THE PBHG FUNDS, INC.
PBHG CLASS SHARES
SUPPLEMENT DATED AUGUST 28, 1998 TO THE
PROSPECTUS DATED JUNE 1, 1998
This supplement updates certain information contained in the above-dated
Prospectus. You should retain both this Supplement and the Prospectus for
future reference. You may obtain an additional copy of the Prospectus, free
of charge, by calling 1-800-433-0051.
The definition entitled "Futures Contracts and Options on Futures
Contracts" on page 43 of the Prospectus and the definition entitled "Options" on
page 44 of the Prospectus are changed to read as follows:
Futures Contracts and Options on Futures Contracts - A purchase of a
futures contract or an option on a futures contract means the acquisition
of a contractual right to obtain delivery of the securities, the cash value
of an index future or foreign currency, called for by the contract at a
specified price during a specified future month. When a futures contract is
sold, the Portfolio incurs a contractual obligation to deliver the
securities, the cash value of an index future, or foreign currency
underlying the contract at a specified price on a specified date during a
specified future month. Each of the Portfolios may sell stock index futures
contracts in anticipation of, or during, a market decline to attempt to
offset the decrease in market value of its common stocks that might
otherwise result; and it may purchase such contracts in order to offset
increases in the cost of common stocks it intends to purchase. Each of the
Portfolios may enter into futures contracts, and options thereon, to the
extent that (i) aggregate initial margin deposits to establish positions
other than "bona fide hedging" positions (and premiums paid for unexpired
options on futures contracts) do not exceed 5% of the Portfolio's net
assets and (ii) the total market value of obligations underlying all
futures contracts does not exceed 20% of the value of the International
Fund's total assets or 50% of the value of each of the other Portfolio's
total assets.
The International Fund may also purchase and write options to buy or
sell futures contracts. The International Fund may write options on futures
only on a covered basis. Options on futures are similar to options on
securities except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract,
rather than actually to purchase or sell the futures contract, at a
specified exercise price at any time during the period of the option.
Each Portfolio will maintain assets sufficient to meet its obligations
under such futures or options contracts in a segregated margin account with
the custodian bank or will otherwise comply with the SEC's position on
asset coverage. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in the
market and interest rates.
<PAGE>
Options - Each Portfolio, other than The PBHG Cash Reserve Fund, may
invest in put and call options for various stocks and stock indices that
are traded on national securities exchanges, from time to time as the
Adviser deems to be appropriate. Options will be used for hedging purposes
and will not be engaged in for speculative purposes. The aggregate value of
option positions may not exceed 10% of the Fund's net assets as of the time
the Fund enters into such options.
A put option gives the purchaser of the option the right to sell, and
the writer the obligation to buy, the underlying security at any time
during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid
to the writer is the consideration for undertaking the obligations under
the option contract. Although a Portfolio will engage in option
transactions only as hedging transactions and not for speculative purposes,
there are risks associated with such investment including the following:
(i) the success of a hedging strategy may depend on the ability of the
Adviser or a sub-adviser to predict movements in the prices of the
individual securities, fluctuations in markets and movements in interest
rates; (ii) there may be an imperfect correlation between the changes in
market value of the stocks held by the Portfolio and the prices of options;
(iii) there may not be a liquid secondary market for options; and (iv)
while the Portfolio will receive a premium when it writes covered call
options, it may not participate fully in a rise in the market value of the
underlying security. When writing options (other than covered call
options), the Portfolio must establish and maintain a segregated account
with the Fund's Custodian containing cash or other liquid assets in an
amount at least equal to the market value of the option.
<PAGE>
THE PBHG FUNDS, INC.
ADVISOR CLASS SHARES
SUPPLEMENT DATED AUGUST 28, 1998 TO THE
PROSPECTUS DATED JUNE 1, 1998
This supplement updates certain information contained in the above-dated
Prospectus. You should retain both this Supplement and the Prospectus for
future reference. You may obtain an additional copy of the Prospectus, free
of charge, by calling 1-800-433-0051.
The following definitions entitled "Futures Contracts and Options on Futures
Contracts" and "Options" should be added on page 25 of the Prospectus to
read as follows:
Futures Contracts and Options on Futures Contracts - A purchase of a
futures contract or an option on a futures contract means the acquisition
of a contractual right to obtain delivery of the securities, the cash value
of an index future or foreign currency, called for by the contract at a
specified price during a specified future month. When a futures contract is
sold, the Portfolio incurs a contractual obligation to deliver the
securities, the cash value of an index future, or foreign currency
underlying the contract at a specified price on a specified date during a
specified future month. Each of the Portfolios may sell stock index futures
contracts in anticipation of, or during, a market decline to attempt to
offset the decrease in market value of its common stocks that might
otherwise result; and it may purchase such contracts in order to offset
increases in the cost of common stocks it intends to purchase. Each of the
Portfolios may enter into futures contracts, and options thereon, to the
extent that (i) aggregate initial margin deposits to establish positions
other than "bona fide hedging" positions (and premiums paid for unexpired
options on futures contracts) do not exceed 5% of the Portfolio's net
assets and (ii) the total market value of obligations underlying all
futures contracts does not exceed 20% of the value of the International
Fund's total assets or 50% of the value of each of the other Portfolio's
total assets.
The International Fund may also purchase and write options to buy or
sell futures contracts. The International Fund may write options on futures
only on a covered basis. Options on futures are similar to options on
securities except that options on futures give the purchaser the right, in
return for the premium paid, to assume a position in a futures contract,
rather than actually to purchase or sell the futures contract, at a
specified exercise price at any time during the period of the option.
Each Portfolio will maintain assets sufficient to meet its obligations
under such futures or options contracts in a segregated margin account with
the custodian bank or will otherwise comply with the SEC's position on
asset coverage. The prices of futures contracts are volatile and are
influenced by, among other things, actual and anticipated changes in the
market and interest rates.
<PAGE>
Options - Each Portfolio, other than The PBHG Cash Reserve Fund, may
invest in put and call options for various stocks and stock indices that
are traded on national securities exchanges, from time to time as the
Adviser deems to be appropriate. Options will be used for hedging purposes
and will not be engaged in for speculative purposes. The aggregate value of
option positions may not exceed 10% of the Fund's net assets as of the time
the Fund enters into such options.
A put option gives the purchaser of the option the right to sell, and
the writer the obligation to buy, the underlying security at any time
during the option period. A call option gives the purchaser of the option
the right to buy, and the writer of the option the obligation to sell, the
underlying security at any time during the option period. The premium paid
to the writer is the consideration for undertaking the obligations under
the option contract. Although a Portfolio will engage in option
transactions only as hedging transactions and not for speculative purposes,
there are risks associated with such investment including the following:
(i) the success of a hedging strategy may depend on the ability of the
Adviser or a sub-adviser to predict movements in the prices of the
individual securities, fluctuations in markets and movements in interest
rates; (ii) there may be an imperfect correlation between the changes in
market value of the stocks held by the Portfolio and the prices of options;
(iii) there may not be a liquid secondary market for options; and (iv)
while the Portfolio will receive a premium when it writes covered call
options, it may not participate fully in a rise in the market value of the
underlying security. When writing options (other than covered call
options), the Portfolio must establish and maintain a segregated account
with the Fund's Custodian containing cash or other liquid assets in an
amount at least equal to the market value of the option.
