<PAGE>
(ART)
ANNUAL REPORT
PBHG Growth Fund
PBHG Emerging Growth
Fund
PBHG Core
Growth Fund
PBHG Select
Equity Fund
PBHG Large Cap
Growth Fund
March 31, 1996
PBHG Technology &
Communications
Fund
PBHG
International Fund
PBHG Cash
Reserves Fund
<PAGE>
Pilgrim Baxter & Associates believes the best way to earn
superior rates of return is through investment in companies
demonstrating exceptional growth with prospects
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INVESTMENT PHILOSOPHY
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for exceeding consensus earnings expectations. Our
unwavering conviction and dedication to this fundamental
principle is the most important ingredient behind Pilgrim
Baxter's portfolio management success.
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Contents
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1 Message to Shareholders
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3 PBHG Family of Funds
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4 A Disciplined Approach to Growth
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5 The Pilgrim Baxter Mutual Fund Managers
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7 Management Discussion and Analysis ("MD&A")
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10 PBHG Growth Fund MD&A
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12 PBHG Emerging Growth Fund MD&A
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13 PBHG Core Growth Fund MD&A
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14 PBHG Select Equity Fund MD&A
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16 PBHG Large Cap Growth Fund MD&A
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18 PBHG Technology & Communications Fund MD&A
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19 PBHG International Fund MD&A
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21 PBHG Cash Reserves Fund MD&A
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22 Report of Independent Public Accountants
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23 Statements of Net Assets
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57 Statements of Operations
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59 Statements of Changes in Net Assets
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61 Financial Highlights
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62 Notes to Financial Statements
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68 Description of Indexes
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69 Notice to Shareholders
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[PICTURE OF "We are committed to giving you a distinctive se-
HAROLD J. BAXTER,
CHAIRMAN OF THE lection of growth funds designed to provide long-
PBHG FUNDS, INC.
APPEARS HERE] term performance, and a range of enhanced serv-
ices designed to promote long-term shareholder
satisfaction."
HAROLD J. BAXTER
Chairman
The PBHG Funds, Inc.
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Message to Shareholders
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Dear Fellow Shareholder:
I'm pleased to send you the Annual Report for The PBHG Funds, Inc. for
the fiscal year ended March 31, 1996. These past twelve months have
been generally rewarding for investors, and PBHG shareholders have
benefitted from especially solid performance. The following pages de-
tail the returns and outlooks for each of the PBHG funds.
The year has been unusually active for us in a number of ways, as the
PBHG funds and Pilgrim Baxter & Associates, adviser to the funds, have
experienced significant growth in virtually every area:
NEW & REOPENED FUNDS The introductions of the PBHG Technology &
Communications Fund in October 1995 and the PBHG Core Growth Fund
in January 1996 brought our fund family to seven equity funds and
one money market fund. In addition, on January 2, 1996, we reopened
our flagship fund, the PBHG Growth Fund. Going forward, we will
continue to expand our equity line, to offer you a broader choice
of specialized, no-load funds that can help you pursue your long-
term objectives.
INCREASED ASSETS UNDER MANAGEMENT As of March 31, 1996, we have
grown to a $4.4 billion mutual fund complex, up from $2.5 billion
on September 30, 1995.
EXPANDED PROFESSIONAL STAFF Additional investment specialists have
been added at Pilgrim Baxter & Associates to locate and track in-
creasing numbers of superior growth candidates for our new and
growing funds.
ENHANCED ACCOUNT SERVICING CAPABILITIES We have implemented a
number of new systems and procedures for better service and cost
savings. A state-of-the-art transfer agent now handles
transactions, while improvements in literature distribution and
shareholder information requests management continue to be made. A
combined statement was introduced in April 1996, and we are
currently in the process of consolidating certain mailings by
household, to gain greater efficiencies for the funds.
(Over please)
1
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ADDITIONAL SHAREHOLDER SERVICES To respond to your needs faster, we have
increased phone staff, instituted new procedures and enhanced the Shareholder
Service Line to provide 24-hour account information. As of May 1, 1996, we
expect to be able to offer fund information via the Internet -- and hope to
phase in account information and transaction capabilities later in the year.
We are fully committed to the continued growth of the funds and the firm in
order to better meet the needs of you, our shareholders. Please also keep in
mind that the PBHG funds are particularly well suited to retirement investing,
assuming you have a long-term horizon. According to Ibbotson Associates of
Chicago, stocks have been the only asset class to deliver, over time, real
returns in excess of the inflation rate. The chart below shows how the tax-
deferred compounding in a retirement account can dramatically increase a
fund's returns.
As always, we thank you for choosing The PBHG Funds Inc. as part of your
investment portfolio. We appreciate the faith you have placed in us, and will
strive to continue providing superior investment results and shareholder
services.
Sincerely,
/s/ Harold J. Baxter
Harold J. Baxter
Chairman
The PBHG Funds, Inc.
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Retirement Investing with PBHG
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[LINE GRAPH APPEARS HERE]
<TABLE>
<S> <C> <C>
Tax Deferred Taxable
DATE 10,000 10,000
12/31/86 12,393 12,393
12/31/87 13,830 12,868
12/31/88 14,775 13,234
12/31/89 19,104 16,717
12/31/90 17,265 15,108
12/31/91 26,175 22,904
12/31/92 33,606 25,804
12/31/93 49,308 34,846
12/31/94 51,652 32,317
12/31/95 77,657 47,795
03/31/96 82,145 50,557
</TABLE>
Chart assumes a one-time $10,000 investment in a taxable and in a tax deferred
account in the PBHG Growth Fund on the fund's 12/19/85 inception. Returns are
based on actual performance of the PBHG Growth Fund from 12/31/85 to 3/31/96.
The taxable account assumes a 36% tax rate. This is past performance, which is
not indicative of future results. Investment returns and principal value will
vary, and you may have a gain or loss when you sell your shares. Earnings
withdrawn from a tax-deferred investment will be taxed upon withdrawal, and
early withdrawal prior to age 59 1/2 is subject to a 10% penalty.
2
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PBHG GROWTH FUND seeks capital appreciation by investing in common stocks of
small- to medium-sized U.S. growth companies. These are companies that, in the
opinion of Pilgrim Baxter, have an outlook for strong growth in earnings and
potential for significant capital appreciation. This fund is aggressive and
should be considered a long-term investment.
PBHG EMERGING GROWTH FUND seeks long-term growth of capital by investing in
common stocks of emerging U.S. companies. This fund is aggressive and should be
considered a long-term investment.
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PBHG Family of Funds
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PBHG CORE GROWTH FUND seeks long-term capital appreciation by investing primar-
ily in a diversified portfolio of equity securities of small-, medium- and
large-capitalization companies. The companies selected are believed to offer
the potential for strong earnings growth and significant capital appreciation.
Although this fund should experience greater price stability than a fund that
invests only in small companies, it is aggressive and should be considered a
long-term investment.
PBHG SELECT EQUITY FUND seeks long-term growth of capital by investing in a
limited number of companies (normally no more than 30) across the domestic eq-
uity market capitalization spectrum that, in the adviser's opinion, have a
strong earnings growth outlook and potential for capital appreciation. This
fund is aggressive and should be considered a long-term investment.
PBHG LARGE CAP GROWTH FUND seeks long-term growth of capital by investing pri-
marily in equity securities of large, established companies. Many of these com-
panies were followed by the Growth Fund and Emerging Growth Fund until their
cap sizes grew too large for those funds. The fund's net asset value may be
less volatile than those of our smaller cap funds.
PBHG TECHNOLOGY & COMMUNICATIONS FUND seeks long-term growth of capital by in-
vesting primarily in common stocks of companies that rely extensively on sci-
ence, technology and communications in their product development or operations,
or which are expected to benefit from technology- or communications-related ad-
vances. The fund is aggressive and should be considered a long-term investment.
PBHG INTERNATIONAL FUND seeks to provide long-term capital appreciation by in-
vesting primarily in a diversified portfolio of equity securities of non-U.S.
issuers. The fund is aggressive and should be considered a long-term invest-
ment. The International Fund is sub-advised by Murray Johnstone International,
Ltd. ("Murray Johnstone").
PBHG CASH RESERVES FUND seeks to preserve principal and maintain a high degree
of liquidity while providing current income. The PBHG Cash Reserves Fund is
sub-advised by Wellington Management Company.
3
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The PBHG Funds, Inc. are advised by Pilgrim Baxter & Associates, Ltd. ("Pilgrim
Baxter"), in Wayne, Pennsylvania. Since 1982, Pilgrim Baxter has been an in-
vestment adviser to some of the country's largest pension plans, foundations
and endowments, and currently manages over $9 billion in assets for individuals
and institutions.
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A Disciplined Approach to Growth
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Pilgrim Baxter follows a team approach to manage the domestic equity funds. Led
by Chief Investment Officer Gary Pilgrim, portfolio managers meet regularly to
exchange ideas and share insights. To locate investments, the managers follow a
Four-Step Process that combines a proprietary quantitative ranking system with
fundamental research and stringent analysis. (Murray Johnstone uses an equally
disciplined, though not identical, process for the International Fund.)
THE FOUR-STEP PROCESS
1. The investment team first constructs a universe of companies that have al-
ready demonstrated and continue to show extraordinary earnings growth charac-
teristics. To be included, a company's earnings growth rates must exceed 20%,
while the average company in Pilgrim Baxter's universe has grown in excess of
50% over the past year.
2. Using a proprietary Quantitative Ranking System (QRS), the investment team
ranks companies within that universe and evaluates each company against its own
operating and financial expectations as well as against its peers.
3. Next, the team conducts extensive fundamental research on the companies
qualifying for investment through the QRS. Traditional bottom-up analysis, in-
cluding proprietary research and face-to-face contact with companies, helps
further refine selections.
4. Strict disciplines are followed in making all buy and sell decisions. To
stay in a fund's portfolio, a company must continue its strong earnings growth
trends.
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Building a Portfolio with our Four-Step Process
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[ART APPEARS HERE]
4
<PAGE>
"The caliber of our people and the structure of our
organization are our fundamental strengths."
Harold J. Baxter
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The Pilgrim Baxter Mutual Fund Managers
----------------------------------------
Gary L. Pilgrim, CFA - Manager, Growth Fund/Co-manager Core
Growth, Large Cap Growth, Select Equity and Emerging Growth
Funds
As President and Chief Investment Officer of Pilgrim
Baxter, Gary Pilgrim is responsible for the investment
[PICTURE OF GARY direction of all institutional and mutual fund portfolios,
L. PILGRIM, CFA - and for overseeing day-to-day operations in trading and
MANAGER, GROWTH account control. Gary is a member of Pilgrim Baxter's Board
FUND/CO-MANAGER of Directors and the Executive Committee, and President of
CORE GROWTH, LARGE The PBHG Funds, Inc. He has been involved in growth stock
CAP GROWTH, SELECT investing throughout his 26-year career. He began at
EQUITY AND Philadelphia National Bank in the late 1960s, where he
EMERGING GROWTH served initially as an analyst, later as Director of
FUNDS, APPEARS Research, and, ultimately, as Chief Investment Officer. An
HERE] M.B.A. graduate from Drexel University with a B.S.B.A. from
the University of Tulsa, Gary is a Chartered Financial
Analyst and a member of the Financial Analysts of
Philadelphia, Inc.
Christine M. Baxter, CFA - Co-manager Emerging Growth and
Core Growth Funds
In addition to co-managing the Emerging Growth and Core
Growth Funds, Christine Baxter is responsible for small cap
[PICTURE OF research. Christine joined Pilgrim Baxter & Associates in
CHRISTINE M. BAXTER, 1991. Her previous responsibilities included
CFA - CO-MANAGER equity/quantitative analysis and the construction of the
EMERGING GROWTH Pilgrim Baxter micro cap universe. Christine is a graduate
AND CORE GROWTH of the University of Pennsylvania. While at Penn, she
FUNDS, APPEARS HERE] interned in the equity area at First Boston Corporation.
Christine is a Chartered Financial Analyst and a member of
the Financial Analysts of Philadelphia, Inc.
James D. McCall, CFA - Co-manager Large Cap Growth, Select
Equity and Core Growth Funds
In addition to his responsibilities with the Large Cap
Growth, Select Equity and Core Growth Funds, Jim McCall
[PICTURE OF JAMES manages institutional investment accounts. Jim previously
D. MCCALL, CFA - worked at The First National Bank of Maryland where he was
CO-MANAGER LARGE Vice President/Portfolio Manager responsible for managing a
CAP, SELECT EQUITY growth mutual fund that invested across all
AND CORE GROWTH capitalizations. Prior to that, Jim was employed by
FUNDS, APPEARS HERE] Provident Mutual Management Co. where he managed a similar
growth mutual fund. Before entering the investment field a
decade ago, Jim spent 10 years as a hospital pharmacist. He
is a Chartered Financial Analyst. He received his M.B.A.
and M.S. in Pharmacy from the University of Utah and holds
a B.S. from the Philadelphia College of Pharmacy and
Science.
5
<PAGE>
John S. Force, CFA - Co-manager Technology & Communications
Fund
In addition to co-managing the PBHG Technology & Communica-
tions Fund, John Force is an analyst and manager of small
[PICTURE OF JOHN cap portfolios for institutional investors. He joined
S. FORCE, CFA - Pilgrim Baxter from Fiduciary Management Associates, where
CO-MANAGER he was Vice President/Portfolio Manager responsible for
TECHNOLOGY & managing a small cap mutual fund and analyzing the health
COMMUNICATIONS FUND, care and consumer stock sectors. John's eighteen years of
APPEARS HERE] portfolio management experience include bank pooled equity
funds, endowments, pensions, and profit-sharing
portfolios. As a research analyst, he has covered a broad
spectrum of industries. An M.B.A. graduate from the
University of Toledo with a B. S. in Finance/Accounting
from Miami University of Ohio, John is a Chartered
Financial Analyst and a member of the Financial Analysts
of Philadelphia, Inc.
James M. Smith, CFA - Co-manager Technology &
Communications Fund
Jim Smith serves as a portfolio manager and analyst for
institutional small cap portfolios at Pilgrim Baxter, in
[PICTURE OF JAMES M. addition to his responsibilities as co-manager of the PBHG
SMITH, CFA - CO- Technology & Communications Fund. Jim has over twenty years
MANAGER TECHNOLOGY of investment experience in equity portfolio management and
& COMMUNICATIONS research. Most recently, he was employed by Selected
FUND, APPEARS HERE] Financial Services as Senior Vice President/Portfolio
Manager for a small cap growth mutual fund. Jim's prior
service includes employment by Sears Investment Management
Company as Vice President responsible for emerging growth
and venture capital portfolios. Jim is a Chartered
Financial Analyst and a graduate of Washington & Lee
University, where he was inducted into Phi Beta Kappa. He
earned his M.B.A. from Northwestern University.
Rodger Scullion, MSI, Murray Johnstone International, Ltd.-
Manager International Fund
Rodger Scullion is Managing Director and Chief Investment
Officer of Murray Johnstone International (MJI) in
[PICTURE OF RODGER Glasgow, Scotland. In addition to the PBHG International
SCULLION, MSI, Fund, for which he assumed responsibility in June 1995,
MURRAY JOHNSTONE, Rodger handles other investment vehicles for all types of
LTD., - MANAGER investors, including a closed-end fund with over $600
INTERNATIONAL FUND, million in assets. Rodger joined MJI thirteen years ago,
APPEARS HERE] and in that time has had primary responsibility for
investments in markets all over the world, except the U.S.
Prior to MJI, Rodger spent eleven years with an
international fund management group in Glasgow, where his
investment arena included the U.S., Europe, U.K., South-
east Asia and Japan. Rodger is a Member of the Securities
Institute (MSI) in Scotland.
John C. Keogh, Wellington Management Company--Manager PBHG
Cash Reserves Fund
John Keogh is a Senior Vice President and Partner of
Wellington Management Company which is sub-adviser to the
[PICTURE OF JOHN C. PBHG Cash Reserves Fund. As a member of Wellington
KEOGH, WELLINGTON Management's Fixed Income Group, John chairs the Short
MANAGEMENT COMPANY - Duration Bond Strategy Group, which develops guidelines for
MANAGER PBHG CASH portfolio managers on investing client assets in short
RESERVES FUND, maturity portfolios. John manages approximately $10
APPEARS HERE] billion in money market portfolios for various clients of
the firm, and has the distinction of managing the first
dollar-denominated money market fund ever offered by a
Japanese entity in Japan. John is a 1979 graduate of Tufts
University (BA in Economics). Prior to joining Wellington
Management Company, he worked in the investment division
of Connecticut National Bank.
6
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"We believe companies that meet and exceed their [PICTURE OF GARY L. PILGRIM,
CFA, CHIEF INVESTMENT
earnings growth expectations make superior in- OFFICER, PILGRIM BAXTER &
ASSOCIATES, APPEARS HERE]
vestment vehicles. Our focus is on finding
`earnings engines' and adhering to strict sell
disciplines to manage risk."
GARY L. PILGRIM, CFA
Chief Investment Officer
Pilgrim Baxter & Associates
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Management Discussion and Analysis
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Dear Fellow Shareholder:
Continuing the gains of the first half of our fiscal year, the U.S. equity mar-
ket was broadly positive for the full period. As shown below, the environment
slightly favored growth over value-oriented portfolios. However, with the per-
ception of a slowing economy emerging in the second half, larger and more de-
fensive equities began to outperform. The Nasdaq OTC Index, for instance, after
widely outperforming the Dow Jones Industrial Average in the first half,
sharply underperformed in the second half. Among major sectors, finance, tech-
nology and capital goods were quite strong for the full year although technol-
ogy performance slipped in the second half.
As we enter the new fiscal year, the developing consensus has shifted from a
very comfortable "soft landing" scenario to a much more muddled view. Surpris-
ingly strong economic data has recently shaken investor complacency towards
both the bond and equity mar-
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Performance Comparisons
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WILSHIRE ASSOCIATES STYLE INDEXES
<TABLE>
<S> <C> <C> <C>
Large Cap Growth +33.1% Large Cap Value +36.3%
MidCap Growth +35.1% MidCap Value +31.6%
Small Cap Growth +32.3% Small Cap Value +27.3%
</TABLE>
(Over please)
7
<PAGE>
kets and stands in some contrast to observations from many companies that busi-
ness conditions are becoming more difficult. We lean towards the view that the
economy is recovering from a weather-induced slowdown and benefiting from the
early delivery of 1995 income tax refunds, but is unlikely to show enough
strength to produce additional restraint from the Federal Reserve. The inci-
dence of earnings disappointments, however, is rising with the slower economy.
Our strategy remains the same: Pay attention to earnings! We continue to be-
lieve that under most circumstances, our search for the strongest relative
earnings performance will uncover companies most likely to achieve sustainable,
exceptional long-term growth. And our long-term portfolio success depends on
this, more than on market timing, economic forecasting or valuation analysis.
Momentum investing: the Pilgrim Baxter point of view
The so-called "momentum approach" to investing receives a lot of press these
days, much of it unfavorable. Momentum investors, a group in which we are often
included, are routinely characterized as ruthless in their selling of stocks
based on minute earnings shortfalls; hyperactive in their portfolio churning in
pursuit of short-term portfolio performance; and reckless in their indifference
to valuation. Recognizing that observers can classify our style as they see fit
and that we run the risk of appearing to "protest too much," we believe a few
comments might be helpful in explaining our approach.
First, we acknowledge and attempt to communicate at every opportunity that our
funds are generally more volatile and less diversified than the average fund.
We want to own the best high-growth companies available, and that objective has
a higher priority than sector diversification.
In our opinion, above-average returns can be achieved by investing in companies
which exhibit exceptional growth rates relative to the market. We attempt to
produce these investment returns through the fundamental performance of our
portfolio companies. Our experience is that great growth companies do not
submit well to valuation tools.
We believe that investors persistently underestimate the return potential
available from companies that accomplish very high growth for an extended peri-
od. A company growing at 25% per annum essentially doubles its earnings every
three years -- that type of performance can quickly overcome questions of valu-
ation. Stocks that go up several-fold over a multi-year period chronically look
"expensive." Our focus on growth over valuation produces portfolios that appear
high on traditional measures of price to earnings, sales or book value. Howev-
er, we view this condition as the entry price to acquire the portfolio charac-
teristics we seek.
Investing in smaller growth companies can be risky. The failure rate is higher
than with larger and more mature companies. The approach we use to find our way
through the uncertain future is very straightforward and based on experience.
Some of the "rules" we follow are:
. Know a lot about your companies through research.
. Be skeptical that companies can quickly cure growth problems.
. As investors, deal promptly with real fundamental change both positive and
negative.
. Understand that staying with a disappointing company involves both absolute
loss and opportunity cost.
8
<PAGE>
. Diversify to control risk.
. Be disciplined in the application of principles that have worked over time.
In this regard we have developed models that guide us to pay particular at-
tention to earnings surprise and earnings estimate revisions.
The result of the above is that we do sell companies that fail to meet expecta-
tions. It is hardly at a frantic pace, however, as the portfolio turnover rates
for the PBHG Growth and Emerging Growth Funds for the latest twelve months were
45% and 97% respectively.
We also find ourselves involved with companies some consider "hot" or "fad-
dish." We believe this is inevitable and a symptom of our relentless search for
the growth companies and industries of today and tomorrow. Keen attention to
current earnings leadership provides excellent direction as to which companies
these will be.
Lastly, it is quite certain that our relative performance standing will ebb and
flow with the market's interest and confidence in growth. We cannot predict if
"momentum" investing, as others practice it, will prove enduringly productive.
However, we are comfortable with the assertion that successfully identifying
companies with sustainable high growth rates will provide competitive returns.
We believe we have the or ganization and disciplines to execute this strategy.
A disciplined approach: key to success
Just as we need to be highly disciplined in our investment process, investors
should practice the techniques proven to help enhance long-term returns and re-
duce overall portfolio risk. Diversification, and investing for the long term,
are paramount. To help you invest effectively and efficiently, we encourage you
to take advantage of the PBHG Systematic Investing Plan, which gives you the
benefits of dollar cost averaging. The chart below demonstrates how systematic
investing can lower your average purchase price per share, since you buy fewer
shares when prices are high and more when prices are lower.
/S/ Gary L. Pilgrim
Gary L. Pilgrim
Chief Investment Officer
Pilgrim Baxter & Associates
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Dollar Cost Averaging At Work
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<TABLE>
<CAPTION>
Dollar Cost Averaging Vs. Lump Sum Purchase
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Number of Number of
Amount Share Shares Amount Share Shares
Invested Price Puchased Invested Price Puchased
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
January $ 100.00 10 10.00 $ 1,200.00 10 120.00
February $ 100.00 11 9.09
March $ 100.00 9 11.11
April $ 100.00 6 16.67
May $ 100.00 7 14.29
June $ 100.00 12 8.33
July $ 100.00 8 12.50
August $ 100.00 7 14.29
September $ 100.00 9 11.11
October $ 100.00 9 11.11
November $ 100.00 11 9.09
December $ 100.00 10 10.00
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------
Total Amount Invested $1,200.00 Vs. $1,200.00
Total Number of Shares 137.59 Vs. 120.00
Average Cost Per Share $8.72 Vs. $10.00
- -----------------------------------------------------------
</TABLE>
A program of regular investment cannot assure a profit nor protect against a
loss in a declining market and, since such a program involves continuous
investment regardless of fluctuating share values, investors should consider
their (financial) ability to continue the program through all market cycles.
9
<PAGE>
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PBHG Growth Fund
---------------------------------------
OBJECTIVE: Long-term capital appreciation
INVESTS IN: Small to medium, high-growth U.S. companies in any field
STRATEGY: While the fund makes the majority of purchase selections in the $300
million to $1.5 billion range, the weighted average capitalization of the port-
folio has increased from a year ago. This is attributable to the higher valua-
tion 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, over 60% of the portfolio's companies have
annual revenues of under $250 million, still comfortably in the small company
category.
[LINE GRAPH APPEARS HERE]
Comparison of Change in the Value of a $10,000 Investment in the PBHG Growth
Fund, versus the Wilshire Small Cap Growth Index, the Russell 2000 Growth Index,
and the Lipper Capital Appreciation 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 Growth Fund
from December 31, 1985 through March 31, 1996 as compared with the growth of
$10,000 investments in the Wilshire Small Cap Growth Index, the Russell 2000
Growth Index, and the Lipper Capital Appreciation Average over the same time
period. The plot points are as follows:
<TABLE>
<CAPTION>
12/31/85 3/86 3/87 3/88 3/89 3/90
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth Fund 10,000 11,510 16,870 14,665 15,249 19,383
Wilshire Small Cap Growth Fund 10,000 11,445 13,678 11,658 12,966 14,163
Russell 2000 Growth Index 10,000 11,481 13,175 10,888 11,991 13,057
Lipper Capital Appreciation Average 10,000 11,594 13,858 12,397 14,009 16,009
<CAPTION>
3/91 3/92 3/93 3/94 3/95 3/96
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth Fund 22,667 25,781 34,668 47,592 54,217 82,139
Wilshire Small Cap Growth Index 15,198 18,535 20,697 23,422 26,317 34,820
Russell 2000 Growth Index 14,462 17,206 17,726 19,628 21,057 27,675
Lipper Capital Appreciation Index 17,789 20,993 23,720 25,895 27,669 35,596
</TABLE>
/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.
* See Page 68 for a description of the Indexes.
PERFORMANCE
For the year ended March 31, 1996 the fund's total return was 51.5% versus the
Wilshire Small Cap Growth Index of 32.3%. The Russell 2000 Growth Index return
was 31.4% and the Lipper Capital Appreciation Funds Average return was 29%.
The technology sec-tor continued to be the fund's largest, with an average
weighting of 39%, and accounted for slightly more than 50% of the year's re-
turn. The services sector, which increased steadily during the year from 8%
to 14%, produced almost 25% of the portfolio return. Of the remaining gain,
consumer stocks accounted for almost half, followed by industrial, financial
and healthcare.
PORTFOLIO HIGHLIGHTS
As mentioned above, a number of portfolio companies, including Ascend
Communications, U.S. Robotics, FORE Systems, Peoplesoft and Gartner Group
have exceeded $2 billion in market capitalization, but remain in our port-
folio. A longer holding period for these exceptional growth companies results
in lower portfolio turnover, postponement of capital gains, and higher after-
tax returns to our shareholders .
Benefitting from telecommunications equipment demand stimulated by use of
Internet and other online services, companies serving these markets were
among our best holdings for the year. Of our top five performers, which
averaged almost a 300% gain, Ascend Communications, U.S. Robotics and Cascade
Communications fall into this category. Among our nontechnology winners
were Quintiles Transnational (contract pharmaceutical research), Gartner
Group (technology consulting), Corrections Corp of America (prison
privatization) and Input-Output (seismic equipment for energy exploration).
10
<PAGE>
The bottom five performers, which averaged a 55% realized loss to the point of
sale, have a familiar theme: all reported much less than expected earnings. With
few exceptions -- possibly Alliance Semiconductor, for example, which was hurt
by an industry-wide decline in SRAM prices -- the problems were company specific
and reinforce the wisdom of broad diversification in small com-pany portfolios.
Sector weightings reflect the relative attraction of individual stocks within
our large universe of growth companies. As we review the year, notable
weightings changes occurred in healthcare -- up from 11% in June to close the
fiscal year at 17%; services -- up from 8% to 14% year-over-year; and
technology -- presently at 33%, down from 43% in December.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
----------------------- -------------------------
ASCEND COMMUNICATIONS COMPUTRON SOFTWARE
----------------------- -------------------------
U.S. ROBOTICS CYRK
----------------------- -------------------------
QUINTILES TRANSNATIONAL COVENTRY
----------------------- -------------------------
GARTNER GROUP WALL DATA
----------------------- -------------------------
CASCADE COMMUNICATIONS ALLIANCE SEMICONDUCTOR
11
<PAGE>
-------------------------------
PBHG Emerging Growth Fund
-------------------------------
OBJECTIVE: Long-term growth of capital
INVESTS IN: Some of the smallest, potentially fastest-growing U.S. companies in
any field
STRATEGY: The fund's strategy is to invest in young, rapidly growing companies
with prospects for continued growth. The portfolio 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 ac-
counting for more than 3% of the portfolio.
[LINE GRAPH APPEARS HERE]
Comparison of Change in the Value of a $10,000 Investment in the PBHG Emerging
Growth Fund, versus the Wilshire Small Cap Growth Index, 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 Emerging
Growth Fund from June 30, 1993 through March 31, 1996 as compared with the
growth of $10,000 investments in the Wilshire Small Cap Growth Index, the
Russell 2000 Growth Index, and the Lipper Small Company Funds Average over the
same time period. The plot points are as follows:
<TABLE>
<CAPTION>
6/30/93 3/94 3/95 3/96
<S> <C> <C> <C> <C>
PBHG Emerging Growth Fund 10,000 13,100 17,290 25,963
Wilshire Small Cap Growth Index 10,000 10,923 12,273 16,238
Russell 2000 Growth Index 10,000 10,763 11,547 15,176
Lipper Small Company Funds Average 10,000 10,815 11,652 15,293
</TABLE>
/1/ Pastperformance 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 PBHG Emerging Growth Fund commenced operations on June 15, 1993.
* See Page 68 for a description of the Indexes.
PERFORMANCE
For the twelve months ending March 31, 1996, the fund produced a 50.2% return
versus its benchmark, Wilshire Small Cap Growth Index, of 32.3%. Technology-
related companies, with a weighting that varied between 36% and 44%, ac-
counted for roughly 40% of the portfolio gain. The majority of the remaining
gain was attributed to the healthcare, consumer and service sectors.
PORTFOLIO HIGHLIGHTS
For the year, the fund's five top performing stocks were up an average of
250%, while the five bottom performing stocks were down an average of 47%. In
both cases the returns were driven by earnings performance.
The fund seeks companies with an ability to sustain superior earnings growth
and to continue to meet or exceed expectations. Sector weightings are a
product of individual stock selection. Though the technology weighting
remained relatively constant, exposure to semiconductor related issues de-
creased and other technology subsectors such as software increased.
Throughout the year, the healthcare weighting increased and the consumer
weighting decreased slightly.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
- -------------------- ------------------------
APOLLO GROUP CROP GROWERS CORP.
- -------------------- ------------------------
QUINTILES TRANSNATIONAL PROFESSIONAL SPORTS
- -------------------- CARE MANAGEMENT
TARGET THERAPEUTICS ------------------------
- -------------------- BROOKS AUTOMATION
SECURITY DYNAMICS ------------------------
- -------------------- SOFTDESK
APPLIX ------------------------
MICROTEST
12
<PAGE>
----------------------------------------
PBHG Core Growth Fund
----------------------------------------
OBJECTIVE: Long-term capital appreciation
INVESTS IN: A diversified portfolio of small, mid-size and large 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 $3.7 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. Sec-
tor exposure is not predetermined, but follows from the selection of the most
attractive individual stocks. As a risk control measure, no sector will be al-
lowed to represent more than 40% of the total fund.
[LINE GRAPH APPEARS HERE]
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.
A line graph depicting the total growth (including reinvestment of dividends and
capital gamins) of a hypothetical investment of $10,000 in the PBHG Core Growth
Fund from December 31, 1995 through March 31, 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:
<TABLE>
<CAPTION>
12/31/95 1/96 2/96 3/96
<S> <C> <C> <C> <C>
PBHG Core Growth Fund 10,000 10,590 11,450 11,820
Russell 3000 Index 10,000 10,292 10,508 10,542
Lipper Growth Funds Average 10,000 10,215 10,445 10,538
</TABLE>
/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 origi-
nal cost.
/2/Total return has not been annualized. The PBHG Core Growth Fund commenced op-
erations on January 2, 1996.
* See Page 68 for a description of the Indexes.
PERFORMANCE
The fund became operational on January 2, 1996, and for the three months ended
March 31, 1996, produced a total return of 18.2% versus a re turn of 5.42% by
its bench mark, the Russell 3000 Index. The technology sector com prised
roughly 26% of the fund and accounted for 29% of the overall gain. Business
services was the next largest sector at 21%, followed by healthcare at 16%.
These two sectors accounted for 16% and 22%, respectively, of the fund's total
return for the quarter. The only other sec tor exposure of significance was
consumer at 12%, which accounted for a strong 26% of the overall gain.
PORTFOLIO HIGHLIGHTS
Of the 71 stocks owned during the three month period, 31 advanced more than
10%, while 14 declined more than 10%. The top five performers were up an
average of 56% while the bottom five, two of which were sold, were down an
average of 26%.
The top five performers, rep resenting three different sectors, were all
driven by the perception of improving business fundamentals leading to higher
future earnings. The bottom five performers, all technology sector stocks,
were hindered by the belief that earnings growth rates were in jeopardy
because of new competition entering the market, pricing pressure due to
industry overcapacity, or a slowdown in end-user demand for product. We
believe the stock price declines were not justified for three of these five
companies, so we con tinue to hold them in antici pation of a rebound.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
---------------------------- --------------------------
ACCUSTAFF C-CUBE MICROSYSTEMS
---------------------------- --------------------------
PMT SERVICES PICTURETEL
---------------------------- --------------------------
CORRECTIONS CORP. OF AMERICA COGNEX
---------------------------- --------------------------
NCS HEALTHCARE GLENAYRE TECHNOLOGIES
---------------------------- --------------------------
U.S. ROBOTICS MAXIM INTEGRATED PRODUCTS
13
<PAGE>
----------------------------------------
PBHG Select Equity Fund
----------------------------------------
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 op-
portunities 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 $730
million (Atlas Air) to $17.4 billion (Computer Associates). The mean market
capitalization was $3.3 billion. The fund's size characteristics may vary dra-
matically from one time period to another, reflecting the inherent sensitivity
to changes in holdings of a highly concentrated portfolio.
[LINE GRAPH APPEARS HERE]
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.
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 March 31, 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:
<TABLE>
<CAPTION>
4/30/95 6/95 9/95 12/95 3/96
<S> <C> <C> <C> <C> <C>
PBHG Select Equity Fund 10,000 11,686 14,546 15,512 17,329
Russell 3000 Index 10,000 10,757 11,758 12,256 12,919
Lipper Capital Appreciation
Funds Average 10,000 10,737 11,750 12,029 12,720
</TABLE>
/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 origi-
nal cost.
/2/Total return has not been annualized. The PBHG Select Equity Fund commenced
operations on April 5, 1995.
* See Page 68 for a description of the Indexes.
PERFORMANCE
Since inception on April 5, 1995 through March 31, 1996, the fund's total
return was 76.9%. This compares favorably with the return of 29.2% for the
Russell 3000 Index and the return of 27.0% for the Lipper Capital Apprecia
tion Funds Average over the same time period. The technology sector had the
largest representation in the fund throughout the period, reaching a peak of
51% in September, which was actively re duced to 37% by period end.
Technology accounted for roughly 33% of the gain in the period. Healthcare was
the second largest sector, averaging 19%; it accounted for 26% of the fund's
return. The consumer sector followed with a 13% representation and contributed
roughly 12% of the gain. Most of the remain ing gain came from the business
services sector, with only modest contributions from the financial, general
manufacturing, basic industry and transportation sectors.
PORTFOLIO HIGHLIGHTS
A total of 52 different stocks -- but not more than 30 at any one time -- were
held in the fund over the period. No sector was dominant among the best
performers. The top five included two consumer companies (America OnLine and
Tommy Hilfiger), one technology company (PeopleSoft, a maker of human resource
and accounting software for corporate client/server environments), one
healthcare company (Oxford Health, a health maintenance organization with a
major presence in New York City), and one business services company
(Accustaff, a temporary help firm).
Similar diversity existed among the bottom five performers, which included two
technology companies (Maxim Integrated Products, a manufacturer of specialty
semiconductors, and
14
<PAGE>
Picturetel, a marketer of video-conferencing systems), one healthcare company
(Sun Healthcare, a nursing home operator), one business services company
(ManPower, a temporary help firm), and one consumer company (Broderbund, a maker
of entertainment software).
All of the top five performers benefitted from strong sales and earnings growth
while three of the bottom five performers reported disappointing financial
results and were sold. The other two companies, Picturetel and Maxim, continued
to produce exceptional growth but their share prices were hurt by broad-based
concerns about the technology sector. These positions were retained in
anticipation of a recovery in share prices commensurate with our expectation for
continued strong sales and earnings growth.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
------------------- ----------------------
AMERICA ONLINE SUN HEALTHCARE
------------------- ----------------------
PEOPLESOFT PICTURETEL
------------------- ----------------------
TOMMY HILFIGER MANPOWER
------------------- ----------------------
OXFORD HEALTH MAXIM INTEGRATED
PRODUCTS
------------------- ----------------------
ACCUSTAFF BRODERBUND
15
<PAGE>
----------------------------------------
PBHG Large Cap Growth Fund
----------------------------------------
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 con-
structed, the fund's 63 holdings range from roughly $1 billion to $60 billion
in market capitalization, with an average capitalization of $6.8 billion. The
stock selection approach remains focused on the fundamental analysis of indi-
vidual companies, the strength of their products and/or services and their com-
petitive positioning. Sector exposure is determined solely by the selection of
the most attractive individual stocks, although a 40% sector limitation is in
place as a risk control measure.
[LINE GRAPH APPEARS HERE]
Comparison of Change in the Value of a $10,000 Investment in the PBHG Large Cap
Growth Fund, versus the Wilshire Small Cap Growth Index, the Russell 1000 Growth
Index and the Lipper Growth 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 Large Cap
Growth Fund from April 30, 1995 through March 31, 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:
<TABLE>
<CAPTION>
4/30/95 6/95 9/95 12/95 3/96
<S> <C> <C> <C> <C> <C>
PBHG Large Cap Growth Fund 10,000 10,920 13,160 13,382 14,992
Russell 1000 Growth Index 10,000 10,748 11,724 12,259 12,917
Lipper Growth Funds Average 10,000 10,738 11,664 11,945 12,587
</TABLE>
/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 origi-
nal cost.
/2/Total return has not been annualized. The PBHG Large Cap Growth Fund com-
menced operations on April 5, 1995.
* See Page 68 for a description of the Indexes.
PERFORMANCE
Since inception on April 5,
1995 through March 31, 1996,
the fund's total return was
49.9%, which compares favor-
ably with the return of 29.2%
for the Russell 1000 Growth
Index over the same time pe-
riod. The technology sector
was the fund's largest, aver-
aging 32% and ending the pe-
riod at 27% of the portfolio.
Technology holdings contrib-
uted 22% of the period's re-
turn with almost all of the
sector's gain coming in the
first five months. The
healthcare sector was the
biggest contributor to over-
all performance, accounting
for 28% of the total gain
while comprising 19% of the
portfolio. The business serv-
ices sector expanded its rel-
ative position steadily
through the period, repre-
senting 18% on March 31,
1996; it contributed 12% of
the fund's total return, most
of which came in the second
half of the period. The con-
sumer sector, at 17% of the
fund, was responsible for 18%
of the return. The balance of
the overall gain was provided
by modest positions in the
financial, basic industry and
general manufacturing sec-
tors.
PORTFOLIO HIGHLIGHTS
The fund's best performers in
the period were from diverse
industry segments, which is
consistent with our "bottom-
up" investment approach. Our
ten best stocks included
three companies from differ-
ent segments of the
healthcare sector, two unre-
lated consumer companies, two
non-competing technology com-
panies, two very different
business services providers,
and one diversified conglom-
erate. Our top five perform-
ers were up an aver-
16
<PAGE>
age of 74%. The bottom five, two of which were sold, were down an average of
23%.
In addition to reporting strong financial results, the fund's top five
performers all demonstrated a strengthening of their respective fundamental
business characteristics suggesting, at a minimum, the sustainability of recent
growth trends. More importantly, it establishes strong potential for
acceleration going forward. The bottom five performers faltered for a variety of
reasons but in only two cases, Sensormatic and LSI Logic, did we feel that
deteriorating fundamentals warranted sale.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
------------------- ----------------------
OXFORD HEALTH BAY NETWORKS
------------------- ----------------------
ACCUSTAFF SENSORMATIC
------------------- ----------------------
THERMO ELECTRON LSI LOGIC
------------------- ----------------------
AMERICA ONLINE ADC TELECOMMUNICATIONS
------------------- ----------------------
MEDTRONIC MICROWAREHOUSE
17
<PAGE>
--------------------------------------
PBHG Technology & Communications Fund
--------------------------------------
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 related com-
panies exhibiting extraordinary rates of growth in earnings and revenues with
high profitability levels. The average company in the portfolio has grown earn-
ings 66.2% over the past twelve months with a 23.9% return on equity, and we
continue to believe the technology-related area will represent one of the fast-
est growing sectors of the U.S. economy.
<TABLE>
<CAPTION>
9/30/95 10/95 11/95 12/95 1/96 2/96 3/96
<S> <C> <C> <C> <C> <C> <C> <C>
PBHG Technology &
Communications Fund 10,000 10,800 11,720 11,602 11,461 12,562 12,481
Pacific Stock Exchange High
Technology Index 10,000 10,057 10,210 9,919 10,154 10,451 9,899
Lipper Science & Technology
Funds Average 10,000 9,788 9,860 9,430 9,380 9,840 9,484
</TABLE>
/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 Technology & Communications
Fund commenced operations on October 2, 1995.
* See Page 68 for a description of the Indexes.
PERFORMANCE
The fund became operational
October 2, 1995. In its first
six months ended March 31,
1996, the fund produced a to-
tal return of 24.8% versus -
1.01% for its benchmark, the
Pacific Stock Exchange High
Technology Index. Software,
internetworking, design manu-
facturing automation, data
communications, transaction
processing and healthcare
contract research industries
provided the majority of the
positive results. Semiconduc-
tors, semiconductor equipment
and hardware (PCs, servers,
peripherals) stocks were
underperformers over the pe-
riod.
PORTFOLIO HIGHLIGHTS
The fund's top five perform-
ers from date of initial pur-
chase produced an average
gain in excess of 100% and
all experienced better than
expected earnings and subse-
quent positively revised
earnings and growth expecta-
tions. Alantec was acquired
by Fore Systems propelling
its stock appreciation. The
losers, with the exception of
Ultratech Stepper, experi-
enced earnings disappoint-
ments and have been sold out
of the portfolio. Ultratech
continues to perform funda-
mentally well in a suspect
industry segment -- semicon-
ductor equipment. Going for-
ward, we see opportunities in
enterprise, application, de-
velopment tool and design
manufacturing software compa-
nies. The corporate computing
market has been shifting from
centralized host-based com-
puting systems dominated by
the major hardware suppliers
to distributed, client/server
systems led by a variety of
internetworking and software
vendors.
TOP FIVE PERFORMERS
BOTTOM FIVE
PERFORMERS
- -------------------- --------------------
CALIFORNIA AMPLIFIER FTP SOFTWARE
- -------------------- --------------------
QUINTILES TRANSNATIONAL VTEL
- -------------------- --------------------
ALANTEC DISCRETE LOGIC
- -------------------- --------------------
REMEDY ULTRATECH STEPPER
- --------------------
BUSINESS OBJECTS --------------------
NETMANAGE
18
<PAGE>
----------------------------------------
PBHG International Fund
----------------------------------------
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 hold-
ings. Where smaller companies already in the portfolio were favored, those se-
curities were retained.
[LINE GRAPH APPEARS HERE]
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 March 31, 1996 as compared with the growth of a
$10,000 investment of the F.T. Actuaries World Index, Non-U.S., in U.S. Dollars
over the same time period. The plot points are as follows:
<TABLE>
<CAPTION>
6/30/94 3/95 3/96
<S> <C> <C> <C>
PBHG International Fund 10,000 9,203 10,634
F.T. Actuaries World Index
Non-U.S., in U.S. Dollars 10,000 10,007 11,274
</TABLE>
/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 origi-
nal cost.
/2/The PBHG International Fund commenced operations on June 14, 1994.
* See Page 68 for a description of the Indexes.
PERFORMANCE
For the year ended March 31,
1996, the fund produced a re-
turn of 15.6% versus 12.7%
returned by its benchmark,
the F.T. Actuaries World In-
dex, Non-U.S., in U.S. Dol-
lars. On March 31, 1996, the
top five country weightings
were Japan, Hong Kong,
France, Italy and Singapore.
PORTFOLIO HIGHLIGHTS
The important feature of the
period was the shift in in-
vestor sentiment in the
United States following a
sustained period of out-per-
formance by Wall Street. In
the fourth quarter of 1995,
investors began to increase
their exposure to European,
Asian and Latin American mar-
kets, which had lagged early
in the year. The larger mar-
kets -- the Netherlands,
Spain, Switzerland and Hong
Kong -- were the primary ben-
eficiaries of this trend. The
fund was well-positioned for
these circumstances, since
Spain and Hong Kong were two
of the markets on which we
had been focusing and which
were overweighted in the
portfolio.
While raising the weighting
of the Far East, we had also
been adding to our invest-
ments in Japan -- after trim-
ming back in the third quar-
ter -- in anticipation of the
recovery of that market in
1996. Although the first
quarter of 1996 was a dull
one for the Tokyo market, we
have seen progress in the
resolution of the bankrupt
housing loan companies, a ma-
jor problem overshadowing the
financial markets. Once this
issue and the bad loans of
the banks have been resolved,
the Tokyo market can focus on
the positive macro-economic
background: a steadily recov-
ering economy, rising corpo-
rate profits and virtually no
inflation.
During the nine month period
in which Murray Johnstone has
been the fund's sub-adviser,
the top five performers
showed an average gain of
92%. The bottom five perform-
ers had an average loss of
19%.
All the best performing
stocks were in Europe and
were the result of investors
seeking growth in dull mar-
kets. Where a stock was dis-
19
<PAGE>
----------------------------------------
PBHG International Fund (continued)
----------------------------------------
covered, its price has risen more than would have been expected due to demand.
The underperforming stocks represented the reverse of the above theme: where
companies failed to deliver expected earnings, the securities were sold.
The portfolio's sector allocations vary within each market. But in general,
European securities are cyclical/interest rate sensitive companies looking for
an easier monetary environment. Strong growth in the Far East is leading us to a
variety of real estate and financials. In Japan, we have been moving away from
defensive companies to cyclicals and manufacturers geared to the recovery of the
economy.
TOP FIVE PERFORMERS BOTTOM FIVE PERFORMERS
-------------------- ----------------------
FRESENIUS -- GERMANY OLIVETTI -- ITALY
-------------------- ----------------------
BULGARI -- ITALY LEGRIS INDUSTRIES --
FRANCE
-------------------- ----------------------
HERMES INTERNATIONAL ARGYLL GROUP -- UK
-- FRANCE
-------------------- ----------------------
GAS NATURAL -- SPAIN AGF -- FRANCE
-------------------- ----------------------
BRE -- POLAND ALLIED IRISH BANKS --
IRELAND
20
<PAGE>
----------------------------------------
PBHG Cash Reserves Fund
----------------------------------------
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 portfo-
lio of short-term, high-quality money market securities.
[BAR GRAPH APPEARS HERE]
Comparison of the 1 year yield, as of March 31, 1996, for the PBHG Cash Reserves
Fund and the Lipper Money Market Average.
A bar graph comparing the 1 year yield, as of March 31, 1996, of the PBHG Cash
Reserves Fund to the Lipper Money Market Average. The plot points are as
follows:
<TABLE>
<S> <C>
PBHG Cash Reserves Fund 5.25
Lipper Money Market Average 5.23
</TABLE>
PERFORMANCE
For the year ended March 31,
1996, the PBHG Cash Reserves
Fund yielded 5.25% compared
to 5.23% for the Lipper Money
Market Average. The key to
the Fund's investment strat-
egy was managing the average
maturity of the portfolio
during a time of changing in-
terest rates, as well as tak-
ing advantage of some higher-
yielding sectors of the money
market arena.
PORTFOLIO HIGHLIGHTS
The Federal Reserve has moved
short-term rates around con-
siderably over the past 15
months. In February 1995, the
Federal Reserve raised the
Federal Funds rate by 50 ba-
sis points, and then subse-
quently eased it by 25 basis
points in both July and De-
cember, followed by a 25 ba-
sis point decrease in January
of this year. These movements
came in response to the Fed-
eral Reserve's evaluation of
the pace of the economy.
For most of the latter part
of 1995, signs of slow eco-
nomic growth pointed to a fa-
vorable inflation backdrop
with ample cushion in real
interest rates for the bank
to stimulate growth modestly.
At year end, market psychol-
ogy was positive as the con-
sumer sector was showing
signs of stress, notable when
analyzing debt levels, tax
burdens and spending pat-
terns. In addition, the wide-
spread anticipation of pro-
gress toward deficit reduc-
tion and a balanced budget
were positive factors in
fixed-income markets. Since
that time, more mixed eco-
nomic signals have had a neg-
ative effect on the fixed-in-
come markets and have reduced
the degree to which the over-
night money market securities
out-yielded 3-month or
slightly longer securities.
In this environment, we be-
lieve that the PBHG Cash Re-
serves Fund's slightly longer
maturity stance, together
with investments in higher-
yielding money market securi-
ties such as floating rate
notes, will benefit share-
holders looking for safety,
liquidity and a slightly
higher yield.
21
<PAGE>
- --------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------
To the Shareholders and Directors of
The PBHG Funds, Inc.:
We have audited the accompanying statements of net assets of PBHG Growth, PBHG
Emerging Growth, PBHG Core Growth, PBHG Select Equity, PBHG Large Cap Growth,
PBHG Technology & Communications, PBHG International and PBHG Cash Reserves
Funds of The PBHG Funds, Inc. (the "Fund") as of March 31, 1996, and the re-
lated statements of operations, changes in net assets, and financial high-
lights for the periods presented, except as described below. These financial
statements and financial highlights are the responsibility of the Fund's man-
agement. Our responsibility is to express an opinion on these financial state-
ments and financial highlights based on our audits. The financial highlights
of PBHG Growth Fund, for each of the two years in the period ended March 31,
1993, were audited by other auditors whose report dated April 25, 1994, ex-
pressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presenta-
tion. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of PBHG
Growth, PBHG Emerging Growth, PBHG Core Growth, PBHG Select Equity, PBHG Large
Cap Growth, PBHG Technology & Communications, PBHG International and PBHG Cash
Reserves Funds of The PBHG Funds, Inc. as of March 31, 1996, the results of
their operations, changes in their net assets, and financial highlights for
the periods presented, except for financial highlights audited by other audi-
tors as described above, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
April 26, 1996
22
<PAGE>
As of March 31, 1996
----------------------------------------------------------------------------
Statement of Net Assets The PBHG Funds, Inc.
----------------------------------------------------------------------------
--------------------------------------------------
PBHG Growth Fund
--------------------------------------------------
[GRAPH APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG
Growth Fund. The breakdown is as follows:
Technology: 33%
Consumers: 20%
Health Care: 17%
Service: 14%
Transportation: 1%
Financial: 3%
Industrial/General Manufacturing: 2%
Energy: 1%
Repurchase Agreements: 9%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK-91.1%
APPAREL-2.1%
Nautica Enterprises* 618,650 $ 29,541
Tommy Hilfiger* 837,200 38,406
----------
67,947
- ----------------------------------------------------------------
AUTOMATED DATA COLLECTION-0.7%
Zebra Technology* 884,500 23,439
- ----------------------------------------------------------------
BIOTECHNOLOGY-1.0%
Idexx Laboratories* 770,700 32,369
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
CLIENT/SERVER SOFTWARE-4.7%
Applix* 332,800 $ 11,648
Arbor Software* 191,700 8,291
Astea
International* 209,100 6,168
Atria Software* 614,600 33,649
Clarify* 302,400 11,869
Computron
Software* 122,700 736
Legato Systems* 440,200 16,618
Peoplesoft* 719,800 41,390
Remedy* 422,750 23,885
----------
154,254
</TABLE>
23
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
-----------------------------------------------------------
Market
Description Shares Value (000)
-----------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
COMMERCIAL SERVICES-1.7%
Catalina Marketing* 223,800 $ 17,484
Gartner Group, Cl A* 637,800 38,906
----------
56,390
-----------------------------------------------------------
COMMUNICATION SERVICES-1.3%
APAC Teleservices* 158,000 11,258
Sitel* 388,700 17,588
TCA Cable TV 515,100 15,002
----------
43,848
-----------------------------------------------------------
COMPONENTS-1.3%
Coherent* 442,300 18,797
Cyberoptics* 231,500 6,656
Teltrend* 350,100 15,930
----------
41,383
-----------------------------------------------------------
CONNECTORS-0.4%
Cable Design Technologies* 406,500 14,939
-----------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS-1.2%
Cidco* 780,400 25,168
Oakley* 391,900 14,794
----------
39,962
-----------------------------------------------------------
CONTRACT MANUFACTURING-1.7%
HADCO* 327,900 10,001
Kent Electronics* 480,800 17,008
Sanmina* 937,500 27,891
----------
54,900
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------
Market
Description Shares Value (000)
-----------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
CONTRACT RESEARCH-1.0%
Quintiles Transnational* 484,200 $ 31,473
-----------------------------------------------------------
CORRECTIONAL SERVICES-1.4%
Corrections of America* 808,400 46,079
-----------------------------------------------------------
DATA COMMUNICATIONS-3.5%
Dialogic* 356,800 15,075
Picturetel* 792,200 24,558
TCSI* 603,800 18,416
US Robotics* 448,900 58,020
----------
116,069
-----------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION-3.1%
Cognex* 1,331,900 34,130
EPIC Design Technology* 109,000 3,331
Filenet* 644,800 37,237
Parametric Technology* 685,000 26,801
----------
101,499
-----------------------------------------------------------
DISTRIBUTED SYSTEMS/SOFTWARE-0.1%
Veritas Software* 58,300 1,887
-----------------------------------------------------------
DRUGS-0.6%
Watson Pharmaceuticals* 502,500 20,100
-----------------------------------------------------------
EDUCATIONAL SERVICES-1.0%
Apollo Group, Cl A* 839,750 32,750
</TABLE>
24
<PAGE>
---------------------------------------
The PBHG Funds, Inc.
---------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
EMPLOYMENT SERVICES-1.6%
Accustaff* 1,419,100 $ 35,832
Alternative Resources* 504,200 16,387
----------
52,219
- -------------------------------------------------------
ENVIRONMENTAL-3.2%
Ionics* 518,100 21,631
Sanifill* 779,100 29,898
United Waste Systems* 616,600 30,829
US Filter* 811,700 22,728
----------
105,086
- -------------------------------------------------------
FINANCIAL-MISCELLANEOUS-2.2%
ContiFinancial* 815,000 25,469
The Money Store 1,739,450 48,487
----------
73,956
- -------------------------------------------------------
GRAPHICS/IMAGE PROCESSING-0.9%
Electronics For Imaging* 721,100 31,368
- -------------------------------------------------------
HEALTH CARE-MANAGEMENT SERVICES-1.3%
Access Health Marketing* 557,250 21,594
Medaphis* 419,800 20,360
----------
41,954
- -------------------------------------------------------
HEALTH CARE-SUPPLIES-0.6%
Gulf South Medical Supply* 151,000 5,700
Physician Sales & Services* 493,000 12,202
Research Medical* 154,800 3,560
----------
21,462
- -------------------------------------------------------
INFORMATION SYSTEMS-1.3%
Medic Computer Sytems* 550,300 41,685
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
INFORMATION/FINANCIAL SERVICES-0.6%
Fair Isaac 476,700 $ 14,301
Kronos* 284,500 7,255
----------
21,556
- -------------------------------------------------------
INSURANCE-1.0%
HCC Insurance Holdings* 243,000 13,335
Vesta Insurance Group 609,250 19,876
----------
33,211
- -------------------------------------------------------
INTERNETWORKING-6.6%
Ascend Communications* 1,557,800 83,929
Cascade Communications* 483,400 43,385
Fore Systems* 814,500 58,237
Premisys Communications* 512,100 16,643
Shiva* 195,700 17,760
----------
219,954
- -------------------------------------------------------
LEISURE-0.6%
Callaway Golf 793,100 21,215
- -------------------------------------------------------
LODGING-1.1%
Doubletree* 532,900 14,588
HFS* 463,800 22,552
----------
37,140
- -------------------------------------------------------
MANAGED CARE-DENTAL-0.6%
Orthodontic Centers of
America* 716,900 21,507
- -------------------------------------------------------
MEDICAL DEVICES-1.0%
Target Therapeutics* 376,700 22,837
Thermo
Cardiosystems* 168,500 11,416
----------
34,253
</TABLE>
25
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
MEDICAL EQUIPMENT-1.0%
Lunar* 433,400 $ 18,528
Steris* 454,000 13,620
----------
32,148
- -------------------------------------------------------
MULTI-INDUSTRY-0.4%
Fastenal 307,600 11,843
- -------------------------------------------------------
NETWORKING SECURITY-0.4%
Security Dynamics
Technology* 224,700 11,909
- -------------------------------------------------------
NETWORKING SOFTWARE-1.1%
McAfee Associates* 665,150 36,417
- -------------------------------------------------------
NON-DURABLES-0.9%
Blyth Industries* 866,300 28,804
- -------------------------------------------------------
PATIENT CARE-HEALTH PLAN-1.4%
Healthsource* 1,204,000 46,655
- -------------------------------------------------------
PATIENT CARE-HOME-0.9%
American Medical
Response* 861,000 30,566
- -------------------------------------------------------
PATIENT CARE-HOSPITAL-0.9%
Health Management
Associates, Cl A* 878,600 30,751
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
PHARMACEUTICAL SERVICES-1.8%
Express Scripts, Cl A* 393,800 $ 18,410
Omnicare 763,900 41,155
----------
59,565
- -------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT-3.4%
American Oncology
Resources* 439,000 18,658
Medpartners/Mullikin* 715,300 20,386
Pediatrix Medical Group* 247,300 8,779
PhyCor* 1,190,075 52,363
Physician Reliance
Network* 329,800 13,068
----------
113,254
- -------------------------------------------------------
RADIO/TELEVISION-1.7%
Clear Channel
Communications* 714,950 40,395
Emmis Broadcasting* 381,100 14,672
----------
55,067
- -------------------------------------------------------
RESTAURANTS-2.3%
Boston Chicken* 929,300 31,654
Landry's Seafood
Restaurants* 879,500 16,051
Papa John's International* 598,500 26,708
----------
74,413
- -------------------------------------------------------
RETAIL-APPAREL-0.6%
Men's Wearhouse* 620,800 19,555
</TABLE>
26
<PAGE>
---------------------------------------
The PBHG Funds, Inc.
---------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
RETAIL-CATALOG-2.4%
CDW Computer Centers* 476,200 $ 24,048
Global DirectMail* 330,300 11,519
Micro Warehouse* 600,000 24,900
MSC Industrial Direct* 585,200 16,898
----------
77,365
- -------------------------------------------------------
RETAIL-HOME FURNISHINGS-1.3%
Bed Bath & Beyond* 786,000 41,462
- -------------------------------------------------------
RETAIL-OFFICE PRODUCTS-3.1%
Boise Cascade Office
Products* 298,400 19,508
Corporate Express* 961,400 31,726
Officemax* 1,291,900 31,329
US Office Products* 585,900 18,163
----------
100,726
- -------------------------------------------------------
RETAIL-SPECIALTY-3.5%
CompUSA* 414,400 22,947
General Nutrition* 1,513,200 37,830
Just For Feet* 166,750 6,941
Sunglass Hut
International* 1,455,600 48,217
----------
115,935
- -------------------------------------------------------
SEMICONDUCTOR MANUFACTURING-4.9%
Altera* 445,300 24,881
C-Cube Microsystems* 949,700 49,859
DSP Communications* 494,600 12,365
Level One Communications* 482,800 13,398
Maxim Integrated Products* 965,900 29,943
Oak Technology* 963,200 20,709
S3* 907,900 10,838
----------
161,993
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SERVICE/EQUIPMENT-0.9%
Input/Output* 921,800 $ 28,576
- -------------------------------------------------------
SOFTWARE-GENERAL-2.1%
Desktop Data* 234,250 8,609
Inso* 267,400 12,334
Macro Media* 956,700 40,899
Pure Software* 196,300 6,772
----------
68,614
- -------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED
RESELLERS-0.9%
Cambridge Technology
Partners* 500,600 28,597
- -------------------------------------------------------
TELECOMMUNICATION EQUIPMENT-0.3%
Coherent Communications
Systems* 425,100 8,827
- -------------------------------------------------------
TRANSACTION PROCESSING-2.1%
Concord EFS* 1,530,750 40,564
National Data 879,900 30,027
----------
70,591
- -------------------------------------------------------
TRANSPORTATION-SURFACE-0.9%
Fritz* 762,600 29,741
- -------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING-2.5%
Aspect Telecommunications* 837,800 38,329
Comverse Technology* 740,000 17,853
Octel Communications* 574,900 27,739
----------
83,921
----------
Total Common Stock
(Cost $2,074,035,894) 3,003,149
</TABLE>
27
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS-9.1%
Nomura
Securities 5.43%,
dated 03/29/96, matures
04/01/96, repurchase
price $158,415,490
(collateralized by
various FHLMC
obligations, total par
value $349,254,537,
0.00%-782.50%,
09/15/06-05/15/25:
FNMA obligations,
total par value
$651,216,047, 0.00%-
876.787%, 09/25/04-
04/25/24: total
market value
$161,511,717)(A) $158,345 $ 158,345
UBS Securities 5.43%,
dated 03/29/96, matures
04/01/96, repurchase
price $142,501,649
(collateralized by
various FHLMC
obligations, total par
value $125,935,000,
6.00%-7.00%,
07/15/18-12/15/21:
FNMA obligations,
total par value
$62,529,581, 5.625%-
9.844%, 11/25/07-
10/25/22: total
market value
$146,711,902)(A) 142,438 142,438
----------
Total Repurchase Agreements
(Cost $300,782,899) 300,783
----------
Total
Investments-100.2%
(Cost $2,374,818,793) 3,303,932
----------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES-(0.2%)
Other Assets and Liabilities, Net $ (5,007)
- -------------------------------------------------------
NET ASSETS:
Fund shares (authorized 200 million
shares-$0.001 par value) based on
130,418,049 outstanding shares of
common stock 2,437,595
Accumulated net realized
loss on investments (67,783)
Net unrealized appreciation on
investments 929,113
----------
Total Net Assets-100.0% $3,298,925
==========
Net Asset Value, Offering
Price and Redemption
Price Per Share $ 25.30
==========
</TABLE>
- -------
* 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.
28
<PAGE>
- -----------------------------------------------------------------------------
The PBHG Funds, Inc.
- -----------------------------------------------------------------------------
----------------------------------------
PBHG Emerging Growth Fund
----------------------------------------
[GRAPH APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG
Emerging Growth Fund. The breakdown is as follows:
Technology: 40%
Consumers: 12%
Health Care: 21%
Service: 8%
Transportation: 1%
Industrial/General Manufacturing: 3%
Repurchase Agreement: 15%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-86.7%
AUTOMATED DATA COLLECTION-0.5%
Trident International* 165,700 $ 3,148
- -------------------------------------------------------
CLIENT/SERVER SOFTWARE-13.7%
Advent Software* 212,400 4,195
Applix* 441,100 15,439
Arbor Software* 171,100 7,400
Astea International* 337,700 9,962
Atria Software* 250,400 13,709
Clarify* 232,800 9,137
Datastream Systems* 281,700 6,127
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
CLIENT/SERVER SOFTWARE-CONTINUED
Legato Systems* 309,200 $ 11,672
Project Software
& Development* 444,050 16,987
--------
94,628
- -------------------------------------------------------
COMMERCIAL SERVICES-1.5%
American List 119,300 3,759
META Group* 115,800 3,271
Motorcar Parts & Accesories* 208,600 3,285
--------
10,315
</TABLE>
29
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Emerging Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
COMMUNICATION SERVICES-0.9%
Sitel* 128,800 $ 5,828
- -------------------------------------------------------
COMPONENTS-2.8%
Coherent Communications
Systems* 407,700 8,466
Cyberoptics* 296,475 8,524
II-VI* 168,900 2,027
--------
19,017
- -------------------------------------------------------
CONSUMER PRODUCTS-MISCELLANEOUS-0.7%
Day Runner* 124,200 3,229
USA Detergents* 58,600 1,905
--------
5,134
- -------------------------------------------------------
CONSUMER SERVICES-1.7%
Veterinary Centers of
America* 423,300 11,429
- -------------------------------------------------------
CONTRACT MANUFACTURING-1.2%
Altron* 288,200 8,394
- -------------------------------------------------------
CONTRACT RESEARCH-1.7%
Parexel International* 67,800 2,932
Pharmaceutical Product
Development* 225,200 7,939
Quintiles Transnational* 12,400 806
--------
11,677
- -------------------------------------------------------
DATA COMMUNICATIONS-1.1%
Microcom* 260,300 7,776
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
DESIGN/MANUFACTURING AUTOMATION-2.6%
EPIC Design Technology* 418,200 $ 12,781
LeCroy* 173,000 2,509
Softdesk* 200,800 2,711
--------
18,001
- -------------------------------------------------------
DIGITAL MEDIA-3.1%
Data Translation* 443,600 7,319
Pinnacle Systems* 354,400 7,088
Videoserver* 280,000 7,070
--------
21,477
- -------------------------------------------------------
DISTRIBUTED SYSTEMS/SOFTWARE-1.2%
Veritas Software* 257,800 8,346
- -------------------------------------------------------
EDUCATIONAL SERVICES-0.5%
Apollo Group, Cl A* 95,700 3,732
- -------------------------------------------------------
EMPLOYMENT SERVICES-2.5%
Alternative
Resources* 249,400 8,106
On Assignment* 187,900 7,140
Right Management
Consultants* 77,600 2,289
--------
17,535
- -------------------------------------------------------
ENVIRONMENTAL-0.7%
Superior
Services* 88,100 1,167
Tetra Tech* 172,500 3,838
--------
5,005
</TABLE>
30
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
FOOD & BEVERAGE-0.6%
Pete's Brewing* 232,400 $ 4,358
- -------------------------------------------------------
GRAPHICS/IMAGE PROCESSING-1.3%
In Focus Systems* 257,700 9,036
- -------------------------------------------------------
HEALTH CARE-MANAGEMENT SERVICES-2.9%
ABR Information
Services* 215,050 10,000
Access Health
Marketing* 251,100 9,730
--------
19,730
- -------------------------------------------------------
HEALTH CARE-SUPPLIES-4.4%
Gulf South
Medical Supply* 365,700 13,805
Maxxim Medical* 229,200 4,326
Physician Sales
& Services* 479,100 11,858
--------
29,989
- -------------------------------------------------------
INFORMATION SYSTEMS-1.8%
Imnet Systems* 227,300 6,875
PHAMIS* 334,300 5,600
--------
12,475
- -------------------------------------------------------
INFORMATION/FINANCIAL SERVICES-1.1%
Fair Isaac 49,100 1,473
Kronos* 246,000 6,273
--------
7,746
- -------------------------------------------------------
MACHINERY/EQUIPMENT-1.4%
Greenwich Air Services 219,100 9,312
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
MANAGED CARE-DENTAL-2.6%
Compdent* 118,200 $ 4,255
Orthodontic Centers of
America* 459,400 13,782
--------
18,037
- --------------------------------------------------------
MEDICAL DEVICES-3.7%
CNS* 101,100 2,515
CONMED* 233,300 5,716
Daig* 127,500 3,076
Target
Therapeutics* 236,100 14,313
--------
25,620
- --------------------------------------------------------
NETWORKING SECURITY-2.0%
Security Dynamics
Technology* 262,000 13,886
- --------------------------------------------------------
PATIENT CARE-HOME-1.2%
Pediatric Services of
America* 336,300 8,534
- --------------------------------------------------------
PATIENT CARE-LONG TERM-0.7%
NCS HealthCare* 188,900 4,628
- --------------------------------------------------------
PATIENT CARE-SPECIALIZED-1.7%
Renal Treatment
Centers* 505,800 12,013
- --------------------------------------------------------
PHYSICIAN PRACTICE MANAGEMENT-1.0%
Medpartners/Mullikin* 72,100 2,055
OccuSystems* 224,100 5,098
--------
7,153
</TABLE>
31
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Emerging Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
RESTAURANTS-3.2%
Longhorn Steaks* 149,000 $ 3,427
Manhattan Bagel* 166,800 3,878
Papa John's
International* 330,600 14,753
--------
22,058
- --------------------------------------------------------
RETAIL-CATALOG-0.5%
Wilmar
Industries* 151,300 3,404
- --------------------------------------------------------
RETAIL-OFFICE PRODUCTS-2.3%
US Office
Products* 506,400 15,698
- --------------------------------------------------------
RETAIL-SPECIALTY-3.5%
Garden Ridge* 41,600 1,903
Just For Feet* 268,775 11,188
West Marine* 230,600 10,723
--------
23,814
- --------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-2.5%
Brooks
Automation* 24,500 276
Helix Technology 269,200 7,570
IKOS Systems* 157,300 2,635
Integrated
Measurement
Systems* 65,300 1,020
PRI Automation* 139,100 3,408
Tylan General* 241,900 2,359
--------
17,268
- --------------------------------------------------------
SEMICONDUCTOR MANUFACTURING-1.1%
DSP Communications* 310,400 7,760
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SOFTWARE-GENERAL-5.9%
Aspen
Technology* 332,600 $ 14,302
Desktop Data* 211,625 7,777
Inso* 284,800 13,136
Visio* 184,600 5,169
--------
40,384
- -------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED
RESELLERS-1.7%
Brooktrout
Technology* 330,350 11,397
- -------------------------------------------------------
TECHNOLOGY-MISCELLANEOUS-0.4%
Zoltek* 55,200 2,615
- -------------------------------------------------------
TRANSACTION PROCESSING-0.3%
Transaction Network
Services* 62,725 2,195
- -------------------------------------------------------
TRANSPORTATION-SURFACE-1.4%
Eagle USA
Airfreight* 352,700 9,787
- -------------------------------------------------------
VOICE/CALL TRANSACTION PROCESSING-1.1%
Natural
Microsystems* 261,900 7,857
--------
Total Common Stock
(Cost $405,269,703) 598,196
</TABLE>
32
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS-15.0%
Nomura
Securities
5.43%, dated
03/29/96,
matures
04/01/96,
repurchase
price
$103,380,862
(collateralized
by FHLMC
obligations,
total par value
$265,220,462,
0.00%-989.975%,
08/15/97-
03/15/24: FNMA
obligations,
total par value
$882,185,120,
0.00%-985.50%,
09/25/00-
04/25/24: total
market value
$105,401,439)(A) $103,335 $103,335
--------
Total Repurchase Agreements
(Cost $103,334,743) 103,335
--------
Total Investments-101.7%
(Cost $508,604,446) 701,531
--------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES-(1.7%)
Other Assets and
Liabilities, Net $(11,826)
- -------------------------------------------------------
NET ASSETS:
Fund shares
(authorized 200
million shares-
$0.001 par value)
based on
29,892,327
outstanding shares
of common stock 447,195
Accumulated net
realized gain on
investments 49,583
Net unrealized
appreciation on
investments 192,927
--------
Total Net Assets-
100.0% $689,705
========
Net Asset Value,
Offering Price and
Redemption Price
Per Share $ 23.07
========
</TABLE>
- -------
* 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.
33
<PAGE>
As of March 31, 1996
- ----------------------------------------------------------------------------
Statement of Net Assets
- ----------------------------------------------------------------------------
----------------------------------------
PBHG Core Growth Fund
----------------------------------------
[GRAPH APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG Core
Growth Fund. The breakdown is as follows:
Technology: 26%
Consumers: 12%
Health Care: 16%
Service: 21%
Transportation: 3%
Industrial/General Manufacturing: 6%
Energy: 2%
Repurchase Agreement: 14%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-89.7%
APPAREL-1.5%
Mossimo* 6,800 $ 220
Tommy Hilfiger* 5,400 248
-------
468
- -------------------------------------------------------
AUTO-RELATED-1.8%
Harley-Davidson 14,600 568
- -------------------------------------------------------
BIOTECHNOLOGY-2.6%
Genzyme--General
Division* 4,100 226
Idexx
Laboratories* 14,000 588
-------
814
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
CLIENT/SERVER SOFTWARE-1.5%
Atria Software* 4,600 $ 252
HNC Software* 3,300 224
-------
476
- -------------------------------------------------------
COMMERCIAL SERVICES-6.6%
DST Systems* 19,400 594
First Data 7,300 515
Gartner Group,
Cl A* 9,800 597
PMT Services* 14,700 353
-------
2,059
</TABLE>
34
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
COMMUNICATION SERVICES-1.5%
LCI International* 18,700 $ 458
- -------------------------------------------------------
CONNECTORS-1.9%
Cable Design
Technologies* 16,000 588
- -------------------------------------------------------
CORRECTIONAL SERVICES-1.5%
Corrections of
America* 8,200 467
- -------------------------------------------------------
DATA COMMUNICATIONS-2.4%
Picturetel* 18,200 564
US Robotics* 1,400 181
-------
745
- --------------------------------------------------------
DATABASE SOFTWARE-0.0%
Oracle* 100 5
- --------------------------------------------------------
DESIGN/MANUFACTURING AUTOMATION-
5.8%
Cognex* 23,700 607
Parametric
Technology* 15,300 599
Synopsys* 18,900 605
-------
1,811
- --------------------------------------------------------
DISTRIBUTED SOFTWARE/HARDWARE & PERIPHERALS-0.1%
Hewlett Packard 200 19
- --------------------------------------------------------
DRUGS-1.8%
Pfizer 8,200 549
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
EMPLOYMENT SERVICES-1.3%
Accustaff* 16,200 $ 409
- -------------------------------------------------------
ENVIRONMENTAL-6.6%
Sanifill* 13,700 526
Thermo Electron* 5,200 309
U.S. Filter* 21,700 608
United Waste
Systems* 12,000 600
-------
2,043
- -------------------------------------------------------
GRAPHICS/IMAGE PROCESSING-2.2%
Electronics for
Imaging* 13,000 566
Xeikon NV ADR* 5,700 110
-------
676
- -------------------------------------------------------
HEALTH CARE-MANAGEMENT SERVICES-
0.9%
Access Health
Marketing* 7,500 291
- -------------------------------------------------------
HEALTH CARE-SUPPLIES-0.9%
Physician Sales
& Services* 11,200 277
- -------------------------------------------------------
INFORMATION/FINANCIAL SERVICES-1.7%
Paychex 9,200 538
- -------------------------------------------------------
INTERNETWORKING-6.7%
Ascend
Communications* 8,100 436
Cascade
Communications* 4,700 422
Cisco Systems* 400 19
Fore Systems* 5,400 386
Shiva* 4,200 381
Stratacom* 12,300 450
-------
2,094
</TABLE>
35
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Core Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
LEISURE-1.8%
Regal Cinemas* 15,000 $ 555
- -------------------------------------------------------
MANAGED CARE-DENTAL-2.3%
Orthodontic Centers of
America* 23,400 702
- -------------------------------------------------------
MEDICAL DEVICES-1.6%
Target Therapeutics* 8,000 485
- -------------------------------------------------------
NETWORKING SECURITY-2.3%
Raptor Systems* 5,200 155
Security Dynamics
Technology* 10,400 552
-------
707
- -------------------------------------------------------
NETWORKING SOFTWARE-1.9%
McAfee Associates* 10,800 591
- -------------------------------------------------------
NON-DURABLES-1.4%
Blyth Industries* 13,300 442
- -------------------------------------------------------
PATIENT CARE-HEALTH PLAN-2.2%
Healthsource* 14,900 577
Oxford Health Plans* 1,300 114
-------
691
- -------------------------------------------------------
PATIENT CARE-SPECIALIZED-1.1%
Healthsouth* 9,800 333
- -------------------------------------------------------
PHARMACEUTICAL SERVICES-0.5%
NCS HealthCare* 5,800 142
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
PHYSICIAN PRACTICE
MANAGEMENT-3.6%
Pediatrix Medical Group* 15,000 $ 533
PhyCor* 13,200 580
-------
1,113
- -------------------------------------------------------
PROCESSING TECHNOLOGY-1.9%
Thermedics* 21,000 593
- -------------------------------------------------------
RADIO/TELEVISION-1.5%
Clear Channel Communications* 8,100 458
- -------------------------------------------------------
RESTAURANTS-1.9%
Boston Chicken* 17,600 600
- -------------------------------------------------------
RETAIL-CATALOG-1.7%
CDW Computer Centers* 10,400 525
- -------------------------------------------------------
RETAIL-OFFICE PRODUCTS-1.5%
Corporate Express* 14,000 462
- -------------------------------------------------------
RETAIL-SPECIALTY-2.8%
General Nutrition* 11,500 288
Sunglass Hut International* 18,000 596
-------
884
- -------------------------------------------------------
SEMICONDUCTOR
MANUFACTURING-3.4%
Linear Technology 500 21
Maxim Integrated Products* 19,200 595
Xilinx* 14,300 454
-------
1,070
</TABLE>
36
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SERVICE/EQUIPMENT-1.8%
Input/Output* 17,600 $ 546
- -------------------------------------------------------
SYSTEM INTEGRATORS/VALUE
ADDED RESELLERS-1.3%
Cambridge Technology
Partners* 7,000 400
- -------------------------------------------------------
TELECOMMUNICATION
EQUIPMENT-0.7%
ADC Telecommunications* 6,800 235
- -------------------------------------------------------
TRANSPORTATION-AIR-1.9%
Atlas Air* 15,900 596
- -------------------------------------------------------
TRANSPORTATION-SURFACE-1.3%
Fritz* 10,400 406
--------
Total Common Stock
(Cost $26,497,046) 27,891
--------
- -------------------------------------------------------
REPURCHASE AGREEMENTS-14.7%
Lehman Brothers
5.09%, dated 03/29/96,
matures 04/01/96,
repurchase price $4,586,000
(collateralized by U.S.
Treasury Note, par value
$4,520,837, 7.00%, 09/30/96:
market value
$4,715,627)(A) $4,584 $ 4,584
--------
Total Repurchase Agreements
(Cost $4,584,064) 4,584
--------
Total Investments-104.4%
(Cost $31,081,110) 32,475
--------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND
LIABILITIES-(4.4%)
Other Assets and Liabilities,
Net $(1,383)
- -------------------------------------------------------
NET ASSETS:
Fund shares (authorized 200 million
shares-$0.001 par value) based on
2,630,647 outstanding shares
of common stock 29,746
Accumulated net investment loss (5)
Accumulated net realized loss on
investments (43)
Net unrealized appreciation on
investments 1,394
-------
Total Net Assets-100.0% $31,092
=======
Net Asset Value, Offering
Price and Redemption
Price Per Share $ 11.82
=======
</TABLE>
- -------
*Non-income producing security
(A)-Tri-party repurchase agreement
ADR-American Depository Receipt
Cl-Class
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
----------------------------------------
PBHG Select Equity Fund
----------------------------------------
[PIE CHART APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG
Select Equity Fund. The breakdown is as follows:
Technology: 37%
Consumers: 13%
Health Care: 14%
Service: 14%
Financial: 4%
Transportation: 2%
Energy: 3%
Repurchase Agreements: 13%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-87.0%
APPAREL-2.7%
Tommy Hilfiger* 121,200 $ 5,560
- -------------------------------------------------------
CLIENT/SERVER SOFTWARE-3.1%
PeopleSoft* 110,000 6,325
- -------------------------------------------------------
COMMERCIAL SERVICES-2.7%
Gartner Group, Cl A* 90,000 5,490
- -------------------------------------------------------
CORRECTIONAL SERVICES-3.3%
Corrections of America* 117,500 6,698
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
DATA COMMUNICATIONS-4.8%
Picturetel* 140,900 $ 4,368
US Robotics* 41,100 5,312
--------
9,680
- -------------------------------------------------------
DESIGN/MANUFACTURING
AUTOMATION-6.2%
Cognex* 162,800 4,172
Parametric Technology* 212,700 8,322
--------
12,494
- -------------------------------------------------------
EMPLOYMENT SERVICES-3.8%
Accustaff* 302,100 7,628
</TABLE>
38
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
FINANCIAL-MISCELLANEOUS-3.9%
The Money Store 286,125 $ 7,976
- -------------------------------------------------------
INFORMATION SYSTEMS-1.9%
HBO 41,700 3,930
- -------------------------------------------------------
INFORMATION/FINANCIAL
SERVICES-0.7%
Paychex 25,000 1,463
- -------------------------------------------------------
INTERNETWORKING-10.1%
Ascend Communications* 152,300 8,205
Cisco Systems* 179,300 8,315
Fore Systems* 55,000 3,933
--------
20,453
- -------------------------------------------------------
LODGING-3.6%
HFS* 148,800 7,235
- -------------------------------------------------------
MEDICAL DEVICES-3.6%
Thermo Cardiosystems* 108,100 7,324
- -------------------------------------------------------
NETWORKING SOFTWARE-3.4%
McAfee Associates* 127,100 6,959
- -------------------------------------------------------
PATIENT CARE-HEALTH PLAN-1.7%
Oxford Health Plans* 40,300 3,536
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
PATIENT CARE-SPECIALIZED-2.4%
Healthsouth* 142,000 $ 4,828
- -------------------------------------------------------
PHYSICIAN PRACTICE
MANAGEMENT-4.7%
PhyCor* 95,000 4,180
Physician Reliance Network* 134,300 5,322
--------
9,502
- -------------------------------------------------------
RADIO/TELEVISION-3.5%
Clear Channel
Communications* 125,900 7,113
- -------------------------------------------------------
RESTAURANTS-3.1%
Boston Chicken* 182,900 6,230
- -------------------------------------------------------
RETAIL-CATALOG-3.9%
Viking Office Products* 140,600 7,821
- -------------------------------------------------------
SEMICONDUCTOR
MANUFACTURING-6.1%
Altera* 143,700 8,029
Maxim Integrated Products* 142,200 4,408
--------
12,437
- -------------------------------------------------------
SERVICE/EQUIPMENT-2.8%
Input/Output* 186,000 5,766
</TABLE>
39
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Select Equity Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Shares/Face Market
Description Amount(000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SYSTEM SOFTWARE-2.8%
Computer Associates
International 79,000 $ 5,658
- -------------------------------------------------------
TRANSPORTATION-AIR-2.2%
Atlas Air* 117,100 4,391
--------
Total Common Stock
(Cost $156,461,747) 176,497
- -------------------------------------------------------
REPURCHASE AGREEMENTS-13.2%
Nomura Securities 5.43%,
dated 03/29/96, matures
04/01/96, repurchase
price $26,697,267
(collateralized by
various FHLMC
obligations, total par
value $47,550,787,
0.00%-185.496%,
07/15/08-03/15/24:
FNMA obligations,
total par value
$70,322,473, 0.00%-
554.926%, 05/25/06-
03/01/26: total
market value
$27,219,065)(A) $26,685 26,685
--------
Total Repurchase Agreements
(Cost $26,685,357) 26,685
--------
Total Investments-100.2%
(Cost $183,147,104) 203,182
--------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND
LIABILITIES-(0.2%)
Other Assets and Liabilities, Net $ (386)
- -----------------------------------
NET ASSETS:
Fund shares (authorized 200 million
shares-$0.001 par value) based on
11,746,005 outstanding shares of
common stock 177,430
Accumulated net realized gain on
investments 5,331
Net unrealized appreciation on
investments 20,035
--------
Total Net Assets-100.0% $202,796
========
Net Asset Value, Offering Price and
Redemption Price Per Share $ 17.27
========
</TABLE>
- -------
* 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.
40
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
----------------------------------------
PBHG Large Cap Growth Fund
----------------------------------------
[PIE CHART APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the Large
Cap Growth Fund. The breakdown is as follows:
Technology: 27%
Consumers: 17%
Health Care: 19%
Service: 18%
Financial: 5%
Transportation: 1%
Industrial/General Manufacturing: 2%
Repurchase Agreements: 11%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-89.9%
APPAREL-3.0%
Nike, Cl B 10,900 $ 886
Tommy Hilfiger* 15,900 729
-------
1,615
- -------------------------------------------------------
AUTO FINANCE-0.6%
Credit Acceptance* 17,500 324
- -------------------------------------------------------
AUTO-RELATED-1.0%
Harley-Davidson 14,400 560
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
BIOTECHNOLOGY-3.0%
Amgen* 10,900 $ 634
Genzyme-General Division* 9,600 528
Idexx Laboratories* 11,000 462
-------
1,624
- -------------------------------------------------------
CLIENT/SERVER SOFTWARE-1.4%
PeopleSoft* 13,000 748
- -------------------------------------------------------
COMMERCIAL SERVICES-6.2%
Computer Sciences* 14,700 1,033
DST Systems* 16,800 515
</TABLE>
41
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- -------------------------------------------------------
PBHG Large Cap Growth Fund (continued)
- -------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
COMMERCIAL SERVICES-CONTINUED
First Data 13,700 $ 966
Gartner Group, Cl A* 13,600 830
-------
3,344
- -------------------------------------------------------
COMMUNICATION SERVICES-2.8%
LCI International* 29,600 725
WorldCom* 17,200 791
-------
1,516
- -------------------------------------------------------
CONSUMER PRODUCTS-
MISCELLANEOUS-0.9%
Gillette 9,300 481
- -------------------------------------------------------
CONSUMER SERVICES-1.8%
America Online* 17,100 958
- -------------------------------------------------------
CONTRACT RESEARCH-1.4%
Quintiles Transnational* 11,700 761
- -------------------------------------------------------
CORRECTIONAL SERVICES-2.0%
Corrections of America* 18,800 1,072
- -------------------------------------------------------
DATABASE SOFTWARE-1.2%
Informix* 24,800 654
Oracle* 300 14
-------
668
- -------------------------------------------------------
DESIGN/MANUFACTURING
AUTOMATION-2.0%
Parametric Technology* 27,500 1,076
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
DISTRIBUTED SOFTWARE/HARDWARE
& PERIPHERALS-1.7%
Hewlett Packard 9,600 $ 902
- -------------------------------------------------------
DRUGS-1.6%
Pfizer 12,800 858
- -------------------------------------------------------
EMPLOYMENT SERVICES-1.5%
Accustaff* 31,800 803
- -------------------------------------------------------
ENVIRONMENTAL-1.7%
Thermo Electron* 15,700 934
- -------------------------------------------------------
FINANCIAL-MISCELLANEOUS-3.0%
First USA 10,900 617
The Money Store 35,100 979
-------
1,596
- -------------------------------------------------------
HEALTH CARE-SUPPLIES-1.3%
Johnson & Johnson 7,894 728
- -------------------------------------------------------
INFORMATION SYSTEMS-1.2%
HBO 6,700 631
- -------------------------------------------------------
INFORMATION/FINANCIAL
SERVICES-2.1%
Paychex 19,200 1,123
- -------------------------------------------------------
INTERNETWORKING-11.4%
Ascend Communications* 25,000 1,346
Bay Networks* 15,300 470
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
INTERNETWORKING-CONTINUED
Cascade Communications* 12,300 $ 1,104
Cisco Systems* 22,300 1,034
Fore Systems* 12,300 879
Shiva* 7,400 672
Stratacom* 17,100 626
-------
6,131
- -------------------------------------------------------
LODGING-1.5%
HFS* 17,000 827
- -------------------------------------------------------
MEDICAL DEVICES-3.3%
Boston Scientific* 15,100 695
Medtronic 18,100 1,079
-------
1,774
- -------------------------------------------------------
MORTGAGE RELATED-1.5%
MGIC Investment 15,000 818
- -------------------------------------------------------
MULTI-INDUSTRY-0.9%
Danaher 13,500 500
- -------------------------------------------------------
PATIENT CARE-HEALTH PLAN-3.0%
Healthsource* 22,500 872
Oxford Health Plans* 8,500 746
-------
1,618
- -------------------------------------------------------
PATIENT CARE-SPECIALIZED-1.2%
Healthsouth* 18,600 632
- -------------------------------------------------------
PHARMACEUTICAL SERVICES-1.5%
Omnicare 14,900 803
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
PHYSICIAN PRACTICE
MANAGEMENT-1.8%
PhyCor* 21,600 $ 950
- -------------------------------------------------------
RADIO/TELEVISION-1.5%
Clear Channel Communications* 13,900 785
- -------------------------------------------------------
RESTAURANTS-1.5%
Boston Chicken* 23,700 807
- -------------------------------------------------------
RETAIL-CATALOG-2.5%
Micro Warehouse* 13,000 540
Viking Office Products* 14,100 784
-------
1,324
- -------------------------------------------------------
RETAIL-OFFICE PRODUCTS-3.0%
Corporate Express* 25,600 845
Staples* 37,500 764
-------
1,609
- -------------------------------------------------------
RETAIL-SPECIALTY-3.1%
General Nutrition* 28,200 705
Sunglass Hut International* 28,700 951
-------
1,656
- -------------------------------------------------------
SEMICONDUCTOR
MANUFACTURING-5.7%
Altera* 17,000 950
Atmel* 19,000 485
Linear Technology 25,500 1,064
Xilinx* 17,700 562
-------
3,061
</TABLE>
43
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Large Cap Growth Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SYSTEM SOFTWARE-1.3%
Computer Associates
International 9,600 $ 688
- -------------------------------------------------------
TELECOMMUNICATION
EQUIPMENT-2.4%
ADC Telecommunications* 21,000 724
Tellabs* 11,700 566
-------
1,290
- -------------------------------------------------------
TRANSPORTATION-SURFACE-1.4%
Fritz* 18,900 737
-------
Total Common Stock
(Cost $44,765,686) 48,332
-------
- -------------------------------------------------------
REPURCHASE AGREEMENTS-11.1%
Lehman Brothers 5.09%,
dated 03/29/96, matures
04/01/96, repurchase
price $5,948,414
(collateralized by
U.S. Treasury Note,
par value $5,863,884,
7.00%, 09/30/96:
market value
$6,116,539) (A) $5,946 5,946
-------
Total Repurchase Agreements
(Cost $5,945,892) 5,946
-------
Total Investments-101.0%
(Cost $50,711,578) 54,278
-------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES-(1.0%)
Other Assets and Liabilities, Net $ (519)
- ----------------------------------
NET ASSETS:
Fund shares (authorized 200 million
shares-$0.001 par value) based on
3,701,084 outstanding shares of
common stock 50,058
Accumulated net realized gain on
investments 135
Net unrealized appreciation on
investments 3,566
-------
Total Net Assets-100.0% $53,759
=======
Net Asset Value, Offering Price and
Redemption Price Per Share $ 14.53
=======
</TABLE>
- -------
* Non-income producing security
(A)-Tri-party repurchase agreement
Cl-Class
The accompanying notes are an integral part of the financial statements.
44
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
----------------------------------------
PBHG Technology & Communications Fund
----------------------------------------
[PIE CHART APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG
Technology & Communications Fund. The breakdown is as follows:
Technology: 70%
Consumers: 1%
Health Care: 5%
Service: 9%
Financial: 1%
Industrial/General Manufacturing: 2%
Energy: 2%
Repurchase Agreements: 10%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-90.9%
APPLICATION SOFTWARE &
SERVICES-0.0%
Citrix Systems* 600 $ 27
- -------------------------------------------------------
AUTOMATED DATA COLLECTION-2.5%
Trident International* 50,200 954
Zebra Technology* 22,000 583
-------
1,537
- -------------------------------------------------------
BIOTECHNOLOGY-1.1%
Genzyme-General Division* 12,000 660
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
CLIENT/SERVER SOFTWARE-9.8%
Astea International* 28,400 $ 838
Baan NV* 15,000 864
Gensym* 6,800 133
Hyperion Software* 23,400 509
PeopleSoft* 22,000 1,265
PowerCerv* 1,800 27
Project Software &
Development* 11,400 436
Red Brick Systems* 400 17
Remedy* 6,000 339
SQA* 700 19
Unison Software* 66,300 1,525
Workgroup Technology* 3,000 65
-------
6,037
</TABLE>
45
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- -------------------------------------------------------
PBHG Technology & Communications Fund (continued)
- -------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
COMMERCIAL SERVICES-1.9%
CBT Group ADR* 5,000 $ 368
Data Processing Resources* 1,300 36
DST Systems* 10,000 306
IntelliQuest Information Group* 2,400 66
May & Speh* 28,200 317
Meta Group* 600 17
Sterling Commerce* 1,700 52
-------
1,162
- -------------------------------------------------------
COMMUNICATION SERVICES-1.5%
WorldCom* 20,000 920
- -------------------------------------------------------
COMPONENTS-1.4%
California Amplifier* 10,000 268
Coherent* 13,700 582
-------
850
- -------------------------------------------------------
CONNECTORS-0.8%
Cable Design Technologies* 13,500 496
- -------------------------------------------------------
CONTRACT MANUFACTURING-0.5%
Kent Electronics* 8,200 290
- -------------------------------------------------------
CONTRACT RESEARCH-0.3%
Pharmaceutical Product
Development* 800 28
Quintiles Transnational* 2,900 189
-------
217
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
DATA COMMUNICATIONS-6.6%
Dialogic* 12,600 $ 532
Microcom* 10,700 320
Picturetel* 26,200 812
TCSI* 11,400 348
Tessco Technologies* 4,800 134
US Robotics* 15,000 1,939
-------
4,085
- -------------------------------------------------------
DATABASE SOFTWARE-6.7%
Business Objects ADR* 21,000 1,785
Cognos* 42,100 2,389
-------
4,174
- -------------------------------------------------------
DESIGN AUTOMATION/GRAPHICS-0.0%
Metatools* 1,600 30
- -------------------------------------------------------
DESIGN/MANUFACTURING
AUTOMATION-9.5%
Cognex* 29,300 751
FileNet* 23,500 1,357
Integrated Systems* 8,900 429
LeCroy* 56,600 821
Parametric Technology* 54,000 2,112
Perceptron* 15,000 388
Visioneer* 1,100 17
-------
5,875
- -------------------------------------------------------
DISTRIBUTED SOFTWARE/HARDWARE &
PERIPHERALS-1.9%
Sun Microsystems* 15,000 656
Telxon 24,000 510
-------
1,166
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
ENVIRONMENTAL-0.4%
Tetra Tech* 11,100 $ 247
- -------------------------------------------------------
FINANCIAL-MISCELLANEOUS-0.7%
ContiFinancial* 14,200 444
- -------------------------------------------------------
GRAPHICS/IMAGE PROCESSING-2.2%
Electronics for Imaging* 25,100 1,092
Engineering Animation* 500 10
Xeikon NV ADR* 13,400 260
-------
1,362
- -------------------------------------------------------
HEALTH CARE-MANAGEMENT
SERVICES-0.1%
Cohr* 2,500 41
- -------------------------------------------------------
INFORMATION SYSTEMS-0.5%
Medic Computer Systems* 900 68
Physician Computer Networks* 17,100 233
-------
301
- -------------------------------------------------------
INTERNETWORKING-10.0%
Bay Networks* 42,300 1,301
Cabletron Systems* 14,700 974
Cisco Systems* 55,000 2,549
Premisys Communications* 11,100 361
Stratacom* 28,000 1,026
-------
6,211
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
MEDICAL DEVICES-2.3%
CONMED* 16,000 $ 392
ESC Medical Systems* 30,900 1,066
-------
1,458
- -------------------------------------------------------
MEDICAL EQUIPMENT-0.9%
ArthroCare* 800 18
Lunar* 12,300 525
-------
543
- -------------------------------------------------------
NETWORKING SECURITY-1.4%
Raptor Systems* 700 21
Security Dynamics Technology* 15,800 837
-------
858
- -------------------------------------------------------
NETWORKING SOFTWARE-2.5%
Cylink* 600 11
McAfee Associates* 27,800 1,522
-------
1,533
- -------------------------------------------------------
PHARMACEUTICAL SERVICES-0.1%
NCS HealthCare* 1,700 42
- -------------------------------------------------------
RADIO/TELEVISION-0.7%
Chancellor, Cl A* 1,500 33
Emmis Broadcasting* 9,900 381
-------
414
</TABLE>
47
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- -------------------------------------------------------
PBHG Technology & Communications Fund (continued)
- -------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
RETAIL-CATALOG-0.7%
Micro Warehouse* 10,600 $ 440
- -------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-0.4%
Ultratech Stepper* 12,900 227
- -------------------------------------------------------
SEMICONDUCTOR
MANUFACTURING-4.3%
Altera* 25,000 1,397
Atmel* 22,900 584
DSP Communications* 7,800 195
Maxim Integrated Products* 15,300 474
-------
2,650
- -------------------------------------------------------
SERVICE/EQUIPMENT-1.3%
Input/Output* 25,500 791
- -------------------------------------------------------
SOFTWARE-GENERAL-4.6%
Pure Software* 10,300 355
Rational Software* 12,100 478
Tecnomatix Technologies* 99,000 1,337
Viasoft* 25,000 703
-------
2,873
- -------------------------------------------------------
SYSTEM INTEGRATORS/VALUE ADDED
RESELLERS-3.1%
Cambridge Technology Partners* 21,500 1,229
Ciber* 12,800 419
Computer Horizons* 6,500 245
-------
1,893
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMON STOCK-CONTINUED
SYSTEM SOFTWARE-0.0%
OrCAD* 800 $ 9
- -------------------------------------------------------
TELECOMMUNICATION
EQUIPMENT-5.6%
ADC Telecommunications* 25,000 863
Glenayre Technologies* 23,000 880
Omnipoint* 300 8
Premiere Technologies* 900 21
Stanford Telecommunications* 14,500 435
Tellabs* 24,300 1,175
TresCom International* 2,800 41
United States Satellite
Broadcasting* 700 23
-------
3,446
- -------------------------------------------------------
TRANSACTION PROCESSING-1.8%
Concord EFS* 20,375 540
National Data 17,200 587
-------
1,127
- -------------------------------------------------------
VOICE/CALL TRANSACTION
PROCESSING-2.8%
Aspect Telecommunications* 20,000 915
Comverse Technology* 33,800 815
-------
1,730
-------
Total Common Stock
(Cost $52,311,501) 56,166
-------
</TABLE>
48
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face Market
Description Amount(000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENTS-10.7%
Nomura Securities 5.43%,
dated 03/29/96, matures
04/01/96, repurchase
price $6,625,000
(collateralized by
various FHLMC
obligations, total par
value $30,420,410,
0.00%-8.00%,
06/01/22-07/01/22:
FNMA obligations,
total par value
$14,010,129, 8.00%,
08/01/22-04/01/24:
total market value
$6,754,544) (A) $6,662 $ 6,622
-------
Total Repurchase Agreements
(Cost $6,622,102) 6,622
-------
Total Investments-101.6%
(Cost $58,933,603) 62,788
-------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Value (000)
- -------------------------------------------------------
<S> <C>
OTHER ASSETS AND LIABILITIES-(1.6%)
Other Assets and Liabilities, Net $(1,016)
- -------------------------------------------------------
NET ASSETS:
Fund shares (authorized 200 million
shares-$0.001 par value) based on
4,951,621 outstanding shares of
common stock 58,185
Accumulated net realized loss on
investments (267)
Net unrealized appreciation on
investments 3,854
-------
Total Net Assets-100.0% $61,772
=======
Net Asset Value, Offering Price and
Redemption Price Per Share $ 12.48
=======
</TABLE>
- -------
* Non-income producing security
ADR-American Depository Receipt
Cl-Class
FHLMC-Federal Home Loan Mortgage Corporation
FNMA-Federal National Mortgage Association
(A)Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
49
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
----------------------------------------
PBHG International Fund
----------------------------------------
[PIE CHART APPEARS HERE]
Pie chart depicting the asset allocation as of March 31, 1996 for the PBHG
International Fund. The breakdown is as follows:
Japan: 31%
United Kingdom: 12%
France: 6%
Hong Kong: 4%
Spain: 6%
Italy: 6%
Singapore: 9%
Australia: 4%
Germany: 4%
Mexico: 3%
Other: 15%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-90.0%
ARGENTINA-1.5%
YPF ADR 8,500 $ 171
- -------------------------------------------------------
AUSTRALIA-3.6%
Australia & New Zealand
Bank 40,000 191
Newscorp 37,000 217
-------
408
- -------------------------------------------------------
FRANCE-5.4%
AGF 3,170 88
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-
CONTINUED
FRANCE-CONTINUED
AXA 1,760 $ 108
Hermes International 500 133
Legris Industries* 1,540 79
Lyonnaise des Eaux 970 91
Michelin, Cl B 2,300 110
-------
609
- -------------------------------------------------------
GERMANY-1.5%
Mannesmann 310 113
Veba 1,250 61
-------
174
</TABLE>
50
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-
CONTINUED
HONG KONG-3.5%
Cheung Kong
Holdings 15,000 $ 106
Peregrine
Investment
Holdings 100,000 161
Swire Pacific,
Cl A 15,000 132
-------
399
- -------------------------------------------------------
IRELAND-1.1%
Allied Irish
Bank 12,100 62
Framlington
Maghreb Fund* 7,500 62
Framlington
Maghreb Fund
Warrants* 1,500 1
-------
125
- -------------------------------------------------------
ITALY-5.7%
Assicurazioni
Generali 4,800 107
Bulgari* 9,000 113
Fiat 38,000 120
Olivetti* 69,000 36
Parmalat
Finanziaria 100,000 92
Telecom Italia
Mobile 27,000 49
Telecom Italia
Mobile di Risp 109,200 120
-------
637
- -------------------------------------------------------
JAPAN-29.7%
Canon 6,000 114
Itochu 27,000 189
Keyence 1,000 120
Matsumoto Kenko* 6,000 199
Mitsubishi
Materials* 32,000 172
Mori Seiki 8,000 169
Nippon Steel 54,000 186
Nissan Motors 19,000 147
NKK* 64,000 185
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-
CONTINUED
JAPAN-CONTINUED
Nomura
Securities 8,000 $ 176
Sanwa Bank 7,000 141
Sekisui House 13,000 163
Sumitomo Bank 8,000 162
Sumitomo Trust &
Banking 11,000 151
Suzuki Motor 16,000 197
TDK 3,000 155
Teijin 34,000 188
Terumo 20,000 223
Tokyo Style 9,000 149
Yamanouchi
Pharmaceutical 7,000 156
-------
3,342
- -------------------------------------------------------
MALAYSIA-1.8%
Genting 11,000 99
Malayan Banking 11,000 103
-------
202
- -------------------------------------------------------
MEXICO-2.7%
Cifra ADR* 100,000 134
Interceramica* 40,000 58
Telefonos de
Mexico ADR 3,300 108
-------
300
- -------------------------------------------------------
NETHERLANDS-2.1%
Aegon 1,200 57
Hollandsche
Beton Groep 540 90
Verenigde
Nederlandse
Uitgevbedri 5,240 87
-------
234
</TABLE>
51
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG International Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-
CONTINUED
NEW ZEALAND-2.0%
Telecom of New
Zealand 50,000 $ 225
- -------------------------------------------------------
PHILIPPINES-0.0%
Benpres Holdings
GDS* 800 5
- -------------------------------------------------------
POLAND-2.1%
BRE 5,000 107
Mostostal
Export* 16,000 47
Polifarb Cieszyn 15,000 78
-------
232
- -------------------------------------------------------
SINGAPORE-8.3%
DBS Land 50,000 192
Hong Kong Land 115,000 276
Keppel 15,500 141
Oversea-Chinese
Banking-F 13,000 175
Singapore Land 20,000 146
-------
930
- -------------------------------------------------------
SPAIN-5.4%
Banco de
Santander 2,255 107
Dragados Y
Construccion 8,206 112
Gas Natural 1,000 173
Portland
Valderrivas 1,750 108
Vallehermoso 5,740 103
-------
603
- -------------------------------------------------------
SWITZERLAND-2.0%
Ciba Geigy 85 106
Sandoz
Pharmaceutical 103 121
-------
227
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------
<S> <C> <C>
FOREIGN COMMON STOCK-
CONTINUED
UNITED KINGDOM-11.6%
3I Group 15,000 $ 99
Abbey National 9,400 81
Argyll Group 20,000 94
Blue Circle
Industries 15,000 78
BTR 20,000 96
Cable & Wireless 16,000 130
Commercial Union 8,000 69
CRH 8,570 75
Glaxo Wellcome 2,500 31
Grand
Metropolitan 17,000 109
Kingfisher 14,000 122
National
Westminster
Bank 6,500 63
Rank
Organisation 11,000 81
Rolls Royce 26,000 86
Smithkline
Beecham, Cl A 3,000 30
Unilever 3,000 56
-------
1,300
-------
Total Foreign Common
Stocks (Cost $9,412,675) 10,123
-------
- -------------------------------------------------------
FOREIGN PREFERRED STOCKS-2.2%
BRAZIL-0.0%
Brahma 6,432 3
- -------------------------------------------------------
GERMANY-2.2%
Fresenius 1,400 248
-------
Total Foreign Preferred
Stocks (Cost $70,235) 251
-------
</TABLE>
52
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
TIME DEPOSIT-3.6%
Industrial Bank
of Japan
5.250%,
04/02/96 $ 400 $ 400
-------
Total Time Deposit
(Cost $400,176) 400
-------
Total Investments-95.8%
(Cost $9,883,086) 10,774
-------
- -------------------------------------------------------
OTHER ASSETS AND LIABILITIES-4.2%
Other Assets and Liabilities,
Net 469
-------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
NET ASSETS:
Fund shares
(authorized 200
million shares--
$0.001 par value)
based on 1,065,691
outstanding shares
of common stock $10,728
Accumulated net
investment loss (35)
Accumulated net
realized loss on
investments (323)
Accumulated net
realized loss on
foreign currency
transactions (17)
Net unrealized
appreciation on
investments 891
Net unrealized
depreciation on
foreign currency
transactions (1)
-------
Total Net Assets-
100.0% $11,243
=======
Net Asset Value,
Offering Price and
Redemption Price
Per Share $ 10.55
=======
</TABLE>
- -------
*Non-income producing security
ADR-American Depository Receipt
Cl-Class
F-Foreign Registry Shares
GDS-Global Depository Shares
The accompanying notes are an integral part of the financial statements.
53
W
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets
- --------------------------------------------------------------------------------
----------------------------------------
PBHG Cash Reserves Fund
----------------------------------------
[GRAPH APPEARS HERE]
Pie chart depicting the asset allocations as of March 31, 1996 for the PBHG Cash
Reserves Fund. The breakdown is as follows:
Commercial Paper: 75%
Certificates of Deposit: 13%
U.S. Treasury Obligations: 4%
Corporate Obligations: 2%
Bank Notes: 2%
Bankers Acceptances: 1%
Repurchase Agreement: 3%
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-76.0%
American Home
Products
5.300%,
04/24/96 $2,000 $ 1,993
Asset
Securitization
Cooperation
5.300%,
04/03/96 1,000 1,000
Associates of
North America
5.270%,
05/14/96 2,300 2,286
Beneficial
5.220%,
05/21/96 3,200 3,177
Burlington
Northern Santa
Fe
5.300%,
05/06/96 1,000 995
Caterpillar
5.350%,
04/29/96 2,300 2,290
Centric Funding
5.200%,
05/03/96 2,000 1,991
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-CONTINUED
Ciesco
5.270%,
04/18/96 $2,200 $ 2,195
Clipper
Receivable
5.300%,
04/15/96 2,500 2,495
Coca-Cola
Enterprises
5.150%,
05/06/96 2,500 2,487
Den Danske
5.270%,
07/31/96 2,500 2,456
Ford Motor
Credit
5.230%,
08/23/96 3,000 2,937
General Electric
Capital
5.600%,
04/03/96 1,500 1,500
5.270%,
05/14/96 1,700 1,689
General Motors
5.310%,
05/15/96 1,600 1,590
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-CONTINUED
Glaxo Wellcome
5.100%,
05/28/96 $ 500 $ 496
Harvard
University
5.250%,
05/15/96 3,000 2,981
Hitachi America
5.160%,
07/12/96 1,500 1,478
ING Bank
5.440%,
04/08/96 2,000 1,998
National
Westminster
Bank
5.380%,
04/11/96 2,000 1,997
New Center Asset
Trust
5.310%,
05/08/96 2,000 1,989
PHH
5.190%,
04/12/96 2,000 1,997
PREFCO
5.250%,
04/04/96 1,482 1,481
Prudential
Funding
5.160%,
04/10/96 2,000 1,997
Puerto Rico
Development
Bank
5.250%,
04/02/96 2,000 2,000
Quebec Province
5.080%,
07/22/96 3,000 2,953
Riverwood
Funding
5.050%,
05/10/96 2,000 1,989
San Paolo US
Financial
5.360%,
04/16/96 2,000 1,996
Sears Roebuck
5.210%,
05/22/96 3,200 3,176
Spain, Kingdom
of
5.300%,
04/12/96 3,200 3,192
Suntrust Bank
5.100%,
05/08/96 2,000 1,990
Supervalue
5.550%,
04/16/96 1,000 998
Toshiba America
5.070%,
05/13/96 2,000 1,988
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER-CONTINUED
TransAmerica
Finance
5.530%,
04/03/96 $2,500 $ 2,499
Westpac Banking
5.530%,
04/30/96 2,000 1,991
Zeneca
Wilmington
5.350%,
04/17/96 3,000 2,993
--------
Total Commercial
Paper
(Cost
$75,260,461) 75,260
- -------------------------------------------------------
CERTIFICATES OF DEPOSIT-13.2%
Bank of New York
5.520%,
05/22/96 2,000 2,000
Bank of Tokyo
5.480%,
05/15/96 2,000 2,000
Chase Manhattan
Delaware
5.770%,
04/15/96 2,000 2,000
First Union
National Bank
5.220%,
05/03/96 3,000 3,000
FNB Maryland
5.750%,
05/01/96 2,000 2,000
NationsBank
5.500%,
06/10/96 2,000 2,000
--------
Total Certificates of
Deposit (Cost $12,999,877) 13,000
- -------------------------------------------------------
U.S. TREASURY OBLIGATIONS-4.1%
U.S. Treasury
Note
7.500%,
01/31/97 4,000 4,076
--------
Total U.S. Treasury
Obligations
(Cost $4,075,640) 4,076
</TABLE>
55
<PAGE>
As of March 31, 1996
- --------------------------------------------------------------------------------
Statement of Net Assets The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
- ----------------------------------------
PBHG Cash Reserves Fund (continued)
- ----------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
CORPORATE OBLIGATIONS-2.5%
Caterpillar (A)
6.091%,
11/29/96 $ 500 $ 501
Florida Power &
Light
4.850%,
06/24/96 2,000 1,996
--------
Total Corporate Obligations
(Cost $2,497,317) 2,497
- -------------------------------------------------------
BANK NOTES-2.0%
CoreStates
Capital
5.390%,
12/10/96 (A) 2,000 2,000
--------
Total Bank Notes
(Cost $2,000,000) 2,000
- -------------------------------------------------------
BANKER'S ACCEPTANCES-0.6%
Bank of Boston
5.350%,
07/29/96 594 584
--------
Total Banker's Acceptances
(Cost $583,807) 584
- -------------------------------------------------------
REPURCHASE AGREEMENTS-3.4%
Aubrey Lanston
5.50%, dated
03/29/96, matures
04/01/96,
repurchase
price
$3,356,517
(collateralized
by U.S.
Treasury Note,
par value
$3,150,000,
7.50%,
11/15/01:
market value
$3,429,081) 3,355 3,355
--------
Total Repurchase Agreements
(Cost $3,355,000) 3,355
--------
Total Investments-101.8%
(Cost $100,772,102) 100,772
--------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------
Face
Description Amount (000) Value (000)
- -------------------------------------------------------
<S> <C> <C>
OTHER ASSETS AND LIABILITIES-(1.8%)
Other Assets and
Liabilities,
Net $ (1,771)
- -------------------------------------------------------
NET ASSETS:
Fund shares (authorized 1.8
billion shares-$0.001 par
value) based on 99,000,404
outstanding shares of common
stock 99,000
Accumulated net realized gain 1
--------
Total Net Assets-100.0% $ 99,001
========
Net Asset Value, Offering
Price and Redemption Price
Per Share $ 1.00
========
</TABLE>
- -------
(A) Variable rate instrument. The rate reflected on the Statement of Net Assets
is the rate in effect on March 31, 1996.
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- ----------- ----------- -----------
PBHG PBHG PBHG
PBHG EMERGING CORE SELECT
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
----------- ----------- ----------- -----------
04/01/95 04/01/95 01/02/96/1/ 04/05/95/2/
to 03/31/96 to 03/31/96 to 03/31/96 to 03/31/96
(000) (000) (000) (000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 564 $ 186 $ 1 $ 35
Interest 11,692 5,735 36 517
-------- -------- ------ -------
Total Investment Income 12,256 5,921 37 552
-------- -------- ------ -------
EXPENSES:
Investment Advisory Fees 15,198 4,785 23 624
Waiver of Investment
Advisory Fees -- -- (23) (162)
Contribution by Adviser -- -- (10) --
Administrative Fees 3,576 1,126 18 164
Waiver of Administrative
Fee -- -- (6) (6)
Custodian Fees 93 41 2 14
Professional Fees 333 110 1 17
Transfer Agent Fees 5,147 1,657 23 307
Printing Fees 856 312 2 36
Directors' Fees 47 14 -- 2
Registration and Filing
Fees 1,028 185 11 96
Insurance and Other Fees 19 5 1 1
Amortization of Deferred
Organizational Costs -- 3 -- 3
Pricing Fees 49 17 -- 2
-------- -------- ------ -------
Total Expenses 26,346 8,255 42 1,098
-------- -------- ------ -------
NET INVESTMENT LOSS (14,090) (2,334) (5) (546)
-------- -------- ------ -------
Net Realized Gain (Loss)
from Security
Transactions (34,304) 76,215 (43) 8,613
Net Change in Unrealized
Appreciation on
Investments 793,260 149,027 1,394 20,035
-------- -------- ------ -------
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS 758,956 225,242 1,351 28,648
-------- -------- ------ -------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS $744,866 $222,908 $1,346 $28,102
======== ======== ====== =======
</TABLE>
/1/ The PBHG Core Growth Fund commenced operations on January 2, 1996.
/2/ The PBHG Select Equity 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.
57
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------- -------------- ------------- -----------
PBHG PBHG PBHG
LARGE CAP TECHNOLOGY & PBHG CASH
GROWTH COMMUNICATIONS INTERNATIONAL RESERVES
FUND FUND FUND FUND
----------- -------------- ------------- -----------
04/05/95/1/ 10/2/95/2/ 04/01/95 04/05/95/1/
to 03/31/96 to 03/31/96 to 03/31/96 to 03/31/96
(000) (000) (000) (000)
----------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 22 $ -- $ 195 $ --
Interest 105 155 59 3,232
Less: Foreign Taxes
Withheld -- -- (24) --
------ ------ ------ ------
Total Investment Income 127 155 230 3,232
------ ------ ------ ------
EXPENSES:
Investment Advisory Fees 116 129 115 165
Waiver of Investment
Advisory Fees (82) (71) (89) (99)
Administrative Fees 76 42 75 123
Waiver of Administrative
Fee (6) (6) -- (6)
Custodian Fees 8 8 26 13
Professional Fees 4 6 -- 13
Transfer Agent Fees 67 72 86 102
Printing Fees 7 6 4 37
Directors' Fees -- -- -- 1
Registration and Filing
Fees 36 44 21 41
Insurance and Other Fees 1 1 -- 1
Amortization of Deferred
Organizational Costs 3 1 9 2
Pricing Fees -- -- 8 1
------ ------ ------ ------
Total Expenses 230 232 255 394
------ ------ ------ ------
NET INVESTMENT INCOME
(LOSS) (103) (77) (25) 2,838
------ ------ ------ ------
Net Realized Gain (Loss)
from Security
Transactions 950 (184) 348 1
Net Realized Gain on
Foreign Currency
Transactions -- -- 96 --
Net Change in Unrealized
Depreciation on Foreign
Currency and Translation
of Other Assets and
Liabilities in Foreign
Currency -- -- (1) --
Net Change in Unrealized
Appreciation on
Investments 3,566 3,854 1,262 --
------ ------ ------ ------
NET REALIZED AND
UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 4,516 3,670 1,705 1
------ ------ ------ ------
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS $4,413 $3,593 $1,680 $2,839
====== ====== ====== ======
</TABLE>
/1/ The PBHG Large Cap Fund and the PBHG Cash Reserves Fund commenced
operations on April 5, 1995.
/2/ The PBHG Technology & Communications Fund commenced operations on
October 2, 1995.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------------- ------------------------ ------------ ------------
PBHG PBHG PBHG
PBHG EMERGING CORE SELECT
GROWTH GROWTH GROWTH EQUITY
FUND FUND FUND FUND
----------------------- ------------------------ ------------ ------------
04/01/95 04/01/94 to 04/01/95 to 11/01/94 /1/ 01/02/96 /2/ 04/05/95 /3/
03/31/96 03/31/95 03/31/96 to 3/31/95 to 03/31/96 to 03/31/96
(000) (000) (000) (000) (000) (000)
---------- ----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Loss $ (14,090) $ (4,140) $ (2,334) $ (66) $ (5) $ (546)
Net Realized Gain
(Loss) from Security
Transactions (34,304) (28,033) 76,215 3,106 (43) 8,613
Net Change in
Unrealized
Appreciation on
Investments 793,260 141,836 149,027 24,756 1,394 20,035
---------- ---------- -------- -------- ------- --------
Net Increase in Net
Assets Resulting from
Operations 744,866 109,663 222,908 27,796 1,346 28,102
---------- ---------- -------- -------- ------- --------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net Realized Gains From
Security Transactions -- (487) (27,375) (347) -- (2,736)
---------- ---------- -------- -------- ------- --------
Total Distributions -- (487) (27,375) (347) -- (2,736)
---------- ---------- -------- -------- ------- --------
CAPITAL SHARE
TRANSACTIONS(A):
Shares Issued 1,989,556 1,062,585 300,741 374,186 32,701 283,506
Shares Issued upon
Reinvestment of
Distributions -- 464 26,142 330 -- 2,634
Shares Redeemed (450,329) (476,452) (244,577) (103,428) (2,955) (108,710)
---------- ---------- -------- -------- ------- --------
Increase in Net Assets
Derived from Capital
Share Transactions 1,539,227 586,597 82,306 271,088 29,746 177,430
---------- ---------- -------- -------- ------- --------
Total Increase in Net
Assets 2,284,093 695,773 277,839 298,537 31,092 202,796
---------- ---------- -------- -------- ------- --------
NET ASSETS:
Beginning of Period 1,014,832 319,059 411,866 113,329 -- --
---------- ---------- -------- -------- ------- --------
End of Period $3,298,925 $1,014,832 $689,705 $411,866 $31,092 $202,796
========== ========== ======== ======== ======= ========
(A) SHARES ISSUED AND
REDEEMED:
Shares Issued 91,357 71,046 15,598 24,830 2,888 18,709
Shares Issued upon
Reinvestment of
Distributions -- 31 1,270 23 -- 176
Shares Redeemed (21,718) (32,041) (12,551) (7,048) (257) (7,139)
---------- ---------- -------- -------- ------- --------
Net Increase in Shares
Outstanding 69,639 39,036 4,317 17,805 2,631 11,746
========== ========== ======== ======== ======= ========
</TABLE>
/1/ 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.
/2/ The PBHG Core Growth Fund commenced operations on January 2, 1996.
/3/ The PBHG Select Equity 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.
59
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------ -------------- ------------------------ ------------
PBHG
LARGE PBHG PBHG
CAP TECHNOLOGY & PBHG CASH
GROWTH COMMUNICATIONS INTERNATIONAL RESERVES
FUND FUND FUND FUND
------------ -------------- ------------------------ ------------
04/05/95 /1/ 10/02/95 /2/ 04/01/95 06/14/94 /3/ 04/05/95 /1/
TO 03/31/96 TO 03/31/96 TO 03/31/96 TO 03/31/95 TO 03/31/96
(000) (000) (000) (000) (000)
------------ -------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITIES:
Net Investment Income
(Loss) $ (103) $ (77) $ (25) $ (47) $ 2,838
Net Realized Gain
(Loss) from Security
Transactions 950 (184) 348 (497) 1
Net Realized Gain
(Loss) on Foreign
Currency Transactions -- -- 96 (359) --
Net Change in
Unrealized
Appreciation
(Depreciation) on
Investments and
Foreign Currency
Transactions 3,566 3,854 1,261 (371) --
------- ------- ------- ------- --------
Net Increase (Decrease)
in Net Assets
Resulting from
Operations 4,413 3,593 1,680 (1,274) 2,839
------- ------- ------- ------- --------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net Investment Income -- (6) -- -- (2,838)
Net Realized Gains from
Security Transactions (712) -- -- (60) --
------- ------- ------- ------- --------
Total Distributions (712) (6) -- (60) (2,838)
------- ------- ------- ------- --------
CAPITAL SHARE
TRANSACTIONS (A):
Shares Issued 74,598 86,263 13,080 18,835 269,541
Shares Issued upon
Reinvestment of
Distributions 592 6 -- 59 2,751
Shares Redeemed (25,132) (28,084) (18,753) (2,324) (173,292)
------- ------- ------- ------- --------
Increase (Decrease) in
Net Assets Derived
from Capital Share
Transactions 50,058 58,185 (5,673) 16,570 99,000
------- ------- ------- ------- --------
Total Increase
(Decrease) in Net
Assets 53,759 61,772 (3,993) 15,236 99,001
------- ------- ------- ------- --------
NET ASSETS:
Beginning of Period -- -- 15,236 -- --
------- ------- ------- ------- --------
End of Period $53,759 $61,772 $11,243 $15,236 $ 99,001
======= ======= ======= ======= ========
(A) SHARES ISSUED AND
REDEEMED:
Shares Issued 5,520 7,440 1,327 1,908 269,541
Shares Issued upon
Reinvestment of
Distributions 46 1 -- 6 2,751
Shares Redeemed (1,865) (2,489) (1,931) (244) (173,291)
------- ------- ------- ------- --------
Net Increase (Decrease)
in Shares Outstanding 3,701 4,952 (604) 1,670 99,001
======= ======= ======= ======= ========
</TABLE>
/1/ The PBHG Large Cap Fund and the PBHG Cash Reserves Fund commenced
operations on April 5, 1995.
/2/ The PBHG Technology & Communications Fund commenced operations on October
2, 1995.
/3/ The PBHG International Fund commenced operations on June 14, 1994.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
For the periods ended March 31, 1996
- --------------------------------------------------------------------------------
Financial Highlights The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout each Period
<TABLE>
<CAPTION>
Ratio
of Net
Net Realized and Net Net Investment
Asset Net Unrealized Distributions Distributions Asset Assets Ratio Income
Value Investment Gains or from Net from Value End of Expenses (Loss)
Beginning Income (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
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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)%
<CAPTION>
- ------------------------------------
PBHG EMERGING GROWTH FUND
- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $16.10 $(0.07) $8.03 -- $(0.99) $23.07 50.16% $ 689,705 1.47% (0.42)%
1995/1/,/2/ 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64%+ 411,866 1.50%* (0.08)%*
1994/1/ 13.22 (0.03) 2.38 -- (0.98) 14.59 19.64% 113,329 1.45% (0.77)%
1993/3/ 10.00 (0.03) 3.25 -- -- 13.22 32.20%+ 34,517 1.50%* (0.72)%*
<CAPTION>
- -------------------------------
PBHG CORE GROWTH FUND
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996/4/ $10.00 $ -- $1.82 -- -- $11.82 18.20%+ $ 31,092 1.50%* (0.18)%*
<CAPTION>
- -------------------------------
PBHG SELECT EQUITY FUND
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996/5/ $10.00 $(0.05) $7.68 -- $(0.36) $17.27 77.75%* $ 202,796 1.50%* (0.74)%*
<CAPTION>
- -------------------------------------
PBHG LARGE CAP GROWTH FUND
- -------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996/5/ $10.00 $(0.03) $4.97 -- $(0.41) $14.53 50.47%* $ 53,759 1.50%* (0.66)%*
<CAPTION>
- -----------------------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996/6/ $10.00 $(0.02) $2.50 -- -- $12.48 24.82%+ $ 61,772 1.50%* (0.50)%*
<CAPTION>
- -------------------------------
PBHG INTERNATIONAL FUND
- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 $ 9.13 $(0.04) $1.46 -- -- $10.55 15.55% $ 11,243 2.25% (0.22)%
1995/7/ 10.00 (0.03) (0.80) -- $(0.04) 9.13 (8.33)%+ 15,236 2.25%* (0.43)%*
<CAPTION>
- --------------------------------
PBHG CASH RESERVES FUND
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996/5/ $ 1.00 $ 0.05 -- $(0.05) -- $ 1.00 5.24%* $ 99,001 0.70%* 5.05 %*
<CAPTION>
Ratio
of Net
Investment
Ratio Income
of Expenses (Loss)
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
----------- ----------- ---------
- ------------------------
PBHG GROWTH FUND
- ------------------------
<S> <C> <C> <C>
1996 1.48% (0.79)% 44.64%
1995 1.50% (0.69)% 118.75%
1994 1.59% (0.82)% 94.28%
1993 3.04% (2.34)% 209.24%
1992 2.00% (1.03)% 114.54%
<CAPTION>
- ------------------------------------
PBHG EMERGING GROWTH FUND
- ------------------------------------
<S> <C> <C> <C>
1996 1.47% (0.42)% 97.05%
1995/1/,/2/ 1.50%* (0.08)%* 27.50%
1994/1/ 1.45% (0.77)% 95.75%
1993/3/ 1.54%* (0.76)%* 71.18%
<CAPTION>
- -------------------------------
PBHG CORE GROWTH FUND
- -------------------------------
<S> <C> <C> <C>
1996/4/ 2.92%* (1.60)%* 17.00%
<CAPTION>
- -------------------------------
PBHG SELECT EQUITY FUND
- -------------------------------
<S> <C> <C> <C>
1996/5/ 1.73%* (0.97)%* 206.22%
<CAPTION>
- -------------------------------------
PBHG LARGE CAP GROWTH FUND
- -------------------------------------
<S> <C> <C> <C>
1996/5/ 2.07%* (1.23)%* 116.75%
<CAPTION>
- -----------------------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -----------------------------------------------------
<S> <C> <C> <C>
1996/6/ 2.00%* (1.00)%* 125.99%
<CAPTION>
- -------------------------------
PBHG INTERNATIONAL FUND
- -------------------------------
<S> <C> <C> <C>
1996 3.03% (1.00)% 140.26%
1995/7/ 2.36%* (0.54)%* 81.72%
<CAPTION>
- --------------------------------
PBHG CASH RESERVES FUND
- --------------------------------
<S> <C> <C> <C>
1996/5/ 0.88%* 4.87 %* N/A
</TABLE>
/*/ Annualized
/+/ Total returns have not been annualized
/1/ 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 to end March 31 in
1995 and reported financial information for the fiscal period from November
1, 1994 to March 31, 1995.
/2/ Per share calculations were performed using average shares for the period.
/3/ The Pilgrim Baxter Emerging Growth Fund, the predecessor series to the PBHG
Emerging Growth Fund, commenced operations on June 15, 1993.
/4/ The PBHG Core Growth Fund commenced operations on January 2, 1996.
/5/ The PBHG Select Equity Fund, the PBHG Large Cap Growth Fund, and the PBHG
Cash Reserves Fund commenced operation on April 5, 1995.
/6/ The PBHG Technology & Communications Fund commenced operation on October 2,
1995.
/7/ The PBHG International Fund commenced operations on June 14, 1994.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
61
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
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 man-
agement investment company with nine 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 & Communica-
tions Fund"), the PBHG International Fund (the "International Fund"), the PBHG
Limited Fund (the "Limited 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 March 31, 1996, the
Limited Fund had not commenced operations. Each Portfolio's prospectus provides
a description of the Portfolio's investment objectives, policies and strate-
gies. 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 which 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 quota-
tions are readily available are valued at the most recently quoted bid price.
Short-term investments may be valued at amortized cost which approximates mar-
ket value. Foreign securities in the International Fund are valued based upon
quotations from the primary market in which they are traded. The values of in-
vestment 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 ac-
counted for on the date the securities are purchased or sold (trade date). Div-
idend income and distributions to shareholders are recognized on the ex-divi-
dend date; interest income is recognized on the accrual basis. Costs used in
determining realized capital gains and losses on the sale of investment securi-
ties are those of the specific securities sold adjusted for the accretion and
amortization of acquisition discounts and premiums during the respective hold-
ing 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 are generally made to shareholders annually.
Dividends from net investment income and distributions from net realized capi-
tal gains are determined in accordance with U.S. federal income tax regula-
tions, which may differ from those amounts determined under generally accepted
accounting principals. These book/tax differences are either temporary or per-
manent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as ap-
propriate, in the period that the differences arise. Accordingly, the following
perma-
62
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
nent differences, 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:
<TABLE>
<CAPTION>
ACCUMULATED NET
PAID-IN-CAPITAL REALIZED GAIN
(000) (000)
--------------- ---------------
<S> <C> <C>
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 --
</TABLE>
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 dis-
tribute all of its taxable income and net capital gains. Accordingly, no provi-
sion has been made for federal income taxes.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated on
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 agree-
ments are held by the custodian bank until the respective agreements mature.
Provisions of the repurchase agreements and procedures adopted by Pilgrim Bax-
ter & Associates, Ltd. (the "Adviser") ensure that the market value of the col-
lateral including accrued interest thereon, is sufficient in the event of de-
fault 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 in-
vestment 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 to
transactions as realized and unrealized gains and losses for financial report-
ing purposes, whereas such gains and losses are treated as ordinary income or
loss for federal income tax purposes.
OTHER -- Expenses that are directly related to one of the Portfolios are
charged directly to that Portfolio. Other operating expenses are prorated to
the Portfolios on the basis of relative net assets.
All organizational costs incurred 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 International
63
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued) The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
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 pay-
able to the holder thereof by the Portfolio 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 re-
demption.
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 as-
sets of the Growth, Emerging Growth, Core Growth, Select Equity, and Technology
& Communications Funds, and 0.30%, 0.75% and 1.00% of the average daily net as-
sets of the Cash Reserves, Large Cap Growth and International Funds, respec-
tively. The Adviser has voluntarily agreed to waive a portion of its fee in or-
der to limit operating expenses.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the sub-ad-
viser to the International Fund. For its services provided pursuant to its In-
vestment 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 Re-
serves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMC is 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.
The Fund and SEI Financial Management Corporation (the "Administrator") are
parties to an Administration Agreement under which the Administrator provides
administrative services for an annual fee with respect to each Portfolio equal
to the greater of $75,000 or 0.20% of the average daily net assets of the Port-
folio.
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 & Communica-
tions 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 Ad-
viser, Administrator and the Distributor received no compensation from the
Fund.
64
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued)
- --------------------------------------------------------------------------------
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
March 31, 1996 were as follows:
<TABLE>
<CAPTION>
---------- -------- ------- -------- ------- -------------- -------------
LARGE
EMERGING CORE SELECT CAP TECHNOLOGY &
GROWTH GROWTH GROWTH EQUITY GROWTH COMMUNICATIONS INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000)
---------- -------- ------- -------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases $2,109,055 $512,067 $28,357 $299,947 $62,404 $92,619 $14,513
Sales 730,879 453,389 1,817 152,098 15,921 40,124 19,305
</TABLE>
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolios and the total cost of securities for federal income tax pur-
poses at March 31, 1996 is as follows:
<TABLE>
<CAPTION>
---------- -------- ------- -------- ------- -------------- -------------
LARGE
EMERGING CORE SELECT CAP TECHNOLOGY &
GROWTH GROWTH GROWTH EQUITY GROWTH COMMUNICATIONS INTERNATIONAL
FUND FUND FUND FUND FUND FUND FUND
(000) (000) (000) (000) (000) (000) (000)
---------- -------- ------- -------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Aggregate gross
unrealized appreciation $ 969,270 $207,184 $ 2,198 $ 24,131 $ 5,064 $ 4,455 $1,209
Aggregate gross
unrealized depreciation (40,266) (14,257) (804) (4,773) (1,498) (1,818) (318)
---------- -------- ------- -------- ------- ------- ------
Net unrealized
appreciation $ 929,004 $192,927 $ 1,394 $ 19,358 $ 3,566 $ 2,637 $ 891
========== ======== ======= ======== ======= ======= ======
Total cost of securities
for federal income tax
purposes $2,374,928 $508,604 $31,081 $183,824 $50,712 $60,151 $9,883
========== ======== ======= ======== ======= ======= ======
</TABLE>
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, respec-
tively. 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.
65
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements (continued) The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
5. SHAREHOLDER VOTING RESULTS (UNAUDITED):
A. On April 13, 1995, there was a special meeting of the shareholders of the
Growth Fund, the Emerging Growth Fund and the International Fund to approve a
new advisory agreement between the PBHG Funds, Inc. and PB Newco, Inc. ("PB
Newco"), a Delaware corporation and a wholly-owned subsidiary of United Asset
Management Corporation ("UAM"), pursuant to which PB Newco would act as adviser
with respect to the assets of each of the Funds, effective upon the acquisition
of substantially all the assets of Pilgrim Baxter & Associates, Ltd. ("Pilgrim
Baxter"), the then-existing adviser, by UAM and the contribution of such assets
to PB Newco (the "Acquisition"). PB Newco would carry on the business of Pilgrim
Baxter under Pilgrim Baxter's name after the Acquisition. The following were the
results of the vote:
<TABLE>
<CAPTION>
------------- -------------------- ------------------
GROWTH FUND EMERGING GROWTH FUND INTERNATIONAL FUND
SHARES VOTED: SHARES VOTED: SHARES VOTED:
------------- -------------------- ------------------
<S> <C> <C> <C>
For 30,123,310 10,028,633 1,319,582
Against 1,433,859 500,590 16,065
Abstain 1,408,664 373,686 12,587
</TABLE>
There were no broker non-votes submitted, and no other proposals voted on at
such meeting.
In addition, at the meeting on April 13, 1995, the shareholders of the
International Fund were asked to approve a new Sub-Advisory Agreement among the
Fund, on behalf of the International Fund, PB Newco and Akamai International,
L.P. ("Akamai"), the then-existing sub-adviser to the International Fund,
pursuant to which Akamai would act as sub-adviser with respect to the assets of
the International Fund, effective upon the Acquisition. The following were the
results of the vote:
<TABLE>
<CAPTION>
------------------
INTERNATIONAL FUND
SHARES VOTED:
------------------
<S> <C>
For 1,322,538
Against 15,211
Abstained 10,485
</TABLE>
There were no broker non-votes submitted, and no other proposals voted on at
such meeting.
B. On October 6, 1995, there was a special meeting of the shareholders of the
International Fund to approve the selection of Murray Johnstone as investment
sub-adviser of the International Fund and to approve the new Investment
Sub-Advisory Agreement between Pilgrim Baxter, the Fund, and Murray Johnstone.
The following were the results of the vote:
<TABLE>
<CAPTION>
------------------
INTERNATIONAL FUND
SHARES VOTED:
------------------
<S> <C>
For 469,753
Against 3,939
Abstained 13,068
</TABLE>
There were no broker non-votes submitted, and no other proposals voted on at
such meeting.
66
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Notes to Financial Statements (concluded)
- --------------------------------------------------------------------------------
6. 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 fund 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 develop-
ments and the level of governmental supervision and regulation of securities
markets in the respective countries.
67
<PAGE>
March 31, 1996
- --------------------------------------------------------------------------------
Description of Indexes (unaudited)
- --------------------------------------------------------------------------------
The F.T. Actuaries World Index, Non-U.S., in U.S. Dollars consists of 1749 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.
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 value of the
funds in the Index with all capital gains distributions and income dividends
reinvested.
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.
The Lipper Science & Technology Funds Average is an equally weighted bench-mark
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.
The Lipper Small Company Funds Average is an equally weighted bench-mark
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.
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.
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.
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.
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.
The Wilshire Small Cap Growth Index is a broad-based capitalization-weighted
index of 250 stocks representing nine industry sectors. The returns of the Index
reflect the reinvestment of income dividends and capital gains distributions, if
any, but do not reflect fees, brokerage commissions or other expenses.
68
<PAGE>
- -----------------------------------------------------------------------
NOTICE TO SHAREHOLDERS OF THE PBHG FUNDS, INC. (unaudited)
- -----------------------------------------------------------------------
For the shareholders that do not have a March 31, 1996 taxable year end, this
notice is for informational purposes only. For shareholders with a March 31,
1996 taxable year end, please consult your tax advisor as to the pertinence of
this notice.
For the fiscal year ended March 31, 1996, the Funds are designating long-term
capital gains, qualifying dividends and exempt interest income with regard to
distributions paid during the year as follows:
<TABLE>
<CAPTION>
(A) (B)
LONG-TERM ORDINARY (C)
CAPITAL GAIN INCOME TOTAL
DISTRIBUTIONS DISTRIBUTIONS DISTRIBUTIONS
FUND (TAX BASIS) (TAX BASIS) (TAX BASIS)
---- ------------- ------------- -------------
<S> <C> <C> <C>
Growth Fund 0% 0% 0%
Emerging Growth Fund 54% 46% 100%
Core Growth Fund 0% 0% 0%
Select Equity Fund 0% 100% 100%
Large Cap Growth Fund 0% 100% 100%
Technology & Communications Fund 0% 100% 100%
International Fund 0% 0% 0%
Cash Reserves Fund 0% 100% 100%
<CAPTION>
(D) (E) (F)
QUALIFYING TAX EXEMPT FOREIGN
FUND DIVIDENDS(1) INTEREST TAX CREDIT
---- ------------- ------------- -------------
<S> <C> <C> <C>
Growth Fund 0% 0% 0%
Emerging Growth Fund 0% 0% 0%
Core Growth Fund 0% 0% 0%
Select Equity Fund 0% 0% 0%
Large Cap Growth Fund 0% 0% 0%
Technology & Communications Fund 0% 0% 0%
International Fund 0% 0% 0%
Cash Reserves Fund 0% 0% 0%
</TABLE>
- --------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of the portfolio's total
distributions.
** Items (D) and (E) are based on a percentage of ordinary income
distributions of the portfolio.
69
