<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 1996.
1933 ACT REGISTRATION NO. 2-99810
1940 ACT REGISTRATION NO. 811-3503
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /x/
PRE-EFFECTIVE AMENDMENT NO. /_/
POST-EFFECTIVE AMENDMENT NO. 22 /x/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
AMENDMENT NO. 20
THE PBHG FUNDS, INC.
(FORMERLY THE ADVISORS' INNER CIRCLE FUND II, INC.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
1255 DRUMMERS LANE
SUITE 300
WAYNE, PENNSYLVANIA 19087-1590
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (610) 341-9000
HAROLD J. BAXTER
1255 DRUMMERS LANE
SUITE 300
WAYNE, PENNSYLVANIA 19087-1590
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
JANE A. KANTER, ESQUIRE
KATTEN MUCHIN & ZAVIS
1025 THOMAS JEFFERSON STREET, NW
EAST LOBBY, SUITE 700
WASHINGTON, D.C. 20007
It is proposed that this filing will become effective:
_____ immediately upon filing pursuant to paragraph (b)
_____ on [date] pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on [date] pursuant to paragraph (a) of Rule 485
x 75 days after filing pursuant to paragraph (a)
_____
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of shares of common stock is being registered by this
Registration Statement. Registrant's Rule 24f-2 Notice for its most recent
fiscal year will be filed on or before May 30, 1996.
Page 1 of ______ . Exhibit List appears on page ______ .
<PAGE>
THE PBHG FUNDS, INC.
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
PBHG Limited Fund
-----------------
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
THE PBHG FUNDS, INC.
(PBHG Limited Fund)
CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 22
<TABLE>
<CAPTION>
PART A. Item No. and Captions Caption in Prospectus
<C> <S> <C>
1. Cover Page Cover Page
2. Synopsis Summary
3. Condensed Financial Information Expense Summary
4. General Description of Registrant The Fund and the Portfolios; Investment
Objective and Policies; General
Investment Policies and Strategies;
Risk Factors; Investment Limitations;
General Information -- The Fund
5. Management of the Fund General Information -- Directors of the
Fund; General Information -- The
Adviser; General Information -- The
Administrator; General Information --
The Transfer Agent; General Information
-- The Distributor
6. Capital Stock and Other Securities General Information -- Voting Rights;
General Information -- Shareholder
Inquiries; General Information --
Dividends and Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Fund Shares; How to
Redeem Fund Shares; Share Price
8. Redemption or Repurchase How to Purchase Fund Shares; How to
Redeem Fund Shares
9. Pending Legal Proceedings Not Applicable
PART B. Item No. and Captions Caption in Statement of Additional
Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Fund
13. Investment Objectives and Policies Description of Permitted Investments;
Investment Limitations; Description of
Shares
14. Management of the Registrant Directors and Officers of the Fund; The
Administrator
15. Control Persons and Principal Holders of Directors and Officers of the Fund
Securities
16. Investment Advisory and Other Services The Adviser; The Administrator; The
Distributor
17. Brokerage Allocation Portfolio Transactions
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
18. Capital Stock and Other Securities Description of Shares
19. Purchase, Redemption, and Pricing of Purchase and Redemption of Shares;
Securities Being Offered Determination of Net Asset Value
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Yield Quotations Computation of Yield; Calculation of
Total Return
23. Financial Statements Financial Statements
(to be filed in Post-Effective
Amendment No. 23)
PART C Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration
Statement.
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST- +
+EFFECTIVE AMENDMENT TO THE FUND'S REGISTRATION STATEMENT RELATING TO THESE +
+SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE +
+TIME THE POST-EFFECTIVE AMENDMENT TO THE FUND'S REGISTRATION STATEMENT BE- +
+COMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURI- +
+TIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL +
+PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH +
+STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1996
THE PBHG FUNDS, INC.
PBHG CLASS SHARES
JULY 1, 1996
The PBHG Funds, Inc. (the "Fund") is a mutual fund that offers a convenient and
economical means of investing in professionally managed portfolios of
securities. This Prospectus offers the PBHG Class Shares of the PBHG Limited
Fund (the "Portfolio"):
.PBHG LIMITED FUND
This Prospectus sets forth concisely the information about the Fund and the
Portfolio that a prospective investor should know before investing. Investors
are advised to read this Prospectus and retain it for future reference. A
Statement of Additional Information dated July 1, 1996, has been filed with the
Securities and Exchange Commission and is available upon request and without
charge by calling 1-800-433-0051. The Statement of Additional Information is
incorporated into this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
In order to facilitate the management of the Fund, the Fund has determined to
limit the total of all initial investments in the Portfolio to $100 million.
Once that amount is reached, the Portfolio will be closed to new investors.
This decision does not affect the status of any other Portfolio of the Fund.
<PAGE>
SUMMARY
- --------------------------------------------------------------------------------
The PBHG Funds, Inc. (the "Fund") is an open-end management investment com-
pany which provides a convenient way to invest in professionally managed diver-
sified and non-diversified portfolios of securities. This summary provides ba-
sic information about the PBHG Limited Fund (the "Limited Fund" or the "Portfo-
lio"). This summary is qualified in its entirety by reference to the more de-
tailed information provided elsewhere in this Prospectus and in the Statement
of Additional Information.
WHAT ARE THE INVESTMENT OBJECTIVES, PROGRAM AND POLICIES OF THE
PORTFOLIO? The Portfolio seeks long-term capital appreciation. There can be no
assurance that the Portfolio will achieve its investment objective. The Portfo-
lio invests primarily in a diversified portfolio of equity securities, with
smaller market capitalization or revenues of up to $250 million, that are be-
lieved by Pilgrim Baxter & Associates, Ltd. (the "Adviser") to have an outlook
for strong earnings growth in and the potential for significant long-term capi-
tal appreciation.
WHAT ARE THE RISKS INVOLVED WITH AN INVESTMENT IN THE PORTFOLIO? The Portfo-
lio invests in securities that fluctuate in value, and investors should expect
the Portfolio's net asset value per share to fluctuate. The Portfolio may in-
vest in common stocks and convertible securities that may be traded in the
over-the-counter market. Some of these securities may not be as liquid as ex-
change-listed stocks. In addition, the Portfolio may invest in equity securi-
ties of smaller market capitalization companies which typically are more vola-
tile than equity securities of larger, more established companies but which
also offer the possibilities of more rapid growth. The Portfolio may invest in
equity securities of non-U.S. issuers, which are subject to certain risks not
typically associated with domestic securities. Such risks include changes in
currency rates and in exchange control regulations, costs associated with con-
versions between various currencies, limited publicly available information re-
garding foreign issuers, lack of uniformity in accounting, auditing and finan-
cial standards and requirements, greater securities market volatility, less li-
quidity, less government supervision of securities markets, changes in taxes on
income on securities, and possible seizure, nationalization or expropriation of
the foreign issuer or foreign deposits. See "Investment Objectives and Poli-
cies" and "Glossary of Permitted Investments."
2
<PAGE>
WHO IS THE ADVISER? Pilgrim Baxter & Associates, Ltd. serves as the invest-
ment adviser to the Portfolio. See "The Adviser."
WHO IS THE ADMINISTRATOR? serves as the administrator of the Fund.
See "The Administrator."
WHO IS THE TRANSFER AGENT? DST Systems, Inc. serves as the transfer agent,
dividend disbursing agent and shareholder servicing agent of the Fund. See "The
Transfer Agent."
IS THERE A SALES LOAD? No, PBHG Class Shares of the Portfolio are offered on
a no-load basis.
IS THERE A MINIMUM INVESTMENT? The Portfolio has a minimum initial investment
of $5,000 for regular accounts and $2,000 for Individual Retirement Accounts
("IRAs").
HOW DO I PURCHASE AND REDEEM SHARES? Purchases and redemptions may be made
through the Transfer Agent on any day on which the New York Stock Exchange is
open for business ("Business Day"). A purchase order will be effective as of
the Business Day it is received by the Transfer Agent if the Transfer Agent re-
ceives sufficient information to execute the order and receives payment by
check or readily available funds prior to 4:00 p.m., Eastern time. Redemption
orders placed with the Transfer Agent prior to 4:00 p.m., Eastern time on any
Business Day will be effective that day. The purchase and redemption price for
shares is the net asset value per share determined as of the end of the day the
order is effective. The Fund also offers a Systematic Investment Plan and a
Systematic Withdrawal Plan. See "Shareholder Services."
3
<PAGE>
- -------------------------------------------------------------------------------
EXPENSE SUMMARY
- -------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
LIMITED
FUND
- -------------------------------------------------------------------------------
[S] [C]
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees(1) None
Exchange Fees None
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) A wire redemption charge, currently $10.00, is deducted from the amount of
a Federal Reserve wire redemption payment made at the request of a
shareholder.
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets after applicable fee waivers)
- -------------------------------------------------------------------------------
LIMITED
FUND
- -------------------------------------------------------------------------------
Advisory Fees(2) 1.00%
12b-1 Fees None
Other Expenses(3) .50%
- -------------------------------------------------------------------------------
Total Operating Expenses (net of reimbursement after fee waiver or ex-
pense reimbursement, if any) 1.50%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(2) The Adviser has agreed to waive a portion of their fee and reimburse
expenses in an amount that operates to limit annual operating expenses for
the current fiscal year to not more than 1.50% of the average daily net
assets of the Limited Fund. The Adviser reserves the right to terminate
its fee waivers and reimbursements at any time in its sole discretion.
Absent fee waivers and reimbursements, Advisory Fees and Total Operating
Expenses for the Limited Fund would be 1.00% and %, respectively. See
"The Adviser."
(3) "Other Expenses" is based on estimated amounts for the current fiscal
year. See "The Administrator."
EXAMPLE
- -------------------------------------------------------------------------------
1 YEAR 3 YEARS
- -------------------------------------------------------------------------------
An investor in a Portfolio would pay the following Limited Fund $15 $47
expenses on a $1,000 investment assuming (1) 5%
annual return, and (2) redemption at the end of
each time period.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The example is based upon estimated total operating expenses of the Limited
Fund, as set forth in the "Annual Operating Expenses" table above. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is
to assist the investor in understanding the various costs and expenses that
may be directly or indirectly borne by investors in each Portfolio. See "The
Adviser" and "The Administrator."
4
<PAGE>
- -------------------------------------------------------------------------------
THE FUND AND THE PORTFOLIOS
- -------------------------------------------------------------------------------
The Fund is an open-end investment company that currently offers shares in
nine separate series (the "Portfolios"). This Prospectus relates solely to the
PBHG Class Shares for the PBHG Limited Fund. Each share of the Portfolio rep-
resents an undivided interest in the Portfolio. The Fund's shares are cur-
rently divided into two classes of shares (PBHG Class and Trust Class) having
such preferences and special or relative rights and privileges as the Board of
Directors determines. Only the Portfolio's PBHG Class Shares are offered by
this Prospectus. The Trust Class Shares are generally subject to the same ex-
penses as the PBHG Class Shares but also bear a Rule 12b-1 shareholder servic-
ing fee of .25% of the average daily net assets attributable to its shares.
The no Trust Class Shares are currently available for this Portfolio. Addi-
tional information pertaining to the Fund may be obtained by writing the
Fund's transfer agent, DST Systems, Inc., P.O. Box 419534, Kansas City,
Missouri 64141-6534, or by calling 1-800-433-0051.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
- -------------------------------------------------------------------------------
PBHG LIMITED FUND
The PBHG Limited Fund seeks long-term capital appreciation. Under normal con-
ditions, the Portfolio will invest primarily in a diversified portfolio of eq-
uity securities (i.e., common stocks, preferred stocks, rights, warrants and
securities convertible into or exchangeable for common stocks) of companies,
with smaller market capitalizations or revenues of up to $250 million, that
are believed by the Adviser to have superior long-term growth prospects and
potential for long-term capital appreciation. The average and median market
capitalizations of holdings in the Portfolio may, however, fluctuate over time
as a result of market valuation levels and the availability of specific in-
vestment opportunities. In addition, the Portfolio may continue to hold secu-
rities of companies whose market capitalizations or revenues grow above $250
million subsequent to purchase, if the company continues to satisfy the other
investment policies of the Portfolio.
The Portfolio seeks to invest in smaller capitalization companies poised for
rapid and dynamic growth. In selecting holdings for the Portfolio, the Adviser
focuses on companies that possess exceptional or strong historical growth
characteristics and whose trend of earnings and stock prices are expected by
the Adviser to grow faster than those of the U.S. stock market as a whole.
Dividend income will not be considered in selecting holdings for the Portfo-
lio.
The securities of smaller companies are usually less actively followed by ana-
lysts and may be undervalued by the market, which can provide significant op-
portunities for capital appreciation. However, the securities of such smaller
companies may also involve greater risks and may be subject to more volatile
market movements than securities of larger, more established companies. See
"Risk Factors" for further information about smaller company securities.
The Portfolio will normally be as fully invested as practicable in common
stocks and investment grade securities convertible into common stocks. The
Portfolio also may invest up to 5% of its assets in warrants and rights to
purchase common stocks. Normally, the Portfolio will purchase only securities
traded in the United States or Canada on registered exchanges or in the over-
the-counter market. The Portfolio may invest up to 15% of its total assets in
securities of foreign issuers (including American Depository Receipts ("ADRs")
and forward foreign currency exchange contracts, and may invest to 15% of its
net assets in illiquid securities, but will not invest more than 10% of its
net assets in restricted securities. The Portfolio may also purchase securi-
ties on a when-issued or delayed-delivery basis. See "Glossary of Permitted
Investments."
There can be no assurance that the Portfolio will achieve its investment ob-
jective.
- -------------------------------------------------------------------------------
GENERAL INVESTMENT POLICIES AND STRATEGIES
- -------------------------------------------------------------------------------
INVESTMENT PROCESS:
The Adviser's investment process in managing the assets of the Limited Fund is
both quantitative and fundamental, and is extremely focused on quality earn-
ings growth. In seeking to identify investment opportunities for the Portfo-
lio, the Adviser begins by creating a universe of rapidly growing companies
with market capitalizations within the parameters described for the Portfolio
and that possess certain quality characteristics. Using proprietary software
and research models that incorporate important attributes of successful
growth, such as positive earnings surprises, upward earnings estimate revi-
sions, and accelerating sales and
5
<PAGE>
earnings growth, the Adviser creates a universe of growing companies. Then,
using fundamental research, the Adviser evaluates each company's earnings
quality and assesses the sustainability of the company's current growth
trends. Through this highly disciplined process, the Adviser seeks to con-
struct investments for the Portfolio that possess strong growth characteris-
tics. The Adviser tries to keep the Portfolio fully invested at all times. Be-
cause the universe of companies will undoubtedly experience volatility in
stock price, it is important that shareholders in the Portfolio maintain a
long-term investment perspective. Of course, there can be no assurance that
use of these techniques will be successful, even over the long term.
PORTFOLIO TURNOVER
Portfolio turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. A higher turnover rate (100% or more)
increases transaction costs (e.g., brokerage commissions) and increases real-
ized gains and losses. It is expected that under normal market conditions, the
annual portfolio turnover rates for the Limited Fund will not exceed %.
TEMPORARY DEFENSIVE POSITIONS
Under normal market conditions, the Portfolio expects to be fully invested in
its primary investments, as described above. However, for temporary defensive
purposes, when the Adviser determines that market conditions warrant, the
Portfolio may invest up to 100% of its assets in cash and money market instru-
ments (consisting of securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities; certificates of deposit, time deposits and
bankers' acceptances issued by banks or savings and loan associations having
net assets of at least $500 million as stated on their most recently published
financial statements; commercial paper rated in one of the two highest rating
categories by at least one nationally recognized statistical rating organiza-
tion ("NRSRO"); repurchase agreements involving such securities; and, to the
extent permitted by applicable law and the Portfolio's investment restric-
tions, shares of other investment companies investing solely in money market
securities). To the extent the Portfolio is invested in temporary defensive
instruments, it will not be pursuing its investment objective. See "Glossary
of Permitted Investments" and the Statement of Additional Information.
- -------------------------------------------------------------------------------
RISK FACTORS
- -------------------------------------------------------------------------------
SMALL CAPITALIZATION STOCKS
Investments in common stocks in general are subject to market risks that may
cause their prices to fluctuate over time. Therefore, an investment in the
Portfolio may be more suitable for long-term investors who can bear the risk
of these fluctuations. The Portfolio may invest in securities of issuers with
small market capitalizations. While the Adviser intends to invest in small
companies that have strong balance sheets and that the Adviser's research in-
dicates should exceed consensus earnings expectations, any investment in small
companies involves greater risk and price volatility than that customarily as-
sociated with investments in larger, more established companies. The
securities of small companies are often traded in the over-the-counter market,
and might not be traded in volumes typical of securities traded on a national
securities exchange. Thus, the securities of small companies are likely to be
subject to more abrupt or erratic market movements, than securities of larger,
more established companies.
OVER-THE-COUNTER MARKET
The Portfolio may invest in over-the-counter stocks. In contrast to the secu-
rities exchanges, the over-the-counter market is not a centralized facility
which limits trading activity to securities of companies which initially sat-
isfy certain defined standards. Generally, the volume of trading in an un-
listed or over-the-counter common stock is less than the volume of trading in
a listed stock. This means that the depth of market liquidity of some stocks
in which the Portfolio may invest may not be as great as that of other securi-
ties and if the Portfolio were to dispose of such a stock, it might have to
offer the shares at a discount from recent prices, or sell the shares in small
lots over an extended period of time.
FOREIGN SECURITIES
Investing in the securities of foreign issuers involves special risks and con-
siderations not typically associated with investing in U.S. companies. These
risks and considerations include differences in accounting, auditing and fi-
nancial reporting standards, generally higher commission rates on foreign
portfolio transactions, the possibility of expropriation or confiscatory taxa-
tion, adverse changes in investment or exchange control regulations, political
instability
6
<PAGE>
which could affect U.S. investment in foreign countries and potential restric-
tions on the flow of international capital and currencies. Foreign issuers may
also be subject to less government regulation than U.S. companies. Moreover,
the dividends and interest payable on foreign securities may be subject to
foreign withholding taxes, thus reducing the net amount of income available
for distribution to the Portfolio's shareholders. Further, foreign securities
often trade with less frequency and volume than domestic securities and,
therefore, may exhibit greater price volatility. Changes in foreign exchange
rates will affect, favorably or unfavorably, the value of those securities
which are denominated or quoted in currencies other than the U.S. dollar.
For additional information regarding risks and permitted investments, see
"Glossary of Permitted Investments" and the Statement of Additional
Information.
- -------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- -------------------------------------------------------------------------------
The investment objective of the Portfolio, and the investment limitations set
forth herein, and certain investment limitations contained in the Statement of
Additional Information, are fundamental policies of the Portfolio. The Portfo-
lio's fundamental policies cannot be changed without the consent of the hold-
ers of a majority of the Portfolio's outstanding shares.
The Portfolio may not:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States, its agencies or instrumentalities and repurchase agree-
ments involving such securities) if, as a result, more than 5% of the total
assets of the Portfolio would be invested in the securities of such issuer.
2. Purchase any securities which would cause 25% or more of the total assets
of the Portfolio to be invested in the securities of one or more issuers con-
ducting their principal business activities in the same industry, provided
that this limitation does not apply to investments in obligations issued or
guaranteed by the U.S. Government or its agencies and instrumentalities and
repurchase agreements involving such securities. For purposes of this limita-
tion, (i) utility companies will be divided according to their services, for
example, gas distribution, gas transmission, electric and telephone will each
be considered a separate industry, and (ii) financial service companies will
be classified according to the end users of their services, for example, auto-
mobile finance, bank finance and diversified finance will each be considered a
separate industry. For purposes of this limitation, supranational organiza-
tions are deemed to be issuers conducting their principal business activities
in the same industry.
The foregoing percentages will apply at the time of the purchase of a securi-
ty.
- -------------------------------------------------------------------------------
HOW TO PURCHASE FUND SHARES
- -------------------------------------------------------------------------------
You may purchase shares of the Portfolio directly through DST Systems, Inc.
("DST" or the "Transfer Agent"). Purchases of shares of the Portfolios may be
on any day on which the New York Stock Exchange is open for business ("Busi-
ness Day"). Shares of the Portfolio are offered only to residents of states in
which such shares are eligible for purchase. Certain brokers assist their cli-
ents in the purchase or redemption of shares and charge a fee for this service
in addition to the Portfolio's public offering price.
You may place orders by mail and wire. If you have elected the Telephone Pur-
chase Authorization option on your Account Application, you may place orders
by telephone. If market conditions are extraordinarily active, or if severe
weather or other emergencies exist, and you experience difficulties placing
redemption orders by telephone, you may wish to consider placing your order by
other means, such as mail or overnight delivery.
The Fund reserves the right to reject any purchase order or to suspend or mod-
ify the continuous offering of its shares.
As noted on the cover page, in order to facilitate the management of the Fund,
the Fund has determined to limit the total of all initial investments in the
Portfolio to $100 million. Once that amount is reached, the Portfolio will be
closed to new investors. This decision does not affect the status of any other
Portfolio of the Fund.
MINIMUM INVESTMENT
The minimum initial investment in the Portfolio is $5,000, and there is no
minimum for subsequent purchases. The minimum initial investment for IRA's is
$2,000. The Distributor may waive the minimum at its discretion. No minimum
applies to subsequent purchases. As described below,
7
<PAGE>
subsequent purchases through the Fund's Systematic Investment Plan must be at
least $25.
INITIAL PURCHASES BY MAIL
An account may be opened by mailing a check or other negotiable bank draft
payable to--PBHG Limited Fund-- for $5,000 or more, and a completed Account
Application to The PBHG Funds, Inc. c/o DST Systems, Inc., P.O. Box 419534,
Kansas City, Missouri 64141-6534.
ADDITIONAL PURCHASES BY PHONE (TELEPHONE PURCHASE AUTHORIZATION)
If you have made this election, you may purchase additional shares by tele-
phoning the Transfer Agent at 1-800-433-0051. THE TELEPHONE PURCHASE AUTHORI-
ZATION IS AN ELECTION AVAILABLE ON THE ACCOUNT APPLICATION. THE MINIMUM TELE-
PHONE PURCHASE IS $1,000, AND THE MAXIMUM IS FIVE TIMES THE NET ASSET VALUE OF
SHARES HELD BY THE SHAREHOLDER ON THE DAY PRECEDING SUCH TELEPHONE PURCHASE
FOR WHICH PAYMENT HAS BEEN RECEIVED. The telephone purchase will be made at
the offering price next computed after the receipt of the call by the Transfer
Agent. Payment for the telephone purchase must be received by the Transfer
Agent within seven days. If payment is not received within seven days, you
will be liable for all losses incurred as a result of the purchase.
INITIAL PURCHASE BY WIRE
If you have an account with a commercial bank that is a member of the Federal
Reserve System, you may purchase shares of the Portfolio by requesting that
your bank transmit funds by wire. Before making an initial investment by wire,
you must first telephone 1-800-433-0051 to be assigned an account number. Your
name, account number, taxpayer identification number or Social Security Num-
ber, and address must be specified in the wire. In addition, an Account Appli-
cation should be promptly forwarded to: DST Systems, Inc., P.O. Box 419534,
Kansas City, Missouri 64141-6534. All wires must be sent as follows: United
Missouri Bank of Kansas, N.A.; ABA #10-10-00695; for Account Number 98705-
23469; Further Credit: Limited Fund.
ADDITIONAL PURCHASES BY WIRE
Additional investments may be made at any time through the wire procedures de-
scribed above, which must include your name and account number. Your bank may
impose a fee for investments by wire.
PURCHASES BY ACH
Shares of the Fund may be purchased via Automated Clearing House ("ACH"). In-
vestors purchasing via ACH should attach a voided check to the Account Appli-
cation.
GENERAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Transfer
Agent if the Transfer Agent receives sufficient information to execute the or-
der and receives payment before 4:00 p.m., Eastern time. Payment may be made
by check or readily available funds. The purchase price of shares of the Port-
folio is the net asset value per share next determined after a purchase order
is effective. Purchases will be made in full and fractional shares of the
Portfolio calculated to three decimal places. The Fund will not issue certifi-
cates representing shares of the Portfolio.
If a check received for the purchase of shares does not clear, the purchase
will be canceled, and you could be liable for any losses or fees incurred. The
Fund reserves the right to reject a purchase order when the Fund determines
that it is not in the best interests of the Fund or its shareholders to accept
such order.
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES AND SERVICES OFFERED
If you have any questions about the Portfolio or the shareholder services de-
scribed below, please call the Fund at 1-800-433-0051. Written inquiries
should be sent to DST SYSTEMS, INC., P.O. BOX 419534, KANSAS CITY, MISSOURI
64141-6534. The Fund reserves the right to amend the shareholder services de-
scribed below or to change the terms or conditions relating to such services
upon 60 days' notice to shareholders. You may, however, discontinue any serv-
ice you select, provided that with respect to the Systematic Investment and
Systematic Withdrawal Plans described below, the Fund's Transfer Agent re-
ceives your
8
<PAGE>
notification to discontinue such service(s) at least ten days before the next
scheduled investment or withdrawal date.
SYSTEMATIC INVESTMENT AND SYSTEMATIC WITHDRAWAL PLANS
For your convenience, the Fund provides plans that enable you to add to your
investment or withdraw from your account(s) with a minimum of paperwork. You
can utilize these plans by simply completing the appropriate section of the
Account Application.
(1) SYSTEMATIC INVESTMENT PLAN. The Systematic Investment Plan is a convenient
way for you to purchase shares in the Portfolio at regular monthly or quar-
terly intervals selected by you. The Systematic Investment Plan enables you to
achieve dollar-cost averaging with respect to investments in the Portfolio de-
spite its fluctuating net asset value through regular purchases of a fixed
dollar amount of shares in the Portfolio. Dollar-cost averaging brings disci-
pline to your investing. Dollar-cost averaging results in more shares being
purchased when the Portfolio's net asset value is relatively low and fewer
shares being purchased when the Portfolio's net asset value is relatively
high, thereby helping to decrease the average price of your shares. Through
the Systematic Investment Plan, shares are purchased by transferring monies
(minimum of $25 per transaction) from your designated checking or savings ac-
count. Your systematic investment in the Portfolio will be processed on a reg-
ular basis at your option beginning on or about either the first or fifteenth
day of the month or quarter you select.
(2) SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan provides a con-
venient way for you to receive current income while maintaining your invest-
ments in the Portfolio. The Systematic Withdrawal Plan permits you to have
payments of $50 or more automatically transferred from your account in the
Portfolio to your designated checking or savings account on a monthly, quar-
terly, or semi-annual basis. In order to start this Plan, you must have a min-
imum balance of $5,000 in any account utilizing this feature. Your systematic
withdrawals will be processed on a regular basis beginning on or about either
the first or fifteenth day of the month, quarter or semi-annual period you se-
lect.
EXCHANGE PRIVILEGES
Once payment for your shares has been received (i.e., an account has been es-
tablished), you may exchange some or all of your shares for shares of the
other seven Portfolios of the Fund currently available to the public. However,
if you own shares of any Portfolio other than the PBHG Cash Reserves Fund, you
are limited to four (4) exchanges annually from such Portfolio to the PBHG
Cash Fund. Exchanges are made at net asset value. The Fund reserves the right
to change the terms and conditions of the exchange privilege discussed herein,
or to terminate the exchange privilege, upon sixty days' notice. Exchanges
will be made only after proper instructions in writing or by telephone (an
"Exchange Request") are received for an established account by the Transfer
Agent. The exchange privilege may be exercised only in those states where the
shares of the new Portfolio may legally be sold.
TAX-SHELTERED RETIREMENT PLANS
A variety of retirement plans, including IRAs, SEP-IRAs, 401(a) Keogh and Cor-
porate money purchase pension and profit sharing plans, and 401(k) and 403(b)
plans are available to investors in the Fund.
(1) INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"). You may save for your retirement
and shelter your investment income from current taxes by either: (a) estab-
lishing a new IRA; or (b) "rolling-over" to the Fund monies from other IRA ac-
counts or lump sum distributions from a qualified retirement plan. If you are
between 18 and 70 1/2 years of age, you can use an IRA to invest up to $2,000
per year of your earned income in the Portfolio. You may also invest up to
$250 per year in a spousal IRA if your spouse has no earned income.
(2) SEP-IRAS. If you are a self-employed person, you can establish a Simpli-
fied Employee Pension Plan ("SEP-IRA"). A SEP-IRA is designed to provide per-
sons with self-employed income (and their eligible employees) with many of the
same tax advantages as a Keogh, but with fewer administrative requirements.
(3) 401(A) KEOGH AND CORPORATE RETIREMENT PLANS. Both a prototype money pur-
chase pension plan and a profit sharing plan, which may be used alone or in
combination, are available for self-employed individuals and their part-
9
<PAGE>
ners, and corporations to provide tax-sheltered retirement benefits for indi-
viduals and employees.
(4) 401(K) PLANS. Through the establishment of a 401(k) plan by a corporation
of any size, employees can invest a portion of their wages in the Portfolio on
a tax-deferred basis in order to help them meet their retirement needs.
(5) 403(B) PLANS. Section 403(b) plans are custodial accounts which are avail-
able to employees of most non-profit organizations and public schools.
OTHER SPECIAL ACCOUNTS
The Fund also offers the following special accounts to meet your needs:
(1) UNIFORM GIFT TO MINORS. By establishing a Uniform Gift to Minors Account
with the Fund you can build a fund for your children's education or a nest egg
for their future and, at the same time, potentially reduce your own income
taxes.
(2) CUSTODIAL AND FIDUCIARY ACCOUNTS. The Fund provides a convenient means of
establishing custodial and fiduciary accounts for investors with fiduciary re-
sponsibilities.
For further information regarding any of the above retirement plans and ac-
counts, please call toll free at 1-800-433-0051. Retirement investors may,
however, wish to consult with their own tax counsel or adviser.
- -------------------------------------------------------------------------------
HOW TO REDEEM FUND SHARES
- -------------------------------------------------------------------------------
Redemption orders received by the Transfer Agent prior to 4:00 p.m., Eastern
time on any Business Day will be effective that day. The redemption price of
shares is the net asset value per share of the Portfolio next determined after
the redemption order is effective. Payment on redemption will be made as
promptly as possible and, in any event, within seven days after the redemption
order is received, provided, however, that redemption proceeds for shares pur-
chased by check (including certified or cashier's checks) will be forwarded
only upon collection of payment for such shares; collection of payment may
take up to 15 days. You may not close your accounts by telephone.
You may receive redemption payments in the form of a check or by Federal Re-
serve or ACH wire transfer.
BY MAIL
There is no charge for having a check for redemption proceeds mailed.
BY TELEPHONE
Redemption orders may be placed by telephone. Neither the Fund nor the Trans-
fer Agent will be responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone instructions that it reasona-
bly believes to be genuine. The Fund and the Transfer Agent will each employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine, including requiring a form of personal identification prior to
acting upon instructions received by telephone and recording telephone in-
structions. If reasonable procedures are not employed, the Fund and the Trans-
fer Agent may be liable for any losses due to unauthorized or fraudulent tele-
phone transactions.
If market conditions are extraordinarily active, or other extraordinary cir-
cumstances exist and you experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by other means, such as
mail or overnight delivery.
BY WIRE
The Custodian will deduct a wire charge, currently $10.00, from the amount of
a Federal Reserve wire redemption payment made at the request of a sharehold-
er. Shareholders cannot redeem shares of the Portfolio by Federal Reserve wire
on federal holidays restricting wire transfers.
BY ACH
The Fund does not charge for ACH wire transactions; however, such transactions
will not be posted to your bank account until the second Business Day follow-
ing the transaction.
SIGNATURE GUARANTEES
A signature guarantee is a widely accepted way to protect you by verifying the
signature on certain redemption re-
10
<PAGE>
quests. The Fund requires signature guarantees to be provided in the following
circumstances: (1) written requests for redemptions in excess of $50,000; (2)
all requests to wire redemption proceeds; and (3) redemption requests that
provide that the redemption proceeds should be sent to an address other than
the address of record or to a person other than the registered shareholder(s)
for the account. Signature guarantees can be obtained from any of the follow-
ing institutions: a national or state bank, a trust company, a federal savings
and loan association, or a broker-dealer that is a member of a national secu-
rities exchange. The Fund does not accept guarantees from notaries public or
organizations that do not provide reimbursement in the case of fraud.
MINIMUM ACCOUNT SIZE
Due to the relatively high cost of maintaining smaller accounts, the Fund re-
serves the right to redeem shares in any account if, as the result of redemp-
tions, the value of that account drops below $2,500. You will be allowed at
least 60 days, after notice by the Fund, to make an additional investment to
bring your account value up to at least $2,500 before the redemption is proc-
essed.
The right of redemption may be suspended or the date of payment of redemption
proceeds postponed during certain periods as set forth more fully in the
Statement of Additional Information.
- -------------------------------------------------------------------------------
SHARE PRICE
- -------------------------------------------------------------------------------
The net asset value per share of the Portfolio is determined by dividing the
total market value of the Portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the Portfolio. Net asset value
per share is determined daily as of the close of trading on the New York Stock
Exchange (currently 4:00 p.m., Eastern time) on any Business Day. The net as-
set value per share of the Portfolio is listed under PBHG in the mutual fund
section of most major daily newspapers, including the Wall Street Journal.
- -------------------------------------------------------------------------------
PERFORMANCE ADVERTISING
- -------------------------------------------------------------------------------
From time to time, the Portfolio may advertise its yield and total return.
These figures will be based on historical earnings and are not intended to in-
dicate future performance. No representation can be made regarding actual fu-
ture yields or returns. Yield refers to the annualized income generated by an
investment in the Portfolio over a specified 30-day period. The yield is cal-
culated by assuming that the same amount of income generated by the investment
during that period is generated in each 30-day period over one year and is
shown as a percentage of the investment.
The total return of the Portfolio refers to the average compounded rate of re-
turn on a hypothetical investment, for designated time periods (including but
not limited to the period from which the Portfolio commenced operations
through the specified date), assuming that the entire investment is redeemed
at the end of each period and assuming the reinvestment of all dividend and
capital gain distributions.
The Portfolio may periodically compare its performance to that of other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical Serv-
ices, Inc.) or by financial and business publications and periodicals, broad
groups of comparable mutual funds, unmanaged indices which may assume invest-
ment of dividends but generally do not reflect deductions for administrative
and management costs, and other investment alternatives. The Portfolio may
quote services such as Morningstar, Inc., a service that ranks mutual funds on
the basis of risk-adjusted performance, and Ibbotson Associates of Chicago,
Illinois, which provides historical returns of the capital markets in the U.S.
The Portfolio may use long-term performance of these capital markets to demon-
strate general long-term risk versus reward scenarios and could include the
value of a hypothetical investment in any of the capital markets. The Portfo-
lio may also quote financial and business publications and periodicals as they
relate to fund management, investment philosophy, and investment techniques.
The Portfolio may quote various measures of volatility and benchmark correla-
tion in advertising and may compare these measures to those of other funds.
Measures of volatility attempt to compare historical share price fluctuations
or total returns to a benchmark while measures of benchmark correlation indi-
cate how valid a comparative benchmark might be. Measures of volatility and
correlation are calculated using averages of historical data and cannot be
calculated precisely.
- -------------------------------------------------------------------------------
TAXES
- -------------------------------------------------------------------------------
The following summary of federal income tax consequences is based on current
tax laws and regulations, which
11
<PAGE>
may be changed by legislative, judicial or administrative action. No attempt
has been made to present a detailed explanation of the federal, state or local
income tax treatment of the Portfolio or its shareholders. Accordingly, you
are urged to consult your tax advisors regarding specific questions as to fed-
eral, state and local income taxes. See the Statement of Additional Informa-
tion.
TAX STATUS OF THE PORTFOLIO:
The Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Fund's other Portfolios. The Portfolio intends to
qualify or to continue to qualify for the special tax treatment afforded regu-
lated investment companies as defined under Subchapter M of the Internal Reve-
nue Code of 1986, as amended. So long as the Portfolio qualifies for this spe-
cial tax treatment, it will be relieved of federal income tax on that part of
its net investment income and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) which it distributes to share-
holders.
TAX STATUS OF DISTRIBUTIONS:
The Portfolio will distribute all of its net investment income (including, for
this purpose, net short-term capital gain) to shareholders. Dividends from net
investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. Distributions from net investment
income will qualify for the dividends-received deduction for corporate share-
holders only to the extent such distributions are derived from dividends paid
by domestic corporations. It can be expected that only certain dividends of
the Portfolio will qualify for that deduction. Any net capital gains will be
distributed annually and will be taxed to shareholders as long-term capital
gains, regardless of how long the shareholder has held shares and regardless
of whether the distributions are received in cash or in additional shares. The
Portfolio will make annual reports to shareholders of the federal income tax
status of all distributions, including the amount of dividends eligible for
the dividends-received deduction.
Certain securities purchased by the Portfolio (such as U.S. Treasury STRIPS,
defined in "Glossary of Permitted Investments" below) are sold with original
issue discount and thus do not make periodic cash interest payments. The Port-
folio will be required to include as part of its current net investment income
the accrued discount on such obligations for purposes of the distribution re-
quirement even though the Portfolio has not received any interest payments on
such obligations during that period. Because the Portfolio distributes all of
its net investment income to its shareholders, the Portfolio may have to sell
portfolio securities to distribute such accrued income, which may occur at a
time when the Adviser would not have chosen to sell such securities and which
may result in a taxable gain or loss.
Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by the Portfolio, and may be exempt, de-
pending on the state, when received by a shareholder as income dividends from
the Portfolio provided certain state-specific conditions are satisfied. Not
all states permit such income dividends to be tax exempt, and some require
that a certain minimum percentage of an investment company's income be derived
from state tax-exempt interest. The Portfolio will inform shareholders annu-
ally of the percentage of income and distributions derived from direct U.S.
obligations. You should consult your tax advisor to determine whether any por-
tion of the income dividends received from the Portfolio is considered tax ex-
empt in your particular state.
Dividends declared by the Portfolio in October, November or December of any
year and payable to shareholders of record on a date in one of those months
will be deemed to have been paid by the Portfolio and received by the share-
holders on December 31 of that year, if paid by the Portfolio at any time dur-
ing the following January.
The Portfolio intends to make sufficient distributions prior to the end of
each calendar year to avoid liability for the federal excise tax that may be
applicable to regulated investment companies.
TAX TREATMENT OF TRANSACTIONS:
Each sale, exchange or redemption of the Portfolio's shares is a taxable event
to the shareholder.
Income derived by the Portfolio from securities of foreign issuers may be sub-
ject to foreign withholding taxes.
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GENERAL INFORMATION
- -------------------------------------------------------------------------------
THE FUND
The Fund, an open-end management investment company, was originally incorpo-
rated in Delaware in 1985 under the
12
<PAGE>
name PBHG Growth Fund, Inc. Effective July 31, 1992, the Fund was reorganized
as a Maryland corporation pursuant to an Agreement and Articles of Merger
which was approved by Fund shareholders on July 21, 1992. On September 8,
1993, the Fund's shareholders voted to change the name of the Fund to The Ad-
visors' Inner Circle Fund II, Inc. On May 2, 1994, the Fund's shareholders
voted to change the name of the Fund to The PBHG Funds, Inc. The Fund has an
authorized capitalization of six billion four hundred million shares of $0.001
par value common stock. All consideration received by the Fund for shares of
any Portfolio and all assets of such Portfolio belong to that Portfolio and
would be subject to liabilities related thereto. The Fund reserves the right
to create and issue shares of additional portfolios.
Each Portfolio of the Fund pays its respective expenses relating to its opera-
tion, including fees of its service providers, audit and legal expenses, ex-
penses of preparing prospectuses, proxy solicitation material and reports to
shareholders, costs of custodial services and registering its shares under
federal and state securities laws, pricing and insurance expenses and pays ad-
ditional expenses including litigation and other extraordinary expenses, bro-
kerage costs, interest charges, taxes and organization expenses.
THE ADVISER
Pilgrim Baxter & Associates, Ltd. is a professional investment management firm
and registered investment adviser that, along with its predecessors, has been
in business since 1982. The controlling shareholder of the Adviser is United
Asset Management Corporation ("UAM"), a New York Stock Exchange listed holding
company principally engaged, through affiliated firms, in providing institu-
tional investment management services and acquiring institutional investment
management firms. UAM's corporate headquarters are located at One Interna-
tional Place, Boston, Massachusetts 02110. The Adviser currently has discre-
tionary management authority with respect to approximately $8 billion in as-
sets. In addition to advising the Portfolio, the Adviser provides advisory
services to the Fund's other Portfolios and to pension and profit-sharing
plans, charitable institutions, corporations, individual investors, trusts and
estates, and other investment companies. The principal business address of the
Adviser is 1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087.
The Adviser serves as the investment adviser to the Portfolio under an invest-
ment advisory agreement with the Fund (the "Advisory Agreement"). The Adviser
makes the investment decisions for the assets of the Portfolio and continu-
ously reviews, supervises and administers the investment program of the Port-
folio, subject to the supervision of, and policies established by, the Board
of Directors of the Fund.
For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of 1.00% of the Limited Fund's average
daily net assets. The investment advisory fees paid by the Portfolio are
higher than those paid by most investment companies, although the Adviser be-
lieves the fees to be comparable to those paid by investment companies with
similar investment objectives and policies. The Adviser has voluntarily agreed
to waive a portion of its fee and reimburse expenses in an amount necessary to
limit annual operating expenses to not more than 1.50% of the average daily
net assets of the Limited Fund. The Adviser reserves the right to terminate
its voluntary fee waivers and reimbursements at any time in its sole
discretion.
The Portfolio will be managed by Christine M. Baxter, CFA. Ms. Baxter has
worked as an equity analyst and portfolio manager for the Adviser since 1991
and has, with Gary L. Pilgrim, CFA, managed the Emerging Growth Fund since its
inception in June 1993.
THE ADMINISTRATOR
(the "Administrator"), a wholly-owned subsidiary of , pro-
vides the Fund with administrative services, including regulatory reporting
and all necessary office space, equipment, personnel and facilities. For these
administrative services, the Administrator is entitled to a fee, which is cal-
culated daily and paid monthly, at an annual rate of . % of the average daily
net assets of the Portfolio.
THE TRANSFER AGENT
DST Systems, Inc., P.O. Box 419534, Kansas City, Missouri 64141-6534, serves
as the transfer agent, dividend disbursing agent and shareholder servicing
agent for the Fund under a transfer agent agreement with the Fund.
13
<PAGE>
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), 680 East Swedesford Road,
Wayne, Pennsylvania 19087-1658, a wholly-owned subsidiary of SEI, provides the
Fund with distribution services. No compensation is paid to the Distributor
for distribution services for the shares of the Portfolio.
DIRECTORS OF THE FUND
The management and affairs of the Fund are supervised by the Board of Direc-
tors under the laws of the State of Maryland. The Directors have approved con-
tracts under which, as described above, certain companies provide essential
management services to the Fund.
VOTING RIGHTS
Each share held entitles the shareholder of record to one vote. Shareholders
of the Portfolio will vote separately on matters relating solely to the Port-
folio, such as approval of advisory agreements and changes in fundamental pol-
icies, and matters affecting some but not all Portfolios of the Fund will be
voted on only by shareholders of the affected Portfolios. Shareholders of all
Portfolios of the Fund will vote together in matters affecting the Fund gener-
ally, such as the election of Directors or selection of accountants. As a
Maryland corporation, the Fund is not required to hold annual meetings of
shareholders, but shareholder approval will be sought for certain changes in
the operation of the Fund and for the election of Directors under certain cir-
cumstances. In addition, a Director may be removed by the remaining Directors
or by shareholders at a special meeting called upon written request of share-
holders owning at least 10% of the outstanding shares of the Fund. In the
event that such a meeting is requested, the Fund will provide appropriate as-
sistance and information to the shareholders requesting the meeting.
REPORTING
The Fund issues unaudited financial information semi-annually, and audited fi-
nancial statements annually for the Portfolio. The Fund also furnishes peri-
odic reports and, as necessary, proxy statements to shareholders of record.
SHAREHOLDER INQUIRIES
You may direct inquiries to the Fund by writing to The PBHG Funds, Inc., P.O.
Box 419009, Kansas City, Missouri 64141-6009, or by calling 1-800-433-0051.
DIVIDENDS AND DISTRIBUTIONS
Substantially all of the net investment income (exclusive of capital gains) of
the Portfolio is distributed in the form of annual dividends. If any capital
gain is realized, substantially all of it will be distributed by the Portfolio
at least annually.
Shareholders automatically receive all dividends and capital gain distribu-
tions in additional shares at the net asset value determined on the next Busi-
ness Day after the record date, unless the shareholder has elected to take
such payment in cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior to the distribu-
tion. Shareholders may receive payments for cash distributions in the form of
a check or by Federal Reserve or ACH wire transfer.
Dividends and distributions of the Portfolio are paid on a per share basis.
The value of each share will be reduced by the amount of the payment. If
shares are purchased shortly before the record date for a dividend or distri-
bution of capital gains, a shareholder will pay the full price for the shares
and receive some portion of the price back as a taxable dividend or distribu-
tion.
CUSTODIAN
CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box 7618, Philadel-
phia, Pennsylvania 19101, serves as the custodian for the Limited Fund (the
"Custodian"). The Custodian holds cash, securities and other assets of the
Fund as required by the Investment Company Act of 1940, as amended (the "1940
Act").
- -------------------------------------------------------------------------------
GLOSSARY OF PERMITTED INVESTMENTS
- -------------------------------------------------------------------------------
The following is a description of permitted investments for the Portfolio.
AMERICAN DEPOSITARY RECEIPTS ("ADRS") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership in-
terests in a secu-
14
<PAGE>
rity or a pool of securities issued by a foreign issuer and deposited with the
depositary. ADRs include American Depositary Shares and New York Shares. ADRs
may be available for investment through "sponsored" or "unsponsored" facili-
ties. A sponsored facility is established jointly by the issuer of the secu-
rity underlying the receipt and a depositary, whereas an unsponsored facility
may be established by a depositary without participation by the issuer of the
receipt's underlying security.
Holders of an unsponsored depositary receipt generally bear all the costs of
the unsponsored facility. The depositary of an unsponsored facility frequently
is under no obligation to distribute shareholder communications received from
the issuer of the deposited security or to pass through to the holders of the
receipts voting rights with respect to the deposited securities.
CONVERTIBLE SECURITIES -- Securities such as rights, bonds, notes and pre-
ferred stocks which are convertible into or exchangeable for common stocks.
Convertible securities have characteristics similar to both fixed income and
equity securities. Because of the conversion feature, the market value of con-
vertible securities tends to move together with the market value of the under-
lying common stock. As a result, the Portfolio's selection of convertible se-
curities is based, to a great extent, on the potential for capital apprecia-
tion that may exist in the underlying stock. The value of convertible securi-
ties is also affected by prevailing interest rates, the credit quality of the
issuer, and any call provisions.
EQUITY SECURITIES -- Investments in common stocks, preferred stocks and other
equity related securities are subject to market risks which may cause their
prices to fluctuate over time. Changes in the value of portfolio securities
will not necessarily affect cash income derived from these securities but will
affect the Portfolio's net asset value.
FORWARD FOREIGN CURRENCY CONTRACTS -- Foreign currency exchange transactions
may be conducted on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward cur-
rency contracts to protect against uncertainty in the level of future exchange
rates between a particular foreign currency and the U.S. dollar, or between
foreign currencies in which the Portfolio's securities are or may be denomi-
nated. A forward foreign currency contract involves an obligation to purchase
or sell a specific currency amount at a future date, which may be any fixed
number of days from the date of the contract, agreed upon by the parties, at a
price set at the time of the contract. Under normal circumstances, considera-
tion of the prospect for changes in currency exchange rates will be incorpo-
rated into the Portfolio's long-term investment strategies. However, the
Adviser believes that it is important to have the flexibility to enter into
forward foreign currency contracts when it determines that the best interests
of the Portfolio will be served.
When the Adviser believes that the currency of a particular country may suffer
a significant decline against the U.S. dollar or against another currency, the
Portfolio may enter into a forward foreign currency contract to sell, for a
fixed amount of U.S. dollars or other appropriate currency, the amount of for-
eign currency approximating the value of some or all of the Portfolio's secu-
rities denominated in such foreign currency.
At the maturity of a forward foreign currency contract, the Portfolio may ei-
ther sell a portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same cur-
rency trader, obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. The Portfolio may realize a gain or loss from
currency transactions.
Generally, the Portfolio will enter into forward foreign currency contracts
only as a hedge against foreign currency exposure affecting the Portfolio or
to hedge a specific security transaction or portfolio position. If the Portfo-
lio enters into forward foreign currency contracts to cover activities which
are essentially speculative, the Portfolio will segregate cash or readily mar-
ketable securities with its Custodian, or a designated sub-custodian, in an
amount at all times equal to or exceeding the Portfolio's commitment with re-
spect to such contracts.
ILLIQUID SECURITIES -- Securities that cannot be disposed of in the ordinary
course of business within seven days at approximately the price at which the
Portfolio has valued the security.
MONEY MARKET INSTRUMENTS -- Money market securities are high-quality, dollar-
denominated, short-term debt in-
15
<PAGE>
struments. They consist of: (i) bankers' acceptances, certificates of depos-
its, notes and time deposits of highly-rated U.S. banks and U.S. branches of
foreign banks; (ii) U.S. Treasury obligations and obligations issued or guar-
anteed by the agencies and instrumentalities of the U.S. Government; (iii)
high-quality commercial paper issued by U.S. and foreign corporations; (iv)
debt obligations with a maturity of one year or less issued by corporations
with outstanding high-quality commercial papers; and (v) repurchase agreements
involving any of the foregoing obligations entered into with highly-rated
banks and broker-dealers.
REPURCHASE AGREEMENTS -- Agreements by which a person obtains a security and
simultaneously commits to return it to the seller at an agreed upon price (in-
cluding principal and interest) on an agreed upon date within a number of days
from the date of purchase. The Fund's Custodian or its agents will hold the
security as collateral for the repurchase agreement. Collateral must be main-
tained at a value at least equal to 102% of the purchase price. The Portfolio
bears a risk of loss in the event the other party defaults on its obligations
and the Portfolio is delayed or prevented from exercising its right to dispose
of the collateral securities or if the Portfolio realizes a loss on the sale
of the collateral securities. The Adviser will enter into repurchase agree-
ments on behalf of the Portfolio only with financial institutions deemed to
present minimal risk of bankruptcy during the term of the agreement based on
guidelines established and periodically reviewed by the Directors. Repurchase
agreements are considered loans under the 1940 Act, as well as for federal and
state income tax purposes.
RESTRICTED SECURITIES -- Securities that may not be sold freely to the public
absent registration under the Securities Act of 1933 or an exemption from reg-
istration. The Portfolio may invest in restricted securities that the Adviser
determines are liquid, based on guidelines and procedures developed and estab-
lished by the Board of Directors of the Fund. The Board of Directors will pe-
riodically review such procedures and guidelines and will monitor the Advis-
er's implementation of such procedures and guidelines. Under these procedures
and guidelines, the Adviser will consider the frequency of trades and quotes
for the security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the na-
ture of the security and of the marketplace trades. The Portfolio may purchase
restricted securities sold in reliance upon the exemption from registration
provided by Rule 144A under the Securities Act of 1933. Restricted securities
may be difficult to value because market quotations may not be readily avail-
able. Because of the restrictions on the resale of restricted securities, they
may pose liquidity problems for the Portfolio.
WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES -- The Portfolio may purchase se-
curities on a when-issued or delay-delivery basis. When the Portfolio pur-
chases securities in a when-issued or delayed-delivery basis, the price of
such securities is fixed at the time of the commitment, but delivery and pay-
ment for the securities may take place up to 120 days after the date of the
commitment to purchase. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. When-
issued and delayed-delivery securities involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date or in-
creases in value and there is a failure to deliver the security.
U.S. GOVERNMENT SECURITIES -- Bills, notes and bonds issued by the U.S. Gov-
ernment and backed by the full faith and credit of the United States.
U.S. TREASURY OBLIGATIONS -- Bills, notes and bonds issued by the U.S. Trea-
sury.
WARRANTS -- Instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price during a specified period.
16
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Summary..................................................................... 2
Expense Summary............................................................. 4
The Fund and the Portfolios................................................. 5
Investment Objective and Policies........................................... 5
General Investment Policies and Strategies.................................. 5
Risk Factors................................................................ 6
Investment Limitations...................................................... 7
How to Purchase Fund Shares................................................. 7
</TABLE>
<TABLE>
<S> <C>
Shareholder Services........................................................ 8
How to Redeem Fund Shares................................................... 10
Share Price................................................................. 11
Performance Advertising..................................................... 11
Taxes....................................................................... 11
General Information......................................................... 12
Glossary of Permitted Investments........................................... 14
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ "INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A POST- +
+ EFFECTIVE AMENDMENT TO THE FUND'S REGISTRATION STATEMENT RELATING TO THESE +
+ SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE +
+ SECURITIES MAY NOT BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE+
+ TIME THE POST-EFFECTIVE AMENDMENT TO THE FUND'S REGISTRATION STATEMENT +
+ BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT +
+ CONSTITUTE A PROSPECTUS." +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED ____, 1996
FUND:
THE PBHG FUNDS, INC.
PBHG LIMITED FUND
INVESTMENT ADVISER:
PILGRIM BAXTER & ASSOCIATES, LTD.
This Statement of Additional Information is not a prospectus and relates only to
the PBHG Limited Fund (the "Portfolio"). It is intended to provide additional
information regarding the activities and operations of The PBHG Funds, Inc. (the
"Fund") and the Portfolio, and should be read in conjunction with the
Portfolio's Prospectus dated July 1, 1996. The Prospectus for the Portfolio may
be obtained without charge by calling 1-800-431-0051.
TABLE OF CONTENTS
THE FUND..................................................................S - 2
DESCRIPTION OF PERMITTED INVESTMENTS......................................S - 2
INVESTMENT LIMITATIONS....................................................S - 3
THE ADVISER...............................................................S - 6
THE ADMINISTRATOR.........................................................S - 7
THE DISTRIBUTOR...........................................................S - 7
DIRECTORS AND OFFICERS OF THE FUND........................................S - 7
COMPUTATION OF YIELD.....................................................S - 11
CALCULATION OF TOTAL RETURN..............................................S - 11
PURCHASE AND REDEMPTION OF SHARES........................................S - 11
DETERMINATION OF NET ASSET VALUE.........................................S - 11
TAXES....................................................................S - 12
PORTFOLIO TRANSACTIONS...................................................S - 14
DESCRIPTION OF SHARES....................................................S - 15
July 1, 1996
<PAGE>
THE FUND
This Statement of Additional Information relates only to the Fund's PBHG Limited
Fund (the "Portfolio"). The Portfolio is a separate series of The PBHG Funds,
Inc. (the "Fund"), which was originally incorporated in Delaware on August 2,
1985, under the name PBHG Growth Fund, Inc., and commenced business shortly
thereafter as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). On July 21, 1992,
shareholders of the Fund approved an Agreement and Articles of Merger pursuant
to which the Fund was reorganized and merged into a new Maryland corporation,
also named PBHG Growth Fund, Inc. On September 8, 1993, the shareholders of the
Fund voted to change the name of the Fund to The Advisors' Inner Circle Fund II,
Inc. On May 2, 1994, the shareholders voted to change the Fund's name to The
PBHG Funds, Inc. The Fund also offers shares of eight other portfolios, PBHG
Growth Fund, PBHG Emerging Growth Fund, PBHG Large Cap Growth Fund, PBHG Select
Equity Fund, PBHG International Fund, PBHG Cash Reserves Fund, PBHG Technology &
Communications Fund and PBHG Core Growth Fund, by a separate prospectus and
statement of additional information. The Portfolio is a separate mutual fund,
and each share of the Portfolio represents an equal proportionate interest in
the Portfolio. See "Description of Shares." No investment in shares of the
Portfolio should be made without first reading the Portfolio's Prospectus.
Capitalized terms not defined herein are defined in the Portfolio's Prospectus.
DESCRIPTION OF PERMITTED INVESTMENTS
Repurchase agreements are agreements by which a person (e.g., the Portfolio)
obtains a security and simultaneously commits to return the security to the
seller (a member bank of the Federal Reserve System or primary securities dealer
as recognized by the Federal Reserve Bank of New York) at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.
Repurchase agreements are considered to be loans by the Portfolio for purposes
of its investment limitations. The repurchase agreements entered into by the
Portfolio will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement (the
Adviser monitors compliance with this requirement). Under all repurchase
agreements entered into by the Portfolio, the Fund's custodian or its agent must
take possession of the underlying collateral. However, if the seller defaults,
the Portfolio could realize a loss on the sale of the underlying security to the
extent that the proceeds of the sale, including accrued interest, are less than
the resale price provided in the agreement including interest. In addition,
even though the Bankruptcy Code provides protection for most repurchase
agreements, if the seller should be involved in bankruptcy or insolvency
proceedings, the Portfolio may incur delay and costs in selling the underlying
security or may suffer a loss of
S - 2
<PAGE>
principal and interest if the Portfolio is treated as an unsecured creditor of
the seller and is required to return the underlying security to the seller's
estate.
Investment Company Shares
The Portfolio may invest in shares of money market mutual funds, to the extent
set forth under "Investment Limitations" below. Since such funds pay management
fees and other expenses, shareholders of the Portfolio would indirectly pay both
the Portfolio's expenses and the expenses of underlying funds with respect to
the Portfolio's assets invested therein. Applicable regulations prohibit the
Portfolio from acquiring the securities of other investment companies if, as a
result of such acquisition, the Portfolio owns more than 3% of the total voting
stock of the company; more than 5% of the Portfolio's total assets are invested
in securities of any one investment company; or more than 10% of the total
assets of the Portfolio are invested in securities (other than treasury stock)
issued by all investment companies.
INVESTMENT LIMITATIONS
Fundamental Policies
The Portfolio has adopted certain investment restrictions which, in addition to
those restrictions in the Prospectus, are fundamental and may not be changed
without approval by a majority vote of the Portfolio's shareholders. Such
majority is defined in the 1940 Act as the lesser of (i) 67% or more of the
voting securities of the Portfolio present in person or by proxy at a meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy; or (ii) more than 50% of the outstanding voting
securities of the Portfolio.
The Portfolio may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate substantial redemption requests if they should
occur and is not for investment purposes. All borrowings in excess of 5%
of the Portfolio's total assets will be repaid before making investments.
4. Make loans, except that the Portfolio, in accordance with the Portfolio's
investment objectives and policies, may (i) purchase or hold debt
instruments, and (ii) enter into repurchase agreements as described in the
Portfolio's Prospectus and Statement of Additional Information.
S - 3
<PAGE>
5. Pledge, mortgage or hypothecate assets, except (i) to secure temporary
borrowings permitted by the Portfolio's limitation on permitted borrowings,
or (ii) in connection with permitted transactions regarding options and
futures contracts, in aggregate amounts not to exceed 10% of total assets
taken at current value of the time of the incurrence of such pledge,
mortgage or hypothecation.
6. Purchase or sell real estate, real estate limited partnership interests,
futures, contracts, commodities or commodity contracts, except that this
shall not prevent the Portfolio from (i) investing in readily marketable
securities of issuers which can invest in real estate or commodities,
institutions that issue mortgages, or real estate investment trusts which
deal in real estate or interests therein, pursuant to the Portfolio's
investment objective and policies, and (ii) entering into futures contracts
and options thereon that are listed on a national securities or commodities
exchange where, as a result thereof, no more than 5% of the total assets
for the Portfolio (taken at market value at the time of entering into the
futures contracts) would be committed to margin deposits on such futures
contracts and premiums paid for unexpired options on such futures
contracts; provided that, in the case of an option that is "in-the-money"
at the time of purchase, the "in-the-money" amount, as defined under
Commodity Futures Trading Commission regulations, may be excluded in
computing the 5% limit. The Portfolio (as a matter of operating policy)
will utilize only listed futures contracts and options thereon.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Portfolio may (i) obtain short-term
credits as necessary for the clearance of security transactions, and (ii)
establish margin accounts as may be necessary in connection with the
Portfolio's use of options and futures contracts.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
9. Purchase securities of other investment companies except as permitted by
the 1940 Act and the rules and regulations thereunder.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowing money or pledging, mortgaging or hypothecating
assets, as described in the Portfolio's limitation on borrowing money, the
Portfolio's limitation on permitted borrowings and the Portfolio's
limitation on pledging, mortgaging or hypothecating assets, or as permitted
by rule, regulation or orders of the SEC.
11. Invest in interests in oil, gas or other mineral exploration or development
programs.
S -4
<PAGE>
Non-fundamental Policies
In addition to the foregoing, and the policies set forth in the Portfolio's
Prospectus, the Portfolio has adopted additional investment restrictions which
may be amended by the Board of Directors without a vote of shareholders.
The Portfolio may not:
1. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of its net assets. This limitation does not include any Rule 144A
restricted security that has been determined by, or pursuant to procedures
established by, the Board, based on trading markets for such security, to
be liquid. However, certain state securities regulators have required that
the Portfolio not invest more than 10% of its net assets in restricted
securities; the Portfolio will so limit its investments, but intends to
remove or loosen this restriction once permitted to do so by state
regulators.
2. Invest in warrants valued at lower of cost or market value in an aggregate
amount not exceeding 5% of the Portfolio's net assets. Included in that
amount, but not to exceed 2% of the Portfolio's net assets, may be warrants
not listed on the New York Stock Exchange or American Stock Exchange.
3. Purchase securities of other investment companies, except to the extent
such purchase is limited to shares of money market open-end investment
companies and the Adviser will waive its fee on that portion of the assets
placed in such money market open-end investment companies.
4. Purchase or retain securities of an issuer if, to the knowledge of the
Portfolio, an officer, trustee, partner or director of the Portfolio or any
investment adviser of the Portfolio owns beneficially more than 1/2 of 1%
of the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.
5. Purchase puts, calls, straddles, spreads, and any combination thereof, if
by reason thereof the value of its aggregate investment in such classes of
securities will exceed 5% of its total assets.
The foregoing percentages will apply at the time of the purchase of a security,
except with respect to the limitation on investing in illiquid securities.
S - 5
<PAGE>
THE ADVISER
The Fund and Pilgrim Baxter & Associates, Ltd. (the "Adviser") have entered into
an advisory agreement (the "Advisory Agreement"). The Advisory Agreement
provides certain limitations on the Adviser's liability, but also provides that
the Adviser shall not be protected against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Advisory Agreement obligates the Adviser to: (1) provide a program of
continuous investment management for the Fund in accordance with the Fund's
investment objectives, policies and limitations; (2) make investment decisions
for the Fund; and (3) place orders to purchase and sell securities for the Fund,
subject to the supervision of the Board of Directors. The Advisory Agreement
requires the Adviser to pay its overhead and employee costs and the compensation
and expenses of all its partners, officers and employees who serve as officers
and executive employees of the Fund. The Advisory Agreement provides that the
Adviser is not responsible for other expenses of operating the Fund. See the
Prospectuses for a description of expenses borne by the Fund.
The Adviser is entitled to a fee which is calculated daily and paid monthly at
an annual rate of 1.00% of the average net assets of the Portfolio.
The Adviser has voluntarily agreed to waive a portion of its fee and reimburse
expenses in an amount that operates to limit total annual operating expenses to
not more than 1.5% of the average daily net assets of the Portfolio. The
Adviser reserves the right to terminate its voluntary fee waivers and
reimbursements at any time in its sole discretion.
The annual fees of the Adviser will be reduced to the extent that the Fund's
ordinary expenses for any fiscal year (including advisory fees, but excluding
brokerage commissions, interest, local, state and federal taxes and
extraordinary expenses) exceed the expense limitations of any state having
jurisdiction over the Fund. In such event, the annual advisory fees will be
reduced pro rata (but not below zero) to the extent necessary to comply with
such expense limitations. At the date of this Statement of Additional
Information, the strictest expense limitation applicable to the Fund is 2.5% of
the first $30 million of the Fund's average net assets, 2.0% of the next $70
million of average net assets, and 1.5% of the remaining average net assets of
any fiscal year.
To the extent the Portfolio is registered in the State of California and
purchases securities of open-end investment companies, the Adviser will waive
its advisory fee on that portion of the Portfolio's assets invested in such
securities.
The continuance of the Advisory Agreement after the first two years must be
specifically approved at least annually (i) by the Fund's Board of Directors or
by vote of a majority of the Fund's outstanding voting securities and (ii) by
the affirmative vote of a majority of the Directors who are not parties to the
agreement or interested persons of any such party by votes
S - 6
<PAGE>
cast in person at a meeting called for such purpose. The Advisory Agreement may
be terminated (i) at any time without penalty by the Fund upon the vote of a
majority of the Directors or by vote of the majority of the Fund's outstanding
voting securities upon 60 days' written notice to the Adviser or (ii) by the
Adviser at any time without penalty upon 60 days' written notice to the Fund.
The Advisory Agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act).
THE ADMINISTRATOR
The Fund and _________________ (the "Administrator") have entered into an
administration agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or negligence on the part of the
Administrator in the performance of its duties or from reckless disregard by it
of its duties and obligations thereunder. The Administration Agreement shall
remain in effect for a period of two years after its effective date and shall
continue in effect for successive periods of one year unless terminated by
either party on not less than 90 days' prior written notice to the other party.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .__% of the average daily net assets of the
Portfolio.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI Corporation, and the Fund are parties to a distribution agreement (the
"Distribution Agreement"). The Distributor will receive no compensation for
distribution of shares of the Portfolio.
The Distribution Agreement is renewable annually. The Distribution Agreement
may be terminated by the Distributor, by a majority vote of the Directors who
are not interested persons and have no financial interest in the Distribution
Agreement or by a majority vote of the outstanding securities of the Fund upon
not more than 60 days' written notice by either party or upon assignment by the
Distributor.
DIRECTORS AND OFFICERS OF THE FUND
The management and affairs of the Fund are supervised by the Directors under the
laws of the State of Maryland. The Directors and executive officers of the Fund
and their principal occupations for the last five years are set forth below.
Each may have held other positions with the named companies during that period.
Unless otherwise noted, the business address of each executive officer is SEI
Financial Management Corporation, 680 East Swedesford Road, Wayne, PA 19087-
1658:
S - 7
<PAGE>
JOHN R. BARTHOLDSON - Director - Triumph Group Holdings, Inc., 1255 Drummers
Lane, Suite 200, Wayne, PA 19087-1590. Chief Financial Officer and Director,
The Triumph Group Holdings, Inc. since 1992. Senior Vice President and Chief
Financial Officer, Lukens, Inc., 1978-1992.
HAROLD J. BAXTER* - Director, Chairman and Chief Executive Officer - 1255
Drummers Lane, Suite 300, Wayne, PA 19087-1590. Chairman, Chief Executive
Officer and Director, Pilgrim Baxter & Associates, Ltd. (and its predecessor
firms) since 1982.
JETTIE M. EDWARDS - Director - Syrus Associates, 76 Seaview Drive, Santa
Barbara, California 93108. Consultant, Syrus Associates since 1986; Trustee,
Provident Investment Counsel Trust (investment company) since 1992.
ALBERT A. MILLER - Director - 7 Jennifer Drive, Holmdel, New Jersey 07733.
Principal and Treasurer, JK Equipment Exporters since 1995; Advisor and
Secretary, The Underwoman Shoppes Inc. since 1980; Merchandising Group Vice
President, R.H. Macy & Co., 1958-1995 (retired).
GARY PILGRIM - President - President, Secretary, Treasurer and Director, Pilgrim
Baxter & Associates, Ltd. since 1982.
CARMEN V. ROMEO - Treasurer, Assistant Secretary - Director, Executive Vice
President, Chief Financial Officer and Treasurer of SEI Corporation ("SEI").
Director and Treasurer of SEI Financial Management Corporation ("SEI Financial")
and the Distributor since 1981.
SANDRA K. ORLOW - Vice President, Assistant Secretary - Vice President and
Assistant Secretary of SEI, SEI Financial and the Distributor since 1983.
KEVIN P. ROBINS - Vice President, Assistant Secretary - Senior Vice President,
Secretary and General Counsel of SEI, SEI Financial and the Distributor since
1994. Vice President and Assistant Secretary of SEI, SEI Financial and the
Distributor since 1992. Associate, Morgan, Lewis & Bockius LLP (law firm), 1988-
1992.
JEFFREY A. COHEN, CPA - Controller, Assistant Secretary - Director,
International and Domestic Funds Accounting, SEI since 1991. Audit Manager,
Price Waterhouse prior to 1991.
KATHRYN L. STANTON - Vice President, Assistant Secretary - Vice President,
Assistant Secretary of SEI, SEI Financial and the Distributor since 1994.
Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
TODD CIPPERMAN - Vice President, Assistant Secretary - Vice President, Assistant
Secretary of SEI, SEI Financial and the Distributor since 1995. Associate, Dewey
Ballantine (law firm) 1994-1995, Associate, Winston & Strawn (law firm), 1991-
1995.
S - 8
<PAGE>
JOSEPH LYDON - Vice President, Assistant Secretary - Director of Business
Administration, SEI since April, 1995; Vice President of Fund Group,
Vice President of the Advisor - Dreman Value Management, LP, President of Dreman
Financial Services, Inc., 1989-1995.
MICHAEL HARRINGTON - Assistant Treasurer - Mutual Fund Coordinator, Pilgrim
Baxter & Associates, Ltd. since 1994; Account Manager, SEI, 1991-1994.
BRIAN BEREZNAK - Vice President, Assistant Secretary - Director, Chief Operating
Officer, Pilgrim Baxter & Associates, Ltd. since 1983.
DARLENE DEREMER - Vice President - President, DeRemer Associates, 155 South
Street, Wrentham, MA 02093 since 1987.
JANE A. KANTER - Secretary - Partner, Katten Muchin & Zavis, 1025 Thomas
Jefferson Street, N.W., East Lobby - Suite 700, Washington, D.C. 20007 (law
firm) since 1994; Partner, Freedman Levy Kroll & Simonds (law firm), 1987-1994.
___________________
*Mr. Baxter is a Director who may be deemed to be an "interested person" of the
Fund as that term is defined in the 1940 Act.
S - 9
<PAGE>
Each current Director of the Fund who is not an "interested person" of the Fund
is expected to receive the following compensation during the fiscal year ending
March 31, 1997:
<TABLE>
<CAPTION>
Total
Pension or Compensation
Aggregate Retirement from the
Compensation Benefits Estimated Portfolio
Name of Person, from the Accrued as Part Annual and the Fund
Position Portfolio* of Benefits Upon Paid to
Fund Expenses Retirement Directors*
<S> <C> <C> <C> <C>
John R. Bartholdson, less than N/A N/A $12,000 for
Director $1,500 services on
one Board
Harold J. Baxter, N/A N/A N/A N/A
Director**
Jettie M. Edwards, less than N/A N/A $12,000 for
Director $1,500 services on
one Board
Albert A. Miller, less than N/A N/A $12,000 for
Director $1,500 services on
one Board
====================================================================================================================================
</TABLE>
___________________
*The Fund is expected to pay approximately $3,000 to each Director who is not an
"interested person" of the Fund for each regular meeting of the Board of
Directors during the fiscal year ending March 31, 1997. The Portfolio is
expected to pay its proportionate share of the total compensation, based on its
total net assets relative to the total net assets of the Fund.
**Mr. Baxter is a Director who may be deemed to be an "interested person" of the
Fund, as that term is defined in the 1940 Act, and consequently will be
receiving no compensation from the Fund.
As of July 1, 1996, Harold J. Baxter and Christine E. Baxter of 1054 S. Leopard
Street, Berwyn, PA 19312-2027, held all of the outstanding shares, both
beneficially and of record, of the Portfolio. As a result of such ownership,
Mr. and Ms. Baxter may be deemed to be control persons of the Portfolio. Such
control may in the future dilute the effect of the votes of other shareholders
in the Portfolio. Mr. Baxter is a Director of the Fund, and so, as of July 1,
1996, all of the outstanding shares of the Portfolio were held by the officers
and Directors of the Portfolio.
S - 10
<PAGE>
COMPUTATION OF YIELD
From time to time, the Portfolio may advertise yield. These figures will be
based on historical earnings and are not intended to indicate future
performance. The yield of the Portfolio refers to the annualized income
generated by an investment in the Portfolio over a specified 30-day period. The
yield is calculated by assuming that the income generated by the investment
during that period generated each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = (2 (a-b/cd + 1)/6/ - 1) where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of
reimbursement); c = the current daily number of shares outstanding during
the period that were entitled to receive dividends; and d = the maximum
offering price per share on the last day of the period.
CALCULATION OF TOTAL RETURN
From time to time, the Portfolio may advertise total return. The total
return of the Portfolio refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including but not
limited to, the period from which the Portfolio commenced operations
through the specified date), assuming that the entire investment is
redeemed at the end of each period. In particular, total return will be
calculated according to the following formula: P (1 + T)/n/ = ERV, where P
= a hypothetical initial payment of $1,000; T = average annual total
return; n = number of years; and ERV = ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the designated time
period as of the end of such period.
Quotations of total return, which are not annualized, represent historical
earnings and asset value fluctuations. Total return is based on past
performance and is not a guarantee of future results.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through the Distributor on any day on
which the New York Stock Exchange is open for business. Currently, the
following holidays are observed by the Fund: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. Shares of the Portfolio are offered on a continuous
basis.
It is currently the Fund's policy to pay all redemptions in cash. The Fund
retains the right, however, to alter this policy to provide for redemptions
in whole or in part by a distribution in-kind of securities held by the
Portfolio in lieu of cash. Shareholders may incur brokerage charges on the
sale of any such securities so received in payment of redemptions.
The Fund reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which
trading on the New York Stock Exchange is restricted, or during the
existence of an emergency (as determined by the SEC by rule or
S - 11
<PAGE>
regulation) as a result of which disposal or valuation of the Portfolio's
securities is not reasonably practicable, or for such other periods as the
SEC has by order permitted. The Fund also reserves the right to suspend
sales of shares of the Portfolio for any period during which the New York
Stock Exchange, the Adviser, the Administrator, the Transfer Agent and/or
the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The securities of the Portfolio are valued by the Administrator. The
Administrator will use an independent pricing service to obtain valuations
of securities. The pricing service relies primarily on prices of actual
market transactions as well as trade quotations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Fund
under the general supervision of the Directors.
Portfolio securities listed on an exchange or quoted on a national market
system are valued at the last sales price. Other securities are quoted at
the mean between the most recent bid and asked prices. In the event a
listed security is traded on more than one exchange, it is valued at the
last sale price on the exchange on which it is principally traded. If
there are no transactions in a security during the day, it is valued at the
mean between the most recent bid and asked prices. However, debt
securities (other than short-term obligations) including listed issues, are
valued on the basis of valuations furnished by a pricing service which
utilizes electronic data processing techniques to determine valuations for
normal institutional size trading units of debt securities, without
exclusive reliance upon exchange or over-the-counter prices. Short-term
obligations are valued at amortized cost. Securities for which market
quotations are not readily available and other assets held by the Fund, if
any, are valued at their fair value as determined in good faith by the
Board of Directors.
TAXES
The following is only a summary of certain income tax considerations
generally affecting the Portfolio and its shareholders, and is not intended
as a substitute for careful tax planning. Shareholders are urged to
consult their tax advisors with specific reference to their own tax
situations, including their state and local income tax liabilities.
Federal Income Tax
The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
The Portfolio intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. By maintaining its
qualifications as a RIC, the Portfolio intends to eliminate or reduce to a
nominal amount the federal taxes to which it may be subject.
S - 12
<PAGE>
In order to qualify for treatment as a RIC under the Code, the Portfolio
must distribute annually to its shareholders at least the sum of 90% of its
net interest income excludable from gross income plus 90% of its investment
company taxable income (generally, net investment income plus net short-
term capital gain) ("Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the following: (i)
at least 90% of the Portfolio's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock or securities, or
certain other income; (ii) the Portfolio must derive less than 30% of its
gross income each taxable year from the sale or other disposition of stocks
or securities held for less than three months; (iii) at the close of each
quarter of the Portfolio's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RICs and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does
not exceed 5% of the value of the Portfolio's assets and that does not
represent more than 10% of the outstanding voting securities of such
issuer; and (iv) at the close of each quarter of the Portfolio's taxable
year, not more than 25% of the value of its assets may be invested in
securities (other than U.S. Government securities or the securities of
other RICs) of any one issuer or of two or more issuers which are engaged
in the same, similar or related trades or businesses if the Portfolio owns
at least 20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which
requires only that the Portfolio distribute at least 90% of its annual
investment company taxable income and does not require any minimum
distribution of net capital gain (the excess of net long-term capital gain
over net short-term capital loss), the Portfolio will be subject to a
nondeductible 4% federal excise tax to the extent it fails to distribute by
the end of any calendar year 98% of its ordinary income for that year and
98% of its capital gain net income (the excess of short- and long-term
capital gains over short- and long-term capital losses) for the one-year
period ending on October 31 of that calendar year, plus certain other
amounts.
In certain cases, the Portfolio will be required to withhold, and remit to
the U.S. Treasury, 31% of any distributions paid to a shareholder who (1)
has failed to provide a correct taxpayer identification number, (2) is
subject to backup withholding by the Internal Revenue Service, or (3) has
not certified to the Portfolio that such shareholder is not subject to
backup withholding.
If the Portfolio fails to qualify as a RIC for any taxable year, it will be
taxable at regular corporate rates on its net investment income and net
capital gain without any deductions for amounts distributed to
shareholders. In such an event, all distributions (including capital gains
distributions) will be taxable as ordinary dividends to the extent of the
Portfolio's current and accumulated earnings and profits and such
distributions will generally be eligible for the corporate dividends-
received deduction.
State Taxes
Distributions by the Portfolio to shareholders and the ownership of shares
may be subject to state and local taxes.
S - 13
<PAGE>
PORTFOLIO TRANSACTIONS
The Adviser is authorized to select brokers and dealers to effect
securities transactions for the Portfolio. The Adviser will seek to obtain
the most favorable net results by taking into account various factors,
including price, commission, if any, size of the transactions and
difficulty of executions, the firm's general execution and operational
facilities and the firm's risk in positioning the securities involved.
While the Adviser generally seeks reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available. The Adviser seeks to select brokers or dealers that
offer the Portfolio best price and execution or other services which are of
benefit to the Portfolio. Certain brokers or dealers assist their clients
in the purchase of shares from the Distributor and charge a fee for this
service in addition to the Portfolio's public offering price. In the case
of securities traded in the over-the-counter market, the Adviser expects
normally to seek to select primary market makers.
The Adviser may, consistent with the interests of the Portfolio, select
brokers on the basis of the research services they provide to the Adviser.
Such services may include analyses of the business or prospects of a
company, industry or economic sector, or statistical and pricing services.
Information so received by the Adviser will be in addition to and not in
lieu of the services required to be performed by the Adviser under the
Advisory Agreement. If, in the judgment of the Adviser, the Portfolio or
other accounts managed by the Adviser will be benefitted by supplemental
research services, the Adviser is authorized to pay brokerage commissions
to a broker furnishing such services which are in excess of commissions
which another broker may have charged for effecting the same transaction.
These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability
of investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses
and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software used in security analyses;
and providing portfolio performance evaluation and technical market
analyses. The expenses of the Adviser will not necessarily be reduced as a
result of the receipt of such supplemental information, and such services
may not be used exclusively, or at all, with respect to the Portfolio or
account generating the brokerage, and there can be no guarantee that the
Adviser will find all of such services of value in advising the Portfolio.
It is expected that the Portfolio may execute brokerage or other agency
transactions through the Distributor, which is a registered broker-dealer,
for a commission in conformity with the 1940 Act, the Securities Exchange
Act of 1934 and rules promulgated by the SEC. Under these provisions, the
Distributor is permitted to receive and retain compensation for effecting
portfolio transactions for the Portfolio on an exchange if a written
contract is in effect between the Distributor and the Portfolio expressly
permitting the Distributor to receive and retain such compensation. These
rules further require that commissions paid to the Distributor by the
Portfolio for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions
to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by
S - 14
<PAGE>
other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time." In addition, the Adviser may direct commission
business to one or more designated broker-dealers, including the
Distributor, in connection with such broker-dealer's payment of certain of
the Portfolio's or the Fund's expenses. Because shares of the Portfolio
are not marketed through intermediary broker-dealers, it is not the
Portfolio's practice to allocate brokerage or effect principal transactions
with broker-dealers on the basis of sales of shares that may be made
through such firms. However, the Adviser may place orders for the purchase
or sale of portfolio securities with qualified broker-dealers who refer
clients to the Portfolio. The Directors, including those who are not
"interested persons" of the Fund, have adopted procedures for evaluating
the reasonableness of commissions paid to the Distributor and will review
these procedures periodically.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking best execution and such
other policies as the Board of Directors may determine, the Adviser may
consider sales of Fund shares as a factor in the selection of dealers to
execute portfolio transactions for the Fund.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of shares of the
Portfolio and to create additional portfolios of the Fund. Each share of
the Portfolio represents an equal proportionate interest in the Portfolio
with each other share. Shares are entitled upon liquidation to a pro rata
share in the net assets of the Portfolio available for distribution to
shareholders. Shareholders have no preemptive rights. All consideration
received by the Fund for shares of the Portfolio and all assets in which
such consideration is invested belong to the Portfolio and would be subject
to the liabilities related thereto.
S - 15
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
To be filed in Post-Effective Amendment No. 23
(b) Exhibits:
1(a) Certificate of Incorporation/1/
1(b) Certificate of Amendment dated October 28, 1985/2/
1(c) Certificate of Amendment to Certificate of Incorporation/4/
1(d) Agreement and Articles of Merger of PBHG Growth Fund, Inc.,
a Maryland corporation/7/
1(e) Articles of Incorporation of The PBHG Funds, Inc./7/
1(f) Articles of Amendment to the Articles of Incorporation of
The PBHG Funds, Inc., dated November 12, 1993/8/
1(g) Articles of Amendment to the Articles of Incorporation of
The PBHG Funds, Inc. dated May 5, 1994/9/
1(h) Articles Supplementary to the Articles of Incorporation of
The PBHG Funds, Inc. dated May 25, 1994/9/
1(i) Articles Supplementary to the Articles of Incorporation of
The PBHG Funds, Inc. dated December 5, 1994/10/
1(j) Articles Supplementary to the Articles of Incorporation of
The PBHG Funds, Inc. dated December 9, 1994/10/
1(k) Articles Supplementary to the Articles of Incorporation of
The PBHG Funds, Inc. dated August 17, 1995/14/
2 By-Laws/7/
3 Voting trust agreement - none
4 Specimen Common Stock Certificate/1/
5(a) Investment Advisory Agreement dated October 28, 1985/2/
5(b) Amendment to Investment Advisory Agreement between
PBHG Growth Fund, Inc. and Pilgrim Baxter Greig & Associates,
Ltd. dated September 1, 1987/3/
5(c) Investment Advisory Agreement between Registrant
and Pilgrim Baxter Greig & Associates, Ltd. dated July 22,
1992/7/
5(d) Form of Amended Investment Advisory Agreement
between Pilgrim Baxter & Associates, Ltd. and The PBHG
Funds, Inc./8/
5(d)(1) Schedule A dated November 20, 1995 to the Investment
Advisory Agreement between Pilgrim Baxter & Associates, Ltd.
and The PBHG Funds, Inc. (filed herewith)
5(e) Form of Investment Sub-Advisory Agreement among Pilgrim
Baxter & Associates, Ltd., on behalf of the PBHG Cash
Reserves Fund, Registrant and Wellington Management
Company/11/
5(f) Form of Investment Sub-Advisory Agreement among Pilgrim
Baxter & Associates, Ltd., Registrant, on behalf of the
International Fund, and Murray Johnstone International
Limited/13/
6(a) Distribution Agreement between Registrant and SEI
Financial Services Company dated July 16, 1993/8/
6(b) Copy of Selling Group Agreement/6/
7 Bonus, profit sharing or pension plans - none
8(a) Custodian Agreement dated October 28, 1985/2/
8(b) Custodian Agreement between Registrant and The First Jersey
National Bank dated February 12, 1988/3/
8(c) Form of Custodian Agreement between Registrant, on behalf of
the PBHG International Fund, and The Northern Trust
Company/8/
C-1
<PAGE>
8(d) Custodian Agreement between Registrant, on behalf of PBHG
Growth and PBHG Emerging Growth Funds, and CoreStates Bank,
N.A./9/
9(a)(1) Administration Agreement between Registrant and SEI Financial
Management Corporation dated September 10, 1993/8/
9(a)(1)(i) Schedule dated April 4, 1995 to the Administration
Agreement dated September 10, 1993 between the Registrant
and SEI Financial Management Corporation/11/
9(a)(1)(ii) Schedule to the Administration Agreement dated September 10,
1993 as amended and restated August 9, 1994 between
the Registrant and SEI Financial Management Corporation/12/
9(b)(1) Agency Agreement dated October 28, 1985/2/
9(b)(2) A gency Agreement between Registrant and Capstone Financial
Services, Inc. dated October 2, 1987/3/
9(b)(3) Shareholder Services Agreement between Registrant and
Fund/Plan Services, Inc. dated February 1, 1991/5/
9(b)(4) Transfer Agency Agreement between Registrant and Supervised
Service Company dated December 16, 1993/8/
10 Opinion of Counsel/7/
11 Consent of Arthur Andersen LLP, Independent Public
Accountants (to be filed)
12 Financial Statements omitted from Part B - none
13 Letter from Philadelphia Life Insurance Company to
the Registrant with respect to the initial capitalization
of the Registrant/2/
14(a)(1) Southwestern Life Insurance Company Defined Benefit Pension
Plan and Trust/1/
14(a)(2) Adoption Agreement for Southwestern Life Insurance Company
Standardized Integrated Defined Benefit Pension Plan
and Trust (with Pairing Provisions)/1/
14(a)(3) Adoption Agreement for Southwestern Life Insurance Company
Standardized Non-Integrated Defined Benefit Pension Plan
and Trust (with Pairing Provisions)/1/
14(a)(4) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Integrated Defined Benefit Pension Plan
and Trust/1/
14(a)(5) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Non-Integrated Defined Benefit Pension Plan
and Trust/1/
14(b)(1) Southwestern Life Insurance Company Combination Profit
Sharing-Money Purchase Plan and Trust/1/
14(b)(2) Adoption Agreement for Southwestern Life Insurance Company
Standardized Money Purchase Plan and Trust (with Pairing
Provisions)/1/
14(b)(3) Adoption Agreement for Southwestern Life Insurance Company
Standardized Profit Sharing Plan and Trust (with Pairing
Provisions)/1/
14(b)(4) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Money Purchase Plan and Trust/1/
14(b)(5) Adoption Agreement for Southwestern Life Insurance Company
Non-Standardized Profit Sharing Plan and Trust/1/
14(c) Form 5305, Simplified Employee Pension-Individual Retirement
Accounts Contribution Agreement/1/
14(d) Form 5305-A, Individual Retirement Custodial Account/1/
14(e)(1) Southwestern Life Insurance Company Tax Deferred Annuity
Program Custodial Agreement/1/
14(e)(2) Amendment to Application for Investment Plans under a
403(b)(7) Plan/14/
15 Plan pursuant to Rule 12b-1 with respect to Advisers Class
Shares/15/
16 Schedule for computation of Performance Quotation provided
in the Registration Statement (to be filed)
18 Form of Rule 18f-3 Multiple Class Plan dated November ,
1995/15/
24 Power of Attorney (filed herewith)
27 Financial Data Schedule (to be filed)
C-2
<PAGE>
-----------------------
1 Incorporated herein by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
2 Incorporated herein by reference to Pre-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
3 Incorporated herein by reference to Post-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
4 Incorporated herein by reference to Post-Effective Amendment No. 6 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
5 Incorporated herein by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
6 Incorporated herein by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
7 Incorporated herein by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
8 Incorporated herein by reference to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
9 Incorporated herein by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
10 Incorporated herein by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
11 Incorporated herein by reference to Post-Effective Amendment No. 16 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
12 Incorporated herein by reference to Post-Effective Amendment No. 17 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
13 Incorporated herein by reference to Post-Effective Amendment No. 18 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
14 Incorporated herein by reference to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
15 Incorporated herein by reference to Post-Effective Amendment No. 21 to
Registrant's Registration Statement on Form N-1A (File No. 2-99810).
Item 25. Persons Controlled by or under Common Control with Registrant
See the Prospectus and the Statement of Additional Information regarding
the Registrant's control relationships.
Item 26. Number of Holders of Securities
As of April 5, 1996:
Title of Class Number of Record Holders
Share of Common Stock, par value - $.001
PBHG Growth Fund 176,044
PBHG Emerging Growth Fund 40,724
C-3
<PAGE>
PBHG International Fund 3,401
PBHG Large Cap Growth Fund 3,484
PBHG Select Equity Fund 10,443
PBHG Cash Reserves Fund 4,026
PBHG Technology & Communications Fund 4,776
PBHG Core Growth Fund 3,158
Item 27. Indemnification
The Articles of Incorporation of the Registrant include the following:
ARTICLE VII
7.4 Indemnification. The Corporation, including its successors and assigns,
---------------
shall indemnify its directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in accordance with the procedures
required, by the General Laws of the State of Maryland and the Investment
Company Act of 1940. The By-Laws may provide that the Corporation shall
indemnify its employees and/or agents in any manner and within such limits as
permitted by applicable law. Such indemnification shall be in addition to any
other right or claim to which any director, officer, employee or agent may
otherwise be entitled. The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise or
employee benefit plan, against any liability (including, with respect to
employee benefit plans, excise taxes) asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have had the power to indemnify against such
liability. The rights provided to any person by this Article 7.4 shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Incorporation shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.
C-4
<PAGE>
The By-Laws of the Registrant include the following:
ARTICLE VI
Indemnification
---------------
"The Corporation shall indemnify (a) its Directors and officers, whether
serving the Corporation or at its request any other entity, to the full
extent required or permitted by (i) Maryland law now or hereafter in
force, including the advance of expenses under the procedures and to the
full extent permitted by law, and (ii) the Investment Company Act of
1940, as amended, and (b) other employees and agents to such extent as
shall be authorized by the Board of Directors and be permitted by law.
The foregoing rights of indemnification shall not be exclusive of any
other rights to which those seeking indemnification may be entitled. The
Board of Directors may take such action as is necessary to carry out
these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts
implementing such provisions nor such further indemnification arrangement
as may be permitted by law."
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suite or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
To the extent that the Articles of Incorporation, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnify any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment adviser or
principal underwriter to the Registrant, any such provision protecting or
purporting to protect such persons against any liability to the Registrant or
its security holders to which he would otherwise by subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties,
or by reason of his contract or agreement, will be interpreted and enforced in a
manner consistent with the provisions of Sections 17(h) and (i) of the
Investment company Act of 1940, as amended, and Release No. IC-11330 issued
thereunder.
Item 28. Business and Other Connections of Investment Adviser:
Other business, profession, vocation, or employment of a substantial nature
in which each director or principal officer of the Pilgrim Baxter & Associates,
Ltd. is or has been, at any time during the last two fiscal years, engaged for
his own account or in the capacity of director, officer, employee, partner or
trustee are as follows:
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Pilgrim Baxter & Associates Other Company Other Company
-------------------------------- ------------- -------------
<S> <C> <C>
Harold J. Baxter United Asset Member, Board
Director, Chairman & Chief Executive Management Corporation of Directors
Officer
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Gary L. Pilgrim - -
Director, President, Secretary,
Treasurer & Chief Investment Officer
Brian F. Bereznak - -
Chief Operating Officer
Eric C. Schneider - -
Chief Financial Officer
</TABLE>
Business and Other Connections of Investment Sub-Adviser:
The list required by this Item 28 of officers and directors of Murray
Johnstone International Limited, together with information as to any other
business, profession, vocation or employment of a substantial nature engaged in
by such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV, filed by Murray Johnstone
International Limited pursuant to the Investment Advisers Act of 1940 (SEC File
No. 801-34926).
The list required by this Item 28 of officers and directors of Wellington
Management, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV, filed by Wellington Management pursuant to the Investment
Advisers Act of 1940 (SEC File No. 801-15908).
Item 29. Principal Underwriters
(a) Furnish the name of each investment company (other than the
Registrant) for which each principal underwriter currently
distributing the securities of the Registrant also acts as a principal
underwriter, distributor or investment adviser.
Registrant's distributor, SEI Financial Services Company ("SFS"), acts
as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFund May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
C-6
<PAGE>
SEI Liquid Asset Trust November 29, 1982
The Arbor Fund January 28, 1993
1784 Funds June 1, 1993
Marquis(SM) Funds August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
Inventor Funds, Inc. August 1, 1994
The Achievement Funds Trust December 27, 1994
Insurance Investment Products Trust December 30, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
Conestoga Family of Funds May 1, 1995
STI Classic Variable Trust August 18, 1995
Ark Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
SFS provides numerous financial services to investment managers, pension plan
sponsors, and bank trust departments. These services include portfolio
evaluation, performance measurement and consulting services ("Funds Evaluation")
and automated execution, clearing and settlement of securities transactions
("MarketLink").
(b) Furnish the information required by the following table with respect
to each director, officer or partner of each principal underwriter
named in the answer to Item 21 of Part B.
<TABLE>
<CAPTION>
Name and Principal Position and Office with Underwriter Positions and
Business Address* Offices with
Registrant
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive Officer -
Henry H. Greer Director, President & Chief Operating Officer -
Carmen V. Romeo Director, Executive Vice President & Treasurer Treasurer
Gilbert L. Beebower Executive Vice President -
Richard B. Lieb Executive Vice President -
Charles A. Marsh Executive Vice President-Capital Resources -
Division
Leo J. Dolan, Jr. Senior Vice President -
Carl A. Guarino Senior Vice President -
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Office with Underwriter Positions and
Business Address* Offices with
Registrant
<S> <C> <C>
Jerome Hickey Senior Vice President -
David G. Lee Senior Vice President -
William Madden Senior Vice President -
A. Keith McDowell Senior Vice President -
Dennis J. McGonigle Senior Vice President -
Hartland J. McKeown Senior Vice President -
James V. Morris Senior Vice President -
Steven Onofrio Senior Vice President -
Kevin P. Robins Senior Vice President, General Counsel & Vice
Secretary President &
Assistant
Secretary
Robert Wagner Senior Vice President -
Patrick K. Walsh Senior Vice President -
Kenneth Zimmer Senior Vice President -
Robert Crudup Managing Director -
Vic Galef Managing Director -
Kim Kirk Managing Director -
John Krzeminski Managing Director -
Carolyn McLaurin Managing Director -
Barbara Moore Managing Director -
Donald Pepin Managing Director -
Mark Samuels Managing Director -
Wayne M. Withrow Managing Director -
Mick Duncan Team Leader -
Robert Ludwig Team Leader -
Vicki Malloy Team Leader -
Robert Aller Vice President -
Steve Bendinelli Vice President -
Gordon W. Carpenter Vice President -
Todd B. Cipperman Vice President & Assistant Secretary -
Ed Daly Vice President -
Jeff Drennen Vice President -
</TABLE>
C-8
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Position and Office with Underwriter Positions and
Business Address* Offices with
Registrant
<S> <C> <C>
Lucinda Duncalfe Vice President -
Kathy Heilig Vice President -
Larry Hutchison Vice President -
Michael Kantor Vice President -
Samuel King Vice President -
Donald H. Korytowski Vice President -
Robert S. Ludwig Vice President -
Jack May Vice President -
W. Kelso Morrill Vice President -
Sandra K. Orlow Vice President & Assistant Secretary Vice
President &
Assistant
Secretary
Larry Pokora Vice President -
Kim Rainey Vice President -
Paul Sachs Vice President -
Steve Smith Vice President -
Daniel Spaventa Vice President -
Kathryn L. Stanton Vice President & Assistant Secretary Vice
President &
Assistant
Secretary
William Zawaski Vice President -
James Dougherty Director of Brokerage Services -
</TABLE>
- ------------------
* Unless otherwise noted, the business address of each director or
officer is 680 East Swedesford Road, Wayne, PA 19087-1658.
(c) None.
Item 30. Location of Accounts and Records
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the Rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records are maintained
at the offices of Registrant's Custodian:
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<PAGE>
CoreStates Bank, N.A. The Northern Trust Company
Broad and Chestnut Streets 50 South LaSalle Street
P.O. Box 7618 Chicago, IL 60675
Philadelphia, PA 19101
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11) and 31a-1(f), the required books and
records are currently maintained at the offices of Registrant's
Administrator:
SEI Financial Management Corporation
680 East Swedesford Road
Wayne, PA 19087
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of
the Registrant's Adviser and Sub-Advisers:
Pilgrim Baxter & Associates, Ltd. Murray Johnstone International
1255 Drummers Lane, Suite 300 Limited
Wayne, PA 19087 11 West Nile Street
Glasgow, Scotland G12PX
Wellington Management company
75 State Street
Boston, MA 02109
Item 31. Management Services: None.
Item 32. Undertakings
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940
inform the Board of Directors of their desire to communicate with
Shareholders of the Fund, the Directors will inform such Shareholders
as to the approximate number of Shareholders of record and the
approximate costs of mailing or afford said Shareholders access to a
list of Shareholders.
Registrant undertakes to call a meeting of Shareholders for the
purpose of voting upon the question of removal of a Director(s) when
requested in writing to do so by the holders of at least 10% of
Registrant's outstanding shares and in connection with such meetings
to comply with the provisions of Section 16(c) of the Investment
Company Act of 1940 relating to Shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
Shareholders, upon request and without charge.
Registrant hereby undertakes to file a post-effective amendment,
including financial statements which need not be audited, within four
(4) to six (6) months from the later of the commencement of operations
of the PBHG Limited Fund of the Registrant or the effective date of
Post-Effective Amendment No. 22 to the Registrant's 1933 Act
Registration Statement.
C-10
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this Post-
Effective Amendment No. 22 to Registration Statement No. 2-99810 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Wayne,
and Commonwealth of Pennsylvania on the 12th day of April, 1996.
THE PBHG FUNDS, INC.
Registrant
By: /s/ Harold J. Baxter
--------------------
Harold J. Baxter
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Harold J. Baxter Chairman and Chief April 12, 1996
- -------------------- Executive Officer, -----------------------------
Harold J. Baxter and Director
* Director -----------------------------
- -------------------
John R. Bartholdson
* Director -----------------------------
- -------------------
Jettie M. Edwards
* Director -----------------------------
- -------------------
Albert A. Miller
* Controller and Chief -----------------------------
- ------------------- Financial Officer
Jeffrey A. Cohen
* By: /s/ Harold J. Baxter
---------------------
Harold J. Baxter, Attorney-in-Fact
C-11
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT LIST
Exhibit Number Description Sequentially Numbered Pages
- -------------- ----------- ---------------------------
<C> <S> <C>
99-5.d.1 Schedule A dated November
20, 1995 to the Investment
Advisory Agreement between
Pilgrim Baxter & Associates,
Ltd. and The PBHG Funds,
Inc..........................
99-24 Power of
Attorney.....................
</TABLE>
C-12
<PAGE>
EXHIBIT 99.5(d)(1)
Schedule A Dated November 20, 1995
to the Investment Adviser Agreement dated
April 28, 1995 between
The PBHG Funds, Inc.
and
Pilgrim Baxter & Associates, Ltd.
Pursuant to Section 5 of this Agreement, each Portfolio shall pay the
Adviser, at the end of each calendar month, compensation computed daily at an
annual rate of the Portfolio's average daily net assets as follows:
<TABLE>
<CAPTION>
Portfolio Fee
--------- ---
<S> <C>
PBHG Growth Fund .85%
PBHG Emerging Growth Fund .85%
PBHG International Fund 1.00%
PBHG Large Cap Growth Fund .75%
PBHG Select Equity Fund .85%
PBHG Cash Reserves Fund .30%
PBHG Technology & Communications Fund .85%
PBHG Core Growth Fund .85%
</TABLE>
THE PBHG FUNDS, INC.
BY: /s/ Brian Bereznak
------------------------------
Title: Vice President
PILGRIM BAXTER & ASSOCIATES, LTD.
BY: /s/ Brian Bereznak
------------------------------
Title: Vice President
<PAGE>
EXHIBIT 99.24
POWER OF ATTORNEY
Each of the undersigned Officers and Directors of The PBHG Funds, Inc. (the
"Fund") whose signatures appear below hereby makes, constitutes and appoints
Harold J. Baxter, Brian Bereznak, and Jane A. Kanter, and each of them acting
individually, to be their true and lawful attorneys and agents, each of them
with the power to act without any other and with full power of substitution, to
execute, deliver and file in each of the undersigned Officers' and Directors'
capacity or capacities as shown below, any and all instruments that said
attorneys and agents may deem necessary or advisable to enable the Fund to
comply with the Securities Act of 1933, as amended, including any and all post-
effective amendments to the Fund's registration statement, and any rules,
regulations, orders or other requirements of the Securities and Exchange
Commission thereunder in connection with the registration of shares or
additional shares of common stock of the Fund or any of its series or classes
thereof, and the registration of the Fund or any of its series under the
Investment Company Act of 1940, as amended, including any and all amendments to
the Fund's registration statement; and without limitation of the foregoing, the
power and authority to sign the name of the Fund on its behalf, and to sign the
names of each of such Directors and Officers on their behalf, and said Officers
and Directors hereby grant to said attorney or attorneys, full power and
authority to do and perform each and every act and thing whatsoever as said
attorney or attorneys may deem necessary or advisable to carry out fully the
intent of this Power of Attorney to the same extent and with the same effect as
each of said Officers and Directors might or could do personally in his or her
capacity or capacities as aforesaid and each of said Officers and Directors
ratifies, confirms and approves all acts and things which said attorney or
attorneys might do or cause to be done by virtue of this Power of Attorney and
his or her signature as the same may be signed by said attorney or attorneys.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Harold J. Baxter Chairman, Chief December 22, 1995
- ----------------------------
Harold J. Baxter Executive Officer
and Director
/s/ John R. Bartholdson Director December 22, 1995
- ---------------------------
John R. Bartholdson
/s/ Jettie M. Edwards Director December 22, 1995
- ---------------------------
Jettie M. Edwards
/s/ Albert A. Miller Director December 22, 1995
- --------------------
Albert A. Miller
/s/ Jeffrey A. Cohen Controller and Chief
- -----------------------------
Jeffrey A. Cohen Financial Officer December 22, 1995
</TABLE>
