------------------------------------------------------------------------
255
- --------------------------------------------------------------------------------
ITALY -- 3.5%
ENI SPA 9,100 47
Fiat 38,000 107
Parmalat Finanziaria 177,000 255
Telecom Italia Mobile 47,000 104
Telecom Italia Mobile di Risp 74,200 92
- --------------------------------------------------------------------------------
605
- --------------------------------------------------------------------------------
JAPAN -- 14.3%
Itochu 33,000 209
JGC 18,000 206
Keyence 1,500 185
Matsushita Communications 8,000 216
Mori Seiki 12,000 185
Nippon Sanso 48,000 215
Nippon Steel 70,000 217
Nissan Motors 28,000 226
Nitto Denko 14,000 214
Sanwa Bank 7,000 126
Sumitomo Electric 17,000 233
Suzuki Motor 19,000 232
- --------------------------------------------------------------------------------
2,464
- --------------------------------------------------------------------------------
MALAYSIA -- 4.2%
Genting 11,000 80
Hicom Holdings 125,000 342
Malayan Banking 30,000 298
- --------------------------------------------------------------------------------
720
- --------------------------------------------------------------------------------
MEXICO -- 4.3%
Cifra ADR* 150,000 216
Desc ADR* 5,600 125
Empresas ICA Sociedad Controlladora ADR* 13,500 206
Interceramica* 40,000 48
Telefonos de Mexico ADR 4,300 138
- --------------------------------------------------------------------------------
733
- --------------------------------------------------------------------------------
NETHERLANDS -- 2.9%
Aegon 1,200 59
Hollandsche Beton Groep 540 98
Ing Groep 5,500 172
Otra 3,700 66
Verenigde Nederlandse Uigevbedri 5,240 102
- --------------------------------------------------------------------------------
497
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- CONTINUED
NEW ZEALAND -- 1.8%
Carter Holt Harvey 70,000 $ 154
Lion Nathan 60,000 149
- --------------------------------------------------------------------------------
303
- --------------------------------------------------------------------------------
NORWAY -- 1.1%
Norsk Hydro 3,900 183
- --------------------------------------------------------------------------------
183
- --------------------------------------------------------------------------------
PHILIPPINES -- 0.0%
Benpres Holdings GDS* 800 6
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
POLAND -- 1.7%
BRE 5,000 171
Mostostal Export 16,000 46
Polifarb Cieszyn 15,000 71
- --------------------------------------------------------------------------------
288
- --------------------------------------------------------------------------------
SINGAPORE -- 5.7%
City Developments 40,000 341
Hong Kong Land 50,000 116
Keppel 35,500 275
Singapore Land 40,000 243
- --------------------------------------------------------------------------------
975
- --------------------------------------------------------------------------------
SPAIN -- 4.5%
Banco de Santander 2,255 117
Gas Natural 1,000 177
Porsegur 4,200 168
General de Aguas de Barcelona 3,800 144
Telefonica de Espana 9,600 178
- --------------------------------------------------------------------------------
784
- --------------------------------------------------------------------------------
SWITZERLAND -- 2.9%
Asea Brown Boveri 160 196
Ciba Geigy 114 146
Sandoz Pharmaceutical 134 161
- --------------------------------------------------------------------------------
503
- --------------------------------------------------------------------------------
THAILAND -- 2.3%
Bangkok Bank, F 30,000 392
- --------------------------------------------------------------------------------
392
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 18.8%
Abbey National 25,100 233
Argyll Group 35,300 181
BOC Group 11,600 159
British Airport Authority 30,700 237
British Petroleum 27,400 284
BTR 25,000 106
Cable & Wireless 16,000 112
Carlton Communications 27,400 207
Commercial Union 19,000 179
CRH 8,570 87
Glaxo Wellcome 10,600 166
Grand Metropolitan 25,700 192
Jefferson Smurfit 47,000 125
Kingfisher 15,000 149
25
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
National Westminster Bank 14,600 $ 155
Rank Organisation 29,800 200
Rolls Royce 44,600 167
Unilever 3,000 64
Wolseley 32,100 244
- --------------------------------------------------------------------------------
3,247
- --------------------------------------------------------------------------------
Total Foreign Common Stocks
(Cost $15,912) 16,650
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCKS -- 1.5%
BRAZIL -- 0.0%
Brahma 6,432 4
- --------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
GERMANY -- 1.5%
Fresenius 1,400 258
- --------------------------------------------------------------------------------
258
- --------------------------------------------------------------------------------
Total Foreign Preferred Stocks
(Cost $70) 262
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.2%
(COST $15,982) 16,912
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.8%
Other Assets and Liabilities, Net 303
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 1,601,967
outstanding shares of common stock 16,501
Accumulated net investment loss (29)
Accumulated net realized loss on investments (150)
Accumulated net realized loss on foreign
currency transactions (34)
Net unrealized appreciation on investments 930
Net unrealized depreciation on foreign currency and
translation of other assets and liabilities in
foreign currency (3)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $17,215
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $10.75
================================================================================
*NON INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITORY RECEIPT
ADS -- AMERICAN DEPOSITORY SHARES
CL -- CLASS
F -- FOREIGN REGISTRY SHARES
GDS -- GLOBAL DEPOSITORY SHARES
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
26
<PAGE>
PORTFOLIO HIGHLIGHTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
PBHG CASH RESERVES FUND
[PIE CHART OMITTED]
Pie Chart depicting the asset allocation as of September 30, 1996 for the
PBHG Cash Reserves Fund. The breakdown is as follows:
Commercial Paper: 72%, Certificates of Deposit: 5%,
U.S. Treasury Obligations: 5%, Corporate Obligations: 5%,
U.S. Government Agency Obligations: 8%, Bankers Acceptances: 1%, Cash: 8%
OBJECTIVE -- Capital preservation, liquidity, and current income
INVESTS IN -- Money market securities
STRATEGY -- The Fund's strategy is to be fully invested in a diversified
portfolio of short-term, high-quality money market securities.
STATEMENT OF NET ASSETS - SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
FACE
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 72.5%
Abbott Labs
5.300%, 10/08/96 $7,200 $ 7,193
American Express Credit
5.290%, 10/10/96 3,500 3,495
American Home Products (B)
5.320%, 10/10/96 5,000 4,993
Beneficial
5.400%, 12/19/96 4,000 3,953
Cades
5.300%, 11/22/96 7,500 7,443
Cariplo Finance
5.380%, 10/09/96 5,000 4,994
Centric Funding
5.320%, 11/13/96 8,000 7,949
Chevron Transport (B)
5.300%, 10/03/96 5,000 4,999
CIT Group
5.360%, 10/15/96 6,000 5,987
Dailmer Benz
5.500%, 12/05/96 5,000 4,950
Electricite de France
5.310%, 12/05/96 7,000 6,933
Enterprise Funding (B)
5.400%, 10/04/96 3,500 3,498
Ford Motor Credit
5.460%, 10/30/96 5,000 4,978
GMAC
5.540%, 12/20/96 5,260 5,195
General Re
5.500%, 12/17/96 6,265 6,191
Goldman Sachs
5.350%, 10/02/96 7,500 7,499
Government Bank of Puerto Rico
5.360%, 11/26/96 7,500 7,437
[BAR GRAPH OMITTED]
A bar graph comparing the Total Return, as of September 30, 1996, of the PBHG
Cash Reserves Fund to the Lipper Money Market Average. The plot points are as
follows:
PBHG Cash Reserves Fund 4.99%
Lipper Money Market Average 4.89%
1 Past performance of the period is not predictive of future performance.
- --------------------------------------------------------------------------------
FACE
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- CONTINUED
Hitachi America
5.250%, 10/07/96 $1,500 $ 1,499
IBM Credit
5.340%, 10/01/96 7,000 7,000
Matterhorn Capital
5.310%, 10/11/96 7,000 6,990
Merrill Lynch
5.280%, 10/31/96 7,500 7,467
Mont Blanc (B)
5.400%, 10/01/96 3,000 3,000
NationsBank
5.400%, 01/06/97 8,000 7,884
New York Times
5.330%, 10/31/96 7,500 7,467
PHH
5.310%, 10/11/96 7,125 7,115
Pitney Bowes Credit
5.470%, 02/20/97 7,000 6,849
Province of British Columbia
5.360%, 10/29/96 2,000 1,992
Province of Quebec
5.380%, 01/28/97 4,500 4,420
Prudential Funding
5.300%, 10/07/96 5,000 4,996
Ranger Funding (B)
5.400%, 11/15/96 4,000 3,973
Sears Roebuck Acceptance
5.300%, 10/22/96 7,500 7,477
Washington Gas & Light
5.370%, 10/04/96 2,200 2,199
5.320%, 11/18/96 4,600 4,567
- --------------------------------------------------------------------------------
Total Commercial Paper
(Cost $182,582) 182,582
- --------------------------------------------------------------------------------
27
<PAGE>
STATEMENT OF NET ASSETS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
FACE
DESCRIPTION AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 5.0%
Caterpillar MTN (A)
5.720%, 11/29/96 $ 500 $ 500
Corestates Capital (A)
5.410%, 12/10/96 2,000 2,000
Peoples Security Life (A) (B)
5.933%, 10/01/96 3,000 3,000
PNC Bank (A)
5.393%, 01/06/97 3,000 2,999
Southtrust Bank of Alabama (A)
5.575%, 06/17/97 2,000 1,999
Travelers Insurance (A)
5.640%, 10/01/96 2,000 2,000
- --------------------------------------------------------------------------------
Total Corporate Obligations
(Cost $12,498) 12,498
- --------------------------------------------------------------------------------
US GOVERNMENT AGENCY OBLIGATIONS -- 8.1%
FHLB
5.512%, 12/12/96 6,370 6,302
5.549%, 12/31/96 4,100 4,045
5.380%, 02/03/97 1,395 1,369
FNMA
5.300%, 12/30/96 7,000 6,907
5.300%, 01/29/97 1,750 1,719
- --------------------------------------------------------------------------------
Total U.S. Government Agency Obligations
(Cost $20,342) 20,342
- --------------------------------------------------------------------------------
US TREASURY OBLIGATION -- 1.6%
US Treasury Note
7.500%, 01/31/97 4,000 4,030
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligation
(Cost $4,030) 4,030
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 4.8%
Chase Manhattan Bank
5.730%, 02/03/97 7,000 7,000
First Alabama Bank
5.700%, 02/03/97 5,000 5,000
- --------------------------------------------------------------------------------
Total Certificates of Deposit
(Cost $12,000) 12,000
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.4%
Lanston
5.70%, dated 09/30/96, matures 10/01/96,
repurchase price $20,003,167
(collateralized by U.S. Treasury Note,
par value $21,997,000, 5.00%, 02/15/99:
total market value $20,817,000) 20,000 20,000
Lanston
5.70%, dated 09/30/96, matures 10/01/96,
repurchase price $1,216,193
(collateralized by U.S. Treasury Note,
par value $21,997,000, 5.00%, 02/15/99:
total market value $1,266,000) 1,216 1,216
- --------------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $21,216) 21,216
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.4%
(COST $252,668) 252,668
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.4%)
Other Assets and Liabilities, Net (884)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION VALUE (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 1 billion, 800 million
shares--$0.001 par value) based on 251,784,437 outstanding
shares of common stock $ 251,784
- --------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 251,784
================================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE $1.00
================================================================================
(A) FLOATING RATE SECURITY. THE RATE REFLECTED ON THE STATEMENT OF NET ASSETS
IS THE RATE IN EFFECT ON SEPTEMBER 30, 1996.
(B) PRIVATE PLACEMENT SECURITY
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
<PAGE>
This page intentionally left blank.
<PAGE>
STATEMENT OF OPERATIONS (000) THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
FOR THE PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
-------- -------- -------- -------- --------
PBHG PBHG PBHG PBHG
PBHG EMERGING CORE SELECT LARGE CAP
GROWTH GROWTH GROWTH EQUITY GROWTH
FUND FUND FUND FUND FUND
-------- -------- -------- -------- --------
04/01/96 04/01/96 04/01/96 04/01/96 04/01/96
to to to to to
09/30/96 09/30/96 09/30/96 09/30/96 09/30/96
-------- -------- -------- -------- --------
INVESTMENT INCOME:
<S> <C> <C> <C> <C> <C>
Dividends $ 906 $ 171 $ 56 $ 47 $ 82
Interest 14,260 5,395 988 1,396 323
Less: Foreign Taxes Withheld -- -- -- -- --
------- -------- ------ ------ -------
Total Investment Income 15,166 5,566 1,044 1,443 405
------- -------- ------ ------ -------
EXPENSES:
Investment Advisory Fees 19,814 4,631 1,035 1,674 337
Waiver of Investment Advisory Fees -- -- (12) -- --
Administrative Fees 4,031 943 201 334 76
Transfer Agent Fees 3,334 1,099 343 316 105
Registration and Filing Fees 761 243 105 92 17
Printing Fees 276 82 33 16 8
Professional Fees 188 50 7 12 9
Custodian Fees 75 19 15 10 8
Insurance and Other Fees 59 13 2 2 2
Directors' Fees 18 4 1 1 1
Amortization of Deferred Organizational Costs -- 2 1 1 1
Distribution Fees2 -- -- -- -- --
------- -------- ------ ------ -------
Total Expenses 28,556 7,086 1,731 2,458 564
------- -------- ------ ------ -------
NET INVESTMENT INCOME (LOSS) (13,390) (1,520) (687) (1,015) (159)
------- -------- ------ ------ -------
Net Realized Gain (Loss) from Security Transactions (5,604) (41,805) (8,030) 3,603 (3,779)
Net Realized Loss on Foreign Currency Transactions -- -- -- -- --
Net Change in Unrealized Depreciation on Foreign
Currency and Translation of Other Assets and
Liabilities in Foreign Currency -- -- -- -- --
Net Change in Unrealized Appreciation on Investments 485,599 141,729 35,801 62,698 14,794
-------- -------- ------ ------ -------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS 479,995 99,924 27,771 66,301 11,015
-------- -------- ------- ------- -------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $466,605 $ 98,404 $27,084 $65,286 $10,856
======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
-------- -------- -------- --------
PBHG PBHG
TECHNOLOGY & PBHG PBHG CASH
COMMUNICATIONS LIMITED INTERNATIONAL RESERVES
FUND FUND FUND FUND
-------- -------- -------- --------
04/01/96 07/01/96 1 04/01/96 04/01/96
to to to to
09/30/96 09/30/96 09/30/96 09/30/96
-------- -------- -------- --------
INVESTMENT INCOME:
<S> <C> <C> <C> <C>
Dividends $ 14 $ 5 $157 $ --
Interest 742 1,527 39 5,035
Less: Foreign Taxes Withheld -- -- (13) --
------- ------- ---- ------
Total Investment Income 756 1,532 183 5,035
------- ------- ---- ------
EXPENSES:
Investment Advisory Fees 687 473 79 277
Waiver of Investment Advisory Fees (3) -- (16) (8)
Administrative Fees 135 71 38 154
Transfer Agent Fees 245 95 37 135
Registration and Filing Fees 40 25 12 31
Printing Fees 17 6 1 21
Professional Fees 9 6 1 12
Custodian Fees 14 4 12 10
Insurance and Other Fees 1 2 6 2
Directors' Fees 1 1 -- 4
Amortization of Deferred Organizational Costs 1 2 7 1
Distribution Fees2 -- -- -- --
------- ------- ---- ------
Total Expenses 1,147 685 177 639
------- ------- ---- ------
NET INVESTMENT INCOME (LOSS) (391) 847 6 4,396
------- ------- ---- ------
Net Realized Gain (Loss) from Security Transactions 6,725 (1,325) 173 (1)
Net Realized Loss on Foreign Currency Transactions -- -- (17) --
Net Change in Unrealized Depreciation on Foreign
Currency and Translation of Other Assets and
Liabilities in Foreign Currency -- -- (2) --
Net Change in Unrealized Appreciation on Investments 33,750 19,538 39 --
------- ------- ---- ------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS 40,475 18,213 193 (1)
------- ------- ---- ------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $40,084 $19,060 $199 $4,395
======= ======= ==== ======
<FN>
1. THE PBHG LIMITED FUND COMMENCED OPERATIONS ON JULY 1, 1996.
2. ALL DISTRIBUTION FEES ARE INCURRED IN THE TRUST CLASS.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
30 & 31
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000) THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND THE PERIOD
ENDING MARCH 31, 1996
<TABLE>
<CAPTION>
-------------------- ------------------- ------------------- ------------------
PBHG PBHG PBHG
PBHG EMERGING CORE SELECT
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
-------------------- ------------------- ------------------- ------------------
04/01/96 04/01/95 04/01/96 04/01/95 04/01/96 01/02/961 04/01/96 04/05/952
to to to to to to to to
09/30/96 03/31/96 09/30/96 03/31/96 09/30/96 03/31/96 09/30/96 03/31/96
-------- -------- -------- -------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (13,390) $ (14,090) $ (1,520) $ (2,334) $ (687) $ (5) $ (1,015) $ (546)
Net Realized Gain (Loss) from
Security Transactions (5,604) (34,304) (41,805) 76,215 (8,030) (43) 3,603 8,613
Net Realized Gain (Loss) on
Foreign Currency Transactions -- -- -- -- -- -- -- --
Net Change in Unrealized
Appreciation on Investments and
Foreign Currency Transactions 485,599 793,260 141,729 149,027 35,801 1,394 62,698 20,035
---------- --------- --------- -------- -------- ------- -------- --------
Net Increase in Net Assets
Resulting from Operations 466,605 744,866 98,404 222,908 27,084 1,346 65,286 28,102
---------- --------- --------- -------- -------- ------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- -- -- --
Net Realized Gains (Losses) from
Security Transactions -- -- -- (27,375) -- -- -- (2,736)
---------- --------- --------- -------- -------- ------- -------- --------
Total Distributions -- -- -- (27,375) -- -- -- (2,736)
---------- --------- --------- -------- -------- ------- -------- --------
CAPITAL SHARE TRANSACTIONS (A):
PBHG Class
Shares Issued 2,953,380 1,989,556 1,008,755 300,741 546,996 32,701 644,606 283,506
Shares Issued upon Reinvestment
of Distributions -- -- -- 26,142 -- -- -- 2,634
Shares Redeemed (846,953) (450,329) (359,083) (244,577) (148,536) (2,955) (236,744) (108,710)
---------- --------- --------- -------- -------- ------- -------- --------
Total PBHG Class Transactions 2,106,427 1,539,227 649,672 82,306 398,460 29,746 407,862 177,430
---------- --------- --------- -------- -------- ------- -------- --------
Trust Class
Shares Issued 198 -- -- -- -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- -- --
---------- --------- --------- -------- -------- ------- -------- --------
Total Trust Class Transactions 198 -- -- -- -- -- -- --
---------- --------- --------- -------- -------- ------- -------- --------
Increase (Decrease) in
Net Assets Derived from
Capital Share Transactions 2,106,625 1,539,227 649,672 82,306 398,460 29,746 407,862 177,430
---------- --------- --------- -------- -------- ------- -------- --------
Total Increase (Decrease) in
Net Assets 2,573,230 2,284,093 748,076 277,839 425,544 31,092 473,148 202,796
---------- --------- --------- -------- -------- ------- -------- --------
NET ASSETS:
Beginning Period 3,298,925 1,014,832 689,705 411,866 31,092 -- 202,796 --
---------- --------- --------- -------- -------- ------- -------- --------
End of Period $5,872,155 $3,298,925 $1,437,781 $689,705 $456,636 $31,092 $675,944 $202,796
========== ========== ========== ======== ======== ======= ======== ========
(A) SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 110,167 91,357 39,467 15,598 40,893 2,888 33,074 18,709
Shares Issued upon Reinvestment
of Distributions -- -- -- 1,270 -- -- -- 176
Shares Redeemed (32,495) (21,718) (14,782) (12,551) (11,364) (257) (12,714) (7,139)
---------- --------- --------- -------- -------- ------- -------- --------
Total PBHG Class Share Transactions 77,672 69,639 24,685 4,317 29,529 2,631 20,360 11,746
---------- --------- --------- -------- -------- ------- -------- --------
Trust Class3
Shares Issued 8 -- -- -- -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- -- -- --
---------- --------- --------- -------- -------- ------- -------- --------
Total Trust Class Share Transactions 8 -- -- -- -- -- -- --
---------- --------- --------- -------- -------- ------- -------- --------
Net Increase (Decrease)
in Shares Outstanding 77,680 69,639 24,685 4,317 29,529 2,631 20,360 11,746
========== ========== ========== ========= ======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
--------------------- --------------------- -------------
PBHG PBHG
LARGE CAP TECHNOLOGY & PBHG
GROWTH COMMUNICATIONS LIMITED
FUND FUND FUND
--------------------- ---------------------- -------------
4/01/96 04/05/954 04/01/96 10/02/955 07/01/966
to to to to to
09/30/96 03/31/96 09/30/96 03/31/96 09/30/96
--------- -------- -------- -------- -------------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (159) $ (103) $ (391) $ (77) $ 847
Net Realized Gain (Loss) from
Security Transactions (3,779) 950 6,725 (184) (1,325)
Net Realized Gain (Loss) on
Foreign Currency Transactions -- -- -- -- --
Net Change in Unrealized
Appreciation on Investments and
Foreign Currency Transactions 14,794 3,566 33,750 3,854 19,538
--------- --------- --------- --------- ---------
Net Increase in Net Assets
Resulting from Operations 10,856 4,413 40,084 3,593 19,060
--------- --------- --------- --------- ---------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- (6) --
Net Realized Gains (Losses) from
Security Transactions -- (712) -- -- --
--------- --------- --------- --------- ---------
Total Distributions -- (712) -- (6) --
--------- --------- --------- --------- ---------
CAPITAL SHARE TRANSACTIONS (A):
PBHG Class
Shares Issued 134,755 74,598 448,094 86,263 196,574
Shares Issued upon Reinvestment
of Distributions -- 592 -- 6 --
Shares Redeemed (56,588) (25,132) (185,965) (28,084) (8,445)
--------- --------- --------- --------- ---------
Total PBHG Class Transactions 78,167 50,058 262,129 58,185 188,129
--------- --------- --------- --------- ---------
Trust Class
Shares Issued -- -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
--------- --------- --------- --------- ---------
Total Trust Class Transactions -- -- -- -- --
--------- --------- --------- --------- ---------
Increase (Decrease) in Net Assets
Derived from Capital
Share Transactions 78,167 50,058 262,129 58,185 188,129
--------- --------- --------- --------- ---------
Total Increase (Decrease)
in Net Assets 89,023 53,759 302,213 61,772 207,189
--------- --------- --------- --------- ---------
NET ASSETS:
Beginning Period 53,759 -- 61,772 -- --
--------- --------- --------- --------- ---------
End of Period $ 142,782 $ 53,759 $ 363,985 $ 61,772 $ 207,189
========= ========= ========= ========= =========
(A) SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 8,794 5,520 29,745 7,440 19,654
Shares Issued upon Reinvestment
of Distributions -- 46 -- 1 --
Shares Redeemed (3,763) (1,865) (12,824) ( 2,489) (829)
--------- --------- --------- --------- ---------
Total PBHG Class Share Transactions 5,031 3,701 16,921 4,952 18,825
--------- --------- --------- --------- ---------
Trust Class3
Shares Issued -- -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- --
Shares Redeemed -- -- -- -- --
--------- --------- --------- --------- ---------
Total Trust Class Share Transactions -- -- -- -- --
--------- --------- --------- --------- ---------
Net Increase (Decrease) in
Shares Outstanding 5,031 3,701 16,921 4,952 18,825
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
-------------------- --------------------
PBHG PBHG
INTERNATIONAL CASH RESERVES
FUND FUND
-------------------- --------------------
04/01/96 04/01/95 04/01/96 04/05/957
to to to to
09/30/96 03/31/96 09/30/96 03/31/96
-------- -------- -------- --------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 6 $ (25) $ 4,396 $ 2,838
Net Realized Gain (Loss) from
Security Transactions 173 348 (1) 1
Net Realized Gain (Loss) on
Foreign Currency Transactions (17) 96 -- --
Net Change in Unrealized
Appreciation on Investments and
Foreign Currency Transactions 37 1,261 -- --
------- ------- -------- --------
Net Increase in Net Assets
Resulting from Operations 199 1,680 4,395 2,839
------- ------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- (4,396) (2,838)
Net Realized Gains (Losses) from
Security Transactions -- -- -- --
------- ------- -------- --------
Total Distributions -- -- (4,396) (2,838)
------- ------- -------- --------
CAPITAL SHARE TRANSACTIONS (A):
PBHG Class
Shares Issued 17,590 13,080 535,184 269,541
Shares Issued upon Reinvestment
of Distributions -- -- 3,211 2,751
Shares Redeemed (11,817) (18,753) (385,611) (173,292)
------- ------- -------- --------
Total PBHG Class Transactions 5,773 (5,673) 152,784 99,000
------- ------- -------- --------
Trust Class
Shares Issued -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- --
Shares Redeemed -- -- -- --
------- ------- -------- --------
Total Trust Class Transactions -- -- -- --
------- ------- -------- --------
Increase (Decrease) in Net Assets
Derived from Capital
Share Transactions 5,773 (5,673) 152,784 99,000
------- ------- -------- --------
Total Increase (Decrease)
in Net Assets 5,972 (3,993) 152,783 99,001
------- ------- -------- --------
NET ASSETS:
Beginning Period 11,243 15,236 99,001 --
------- ------- -------- --------
End of Period $17,215 $11,243 $251,784 $ 99,001
======= ======= ======== ========
(A) SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 1,648 1,327 535,184 269,541
Shares Issued upon Reinvestment
of Distributions -- -- 3,211 2,751
Shares Redeemed (1,112) (1,931) (385,611) (173,291)
------- ------- -------- --------
Total PBHG Class Share Transactions 536 (604) 152,784 99,001
------- ------- -------- --------
Trust Class3
Shares Issued -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- --
Shares Redeemed -- -- -- --
------- ------- -------- --------
Total Trust Class Share Transactions -- -- -- --
------- ------- -------- --------
Net Increase (Decrease) in
Shares Outstanding 536 (604) 152,786 99,001
======= ======= ======== ========
<FN>
1 THE PBHG CORE GROWTH FUND COMMENCED OPERATIONS ON JANUARY 2, 1996.
2 THE PBHG SELECT EQUITY FUND COMMENCED OPERATIONS ON APRIL 5, 1995.
3 THE PBHG GROWTH FUND -- TRUST CLASS COMMENCED OPERATIONS ON AUGUST 19, 1996.
4 THE PBHG LARGE CAP GROWTH FUND COMMENCED OPERATIONS ON APRIL 5, 1995.
5 THE PBHG TECHNOLOGY & COMMUNICATIONS FUND COMMENCED OPERATIONS ON
OCTOBER 2, 1995.
6 THE PBHG LIMITED FUND COMMENCED OPERATIONS ON JULY 1, 1996.
7 THE PBHG CASH RESERVES FUND COMMENCED OPERATIONS ON APRIL 5, 1995.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
32 & 33
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND THE PERIODS
ENDING MARCH 31, 1996
For A Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
RATIO
OF NET
NET NET NET INVESTMENT
ASSET NET REALIZED AND DISTRIBUTIONS DISTRIBUTIONS ASSET ASSETS RATIO INCOME
VALUE INVESTMENT UNREALIZED FROM NET FROM VALUE END OF EXPENSES (LOSS)
BEGINNING INCOME GAINS OR (LOSSES) INVESTMENT CAPITAL END TOTAL OF PERIOD TO AVERAGE TO AVERAGE
OF PERIOD (LOSS) ON SECURITIES INCOME GAINS OF PERIOD RETURN (000) NET ASSETS NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996** $25.30 $(0.01) $2.93 -- -- $28.22 11.54%+ $5,871,939 1.23%* (0.57)%*
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50% 3,298,925 1.48% (0.79)%
1995 14.67 (0.05) 2.09 -- $(0.01) 16.70 13.92% 1,014,832 1.50% (0.69)%
1994 10.83 (0.03) 4.06 -- (0.19) 14.67 37.28% 319,059 1.55% (0.78)%
1993 10.37 (0.16) 3.07 -- (2.45) 10.83 34.47% 6,069 2.39% (1.69)%
1992 11.51 (0.06) 1.35 -- (2.43) 10.37 13.78% 7,339 1.52% (0.55)%
PBHG TRUST CLASS
1996**1 $25.42 $(0.02) $2.81 -- -- $28.21 10.98%+ $ 216 1.50%* (0.90)%*
- -------------------------
PBHG EMERGING GROWTH FUND
- -------------------------
PBHG CLASS
19963** $23.07 $(0.04) $3.31 -- -- $26.34 14.17%+ $1,437,781 1.30%* (0.28)%*
1996 16.10 (0.07) 8.03 -- $(0.99) 23.07 50.16% 689,705 1.47% (0.42)%
19952,3 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64%+ 411,866 1.50%* (0.08)%*
19942 13.22 (0.03) 2.38 -- (0.98) 14.59 19.64% 113,329 1.45% (0.77)%
19934 10.00 (0.03) 3.25 -- -- 13.22 32.20%+ 34,517 1.50%* (0.72)%*
- ---------------------
PBHG CORE GROWTH FUND
- ---------------------
PBHG CLASS
1996** $11.82 $(0.02) $2.40 -- -- $14.20 20.14%+ $ 456,636 1.42%* (0.56)%*
19965 10.00 -- 1.82 -- -- 11.82 18.20%+ 31,092 1.50%* (0.18)%*
- -----------------------
PBHG SELECT EQUITY FUND
- -----------------------
PBHG CLASS
1996** $17.27 -- $3.78 -- -- $21.05 21.89%+ $ 675,944 1.25%* (0.52)%*
19966 10.00 $(0.05) 7.68 -- $(0.36) 17.27 77.75%* 202,796 1.50%* (0.74)%*
- --------------------------
PBHG LARGE CAP GROWTH FUND
- --------------------------
PBHG CLASS
1996** $14.53 -- $1.82 -- -- $16.35 12.53%+ $ 142,782 1.26%* (0.35)%*
19966 10.00 $(0.03) 4.97 -- $(0.41) 14.53 50.47%* 53,759 1.50%* (0.66)%*
- -------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -------------------------------------
PBHG CLASS
1996** $12.48 -- $4.16 -- -- $16.64 33.33%+ $ 363,985 1.42%* (0.48)%*
19967 10.00 $(0.02) 2.50 -- -- 12.48 24.82%+ 61,772 1.50%* (0.50)%*
- -----------------
PBHG LIMITED FUND
- -----------------
PBHG CLASS
19968** $10.00 $ 0.05 $0.96 -- -- $11.01 10.10%+ $ 207,189 1.45%* 1.79%*
- -----------------------
PBHG INTERNATIONAL FUND
- -----------------------
PBHG CLASS
1996** $10.55 $ 0.03 $0.17 -- -- $10.75 1.90%+ $ 17,215 2.25%* 0.07%*
1996 9.13 (0.04) 1.46 -- -- 10.55 15.55% 11,243 2.25% (0.22)%
19959 10.00 (0.03) (0.80) -- $(0.04) 9.13 (8.33)%+ 15,236 2.25%* (0.43)%*
- -----------------------
PBHG CASH RESERVES FUND
- -----------------------
PBHG CLASS
1996** $ 1.00 $ 0.02 -- $(0.02) -- $ 1.00 2.40%+ $ 251,784 0.69%* 4.77%*
19966 1.00 0.05 -- (0.05) -- 1.00 5.24%* 99,001 0.70%* 5.05%*
</TABLE>
<TABLE>
<CAPTION>
RATIO
OF NET
RATIO INVESTMENT
OF EXPENSES INCOME(LOSS)
TO AVERAGE TO AVERAGE
NET ASSETS NET ASSETS PORTFOLIO AVERAGE
(EXCLUDING (EXCLUDING TURNOVER COMMISSION
WAIVERS) WAIVERS) RATE RATE 10
- -----------------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG CLASS
<S> <C> <C> <C> <C>
1996* 1.23%* (0.57)%* 25.76% $0.0469
1996 1.48% (0.79)% 44.64% n/a
1995 1.50% (0.69)% 118.75% n/a
1994 1.59% (0.82)% 94.28% n/a
1993 3.04% (2.34)% 209.24% n/a
1992 2.00% (1.03)% 114.54% n/a
PBHG TRUST CLASS
1996**1 1.50%* (0.90)%* 25.76% $0.0469
- -------------------------
PBHG EMERGING GROWTH FUND
- -------------------------
PBHG CLASS
19963** 1.30%* (0.28)%* 18.00% $0.0302
1996 1.47% (0.42)% 97.05% n/a
19952,3 1.50%* (0.08)%* 27.50% n/a
19942 1.45% (0.77)% 95.75% n/a
19934 1.54%* (0.76)%* 71.18% n/a
- ---------------------
PBHG CORE GROWTH FUND
- ---------------------
PBHG CLASS
1996** 1.43%* (0.57)%* 17.77% $0.0413
19965 2.92%* (1.60)%* 17.00% n/a
- -----------------------
PBHG SELECT EQUITY FUND
- -----------------------
PBHG CLASS
1996** 1.25%* (0.52)%* 25.14% $0.0388
19966 1.73%* (0.97)%* 206.22% n/a
- --------------------------
PBHG LARGE CAP GROWTH FUND
- --------------------------
PBHG CLASS
1996** 1.26%* (0.35)%* 17.88% $0.0520
19966 2.07%* (1.23)%* 116.75% n/a
- -------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -------------------------------------
PBHG CLASS
1996** 1.42%* (0.48)%* 160.79% $0.0289
19967 2.00%* (1.00)%* 125.99% n/a
- -----------------
PBHG LIMITED FUND
- -----------------
PBHG CLASS
19968** 1.45%* 1.79%* 7.33% $0.0293
- -----------------------
PBHG INTERNATIONAL FUND
- -----------------------
PBHG CLASS
1996** 2.45%* (0.13)%* 40.82% $0.0283
1996 3.03% (1.00)% 140.26% n/a
19959 2.36%* (0.54)%* 81.72% n/a
- -----------------------
PBHG CASH RESERVES FUND
- -----------------------
PBHG CLASS
1996** 0.70%* 4.76%* n/a n/a
19966 0.88%* 4.87%* n/a n/a
<FN>
* ANNUALIZED
** FOR THE SIX MONTH PERIOD ENDED SEPTEMBER 30, 1996.
(DAGGER) TOTAL RETURNS HAVE NOT BEEN ANNUALIZED.
1 THE PBHG GROWTH FUND TRUST CLASS COMMENCED OPERATIONS ON AUGUST 19, 1996.
2 THE INFORMATION SET FORTH IN THIS TABLE FOR THE PERIODS PRIOR TO JUNE 2, 1994
IS THE FINANCIAL DATA OF THE PILGRIM BAXTER EMERGING GROWTH FUND, A SERIES OF
THE ADVISORS' INNER CIRCLE FUND. THE PBHG EMERGING GROWTH FUND ACQUIRED THE
ASSETS AND ASSUMED THE LIABILITIES OF THE PILGRIM BAXTER EMERGING GROWTH FUND
ON JUNE 2, 1994. THE PBHG EMERGING GROWTH FUND RETAINED THE OCTOBER 31 FISCAL
YEAR END OF ITS PREDECESSOR ONLY FOR FISCAL YEAR 1994. THE PBHG EMERGING
GROWTH FUND CHANGED ITS FISCAL YEAR END TO MARCH 31, IN 1995 AND REPORTED
FINANCIAL INFORMATION FOR THE FISCAL PERIOD FROM NOVEMBER 1, 1994 TO
MARCH 31, 1995.
3 PER SHARE CALCULATIONS WERE PERFORMED USING AVERAGE SHARES FOR THE PERIOD.
4 THE PILGRIM BAXTER EMERGING GROWTH FUND, THE PREDECESSOR SERIES TO THE PBHG
EMERGING GROWTH FUND, COMMENCED OPERATIONS ON JUNE 15, 1993.
5 THE PBHG CORE GROWTH FUND COMMENCED OPERATIONS ON JANUARY 2, 1996.
6 THE PBHG SELECT EQUITY FUND, THE PBHG LARGE CAP GROWTH FUND, AND THE PBHG
CASH RESERVES FUND COMMENCED OPERATIONS ON APRIL 5, 1995.
7 THE PBHG TECHNOLOGY & COMMUNICATIONS FUND COMMENCED OPERATIONS ON
OCTOBER 2, 1995.
8 THE PBHG LIMITED FUND COMMENCED OPERATIONS ON JULY 1, 1996.
9 THE PBHG INTERNATIONAL FUND COMMENCED OPERATIONS ON JUNE 14, 1994.
10 AVERAGE COMMISION RATE PAID PER SHARE FOR SECURITY PURCHASES AND SALES DURING
THE PERIOD. PRESENTATION OF THE RATE IS ONLY REQUIRED FOR FISCAL YEARS
BEGINNING AFTER SEPTEMBER 1, 1995.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
AS OF SEPTEMBER 30, 1996 (UNAUDITED)
1. ORGANIZATION
The PBHG Funds, Inc. (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as a diversified open-end
management investment company with thirteen series: the PBHG Growth Fund (the
"Growth Fund"), the PBHG Emerging Growth Fund (the "Emerging Growth Fund"), the
PBHG Core Growth Fund (the "Core Growth Fund"), the PBHG Select Equity Fund (the
"Select Equity Fund"), the PBHG Large Cap Growth Fund (the "Large Cap Growth
Fund"), the PBHG Technology & Communications Fund (the "Technology &
Communications Fund"), the PBHG International Fund (the "International Fund"),
the PBHG Limited Fund (the "Limited Fund"), the PBHG Large Cap 20 Fund (the
"Large Cap 20 Fund"), the PBHG Large Cap Value Fund (the "Large Cap Value
Fund"), the PBHG Mid-Cap Value Fund (the "Mid-Cap Value Fund"), the PBHG
Strategic Small Company Fund ("the Strategic Small Company Fund") (collectively
referred to as the "Equity Portfolios"), and the PBHG Cash Reserves Fund (the
"Cash Reserves Fund") (each a "Portfolio" and, collectively, the "Portfolios").
As of September 30, 1996, the Large Cap 20 Fund, the Large Cap Value Fund, the
Mid-Cap Value Fund and the Strategic Small Company Fund had not commenced
operations. Each Portfolio's prospectus provides a description of the
Portfolio's investment objectives, policies and strategies. The Fund is
registered to offer two classes of shares, PBHG Class and Trust Class. The
assets of each Portfolio are segregated, and a shareholder's interest is limited
to the Portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION -- Investment securities of the Equity Portfolios that are
listed on a securities exchange for which market quotations are available are
valued at the last quoted sales price on each business day. If there is no such
reported sale, these securities and unlisted securities for which market
quotations are readily available, with a remaining maturity of sixty days or
less, are valued at the most recently quoted bid price. Short-term investments
may be valued at amortized cost which approximates market value. Foreign
securities in the International Fund are valued based upon quotations from the
primary market in which they are traded. The values of investment securities
held by the Cash Reserves Fund are stated at amortized cost, which approximates
market value. Under this valuation method, acquisition discounts and premiums
are accreted and amortized ratably to maturity and are included in interest
income.
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 accural 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. Acquisition discounts and premiums are accreted and amortized
to maturity using a method which approximates the effective interest method.
DIVIDENDS -- Dividends from net investment income for the Equity Portfolios are
declared annually, if available. Dividends from net investment income for the
Cash Reserves Fund are declared daily and paid monthly. Distributions of net
realized capital gains, for all portfolios, are generally made to shareholders
annually.
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 or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of March 31, 1996, primarily attributable to
certain net operating losses, which for tax purposes, are not available to
offset future income or have been offset by short-term capital gains, have been
reclassified to the following accounts:
ACCUMULATED NET
PAID-IN-CAPITAL REALIZED GAIN
(000) (000)
-------------- --------------
Growth Fund $14,090 $ --
Emerging Growth Fund -- 2,334
Select Equity Fund -- 546
Large Cap Growth Fund -- 103
Technology & Communications Fund -- 83
International Fund 154 --
These reclassifications have no effect on net assets or net asset values per
share.
FEDERAL INCOME TAXES -- It is each Portfolio's intention to continue to qualify
as a regulated investment company for Federal income tax purposes and to
distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated each
business day by dividing the total value of each Portfolio's assets, less
liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements and procedures adopted by
Pilgrim Baxter & Associates, Ltd. (the "Adviser") ensure that the market value
of the collateral including accrued interest thereon, is sufficient in the event
of default by the counterparty. If the counterparty defaults and the value of
the collateral declines, or if the counterparty enters into insolvency
proceedings, realization of the collateral by a Portfolio may be delayed or
limited.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(I) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The International Fund does not isolate that portion of gains and losses on
investment securities which is due to changes in the foreign exchange rates from
that which is due to changes in market prices of such securities.
The International Fund reports gains and losses on foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income or loss for Federal
income tax purposes.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996 (UNAUDITED)
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. Class specific expenses, such as
12b-1 distribution fees, are borne by that class. Income, other expenses and
accumulated realized and unrealized gains and losses of a Portfolio are
allocated to the respective class on the basis of the relative net assets each
day.
All organizational costs incurred with the start up of the Emerging Growth Fund,
the Core Growth Fund, the Select Equity Fund, the Large Cap Growth Fund, the
Technology & Communications Fund, the Limited Fund, the International Fund and
the Cash Reserves Fund are being amortized on a straight line basis over a
period of sixty months. In the event that any of the initial shares of the
Portfolio are redeemed by any holder thereof during the period that the
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.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES
AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
paid a monthly fee at an annual rate of 0.85% of the average daily net assets of
the Growth, Emerging Growth, Core Growth, Select Equity, and Technology &
Communications Funds, and 0.30%, 0.75%, 1.00% and 1.00% of the average daily net
assets of the Cash Reserves, Large Cap Growth, Limited and International Funds,
respectively. The Adviser has voluntarily agreed to waive a portion of its fee
in order to limit operating expenses.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the
sub-adviser to the International Fund. For its services provided pursuant to its
Investment Sub-Advisory Agreement with the Adviser and the Fund, Murray
Johnstone receives a fee from the Adviser at an annual rate of 0.50% of the
International Fund's average daily net assets. Murray Johnstone receives no fees
directly from the International Fund, and may periodically reduce its
sub-advisory fee.
Wellington Management Company ("WMC") serves as the sub-adviser to the Cash
Reserves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMCis entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum annual fee of $50,000. WMC may, from time
to time, waive all or a portion of its fee from the Adviser. WMC receives no
fees directly from the Cash Reserves Fund.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of Pilgrim
Baxter & Associates, Ltd., provides the Fund with administrative services,
including regulatory reporting and all necessary office space, equipment,
personnel and facilities. For these administrative services, the Administrator
is entitled to a fee, which is calculated daily and paid monthly, at an annual
rate of 0.15% of the average daily net assets of each Portfolio.
SEI Financial Management Corporation, a wholly-owned subsidiary of SEI
Corporation, is the owner of all beneficial interest in SEI Fund Resources (the
"Sub-Administrator"). The Sub-Administrator 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 at the annual rate of 0.07% of the average daily net
assets of each Portfolio with respect to $2.5 billion of the total average daily
net assets of the Fund, and a fee at the annual rate of 0.025% of the average
daily net assets of each Portfolio with respect to the total daily net assets of
the Fund in excess of $2.5 billion.
The Fund and SEI Financial Services Company (the "Distributor") are parties to a
Distribution Agreement. The Distributor receives no fees for its distribution
services under this agreement.
DST Systems, Inc. serves as the transfer agent, dividend disbursing agent and
shareholder servicing agent of the Fund. CoreStates Bank, N.A. serves as the
custodian for the Growth Fund, the Emerging Growth Fund, the Core Growth Fund,
the Select Equity Fund, the Large Cap Growth Fund, the Technology &
Communications Fund, the Limited Fund and the Cash Reserves Fund. The Northern
Trust Company serves as the custodian for the International Fund.
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.
36
<PAGE>
THE PBHG FUNDS, INC.
- --------------------------------------------------------------------------------
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Equity Portfolios for the period ended
September 30, 1996 were as follows:
EMERGING CORE SELECT
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
(000) (000) (000) (000)
---------- -------- -------- --------
Purchases $2,906,265 $614,960 $394,664 $411,952
Sales 1,082,883 161,015 37,940 87,846
LARGE
CAP TECHNOLOGY &
GROWTH COMMUNICATIONS LIMITED INTERNATIONAL
FUND FUND FUND FUND
(000) (000) (000) (000)
-------- -------- -------- --------
Purchases $ 83,365 $468,849 $149,426 $ 12,080
Sales 14,222 237,200 5,916 5,710
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolios and the total cost of securities for Federal income tax
purposes at September 30, 1996 are as follows:
EMERGING CORE SELECT
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
(000) (000) (000) (000)
---------- ---------- -------- --------
Aggregate
gross
unrealized
appreciation $1,565,400 $ 378,680 $ 52,090 $ 98,149
Aggregate
gross
unrealized
depreciation (150,688) (44,024) (14,895) (15,416)
---------- ---------- -------- --------
Net unrealized
appreciation $1,414,712 $ 334,656 $ 37,195 $ 82,733
========== ========== ======== ========
Total cost of
securities
for Federal
income tax
purposes $4,546,958 $1,119,078 $434,638 $593,944
========== ========== ======== ========
LARGE
CAP TECHNOLOGY &
GROWTH COMMUNICATIONS LIMITED INTERNATIONAL
FUND FUND FUND FUND
(000) (000) (000) (000)
-------- -------- -------- ------------
Aggregate
gross
unrealized
appreciation $ 20,157 $ 42,165 $ 24,405 $ 1,461
Aggregate
gross
unrealized
depreciation (1,797) (4,561) (4,867) (531)
-------- -------- -------- -------
Net unrealized
appreciation $ 18,360 $ 37,604 $ 19,538 $ 930
======== ======== ======== =======
Total cost of
securities
for Federal
income tax
purposes $128,409 $347,581 $197,357 $15,982
======== ======== ======== =======
At March 31, 1996, the Growth Fund and International Fund had available
$24,360,957 and $293,514, respectively, of realized capital losses to offset
future net capital gains through the fiscal years ended 2003 and 2004,
respectively. The Growth Fund utilized capital loss carryforwards of $8,795,147
in 1996.
Subsequent to October 31, 1995, the Growth Fund recognized net capital losses of
$43,320,269 that have been deferred to 1997 for tax purposes and can be used to
offset future capital gains at March 31, 1997.
5. CONCENTRATION OF CREDIT RISK
The Cash Reserves Fund invests primarily in a portfolio of money market
instruments maturing in one year or less whose ratings are within the highest
ratings category assigned by a nationally recognized statistical rating agency,
or, if not rated, are believed to be of comparable quality. The ability of the
issuers of the securities held by the portfolio to meet their obligations may be
affected by economic developments in a specific industry, state or region.
The International Fund invests in securities of foreign issuers in various
countries. These investments may involve certain considerations and risks not
typically associated with investments in the United States, as a result of,
among other factors, the possibility of future political and economic
developments and the level of governmental supervision and regulation of
securities markets in the respective countries.
37
