The PBHG Funds, Inc.
PBHG
[GRAPHIC]
A N N U A L R E P O R T
March 31, 1998
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The PBHG Funds, Inc.
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Table of Contents
Message to Shareholders 3
PBHG Family of Funds 4
PBHG Portfolio Managers 6
Management Discussion and Analysis 9
PBHG GROWTH FUNDS
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PBHG Growth Fund 10
PBHG Emerging Growth Fund 12
PBHG Large Cap Growth Fund 14
PBHG Select Equity Fund 16
PBHG Core Growth Fund 18
PBHG Limited Fund 20
PBHG Large Cap 20 Fund 22
PBHG VALUE FUNDS
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PBHG Large Cap Value Fund 24
PBHG Mid-Cap Value Fund 26
PBHG Small Cap Value Fund 28
PBHG SPECIALTY FUNDS
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PBHG International Fund 30
PBHG Cash Reserves Fund 32
PBHG Technology & Communications Fund 34
PBHG Strategic Small Company Fund 36
Report of Independent Accountants 38
Statements of Net Assets 39
Statements of Asset and Liabilities 77
Statements of Operations 78
Statements of Changes in Net Assets 80
Financial Highlights 84
Notes to Financial Statements 86
Notice to Shareholders 90
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The PBHG Funds, Inc.
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Message To Shareholders
[PHOTO]
Harold J. Baxter
DEAR FELLOW SHAREHOLDERS:
We are pleased to send you The PBHG Funds, Inc. ( the "Fund") Annual report for
the year ended March 31, 1998. The past year has been one of hard work and many
accomplishments. It was a year marked by mixed performance results, ambitious
service enhancements, expanded investment choices and strategic business
initiatives. We're proud of our accomplishments and even more excited about the
future.
MARKET ENVIRONMENT
Against the backdrop of a volatile investment climate this past year, many of
our growth and value funds performed well, while some struggled against an
environment of alternating sentiment brought on by lingering Asian concerns. To
us, the strong results of our value funds were particularly gratifying. We are
pleased that these new funds, which invest in attractively valued companies with
strong earnings growth potential, offered our shareholders a strong complement
to both our diversified and concentrated growth products.
On the other hand, the performance of our Growth and Emerging Growth Funds
struggled over the past year. Investors' unease over the Asian crisis triggered
a "flight to quality" which favored larger capitalization issues in the U.S.
markets. Realizing that cycles of performance are not unique to any one
investment class, in the coming year, we plan to offer you additional sound fund
options to help build your investment portfolio.
THE PBHG FUNDS' GROWTH
At March 31, 1998 the Fund's assets stood at $8.8 billion, up from $7.8 billion
at the beginning of the fiscal year. The number of funds offered grew from
twelve to fourteen as we strengthened our value product line. During the year
Pilgrim Baxter & Associates, the Fund's adviser, added 80 employees to bring its
total staff to 150 professionals. Most of our new staff members are focused on
investments, services and technology.
PBHG Fund Services, the Fund's Administrator, worked to anticipate your needs
through cost containment and expanded services. Enhanced voice response and
internet services were developed and introduced during the year. More detailed,
up-to-date information about our funds is now available to shareholders online
and via telephone. And it is now possible to securely access account information
and complete transactions online as well as telephonically.
STRATEGIC BUSINESS INITIATIVES
In the fall of 1997, PBHG Fund Services, Pilgrim Baxter and Pilgrim
Baxter's parent company, United Asset Management, successfully co-invested to
build a shareholder servicing company, United Asset Management Shareholder
Services Center, Inc., to enhance shareholder services. This state-of-the-art
operation is located in the same facility as Pilgrim Baxter, bringing our
investment professionals closer to our shareholders.
Additionally, the PBHG Funds' web site (www.pbhgfunds.com) has been enhanced to
offer shareholders more information. Expanded Fund information, portfolio
manager commentary and shareholder account access are among the new features of
the site. We encourage you to visit the site and watch for further enhancements
over the coming months.
Most significant in 1997 was the arrival of Paul Hondros at Pilgrim Baxter &
Associates. In October, Paul accepted the position of President and Chief
Operating Officer of Pilgrim Baxter and comes to us with many years of senior
management experience at a major fund company. As we look back on the
accomplishments of the year past and prepare for the challenges of the days
ahead, we are reminded that our commitment to you must be renewed with sincere
appreciation for your investment in and dedication to The PBHG Funds, Inc. We,
in turn, ask you to renew your commitment to the Fund by staying focused on
long-term investment performance. We'll do the same.
Sincerely,
/s/ Harold J. Baxter
Harold J. Baxter
Chairman
The PBHG Funds, Inc.
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The PBHG Funds, Inc.
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PBHG Family of Funds
PBHG AGGRESSIVE GROWTH FUNDS
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PBHG Growth Fund
The PBHG Growth Fund seeks capital appreciation by investing primarily in common
stocks of small- and medium-sized U.S. growth companies. These are companies
that, in the opinion of Pilgrim Baxter, have an outlook for strong growth in
earnings and potential for significant capital appreciation. This Fund is
aggressive and should be considered a long-term investment.
PBHG Emerging Growth Fund
The PBHG Emerging Growth Fund seeks long-term growth of capital by investing
primarily in common stocks of emerging U.S. companies. This Fund is aggressive
and should be considered a long-term investment.
PBHG Large Cap Growth Fund
The PBHG Large Cap Growth Fund seeks long-term growth of capital by investing
primarily in equity securities of large, established companies. Many of these
companies were followed by the PBHG Growth and Emerging Growth Funds until their
market capitalizations grew too large for those Funds. The Fund's net asset
value may be less volatile than those of our smaller cap Funds.
PBHG Select Equity Fund
The PBHG Select Equity Fund seeks long-term growth of capital by investing at
least 65% of its portfolio in a limited number of companies (normally no more
than 30) across the domestic equity market capitalization spectrum that, in
Pilgrim Baxter's opinion, have a strong earnings growth outlook and potential
for capital appreciation. This Fund is aggressive and should be considered a
long-term investment.
PBHG Core Growth Fund
The PBHG Core Growth Fund seeks long-term capital appreciation by investing
primarily in a diversified portfolio of equity securities of domestic small-,
medium- and large-capitalization companies. The companies selected are believed
by Pilgrim Baxter to offer the potential for superior long-term growth prospects
and potential for long-term capital appreciation. This Fund is aggressive and
should be considered a long-term investment.
PBHG Limited Fund
The PBHG Limited Fund seeks long-term capital appreciation. The Portfolio
invests primarily in a diversified portfolio of equity securities of companies
with market capitalizations or annual revenues of up to $250 million that are
believed to have an outlook for strong earnings growth and the potential for
significant long-term capital appreciation. This Fund is aggressive and should
be considered a long-term investment.
PBHG Large Cap 20 Fund
The PBHG Large Cap 20 Fund seeks long-term growth of capital by investing at
least 65% of its portfolio in a limited number (no more than 20) of large
capitalization companies that, in Pilgrim Baxter's opinion, have a strong
earnings growth outlook and potential for capital appreciation. The concentrated
investment strategy of this Fund is expected to produce above-average
volatility.
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The PBHG Funds, Inc.
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PBHG Family of Funds
PBHG VALUE FUNDS
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PBHG Large Cap Value Fund
The PBHG Large Cap Value Fund seeks long-term growth of capital and income.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in a diversified portfolio of equity securities of large capitalization
companies which, in the Adviser's opinion, are undervalued or overlooked by the
market. (The PBHG Large Cap Value Fund is sub-advised by Pilgrim Baxter Value
Investors, Inc.)
PBHG Mid-Cap Value Fund
The PBHG Mid-Cap Value Fund seeks to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing in common stocks and other equity securities of companies with market
capitalizations in the range of companies represented in the Standard & Poor's
Mid-Cap 400 Index (typically $200 million to over $5 billion). These companies
are considered to be relatively undervalued by the Adviser based on certain
proprietary measures of value. (The PBHG Mid-Cap Value Fund is sub-advised by
Pilgrim Baxter Value Investors, Inc.)
PBHG Small Cap Value Fund
The PBHG Small Cap Value Fund seeks to achieve above average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing primarily in a diversified portfolio of common stocks of small
companies with market capitalizations in the range of companies represented by
the Russell 2000 Index (typically between $57 million and $610 million), which
are considered to be relatively undervalued by the Adviser based on certain
proprietary measures of value. (The PBHG Small Cap Value Fund is sub-advised by
Pilgrim Baxter Value Investors, Inc.)
PBHG SPECIALTY FUNDS
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PBHG International Fund
The PBHG International Fund seeks to provide long-term capital appreciation by
investing primarily in a diversified portfolio of equity securities of non-U.S.
issuers. The Fund is aggressive and should be considered a long-term investment.
(The PBHG International Fund is sub-advised by Murray Johnstone International,
Ltd.)
PBHG Cash Reserves Fund
The PBHG Cash Reserves Fund seeks to preserve principal and maintain a high
degree of liquidity while providing current income. (The PBHG Cash Reserves Fund
is sub-advised by Wellington Management Company, LLP.)
PBHG Technology & Communications Fund
The PBHG Technology & Communications Fund seeks long-term growth of capital by
investing primarily in common stocks of companies that rely extensively on
technology or communications in their product development or operations, or
which are expected to benefit from technology- or communications-related
advances. This Fund is aggressive and should be considered a long-term
investment.
PBHG Strategic Small Company Fund
The PBHG Strategic Small Company Fund seeks growth of capital. Under normal
market conditions, the Fund will invest at least 65% of its total assets in a
diversified portfolio of equity securities of small capitalization companies. In
selecting investments for the Portfolio, the Advisers (Pilgrim Baxter &
Associates, Ltd. and Pilgrim Baxter Value Investors, Inc.) may emphasize
securities poised for rapid and dynamic growth ("growth securities") or
securities that are undervalued or overlooked by the market ("value securities")
depending on the Advisers' view of current economic or market conditions and
their long-term investment outlook.
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The PBHG Funds, Inc.
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PBHG Portfolio Managers
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Gary L. Pilgrim, CFA
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[PHOTO]
Manager
PBHG Growth Fund
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As Chief Investment Officer of Pilgrim Baxter & Associates, Ltd., Gary Pilgrim
is responsible for the investment direction of all institutional and mutual fund
portfolios, and for overseeing day-to-day operations in trading and account
control. Gary is a member of Pilgrim Baxter's Board of Directors and is
President of The PBHG Funds, Inc. He has been involved in growth stock investing
throughout his 28-year career. He began his career at Philadelphia National Bank
in the late 1960s, where he served initially as an analyst, later as Director of
Research, and, ultimately, as Chief Investment Officer. He is an M.B.A. graduate
from Drexel University with a B.S.B.A. from the University of Tulsa. Gary is a
Chartered Financial Analyst and a member of the Financial Analysts of
Philadelphia, Inc.
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Christine M. Baxter, CFA
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[PHOTO]
Manager
PBHG Limited Fund
PBHG Emerging Growth Fund
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In addition to managing PBHG mutual funds, Christine Baxter is responsible for
research on the smallest companies in the Pilgrim Baxter investment universe.
Christine joined Pilgrim Baxter & Associates, Ltd. in 1991. Her previous
responsibilities included equity/quantitative analysis and the construction of
the Pilgrim Baxter micro-cap investment universe. She is a graduate of the
University of Pennsylvania. While at Penn, she interned in the equity area at
First Boston Corporation. Christine is a Chartered Financial Analyst and a
member of the Financial Analysts of Philadelphia, Inc.
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John S. Force, CFA
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[PHOTO]
Co-Manager
PBHG Technology &
Communications Fund
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In addition to co-managing the PBHG Technology & Communications Fund, John Force
is an analyst and manager of small cap portfolios for institutional investors.
He joined Pilgrim Baxter & Associates, Ltd. from Fiduciary Management
Associates, where he was Vice-President/Portfolio Manager responsible for
managing a small cap mutual fund and analyzing the health care and consumer
stock sectors. John's nineteen years of portfolio management experience include
bank-pooled equity funds, endowments, pensions, and profit-sharing portfolios.
As a research analyst, he has covered a broad spectrum of industries. He is an
M.B.A. graduate from the University of Toledo and has a B.S. in Finance and
Accounting from Miami University of Ohio. John is a Chartered Financial Analyst
and a member of the Financial Analysts of Philadelphia, Inc.
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The PBHG Funds, Inc.
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PBHG Portfolio Managers
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Gary D. Haubold, CFA
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[PHOTO]
Manager
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
Co-Manager
PBHG Strategic Small Company
Fund
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Gary Haubold joined Pilgrim Baxter Value Investors, Inc. ("PBVI") subadviser to
the PBHG Value Funds in January 1997. Prior to joining PBVI, Gary co-managed the
MAS Small Cap and Mid-Cap Funds for Miller, Anderson & Sherrerd. From 1986 to
1993 he was with Wood, Stuthers & Winthrop, an investment advisory firm. An
M.B.A. graduate from the Wharton School of Business, University of Pennsylvania,
he holds a B.S. in Civil/Structural Engineering from Rice University. Gary is a
Chartered Financial Analyst.
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John C. Keogh
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Manager
PBHG Cash Reserves Fund
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John Keogh is a Senior Vice President and Partner of Wellington Management
Company, LLP, sub-adviser to the PBHG Cash Reserves Fund. As a member of
Wellington Management's Fixed Income Group, John chairs the Short Duration Bond
Strategy Group, which develops guidelines for portfolio managers on investing
client assets in short maturity portfolios. John manages approximately $10
billion in money market portfolios for various clients of the firm, and he has
the distinction of managing the first dollar-denominated money market fund ever
offered by a Japanese entity in Japan. Prior to joining Wellington Management
Company in 1983, he worked in the investment division of Connecticut National
Bank. John holds a B.A. in Economics from Tufts University.
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James D. McCall, CFA
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[PHOTO]
Co-Manager
PBHG Large Cap Growth Fund
PBHG Select Equity Fund
PBHG Core Growth Fund
PBHG Large Cap 20 Fund
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In addition to his responsibilities with the PBHG Core Growth, Large Cap Growth,
Large Cap 20 and Select Equity Funds, Jim McCall manages institutional
investment accounts. Jim previously worked at The First National Bank of
Maryland where he was Vice President/Portfolio Manager responsible for managing
a growth mutual fund that invested across all capitalizations. Prior to that,
Jim was employed by Provident Mutual Management, Co., where he managed a similar
growth mutual fund. He received his M.B.A. and M.S. in Pharmacy from the
University of Utah and holds a B.S. from the Philadelphia College of Pharmacy &
Science. Jim is a Chartered Financial Analyst.
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The PBHG Funds, Inc.
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PBHG Portfolio Managers
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Ellen A. McGee, CFA
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[PHOTO]
Co-Manager
PBHG Core Growth Fund
PBHG Large Cap Growth Fund
PBHG Select Equity Fund
PBHG Large Cap 20 Fund
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Ellen McGee manages growth equity portfolios across all market capitalizations.
Prior to joining Pilgrim Baxter & Associates, Ltd., Ellen was a Senior Portfolio
Manager managing portfolios for entrepreneurs in the Family Office Group at
First Union National Bank and NationsBank. During the first eight years of her
investment career, Ellen managed institutional portfolios and was an equity
analyst in the publishing, broadcasting and gaming industries at First National
Bank of Maryland. Ellen graduated with high honors from Rutgers University and
she holds the Chartered Financial Analyst designation. She is currently a member
of the Financial Analysts Society in Washington D.C. and Baltimore.
=========================
Rodger Scullion, MSI
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[PHOTO]
Manager
PBHG International Fund
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Rodger Scullion is Managing Director and Chief Investment Officer of Murray
Johnstone International, Ltd. (MJI) in Glasgow, Scotland. In addition to the
PBHG International Fund, for which he assumed responsibility in June 1995,
Rodger manages other investment vehicles for all types of investors, including a
closed-end fund with over $600 million in assets. Rodger joined MJI fifteen
years ago, and in that time has had primary responsibility for the investments
in markets outside the U.S. Prior to MJI, he spent eleven years with an
international fund management group in Glasgow, where his investment arena
included the U.S., Europe, U.K., Southeast Asia and Japan. Rodger is a Member of
the Securities Institute (MSI) in Scotland.
=========================
James M. Smith, CFA
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[PHOTO]
Co-Manager
PBHG Strategic Small
Company Fund
PBHG Technology & Communications Fund
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Jim Smith serves as portfolio manager and analyst for institutional small cap
portfolios at Pilgrim Baxter & Associates, Ltd., as well as co-manager of the
PBHG Strategic Small Company Fund and PBHG Technology & Communications Fund. Jim
has over twenty years of investment experience in equity portfolio management
and research. Prior to joining Pilgrim Baxter, he was employed by Selected
Financial Services as Senior Vice-President/Portfolio Manager for a small cap
growth mutual fund. Jim's prior service includes employment by Sears Investment
Management Company as Vice President responsible for emerging growth and venture
capital portfolios. He is a graduate of Washington & Lee University, where he
was inducted into Phi Beta Kappa, and he earned his M.B.A. from Northwestern
University. Jim is a Chartered Financial Analyst.
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The PBHG Funds, Inc.
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Management Discussion and Analysis
[PHOTO]
Gary L. Pilgrim
DEAR FELLOW SHAREHOLDERS:
In reviewing what we accomplished in the past fiscal year, there are several
important events that merit discussion.
Most of our shareholders know the Fund for its growth-stock orientation which
is, of course, our heritage. In 1997, however, we added a new dimension to our
product line by launching the PBHG Large Cap, Mid-Cap and Small Cap Value Funds.
The goal was to provide our shareholders with the ability to further diversify
their existing portfolios. We are very pleased with the performance of these
funds--some of which have earned notable recognition from leading financial
publications and magazines. We feel that the value funds represent a good
strategic fit with our existing line of growth funds. We will continue to
evaluate adding new funds as we see opportunities to offer products that provide
quality investment choices.
PBHG's two concentrated funds, the PBHG Large Cap 20 and Select Equity Funds,
were exceptionally strong performers for the year ended March 31, 1998,
returning 72.8% and 51.8% respectively. These Funds employ a unique approach to
aggressive-growth investing by concentrating each Fund's investments on only
their "very best ideas".
The performance of small cap aggressive growth stocks, as experienced by the
PBHG Growth and Emerging Growth Funds, were marked by distinctly different and
contrasting periods of performance. The Asian currency problems that erupted
early in the 4th quarter, 1997, reversed a trend that had favored small company
growth stocks since April, 1997. Ironically, shares of those companies with the
least exposure to Asian markets -- small company growth stocks -- bore the brunt
of selling while shares of large U.S. multi-nationals fell less and recovered
faster.
Typical of the PBHG Growth Fund, there were bursts of upside performance in very
compressed time periods. During the 18 trading days from April 25th through May
23rd, 1997, the PBHG Growth Fund returned 19.5%. For the year ended March 31,
1998, the PBHG Growth and Emerging Growth Funds returned 34.05% and 34.11%,
respectively.
Because our growth funds are volatile, the timing of an investor's purchase may
have a significant impact on their investment's overall return. For this reason,
we encourage shareholders to have a long-term investment horizon and to
establish a strategy like dollar-cost averaging to help even out the highs and
the lows of the Fund's price movement.
So, what are the prospects for 1998? We are optimistic about the current
economic environment. Interest rates and inflation are at historically-low
levels. The stocks that we favor seem attractive on a relative earnings basis
versus those of the S&P 500. And, relative attractiveness may become even more
important, if as expected by most analysts, the earnings growth rate for
companies making up the S&P 500 slows from previous years, and small company
stocks continue to meet and even exceed current earnings estimates.
We are confident that our style of investment management will continue to reward
our shareholders over the long-term.
Sincerely,
/s/ Gary L. Pilgrim
Gary L. Pilgrim
Chief Investment Officer
Pilgrim Baxter & Associates, Ltd.
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The PBHG Funds, Inc.
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PBHG Growth Fund
Portfolio Profile
OBJECTIVE: The PBHG Growth Fund seeks capital appreciation by investing
primarily in common stocks of small- and medium-sized U.S. growth companies.
These companies in the opinion of Pilgrim Baxter, have an outlook for strong
growth in earnings and potential for significant capital appreciation. This Fund
is aggressive and should be considered a long-term investment.
INVESTS IN: Small to medium sized growth companies.
STRATEGY: The Fund is currently making the majority of purchase selections in
companies with market capitalizations below $1 billion and intends to reduce or
eliminate positions as they approach the $4 billion level. Thus, in spite of the
higher valuation levels of a rising market, the Fund's weighted average market
capitalization is approximately the same as a year ago.
Performance
For the year ended March 31, 1998, the Fund's total return was 34.05% versus the
Russell 2000 Growth Index return of 41.16% and the Lipper Mid-Cap Funds Index of
43.53%. Performance during the fiscal year was relatively strong except for the
quarter ended December, which was impacted by the general anxiety created by the
Asian economic turmoil. This event took a particularly heavy toll on the price
performance of our technology and energy holdings, but small growth companies
broadly took a relative beating as investors deserted the asset class in favor
of larger and more liquid stocks, i.e., a risk avoidance stance. With the
exception of this quarter, however, we believe a return of investor interest to
small growth companies was clearly evident since the capitulation low was
established in April of 1997. At that point, investors were becoming aware of
the combination of an increasingly attractive relative valuation and relative
earnings outlook. We are optimistic that this trend can be sustained as our
portfolio companies continue to report impressive earnings.
The Services sector finished the year as the largest weighting in the
portfolio, as Technology declined to the second largest for the first time in
years. While the difference between the two sectors' weightings is not
significant, the discipline of following earnings trends accounts for the shift.
Not surprisingly, these two sectors accounted for approximately two-thirds of
the year's return. Consumer stocks, followed by Health Care, accounted for the
balance of the return and both sectors increased slightly in their portfolio
weighting.
Portfolio Highlights
The theme of both our best and worst stocks for the year was predictable and
familiar; where our companies met or exceeded earnings expectations the stocks
tended to do well, and the reverse was also painfully apparent. Chesapeake
Energy, Clarify, Electronics for Imaging, APAC Teleservices and Remedy (our five
worst stocks) all missed earnings forecasts badly and with the exception of a
small position in Chesapeake, all have been sold. The large loss in Chesapeake
was particularly disappointing, because the actual news and earnings on the
company were quite positive until an important exploration play was officially
declared a "bust" by the company, and a large write-off was taken to reflect the
decline in value. Also during this period, energy prices weakened, which
contributed to a very negative investor psychology.
On a more constructive note, we had many winners. Seventy-five percent of
issues owned during the year produced a positive return. Thirty-five of these
increased by more than 50%, while our top five winners each appreciated by more
than 100%. Beyond the association of "good earnings equals good stocks",
Education Services (CBT Group, Apollo Group, Devry), Technology and Consulting
Services (Cambridge Technology, Ciber, Sapient), and Wholesome Living (Whole
Foods, Rexall Sundown, General Nutrition) were very productive themes. Our
largest winner, up some six-fold for the year, was Citrix Systems, the leader in
software that allows one NT server to support many clients. While controversy
over Citrix's relationships with Microsoft drove the stock to very depressed
levels at one point, we stayed with the position (and actually added to it) and
were well rewarded as the issues were resolved favorably. During this uproar,
the company never missed a beat in earnings continuity.
All in all, Fiscal 1997 was a bumpy year, but one during which we gained
some satisfaction (and relief) that our stock selection tools proved reasonably
robust and affirmed our confidence in our philosophy and strategy. That is, that
investing in high-growth companies meeting or exceeding our expectations does
work well over time.
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Top Five Performers* Bottom Five Performers*
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Citrix Systems Chesapeake Energy
Saville Systems ADR Clarify
Legato Systems Electronics for Imaging
Rexall Sundown APAC Teleservices
Information Management Resources Remedy
* During the year ended March 31, 1998
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The PBHG Funds, Inc.
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PBHG Growth Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Growth Fund, versus
the Russell 2000 Growth Index and the Lipper
Mid-Cap Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Growth Russell Lipper Mid
(PBHG Class) 2000 Cap Funds
Fund Growth Index(3) Average(4)
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12/85 $10,000 $10,000 $10,000
3/86 $11,510 $11,482 $11,698
6/86 $12,680 $12,233 $12,843
9/86 $11,240 $10,245 $11,252
12/86 $12,394 $10,358 $11,690
3/87 $16,871 $13,175 $14,494
6/87 $1,508 $12,991 $14,601
9/87 $17,524 $13,413 $15,375
12/87 $13,832 $9,273 $11,808
3/88 $14,660 $10,888 $13,080
6/88 $15,684 $11,579 $13,994
9/88 $14,744 $11,260 $13,679
12/88 $14,780 $11,162 $13,789
3/89 $15,244 $11,991 $14,878
6/89 $17,004 $12,767 $16,184
9/89 $19,896 $13,907 $18,005
12/89 $19,109 $13,413 $17,652
3/90 $19,377 $13,057 $17,511
6/90 $21,823 $13,881 $18,891
9/90 $15,483 $10,259 $15,247
12/90 $17,266 $11,078 $16,767
3/91 $22,659 $14,462 $20,487
6/91 $20,664 $13,961 $20,295
9/91 $23,074 $15,467 $22,196
12/91 $26,179 $16,748 $24,503
3/92 $25,782 $17,207 $24,623
6/92 $23,544 $15,140 $23,128
9/92 $23,644 $15,433 $23,968
12/92 $33,612 $18,050 $27,342
3/93 $34,668 $17,726 $27,870
6/93 $39,822 $18,236 $28,544
9/93 $47,344 $19,938 $30,708
12/93 $49,312 $20,461 $31,460
3/94 $47,592 $19,629 $30,457
6/94 $41,591 $18,397 $28,931
9/94 $49,052 $20,112 $31,271
12/94 $51,654 $19,964 $30,915
3/95 $54,219 $21,058 $33,082
6/95 $59,998 $23,147 $36,007
9/95 $70,712 $25,779 $39,910
12/95 $77,660 $26,158 $40,544
3/96 $82,140 $27,662 $43,062
6/96 $89,348 $29,278 $45,362
9/96 $91,621 $29,027 $46,822
12/96 $85,290 $29,105 $47,862
3/97 $69,375 $26,052 $44,880
6/97 $80,420 $30,626 $51,877
9/97 $90,192 $35,808 $59,352
12/97 $82,433 $32,874 $57,429
3/98 $91,653 $36,780 $64,349
Average Annual Total Return(1)
As of March 31, 1998
Annualized Annualized Annualized
One Year 3 Year 5 Year 10 Year
Return Return Return Return
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PBHG Growth Fund-PBHG Class 34.05% 19.12% 21.46% 20.12%
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PBHG Growth Fund-Advisor Class(2) 33.71% 18.97% 21.37% 20.07%
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Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
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Cash 6%
Consumer 17%
Energy 7%
Financial 1%
Health 16%
Industrial/General Manufacturing 2%
Services 27%
Technology 24%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The performance shown for the Advisor Class (formerly known as the Trust
Class) prior to its inception on August 19, 1996, is based on the
performance and expenses of the PBHG Class. Subsequent to August 19, 1996,
the performance is that of the Advisor Class and reflects the expenses
specific to the Advisor Class, which will cause its returns to be less than
those of the PBHG Class. The average annual total return of the PBHG
Advisor Class from its inception date to March 31, 1998 was 6.42%.
(3) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Mid-Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies with average market capitalizations and/or
revenues between $800 million and the average market capitalization of the
Wilshire 4500 Index. The performance figures are based on changes in net
asset value of the funds in the Index with all capital gains distributions
and income dividends reinvested.
11
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Emerging Growth Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Domestic emerging growth companies.
STRATEGY: The Fund's strategy is to invest in young, rapidly growing companies
with prospects for continued growth. The Fund will typically target the
following sectors: technology, healthcare, consumer and service. The Fund will
remain diversified over a large number of securities, with no one security
accounting for more than 3% of the portfolio.
Performance
For the year ended March 31, 1998, the Fund's total return was 34.11% versus
44.50%, 41.16%, and 43.53% for the Wilshire Small Cap Growth Index, the Russell
2000 Growth Index, and the Lipper Small Company Funds Average, respectively.
Technology and Service companies were responsible for the majority of the
Fund's return. The Consumer and Health sectors provided positive contribution to
return, but to a lesser degree.
The 12 month period ended March 31, 1998 can be characterized by three
distinct periods.
First, the Fund generated a positive return of 40.7% in the period between
March 31, 1997 and October 10, 1997. During this period, the Fund benefited from
the attractive relative valuations of smaller companies and continued strong
company growth. It is notable that at March 31, 1997, the weighted average Price
to Earnings ratio based on the next 12 months EPS estimates of the Fund was 27,
while the weighted average next 12 months EPS estimated growth rate of the
companies in the portfolio was 42.7%.
Second, the Fund generated a negative return of 20.4% in the period between
October 10, 1997 and January 12, 1998. The negative move began with fears of the
effects of the Asian economic crisis. While many small companies have limited
international exposure, smaller technology companies may have significant
exposure to Asian customers. The uncertainty surrounding the magnitude and
duration of the ill effects of the crisis in Asia caused a broad sell-off in
smaller stocks with Technology stocks being hit the hardest.
Third, the Fund generated a positive return of 19.7% in the period between
January 12, 1998 and March 31, 1998. With the immediate effects of Asia becoming
clearer, the broader positive move in smaller stocks resumed.
Portfolio Highlights
The Fund remains focused on what Pilgrim Baxter believes are what Pilgrim Baxter
believes are the highest growth companies and remains concentrated in the
following four sectors: Consumer, Healthcare, Service and Technology. Over the
year ended March 31, 1998, the Consumer allocation increased by roughly 9
percentage points to approximately 21% of equity holdings, and the Technology
weighting decreased roughly 8 percentage points to 32% of equity holdings. We
continue to build the portfolio with a bottom-up approach, and add positions to
the portfolio one stock at a time.
For the year, the Fund's five top performing stocks were up an average of
233% while the worst five performing stocks were down an average of 62%. Those
stocks held throughout the period produced an average return for the Fund of
83%, those purchased during the period produced and average return for the Fund
of 16%, and those positions eliminated during the period produced an average
return for the Fund of 0.1%.
The Fund seeks companies with an ability to sustain superior revenue and
earnings growth. Throughout the period, the growth characteristics of the
companies in the portfolio have remained consistent. The position weighted
average earnings per share growth for the last 12 months remains above 60%. We
are encouraged by this fact. As of March 31, 1998, the position weighted average
Price to Earnings ratio for the Portfolio, based on next 12 months EPS estimates
was 33. We believe the combination of reasonable relative valuations and
indications of continued strong small company growth fundamentals provides a
constructive backdrop for smaller growth companies at this point in time.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
NBTY Inso
Legato Systems Forte Software
Romac International Project Software
Manugistics Group Clarify
Documentum Videoserver
* During the year ended March 31, 1998
12
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Emerging Growth Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Emerging Growth Fund, versus
the Russell 2000 Growth Index and the Lipper
Small Company Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper
Emerging 2000 Small Company
Growth Fund Growth Index(3) Funds Average(4)
----------- --------------- ----------------
6/93 $10,000 $10,000 $10,000
9/93 $12,500 $10,933 $10,883
12/93 $13,100 $11,220 $11,157
3/94 $13,100 $10,764 $10,844
6/94 $12,008 $10,088 $10,260
9/94 $14,621 $11,029 $11,126
12/94 $16,216 $10,947 $11,096
3/95 $17,290 $11,548 $11,740
6/95 $19,384 $12,693 $12,799
9/95 $22,359 $14,136 $14,305
12/95 $24,072 $14,344 $14,600
3/96 $25,963 $15,169 $15,565
6/96 $29,159 $16,055 $16,754
9/96 $29,643 $15,918 $17,081
12/96 $28,184 $15,960 $17,506
3/97 $22,403 $14,286 $16,347
6/97 $27,033 $16,794 $19,139
9/97 $30,918 $19,636 $22,313
12/97 $27,149 $18,027 $21,199
3/98 $30,045 $20,169 $23,508
Average Annual Total Return(1)
As of March 31, 1998
Annualized Annualized
One Year 3 Year Inception
Return Return to Date (2)
- --------------------------------------------------------------------------------
PBHG Emerging Growth Fund 34.11% 20.22% 26.10%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 3%
Consumer 21%
Energy 1%
Financial 3%
Health 14%
Industrial/General Manufacturing 2%
Services 21%
Technology 32%
Transportation 3%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Emerging Growth Fund commenced operations on June 15, 1993.
(3) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested.
13
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Large Cap Growth Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Companies, with above $1 billion of market capitalization that, in
Pilgrim Baxter's opinion, have an outlook for strong growth in earnings and
potential for capital appreciation.
STRATEGY: This Fund consists of larger companies with historical and estimated
future growth rates of over 20%. The Portfolio strives to layer additional
strong investment ideas on top of the 20 "best ideas" found in the PBHG Large
Cap 20 Fund to provide a more diversified investment opportunity for
shareholders interested in the large company arena.
In the current environment--where very large, multinational, economically
sensitive corporations are experiencing slowing growth rates, this Fund attempts
to isolate and harness the power of consistent, high-growth, large companies
that are less affected by economic cycles.
Performance
The Fund finished the fiscal year on a strong note, returning 17.20% in the
final quarter ended March 31, 1998, which compared favorably to the S&P 500
Index return for the quarter of 13.53%. The Portfolio's 60.80% return for the
full year was also strong, particularly when viewed against the surprisingly
robust gain of 49.45% and 47.88% for the Russell 1000 Growth Index and the S&P
500 Index respectively, over the same period. The Fund reached its third
anniversary on April 5, 1998, a few days after the end of our fiscal year. The
Portfolio's annualized total return over its initial 3-year period was 34.31%,
which compares favorably to the S&P 500 Index's annualized total return for the
same period of 32.83%.
The outperformance in the final quarter and year was led by the Technology
sector, which benefited from better-than-expected earnings reports from several
holdings including Dell Computer, PeopleSoft, America Online, and Microsoft.
Importantly, these companies have very little exposure to the Asian market and
have been relatively unaffected by the economic problems in that region. In
fact, Dell Computer, which does much of its PC assembly work in Malaysia has
actually benefited from reduced costs for components and labor that have
resulted from the regional turmoil. Also, most of Dell's Southeast Asian sales
go to Japan, which has been a challenging market for the past several years.
Nonetheless, Dell has been successful thus far in its effort to penetrate that
market.
Another strong performance contributor was the Financial sector, led by
Associates First Capital and MGIC Investment. The General Manufacturing Sector
benefited from excellent gains in Harley-Davidson and Danaher, while the
Healthcare sector, another positive contributor, was helped by exposure to the
drug group-particularly Pfizer-and healthcare information systems provider HBO &
Co. The Service sector, the Fund's largest, was also a positive contributor, led
by radio station and billboard company Clear Channel Communications and systems
integrator Cambridge Technology Partners. Finally, our Energy sector holdings
underperformed, pressured by declining oil prices, and our Consumer sector
holdings underperformed slightly, though we enjoyed a few strong individual
performances from companies like Cendant and Staples.
Portfolio Highlights
Of the 80 different stocks owned over the last 12 months, 37 advanced more than
40% while only 2 declined more than 40%. The top five performers (listed below)
were up an average of 177%, led by Dell's impressive gain of 300%. The bottom
five performers, all of which were sold during the year because of weakening
business trends, declined an average of 35%.
The top five performers came from our three key sectors of Technology (Dell
Computer and PeopleSoft), Healthcare (HBO & Co. and Pfizer) and Services (Clear
Channel Communications). Dell Computer's direct model for selling PC's,
workstations, and servers continued to demonstrate its superiority over the
indirect distribution model used by most competitors. In fact, both Compaq and
IBM stumbled badly near year end, as they finally acquiesced and began a shift
to more of a direct selling model. PeopleSoft offers a full suite of software
applications that bring efficiencies to many corporate functions, thereby
enhancing competitiveness. Demand for these products remains strong. HBO & Co.
continues to capitalize on its industry dominant position, offering the most
extensive end-to-end information systems solutions to its healthcare provider
customers. Pfizer continually gained recognition over the past year for the
power of its new drug development pipeline, and for the superior competitive
profile of its stable of existing drug products. Clear Channel Communications
continues to acquire strategically located radio stations and billboard
properties, boosting profitability and cash flow through economies of scale and
cross-selling of advertising between the two mediums.
The bottom five performers all announced disappointing financial results
caused by a variety of factors. Oxford Health Plans' tremendous growth in HMO
membership overwhelmed the ability of the company's information systems, leading
to lost revenues and costly (and failed) attempts at quick fixes. Boston Chicken
"hit the wall" in terms of their ability to boost same-restaurant traffic and to
raise prices. ADC Telecommunications, one of the Fund's top performers in the
prior fiscal year, fell behind the technology curve and lost market share to
stronger players like Lucent and Northern Telecom. Viking Office Products ran
into management problems in key European markets. Finally, Boston Scientific
failed to keep pace with competitors' new product enhancements, while growth in
older products slowed substantially.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Dell Computer Oxford Health Plans
PeopleSoft Boston Chicken
HBO & Co. ADC Telecommunications
Pfizer Viking Office Products
Clear Channel Communications Boston Scientific
* During the year ended March 31, 1998
14
<PAGE>
- --------------------------------------------------------------------------------
The PBHG Funds, Inc.
- --------------------------------------------------------------------------------
PBHG Large Cap Growth Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Large Cap Growth Fund, versus
the Russell 1000 Growth Index, the Lipper Growth Funds
Average and the S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper S&P
Large Cap 1000 Growth & Income 500
Growth Fund Growth Index(3) Funds Average(4) Index(5)
----------- --------------- ---------------- --------
4/95 $10,000 $10,000 $10,000 $10,000.00
6/95 $10,920 $10,748 $10,748 $10,640.25
9/95 $13,160 $11,724 $11,673 $11,485.27
12/95 $13,383 $12,258 $11,944 $12,176.25
3/96 $14,992 $12,916 $12,601 $12,829.60
6/96 $16,158 $13,739 $13,178 $13,404.66
9/96 $16,870 $14,233 $13,573 $13,819.10
12/96 $16,514 $15,092 $14,308 $14,969.96
3/97 $14,727 $15,173 $14,168 $15,372.16
6/97 $18,197 $18,043 $16,412 $18,053.90
9/97 $20,139 $19,399 $18,137 $19,406.77
12/97 $20,206 $19,693 $17,920 $19,963.85
3/98 $23,681 $22,677 $20,221 $22,746.63
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Large Cap Growth Fund 60.80% 33.43%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 4%
Consumer 12%
Energy 2%
Financial 7%
Health 18%
Industrial/General Manufacturing 4%
Services 30%
Technology 23%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
(3) The Russell 1000 Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indexes.
The performance figures are based on changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested.
(5) The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries.
15
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Select Equity Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Normally no more than 30 common stocks of companies that, in Pilgrim
Baxter's opinion, have a strong earnings growth outlook and potential for
capital appreciation.
STRATEGY: This portfolio is designed to concentrate our investments in 25 to 30
companies that we believe represent the best growth company stories in the
market at a given time, regardless of company size. We purchase only those high
growth, high quality companies where we have the greatest confidence in the
company specific fundamental business characteristics.
Performance
With a strong March, the Select Equity Fund surpassed its benchmarks, the
Russell 3000 Growth Index and the S&P 500 Index, for the quarter ended March 31,
1998, returning 15.38% versus 14.83% and 13.53% for the Russell 3000 Growth
Index and S&P 500 Index, respectively. For the one year period ended March 31,
1998, the Fund returned 51.79% also beating the benchmarks. The Fund reached its
third anniversary on April 5, 1998, just a few days after the end of the fiscal
year. The Fund's annualized return over its first 3 years was 36.71%, which
compares favorably to the S&P 500's annualized total return of 32.83% over the
same period.
Our two largest sectors, Technology and Services, were the biggest
contributors to performance in the fiscal year. The Healthcare sector was also a
positive contributor. The Consumer sector was essentially neutral, while the
Energy sector underperformed because of the steady decline in the price of oil.
The most common theme driving individual stock performance was the reporting of
better-than-expected financial results. Examples in Technology include Dell
Computer, PeopleSoft, Visio, and Lucent; in Healthcare, HBO & Co. and Quintiles;
in Services, Clear Channel Communications and Saville Systems. Strategic mergers
or acquisitions also proved beneficial to certain stocks. Examples here include
Network Associates (formed from the merger of McAfee Associates and Network
General) and Cendant Corp., which made a number of accretive acquisitions during
the fiscal year.
A key development during the fiscal year was the recognition of the
financial/economic crisis in Southeast Asia. We quickly analyzed each company in
the portfolio to identify the level of exposure to this risky situation. We
determined that the Fund's exposure was limited to just a few of our Technology
holdings, and in each case the risk to overall financial performance was
determined to be insignificant. In fact, we concluded that Dell Computer stands
to benefit from the developments in Southeast Asia. Much of Dell's PC assembly
is done in Malaysia and numerous components are sourced from that part of the
world, which means that lower costs for labor and parts were likely to more than
offset any sales shortfall in the region.
Portfolio Highlights
The Fund owned 42 different stocks during the fiscal year, but no more than
30 at any one time. The top five performers (listed below) were up an average of
173%; the bottom five performers, all of which were sold during the year because
of deteriorating business fundamentals, declined an average of 47%.
The top five performers came from our three key sectors of Technology (Dell
Computer, PeopleSoft, and Visio), Healthcare (HBO & Co.), and Services (Clear
Channel Communications). Dell Computer's direct model for selling PC's,
workstations, and servers continued to demonstrate its superiority over the
indirect distribution model used by most competitors. In fact, key competitors
IBM and Compaq both stumbled badly near year end as they finally acquiesced and
attempted to undertake some direct-selling initiatives. PeopleSoft offers a full
suite of software applications to bring efficiencies to many essential corporate
functions, thereby enhancing competitiveness. Demand for these products remains
powerful. Visio's desktop diagramming/drawing software programs also represent
efficiency enhancers for their corporate customers. A steadily broadening
product line is expected to sustain strong growth well into the future. HBO &
Co. continues to capitalize on its industry dominant position, offering the most
extensive end-to-end information systems solutions to its healthcare provider
customers. Clear Channel Communications continues to acquire strategically
located radio stations and billboard properties, boosting profitability and cash
flow through economics of scale and the cross-selling of advertising between the
two mediums.
The bottom five performer's experienced deteriorating business conditions
caused by a variety of circumstances. In the cases of help desk software maker
Remedy and high speed transmission systems provider PairGain Technologies,
competition intensified faster than expected. This led to severe price
discounting, which negatively impacted profit margins. At Oxford Health Plans,
the tremendous growth in HMO membership overwhelmed the abilities of the
company's information systems, leading to lost revenues and costly (and failed)
attempts at quick fixes. Forte Software's object-oriented software development
tools fell behind the technology curve in this rapidly changing and complex
niche and financial results suffered. Finally, Dura Pharmaceuticals, a marketer
of respiratory drug products, was adversely affected by a relatively mild flu
season and by an inability to hire and retain high quality salespeople.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Dell Computer Remedy
PeopleSoft Oxford Health Plans
HBO & Co. Forte Software
Clear Channel Communications PariGain Technologies
Visio Dura Pharmaceuticals
* During the year ended March 31, 1998
16
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Select Equity Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Select Equity Fund, versus the Russell
3000 Growth Index, the Lipper Capital Appreciation Funds
Average and the S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper S&P
Select Equity 3000 Capital Appreciation 500
Fund Growth Index(3) Average(4) Index(5)
---- ------------ ------- ----------
4/95 $10,000 $10,000 $10,000 $10,000.00
6/95 $11,685 $10,756 $10,756 $10,640.25
9/95 $14,545 $11,757 $11,813 $11,485.27
12/95 $15,510 $12,256 $12,140 $12,176.25
3/96 $17,326 $12,919 $12,859 $12,829.60
6/96 $19,603 $13,733 $13,488 $13,404.66
9/96 $21,118 $14,164 $13,795 $13,819.10
12/96 $19,852 $14,937 $14,184 $14,969.96
3/97 $16,123 $14,857 $13,733 $15,372.16
6/97 $19,568 $17,649 $15,676 $18,053.90
9/97 $22,335 $19,136 $17,738 $19,406.77
12/97 $21,210 $19,230 $17,023 $19,963.85
3/98 $24,473 $22,083 $19,067 $22,746.63
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Select Equity Fund 51.79% 35.85%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 2%
Consumer 13%
Energy 1%
Health 13%
Services 30%
Technology 43%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Select Equity Fund commenced operations on April 5, 1995.
(3) The Russell 3000 Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 and Russell 2000 Indexes with greater-than
average growth orientation. The Index reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing.
(4) The Lipper Capital Appreciation Funds Average is an equally weighted
benchmark composed of mutual funds with the investment objective of maximum
capital appreciation. The performance figures are based on changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested.
(5) The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries.
17
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Core Growth Fund
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities of companies, without
regard to market capitalization, that are believed by Pilgrim Baxter to have
superior long-term growth prospects and potential for long-term capital
appreciation.
STRATEGY: At year end the Fund's holdings ranged from roughly $174 million to
$282 billion in market capitalization, with an average size of $12.3 billion.
While future changes in holdings will create some variability, we do not expect
the company size features of the fund to differ substantially from what they are
presently. Stock selection is exclusively "bottom up", focusing on individual
companies and the strength of their fundamental business characteristics. Sector
exposure is not predetermined, but follows from the selection of the most
attractive individual stocks.
Performance
The Core Growth Fund returned 30.85% compared with the 48.64% return of the
Russell 3000 Growth Index for the year ended March 31, 1998. The greatest
contributor to the gap in performance was market capitalization as evidenced by
a closer look at the Russell 3000 Growth Index. For example, the Russell 3000
Growth Index includes the large cap, Russell 1000 Growth Index which returned
49.5% in the period. The top 30 stocks in the 3000 averaged $104.5 Billion
market cap and accounted for 48% of the total Index. A second, although smaller,
source of performance disparity was style. Except in the Large Cap arena, value
outperformed the growth style in all other capitalization ranges. The Core
Growth Fund was off to a good start in its first quarter (second calendar
quarter 1997) as valuation and capital gains tax cuts helped smaller, growth
companies to surge ahead. All that came to an abrupt halt in the Fund's third
quarter as Asian fears took hold of investors: earnings estimates were revised
downward and P/E ratios contracted. After a tough January, the Fund rebounded
for the remainder of its fourth quarter, returning a respectable 12.84% to top
off the year.
At year end Technology, the largest sector, stood at 30% of Fund assets and
registered a gain of 35%, Business Services was the second largest sector,
returning 60.3%, and Healthcare, at a 14% weighting, contributed 28.0%. The
Finance sector, weighted at just 3.0% of the Fund, gained 71.7% for the 52 week
period.
Portfolio Highlights
The Fund typically invests in 75-90 stocks at any given time, investing in
approximately 130 stocks, in total, throughout the year. The top 40% of holdings
performed in excess of 23% while the bottom 40% of the companies returned less
than 7.5%. Of the top 5 performing stocks, 4 were held throughout the year, and
represent the diversification of the Fund. As a group, the average return of the
5 was 178%. The bottom 5 performers averaged -58% and were sold after announcing
earnings shortfalls.
For the second consecutive year, Dell Computer was a member of the top 5
club with a 300% gain for the year. Dell's build-to-order PC business model
allows it to maintain attractive average selling prices as a new PC cycle
progresses and unit volume grows as prices fall. Dell's model avoids the problem
of accumulating obsolete inventory which non-direct PC manufactures must write
down. The other technology name, in the top 5, PeopleSoft, grew revenues and
earnings in excess of 70% through sales of its enterprise-wide, integrated
product suite software delivering human resources, finance, manufacturing and
supply chain management functions. Business Services representatives, Clear
Channel Commun-ications and Saville Systems, gained 128% and 142% respectively.
Clear Channel grew through a series of highly accretive acquisitions in the
radio and outdoor advertising industries consistent with its successful strategy
of integration and increasing advertising rates. Saville Systems is an indirect
beneficiary of telecom deregulation as new communications providers focus
resources on building infrastructure and outsourcing billing functions. Saville
offers convergent billing solutions to global wireline and wireless
communications providers. HBO & Co. continues to turn in good earnings results
through a two-pronged approach. New products added to its information systems
and its aggressive sales to existing and new customers.
Remedy and Scopus Technology participate in the Front Office Automation
segment and were hurt by an increasingly competitive environment characterized
by aggressive pricing and larger, "lumpier" sales orders which caused both
companies to miss earnings estimates. APAC Teleservices faced a similar
situation when one of its largest clients, UPS, driven by its own strike-related
problems, renegotiated its contract with the company at less favorable rates.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Dell Computer Scopus Technology
PeopleSoft Remedy
HBO & Co. Electronics for Imaging
Saville Systems ADR APAC Teleservices
Clear Channel Communications Videoserver
* During the year ended March 31, 1998
18
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Core Growth Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Core Growth Fund,
versus the Russell 3000 Growth Index and the
Lipper Growth Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper
Core Growth 3000 Growth Funds
Fund Growth Index(3) Average (4)
---- -------------- ----------
12/31/95 $10,000 $10,000 $10,000
3/96 $11,820 $10,541 $10,553
6/96 $13,800 $11,206 $11,029
9/96 $14,200 $11,557 $11,359
12/96 $13,280 $12,188 $11,974
3/97 $10,340 $12,122 $11,858
6/97 $12,230 $14,400 $13,735
9/97 $12,890 $15,612 $15,179
12/97 $11,990 $15,689 $15,001
3/98 $13,530 $18,015 $16,926
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Core Growth Fund 30.85% 14.35%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 2%
Consumer 16%
Energy 3%
Financial 3%
Health 14%
Industrial/General Manufacturing 3%
Services 28%
Technology 30%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Core Growth Fund commenced operations on January 2, 1996.
(3) The Russell 3000 Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 and Russell 2000 Indexes with a greater-than
average growth orientation. The Index reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing.
(4) The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indexes.
The performance figures are based on changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested.
19
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Limited Fund
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities of companies that are
believed, by Pilgrim Baxter, to have superior long-term growth prospects and
potential for long-term capital appreciation.
STRATEGY: The Fund invests in companies under $250 million in market
capitalization or annual revenues. The Fund is currently closed to investment by
new shareholders in order to protect achievement of its investment objective.
Performance
For the year ended March 31, 1998, the Fund's total return was 60.78% versus
44.50%, 41.16%, and 41.84% for the Wilshire Small Cap Growth Index, Russell 2000
Growth Index, and Lipper MicroCap Funds Index, respectively.
Technology and Service companies were responsible for the majority of the
Fund's total return. The Consumer and Health sectors provided positive
contribution to return, but to a lesser degree.
The 12 month period can be characterized by three distinct periods.
First, the Fund generated a positive return of 54.9% in the period between
March 31, 1997 and October 10, 1997. During this period, the Fund benefited from
the attractive relative valuations of smaller companies and continued strong
company growth. It is notable that at March 31, 1997, the weighted average Price
to Earnings ratio based on the next 12 months EPS estimates was 22, while the
weighted average next 12 months EPS estimated growth rate of the companies in
the portfolio was 43.4%.
Second, the Fund generated a negative return of 16.6% in the period between
October 10, 1997 and January 12, 1998. The negative move began with fears of the
effects of the Asian economic crisis. While many small companies have limited
international exposure, smaller technology companies may have significant
exposure to Asian customers. The uncertainty surrounding the magnitude and
duration of the ill effects of the crisis in Asia caused a broad sell-off in
smaller stocks with technology stocks being hit the hardest.
Third, the Fund generated a positive return of 20.5% in the period between
January 12, 1998 and March 31, 1998. With the immediate effects of Asia becoming
clearer, the broader positive move in smaller stocks resumed.
Portfolio Highlights
The Fund remains focused on the fastest growing small companies and remains
concentrated in the following four sectors: Consumer, Healthcare, Service and
Technology. There were no significant weighting changes throughout the period.
We continue to build the portfolio with a bottom-up approach and add positions
to the portfolio one stock at a time.
For the year, the Fund's five top performing stocks were up an average of
211% while the worst five performing stocks were down an average of 42%. Those
stocks held throughout the period produced an average return of 83.5%, those
purchased during the period produced an average return of 23.3%, and those
positions eliminated during the period produced an average return of 10.4%.
The Fund seeks small companies with an ability to sustain superior revenue
and earnings growth. Throughout the period, the growth characteristics of the
companies in the portfolio have remained consistent. The position weighted
average earnings per share growth for the last 12 months is above 60%. We are
encouraged by this fact. As of March 31, 1998, the position weighted average
Price to Earnings ratio for the Portfolio, based on next 12 months EPS estimates
was 32. We believe the combination of reasonable relative valuations and
indications of continued strong small company growth fundamentals provides a
constructive backdrop for smaller growth companies at this point in time.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Smart Modular Technologies Desktop Data
Applied Voice Technology Interlink Computer Sciences
Romac International Ultrak
Documentum DSP Group
Radiant Systems Meridian Diagnostics
* During the year ended March 31, 1998
20
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Limited Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Limited Fund, versus the
Russell 2000 Growth Index and the Lipper Small
Company Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper
Limited 2000 Small Company
Fund Growth Index(3) Funds Average(4)
---- -------------- ----------------
6/30/96 $10,000 $10,000 $10,000
9/96 $11,010 $9,914 $10,195
12/96 $11,083 $9,941 $10,449
3/97 $9,084 $8,898 $9,757
6/97 $11,454 $10,460 $11,424
9/97 $13,622 $12,229 $13,318
12/97 $12,863 $11,228 $12,653
3/98 $14,606 $12,562 $14,031
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Limited Fund 60.78% 24.08%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 7%
Consumer 16%
Health 20%
Services 22%
Technology 33%
Transportation 2%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Limited Fund commenced operations on July 1, 1996.
(3) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the Funds in the category with all capital gains distributions and
income dividends revinested.
21
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Large Cap 20 Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: A limited number of larger capitalization companies (no more than
20) that have above-average potential for capital appreciation.
STRATEGY: This Fund is different from other PBHG Funds in two key ways: it
invests only in large capitalization companies (over $5 billion) and it
concentrates investments in just 20 stocks. Stocks are chosen from the large
growth company arena that are believed to represent the best opportunities for
meaningful capital appreciation in the foreseeable future.
Our fundamental investment approach involves looking beyond the financial
data and analysts' reports to find some dynamic within a company that may not be
fully appreciated and that, when exploited, can lead to positive earnings
surprises and upward revisions of future growth expectations.
Performance
The Fund had a strong first calendar quarter of 1998, posting a 22.26% return
and easily beating the S&P 500 Index total return for the quarter of 13.93%. For
the full fiscal year ended March 31, 1998, the Fund returned an impressive
72.76% versus 52.09% and 47.88% for the Russell Top 200 Growth Index and S&P 500
Index, respectively.
The strong performance for the year was led by the Portfolio's largest
sector, Technology, which benefited from much better-than-expected earnings
reports from several holdings including Dell Computer, PeopleSoft, EMC Corp.,
and MicroSoft. Importantly, these companies have very little exposure to the
Asian market, and have been relatively unaffected by the economic turmoil there.
In fact, Dell Computer, which does much of its PC assembly work in Malaysia, has
actually benefited from reduced costs for components and labor caused by the
economic turmoil in the region. In addition, Dell has plenty of experience
dealing with the formidable Japanese market, where most of Dell's Southeast
Asian sales are made.
The next best performing sector in the Portfolio was Financials, paced by
consumer and commercial finance company Associates First Capital. The Services
sector (led by Clear Channel Communications) and the Healthcare sector (led by
HBO & Co. and Pfizer) also were positive contributors. Minimal exposure
to the underperforming Consumer and Energy sectors proved fortunate.
Portfolio Highlights
The Fund owned 31 different stocks during the fiscal year but never more than 20
at any one time. Our concentrated investment approach proved rewarding as the
relatively large positions (5-to-6% each) in the five stocks that appreciated
more than 100% in the year more than made up for those few holdings that were
less than stellar performers. The top five performers (listed below) were up an
average of 174%. The bottom five performers were down an average of 13%.
The top five performers came from two of our key sectors: Technology (Dell
Computer, PeopleSoft, and EMC) and Healthcare (HBO & Co. and Pfizer). Dell's
direct model for selling PC's, workstations, and servers continued to
demonstrate its superiority over the indirect distribution models used by most
competitors. In fact, both Compaq and IBM stumbled badly near year end as they
finally acquiesced and attempted to initiate some direct sell business.
PeopleSoft offers a full suite of software applications that enhance the
efficiency of many essential corporate functions, thereby improving
competitiveness. Demand for these products remains powerful. EMC, a supplier of
high-capacity data storage hardware and software systems, continues to benefit
from a major shift among its large corporate customers to centralized storage
systems (from smaller decentralized systems) to improve security and integrity
of, and access to, data. As corporate data gains recognition as a valuable
strategic asset, HBO & Co. continues to capitalize on its industry dominant
position, offering the most extensive end-to-end information systems solutions
to its healthcare provider customers. Pfizer continually gained recognition over
the year for the potential power of its drugs-in-development pipeline, as well
as the superior competitive attributes of its current stable of marketed drug
products. We continue to own all 5 of these great growth companies.
The bottom five performers were a diverse group and underperformed for a
variety of reasons. The worst performer by far was HMO operator Oxford Health
Plans, where tremendous growth in their insured membership overwhelmed the
capacity of the company's information systems, leading to lost revenues and
costly (and failed) attempts at quick fixes. Parametric Technology experienced a
temporary disruption in their key Japanese market following a salesforce
reorganization. We continue to like the longer-term fundamentals at Parametric
(we retain a position in the PBHG Large Cap Growth Fund), but we felt at the
time that there were better investment opportunities for the Fund. Nike was held
for just the first four days of the fiscal year. While a strong performer for
the Fund in the prior fiscal year, Nike products began to oversaturate the
market and sales stalled. Chancellor Media, the largest radio station operator
in the U.S., was purchased just a few days prior to the end of the fiscal year
and suffered a market related decline in price. We are very constructive on the
outlook for Chancellor Media. Finally, Intel's growth slowed due to a major
product transition, which led us (reluctantly) to replace the position.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Dell Computer Oxford Health Plans
PeopleSoft Parametric Technology
HBO & Co. Nike
Pfizer Chancellor Media
EMC Intel
* During the year ended March 31, 1998
22
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Large Cap 20 Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Large Cap 20 Fund, versus the
Russell Top 200 Growth Index, the Lipper Growth Funds
Average and the S&P 500 Index
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper S&P
Large Cap 20 Top 200 Growth 500
Fund Growth Index(3) Funds Average(4) Index(5)
---- -------------- --------------- --------
11/30/96 $10,000 $10,000 $10,000 $10,000.00
12/96 $9,841 $9,793 $9,843 $9,801.90
3/97 $9,260 $10,007 $9,748 $10,065.25
6/97 $11,523 $12,057 $11,291 $11,821.17
9/97 $12,915 $12,708 $12,477 $12,706.99
12/97 $13,085 $13,096 $12,331 $13,071.76
3/98 $15,998 $15,221 $13,913 $14,893.84
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Large Cap 20 Growth Fund 72.76% 42.21%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 9%
Consumer 5%
Financial 8%
Health 15%
Services 19%
Technology 44%
% of Total Porfolio Investments
(1) Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Large Cap 20 Fund commenced operations on December 2, 1996.
(3) The Russell Top 200 Growth Index is an unmanaged index comprised of those
securities in the Russell Top 200 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indexes.
The performance figures are based on changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested.
(5) The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries.
23
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Large Cap Value Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital and income.
INVESTS IN: A diversified portfolio of equity securities of large capitalization
companies.
STRATEGY: The Fund invests in companies with market capitalizations in excess of
$1 billion which, in the Advisers' opinion, are undervalued or overlooked by the
market. In selecting investments for the Fund, the Advisers emphasize
fundamental investment value and consider factors such as the relationship of a
company's potential earning power to the current market price of its stock;
continuing dividend income and the potential for increased dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; and potential for favorable business
developments.
Performance
For the quarter ended March 31, 1998, the Fund's total return was 12.25% versus
13.53% for the S&P 500 Index. For the fiscal year, the Fund's total return was
39.47% versus 47.17% and 47.88% for the Russell 1000 Value Index and S&P 500
Index, respectively. While we are pleased with our absolute return, we are not
satisfied with our results relative to our benchmark and are working hard to
improve results in the coming year. In our defense, we would note that the S&P
500 had one of its best 12 month periods ever in the fiscal year just ended, and
our value disciplines make it difficult to keep up with a market that rises at
such a rapid pace.
Looking ahead, our fundamental long-term view of the stock market remains
favorable. Despite the strong returns thus far in 1998, we believe many large
cap stocks still offer good business fundamentals at reasonable multiples of
earnings. Additionally, while market volatility can be unsettling in the
short-run, it affords us many opportunities to use our disciplined approach to
"buy low and sell high". If the stock market remains volatile throughout the
year, we are confident that our approach will continue to produce above-average
results.
Portfolio Highlights
Almost all of the investment news was good news in the fiscal year just ended.
Interest rates declined, oil prices fell and the price of gold receded below
$300 per ounce. Perhaps most surprisingly, the Federal Budget has been balanced
for the first time in 20 years. Against this extremely positive backdrop, the
U.S. stock market posted a 12 month return of 47.88% (as measured by the S&P 500
Index) for the period ended March 31, 1998. While we have a clear preference for
good markets over bad ones, we would like to caution our investors that future
returns will likely be modest compared to the past 12 months' results.
Despite the widely reported outbreak of "Asian contagion" in the fall, the
U.S. economy has continued to march ahead. Thus far, the Federal Reserve has
appeared hesitant to tighten monetary policy in the wake of the Asian financial
crisis. However, given the ease with which the global and U.S. economies have
shrugged off the Asian panic, we suspect that the "monetary grace period" will
soon be behind us.
There have been no major changes in our investment strategy. We remain
fully-invested and concentrate our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Auto manufacturers and airlines continue to look
attractive to us, with Ford, Chrysler, Southwest Airlines and Continental
Airlines ranking as significant holdings in those industries. We are also
working hard to stay in front of the secular consolidation wave sweeping through
the Financial sector. In fact, results since the end of the fiscal year have
already benefited from our holding in Mellon Bank. Although we are currently
underweighted in Energy, we are impressed with the positive impact technological
developments have had on the Oil and Gas sector, and we are patiently waiting
for an opportunity to increase our exposure to the energy services industry.
Lastly, we are carefully monitoring Federal Reserve policy to ensure that our
investment strategy remains in synch with macroeconomic trends.
24
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Large Cap Value Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Large Cap Value Fund,
versus the Russell 1000 Value Index and the
Lipper Growth & Income Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper
Large Cap Value 1000 Value Growth & Income
Fund Index(3) Funds Average(4)
---- -------- ---------------
12/31/96 $10,000 $10,000 $10,000
3/97 $10,110 $10,256 $10,116
6/97 $11,560 $11,768 $11,569
9/97 $12,450 $12,940 $12,610
12/97 $12,562 $13,518 $12,709
3/98 $14,101 $15,094 $14,186
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Large Cap Value Fund 39.47% 31.74%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 1%
Basic Materials 5%
Capital Goods 6%
Comsumer Cyclical 13%
Consumer Staples 9%
Energy 2%
Financial 22%
Health Care 12%
Service/Diversified 6%
Technology 10%
Transportation 9%
Utilities 5%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Large Cap Value Fund commenced operations on January 2, 1997.
(3) The Russell 1000 Value Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with lower price-to-book ratios and
lower forecasted growth values. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
(4) The Lipper Growth & Income Funds Average is an equally weighted benchmark
composed of mutual funds, each of which combines growth of earnings with an
income requirement for level and/or rising dividends. The performance
figures are based on changes in net asset value of the Funds in the
category with all capital gains distributions and income dividends
reinvested.
25
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Mid-Cap Value Fund
Portfolio Profile
OBJECTIVE: To achieve above-average total return over a market cycle of three to
five years, consistent with reasonable risk.
INVESTS IN: Common stocks and other equity securities of companies with market
capitalizations in the range of companies represented by the Standard & Poor's
Mid-Cap 400 Index (S&P 400), which are considered to be undervalued based on
certain proprietary measures of value.
STRATEGY: The Fund invests in equity securities of companies with between $200
million and $5 billion in market capitalization. In selecting investments for
the Fund, the Adviser emphasizes fundamental investment value and considers the
following factors, among others, in identifying and analyzing a security's
fundamental value and capital appreciation potential: the relationship of a
company's potential earning power to the current price of its stock; current
dividend income and the potential for dividend growth; low price/earnings ratio
relative to either that company's historical results or the current ratios for
other similar companies; strong competitive advantages; and potential for
favorable business developments.
Performance
For the quarter ended March 31, 1998, the Fund's total return was 13.84% versus
11.04% for the S&P 400 Mid-Cap Index. Since inception on May 1, 1997, the Fund
has returned 61.06% versus 45.23% for the S&P 400 Mid-Cap Index. We are pleased
to be off to a good start in our first 11 months of operations and we look
forward to serving you for a full year in fiscal 1999.
Our fundamental long-term view of the mid-cap market remains favorable.
Despite the strong market thus far in 1998, we believe many mid-cap stocks still
offer good business fundamentals at reasonable multiples of earnings.
Additionally, while market volatility can be unsettling in the short-run, it
affords us many opportunities to use our disciplined approach to "buy low and
sell high". If the stock market remains volatile throughout the year, we are
confident that our approach will continue to produce above-average results.
Portfolio Highlights
Almost all of the investment news was good news in the fiscal year just ended.
Interest rates declined, oil prices fell and the price of gold receded below
$300 per ounce. Perhaps most surprisingly, the Federal Budget has been balanced
for the first time in 20 years. Against this extremely positive backdrop, the
U.S. stock market posted a 12 month return of 47.88% (as measured by the S&P 500
Index) for the period ended March 31,1998. While we have a clear preference for
good markets over bad ones, we would like to caution our investors that future
returns will likely be modest compared to the past 12 months results.
Despite the widely reported outbreak of "Asian contagion" in the fall, the
U.S. economy has continued to march ahead. Thus far, the Federal Reserve has
appeared hesitant to tighten monetary policy in the wake of the Asian financial
crises. However, given the ease with which the global and U.S. economies have
shrugged off the Asian panic, we suspect that the "monetary grace period" will
soon be behind us.
There have been no major changes in our investment strategy. Airlines and
aerospace supply companies continue to look attractive, and we are working hard
to stay in front of the secular consolidation wave sweeping through the
Financial sector. Although we are currently underweighted in Energy, we are
impressed with the positive impact technological developments have had on the
Oil and Gas sector, and we are patiently waiting for an opportunity to increase
our exposure to the energy services industry.
26
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Mid-Cap Value Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Mid-Cap Value Fund,
versus the S&P 400 Mid-Cap Index and the
Lipper Mid-Cap Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG S&P 400 Lipper
Mid Cap Value Mid-Cap Mid-Cap
Fund Index(3) Funds Average(4)
---- ------- ------------------
4/30/97 $10,000 $10,000 $10,000
5/97 $10,740 $10,874 $10,995
6/97 $11,410 $11,180 $11,408
7/97 $12,890 $12,285 $12,327
8/97 $13,241 $12,270 $12,270
9/97 $14,301 $12,976 $13,053
10/97 $13,761 $12,412 $12,454
11/97 $13,871 $12,595 $12,448
12/97 $14,150 $13,083 $12,624
1/98 $14,140 $12,834 $12,436
2/98 $15,445 $13,897 $13,517
3/98 $16,107 $14,524 $14,145
Aggregate Annual Total Return(1)
As of March 31, 1998
Cumulative Inception to Date(2)
- --------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund 61.06%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 1%
Basic Materials 5%
Capital Goods 11%
Consumer Cyclical 12%
Consumer Staples 5%
Energy 2%
Financial 20%
Health Care 10%
Services/Diversified 4%
Technology 9%
Transportation 15%
Utilities/Income 6%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) Total return has not been annualized. The PBHG Mid-Cap Value Fund commenced
operations on May 1, 1997.
(3) The S&P Mid-Cap 400 Index is an unmanaged capitalization-weighted index
that measures the performance of the mid-range sector of the U.S. stock
market. The Index reflects the reinvestment of income dividends and capital
gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Mid-Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which by prospectus or portfolio practice invests
primarily in companies with market capitalizations less than $5 billion at
the time of purchase. The performance figures are based on changes in net
asset value of the Funds in the category with all capital gains
distributions and income dividends reinvested.
27
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Small Cap Value Fund
Portfolio Profile
OBJECTIVE: To achieve above-average total return over a market cycle of three to
five years, consistent with reasonable risk.
INVESTS IN: A diversified portfolio of common stocks of small companies with
market capitalizations in the range of companies represented by the Russell 2000
Index, which are considered to be relatively undervalued based on certain
proprietary measures of value.
STRATEGY: The Fund invests in equity securities of companies with between $57
million and $610 million in market capitalization. In selecting investments for
the Fund, the Adviser emphasizes fundamental investment value and considers the
following factors, among others, in identifying and analyzing a security's
fundamental value and capital appreciation potential: the relationship of a
company's potential earning power to the current price of its stock; current
dividend income and the potential for dividend growth; low price/earnings ratio
relative to either that company's historical results or the current ratios for
other similar companies; strong competitive advantages; and potential for
favorable business developments.
Performance
For the quarter ended March 31, 1998, the Fund's total return was 11.61% versus
10.05% for the Russell 2000 Index. Since inception on May 1, 1997, the Fund has
returned 62.27% versus 41.62% for the Russell 2000 Index. We are pleased to be
off to a good start in our first 11 months of operations and we look forward to
serving you for a full year in fiscal 1999.
Our fundamental long-term view of the small cap market remains favorable.
Despite the strong market thus far in 1998, we believe many small cap stocks
still offer good business fundamentals at reasonable multiples of earnings.
Additionally, while market volatility can be unsettling in the short-run, it
affords us many opportunities to use our disciplined approach to "buy low and
sell high". If the stock market remains volatile throughout the year, we are
confident that our approach will continue to produce above-average results.
Portfolio Highlights
Almost all of the investment news was good news in the fiscal year just ended.
Interest rates declined, oil prices fell and the price of gold receded below
$300 per ounce. Perhaps most surprisingly, the Federal Budget has been balanced
for the first time in 20 years. Against this extremely positive backdrop, the
U.S. stock market posted a 12 month return of 47.88% (as measured by the S&P 500
Index) for the period ended March 31,1998. While we have a clear preference for
good markets over bad ones, we would like to caution our investors that future
returns will likely be modest compared to the past 12 month's results.
Despite the widely reported outbreak of "Asian contagion" in the fall, the
U.S. economy has continued to march ahead. Thus far, the Federal Reserve has
appeared hesitant to tighten monetary policy in the wake of the Asian financial
crises. However, given the ease with which the global and U.S. economies have
shrugged off the Asian panic, we suspect that the "monetary grace period" will
soon be behind us.
There have been no major changes in our investment strategy. Regional
airlines, cement companies and aerospace component manufacturers continue to
look attractive, and we are working hard to stay in front of the secular
consolidation wave sweeping through the Financial sector. Although we are
currently underweighted in Energy, we are impressed with the positive impact
technological developments have had on the Oil and Gas sector, and we are
patiently waiting for an opportunity to increase our exposure to the energy
services industry. Lastly, we are carefully monitoring Federal Reserve policy to
ensure that our investment strategy remains in synch with macroeconomic trends.
28
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The PBHG Funds, Inc.
================================================================================
PBHG Small Cap Value Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Small Cap Value Fund,
versus the Russell 2000 Index and
the Lipper Small Cap Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG Russell Lipper
Samll Cap Value 2000 Small-Cap
Fund Index(3) Funds Average(4)
---- ------- ----------------
4/30/97 $10,000 $10,000 $10,000
5/97 $10,880 $11,113 $11,193
6/97 $11,880 $11,590 $11,791
7/97 $13,070 $12,129 $12,536
8/97 $13,371 $12,406 $12,764
9/97 $14,551 $13,315 $13,726
10/97 $14,211 $12,730 $13,127
11/97 $14,201 $12,647 $12,939
12/97 $14,540 $12,869 $13,042
1/98 $14,519 $12,665 $12,823
2/98 $15,616 $13,601 $13,820
3/98 $16,228 $14,162 $14,462
Aggregate Annual Total Return(1)
As of March 31, 1998
Cumulative Inception to Date(2)
- -------------------------------------------------------------------------------
PPBHG Small Cap Value Fund 62.27%
- -------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 4%
Basic Materials 6%
Capital Goods 18%
Consumer Cyclical 15%
Consumer Staples 3%
Energy 2%
Financial 19%
Health Care 6%
Services/Diversified 6%
Technology 11%
Transportation 5%
Utilities/Income 5%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) Total return has not been annualized. The PBHG Small Cap Value Fund
commenced operations on May 1, 1997.
(3) The Russell 2000 Index is an unmanaged index comprised of the 2,000
smallest securities in the Russell 3000 Index. The Index reflects the
reinvestment of income dividends and capital gains distributions, if any,
but does not reflect fees, brokerage commissions, or other expenses of
investing.
(4) The Lipper Small Cap Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net assets
value of the Funds in the Index with all capital gains distributions and
income dividends reinvested.
29
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The PBHG Funds, Inc.
================================================================================
PBHG International Fund
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Non-U.S. companies.
STRATEGY: The focus of the Fund was on three areas: Europe, the Far East and the
Emerging markets.
Performance
For the year ended March 31, 1998, the Fund produced a return of 17.5% versus
17.2% returned by the benchmark, the FT S&P World Index, Non-U.S. in U.S.
dollars. On March 31, the top five country weightings were Japan, the UK,
France, Germany, and Switzerland.
Portfolio Highlights
The year was again marked by the strong performance of the European markets
while the Asian currencies and markets collapsed. Latin America fell back when
interest rates rose across all the emerging markets and Japan slipped into
recession due to the combination of higher taxes and the collapse in Asia.
The Asian crisis deepened with the collapse of the currencies and markets
in Korea, Indonesia, Malaysia and the Philippines. Hong Kong and Singapore were
dragged down when sentiment turned negative in the region as a whole and rumors
spread that the HK dollar/U.S. dollar peg might collapse. This did not happen
but the defense of the peg by the Hong Kong Monetary Authority forced interest
rates to a level which inflicted its own damage on the property and banking
sectors of the economy. With extensive trade links to South East Asia, Japan
also came under pressure when the outlook for exports deteriorated. All markets
in the region declined substantially during the year, even though financial
reconstruction packages introduced by the IMF began to turn the situation around
in early 1998. Since January, the Thai and Korean markets have rebounded
strongly but real recovery will be slow. Economies in the region will see a
collapse in activity this year which could lead to a drawn out period of
rehabilitation.
By contrast, the European markets generated steady returns through the
period with the exception of October when there was a fear that the contagion
from Asia would engulf markets in a world-wide collapse. However, as
commentators began to minimize the probable impact, these fears passed. The
European markets returned 39.1% with the UK itself returning 37.4%. Europe
responded to moderate growth, very low inflation (except for the UK) and falling
interest rates (part of the EMU convergence process). In addition, the European
markets were tantalized by a steady flow of news on corporate activity,
predominately but not exclusively, in the Financial sector.
The emerging markets generated strong returns through 1997, especially
Mexico, but investors took profits early in 1998 so that the market ended the
period up 25.6%. The South African market was a poor performer through 1997
although it did withstand the pressure on the emerging markets generally from
the Asian collapse. In the first three months of 1998, South Africa stood out as
one of the best performing markets as falling inflation pointed to lower
interest rates (which were indeed introduced on March 7, 1998). Financial stocks
responded well to these developments.
Investment Strategy
Throughout the year we have followed two principal lines of strategy. First, we
reduced exposure to Asia on a regular basis as we became more cautious on
events. The balance of Malaysian investments, which were trimmed to an index
weighting in May, were sold in early August, prior to the eventual collapse of
that market. Hong Kong, which was cut back in July 1997, was reduced again in
early 1998 when the collapse of the peg became a real possibility. In Australia
investments in the banks, ANZ and NAB were sold as exposure was reduced. We
retained Commonwealth Bank and Telstra which were insulated from the regional
collapse.
The second part of the strategy was to reinvest funds in Europe. We added
to France with investments in Total and Rhone-Poulenc, and increased exposure to
the Netherlands with the purchase of KNP-BT, the packaging group. We also
increased Japan, adding Fujitsu, the computer manufacturer, Fanuc, the robotics
group and Marudai Food. We raised cash in Italy, Germany and the UK.
The main supports to markets over the last year appear set to continue in
the period ahead: low to moderate growth in most regions will keep inflation
under control and allow interest rates to remain largely unchanged from current
levels. With depressed economies in Asia, there has been a steady erosion of
commodity prices, most recently demonstrated in the sharp fall in the price of
oil. Output controls may reverse this but the generally weak price trend is
likely to remain in place. The lower oil price acts in a similar manner to a tax
cut for industry and will help to underpin lower costs.
Corporate activity, a major driver of European equity markets in 1997,
should continue and even accelerate in 1998. This has been prompted by
preparations for the single currency but in addition to this, there is a new
trend to unlocking value for shareholders, be it in the Banking or Manufacturing
sectors.
The strategy for the coming period will be to maintain the current level of
investments in Europe and the emerging markets. Japan is the least extended of
world markets and one where much of the bad news is in the price. Accordingly, a
solid package, accompanied by convincing policies designed to kick-start the
economy could make it one of the surprises of 1998. If the initial positive
stance of the government can be sustained we will look to add to investments.
During the year the five best performing stocks were in Europe. Two were
telephone utilities, Telecom Italia Mobile and Telefonica, two were Irish banks
and one was a German cyclical group Mannesmann. Three of the worst performing
stocks were in Japan, Canon Sales, Hitachi and Sumitomo Bank, one was in Hong
Kong, Hong Kong Land and one was a fertilizer producer in Chile, Quimica Y
Minera.
The sector allocations within the Fund in Europe have continued to focus on
interest rate sensitive stocks which have benefited not only from falling rates
but also from activity in the sector. New purchases in Japan have targeted
domestic companies which will benefit from the revival of the economy while the
only addition to the emerging markets was to the Financial sector in South
Africa.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Telecom Italia Mobile Hong Kong Land
Bank of Ireland Canon Sales
Mannesmann Quimica Y Minera
Allied Irish Bank Hitachi
Telefonica Sumitomo Bank
* During the year ended March 31, 1998
30
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The PBHG Funds, Inc.
================================================================================
PBHG International Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG International Fund,
versus the F. T. S&P World Index, Non-U.S., in U.S. Dollars
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBHG F. T. S&P
International World Index
Fund Non-U.S., in U.S. Dollars(3)
---- ----------------------------
6/94 $10,000 $10,000
3/95 $9,203 $10,007
3/96 $10,634 $11,274
3/97 $11,350 $11,466
3/98 $13,332 $13,438
Average Annual Total Return(1)
As of March 31, 1998
Annualized Annualized
One Year 3 Year Inception
Return Return to Date(2)
- --------------------------------------------------------------------------------
PBHG International Fund 17.46% 13.15% 7.77%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
United Kingdom 15%
Japan 15%
France 10%
Germany 8%
Switzerland 7%
Netherlands 6%
Italy 4%
South Africa 3%
Belgium 3%
Chile 3%
Ireland 3%
Spain 3%
Other 20%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG International Fund commenced operations on June 14, 1994.
(3) The F.T. S&P World Index, Non-U.S., in U.S. Dollars consists of the largest
international companies which have been selected based on market
capitalization, ability to be purchased by international investors and the
degree to which the companies reflect the weightings of industries within
their respective countries. The returns of the Index reflect the
reinvestment of income dividends and capital gains distributions.
31
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The PBHG Funds, Inc.
================================================================================
PBHG Cash Reserves Fund
Portfolio Profile
OBJECTIVE: Preserve principal value & maintain a high degree of liquidity while
providing current income.
INVESTS IN: Money market securities.
STRATEGY: The Fund's strategy is to be fully invested in a diversified portfolio
of short-term, high-quality money market securities.
Performance
For the 12 months ended March 31, 1998, the PBHG Cash Reserves Fund portfolio
yielded 5.1% compared to 5.0% for the Lipper Money Market Funds Average. The key
to this higher yield was managing the average maturity of the portfolio during
periods when the market anticipated interest rate moves, and taking advantage of
higher yielding sectors.
Market Highlights
The past year was one of stable short term interest rates. After raising short
term interest rates by 25 basis points to 5.50% in March of 1997, the Federal
Reserve has left rates at that level. Despite continued growth, inflation
remained subdued and additional increases were unnecessary. As expected in this
environment, the monthly returns on the Fund were stable over the course of the
year.
The year was not without pitfalls, as late in 1997, market upheaval in
southeast Asia spread credit concerns through the financial markets. However,
due to its conservative investment profile and prudent investment management,
the Fund avoided any exposure to deteriorating credits. The PBHG Cash Reserves
Fund remains concentrated in high quality commercial paper and bank investments
such as bank notes and CDs.
Looking forward, the US economy is likely to moderate, and the inevitable
slowdown in Asia will also dampen domestic growth. These factors, combined with
a continued lack of inflation, will leave the central bank more inclined to
lower rates than to raise them. As we expect this to occur, our strategy will be
to buy longer maturity investments to lock in prevailing high market yields. As
the Treasury moves toward a budget surplus, the supply of Treasury Bills is
expected to decline, as is the supply of collateral used to back repurchase
agreements. Facing reduced supply, the yields on these types of money market
instruments may decline relative to commercial paper and bank instruments,
making them relatively less attractive investments.
Finally, the SEC, the regulatory body for mutual funds, has invoked some
rule changes regarding the management of money market funds to be implemented in
1998. We have been keenly attuned to these proposed changes and do not envision
that they will have any impact on the Fund's returns. Additionally, there will
also be no significant changes to our management style resulting from these
changes.
Portfolio Highlights
With the Fed making no changes to short term rates for the entirety of the
fiscal year, the Fund's strategy was based on shifts in market expectations and
sentiment. Periodic concerns that the Fed might soon tighten led to temporary
steepenings of the money market yield curve. When this occurred we used the
opportunity to purchase longer maturity securities for the Fund, as it was these
that gave the most beneficial yields. This search for yield led to an overall
increase in the funds average maturity for most of the year from 33 days in
March 1997 to 55 days in December. It also led to a shift in the Fund's sector
allocation between money market instruments, though this was more a fallout of
what securities were the highest yielding at the time the purchases were made,
rather than part of the overall strategy. As of March 31, 1998, 83% of the
holdings of the Fund were commercial paper. Other key sectors were Floating Rate
Notes which made up 6% of the Fund and Bank Instruments which made up 9%.
At year end we took advantage of year end funding pressures, a seasonal
phenomena that tends to inflate yields on securities maturing in the new year.
Since then, for the first three months of 1998, we have been focusing on
maintaining the liquidity of the portfolio due to significant fluctuations in
the assets of the Fund. This has led us to reduce the average maturity to around
40 days.
In summary, once again there were few opportunities for money market funds
to differentiate themselves in the fiscal year ending March 31, 1998. The Fund
closely tracked the minor fluctuations in short term rates and successfully
managed to outperform its competitors.
32
<PAGE>
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The PBHG Funds, Inc.
================================================================================
PBHG Cash Reserves Fund
Comparison of total return, as of March 31, 1998
for the PBHG Cash Reserves Fund, versus the IBC
Financial First Tier Average and the Lipper Money
Market Funds Average(1)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
PBGH Cash IBC Lipper
Receivables Financial First Money Maker
Fund Tier Average Funds Average(1)
----------- --------------- ----------------
One Year 5.13% 5.06% 4.96%
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 1%
Certificates of Deposit 9%
Commercial Paper 83%
Corporate Obligations 7%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results.
33
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Technology & Communications Fund
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Companies which rely extensively on the technology or communications
in their product development and operations or which are expected to benefit
from technological advances and improvements.
STRATEGY: The Fund's strategy is to be invested in technology and related
companies exhibiting extraordinary rates of growth in earnings and revenue with
high profitability levels. The Fund's 65 holdings as of year end March 31, range
in market cap from $82 million to $19.5 billion, with the current average and
median market capitalization of $1.81 billion and $782 million.
PERFORMANCE:
For the 12 months ended March 31, 1998, the Fund produced a 38.29% total return
versus 43.46% for its benchmark, the Pacific Stock Exchange High Technology
Index. The Fund modestly outperformed the 36.43% average return of technology
funds, as measured by the Lipper Science & Technology Funds Average. Information
Technology services was again the best performing subsector for the second
straight year as the demand for professional consulting, outsourcing and systems
integration services remains robust. An ongoing shortage of information
technology professionals, combined with increasing competitive pressures to keep
pace with rapidly changing technologies, has provided the catalyst for strong
revenue and earnings comparison for a host of companies in this sector.
Semiconductor and semiconductor equipment stocks performed quite well in the
first half of the fiscal year, but as the "Asian contagion" hit the market in
October 1997, the stocks gave back substantial first half gains. Slowing PC unit
growth, over capacity, particularly in memory semiconductors, and Intel's
earnings disappointment on October 13th helped fuel the sell off in these
stocks.The Fund was underweighted in this group for the past year. The Software
subsector provided the Fund with disparate results with both winners
(Documentum, Cadence Design Systems, Citrix Systems) and disappointments (INSO
Corp., Scopus). The Networking industry began the fiscal year with many
disappointing earnings reports, but began to re-emerge in the first calendar
quarter of 1998 with better results.
The Fund remains somewhat more concentrated in smaller-cap technology
companies versus those found in the benchmark. This helps explain the volatility
of returns versus the benchmark or the Lipper Science & Technology Funds
Average. While it aided returns in the first fiscal half, it hindered results
from October 1997 to the end of the fiscal year in March 1998. The Fund's
strategy remains to find the fastest growing sustainable growth companies in the
Technology sector. The average company in the portfolio has grown earnings 72.2%
over the past 12 months, substantially above the benchmark.
PORTFOLIO HIGHLIGHTS:
The Fund's top five performers produced an average gain in excess of 125% and
all experienced dramatically better than expected earnings and subsequently
positively revised earnings, revenue, and growth expectations. Saville Systems,
based in Burlington, MA and incorporated in Ireland is a direct play on the high
growth of the converging communications market. Cashing in on the deregulation
of the telecommunications industry, the company provides billing systems,
software and services to domestic CLECs (competitive local exchange carriers)
and international carriers. Documentum develops document management software
products that specifically address the challenges of managing intellectual
capital effectively across large enterprises. CMF Technologies, ESS Technology
and Quickturn Design Systems all suffered from problems that evolved in the
semiconductor industry. As is customary to our investment philosophy, the bottom
five performers were sold out of the Fund due to disappointing earnings.
Looking ahead into the remainder of 1998 and 1999, we expect a challenging
environment for technology stocks. What investors dread most is uncertainty and
the ultimate impact of the "Asian contagion" on technology stocks has yet to be
completely ascertained. However, companies today have a much better handle on
the sensitivity to an Asian slowdown than last October. Earnings and revenue
guidance has been effectively discounted in many technology subsectors. Current
capital spending surveys for U.S. companies remain well above 1997 levels.
According to Dataquest, a major technology market research firm, worldwide
technology IT outsourcing revenues are expected to grow from $37.9 billion in
1996 to $90.0 billion in 2001 (an 18.9% compound annual growth rate). As a
result, we continue to focus on the information services, systems integration
and transaction processing companies to remain a significant percentage of the
portfolio. These subsectors benefit from the internet, intranet, the Year 2000
software code problem, electronic commerce and application software development.
These companies provide recurring revenue and earnings visibility without
Southeast Asian business exposure. The earnings outlook for U.S. technology
stocks remains vibrant. The shortage of bandwidth, brought on by the
ever-increasing demand for the internet will provide for strong results for many
networking and telecommunication equipment companies. Productivity enhancement
will continue to drive high technology capital expenditures, providing a healthy
backdrop for this sector.
- --------------------------------------------------------------------------------
Top Five Performers* Bottom Five Performers*
- --------------------------------------------------------------------------------
Saville Systems ADR Scopus Technology
Documentum Quickturn Design System
ASM Lithography Holding N.V. Ultrak
Arterial Vascular Engineering ESS Technology
Advanced Fibre Communications CFM Technologies
* During the year ended March 31, 1998
34
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
PBHG Technology & Communications Fund
Comparison of Change in the Value of a $10,000
Investment in the PBHG Technology & Communications Fund,
versus the Pacific Stock Exchange High Technology Index
and the Lipper Science & Technology Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBGH Pacific Stock Lipper
Technology & Stock Exchange Science &
Communications High Technology Technology
Fund Index(3) Funds Average(4)
---- ------- ---------------
9/95 $10,000 $10,000 $10,000
12/95 $11,602 $9,919 $9,440
3/96 $12,483 $9,899 $9,493
6/96 $14,973 $10,245 $10,174
9/96 $16,644 $10,945 $10,802
12/96 $17,917 $11,955 $11,339
3/97 $14,927 $11,955 $10,317
6/97 $18,641 $13,958 $12,195
9/97 $22,415 $16,638 $14,554
12/97 $18,510 $14,392 $12,611
3/98 $20,643 $17,149 $14,750
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Technology & Communications Fund 38.29% 33.57%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 8%
Health 5%
Service 32%
Technology 55%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Technology & Communications Fund commenced operations on October
2, 1995.
(3) The Pacific Stock Exchange High Technology Index is a price-weighted index
of the top 100 U.S. technology stocks. The Index reflects the reinvestment
of income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
(4) The Lipper Science & Technology Funds Average is an equally weighted
benchmark composed of mutual funds, each of which normally invests more
than 65% of its equity portfolio in science and technology stocks. The
performance figures are based on changes in net asset value of the funds in
the category with all capital gains distributions and income dividends
reinvested.
35
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The PBHG Funds, Inc.
================================================================================
PBHG Strategic Small Company Fund
Portfolio Profile
OBJECTIVE: Growth of capital.
INVESTS IN: Small companies having a market capitalization or annual revenues of
up to $750 million.
STRATEGY: The Fund invests in securities poised for rapid and dynamic growth
("growth companies") or securities that are undervalued or overlooked by the
market ("value securities") depending on the Advisers' view of current economic
or market conditions and their long-term investment outlook.
Performance
For the fiscal year ended March 31, 1998, the Fund's total return was 56.54%,
versus the Russell 2000 Growth Index return of 41.18% and the Lipper Small
Company Fund Index return of 40.63%. The total return for the growth portion of
the portfolio at 57.23% was similar to the total Fund's performance, although
this close tracking did not prevail in all four periods of the fiscal year.
Coming off of a very tough period of sailing for small growth companies in March
and April of last year, the quarter ended June 30, 1997 marked a strong rebound
for growth. Similarly, the March 1998 period experienced strong growth returns,
with a 13.88% return enjoyed by the growth portion of the Fund, compared with
10.37% for the Fund as a whole. The comparable performance benchmarks for the
March 1998 period were 10.28% for the Russell 2000 Growth Index and 10.71% for
the Lipper Small Company Funds Average.
The Fund is structured to allow its assets to be proactively allocated
between the growth style employed by Pilgrim Baxter & Associates and the value
style utilized by Pilgrim Baxter Value Investors (formerly Newbold's Asset
Management, Inc.). Since the inception of the Fund, this allocation has remained
at a neutral 50/50 split based on the flow of funds into and out of the
portfolio. At March 31, 1998 the split of assets was 45% growth and 55% value.
The juxtaposition of two distinct styles of small company investing in one fund
product is intended to provide some moderating impact during difficult stock
market environments, while permitting the achievement of competitive long term
returns.
The performance enjoyed by the Fund in fiscal 1998 is consistent with this view.
Portfolio Highlights -- Growth
Looking first at the growth portion of the Fund, Technology remains an important
exposure, at 30% of assets, albeit somewhat less than at this time last year.
Our systematic bottom-up approach to identify positive earnings dynamics has
pushed the Fund more towards Business Service, which now rivals Technology in
importance to the Fund. Many of these service companies are beneficiaries of
rapid technological change, as they help their customers study (Forrester
Research), purchase (Insight Enterprises) or implement (Diamond Technology
Partners) new technology. The Fund has also experienced considerable success
with industry consolidators, where strong management teams using inexpensive
capital aggressively build market share, gaining economies of scale and earnings
accretion with each additional acquisition. Successful examples of this type of
enterprise are United Rentals (equipment rental), Coach USA (motor coach
transportation), and Suiza Food (dairies). Finally, outsourcing continues to be
a major theme in the Fund, as enterprises refocus on core competencies and
outsource non-critical activities. Examples of these investments include AHL
Services (support personnel for airlines) and Vincam Group (payroll
administration).
When one considers that the average latest 12 months earning growth rate
across all companies in the growth portion of the portfolio is 77%, one should
not be surprised that occasional unexpected earnings disappointments will cause
significant price declines and loss realizations on individual securities. The
Fund attempts to control issuer risk by avoiding large positions and more
importantly by quickly reacting to deteriorating fundamentals. Recent
eliminations by reason of deteriorating earnings include Sawtek, Sykes
Enterprises, and Zoltek.
We believe the conditions for investors in small growth companies are
favorable. Valuations are much more reasonable than at many times over the last
few years, and the earnings growth prospects and visibility for the Fund's
holdings are excellent compared to the broader U.S. stock market. We continue to
believe that investors will be well rewarded for their investment in the Fund.
Portfolio Highlights -- Value
Our fundamental long-term view of the small cap value market is favorable.
Despite the strong stock market over the past 12 months, we believe many small
cap stocks still offer good business fundamentals at reasonable multiples of
earnings. Additionally, while stock price volatility can be unsettling in the
short-run, it affords us many opportunities to use our disciplined approach to
"buy low and sell high". If the stock market remains volatile throughout the
year, we are confident that our approach will continue to produce above-average
results.
There have been no major changes in our investment strategy. Regional
airlines, cement companies and aerospace component manufacturers continue to
look attractive, and we are working hard to stay in front of the secular
consolidation wave sweeping through the Financial sector. Although we are
currently underweighted in Energy, we are impressed with the positive impact
technological developments have had on the Oil and Gas sector, and we are
patiently waiting for an opportunity to increase our exposure to the energy
services industry.
Lastly, we are carefully monitoring Federal Reserve policy to ensure that
our investment strategy remains in synch with macroeconomic trends. Despite the
widely reported outbreak of "Asian contagion" in the fall, the U.S. economy has
continued to march ahead. Thus far, the Federal Reserve has appeared hesitant to
tighten monetary policy in the wake of the Asian financial crises. However,
given the ease with which the global and U.S. economies have shrugged off the
Asian panic, we suspect that the "monetary grace period" will soon be behind us.
36
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The PBHG Funds, Inc.
================================================================================
PBHG Strategic Small Company Fund
Comparison of Change in the Value of a $10,000 Investment
in the PBHG Strategic Small Company Fund, versus the
Russell 2000 Growth Index and the Lipper Small Company Funds Average
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
PBGH Russell Lipper
Strategic 2000 Small
Small Company Growth Company
Fund Index(3) Funds Average(4)
---- -------- ----------------
12/30/96 $10,000 $10,000 $10,000
3/97 $8,860 $8,951 $9,338
6/97 $11,130 $10,522 $10,933
9/97 $13,439 $12,302 $12,746
12/97 $12,566 $11,295 $12,110
3/98 $13,869 $12,636 $13,428
Average Annual Total Return(1)
As of March 31, 1998
Annualized
One Year Inception
Return to Date(2)
- --------------------------------------------------------------------------------
PBHG Strategic Small Company Fund 56.54% 30.01%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Investment %
---------- ---
Cash 2%
Basic Materials 2%
Capital Goods 15%
Consumer 15%
Energy 2%
Financial 2%
Health 7%
Industrial/General Manufacturing 2%
Services 15%
Technology 20%
Transportation 5%
Utilities 3%
% of Total Porfolio Investments
(1) Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The PBHG Strategic Small Company Fund commenced operations on January 2,
1997.
(3) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(4) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the Funds in the category with all capital gains distributions and
income dividends reinvested.
37
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Report of Independent Accountants
To the Shareholders and Directors of The PBHG Funds, Inc.:
We have audited the accompanying statements of net assets of the PBHG Growth
Fund, PBHG Emerging Growth Fund, PBHG Large Cap Growth Fund, PBHG Select Equity
Fund, PBHG Core Growth Fund, PBHG Limited Fund, PBHG Large Cap 20 Fund, PBHG
International Fund, PBHG Cash Reserves Fund, PBHG Technology & Communications
Fund and PBHG Strategic Small Company Fund, and the statements of assets and
liabilities, including the schedules of investments, of the PBHG Large Cap Value
Fund, PBHG Mid-Cap Value Fund, and PBHG Small Cap Value Fund of The PBHG Funds,
Inc. (the "Fund") as of March 31, 1998, and the related statements of operations
for the year then ended, or the period May 1, 1997 (commencement of operations)
to March 31, 1998 for the PBHG Mid-Cap Value Fund and PBHG Small Cap Value Fund,
and the statements of changes in net assets and financial highlights for each of
the two years (or periods) in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the Fund
for each of the three years (or periods) ended March 31, 1996 were audited by
other auditors, whose report dated April 26, 1996 expressed an unqualified
opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
March 31, 1998, by correspondence with the custodians and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds constituting The PBHG Funds, Inc. as of March 31,
1998 and the results of their operations for the year (or period) then ended,
and the changes in their net assets and financial highlights for each of the two
years (or periods) in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 29, 1998
38
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
----------------
PBHG Growth Fund
----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 95.3%
Consumer -- 17.4%
Consumer Products Miscellaneous -- 0.2%
Fossil* 200,000 $ 6,475
Memberworks* 211,300 6,313
---------
12,788
- --------------------------------------------------------------------------------
Entertainment/Movies -- 0.2%
Family Golf Centers* 276,900 11,214
---------
11,214
- --------------------------------------------------------------------------------
Hotels/Resorts -- 2.3%
Fairfield Communities* 1,428,200 31,510
Prime Hospitality* 2,933,100 57,195
Signature Resorts* 1,740,100 34,367
Vistana* 68,000 1,802
---------
124,874
- --------------------------------------------------------------------------------
Packaged Goods/Cosmetics -- 1.8%
Rexall Sundown* 2,565,600 87,391
Twinlab* 195,000 7,898
---------
95,289
- --------------------------------------------------------------------------------
Restaurants -- 0.2%
Showbiz Pizza Time* 350,000 11,659
---------
11,659
- --------------------------------------------------------------------------------
Retail-Apparel -- 1.9%
American Eagle Outfitters* 297,500 13,090
Buckle* 150,200 7,529
Goodys Family Clothing* 1,081,600 47,861
Pacific Sunwear Of California* 340,000 14,110
Stage Stores* 385,000 19,875
---------
102,465
- --------------------------------------------------------------------------------
Retail-Catalog -- 0.7%
MSC Industrial Direct Company* 729,200 39,514
---------
39,514
- --------------------------------------------------------------------------------
Retail-Department Stores -- 1.7%
Proffitt's* 2,531,100 91,752
---------
91,752
- --------------------------------------------------------------------------------
Retail-Discount Stores -- 1.5%
Dollar Tree Stores* 1,577,200 83,789
---------
83,789
- --------------------------------------------------------------------------------
Retail-Home Furnishing -- 0.2%
Linens N Things* 199,500 10,960
---------
10,960
- --------------------------------------------------------------------------------
Retail-Specialty -- 3.7%
Central Garden and Pet Company* 1,402,200 54,773
General Nutrition Companies* 3,533,300 140,449
Party City* 125,000 4,234
---------
199,456
- --------------------------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 2.2%
Whole Foods Market* 1,694,200 118,170
---------
118,170
- --------------------------------------------------------------------------------
Specialty Food/Candy -- 0.8%
Suiza Foods* 736,000 45,264
---------
45,264
---------
Total Consumer (Cost $616,170) 947,194
---------
- --------------------------------------------------------------------------------
Energy -- 6.6%
Drilling Services & Equipment -- 1.2%
Varco International* 2,566,000 66,075
---------
66,075
- --------------------------------------------------------------------------------
Environmental Services -- 0.9%
Newpark Resources* 2,608,400 47,603
---------
47,603
- --------------------------------------------------------------------------------
Oil/Gas Production -- 0.3%
Chesapeake Energy 2,654,108 15,593
---------
15,593
- --------------------------------------------------------------------------------
Production Equipment -- 0.8%
National-Oilwell* 1,414,800 46,423
---------
46,423
- --------------------------------------------------------------------------------
Seismic Data Acquisition Equipment -- 3.4%
Core Laboratories N.V.* 1,914,000 46,654
Input/Output* 2,441,000 57,058
Veritas DGC* 1,599,700 80,885
---------
184,597
---------
Total Energy (Cost $292,867) 360,291
---------
- --------------------------------------------------------------------------------
Financial -- 1.1%
Diversified Financial Service -- 0.8%
Amresco 1,237,200 40,518
---------
40,518
- --------------------------------------------------------------------------------
Insurance -- 0.3%
Mutual Risk Management Limited 520,900 17,646
---------
17,646
---------
Total Financial (Cost $53,430) 58,164
---------
- --------------------------------------------------------------------------------
Health -- 16.2%
Assisted Living -- 1.3%
Alternative Living Services* 567,100 18,785
Sunrise Assisted Living* 1,193,400 53,405
---------
72,190
- --------------------------------------------------------------------------------
Biotechnology -- 0.5%
Agouron Pharmaceutical* 642,500 24,335
---------
24,335
- --------------------------------------------------------------------------------
39
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ----------------
PBHG Growth Fund
- ----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Contact Lenses -- 0.6%
Cooper Companies* 819,300 $ 34,769
---------
34,769
- --------------------------------------------------------------------------------
Contract Research -- 1.6%
Quintiles Transnational* 1,833,400 88,347
---------
88,347
- --------------------------------------------------------------------------------
Health Care Management Services -- 0.9%
Access Health Marketing* 1,258,500 46,250
---------
46,250
- --------------------------------------------------------------------------------
Hospital -- 0.7%
Health Management Associates, Cl A* 1,241,400 35,535
---------
35,535
- --------------------------------------------------------------------------------
Hospital Supplies -- 0.6%
Safeskin* 447,500 33,059
---------
33,059
- --------------------------------------------------------------------------------
Hospital/Nursing Management -- 0.6%
Res-Care* 843,500 31,420
---------
31,420
- --------------------------------------------------------------------------------
Information Systems -- 1.1%
Incyte Pharmaceuticals* 819,700 38,321
Medical Manager* 105,500 3,059
Transition Systems* 850,000 17,319
---------
58,699
- --------------------------------------------------------------------------------
Medical Devices -- 1.7%
Arterial Vascular Engineering* 912,000 33,402
Cyberonics* 196,800 6,273
Minimed* 16,800 743
Theragenics* 830,000 52,861
---------
93,279
- --------------------------------------------------------------------------------
Medical Equipment -- 0.5%
CYTYC* 170,000 4,250
ESC Medical Systems Limited* 618,900 21,739
---------
25,989
- --------------------------------------------------------------------------------
Pharmaceutical Services -- 3.2%
Express Scripts, Cl A* 1,051,300 89,131
Omnicare 2,140,200 84,805
---------
173,936
- --------------------------------------------------------------------------------
Physician Practice Management -- 0.1%
Pediatrix Medical Group* 138,500 6,440
---------
6,440
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 2.8%
Renal Care Group* 685,000 26,030
Total Renal Care Holdings* 3,825,713 127,444
---------
153,474
---------
Total Health (Cost $625,585) 877,722
---------
- --------------------------------------------------------------------------------
Industrial/General Manufacturing -- 1.8%
Auto-Related -- 0.1%
Gentex* 194,600 6,604
---------
6,604
- --------------------------------------------------------------------------------
Electrical Products -- 0.6%
Chicago Miniature Lamp* 784,050 30,480
---------
30,480
- --------------------------------------------------------------------------------
Multi-Industry -- 1.1%
Applied Power, Cl A 1,543,300 59,417
---------
59,417
---------
Total Industrial/General Manufacturing (Cost $77,893) 96,501
---------
- --------------------------------------------------------------------------------
Service -- 27.3%
Advertising -- 1.0%
Lamar Advertising* 1,583,400 55,419
---------
55,419
- --------------------------------------------------------------------------------
Commercial Services -- 1.4%
Caribner International* 1,086,800 41,842
Network Solutions* 200,000 7,425
Pre Paid Legal* 773,300 27,452
---------
76,719
- --------------------------------------------------------------------------------
Communications Services -- 1.7%
IDT* 242,500 9,094
Pacific Gateway Exchange* 643,700 36,852
Premiere Technologies* 951,800 32,956
Star Telecommunications* 194,900 10,841
---------
89,743
- --------------------------------------------------------------------------------
Consulting -- 0.1%
Metzler Group* 149,100 7,418
---------
7,418
- --------------------------------------------------------------------------------
Distribution -- 0.3%
Brightpoint* 902,600 15,513
---------
15,513
- --------------------------------------------------------------------------------
Educational Services -- 5.0%
Apollo Group, Cl A* 2,500,400 120,332
CBT Group ADR* 2,403,000 124,355
Devry* 802,000 27,418
---------
272,105
- --------------------------------------------------------------------------------
Electronic Commerce -- 3.0%
Sterling Commerce* 1,962,900 91,029
Transaction Systems Architects* 1,909,600 74,236
---------
165,265
- --------------------------------------------------------------------------------
Employment Service -- 1.5%
ABR Information Services* 295,000 8,297
Century Business Services* 185,000 3,272
Metamor Worldwide* 1,324,700 49,759
Romac International* 263,500 7,246
Syntel* 260,800 10,693
---------
79,267
- --------------------------------------------------------------------------------
40
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
----------------
PBHG Growth Fund
----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Information/Computer Services -- 0.6%
Systems and Computers Technology* 833,700 $ 34,390
----------
34,390
- --------------------------------------------------------------------------------
Printing Services/Forms -- 0.6%
Mail-Well* 899,800 34,080
----------
34,080
- --------------------------------------------------------------------------------
Systems Integrator -- 7.0%
Cambridge Technology Partners* 1,990,100 98,634
Ciber* 1,006,600 70,399
Complete Business Solutions* 660,200 23,684
Computer Horizons* 810,800 40,743
Computer Task Group 729,100 30,030
Henry, Jack and Associates 236,300 8,507
Information Management Resources* 735,200 43,285
International Network Services* 273,000 7,985
Mastech* 83,300 4,246
Sapient* 796,200 37,720
Whittman-Hart* 305,700 13,833
----------
379,066
- --------------------------------------------------------------------------------
Transactions Processing -- 5.1%
Billing Concepts* 658,500 17,080
Concord EFS* 2,917,225 100,827
Saville Systems ADR* 3,043,000 155,954
----------
273,861
----------
Total Service (Cost $944,717) 1,482,846
----------
- --------------------------------------------------------------------------------
Technology -- 24.5%
Automated Software Quality -- 0.4%
Mercury Interactive* 632,300 23,079
----------
23,079
- --------------------------------------------------------------------------------
Cables/Fiberoptics -- 0.7%
Cable Design Technologies* 1,235,000 37,204
----------
37,204
- --------------------------------------------------------------------------------
Client/Server Help Desk -- 0.2%
Vantive* 253,900 9,283
----------
9,283
- --------------------------------------------------------------------------------
Contract Manufacturing -- 1.5%
Flextronics International Limited* 709,200 30,629
Sanmina* 735,600 51,446
----------
82,075
- --------------------------------------------------------------------------------
Data Storage -- 0.1%
MTI Technology* 184,600 3,184
----------
3,184
- --------------------------------------------------------------------------------
Digital Video Related -- 1.8%
Discreet Logic* 1,601,700 26,128
Engineering Animation* 497,500 20,646
Gemstar International* 1,335,900 40,077
Pinnacle Systems* 217,400 8,234
----------
95,085
- --------------------------------------------------------------------------------
Networking Hardware -- 0.2%
MMC Networks* 75,500 1,557
Yurie Systems* 450,000 10,884
----------
12,441
- --------------------------------------------------------------------------------
Networking Security -- 1.2%
Checkpoint Software* 1,169,600 53,436
Memco Software Limited* 335,600 10,488
----------
63,924
- --------------------------------------------------------------------------------
Networking Software -- 2.1%
Legato Systems* 575,500 34,170
Veritas Software* 1,308,850 77,386
----------
111,556
- --------------------------------------------------------------------------------
PC-Peripherals Manufacturing -- 0.3%
Neomagic* 811,900 15,325
Xeikon NV ADR* 119,700 2,723
----------
18,048
- --------------------------------------------------------------------------------
Precision Instruments -- 1.7%
Cognex* 270,000 5,771
Waters* 1,740,700 86,926
----------
92,697
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 2.0%
Applied Micro Circuits* 210,500 4,736
DSP Communications* 250,000 4,266
Level One Communications* 930,750 21,873
Micrel* 1,018,000 38,620
Sipex* 657,500 21,698
Vitesse Semiconductor* 400,200 18,872
----------
110,065
- --------------------------------------------------------------------------------
Semi-Conductor Testing Equipment -- 0.9%
ASE Test Limited* 938,000 47,135
----------
47,135
- --------------------------------------------------------------------------------
Software-Client/Server -- 5.0%
Arbor Software* 894,500 41,259
Citrix Systems* 3,486,350 188,917
Hyperion Software* 973,500 43,077
----------
273,253
- --------------------------------------------------------------------------------
Software-Manufacturing -- 2.9%
Aspect Development* 601,100 32,985
I2 Technologies* 580,000 38,063
Industri-Matematik International* 318,700 9,999
Manugistics* 1,168,700 65,520
Tecnomatix Technologies Limited* 354,100 13,323
----------
159,890
- --------------------------------------------------------------------------------
Software-Other -- 0.7%
Filenet* 260,700 12,742
JDA Software Group* 495,100 26,302
Software AG Systems* 50,400 1,336
----------
40,380
- --------------------------------------------------------------------------------
41
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ----------------
PBHG Growth Fund
- ----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Telecommunication Components -- 0.5%
Uniphase* 649,900 $ 27,336
----------
27,336
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 1.5%
Advanced Fibre Communication* 659,000 23,971
California Micro Devices* 4,579 28
Excel Switching* 109,400 2,762
Gilat Satellite Networks Limited* 185,000 6,753
Inter-Tel 180,800 4,870
Premisys Communications* 1,177,500 33,780
World Access* 220,000 7,150
----------
79,314
- --------------------------------------------------------------------------------
Voice/Call Transaction Processing -- 0.8%
Dialogic* 488,600 20,857
Edify* 663,400 13,392
Genesys Telecom Labs* 198,600 7,547
----------
41,796
----------
Total Technology (Cost $990,509) 1,327,745
----------
- --------------------------------------------------------------------------------
Transportation -- 0.4%
Surface -- 0.4%
Coach USA* 527,600 22,951
----------
Total Transportation (Cost $21,709) 22,951
----------
Total Common Stocks (Cost $3,622,880) 5,173,414
----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 6.3%
Greenwich
6.04%, dated 03/31/98,
matures 04/01/98, repurchase price
$12,219,031 (collaterized by U.S.
Government Agency Instruments:
total market value $12,465,269) (A) $12,217 12,217
J.P. Morgan
6.04%, dated 03/31/98,
matures 04/01/98, repurchase price
$297,647,986 (collaterized by U.S.
Government Agency Instruments:
total market value $303,550,017) (A) 297,598 297,598
Prudential
6.04%, dated 03/31/98,
matures 04/01/98, repurchase price
$31,278,881 (collaterized by U.S.
Treasury and Government Agency
Instruments: total market
value $31,899,378) (A) 31,274 31,274
----------
Total Repurchase Agreement (Cost $341,089) 341,089
==========
Total Investments-- 101.6% (Cost $3,963,969) 5,514,503
----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- (1.6%)
Other Assets and Liabilities, Net $ (86,896)
----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 189,106,426
outstanding shares of common stock 3,973,033
Fund Shares of Advisor Class (authorized 200 million
shares -- $0.001 par value) based on 3,172,743
outstanding shares of common stock 76,301
Accumulated net realized loss on investments (172,261)
Net unrealized appreciation on investments 1,550,534
-----------
Total Net Assets-- 100.0% $5,427,607
===========
Net Asset Value, Offering and Redemption
Price Per Share-- PBHG Class $28.23
===========
Net Asset Value, Offering and Redemption
Price Per Share-- Advisor Class $28.12
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
-------------------------
PBHG Emerging Growth Fund
-------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 95.7%
Consumer -- 21.1%
Entertainment/Movies -- 2.0%
Cinar Films, Cl B* 305,500 $ 13,022
Family Golf Centers* 371,000 15,026
------------
28,048
- --------------------------------------------------------------------------------
Hotels/Resorts -- 1.6%
Fairfield Communities* 577,400 12,739
Vistana* 370,000 9,805
------------
22,544
- --------------------------------------------------------------------------------
Leisure/Recreational -- 1.7%
Action Performance* 629,400 22,147
Championship Auto Racing* 54,500 1,008
------------
23,155
- --------------------------------------------------------------------------------
Packaged Goods/Cosmetics -- 2.6%
NBTY* 612,400 37,203
------------
37,203
- --------------------------------------------------------------------------------
Restaurants -- 5.1%
CKE Restaurants 660,490 24,273
Logan's Roadhouse* 546,450 12,363
Papa John's International* 900,600 34,561
------------
71,197
- --------------------------------------------------------------------------------
Retail-Apparel -- 4.2%
Goodys Family Clothing* 398,600 17,638
North Face* 417,400 10,122
Pacific Sunwear Of California* 568,650 23,599
Stage Stores* 155,200 8,012
------------
59,371
- --------------------------------------------------------------------------------
Retail-Catalog -- 0.7%
Insight Enterprises* 84,150 3,419
PC Connection* 75,000 1,594
Wilmar Industries* 179,900 4,474
------------
9,487
- --------------------------------------------------------------------------------
Retail-Office Products/Supplies -- 0.8%
US Office Products* 587,850 11,169
------------
11,169
- --------------------------------------------------------------------------------
Retail-Specialty -- 0.9%
Guitar Center* 48,300 1,141
USA Floral Products* 522,400 11,852
------------
12,993
- --------------------------------------------------------------------------------
Shoe Manufacturing -- 1.5%
Wolverine World Wide 752,450 21,257
------------
21,257
------------
Total Consumer (Cost $204,209) 296,424
------------
- --------------------------------------------------------------------------------
Energy -- 0.5%
Marine Construction -- 0.3%
Gulf Island Fabrication* 262,900 4,864
------------
4,864
- --------------------------------------------------------------------------------
Vessel & Rig Construction -- 0.2%
Friede Goldman International* 79,100 2,284
------------
2,284
------------
Total Energy (Cost $8,410) 7,148
------------
- --------------------------------------------------------------------------------
Financial -- 2.7%
Auto Finance -- 0.6%
Americredit* 313,100 8,610
------------
8,610
- --------------------------------------------------------------------------------
Investment Firms -- 1.4%
Sirrom Capital 634,400 19,072
------------
19,072
- --------------------------------------------------------------------------------
Mortgage Related -- 0.3%
New Century Financial* 375,900 3,712
------------
3,712
- --------------------------------------------------------------------------------
Specialty Finance -- 0.4%
Healthcare Financial Partners* 132,500 6,277
------------
6,277
------------
Total Financial (Cost $33,925) 37,671
------------
- --------------------------------------------------------------------------------
Health -- 14.0%
Assisted Living -- 1.0%
Assisted Living Concepts* 77,600 1,678
Atria Communities* 661,300 12,730
------------
14,408
- --------------------------------------------------------------------------------
Contact Lenses -- 1.0%
Wesley Jessen Visioncare* 450,400 14,807
------------
14,807
- --------------------------------------------------------------------------------
Contract Research -- 1.0%
Kendle International* 100,000 2,325
Parexel International* 361,800 11,306
------------
13,631
- --------------------------------------------------------------------------------
Drugs/Pharmaceuticals -- 1.9%
Medicis Pharmaceutical, Cl A* 600,300 26,188
------------
26,188
- --------------------------------------------------------------------------------
Health Care Management Services -- 0.3%
Hooper Holmes 168,700 3,606
------------
3,606
- --------------------------------------------------------------------------------
Health Care-Services -- 1.2%
Rural/Metro* 511,100 16,802
------------
16,802
- --------------------------------------------------------------------------------
43
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Emerging Growth Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Home Health Care -- 0.5%
Pediatric Services of America* 364,700 $ 7,796
-----------
7,796
- --------------------------------------------------------------------------------
Information Systems -- 1.5%
Impath* 259,200 9,914
Medquist* 172,050 6,334
Quadramed* 145,400 4,853
-----------
21,101
- --------------------------------------------------------------------------------
Medical Devices -- 3.8%
Biovail International* 141,500 6,827
Minimed* 324,500 14,359
Sabratek* 584,500 20,458
Trex Medical* 599,600 11,280
-----------
52,924
- --------------------------------------------------------------------------------
Pharmaceutical Services -- 0.3%
NCS Healthcare* 141,400 4,737
-----------
4,737
- --------------------------------------------------------------------------------
Physician Practice Management -- 0.4%
Advanced Health* 462,700 5,928
-----------
5,928
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 1.1%
National Surgery Centers* 579,950 14,825
-----------
14,825
-----------
Total Health (Cost $167,820) 196,753
-----------
- --------------------------------------------------------------------------------
Industrial/Basic -- 0.2%
Plastic/Carbon -- 0.2%
Zoltek Companies* 89,100 3,118
-----------
Total Industrial/Basic (Cost $2,647) 3,118
-----------
- --------------------------------------------------------------------------------
Industrial/General Manufacturing -- 1.6%
Electrical Products -- 0.9%
Chicago Miniature Lamp* 318,000 12,362
-----------
12,362
- --------------------------------------------------------------------------------
Railroad -- 0.7%
Motivepower Industries* 340,900 9,418
-----------
9,418
-----------
Total Industrial/General Manufacturing (Cost $17,746) 21,780
-----------
- --------------------------------------------------------------------------------
Service -- 20.9%
Commercial Services -- 0.8%
Getty Images* 100,000 2,512
United Rentals* 335,600 8,726
-----------
11,238
- --------------------------------------------------------------------------------
Communications Services -- 0.2%
Smartalk Teleservices* 100,000 3,194
-----------
3,194
- --------------------------------------------------------------------------------
Consulting -- 0.5%
Metzler Group* 148,000 7,363
-----------
7,363
- --------------------------------------------------------------------------------
Educational Services -- 0.5%
Edutrek International* 314,300 6,954
-----------
6,954
- --------------------------------------------------------------------------------
Employment Services -- 5.7%
ABR Information Services* 924,400 25,999
Romac International* 1,176,600 32,357
Source Services* 37,500 1,036
Vincam Group* 744,150 21,580
-----------
80,972
- --------------------------------------------------------------------------------
Environmental -- 1.8%
Casella Waste Systems, Cl A* 69,700 1,842
Superior Services* 544,600 16,985
Tetra Tech* 269,531 6,536
-----------
25,363
- --------------------------------------------------------------------------------
Information/Computer Services -- 1.7%
Forrester Research* 241,700 8,580
Meta Group* 428,000 14,766
-----------
23,346
- --------------------------------------------------------------------------------
Marketing Information -- 0.9%
Abacus Direct* 236,800 12,373
-----------
12,373
- --------------------------------------------------------------------------------
Printing Services/Forms -- 1.7%
Consolidated Graphics* 404,600 23,416
-----------
23,416
- --------------------------------------------------------------------------------
Systems Integrator -- 7.1%
Aris* 523,700 15,580
Ciber* 364,400 25,485
Command Systems* 59,900 854
Computer Management Sciences* 276,200 7,647
Intelligroup* 205,500 3,326
Renaissance Worldwide* 333,440 9,149
Technology Solutions* 319,950 8,479
Whittman-Hart* 638,700 28,901
-----------
99,421
-----------
Total Service (Cost $192,099) 293,640
-----------
- --------------------------------------------------------------------------------
Technology -- 31.6%
Automated Data Collection -- 0.1%
Eltron International* 63,400 1,553
-----------
1,553
- --------------------------------------------------------------------------------
Contract Manufacturing -- 1.5%
EFTC* 163,800 2,150
Flextronics International Limited* 13,300 574
Smart Modular Technologies* 811,100 18,503
-----------
21,227
- --------------------------------------------------------------------------------
44
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
-------------------------
PBHG Emerging Growth Fund
-------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Data Communications -- 0.1%
DSET* 38,900 $ 727
-----------
727
- --------------------------------------------------------------------------------
Data Storage -- 1.0%
Boxhill Systems* 199,400 2,555
Network Appliance* 324,600 11,523
-----------
14,078
- --------------------------------------------------------------------------------
Digital Video Related -- 1.9%
Discreet Logic* 743,000 12,120
Gemstar International* 492,900 14,787
-----------
26,907
- --------------------------------------------------------------------------------
Electronic Components -- 0.2%
Power-One* 47,300 804
WPI Group* 301,100 2,484
-----------
3,288
- --------------------------------------------------------------------------------
Graphic/Image Process -- 0.2%
Splash Technologies Holdings* 138,300 2,317
-----------
2,317
- --------------------------------------------------------------------------------
Networking Hardware -- 1.4%
Apex PC Solutions* 257,400 6,918
Cybex Computer Products* 25,000 814
Extended Systems* 89,400 738
Yurie Systems* 428,800 10,372
-----------
18,842
- --------------------------------------------------------------------------------
Networking Security -- 1.3%
Checkpoint Software* 213,000 9,731
Memco Software Limited* 254,400 7,950
-----------
17,681
- --------------------------------------------------------------------------------
Networking Software -- 2.6%
Legato Systems* 619,400 36,777
-----------
36,777
- --------------------------------------------------------------------------------
PC-Peripherals Manufacturing -- 1.2%
Neomagic* 865,500 16,336
-----------
16,336
- --------------------------------------------------------------------------------
Precision Instruments -- 1.8%
II-VI* 541,300 11,503
Lecroy* 301,700 6,411
Remec* 264,700 7,594
-----------
25,508
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 2.5%
Galileo Technology Limited* 211,400 5,972
Genesis Microchip* 65,700 924
Level One Communications* 465,450 10,938
Micrel* 209,200 7,937
Sipex* 296,900 9,798
-----------
35,569
- --------------------------------------------------------------------------------
Semi-Conductor Production Equipment -- 1.1%
Asyst Technologies* 234,300 5,447
Helix Technology 484,400 9,688
-----------
15,135
- --------------------------------------------------------------------------------
Software-Client/Server -- 2.8%
Advent Software* 309,900 14,720
Deltek Systems* 264,800 4,700
Documentum* 350,300 18,960
Fundtech Limited* 60,000 1,080
-----------
39,460
- --------------------------------------------------------------------------------
Software-Desktop -- 2.6%
Visio* 836,900 35,987
-----------
35,987
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 0.9%
Flexiinternational Software* 55,000 688
Great Plains Software* 347,000 12,622
-----------
13,310
- --------------------------------------------------------------------------------
Software-Manufacturing -- 1.9%
Aspen Technology* 110,900 4,575
Dataworks* 537,200 14,169
Manugistics* 5,900 331
Tecnomatix Technologies Limited* 208,700 7,852
-----------
26,927
- --------------------------------------------------------------------------------
Software-Other -- 1.0%
Corsair* 204,500 3,847
Radiant Systems* 436,100 10,793
-----------
14,640
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 2.3%
California Micro Devices* 549 3
DSP Group* 267,700 5,120
Geotel Communications* 671,900 18,561
Tekelec* 200,900 9,116
-----------
32,800
- --------------------------------------------------------------------------------
Voice/Call Transaction Processing -- 3.2%
Davox* 498,150 15,505
Edify* 550,500 11,113
Natural Microsystems* 476,500 18,881
-----------
45,499
-----------
Total Technology (Cost $338,573) 444,568
-----------
- --------------------------------------------------------------------------------
Transportation -- 3.1%
Logistics -- 0.8%
Eagle USA Airfreight* 420,300 11,348
-----------
11,348
- --------------------------------------------------------------------------------
Surface -- 2.3%
Coach USA* 728,000 31,668
-----------
31,668
-----------
Total Transportation (Cost $33,985) 43,016
-----------
Total Common Stocks (Cost $999,414) 1,344,118
-----------
- --------------------------------------------------------------------------------
45
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Emerging Growth Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.9%
Greenwich
6.00%, dated 03/31/98,
matures 04/01/98, repurchase price
$5,838,956 (collaterized by U.S.
Government Agency Instruments:
total market value $5,959,405) (A) $ 5,838 $ 5,838
J.P. Morgan
6.00%, dated 03/31/98,
matures 04/01/98, repurchase price
$1,538,229 (collaterized by U.S.
Government Agency Instruments:
Total Market Value $1,568,731) (A) 1,538 1,538
Prudential
6.00%, dated 03/31/98,
matures 04/01/98, repurchase price
$32,647,401 (collaterized by U.S.
Treasury and Government Agency
Instruments: total market
value $33,295,374) (A) 32,642 32,642
-----------
Total Repurchase Agreement (Cost $40,018) 40,018
-----------
Total Investments-- 98.6% (Cost $1,039,432) $1,384,136
-----------
- --------------------------------------------------------------------------------
Other Assets And Liabilities -- 1.4%
Other Assets And Liabilities, Net 20,021
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 54,368,438
outstanding shares of common stock 1,057,838
Undistributed net investment income 7
Accumulated net realized gain on investments 1,608
Net unrealized appreciation on investments 344,704
-----------
Total Net Assets-- 100.0% $1,404,157
===========
Net Asset Value, Offering and Redemption Price Per Share $25.83
===========
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statments.
46
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
--------------------------
PBHG Large Cap Growth Fund
--------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 93.8%
Consumer -- 12.1%
Consumer Products Miscellaneous -- 2.9%
Cendant* 105,240 $ 4,170
-----------
4,170
- --------------------------------------------------------------------------------
Entertainment/Movies -- 0.9%
Premier Parks* 23,100 1,340
-----------
1,340
- --------------------------------------------------------------------------------
Funeral Services -- 2.0%
Service Corporation International 68,300 2,899
-----------
2,899
- --------------------------------------------------------------------------------
Hotels/Resorts -- 1.2%
Marriott International* 24,100 896
Marriott International, Cl A* 24,100 863
-----------
1,759
- --------------------------------------------------------------------------------
Retail-Apparel -- 2.5%
Jones Apparel Group* 51,800 2,852
Polo Ralph Lauren* 24,500 737
-----------
3,589
- --------------------------------------------------------------------------------
Retail-Office Products/Supplies -- 2.1%
Staples* 135,000 3,130
-----------
3,130
- --------------------------------------------------------------------------------
Retail-Specialty -- 0.5%
Borders Group* 22,900 780
-----------
780
-----------
Total Consumer (Cost $11,749) 17,667
-----------
- --------------------------------------------------------------------------------
Energy -- 1.8%
Contract Drilling -- 1.0%
Noble Drilling* 22,600 691
Transocean Offshore 16,000 823
-----------
1,514
- --------------------------------------------------------------------------------
Environmental Services -- 0.8%
Newpark Resources* 64,200 1,171
-----------
1,171
-----------
Total Energy (Cost $2,906) 2,685
-----------
- --------------------------------------------------------------------------------
Financial -- 6.7%
Consumer Finance -- 3.7%
Associates First Capital 38,000 3,002
Newcourt Credit 47,700 2,385
-----------
5,387
- --------------------------------------------------------------------------------
Diversified Financial Service -- 1.1%
Ocwen Financial* 59,200 1,643
-----------
1,643
- --------------------------------------------------------------------------------
Mortgage Related -- 1.9%
MGIC Investment 41,200 2,706
-----------
2,706
-----------
Total Financial (Cost $6,091) 9,736
-----------
- --------------------------------------------------------------------------------
Health -- 17.8%
Contract Research -- 2.1%
Quintiles Transnational* 64,800 3,123
-----------
3,123
- --------------------------------------------------------------------------------
Drugs/Pharmaceuticals -- 4.3%
Lilly (Eli) & Co 23,800 1,419
Pfizer 35,000 3,489
Schering-Plough 17,000 1,389
-----------
6,297
- --------------------------------------------------------------------------------
Hospital -- 2.5%
Health Management Associates, Cl A* 128,200 3,670
-----------
3,670
- --------------------------------------------------------------------------------
Information Systems -- 2.7%
HBO & Company 64,100 3,870
-----------
3,870
- --------------------------------------------------------------------------------
Medical Devices -- 1.8%
Guidant 34,900 2,561
-----------
2,561
- --------------------------------------------------------------------------------
Pharmaceutical Services -- 2.2%
Omnicare 81,200 3,217
-----------
3,217
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 2.2%
Healthsouth* 115,400 3,238
-----------
3,238
-----------
Total Health (Cost $15,189) 25,976
-----------
- --------------------------------------------------------------------------------
Industrial/General Manufacturing -- 4.2%
Auto-Related -- 2.1%
Harley-Davidson 92,900 3,065
-----------
3,065
- --------------------------------------------------------------------------------
Multi-Industry -- 2.1%
Danaher 39,400 2,992
-----------
2,992
-----------
Total Industrial/General Manufacturing (Cost $3,485) 6,057
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Service -- 28.9%
Commercial Services -- 3.1%
Central Parking 38,700 1,848
DST Systems* 33,300 1,750
Pittston Brinks Group 22,100 843
-----------
4,441
- --------------------------------------------------------------------------------
47
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- --------------------------
PBHG Large Cap Growth Fund
- --------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Communications Services -- 2.1%
Worldcom* 71,400 $ 3,075
-----------
3,075
- --------------------------------------------------------------------------------
Educational Services -- 2.8%
Apollo Group, Cl A* 36,025 1,734
CBT Group ADR* 46,200 2,391
-----------
4,125
- --------------------------------------------------------------------------------
Electronic Commerce -- 2.0%
Sterling Commerce* 62,300 2,889
-----------
2,889
- --------------------------------------------------------------------------------
Employment Service -- 3.4%
Accustaff* 84,400 2,912
Select Appointments Holdings* 80,000 2,020
-----------
4,932
- --------------------------------------------------------------------------------
Environmental -- 5.0%
Allied Waste Industries* 114,000 2,846
Thermo Electron* 31,850 1,286
USA Waste Services* 71,417 3,183
-----------
7,315
- --------------------------------------------------------------------------------
Information/Computer Services -- 1.1%
Gartner Group, Cl A* 44,400 1,659
-----------
1,659
- --------------------------------------------------------------------------------
Radio/Television -- 5.4%
Chancellor Media, Cl A* 45,300 2,078
Clear Channel Communications* 36,900 3,616
Jacor Communications* 11,200 661
Univision Communications* 42,000 1,564
-----------
7,919
- --------------------------------------------------------------------------------
Systems Integrator -- 4.0%
Cambridge Technology Partners* 71,400 3,539
Computer Horizons* 43,900 2,206
-----------
5,745
-----------
Total Service (Cost $30,293) 42,100
-----------
- --------------------------------------------------------------------------------
Technology -- 22.3%
Computer-Manufacturing -- 2.8%
Dell Computer* 59,600 4,038
-----------
4,038
- --------------------------------------------------------------------------------
Design Automation Software -- 1.5%
Parametric Technology* 65,600 2,185
-----------
2,185
- --------------------------------------------------------------------------------
Networking Hardware -- 2.3%
Cisco Systems* 49,550 3,388
-----------
3,388
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 1.8%
Linear Technology 38,300 2,643
-----------
2,643
- --------------------------------------------------------------------------------
Software-Desktop -- 2.6%
Microsoft* 42,600 3,813
-----------
3,813
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 3.2%
J.D. Edwards & Company* 11,600 379
Peoplesoft* 81,700 4,305
-----------
4,684
- --------------------------------------------------------------------------------
Software-Internet -- 2.0%
America Online* 42,400 2,896
-----------
2,896
- --------------------------------------------------------------------------------
Software-System/Mainframe -- 1.2%
BMC Software* 19,700 1,651
-----------
1,651
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 4.9%
Lucent Technologies 26,100 3,338
Tellabs* 56,600 3,799
-----------
7,137
-----------
Total Technology (Cost $15,584) 32,435
-----------
Total Common Stocks (Cost $85,297) 136,656
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 3.7%
J.P. Morgan
6.05%, dated 03/31/98, matures
04/01/98, repurchase price $5,372,774
(collaterized by U.S. Government
Obligations: total market
value $5,479,309) (A) $5,372 5,372
-----------
Total Repurchase Agreement (Cost $5,372) 5,372
-----------
Total Investments-- 97.5% (Cost $90,669) 142,028
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- 2.5%
Other Assets and Liabilities, Net 3,634
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million shares -- $0.001 par value)
based on 6,419,874
outstanding shares of common stock 86,981
Accumulated net realized gain on investments 7,322
Net unrealized appreciation on investments 51,359
-----------
Total Net Assets -- 100.0% $145,662
===========
Net Asset Value, Offering and Redemption
Price Per Share $22.69
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
48
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
-----------------------
PBHG Select Equity Fund
-----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 97.0%
Consumer -- 10.7%
Consumer Products Miscellaneous -- 5.7%
Cendant* 484,000 $ 19,179
-----------
19,179
- --------------------------------------------------------------------------------
Retail-Apparel -- 5.0%
Jones Apparel Group* 287,200 15,813
Polo Ralph Lauren* 29,000 872
-----------
16,685
-----------
Total Consumer (Cost $24,490) 35,864
-----------
- --------------------------------------------------------------------------------
Energy -- 0.5%
Production Equipment -- 0.5%
National-Oilwell* 52,100 1,710
-----------
1,710
-----------
Total Energy (Cost $1,655) 1,710
-----------
- --------------------------------------------------------------------------------
Health -- 13.1%
Contract Research -- 5.7%
Quintiles Transnational* 396,400 19,102
-----------
19,102
- --------------------------------------------------------------------------------
Information Systems -- 7.4%
HBO & Company 339,300 20,485
Incyte Pharmaceuticals* 98,200 4,591
-----------
25,076
-----------
Total Health (Cost $28,731) 44,178
-----------
- --------------------------------------------------------------------------------
Service -- 29.6%
Educational Services -- 6.0%
CBT Group ADR* 390,000 20,183
-----------
20,183
- --------------------------------------------------------------------------------
Environmental -- 2.1%
Superior Services* 223,000 6,955
-----------
6,955
- --------------------------------------------------------------------------------
Information/Computer Services -- 2.2%
Gartner Group, Cl A* 200,000 7,475
-----------
7,475
- --------------------------------------------------------------------------------
Radio/Television -- 5.8%
Clear Channel Communications* 199,300 19,531
-----------
19,531
- --------------------------------------------------------------------------------
Systems Integrator -- 9.2%
Computer Horizons* 263,300 13,231
Keane* 315,500 17,825
-----------
31,056
- --------------------------------------------------------------------------------
Transactions Processing -- 4.3%
Saville Systems ADR* 279,200 14,309
-----------
14,309
-----------
Total Service (Cost $58,521) 99,509
-----------
- --------------------------------------------------------------------------------
Technology -- 43.1%
Computer-Manufacturing -- 5.8%
Dell Computer* 285,200 19,322
-----------
19,322
- --------------------------------------------------------------------------------
Networking Software -- 3.4%
Networks Associates* 170,000 11,263
-----------
11,263
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 2.2%
Galileo Technology Limited* 260,000 7,345
-----------
7,345
- --------------------------------------------------------------------------------
Software-Client/Server -- 2.7%
Citrix Systems* 169,950 9,209
-----------
9,209
- --------------------------------------------------------------------------------
Software-Desktop -- 4.8%
Visio* 375,000 16,125
-----------
16,125
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 9.7%
J.D. Edwards & Company* 409,800 13,395
Peoplesoft* 366,700 19,321
-----------
32,716
- --------------------------------------------------------------------------------
Software-Internet -- 1.7%
America Online* 84,000 5,738
-----------
5,738
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 12.8%
Advanced Fibre Communications* 316,100 11,498
Lucent Technologies 154,000 19,692
Tekelec* 261,700 11,875
-----------
43,065
-----------
Total Technology (Cost $83,508) 144,783
-----------
Total Common Stocks (Cost $196,905) 326,044
-----------
- --------------------------------------------------------------------------------
49
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -----------------------
PBHG Select Equity Fund
- -----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreement -- 1.8%
J.P. Morgan
6.05%, dated 03/31/98, matures
04/01/98, repurchase price $6,004,038
(collaterized by U.S. Government
Obligations: total market
value $6,123,090) (A) $ 6,003 $ 6,003
-----------
Total Repurchase Agreement (Cost $6,003) 6,003
-----------
Total Investments -- 98.8% (Cost $202,908) 332,047
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- 1.2%
Other Assets and Liabilities, Net 4,029
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million shares -- $0.001 par value)
based on 13,914,825
outstanding shares of common stock 218,937
Accumulated net realized loss on investments (12,000)
Net unrealized appreciation on investments 129,139
-----------
Total Net Assets-- 100.0% $336,076
===========
Net Asset Value, Offering and Redemption
Price Per Share $24.15
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the finanical statements.
50
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
---------------------
PBHG Core Growth Fund
---------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 97.7%
Consumer -- 15.5%
Building Material Chains -- 1.0%
Lowe's Companies 23,300 $ 1,635
-----------
1,635
- --------------------------------------------------------------------------------
Consumer Products Miscellaneous -- 3.3%
Blyth Industries* 59,100 2,018
Cendant* 43,000 1,704
Gillette Company 14,100 1,673
-----------
5,395
- --------------------------------------------------------------------------------
Entertainment/Movies -- 1.9%
Cinar Films, Cl B* 39,000 1,662
Premier Parks* 25,700 1,491
-----------
3,153
- --------------------------------------------------------------------------------
Hotels/Resorts -- 0.8%
Capstar Hotel* 37,500 1,301
-----------
1,301
- --------------------------------------------------------------------------------
Packaged Goods/Cosmetics -- 0.8%
NBTY* 21,900 1,330
-----------
1,330
- --------------------------------------------------------------------------------
Retail-Apparel -- 2.2%
Jones Apparel Group* 67,100 3,695
-----------
3,695
- --------------------------------------------------------------------------------
Retail-Catalog -- 1.4%
CDW Computer Centers* 38,049 2,278
-----------
2,278
- --------------------------------------------------------------------------------
Retail-Specialty -- 1.2%
General Nutrition Companies* 21,000 835
Hibbet Sporting Goods* 43,400 1,204
-----------
2,039
- --------------------------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 1.0%
Whole Foods Market* 23,400 1,632
-----------
1,632
- --------------------------------------------------------------------------------
Specialty Food/Candy -- 1.9%
Suiza Foods* 51,900 3,192
-----------
3,192
-----------
Total Consumer (Cost $22,993) 25,650
-----------
- --------------------------------------------------------------------------------
Energy -- 3.1%
Drilling Services & Equipment -- 1.8%
Varco International* 116,400 2,997
-----------
2,997
- --------------------------------------------------------------------------------
Marine Construction -- 0.7%
Global Industries Limited* 58,200 1,186
-----------
1,186
- --------------------------------------------------------------------------------
Vessel & Rig Construction -- 0.6%
Friede Goldman International* 31,800 918
-----------
918
-----------
Total Energy (Cost $3,202) 5,101
-----------
- --------------------------------------------------------------------------------
Financial -- 2.9%
Consumer Finance -- 2.2%
Associates First Capital 46,900 3,705
-----------
3,705
- --------------------------------------------------------------------------------
Specialty Finance -- 0.7%
Healthcare Financial Partners* 23,400 1,109
-----------
1,109
-----------
Total Financial (Cost $2,915) 4,814
-----------
- --------------------------------------------------------------------------------
Health -- 14.5%
Assisted Living -- 1.1%
Sunrise Assisted Living* 41,800 1,871
-----------
1,871
- --------------------------------------------------------------------------------
Drugs/Pharmaceuticals -- 0.6%
Merck & Company 8,000 1,027
-----------
1,027
- --------------------------------------------------------------------------------
Hospital -- 1.4%
Health Management Associates, Cl A* 79,500 2,276
-----------
2,276
- --------------------------------------------------------------------------------
Hospital Supplies -- 1.2%
Safeskin* 27,800 2,054
-----------
2,054
- --------------------------------------------------------------------------------
Information Systems -- 3.4%
Daou Systems* 97,200 1,901
HBO & Company 60,800 3,670
-----------
5,571
- --------------------------------------------------------------------------------
Medical Devices -- 2.0%
Thermo Cardiosystems* 120,600 3,264
-----------
3,264
- --------------------------------------------------------------------------------
Pharmaceutical Services -- 2.5%
Omnicare 103,600 4,105
-----------
4,105
- --------------------------------------------------------------------------------
Physician Practice Management -- 1.2%
FPA Medical Management* 128,200 1,979
-----------
1,979
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 1.1%
Healthsouth* 64,200 1,802
-----------
1,802
-----------
Total Health (Cost $20,620) 23,949
-----------
- --------------------------------------------------------------------------------
51
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ---------------------
PBHG Core Growth Fund
- ---------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Industrial/General Manufacturing -- 3.4%
Auto-Related -- 1.3%
Harley-Davidson 64,400 $ 2,125
-----------
2,125
- --------------------------------------------------------------------------------
Electrical Products -- 0.6%
General Electric 12,000 1,034
-----------
1,034
- --------------------------------------------------------------------------------
Railroad -- 1.5%
Motivepower Industries* 86,700 2,396
-----------
2,396
-----------
Total Industrial/General Manufacturing (Cost $4,441) 5,555
-----------
- --------------------------------------------------------------------------------
Service -- 27.5%
Commercial Services -- 2.2%
Central Parking 41,000 1,957
DST Systems* 32,200 1,693
-----------
3,650
- --------------------------------------------------------------------------------
Communications Services -- 2.8%
Smartalk Teleservices* 87,900 2,807
Worldcom* 42,400 1,826
-----------
4,633
- --------------------------------------------------------------------------------
Educational Services -- 3.0%
Apollo Group, Cl A* 84,900 4,086
Strayer Education 25,000 831
-----------
4,917
- --------------------------------------------------------------------------------
Information/Computer Services -- 1.6%
Gartner Group, Cl A* 71,700 2,680
-----------
2,680
- --------------------------------------------------------------------------------
Marketing Information -- 1.2%
Abacus Direct* 37,000 1,933
-----------
1,933
- --------------------------------------------------------------------------------
Radio/Television -- 4.8%
Clear Channel Communications* 40,100 3,930
Jacor Communications* 56,500 3,333
Univision Communications* 20,900 779
-----------
8,042
- --------------------------------------------------------------------------------
Systems Integrator -- 7.4%
Cambridge Technology Partners* 83,100 4,118
Computer Horizons* 56,300 2,829
Ecsoft Group ADR* 50,000 1,250
RWD Technologies* 147,700 4,062
-----------
12,259
- --------------------------------------------------------------------------------
Transactions Processing -- 4.5%
International Telecommunications Data Systems* 101,250 2,645
Saville Systems ADR* 93,200 4,777
-----------
7,422
-----------
Total Service (Cost $32,166) 45,536
-----------
- --------------------------------------------------------------------------------
Technology -- 30.2%
Computer-Manufacturing -- 2.2%
Dell Computer* 54,600 3,699
-----------
3,699
- --------------------------------------------------------------------------------
Design Automation Software -- 4.8%
Cadence Design Systems* 100,500 3,479
Parametric Technology* 98,900 3,295
Summit Design* 79,900 1,189
-----------
7,963
- --------------------------------------------------------------------------------
Networking Security -- 0.8%
Axent Technologies* 21,800 665
Memco Software Limited* 19,900 622
-----------
1,287
- --------------------------------------------------------------------------------
Networking Software -- 1.3%
Networks Associates* 32,250 2,137
-----------
2,137
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 2.1%
Applied Micro Circuits* 36,700 826
Galileo Technology Limited* 66,600 1,881
Level One Communications* 33,300 783
-----------
3,490
- --------------------------------------------------------------------------------
Software-Client/Server -- 4.1%
BEA Systems* 121,900 3,428
Citrix Systems* 30,000 1,626
Documentum* 32,800 1,775
-----------
6,829
- --------------------------------------------------------------------------------
Software-Desktop -- 1.1%
Visio* 41,100 1,767
-----------
1,767
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 4.9%
J.D. Edwards & Company* 116,300 3,802
Peoplesoft* 83,200 4,383
-----------
8,185
- --------------------------------------------------------------------------------
Software-Manufacturing -- 1.5%
I2 Technologies* 19,400 1,273
Manugistics* 21,100 1,183
-----------
2,456
- --------------------------------------------------------------------------------
Software-Other -- 3.2%
Lernout & Hauspie* 37,800 3,302
Radiant Systems* 83,300 2,062
-----------
5,364
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 4.2%
Advanced Fiber Communications* 95,900 3,489
Lucent Technologies 10,900 1,394
Tekelec* 43,600 1,978
-----------
6,861
-----------
Total Technology (Cost $34,763) 50,038
-----------
- --------------------------------------------------------------------------------
52
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
---------------------
PBHG Core Growth Fund
---------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Transportation -- 0.6%
Surface -- 0.6%
Coach USA* 23,200 $ 1,009
-----------
Total Transportation (Cost $754) 1,009
-----------
Total Common Stocks (Cost $121,854) 161,652
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.0%
J.P. Morgan
6.05%, dated 03/31/98, matures 04/01/98,
repurchase price $3,283,615
(collaterized by U.S.
Government Obligations: total
market value $3,352,729) (A) $3,283 3,283
-----------
Total Repurchase Agreement (Cost $3,283) 3,283
-----------
Total Investments-- 99.7% (Cost $125,137) 164,935
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- 0.3%
Other Assets and Liabilities, Net 575
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 12,232,407
outstanding shares of common stock 181,967
Accumulated net investment loss (1,290)
Accumulated net realized loss on investments (54,965)
Net unrealized appreciation on investments 39,798
-----------
Total Net Assets -- 100.0% $165,510
===========
Net Asset Value, Offering and Redemption
Price Per Share $13.53
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
53
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -----------------
PBHG Limited Fund
- -----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 93.9%
Consumer -- 15.6%
Leisure/Recreational -- 0.9%
American Coin Merchandising* 79,900 $ 1,598
-----------
1,598
- --------------------------------------------------------------------------------
Packaged Goods/Cosmetics -- 1.7%
Natural Alternatives International* 150,300 3,025
-----------
3,025
- --------------------------------------------------------------------------------
Restaurants -- 4.3%
Logan's Roadhouse* 72,100 1,631
PJ America* 165,700 2,983
Schlotzsky's* 128,700 3,008
-----------
7,622
- --------------------------------------------------------------------------------
Retail-Apparel -- 0.8%
North Face* 59,700 1,448
-----------
1,448
- --------------------------------------------------------------------------------
Retail-Catalog -- 2.9%
Insight Enterprises* 116,400 4,729
Wilmar Industries* 21,200 527
-----------
5,256
- --------------------------------------------------------------------------------
Retail-Specialty -- 3.9%
Hibbet Sporting Goods* 143,500 3,982
USA Floral Products * 129,900 2,947
-----------
6,929
- --------------------------------------------------------------------------------
Shoe Manufacturing -- 1.1%
Rocky Shoes* 117,000 1,879
-----------
1,879
-----------
Total Consumer (Cost $21,629) 27,757
-----------
- --------------------------------------------------------------------------------
Financial -- 0.2%
Mortgage Related -- 0.2%
New Century Financial* 44,100 435
-----------
Total Financial (Cost $485) 435
-----------
- --------------------------------------------------------------------------------
Health -- 20.6%
Assisted Living -- 0.7%
Assisted Living Concepts* 60,300 1,304
-----------
1,304
- --------------------------------------------------------------------------------
Contact Lenses -- 0.8%
1-800 Contacts* 68,100 1,353
-----------
1,353
- --------------------------------------------------------------------------------
Contract Research -- 2.0%
Kendle International* 155,300 3,611
-----------
3,611
- --------------------------------------------------------------------------------
Drugs/Pharmaceuticals -- 1.1%
Medicis Pharmaceutical, Cl A* 43,150 1,882
-----------
1,882
- --------------------------------------------------------------------------------
Health Care Management Services -- 1.7%
Hooper Holmes 112,900 $ 2,413
Horizon Health* 26,300 641
-----------
3,054
- --------------------------------------------------------------------------------
Home Health Care -- 1.7%
Lifeline Systems* 84,100 1,913
Pediatric Services Of America* 50,300 1,075
-----------
2,988
- --------------------------------------------------------------------------------
Hospital/Nursing Management -- 0.4%
Res-Care* 18,300 682
-----------
682
- --------------------------------------------------------------------------------
Information Systems -- 7.3%
Impath* 82,500 3,156
Mecon* 216,100 2,377
Medquist* 105,600 3,888
Quadramed* 107,500 3,588
-----------
13,009
- --------------------------------------------------------------------------------
Medical Devices -- 3.7%
Resmed* 103,400 3,671
Sabratek* 83,600 2,926
-----------
6,597
- --------------------------------------------------------------------------------
Pharmaceutical Services -- 0.3%
NCS Healthcare* 16,000 536
-----------
536
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 0.9%
National Surgery Centers* 64,850 1,658
-----------
1,658
-----------
Total Health (Cost $21,821) 36,674
-----------
- --------------------------------------------------------------------------------
Service -- 21.8%
Commercial Services -- 2.4%
Analytical Surveys* 33,900 1,737
Healthcare Recoveries* 108,000 2,511
-----------
4,248
- --------------------------------------------------------------------------------
Correctional Service -- 1.4%
Cornell Corrections* 100,900 2,472
-----------
2,472
- --------------------------------------------------------------------------------
Distribution -- 1.5%
Scansource* 125,200 2,629
-----------
2,629
- --------------------------------------------------------------------------------
Document Processing -- 1.3%
Lason* 62,500 2,359
-----------
2,359
- --------------------------------------------------------------------------------
Educational Services -- 0.1%
Edutrek International* 11,400 252
-----------
252
- --------------------------------------------------------------------------------
54
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
-----------------
PBHG Limited Fund
-----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Electronic Commerce -- 1.5%
Quickresponse Services* 50,900 $ 2,723
-----------
2,723
- --------------------------------------------------------------------------------
Employment Service -- 3.5%
Romac International* 133,800 3,680
Vincam Group* 85,650 2,484
-----------
6,164
- --------------------------------------------------------------------------------
Environmental -- 1.1%
Casella Waste Systems, Cl A* 7,400 196
Superior Services* 59,200 1,846
-----------
2,042
- --------------------------------------------------------------------------------
Information/Computer Services -- 2.1%
Forrester Research* 63,600 2,258
Meta Group* 43,800 1,511
-----------
3,769
- --------------------------------------------------------------------------------
Marketing Information -- 1.7%
Abacus Direct* 27,500 1,437
Market Facts 78,200 1,544
-----------
2,981
- --------------------------------------------------------------------------------
Printing Services/Forms -- 1.6%
Consolidated Graphics* 48,700 2,819
-----------
2,819
- --------------------------------------------------------------------------------
Systems Integrator -- 3.6%
Command Systems* 30,000 428
Computer Management Sciences* 48,550 1,344
Intelligroup* 198,600 3,215
Whittman-Hart* 32,200 1,457
-----------
6,444
-----------
Total Service (Cost $23,800) 38,902
-----------
- --------------------------------------------------------------------------------
Technology -- 33.4%
Automated Data Collection -- 0.1%
Eltron International* 7,900 194
-----------
194
- --------------------------------------------------------------------------------
Contract Manufacturing -- 1.4%
EFTC* 190,700 2,503
-----------
2,503
- --------------------------------------------------------------------------------
Data Storage -- 0.2%
Box Hill Systems* 23,800 305
-----------
305
- --------------------------------------------------------------------------------
Design Automation Software -- 1.5%
Summit Design* 175,600 2,612
-----------
2,612
- --------------------------------------------------------------------------------
Digital Video Related -- 1.7%
Engineering Animation* 73,800 3,063
-----------
3,063
- --------------------------------------------------------------------------------
Electronic Components -- 2.5%
General Scanning* 101,700 2,187
Vivid Technologies* 111,000 1,665
WPI Group* 83,100 686
-----------
4,538
- --------------------------------------------------------------------------------
Embedded Software -- 1.4%
Peerless Systems* 139,300 2,507
-----------
2,507
- --------------------------------------------------------------------------------
Graphic/Image Process -- 0.7%
Splash Technologies Holdings* 79,200 1,327
-----------
1,327
- --------------------------------------------------------------------------------
Networking Hardware -- 2.2%
Apex PC Solutions* 29,800 801
Cybex Computer Products* 95,700 3,116
-----------
3,917
- --------------------------------------------------------------------------------
Networking Services -- 0.0%
Extended Systems* 10,600 87
-----------
87
- --------------------------------------------------------------------------------
Precision Instruments -- 1.9%
II-VI* 70,000 1,487
Lecroy* 51,200 1,088
Remec* 30,700 881
-----------
3,456
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 0.8%
Genesis Microchip* 100,200 1,409
-----------
1,409
- --------------------------------------------------------------------------------
Semi-Conductor Production Equipment -- 0.4%
Asyst Technologies* 27,100 630
-----------
630
- --------------------------------------------------------------------------------
Software-Client/Server -- 3.2%
Advent Software* 37,100 1,762
Deltek Systems* 33,900 602
Documentum* 30,300 1,640
Smallworldwide ADR* 84,700 1,652
-----------
5,656
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 1.4 %
Great Plains Software* 57,000 2,073
Infinium Software* 19,400 387
-----------
2,460
- --------------------------------------------------------------------------------
Software-Manufacturing -- 3.6%
Dataworks* 155,200 4,093
Tecnomatix Technologies Limited* 60,100 2,261
-----------
6,354
- --------------------------------------------------------------------------------
Software-Other -- 4.5%
New Era of Networks* 164,300 3,943
Radiant Systems* 163,200 4,039
-----------
7,982
- --------------------------------------------------------------------------------
55
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -----------------
PBHG Limited Fund
- -----------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 1.5%
DSP Group* 30,300 $ 579
Geotel Communications* 76,900 2,125
-----------
2,704
- --------------------------------------------------------------------------------
Voice/Call Transaction Processing -- 4.4%
Applied Voice Technology* 94,800 3,697
Davox* 59,050 1,838
Natural Microsystems* 58,200 2,306
-----------
7,841
-----------
Total Technology (Cost $44,819) 59,545
-----------
- --------------------------------------------------------------------------------
Transportation -- 2.3%
Trucking -- 2.3%
Carey International* 167,500 3,978
-----------
Total Transportation (Cost $3,128) 3,978
-----------
Total Common Stocks (Cost $115,682) 167,291
-----------
- --------------------------------------------------------------------------------
Repurchase Agreements -- 6.6%
Greenwich
6.00%, dated 03/31/98, matures
04/01/98, repurchase price $10,167,504
(collaterized by U.S. Government
Obligations: total market
value $10,372,667) (A) $10,166 10,166
J.P. Morgan
6.00%, dated 03/31/98, matures
04/01/98, repurchase price $1,670,209
(collaterized by U.S. Government
Obligations: total market
value $1,703,328) (A) 1,670 1,670
-----------
Total Repurchase Agreements (Cost $11,836) 11,836
-----------
Total Investments-- 100.5% (Cost $127,518) 179,127
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- (0.5%)
Other Assets and Liabilities, Net (959)
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million shares -- $0.001 par value)
based on 12,653,638
outstanding shares of common stock 121,041
Accumulated net investment loss (2)
Accumulated net realized gain on investments 5,520
Net unrealized appreciation on investments 51,609
-----------
Total Net Assets-- 100.0% $178,168
===========
Net Asset Value, Offering and Redemption
Price Per Share $14.08
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
----------------------
PBHG Large Cap 20 Fund
----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 91.4%
Consumer -- 5.1%
Consumer Products Miscellaneous -- 5.1%
Cendent* 249,445 $ 9,884
-----------
Total Consumer (Cost $8,044) 9,884
-----------
- --------------------------------------------------------------------------------
Financial -- 8.2%
Consumer Finance -- 4.2%
Associates First Capital 102,300 8,082
-----------
8,082
- --------------------------------------------------------------------------------
Mortgage Related -- 4.0%
MGIC Investment 118,000 7,751
-----------
7,751
-----------
Total Financial (Cost $11,751) 15,833
-----------
- --------------------------------------------------------------------------------
Health -- 15.2%
Drugs/Pharmaceuticals -- 2.0%
Pfizer 37,900 3,778
-----------
3,778
- --------------------------------------------------------------------------------
Information Systems -- 5.2%
HBO & Company 167,300 10,100
-----------
10,100
- --------------------------------------------------------------------------------
Medical Devices -- 4.4%
Guidant 114,300 8,387
-----------
8,387
- --------------------------------------------------------------------------------
Special Outpatient Facility -- 3.6%
Healthsouth* 245,800 6,898
-----------
6,898
-----------
Total Health (Cost $21,270) 29,163
-----------
- --------------------------------------------------------------------------------
Service -- 19.3%
Communications Services -- 4.8%
Worldcom* 213,200 9,181
-----------
9,181
- --------------------------------------------------------------------------------
Environmental -- 4.8%
USA Waste Services* 205,700 9,167
-----------
9,167
- --------------------------------------------------------------------------------
Radio/Television -- 9.7%
Chancellor Media, Cl A* 203,300 9,326
Clear Channel Communications* 97,000 9,506
-----------
18,832
-----------
Total Service (Cost $32,083) 37,180
-----------
- --------------------------------------------------------------------------------
Technology -- 43.6%
Computer-Manufacturing -- 5.2%
Dell Computer* 146,700 9,939
-----------
9,939
- --------------------------------------------------------------------------------
Data Storage -- 4.8%
EMC* 246,900 9,336
-----------
9,336
- --------------------------------------------------------------------------------
Networking Hardware -- 5.1%
Cisco Systems* 144,050 9,849
-----------
9,849
- --------------------------------------------------------------------------------
Software-Client/Server -- 4.7%
Compuware* 183,500 9,060
-----------
9,060
- --------------------------------------------------------------------------------
Software-Desktop -- 3.9%
Microsoft* 84,600 7,572
-----------
7,572
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 5.2%
Peoplesoft* 188,600 9,937
-----------
9,937
- --------------------------------------------------------------------------------
Software-Internet -- 4.7%
America Online* 132,200 9,031
-----------
9,031
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 10.0%
Lucent Technologies 77,000 9,847
Tellabs* 139,800 9,384
-----------
19,231
-----------
Total Technology (Cost $55,432) 83,955
-----------
Total Common Stocks (Cost $128,580) 176,015
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 9.2%
J.P. Morgan
6.05%, dated 03/31/98, matures
04/01/98, repurchase price $17,855,658
(collaterized by U.S. Government
Obligations: total market
value $18,209,712) (A) $17,853 17,853
-----------
Total Repurchase Agreement (Cost $17,853) 17,853
-----------
Total Investments-- 100.6% (Cost $146,433) 193,868
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- (0.6%)
Other Assets and Liabilities, Net (1,237)
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million shares -- $0.001 par value)
based on 12,053,630
outstanding shares of common stock 140,120
Accumulated net realized gain on investments 5,076
Net unrealized appreciation on investments 47,435
-----------
Total Net Assets-- 100.0% $192,631
===========
Net Asset Value, Offering and Redemption
Price Per Share $15.98
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Large Cap Value Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 93.4%
Basic Materials -- 3.8%
Chemicals -- 1.4%
Arco Chemical 8,700 $ 412
Solutia 21,100 628
-----------
1,040
- --------------------------------------------------------------------------------
Chemicals-Specialty -- 0.1%
Millenium Chemicals 3,300 111
-----------
111
- --------------------------------------------------------------------------------
Steel -- 2.3%
Carpenter Technology 15,400 832
Nucor 17,500 952
-----------
1,784
-----------
Total Basic Materials (Cost $2,659) 2,935
-----------
- --------------------------------------------------------------------------------
Capital Goods -- 6.2%
Aerospace/Defense -- 4.0%
General Dynamics 22,600 1,946
Sundstrand 6,200 375
United Technologies 7,900 729
-----------
3,050
- --------------------------------------------------------------------------------
Building Supplies -- 0.3%
PPG Industries 3,900 265
-----------
265
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.3%
Emerson Electric 3,400 222
-----------
222
- --------------------------------------------------------------------------------
Machinery -- 0.8%
Deere & Co 4,800 297
Essex International* 8,200 324
-----------
621
- --------------------------------------------------------------------------------
Office Equipment -- 0.8%
Lexmark International Group, Cl A* 3,700 167
Xerox 4,000 426
-----------
593
-----------
Total Capital Goods (Cost $4,495) 4,751
-----------
- --------------------------------------------------------------------------------
Consumer Cyclical -- 12.9%
Apparel & Textiles -- 0.7%
VF 9,600 505
-----------
505
- --------------------------------------------------------------------------------
Autos/Trucks -- 3.3%
Chrysler 7,500 312
Ford Motor Company 32,700 2,119
General Motors 1,700 115
-----------
2,546
- --------------------------------------------------------------------------------
Printing & Publishing -- 4.5%
Belo (A.H.), Series A 5,000 275
Gannett 2,800 201
New York Times, Cl A 37,600 2,633
Tribune 4,900 345
-----------
3,454
- --------------------------------------------------------------------------------
Retailing-General -- 3.3%
Federated Department Stores* 10,100 523
Intimate Brands, Cl A 40,700 1,101
May Department Stores 8,400 533
TJX Companies 8,500 385
-----------
2,542
- --------------------------------------------------------------------------------
Wholesalers -- 1.1%
Dayton Hudson 5,800 510
Office Depot* 9,400 293
-----------
803
-----------
Total Consumer Cyclical (Cost $8,769) 9,850
-----------
- --------------------------------------------------------------------------------
Consumer Staples -- 8.8%
Beverages -- 1.2%
Pepsico 22,200 948
-----------
948
- --------------------------------------------------------------------------------
Cosmetics & Toiletries -- 2.7%
Colgate-Palmolive 2,600 225
Dial 18,400 440
Proctor & Gamble 16,700 1,409
-----------
2,074
- --------------------------------------------------------------------------------
Food & Drug Retailers -- 2.9%
Albertson's 26,900 1,416
Safeway* 13,500 499
Supervalu* 5,800 270
-----------
2,185
- --------------------------------------------------------------------------------
Food Producers -- 2.0%
Heinz (HJ) 21,800 1,273
Quaker Oats 3,900 223
-----------
1,496
-----------
Total Consumer Staples (Cost $6,181) 6,703
-----------
- --------------------------------------------------------------------------------
Energy -- 1.5%
Energy Services -- 1.5%
Santa Fe International 30,200 1,146
-----------
Total Energy (Cost $1,069) 1,146
-----------
- --------------------------------------------------------------------------------
58
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
-------------------------
PBHG Large Cap Value Fund
-------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Financial -- 20.8%
Banks -- 8.6%
Amsouth Bancorporation 18,300 $ 1,081
BankBoston 4,000 441
First Chicago NBD 7,400 652
First Tennessee National 6,000 193
Fleet Financial Group 3,100 264
Mellon Bank 24,200 1,537
Mercantile Bankshares 10,000 362
Southtrust 48,100 2,014
-----------
6,544
- --------------------------------------------------------------------------------
Financial Services -- 9.1%
American Express 5,200 477
Equitable Companies 6,500 367
Everen Capital 8,500 375
Fannie Mae 44,000 2,783
Legg Mason 30,000 1,779
Merrill Lynch & Co 3,000 249
Paine Webber Group 15,300 614
Waddell & Reed Financial, Cl A* 12,800 333
-----------
6,977
- --------------------------------------------------------------------------------
Insurance -- 3.1%
Allstate 22,200 2,041
Travelers Group 6,000 360
-----------
2,401
-----------
Total Financial (Cost $15,444) 15,922
-----------
- --------------------------------------------------------------------------------
Health Care -- 11.3%
Medical Services -- 2.0%
Tenet Healthcare* 41,300 1,500
-----------
1,500
- --------------------------------------------------------------------------------
Medical Supplies -- 2.1%
Bard (C.R.) 11,400 419
Becton Dickinson & Co 13,400 912
Guidant 3,700 271
-----------
1,602
- --------------------------------------------------------------------------------
Pharmaceuticals -- 7.2%
Abbott Laboratories 5,300 399
Baxter International 15,400 849
Bristol Myers Squibb 4,550 475
Lilly (Eli) & Co 5,600 334
Pfizer 4,600 459
Schering-Plough 29,300 2,393
Warner-Lambert 3,600 613
-----------
5,522
-----------
Total Health Care (Cost $8,066) 8,624
-----------
- --------------------------------------------------------------------------------
Services/Diversified -- 5.3%
Business Services -- 1.5%
Dun & Bradstreet 32,300 1,104
-----------
1,104
- --------------------------------------------------------------------------------
Conglomerates -- 3.8%
General Electric 16,300 $ 1,405
Trinity Industries 13,400 735
Tyco International Limited 14,200 776
-----------
2,916
-----------
Total Services/Diversified (Cost $3,527) 4,020
-----------
- --------------------------------------------------------------------------------
Technology -- 9.8%
Communication Equipment -- 0.5%
Lucent Technologies 2,300 294
Tellabs* 2,000 134
-----------
428
- --------------------------------------------------------------------------------
Computer & Related -- 0.5%
Sun Microsystems* 9,000 375
-----------
375
- --------------------------------------------------------------------------------
Electronics & Semiconductors -- 0.4%
Linear Technology 4,100 283
-----------
283
- --------------------------------------------------------------------------------
Telecommunication Services -- 8.4%
Alltel 7,700 336
AT&T 35,000 2,299
US West Communications 41,500 2,272
Worldcom* 35,400 1,524
-----------
6,431
-----------
Total Technology (Cost $6,857) 7,517
-----------
- --------------------------------------------------------------------------------
Transportation -- 8.6%
Airlines -- 7.2%
Continental Airlines, Cl B* 23,000 1,353
Delta Air Lines 5,600 662
Midway Airlines* 20,000 378
Southwest Airlines 96,600 2,855
UAL* 2,400 223
-----------
5,471
- --------------------------------------------------------------------------------
Trucking & Shipping -- 1.4%
Royal Caribbean Cruises Limited 15,700 1,100
-----------
1,100
-----------
Total Transportation (Cost $6,108) 6,571
-----------
- --------------------------------------------------------------------------------
Utilities -- 4.4%
Electric Power -- 2.6%
Consolidated Edison 9,100 425
Firstenergy 12,000 370
Public Service Enterprise Group 4,300 163
Rochester Gas and Electric 32,300 1,049
-----------
2,007
- --------------------------------------------------------------------------------
59
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Large Cap Value Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Natural Gas -- 1.8%
KN Energy 22,800 $ 1,347
-----------
1,347
-----------
Total Utilities (Cost $3,066) 3,354
-----------
Total Common Stocks (Cost $66,241) 71,393
-----------
- --------------------------------------------------------------------------------
Preferred Stocks -- 2.0%
Basic Materials -- 1.2%
Metals & Mining -- 1.2%
Placer Dome 38,800 972
-----------
Total Basic Materials (Cost $1,001) 972
-----------
- --------------------------------------------------------------------------------
Financial -- 0.2%
Financial Services -- 0.2%
Bear Sterns 5,500 138
-----------
Total Financial (Cost $143) 138
-----------
- --------------------------------------------------------------------------------
Utilities -- 0.6%
Electric Power -- 0.6%
Pacificorp 17,600 448
-----------
Total Utilities (Cost $460) 448
-----------
Total Preferred Stocks (Cost $1,604) 1,558
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 1.3%
J.P Morgan
6.05%, dated 03/31/98, matures
04/01/98, repurchase price $1,007,520
(collaterized by U.S. Government
Obligations: total market
value $1,027,498) (A) $1,007 1,007
-----------
Total Repurchase Agreement (Cost $1,007) 1,007
===========
Total Investments-- 96.7% (Cost $68,852) $73,958
-----------
*Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
-----------------------
PBHG Mid-Cap Value Fund
-----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 99.6%
Basic Materials -- 5.1%
Chemicals -- 1.3%
Arco Chemical 3,200 $ 152
Solutia 18,900 562
-----------
714
- --------------------------------------------------------------------------------
Chemicals-Specialty -- 1.7%
Crompton & Knowles 17,300 501
Millenium Chemicals 12,000 402
-----------
903
- --------------------------------------------------------------------------------
Steel -- 2.1%
Carpenter Technology 16,000 863
Nucor 5,300 289
-----------
1,152
-----------
Total Basic Materials (Cost $2,469) 2,769
-----------
- --------------------------------------------------------------------------------
Capital Goods -- 10.3%
Aerospace/Defense -- 2.9%
General Dynamics 7,200 620
Gulfstream Aerospace* 14,300 620
Moog, Cl A* 2,000 84
Sundstrand 3,700 224
-----------
1,548
- --------------------------------------------------------------------------------
Building Supplies -- 0.9%
Lafarge 4,700 180
USG* 5,500 298
-----------
478
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.2%
American Power Conversion* 3,800 109
-----------
109
- --------------------------------------------------------------------------------
Machinery -- 5.6%
Commonwealth Industries 7,000 122
Essex International* 34,400 1,359
Greenbrier Companies 15,600 269
Ingersoll-Rand 6,200 297
Kaynar Technologies* 9,000 251
Kennametal 3,200 168
Paccar 3,000 179
Terex* 10,900 295
Watts Industries, Cl A 4,000 120
-----------
3,060
- --------------------------------------------------------------------------------
Office Equipment -- 0.7%
Lexmark International Group, Cl A* 3,200 144
Steelcase* 7,000 256
-----------
400
-----------
Total Capital Goods (Cost $5,264) 5,595
-----------
- --------------------------------------------------------------------------------
Consumer Cyclical -- 12.2%
Apparel & Textiles -- 0.8%
Guilford Mills 7,000 207
VF 4,400 231
-----------
438
- --------------------------------------------------------------------------------
Auto/Truck Parts -- 0.9%
Carlisle Companies 2,000 98
Dana 3,300 192
Lear* 3,500 198
-----------
488
- --------------------------------------------------------------------------------
Broadcasting & Recreation -- 0.4%
Broderbund Software* 12,000 219
-----------
219
- --------------------------------------------------------------------------------
Printing & Publishing -- 3.5%
Belo (A.H.), Series A 9,800 539
Knight-Ridder 8,500 475
New York Times, Cl A 6,900 482
Tribune 5,500 388
-----------
1,884
- --------------------------------------------------------------------------------
Resturants & Lodging -- 2.1%
Brinker International* 25,000 547
Promus Hotel* 11,600 554
-----------
1,101
- --------------------------------------------------------------------------------
Retailing-General -- 3.0%
Intimate Brands, Cl A 29,500 798
Ross Stores 9,300 410
TJX Companies 9,700 439
-----------
1,647
- --------------------------------------------------------------------------------
Wholesalers -- 1.5%
Costco Companies* 9,700 518
Office Depot* 9,700 302
-----------
820
-----------
Total Consumer Cyclical (Cost $6,049) 6,597
-----------
- --------------------------------------------------------------------------------
Consumer Staples -- 5.3%
Cosmetics & Toiletries -- 0.7%
Dial 16,700 400
-----------
400
- --------------------------------------------------------------------------------
Food & Drug Retailers -- 1.6%
Albertson's 5,900 310
Safeway* 9,000 332
Supervalu 4,000 187
-----------
829
- --------------------------------------------------------------------------------
Food Producers -- 3.0%
Earthgrains 3,700 163
Heinz (HJ) 3,800 222
Hormel Foods 19,000 737
Keebler Foods* 4,800 144
Smithfield Foods* 11,000 380
-----------
1,646
-----------
Total Consumer Staples (Cost $2,677) 2,875
-----------
- --------------------------------------------------------------------------------
61
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
- -----------------------
PBHG Mid-Cap Value Fund
- -----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Energy -- 2.0%
Energy Services -- 1.6%
Cliffs Drilling* 3,700 $ 153
Santa Fe International 11,300 428
Weatherford Enterra* 7,200 306
-----------
887
- --------------------------------------------------------------------------------
Oil & Gas Exploration & Production -- .4%
Ashland 3,800 215
-----------
215
-----------
Total Energy (Cost $1,031) 1,102
-----------
- --------------------------------------------------------------------------------
Financial -- 20.3%
Banks -- 11.8%
Amsouth Bancorporation 18,200 1,075
Comerica 1,900 201
Commerce Bancshares 8,250 394
Commercial Bank Of New York 14,300 361
First Tennessee National 30,000 964
Fleet Financial Group 3,100 264
Mellon Bank 3,300 210
Mercantile Bankshares 15,300 554
Old Kent Financial 9,000 345
Republic of New York 2,100 280
Southtrust 37,950 1,588
Zions Bancorporation 2,800 147
-----------
6,383
- --------------------------------------------------------------------------------
Financial Services -- 6.9%
Bear Sterns 9,000 462
Charles Schwab 7,100 270
Everen Capital 15,700 693
Legg Mason 29,700 1,761
Paine Webber Group 7,200 289
Waddell & Reed Financial, Cl A* 11,000 286
-----------
3,761
- --------------------------------------------------------------------------------
Insurance -- 1.6%
Allstate 1,400 129
Choicepoint* 3,900 213
Mercury General 6,000 376
MGIC Investment* 2,400 158
-----------
876
-----------
Total Financial (Cost $10,593) 11,020
-----------
- --------------------------------------------------------------------------------
Health Care -- 10.0%
Medical Services -- 3.8%
FPA Medical Management* 24,200 373
Health Care And Retirement* 4,000 172
Manor Care 14,800 548
Owens & Minor 14,100 255
Tenet Healthcare* 19,200 697
-----------
2,045
- --------------------------------------------------------------------------------
Medical Supplies -- 6.2%
Arrow International 3,000 103
Aterial Vascular Engineering* 5,900 216
Bard (C.R.) 8,700 320
Biomet* 5,500 165
Guidant 15,900 1,167
Mallinckrodt 7,500 296
Maxxim Medical* 18,000 516
Ocular Sciences* 10,000 319
Stryker 5,700 267
-----------
3,369
-----------
Total Health Care (Cost $5,345) 5,414
-----------
- --------------------------------------------------------------------------------
Services/Diversified -- 4.1%
Business Services -- 2.2%
Dun and Bradstreet 19,400 664
Pentacon* 19,600 274
Valassis Communications* 3,100 127
Viad 4,500 109
-----------
1,174
- --------------------------------------------------------------------------------
Conglomerates -- 1.9%
Aerquip-Vickers 7,100 410
Coltec Industries* 2,700 68
Tredgar Industries 4,100 297
Trinity Industries 5,000 274
-----------
1,049
-----------
Total Services/Diversified (Cost $1,962) 2,223
-----------
- --------------------------------------------------------------------------------
Technology -- 9.4%
Communication Equipment -- 0.1%
P-Com* 1,800 36
-----------
36
- --------------------------------------------------------------------------------
Computer & Related -- 1.2%
Box Hill Systems* 15,400 197
EMC* 4,300 163
Filenet* 3,000 147
Sequent Computer Systems* 8,000 146
-----------
653
- --------------------------------------------------------------------------------
Electronics & Semiconductors -- 1.8%
Cirrus Logic* 40,900 414
Linear Technology 4,000 276
SCI Systems* 7,500 267
-----------
957
- --------------------------------------------------------------------------------
Software & Services -- 5.1%
America Online* 15,900 1,086
Autodesk 16,700 720
Parametric Technology* 2,000 67
Symantec* 31,000 835
USCS International* 2,400 51
-----------
2,759
- --------------------------------------------------------------------------------
62
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
-----------------------
PBHG Mid-Cap Value Fund
-----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Telecommunication Services -- 1.2%
Alltel 2,300 $ 100
US West Communications 3,900 214
Worldcom* 8,000 345
-----------
659
-----------
Total Technology (Cost $4,841) 5,064
-----------
- --------------------------------------------------------------------------------
Transportation -- 14.8%
Airlines -- 12.6%
Alaska Airgroup* 3,700 200
America West Holdings, Cl B* 17,800 456
AMR* 1,500 215
Continential Airlines, Cl B* 20,500 1,206
Delta Air Lines 6,500 769
Midway Airlines* 31,100 587
Skywest 27,700 1,011
Southwest Airlines 75,900 2,244
UAL* 1,100 102
-----------
6,790
- --------------------------------------------------------------------------------
Trucking & Shipping -- 2.2%
Royal Caribbean Cruises Limited 15,100 1,058
US Xpress Enterprises, Cl A* 7,000 145
-----------
1,203
-----------
Total Transportation (Cost $7,415) 7,993
-----------
- --------------------------------------------------------------------------------
Utilities/Income -- 6.1%
Electric Power -- 2.7%
Baltimore Gas & Electric 10,500 342
Boston Edison 1,600 67
Conective, Cl A* 312 11
Duke Energy 2,800 167
Firstenergy 6,100 188
Minnesota Power & Light 2,500 106
New York State Electric & Gas 8,400 335
Public Service Enterprise Group 6,300 239
-----------
1,455
- --------------------------------------------------------------------------------
Natural Gas -- 2.0%
KN Energy 18,600 1,099
-----------
1,099
- --------------------------------------------------------------------------------
REITS -- 1.4%
Apartment Investment & Management 8,800 338
Colonial Properties Trust 3,800 121
Spieker Properties 7,600 314
-----------
773
-----------
Total Utilities/Income (Cost $3,024) 3,327
-----------
Total Common Stocks (Cost $50,670) 53,979
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 1.0%
Morgan Stanley
5.25%, dated 03/31/98, matures
04/01/98, repurchase price $562,090
(collaterized by U.S. Treasury Instruments:
total market value $576,214) (A) $562 $ 562
-----------
Total Repurchase Agreement (Cost $562) 562
===========
Total Investments -- 100.6% (Cost $51,232) $54,541
-----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
63
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Small Cap Value Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 91.7%
Basic Materials -- 5.6%
Chemicals -- 0.4%
Solutia 16,300 $ 485
-----------
485
- --------------------------------------------------------------------------------
Chemicals-Specialty -- 3.2%
Airgas* 60,400 1,042
Crompton & Knowles 66,500 1,924
Dexter 2,900 120
Millenium Chemicals 28,400 951
-----------
4,037
- --------------------------------------------------------------------------------
Metals & Mining -- 0.4%
Titanium Metals* 16,100 437
-----------
437
- --------------------------------------------------------------------------------
Paper & Forest Products -- 1.6%
Fibermark* 88,000 2,052
-----------
2,052
-----------
Total Basic Materials (Cost $6,420) 7,011
-----------
- --------------------------------------------------------------------------------
Capital Goods -- 17.6%
Aerospace/Defense -- 1.7%
Gulfstream Aerospace* 31,400 1,362
Thiokol* 15,000 725
-----------
2,087
- --------------------------------------------------------------------------------
Building Supplies -- 1.5%
Lone Star Industries 9,000 625
Texas Industries 21,300 1,231
-----------
1,856
- --------------------------------------------------------------------------------
Commercial Construction -- 0.4%
Willbros Group* 27,900 459
-----------
459
- --------------------------------------------------------------------------------
Environmental -- 0.9%
Barringer Technologies* 96,800 1,180
-----------
1,180
- --------------------------------------------------------------------------------
Machinery -- 11.2%
Applied Power, Cl A 12,900 497
Commonwealth Industries 77,700 1,354
Denison International ADR* 31,000 574
Doncasters ADR* 17,000 444
Essex International* 104,300 4,120
Gehl* 22,300 477
Gleason 48,200 1,689
Greenbrier Companies 85,100 1,467
JLG Industries 30,000 499
NN Ball & Roller 44,000 476
Terex* 20,000 541
Tokheim* 51,100 933
Tower Automotive* 5,700 257
Watts Industries, Cl A 28,100 839
-----------
14,167
- --------------------------------------------------------------------------------
Office Equipment -- 1.9%
Compx International* 36,000 842
Interface, Cl A* 37,200 1,546
-----------
2,388
-----------
Total Capital Goods (Cost $20,570) 22,137
-----------
- --------------------------------------------------------------------------------
Consumer Cyclical -- 14.1%
Apparel & Textiles -- 3.6%
Dan River* 94,300 1,791
Guilford Mills 32,900 971
Gymboree* 15,000 388
I.C. Isaacs & Company* 122,000 854
Timberland, Cl A* 4,400 315
Tropical Sportswear International* 11,600 164
-----------
4,483
- --------------------------------------------------------------------------------
Auto/Truck Parts -- 3.5%
Delco Remy International* 135,000 2,049
Meritor Automotive 33,400 887
Stoneridge* 69,600 1,392
Superior Industries International 1,800 60
-----------
4,388
- --------------------------------------------------------------------------------
Broadcasting & Recreation -- 0.5%
Broderbund Software* 36,700 670
-----------
670
- --------------------------------------------------------------------------------
Furniture & Appliances -- 0.3%
Shaw Industries 28,500 419
-----------
419
- --------------------------------------------------------------------------------
Homebuilding -- 1.8%
Crossman Communities* 76,100 2,259
-----------
2,259
- --------------------------------------------------------------------------------
Resturants & Lodging -- 1.8%
Brinker International* 71,100 1,555
Foodmaker* 22,700 440
Ryan's Family Steak Houses* 25,000 227
-----------
2,222
- --------------------------------------------------------------------------------
Retailing-General -- 1.0%
Lands End 21,800 804
Ross Stores 10,900 481
-----------
1,285
- --------------------------------------------------------------------------------
Wholesalers -- 1.6%
Finlay Enterprises* 53,000 1,348
Group 1 Automotive* 26,400 289
Hancock Fabrics 22,250 346
-----------
1,983
-----------
Total Consumer Cyclical (Cost $15,933) 17,709
-----------
- --------------------------------------------------------------------------------
64
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
-------------------------
PBHG Small Cap Value Fund
-------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Consumer Staples -- 3.0%
Food Producers -- 2.7%
Earthgrains 40,100 $ 1,772
Smithfield Foods* 46,000 1,587
-----------
3,359
- --------------------------------------------------------------------------------
Tobacco -- 0.3%
JR Cigar* 19,600 392
Universal-Virginia 600 26
-----------
418
-----------
Total Consumer Staples (Cost $3,758) 3,777
-----------
- --------------------------------------------------------------------------------
Energy -- 1.9%
Energy Services -- 1.9%
Cliffs Drilling* 30,300 1,252
IRI International* 11,900 146
Nabors Industries* 25,000 592
Oceaneering International* 4,200 83
Trico Marine Services* 15,000 316
-----------
2,389
-----------
Total Energy (Cost $2,374) 2,389
-----------
- --------------------------------------------------------------------------------
Financial -- 17.9%
Banks -- 8.5%
Bayonne Bancshares 49,000 729
CNB Bancshares 1,600 78
Commercial Bank Of New York 20,000 505
FFY Financial 6,000 200
First International Bancorp 15,000 242
GBC Bancorp 7,700 514
Jacksonville Bancorp 20,000 408
MAF Bancorp 41,000 1,561
Mercantile Bankshares 14,000 507
North Fork Bancorporation 11,300 436
SIS Bancorp 28,800 1,159
Southtrust 26,700 1,118
Soverign Bancorp 45,376 825
Trans Financial 1,300 56
Trustmark 2,300 53
Webster Financial 18,000 1,251
Wilmington Trust 16,500 1,095
-----------
10,737
- --------------------------------------------------------------------------------
Financial Services -- 8.7%
ARM Financial Group, Cl A 16,300 378
Everen Capital 46,100 2,034
Investment Technology Group* 27,000 884
Legg Mason 85,300 5,059
Liberty Financial 18,100 716
Raymond James Financial 6,900 301
Waddell & Reed Financial, Cl A* 52,000 1,352
Willis Lease Finance* 8,000 179
-----------
10,903
- --------------------------------------------------------------------------------
Insurance -- 0.7%
Allied Group 8,850 285
Amerus Life Holdings, Cl A 1,700 55
Orion Capital 5,200 285
Paula Financial* 13,000 309
-----------
934
-----------
Total Financial (Cost $20,585) 22,574
-----------
- --------------------------------------------------------------------------------
Health Care -- 5.5%
Medical Services -- 2.8%
Bindley Western Industries 1,000 38
Complete Management* 50,000 425
FPA Medical Management* 67,200 1,036
Manor Care 11,400 422
Owens & Minor 22,200 401
Pediatrix Medical Group* 12,000 558
Phymatrix* 27,000 302
Physician Reliance Network* 4,000 55
Prime Medical Services* 29,000 341
-----------
3,578
- --------------------------------------------------------------------------------
Medical Supplies -- 2.7%
Arrow International 13,000 447
Conmed* 23,000 549
Maxxim Medical* 15,000 431
Ocular Sciences* 44,900 1,431
Xomed Surgical Products* 18,000 495
-----------
3,353
-----------
Total Health Care (Cost $6,821) 6,931
-----------
- --------------------------------------------------------------------------------
Services/Diversified -- 5.4%
Business Services -- 4.3%
Avteam, Cl A* 67,000 771
Daisytek International* 45,200 1,101
Merrill 39,000 858
Pentacon* 46,100 645
Scansource* 47,600 1,000
Sunsource 15,200 446
Valassis Communications* 11,000 451
Veterinary Centers Of America* 9,200 148
-----------
5,420
- --------------------------------------------------------------------------------
Conglomerates -- 1.1%
Coltec Industries* 7,900 198
Trinity Industries 21,800 1,196
-----------
1,394
-----------
Total Services/Diversified (Cost $6,157) 6,814
-----------
- --------------------------------------------------------------------------------
Technology -- 10.6%
Communication Equipment -- 0.5%
Glenayre Technologies* 40,000 500
P-Com* 8,500 170
-----------
670
- --------------------------------------------------------------------------------
65
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Schedule of Investments
- --------------------------------------------------------------------------------
As of March 31, 1998
- -------------------------
PBHG Small Cap Value Fund
- -------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Computer & Related -- 3.0%
Diamond Mutimedia Systems* 45,000 $ 669
Jetfax* 39,000 200
Sequent Computer Systems* 67,300 1,228
Telxon 32,000 848
Vanstar* 70,700 884
-----------
3,829
- --------------------------------------------------------------------------------
Electronics & Semiconductors -- 3.3%
Aehr Test Systems* 60,500 363
Applied Films* 115,000 1,064
Cirrus Logic* 143,100 1,449
Fusion Systems* 3,000 1
Radisys* 24,900 625
Smart Modular Technologies* 26,800 611
-----------
4,113
- --------------------------------------------------------------------------------
Software & Services -- 3.8%
Award Software International* 14,400 187
INSO* 46,100 818
QAD* 59,700 877
Symantec* 91,600 2,468
USCS International* 17,000 363
-----------
4,713
-----------
Total Technology (Cost $14,301) 13,325
-----------
- --------------------------------------------------------------------------------
Transportation -- 4.9%
Airlines -- 3.1%
Atlantic Coast Airlines* 8,000 384
Midway Airlines* 85,100 1,606
Skywest 53,200 1,942
-----------
3,932
- --------------------------------------------------------------------------------
Trucking & Shipping -- 1.8%
American Freightways* 27,000 297
Coach USA* 5,400 235
Covenant Transportation, Cl A* 23,000 504
Jevic Transportation* 16,000 240
US Xpress Enterprises, Cl A* 19,000 394
US Freightways 15,100 544
-----------
2,214
-----------
Total Transportation (Cost $5,898) 6,146
-----------
- --------------------------------------------------------------------------------
Utilities/Income -- 5.2%
Electric Power -- 0.0%
Conectiv, Cl A* 725 25
-----------
25
- --------------------------------------------------------------------------------
Natural Gas -- 0.7%
KN Energy 15,100 892
-----------
892
- --------------------------------------------------------------------------------
REITS -- 4.5%
Apartment Investment & Management 8,100 312
Arden Realty Group 17,000 484
Berkshire Realty 172,500 2,070
Colonial Properties Trust 13,100 417
Cornerstone Properties 20,100 366
Excel Realty Trust 6,000 214
Highwoods Properties 35,600 1,257
Liberty Property 6,200 167
Pennsylvania Real Estate Investment Trust 6,800 166
Weingarten Realty 5,000 223
-----------
5,676
-----------
Total Utilities/Income (Cost $6,207) 6,593
-----------
Total Common Stocks (Cost $109,024) 115,406
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 3.8%
Morgan Stanley
5.25%, dated 03/31/98,
matures 04/01/98,
repurchase price $4,755,173
(collaterized by U.S. Government
Obligations: total market
value $4,874,768) (A) $4,755 4,755
-----------
Total Repurchase Agreement (Cost $4,755) 4,755
===========
Total Investments-- 95.5% (Cost $113,779) $120,161
===========
* Non- income producing security
(A) --Tri-party repurchase agreement
ADR --American Depository Receipt
Cl --Class
The accompanying notes are an integral part of the financial statements.
66
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
-----------------------
PBHG International Fund
-----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Foreign Common Stock -- 96.4%
Argentina -- 2.7%
Banco Frances ADR 8,500 $ 256
Telecom Argentina ADR 8,900 319
-----------
575
- --------------------------------------------------------------------------------
Australia -- 2.0%
Commonwealth Bank of Australia 15,000 178
Telstra Corporation Installment Receipts* 95,000 244
-----------
422
- --------------------------------------------------------------------------------
Belgium -- 3.2%
Fortis 2,390 664
-----------
664
- --------------------------------------------------------------------------------
Brazil -- 1.6%
Petrobras ADR 14,000 332
-----------
332
- --------------------------------------------------------------------------------
Chile -- 3.1%
Madeco ADR 8,500 147
Sociedad Quimica Y Minera 5,000 220
Telecom De Chile ADR 10,000 276
-----------
643
- --------------------------------------------------------------------------------
France -- 9.9%
Rhone-Poulenc, Cl A 12,349 628
SGS Thomson Microelectronics* 4,700 369
Suez Lyonnaise Des Eaux 3,081 445
Total B Compaigne 5,290 635
-----------
2,077
- --------------------------------------------------------------------------------
Germany -- 7.5%
Allianz 2,220 671
Allianz Rights* 2,220 11
Mannesmann 770 564
Marschollek Lauten 295 97
Volkswagen 284 222
Volkswagen Rights* 284 5
-----------
1,570
- --------------------------------------------------------------------------------
Hong Kong -- 2.7%
Hong Kong & China Gas 200,000 335
Hong Kong Land 50,000 86
Hutchison Whampoa 20,000 141
-----------
562
- --------------------------------------------------------------------------------
Hungary -- 1.0%
MOL GDS 6,500 199
-----------
199
- --------------------------------------------------------------------------------
Italy -- 4.4%
Telecom Italia Mobile 50,550 398
T.I.M. 95,169 512
-----------
910
- --------------------------------------------------------------------------------
Ireland -- 3.2%
Allied Irish Bank 30,103 373
Bank of Ireland 15,070 297
-----------
670
- --------------------------------------------------------------------------------
Japan -- 14.6%
Canon Sales 15,000 208
Fanuc 7,000 242
Fuji Machine 8,000 212
Fuji Photo Film 6,000 223
Fujitsu 21,000 219
Hitachi 25,000 182
Marudai Food 58,000 153
Matsushita Communications 8,000 256
Mitsui 38,000 242
NTT 26 217
Ricoh 17,000 171
Shin-Etsu Chemical 8,000 159
Sumitomo Bank 22,000 225
Sumitomo Electric 9,000 116
Yamanouchi Pharmaceutical 10,000 230
-----------
3,055
- --------------------------------------------------------------------------------
Mexico -- 2.4%
Cifra SA ADR, Cl V 10,271 188
Empresas Moderna* 7,500 149
Grupo Industrial Durango* 11,000 166
-----------
503
- --------------------------------------------------------------------------------
Netherlands -- 5.7%
ING Groep 7,340 417
KNP BT 11,999 316
VNU 13,750 470
-----------
1,203
- --------------------------------------------------------------------------------
Norway -- 2.0%
Christiana Bank 49,367 210
Petroleum Geo Services ADR* 3,567 212
-----------
422
- --------------------------------------------------------------------------------
Portugal -- 0.8%
Portugal Telecom 3,250 169
-----------
169
- --------------------------------------------------------------------------------
Singapore -- 2.0%
City Developments 10,000 49
Creative Technology* 5,000 110
Singapore Press Holdings 22,968 264
-----------
423
- --------------------------------------------------------------------------------
South Africa -- 3.2%
Standard Bank* 11,000 667
-----------
667
- --------------------------------------------------------------------------------
Spain -- 3.1%
Prosegur 9,990 128
Telefonica De Espana 11,590 511
-----------
639
- --------------------------------------------------------------------------------
Switzerland -- 6.8%
Novartis, Registered 140 248
Roche Holdings 35 379
Zurich Insurance 1,373 797
-----------
1,424
- --------------------------------------------------------------------------------
67
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- -----------------------
PBHG International Fund
- -----------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
United Kingdom -- 14.5%
Abbey National 12,100 $ 234
Barclays 8,000 240
British Aerospace 6,000 198
Cadbury Schweppes 15,100 209
Halifax 15,575 241
Kingfisher 11,400 213
Ladbroke 37,500 210
Misys 3,200 157
Norwich Union* 24,700 192
Safeway 20,500 127
Scottish Power 19,200 181
Shell Transportation & Trading 26,600 195
Smithkline Beecham 18,400 232
Williams 28,900 231
Wolseley 21,800 167
-----------
3,027
-----------
Total Foreign Common Stocks (Cost $16,505) 20,156
-----------
- --------------------------------------------------------------------------------
Foreign Preferred Stock -- 1.4%
Brazil -- 1.4%
Brahma 6,432 5
Cemig ADR* 6,000 283
-----------
288
-----------
Total Foreign Preferred Stock (Cost $256) 288
-----------
Total Investments-- 97.8% (Cost $16,761) 20,444
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- 2.2%
Other Assets and Liabilities, Net 461
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million
shares -- $.001 par value) based on 1,735,918
outstanding shares common stock 17,097
Accumulated net investment loss (55)
Accumulated net realized gain on investments 180
Net unrealized appreciation on investments 3,683
-----------
Total Net Assets-- 100% $20,905
===========
Net Asset Value, Offering and Redemption
Price Per Share $12.04
===========
* Non Income Producing
ADR -- American Depository Receipt
Cl -- Class
GDS -- Global Depository Share
The accompanying notes are an integral part of the financial statements.
68
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
----------------------
PBHG Cash Reserve Fund
----------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Certificates of Deposit -- 10.2%
Bank Nova Scotia N.Y.
5.83%, 10/02/98 $3,000 $ 2,998
Bank One Wisconsin
5.55%, 02/26/99 2,000 1,999
Regions Bank
5.82%, 04/17/98 5,000 5,000
Societe Generale N.Y.
5.73%, 03/22/99 2,000 1,999
-----------
Total Certificates of Deposit (Cost $11,996) 11,996
-----------
- --------------------------------------------------------------------------------
Commercial Paper -- 97.0%
Allstate
6.05%, 04/01/98 5,000 5,000
American Express Credit
5.38%, 04/10/98 3,000 2,996
AON
5.53%, 6/10/98 3,000 2,968
Associates Corporation of North America
5.45%, 04/08/98 4,000 3,996
AVCO Financial Services
5.43%, 05/18/98 3,000 2,979
Bear Sterarns Company
5.54%, 04/24/98 4,000 3,986
Coca-Cola Enterprises
5.45%, 06/19/98 4,000 3,952
Corporate Asset Funding
6.00%, 04/01/98 5,000 5,000
Enterprise Funding
5.44%, 04/16/98 3,000 2,993
Falcon Asset Sec
5.48%, 04/13/98 3,000 2,994
Fina Oil & Chemical
5.54%, 05/12/98 4,000 3,975
Fortune Brands
5.52%, 04/30/98 4,000 3,982
Gillette
6.00%, 04/01/98 5,000 5,000
Goldman Sachs Group LP
6.00%, 04/01/98 5,000 5,000
Honeywell
6.00%, 04/01/98 5,000 5,000
International Lease Finance
5.38%, 04/22/98 3,000 2,990
Island Finance Puerto Rico
5.45%, 05/15/98 3,000 2,980
MCI Communications
6.08%, 04/01/98 5,000 5,000
Merril Lynch
5.53%, 05/07/98 3,500 3,481
Minnesota Mining & Manufacturing
5.46%, 04/21/98 4,000 3,988
Morgan Stanley Dean Witter & Discover
5.48%, 04/17/98 3,000 2,993
National Rural Utilities
5.43%, 05/26/98 4,000 3,967
Park Avenue Receivables Corporation
5.45%, 04/24/98 3,000 2,990
Preferred Receivables Funding Corporation
5.45%, 05/19/98 3,000 2,978
Ranger Funding
5.48%, 05/08/98 3,500 3,480
Sears Roebuck Acceptance
5.40%, 08/13/98 3,500 3,430
Xerox Credit Corp
5.45%, 04/09/98 3,000 2,996
Apreco
6.05%, 04/01/98 5,000 5,000
Mont Blanc Capital Co
5.50%, 04/24/98 3,000 2,989
UBS Finance
6.00%, 04/01/98 5,000 5,000
-----------
Total Commercial Paper (Cost $114,083) 114,083
-----------
- --------------------------------------------------------------------------------
Corporate Obligations -- 8.5%
Bank of America N.A. 5.65%, 04/16/98 (A) 3,000 3,000
PNC Bank N.A. 5.60%, 09/23/98 (A) 5,000 4,998
J.P. Morgan & Company MTN
5.65%, 03/10/99 2,000 2,000
-----------
Total Corporate Obligations (Cost $9,998) 9,998
-----------
- --------------------------------------------------------------------------------
Repurchase Agreement -- 0.7%
J.P. Morgan
5.90%, dated 03/31/98, matures
04/01/98, Repurchase Price $835,137
(collateralized by U.S. Government
Obligations: total market value $853,179) 835 835
-----------
Total Repurchase Agreement (Cost $835) 835
-----------
Total Investments-- 116.4% (Cost $136,912) 136,912
-----------
- --------------------------------------------------------------------------------
Other Assets And Liabilities -- (16.4%)
Payable for Capital Shares redeemed (20,402)
Other Assets and Liabilities, Net 1,064
-----------
Total Other Assets and Liabilities (19,338)
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (Authorized 1 Billion,
800 Million Shares -- $0.001 Par Value) based on
117,569,569 outstanding shares of common stock 117,570
Accumulated net realized gain on investments 4
-----------
Total Net Assets-- 100.0% $117,574
===========
Net Asset Value, Offering and Redemption
Price Per Share $1.00
===========
(A) Floating rate securitiy. The rate reflected on the Statement of Net Assets
is the rate in effect on March 31, 1998.
MTN -- Medium Term Note
The accompanying notes are an integral part of the financial statements.
69
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- --------------------------------------
PBHG Technology & Commmunications Fund
- --------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 92.3%
Health -- 4.9%
Contract Research -- 2.7%
Applied Analytical* 96,000 $ 1,548
Parexel International* 252,600 7,894
Quintiles Transnational* 83,800 4,038
-----------
13,480
- --------------------------------------------------------------------------------
Information Systems -- 0.7%
Daou Systems* 179,900 3,519
-----------
3,519
- --------------------------------------------------------------------------------
Medical Devices -- 1.5%
Arterial Vascular Engineer* 193,600 7,091
-----------
7,091
-----------
Total Health (Cost $18,969) 24,090
-----------
- --------------------------------------------------------------------------------
Service -- 32.7%
Commercial Services -- 1.5%
VDI Media* 457,100 7,428
-----------
7,428
- --------------------------------------------------------------------------------
Communications Services -- 0.9%
Smartalk Teleservices* 144,300 4,608
-----------
4,608
- --------------------------------------------------------------------------------
Information/Computer Services -- 2.4%
Aris* 116,400 3,463
Meta Group* 248,800 8,584
-----------
12,047
- --------------------------------------------------------------------------------
Printing Services/Forms -- 2.3%
Consolidated Graphics* 192,100 11,118
-----------
11,118
- --------------------------------------------------------------------------------
Systems Integrator -- 19.3%
Cambridge Technology Partners* 233,900 11,593
Command Systems* 131,400 1,872
Computer Horizons* 143,300 7,201
Diamond Technology Partners* 135,900 3,703
Ecsoft Group ADR* 764,500 19,112
Intelligroup* 586,500 9,494
International Network Services* 137,900 4,034
Keane* 228,400 12,905
Renaissance Worldwide* 387,000 10,618
SPR* 121,600 4,013
Technology Solutions* 200,500 5,313
Tier Technologies* 341,800 5,896
-----------
95,754
- --------------------------------------------------------------------------------
Transactions Processing -- 6.3%
Concord EFS* 254,800 8,806
Saville Systems ADR* 438,100 22,453
-----------
31,259
-----------
Total Service (Cost $110,198) 162,214
-----------
- --------------------------------------------------------------------------------
Technology -- 54.7%
Cables/Fiberoptics -- 2.9%
Cable Design Technologies* 474,125 14,283
-----------
14,283
- --------------------------------------------------------------------------------
Client/Server Help Desk -- 1.0%
Vantive* 137,200 5,016
-----------
5,016
- --------------------------------------------------------------------------------
Contract Manufacturing -- 0.4%
International Manufacturing Services* 226,600 1,841
-----------
1,841
- --------------------------------------------------------------------------------
Data Communications -- 0.2%
DSET* 61,200 1,144
-----------
1,144
- --------------------------------------------------------------------------------
Data Storage -- 4.1%
EMC* 284,500 10,758
Network Appliance* 265,500 9,425
-----------
20,183
- --------------------------------------------------------------------------------
Design Automation Software -- 1.7%
Cadence Design Systems* 251,000 8,691
-----------
8,691
- --------------------------------------------------------------------------------
Digital Video Related -- 1.1%
Avid Technology* 88,800 3,652
Eidos ADR* 97,600 1,842
-----------
5,494
- --------------------------------------------------------------------------------
Embedded Software -- 2.4%
Peerless Systems* 209,400 3,769
Wind River Systems* 211,100 8,391
-----------
12,160
- --------------------------------------------------------------------------------
Graphic/Image Process -- 1.0%
Electronics For Imaging* 187,500 4,875
-----------
4,875
- --------------------------------------------------------------------------------
Networking Security -- 2.2%
Memco Software Limited* 341,800 10,681
-----------
10,681
- --------------------------------------------------------------------------------
Networking Software -- 2.4%
Legato Systems* 46,700 2,773
Veritas Software* 152,500 9,017
-----------
11,790
- --------------------------------------------------------------------------------
PC-Peripherals Manufacturing -- 1.3%
Neomagic* 347,900 6,567
-----------
6,567
- --------------------------------------------------------------------------------
Precision Instruments -- 2.6%
Lecroy* 75,600 1,606
Remec* 389,050 11,161
-----------
12,767
- --------------------------------------------------------------------------------
70
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
--------------------------------------
PBHG Technology & Commmunications Fund
--------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 4.9%
Analog Devices* 179,600 $ 5,972
Integrated Circuit Systems* 122,000 2,554
Maxim Integrated Products* 48,600 1,771
Microchip Technology* 58,100 1,220
Pericom Semiconductor* 320,700 2,465
Semtech* 129,700 3,307
Vitesse Semiconductor* 150,200 7,083
-----------
24,372
- --------------------------------------------------------------------------------
Semi-Conductor Production Equipment -- 0.2%
PRI Automation* 34,600 906
-----------
906
- --------------------------------------------------------------------------------
Software-Client/Server -- 10.0%
Citrix Systems* 446,550 24,197
Compuware* 220,100 10,867
Documentum* 152,700 8,265
Fundtech Limited* 59,300 1,067
Smallworldwide ADR* 278,900 5,439
-----------
49,835
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 2.0%
J.D. Edwards & Company* 299,100 9,777
-----------
9,777
- --------------------------------------------------------------------------------
Software-Manufacturing -- 3.0%
Tecnomatix Technologies Limited* 394,300 14,836
-----------
14,836
- --------------------------------------------------------------------------------
Software-Other -- 0.9%
Radiant Systems* 186,300 4,611
-----------
4,611
- --------------------------------------------------------------------------------
Telecommunication Components -- 1.0%
P-Com* 244,700 4,894
-----------
4,894
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 8.3%
Advanced Fibre Communications* 431,500 15,696
Reltec* 7,200 255
Tekelec* 228,000 10,345
Tellabs* 87,100 5,847
World Access* 272,200 8,847
-----------
40,990
- --------------------------------------------------------------------------------
Voice/Call Transaction Processing -- 1.1%
Nice Systems Limited ADR* 115,100 5,295
-----------
5,295
-----------
Total Technology (Cost $200,438) 271,008
-----------
Total Common Stocks (Cost $329,605) 457,312
-----------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreements -- 8.5%
Greenwich
6.03%, dated 03/31/98,
matures 04/01/98, repurchase price
$11,058,906 (collaterized by U.S.
Government Obligations: total market
value $11,281,050) (A) 11,057 11,057
Morgan Stanley
6.03%, dated 03/31/98, matures
04/01/98, repurchase price $1,407,761
(collaterized by U.S. Government
Obligations: total market
value $1,443,087) (A) 1,407 1,407
J.P. Morgan
6.03%, dated 03/31/98, matures
04/01/98, repurchase price $29,766,833
(collaterized by U.S. Government
Obligations: total market
value $30,357,068) (A) 29,762 29,762
-----------
Total Repurchase Agreements (Cost $42,226) 42,226
-----------
Total Investments-- 100.8% (Cost $371,831) 499,538
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- (0.8%)
Other Assets and Liabilities, Net (3,841)
-----------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 25,724,441
outstanding shares of common stock 388,777
Accumulated net realized loss on investments (20,787)
Net unrealized appreciation on investments 127,707
-----------
Total Net Assets-- 100.0% $495,697
===========
Net Asset Value, Offering and Redemption
Price Per Share $19.27
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements.
71
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ---------------------------------
PBHG Strategic Small Company Fund
- ---------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Common Stocks -- 97.8%
Basic Materials -- 1.3%
Chemicals -- 0.1%
Solutia 4,400 $ 131
-----------
131
- --------------------------------------------------------------------------------
Chemicals-Specialty -- 0.8%
Airgas* 15,000 259
Crompton & Knowles 10,800 312
Millenium Chemicals 10,800 362
-----------
933
- --------------------------------------------------------------------------------
Steel -- 0.4%
Armco* 18,800 110
Carpenter Technology 6,000 324
-----------
434
-----------
Total Basic Materials (Cost $1,278) 1,498
-----------
- --------------------------------------------------------------------------------
Capital Goods -- 14.5%
Aerospace/Defense -- 0.4%
AAR 9,000 245
Gulfstream Aerospace* 5,000 217
-----------
462
- --------------------------------------------------------------------------------
Building Supplies -- 0.8%
Lone Star Industries 5,900 410
Texas Industries 9,200 532
-----------
942
- --------------------------------------------------------------------------------
Commercial Construction -- 0.4%
Willbros Group* 24,100 396
-----------
396
- --------------------------------------------------------------------------------
Environmental -- 0.7%
Barringer Technologies* 62,000 756
-----------
756
- --------------------------------------------------------------------------------
Machinery -- 10.9%
Commonwealth Industries 74,000 1,290
Denison International ADR* 100,000 1,850
Essex International* 82,400 3,255
Gehl* 6,200 133
Gleason 16,900 593
Greenbrier Companies 21,700 374
Kaynar Technologies* 102,000 2,843
NN Ball & Roller 15,000 162
Terex* 15,100 409
Tokheim* 35,000 639
Watts Industries, Cl A 20,600 615
-----------
12,163
- --------------------------------------------------------------------------------
Office Equipment -- 1.3%
Compx International* 10,000 234
Hon Industries 8,200 301
Interface, Cl A* 19,900 827
Knoll* 3,700 143
-----------
1,505
-----------
Total Capital Goods (Cost $13,901) 16,224
-----------
- --------------------------------------------------------------------------------
Consumer -- 7.1%
Entertainment/Movies -- 0.6%
Cinar Films, Cl B* 15,000 639
-----------
639
- --------------------------------------------------------------------------------
Hotels/Resorts -- 0.3%
Silverleaf Resorts* 15,000 361
-----------
361
- --------------------------------------------------------------------------------
Packaged Goods/Cosmetics -- 0.7%
NBTY* 12,500 759
-----------
759
- --------------------------------------------------------------------------------
Restaurants -- 0.5%
CKE Restaurants 14,455 531
-----------
531
- --------------------------------------------------------------------------------
Retail-Apparel -- 0.9%
Buckle* 7,500 376
Stage Stores* 12,400 640
-----------
1,016
- --------------------------------------------------------------------------------
Retail-Catalog -- 0.6%
Insight Enterprises* 17,500 711
-----------
711
- --------------------------------------------------------------------------------
Retail-Discount Stores -- 1.0%
Dollar Tree Stores* 12,600 669
Fred's, Cl A 20,000 498
-----------
1,167
- --------------------------------------------------------------------------------
Retail-Specialty -- 0.8%
Hibbet Sporting Goods* 16,400 455
USA Floral Products* 20,000 454
-----------
909
- --------------------------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 0.7%
Wild Oats Markets* 22,500 802
-----------
802
- --------------------------------------------------------------------------------
Specialty Food/Candy -- 0.6%
Suiza Foods* 10,000 615
-----------
615
- --------------------------------------------------------------------------------
Toys -- 0.4%
Action Performance* 12,500 440
-----------
440
-----------
Total Consumer (Cost $5,558) 7,950
-----------
- --------------------------------------------------------------------------------
Consumer Cyclical -- 7.1%
Apparel & Textiles -- 2.2%
Dan River* 49,700 944
Guilford Mills 6,300 186
Gymboree* 11,000 285
I.C. Isaacs & Company* 150,000 1,050
Timberland Company, Cl A* 800 57
-----------
2,522
- --------------------------------------------------------------------------------
72
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
---------------------------------
PBHG Strategic Small Company Fund
---------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Auto/Truck Parts -- 1.8%
Carlisle Companies 6,300 $ 309
Delco Remy International* 80,500 1,223
Stoneridge* 22,100 442
-----------
1,974
- --------------------------------------------------------------------------------
Broadcasting & Recreation -- 0.3%
Broderbund Software* 18,300 334
-----------
334
- --------------------------------------------------------------------------------
Resturants & Lodging -- 0.2%
Prime Hospitality* 12,100 236
-----------
236
- --------------------------------------------------------------------------------
Retailing-General -- 0.3%
Ross Stores 7,500 331
-----------
331
- --------------------------------------------------------------------------------
Wholesalers -- 2.3%
Finlay Enterprises* 47,000 1,195
Group 1 Automotive* 35,800 392
Hancock Fabrics 23,400 364
Shopko Stores 19,700 624
-----------
2,575
-----------
Total Consumer Cyclical (Cost $7,451) 7,972
-----------
- --------------------------------------------------------------------------------
Consumer Staples -- 1.1%
Food Producers -- 0.2%
Earthgrains 3,700 163
-----------
163
- --------------------------------------------------------------------------------
Tobacco -- 0.9%
JR Cigar* 21,000 420
Standard Commercial 40,100 639
-----------
1,059
-----------
Total Consumer Staples (Cost $1,388) 1,222
-----------
- --------------------------------------------------------------------------------
Energy -- 2.4%
Coal & Gas Pipeline -- 1.0%
Midcoast Energy Resources 51,810 1,137
-----------
1,137
- --------------------------------------------------------------------------------
Energy Services -- 0.9%
Cliffs Drilling* 9,500 392
Gulfmark Offshore* 11,000 303
Oceaneering International* 2,000 40
Precision Drilling* 4,700 99
Pride International* 7,300 174
-----------
1,008
- --------------------------------------------------------------------------------
Oil & Gas Exploration & Production -- 0.1%
Tesoro Petroleum* 5,500 98
-----------
98
- --------------------------------------------------------------------------------
Vessel & Rig Construction -- 0.4%
Friede Goldman International* 15,000 433
-----------
433
-----------
Total Energy (Cost $2,338) 2,676
-----------
- --------------------------------------------------------------------------------
Financial -- 12.3%
Banks -- 2.1%
Albank Financial 3,700 185
Bayonne Bancshares 39,000 580
Commercial Bank of New York 16,800 424
FFY Financial 5,000 167
First International Bancorp 11,000 177
Jacksonville Bancorp 15,000 306
Mercantile Bankshares 3,300 119
SIS Bancorp 6,200 250
Trustco Bank 6,900 196
-----------
2,404
- --------------------------------------------------------------------------------
Consumer Finance -- 0.4%
Metris Companies 10,000 435
-----------
435
- --------------------------------------------------------------------------------
Diversified Financial Services -- 0.4%
Amresco 15,000 491
-----------
491
- --------------------------------------------------------------------------------
Financial Services -- 5.9%
ARM Financial Group, Cl A 29,000 672
Everen Capital 7,000 309
Investment Technology Group* 28,300 927
Legg Mason 23,000 1,364
Liberty Financial 69,300 2,741
McDonald & Co 12,000 359
Raymond James Financial 5,600 244
-----------
6,616
- --------------------------------------------------------------------------------
Insurance -- 1.6%
Allied Group 6,900 223
Nymagic 44,600 1,321
Paula Financial* 7,900 188
-----------
1,732
- --------------------------------------------------------------------------------
Investment Firms -- 0.8%
Sirrom Capital 30,000 902
-----------
902
- --------------------------------------------------------------------------------
Mortgage Related -- 0.4%
Federal Agricultural Mortgage* 7,000 392
-----------
392
- --------------------------------------------------------------------------------
Specialty Finance -- 0.7%
Healthcare Financial Partners* 17,500 829
-----------
829
-----------
Total Financial (Cost $10,990) 13,801
- --------------------------------------------------------------------------------
73
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ---------------------------------
PBHG Strategic Small Company Fund
- ---------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Health -- 6.9%
Contact Lenses -- 0.4%
Wesley Jessen Visioncare* 12,400 $ 408
-----------
408
- --------------------------------------------------------------------------------
Contract Research -- 0.9%
Kendle International* 20,000 465
Parexel International* 15,900 497
-----------
962
- --------------------------------------------------------------------------------
Drugs/Pharmaceuticals -- 0.5%
Medicis Pharmaceutical, Cl A* 11,800 515
-----------
515
- --------------------------------------------------------------------------------
Information Systems -- 1.4%
Daou Systems* 20,800 407
Medical Manager* 15,000 435
Quadramed* 22,500 751
-----------
1,593
- --------------------------------------------------------------------------------
Medical Devices -- 1.5%
Osteotech* 15,000 388
Sabratek* 17,500 613
Theragenics* 10,700 681
-----------
1,682
- --------------------------------------------------------------------------------
Medical Services -- 0.7%
Complete Management* 38,700 329
FPA Medical Management* 33,600 519
-----------
848
- --------------------------------------------------------------------------------
Medical Supplies -- 1.5%
Maxxim Medical* 18,100 519
Ocular Sciences* 17,000 542
Urologix* 15,000 139
Xomed Surgical Products* 17,000 467
-----------
1,667
-----------
Total Health (Cost $6,813) 7,675
-----------
- --------------------------------------------------------------------------------
Industrial/General Manufacturing -- 1.7%
Aerospace -- 0.4%
Kellstrom Industries* 20,000 504
-----------
504
- --------------------------------------------------------------------------------
Home Building -- 0.2%
Standard Pacific 15,000 228
-----------
228
- --------------------------------------------------------------------------------
Machinery/Equipment -- 0.5%
JLK Direct Distribution, Cl A* 15,000 573
-----------
573
- --------------------------------------------------------------------------------
Railroad -- 0.6%
Motivepower Industries* 22,500 621
-----------
621
-----------
Total Industrial/General Manufacturing (Cost $1,668) 1,926
-----------
- --------------------------------------------------------------------------------
Service -- 12.8%
Commercial Services -- 2.4%
Analytical Surveys* 10,000 512
Caribiner International* 15,000 578
Inspire Insurance Solutions* 10,000 332
Network Solutions* 12,500 464
Rental Service* 17,300 402
United Rentals* 14,600 380
-----------
2,668
- --------------------------------------------------------------------------------
Communications Services -- 1.4%
Pacific Gateway Exchange* 12,500 716
Star Telecommunications* 15,000 834
-----------
1,550
- --------------------------------------------------------------------------------
Employment Service -- 1.0%
AHL Services* 7,400 241
Syntel* 20,000 820
-----------
1,061
- --------------------------------------------------------------------------------
Environmental -- 0.7%
American Disposal Services* 22,100 834
-----------
834
- --------------------------------------------------------------------------------
Information/Computer Services -- 0.6%
Forrester Research* 20,000 710
-----------
710
- --------------------------------------------------------------------------------
Marketing Information -- 0.7%
Abacus Direct* 14,700 768
-----------
768
- --------------------------------------------------------------------------------
Printing Services/Forms -- 1.2%
Consolidated Graphics* 12,500 723
Mail-Well* 17,500 663
-----------
1,386
- --------------------------------------------------------------------------------
Real Estate -- 0.4%
CB Commercial Real Estate* 10,000 400
-----------
400
- --------------------------------------------------------------------------------
Systems Integrator -- 3.2%
Ciber* 10,300 720
Complete Business Solutions* 20,000 718
Diamond Technology Partners* 35,000 955
Keane* 12,500 706
SPR* 15,000 495
-----------
3,594
- --------------------------------------------------------------------------------
Telemarketing -- 0.6%
Snyder Communications* 13,500 633
-----------
633
- --------------------------------------------------------------------------------
Transactions Processing -- 0.6%
Saville Systems ADR* 13,500 692
-----------
692
-----------
Total Service (Cost $9,006) 14,296
-----------
- --------------------------------------------------------------------------------
74
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
---------------------------------
PBHG Strategic Small Company Fund
---------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Services/Diversified -- 2.2%
Business Services -- 1.9%
Avteam, Cl A* 37,300 $ 429
Daisytek International* 27,100 661
Pentacon* 15,000 210
Scansource* 8,000 168
Wallace Computer Services 17,800 616
-----------
2,084
- --------------------------------------------------------------------------------
Conglomerates -- 0.3%
St. Joe 10,000 336
-----------
336
-----------
Total Services/Diversified (Cost $2,268) 2,420
-----------
- --------------------------------------------------------------------------------
Technology -- 20.3%
Client/Server Help Desk -- 0.5%
Siebel Systems* 20,000 575
-----------
575
- --------------------------------------------------------------------------------
Communication Equipment -- 0.5%
Digital Microwave* 17,000 250
Glenayre Technologies* 15,000 188
P-Com* 3,600 72
-----------
510
- --------------------------------------------------------------------------------
Computer & Related -- 2.0%
Box Hill Systems* 12,000 154
HMT Technology* 8,000 103
Jetfax* 25,000 128
Sequent Computer Systems* 89,200 1,628
Telxon 7,000 186
Vanstar* 7,700 96
-----------
2,295
- --------------------------------------------------------------------------------
Data Storage -- 0.6%
Network Appliance* 20,000 710
-----------
710
- --------------------------------------------------------------------------------
Design Automation Software -- 0.6%
Summit Design* 41,400 616
-----------
616
- --------------------------------------------------------------------------------
Digital Video Related -- 0.4%
Engineering Animation* 11,250 467
-----------
467
- --------------------------------------------------------------------------------
Electronics & Semiconductors -- 2.5%
Aehr Test Systems* 97,000 582
Applied Films* 79,000 731
Cirrus Logic* 49,500 501
Fusion Systems* 10,000 2
Radisys* 25,900 651
Smart Modular Technologies* 15,000 342
-----------
2,809
- --------------------------------------------------------------------------------
Embedded Software -- 0.8%
Peerless Systems* 15,000 270
Wind River Systems* 14,350 570
-----------
840
- --------------------------------------------------------------------------------
Networking Hardware -- 0.9%
Apex PC Solutions* 17,500 470
Yurie Systems* 20,000 484
-----------
954
- --------------------------------------------------------------------------------
Networking Software -- 0.8%
Legato Systems* 15,000 891
-----------
891
- --------------------------------------------------------------------------------
Precision Instruments -- 0.5%
Remec* 20,200 579
-----------
579
- --------------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 1.5%
Applied Micro Circuits* 14,600 329
Sipex* 20,000 660
Vitesse Semiconductor* 15,000 707
-----------
1,696
- --------------------------------------------------------------------------------
Software-Client/Server -- 1.1%
Dendrite International* 16,300 468
Hyperion Software* 11,500 509
Sanchez Computer Associates* 10,000 206
-----------
1,183
- --------------------------------------------------------------------------------
Software-Database -- 0.4%
Medirisk* 22,500 478
-----------
478
- --------------------------------------------------------------------------------
Software-Desktop -- 1.0%
Datastream Systems* 25,000 553
Visio* 12,500 538
-----------
1,091
- --------------------------------------------------------------------------------
Software-Manufacturing -- 1.1%
Industri-Matematik International* 15,000 470
Manugistics* 14,300 802
-----------
1,272
- --------------------------------------------------------------------------------
Software-Other -- 0.4%
Filenet* 9,300 455
-----------
455
- --------------------------------------------------------------------------------
Software & Services -- 1.9%
Inso* 26,400 469
Symantec* 60,000 1,616
USCS International* 2,800 60
-----------
2,145
- --------------------------------------------------------------------------------
Telecommunication Components -- 0.6%
Uniphase* 15,200 639
-----------
639
- --------------------------------------------------------------------------------
75
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
As of March 31, 1998
- ---------------------------------
PBHG Strategic Small Company Fund
- ---------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
Telecommunications Equipment -- 1.8%
Geotel Communications* 25,000 $ 691
Superior Telecom 5,000 209
Tekelec* 25,000 1,134
-----------
2,034
- --------------------------------------------------------------------------------
Voice/Call Transaction Processing -- 0.4%
Natural Microsystems* 12,500 495
-----------
495
-----------
Total Technology (Cost $20,106) 22,734
-----------
- --------------------------------------------------------------------------------
Transportation -- 5.0%
Airlines -- 1.0%
Midway Airlines* 41,600 786
Skywest 7,800 285
-----------
1,071
- --------------------------------------------------------------------------------
Trucking & Shipping -- 4.0%
Carey International* 15,000 356
Coach USA* 20,400 887
Covenant Transportation, Cl A* 16,000 350
Kitty Hawk* 64,700 1,423
US Express Enterprises* 10,000 208
US Freightways 37,600 1,354
-----------
4,578
-----------
Total Transportation (Cost $4,688) 5,649
-----------
- --------------------------------------------------------------------------------
Utilities/Income -- 3.1%
Natural Gas -- 0.3%
KN Energy 5,400 319
-----------
319
-----------
- --------------------------------------------------------------------------------
REITS -- 2.8%
Apartment Investment & Management 8,200 316
Berkshire Realty 35,900 431
Colonial Properties Trust 11,300 359
Developers Diversified Realty 12,700 519
Excel Realty Trust 5,000 178
Highwoods Properties 29,000 1,024
Pennsylvania Real Estate Investment Trust 12,000 294
-----------
3,121
-----------
Total Utilities/Income (Cost $3,264) 3,440
-----------
Total Common Stocks (Cost $90,717) 109,483
-----------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
Repurchase Agreement -- 2.2%
J.P. Morgan
6.05%, dated 03/31/98, matures
04/01/98, repurchase price $2,502,224
(collaterized by U.S. Government
Obligations: Total market
value $2,551,840) (A) $2,502 $ 2,502
-----------
Total Repurchase Agreement (Cost $2,502) 2,502
-----------
Total Investments-- 100.0% (Cost $93,219) 111,985
-----------
- --------------------------------------------------------------------------------
Other Assets and Liabilities -- 0.0%
Other Assets and Liabilities, Net (2)
-----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net Assets:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 8,690,025
outstanding shares of common stock 90,718
Undistributed net investment income 13
Accumulated net realized gain on investments 2,486
Net unrealized appreciation on investments 18,766
-----------
Total Net Assets -- 100.0% $111,983
===========
Net Asset Value, Offering and Redemption
Price Per Share $12.89
===========
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
76
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Assets and Liabilities (000)
- --------------------------------------------------------------------------------
March 31, 1998
<TABLE>
<CAPTION>
--------- -------- ---------
PBHG PBHG PBHG
Large Cap Mid-Cap Small Cap
Value Value Value
Fund Fund Fund
--------- -------- ---------
<S> <C> <C> <C>
Assets:
Investment securities (Cost $68,852, $51,232, and
$113,779 respectively) at market value $ 73,958 $ 54,541 $120,161
Cash 151 -- --
Accrued Income 165 32 36
Receivable for capital shares sold 36 162 10,304
Receivable for investment securities sold 9,962 3,662 2,421
-------- -------- --------
Total assets 84,272 58,397 132,922
-------- -------- --------
Liabilities:
Payable for investment securities purchased 7,629 3,915 6,232
Payable for capital shares redeemed 43 240 748
Accrued Expenses 124 69 108
-------- -------- --------
Total liabilities 7,796 4,224 7,088
-------- -------- --------
Net Assets:
Portfolio shares (authorized 200 million shares for each of the PBHG Large
Cap Value, PBHG Mid-Cap Value and PBHG Small Cap Value Funds -- $0.001
par value) based on 5,878,267, 3,541,869, and 8,179,172
outstanding shares of common stock 63,525 47,451 113,032
Accumulated net investment income 272 13 24
Accumulated net realized gain on investments 7,573 3,400 6,396
Net unrealized appreciation on investments 5,106 3,309 6,382
-------- -------- --------
Net assets $ 76,476 $ 54,173 $125,834
-------- -------- --------
Net Asset Value, Offering Price and Redemption Price Per Share $ 13.01 $ 15.30 $ 15.38
======== ======== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
77
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statement of Operations (000)
- --------------------------------------------------------------------------------
For the Period Ended March 31, 1998
<TABLE>
<CAPTION>
---------- ---------- ---------- ---------- ---------- ----------
PBHG PBHG PBHG PBHG
PBHG Emerging Large Cap Select Core PBHG
Growth Growth Growth Equity Growth Limited
Fund Fund Fund Fund Fund Fund
---------- ---------- ---------- ---------- ---------- ----------
4/1/97 4/1/97 4/1/97 4/1/97 4/1/97 4/1/97
to to to to to to
3/31/98 3/31/98 3/31/98 3/31/98 3/31/98 3/31/98
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 2,662 $ 751 $ 250 $ 103 $ 218 $ 12
Interest 26,105 6,525 329 673 476 1,111
Less: Foreign Taxes Withheld -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Investment Income 28,767 7,276 579 776 694 1,123
---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Investment Advisory Fees 47,429 12,966 1,015 3,228 2,096 1,659
Administrative Fees 8,370 2,288 203 570 370 249
Transfer Agent Fees 11,366 3,327 339 1,009 681 271
Registration and Filing Fees 124 38 26 60 69 62
Printing Fees 1,708 444 37 142 65 45
Professional Fees 533 147 9 42 13 3
Custodian Fees 327 101 11 41 16 13
Insurance and Other Fees 61 17 1 6 5 2
Directors' Fees 131 26 3 11 7 4
Amortization of Deferred Organizational Costs -- 3 2 2 3 8
Line of Credit Fees 224 60 6 16 13 7
Distribution Fees 1 153 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total Expenses: 70,426 19,417 1,652 5,127 3,338 2,323
---------- ---------- ---------- ---------- ---------- ----------
Net Investment Income (Loss) (41,659) (12,141) (1,073) (4,351) (2,644) (1,200)
---------- ---------- ---------- ---------- ---------- ----------
Net Realized Gain (Loss) from Security Transactions 140,179 52,716 14,465 21,675 (5,477) 11,738
Net Realized Loss on Foreign Currency Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
on Investments 1,461,423 384,540 49,242 140,704 79,526 64,636
---------- ---------- ---------- ---------- ---------- ----------
Net Realized and Unrealized Gain on
Investments and Foreign Currency Transactions 1,601,602 437,256 63,707 162,379 74,049 76,374
---------- ---------- ---------- ---------- ---------- ----------
Increase in Net Assets Resulting
from Operations $1,559,943 $ 425,115 $ 62,634 $ 158,028 $ 71,405 $ 75,174
========== ========== ========== ========== ========== ==========
</TABLE>
1. All distribution fees are incurred in the Advisor Class
2. The PBHG Mid-Cap Value and PBHG Small Cap Value funds commenced operations
on May 1, 1997.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
78
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
<TABLE>
<CAPTION>
--------- --------- --------- --------- ------------- --------- -------------- ---------
PBHG PBHG PBHG PBHG PBHG PBHG PBHG
Large Cap Large Cap Mid-Cap Small Cap PBHG Cash Technology & Strategic
20 Value Value Value International Reserves Communications Small Company
Fund Fund Fund Fund Fund Fund Fund Fund
--------- --------- --------- --------- ------------- --------- -------------- ---------
4/1/97 4/1/97 5/1/97(2) 5/1/97(2) 4/1/97 4/1/97 4/1/97 4/1/97
to to to to to to to to
3/31/98 3/31/98 3/31/98 3/31/98 3/31/98 3/31/98 3/31/98 3/31/98
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 215 $ 1,127 $ 260 $ 359 $ 396 $ -- $ 72 $ 379
466 88 59 124 35 10,613 2,254 172
-- -- -- -- (35) -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
681 1,215 319 483 396 10,613 2,326 551
--------- --------- --------- --------- --------- --------- --------- ---------
925 371 207 501 210 560 5,105 1,029
163 85 37 75 31 280 901 154
280 119 73 106 86 322 1,319 220
108 12 7 23 13 31 98 13
31 28 9 12 6 46 201 27
8 11 7 8 2 5 73 10
10 17 16 17 49 23 61 31
3 3 1 1 13 2 8 4
3 5 1 1 -- 2 16 2
3 7 1 1 12 3 2 2
4 2 1 2 -- 1 24 4
-- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
1,538 660 360 747 422 1,275 7,808 1,496
--------- --------- --------- --------- --------- --------- --------- ---------
(857) 555 (41) (264) (26) 9,338 (5,482) (945)
--------- --------- --------- --------- --------- --------- --------- ---------
8,307 12,603 5,307 10,557 1,631 5 4,812 13,618
-- -- -- -- (22) -- -- --
52,271 5,906 3,309 6,382 2,014 -- 179,889 25,036
--------- --------- --------- --------- --------- --------- --------- ---------
60,578 18,509 8,616 16,939 3,623 5 184,701 38,654
--------- --------- --------- --------- --------- --------- --------- ---------
$ 59,721 $ 19,064 $ 8,575 $ 16,675 $ 3,597 $ 9,343 $ 179,219 $ 37,709
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
79
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statements of Changes in Net Assets (000)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
------------------------- ------------------------- -----------------------
PBHG PBHG PBHG
Growth Emerging Growth Large Cap Growth
Fund Fund Fund
------------------------- ------------------------- -----------------------
4/1/97 4/1/96 4/1/97 4/1/96 4/1/97 4/1/96
to to to to to to
3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ (41,659) $ (35,923) $ (12,141) $ (4,549) $ (1,073) $ (581)
Net Realized Gain (Loss) from Security
Transactions 140,179 (244,650) 52,716 (51,106) 14,465 (5,730)
Net Change in Unrealized Appreciation
(Depreciation) on Investments and
Foreign Currency Transactions 1,461,423 (840,002) 384,540 (232,763) 49,242 (1,449)
----------- ----------- ----------- ----------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,559,943 (1,120,575) 425,115 (288,418) 62,634 (7,760)
----------- ----------- ----------- ----------- ---------- ----------
Distributions to Shareholders From:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security Transactions -- -- -- (49,616) (1,402) (146)
----------- ----------- ----------- ----------- ---------- ----------
Total Distributions -- -- -- (49,616) (1,402) (146)
----------- ----------- ----------- ----------- ---------- ----------
Capital Share Transactions:
PBHG Class
Shares Issued 2,552,092 5,020,812 1,875,607 1,925,528 174,995 259,520
Shares Issued upon Reinvestment of Distributions -- -- -- 47,297 1,233 135
Shares Redeemed (3,392,800) (2,567,916) (2,092,185) (1,128,876) (211,769) (185,537)
----------- ----------- ----------- ----------- ---------- ----------
Total PBHG Class Transactions (840,708) 2,452,896 (216,578) 843,949 (35,541) 74,118
----------- ----------- ----------- ----------- ---------- ----------
Advisor Class (3)
Shares Issued 72,982 15,962 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed (11,739) (79) -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Total Advisor Class Transactions 61,243 15,883 -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions (779,465) 2,468,779 (216,578) 843,949 (35,541) 74,118
----------- ----------- ----------- ----------- ---------- ----------
Total Increase (Decrease) in Net Assets 780,478 1,348,204 208,537 505,915 25,691 66,212
----------- ----------- ----------- ----------- ---------- ----------
Net Assets:
Beginning of Period 4,647,129 3,298,925 1,195,620 689,705 119,971 53,759
----------- ----------- ----------- ----------- ---------- ----------
End of Period $ 5,427,607 $ 4,647,129 $ 1,404,157 $ 1,195,620 $ 145,662 $ 119,971
=========== =========== =========== =========== ========== ==========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 102,864 189,736 80,964 77,652 9,034 16,415
Shares Issued upon Reinvestment of Distributions -- -- -- 1,921 66 8
Shares Redeemed (133,809) (100,103) (88,673) (47,388) (11,093) (11,712)
----------- ----------- ----------- ----------- ---------- ----------
Total PBHG Class Share Transactions (30,945) 89,633 (7,709) 32,185 (1,993) 4,711
----------- ----------- ----------- ----------- ---------- ----------
Advisor Class (3)
Shares Issued 3,017 621 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed (462) (3) -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Total Advisor Class Share Transactions 2,555 618 -- -- -- --
----------- ----------- ----------- ----------- ---------- ----------
Net Increase (Decrease) in Shares Outstanding (28,390) 90,251 (7,709) 32,185 (1,993) 4,711
=========== =========== =========== =========== ========== ==========
</TABLE>
1. PBHG Limited Fund commenced operations on July 1, 1996.
2. PBHG Large Cap 20 Fund commenced operations on December 1, 1996.
3. PBHG Growth Fund Advisor Class commenced operations on August 19, 1996.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
80
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
<TABLE>
<CAPTION>
PBHG PBHG PBHG PBHG
Select Equity Core Growth Limited Large Cap 20
Fund Fund Fund Fund
-------------------------- -------------------------- -------------------------- --------------------------
4/1/97 4/1/96 4/1/97 4/1/96 4/1/97 7/1/96(1) 4/1/97 12/1/96(2)
to to to to to to to to
3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (4,351) $ (3,667) $ (2,644) $ (2,598) $ (1,200) $ 464 $ (857) $ 36
21,675 (32,999) (5,477) (49,445) 11,738 641 8,307 (2,539)
140,704 (31,600) 79,526 (41,122) 64,636 (13,027) 52,271 (4,836)
--------- --------- --------- --------- --------- --------- --------- ---------
158,028 (68,266) 71,405 (93,165) 75,174 (11,922) 59,721 (7,339)
--------- --------- --------- --------- --------- --------- --------- ---------
-- -- -- -- -- (464) -- (53)
-- (6,009) -- -- (5,376) (285) -- --
--------- --------- --------- --------- --------- --------- --------- ---------
-- (6,009) -- -- (5,376) (749) -- (53)
--------- --------- --------- --------- --------- --------- --------- ---------
122,632 828,376 110,417 804,054 19,454 198,852 228,573 109,566
-- 5,665 -- -- 5,219 720 -- 50
(317,070) (590,076) (300,307) (457,986) (53,823) (49,381) (165,482) (32,405)
--------- --------- --------- --------- --------- --------- --------- ---------
(194,438) 243,965 (189,890) 346,068 (29,150) 150,191 63,091 77,211
--------- --------- --------- --------- --------- --------- --------- ---------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
-- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
(194,438) 243,965 (189,890) 346,068 (29,150) 150,191 63,091 77,211
--------- --------- --------- --------- --------- --------- --------- ---------
(36,410) 169,690 (118,485) 252,903 40,648 137,520 122,812 69,819
--------- --------- --------- --------- --------- --------- --------- ---------
372,486 202,796 283,995 31,092 137,520 -- 69,819 --
--------- --------- --------- --------- --------- --------- --------- ---------
$ 336,076 $ 372,486 $ 165,510 $ 283,995 $ 178,168 $ 137,520 $ 192,631 $ 69,819
========= ========= ========= ========= ========= ========= ========= =========
6,144 42,146 9,459 60,034 1,549 19,868 17,218 10,798
-- 284 -- -- 442 66 -- 5
(15,642) (30,763) (24,681) (35,211) (4,532) (4,739) (12,712) (3,255)
--------- --------- --------- --------- --------- --------- --------- ---------
(9,498) 11,667 (15,222) 24,823 (2,541) 15,195 4,506 7,548
--------- --------- --------- --------- --------- --------- --------- ---------
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
-- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
(9,498) 11,667 (15,222) 24,823 (2,541) 15,195 4,506 7,548
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
81
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Statements of Changes in Net Assets (000) - Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------- ------------- ---------------
PBHG PBHG PBHG
Large Cap Value Mid-Cap Value Small Cap Value
Fund Fund Fund
-------------------------- ------------- ---------------
4/1/97 1/2/97(4) 5/1/97(5) 5/1/97(5)
to to to to
3/31/98 3/31/97 3/31/98 3/31/98
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 555 $ 60 $ (41) $ (264)
Net Realized Gain (Loss) from Security Transactions 12,603 -- 5,307 10,557
Net Realized Gain (Loss) on Foreign Currency Transactions -- -- -- --
Net Change in Unrealized Appreciation (Depreciation)
on Investments and Foreign Currency Transactions 5,906 (800) 3,309 6,382
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting from Operations 19,064 (740) 8,575 16,675
----------- ----------- ----------- -----------
Distributions to Shareholders From:
Net Investment Income (343) -- -- --
Net Realized Gains from Security Transactions (5,030) -- (1,853) (3,873)
----------- ----------- ----------- -----------
Total Distributions (5,373) -- (1,853) (3,873)
----------- ----------- ----------- -----------
Capital Share Transactions:
PBHG Class
Shares Issued 60,032 35,206 95,035 209,518
Shares Transfered (6) 10,076 -- -- --
Shares Issued upon Reinvestment of Distributions 5,275 -- 1,731 3,541
Shares Redeemed (38,860) (8,204) (49,315) (100,027)
----------- ----------- ----------- -----------
Total PBHG Class Transactions 36,523 27,002 47,451 113,032
----------- ----------- ----------- -----------
Increase (Decrease) in Net Assets Derived from Capital
Share Transactions 36,523 27,002 47,451 113,032
----------- ----------- ----------- -----------
Total Increase (Decrease) in Net Assets 50,214 26,262 54,173 125,834
----------- ----------- ----------- -----------
Net Assets:
Beginning of Period 26,262 -- -- --
----------- ----------- ----------- -----------
End of Period $ 76,476 $ 26,262 $ 54,173 $ 125,834
=========== =========== =========== ===========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 5,169 3,381 7,022 15,018
Shares Transfered (6) 989 -- -- --
Shares Issued upon Reinvestment of Distributions 460 -- 132 264
Shares Redeemed (3,337) (784) (3,612) (7,103)
----------- ----------- ----------- -----------
Total PBHG Class Share Transactions 3,281 2,597 3,542 8,179
----------- ----------- ----------- -----------
Net Increase (Decrease) in Shares Outstanding 3,281 2,597 3,542 8,179
=========== =========== =========== ===========
</TABLE>
4. PBHG Large Cap Value and PBHG Strategic Small Company Funds commenced
operations on January 2, 1997.
5. PBHG Mid-Cap Value and PBHG Small Cap Value Funds commenced operations on
May 1, 1997.
6. Net asset value of shares issued in connection with the transfer of the
Newbold Equity Fund's Net Assets. Reference note 6 to Financial Statements.
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
82
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
<TABLE>
<CAPTION>
PBHG PBHG
PBHG PBHG Technology & Strategic
International Cash Reserves Communications Small Company
Fund Fund Fund Fund
---------------------------- ---------------------------- ---------------------------- ---------------------------
4/1/97 4/1/96 4/1/97 4/1/96 4/1/97 4/1/96 4/1/97 1/2/97(4)
to to to to to to to to
3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97 3/31/98 3/31/97
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (26) $ (57) $ 9,338 $ 10,844 $ (5,482) $ (2,047) $ (945) $ 28
1,631 451 5 (2) 4,812 18,009 13,618 (2,048)
(22) (34) -- -- -- -- -- --
2,014 779 -- -- 179,889 (56,036) 25,036 (6,270)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
3,597 1,139 9,343 10,842 179,219 (40,074) 37,709 (8,290)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
-- -- (9,338) (10,844) -- -- -- --
(1,541) -- -- -- (26,386) (10,050) (8,154) --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(1,541) -- (9,338) (10,844) (26,386) (10,050) (8,154) --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
49,801 39,195 1,974,482 1,393,768 910,539 1,278,462 127,228 87,204
-- -- -- -- -- -- -- --
1,478 -- 9,128 8,942 25,100 9,213 7,759 --
(53,695) (30,312) (2,207,617) (1,160,133) (1,085,931) (806,167) (113,941) (17,532)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(2,416) 8,883 (224,007) 242,577 (150,292) 481,508 21,046 69,672
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(2,416) 8,883 (224,007) 242,577 (150,292) 481,508 21,046 69,672
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(360) 10,022 (224,002) 242,575 2,541 431,384 50,601 61,382
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
21,265 11,243 341,576 99,001 493,156 61,772 61,382 --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
$ 20,905 $ 21,265 $ 117,574 $ 341,576 $ 495,697 $ 493,156 $ 111,983 $ 61,382
=========== =========== =========== =========== =========== =========== =========== ===========
4,207 3,602 1,974,482 1,393,768 49,980 77,511 10,645 8,740
-- -- -- -- -- -- -- --
143 -- 9,128 8,942 1,474 525 684 --
(4,503) (2,778) (2,207,617) (1,160,133) (59,449) (49,269) (9,564) (1,815)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(153) 824 (224,007) 242,577 (7,995) 28,767 1,765 6,925
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(153) 824 (224,007) 242,577 (7,995) 28,767 1,765 6,925
=========== =========== =========== =========== =========== =========== =========== ===========
</TABLE>
83
<PAGE>
================================================================================
The PBHG Funds, Inc.
================================================================================
Financial Highlights
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Period
For the Period Ended March 31
<TABLE>
<CAPTION>
Net Net
Asset Net Realized and Distributions Distributions Asset
Value Investment Unrealized from Net from Value
Beginning Income Gains or (Losses) Investment Capital End Total
of Period (Loss) on Securities Income Gains of Period Return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
PBHG Growth Fund
- --------------------------
PBHG Class
1998 $21.06 $(0.26) $ 7.43 -- -- $28.23 34.05%
1997 25.30 (0.10) (4.14) -- -- 21.06 (16.76)%
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50%
1995 14.67 (0.05) 2.09 -- $(0.01) 16.70 13.92%
1994 (1) 10.83 (0.03) 4.06 -- (0.19) 14.67 37.28%
PBHG Advisor Class
1998 $21.03 $(0.15) $7.24 -- -- $28.12 33.71%
1997 (2) 25.42 (0.06) (4.33) -- -- 21.03 (17.27)%+
- --------------------------
PBHG Emerging Growth Fund
- --------------------------
PBHG Class
1998 $19.26 $(0.24) $6.81 -- -- $25.83 34.11%
1997 23.07 (0.11) (2.87) -- $(0.83) 19.26 (13.71)%
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16%
1995 (3(4) 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64%+
1994 (3) 13.22 (0.03) 2.38 -- (0.98) 14.59 19.64%
- --------------------------
PBHG Large Cap Growth Fund
- --------------------------
PBHG Class
1998 $14.26 $(0.19) $ 8.82 -- $(0.20) $22.69 60.80%
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)%
1996 (6) 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47%*
- --------------------------
PBHG Select Equity Fund
- --------------------------
PBHG Class
1998 $15.91 $(0.44) $ 8.68 -- -- $24.15 51.79%
1997 17.27 (0.13) (1.03) -- $(0.20) 15.91 (6.94)%
1996 (6) 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75%*
- --------------------------
PBHG Core Growth Fund
- --------------------------
PBHG Class
1998 $10.34 $(0.33) $ 3.52 -- -- $13.53 30.85%
1997 11.82 (0.09) (1.39) -- -- 10.34 (12.52)%
1996 (5) 10.00 -- 1.82 -- -- 11.82 18.20%+
- --------------------------
PBHG Limited Fund
- --------------------------
PBHG Class
1998 $ 9.05 $(0.10) $ 5.53 -- $(0.40) $14.08 60.78%
1997 (8) 10.00 0.02 (0.93) $(0.03) (0.01) 9.05 (9.15)%+
- --------------------------
PBHG Large Cap 20 Fund
- --------------------------
PBHG Class
1998 $ 9.25 $(0.07) $ 6.80 -- -- $15.98 72.76%
1997 (9) 10.00 (0.01) (0.73) $(0.01) -- 9.25 (7.40)%+
- --------------------------
PBHG Large Cap Value Fund
- --------------------------
PBHG Class
1998 $10.11 $0.02 $ 3.84 $(0.06) $(0.90) $13.01 39.47%
1997 (10) 10.00 0.02 0.09 -- -- 10.11 1.10%+
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Net Investment of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (Loss) Net Assets Net Assets Portfolio Average
of Period to Average to Average (Excluding (Excluding Turnover Commision
(000) Net Assets Net Assets Waivers) Waivers) Rate Rate (13)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
PBHG Growth Fund
- --------------------------
PBHG Class
1998 $5,338,380 1.26% (0.74)% 1.26% (0.74)% 94.21% $0.0549
1997 4,634,138 1.25% (0.69)% 1.25% (0.69)% 64.89% 0.0493
1996 3,298,666 1.48% (0.79)% 1.48% (0.79)% 44.64% n/a
1995 1,014,832 1.50% (0.69)% 1.50% (0.69)% 118.75% n/a
1994 (1) 319,059 1.55% (0.78)% 1.59% (0.82)% 94.28% n/a
PBHG Advisor Class
1998 $89,227 1.51% (1.02)% 1.51% (1.02)% 94.21% $0.0549
1997 (2) 12,991 1.53%* (1.11)%* 1.53%* (1.11)%* 64.89% 0.0493
- --------------------------
PBHG Emerging Growth Fund
- --------------------------
PBHG Class
1998 $1,404,157 1.27% (0.80)% 1.27% (0.80)% 95.21% $0.0434
1997 1,195,620 1.28% (0.36)% 1.28% (0.36)% 47.75% 0.0328
1996 689,705 1.47% (0.42)% 1.47% (0.42)% 97.05% n/a
1995 (3)(4) 411,866 1.50%* (0.08)%* 1.50%* (0.08)%* 27.50% n/a
1994 (3) 113,329 1.45% (0.77)% 1.45% (0.77)% 95.75% n/a
- --------------------------
PBHG Large Cap Growth Fund
- --------------------------
PBHG Class
1998 $145,662 1.22% (0.79)% 1.22% (0.79)% 46.56% $0.0582
1997 119,971 1.23% (0.47)% 1.23% (0.47)% 51.70% 0.0547
1996 (6) 53,759 1.50%* (0.66)%* 2.07%* (1.23)%* 116.75% n/a
- --------------------------
PBHG Select Equity Fund
- --------------------------
PBHG Class
1998 $336,076 1.35% (1.15)% 1.35% (1.15)% 72.16% $0.0566
1997 372,486 1.26% (0.76)% 1.26% (0.76)% 71.70% 0.0443
1996 (6) 202,796 1.50%* (0.74)%* 1.73%* (0.97)%* 206.22% n/a
- --------------------------
PBHG Core Growth Fund
- --------------------------
PBHG Class
1998 $165,510 1.35% (1.07)% 1.35% (1.07)% 72.78% $0.0555
1997 283,995 1.36% (0.77)% 1.36% (0.77)% 46.75% 0.0437
1996 (5) 31,092 1.50%* (0.18)%* 2.92%* (1.60)%* 17.00% n/a
- --------------------------
PBHG Limited Fund
- --------------------------
PBHG Class
1998 $178,168 1.40% (0.72)% 1.40% (0.72)% 81.36% $0.0380
1997 (8) 137,520 1.42%* 0.33%* 1.42%* 0.33%* 75.46% 0.0304
- --------------------------
PBHG Large Cap 20 Fund
- --------------------------
PBHG Class
1998 $192,631 1.41% (0.79)% 1.41% (0.79)% 98.27% $0.0594
1997 (9) 69,819 1.50%* 0.17 %* 1.50%* 0.17%* 43.98% 0.0550
- --------------------------
PBHG Large Cap Value Fund
- --------------------------
PBHG Class
1998 $76,476 1.17% 0.98 % 1.17% 0.98% 403.59% $0.0588
1997 (1)0 26,262 1.50%* 1.61 %* 1.74%* 1.37%* 0.00% 0.0588
</TABLE>
84
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The PBHG Funds, Inc.
================================================================================
<TABLE>
<CAPTION>
Net Net
Asset Net Realized and Distributions Distributions Asset
Value Investment Unrealized from Net from Value
Beginning Income Gains or (Losses) Investment Capital End Total
of Period (Loss) on Securities Income Gains of Period Return
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
PBHG Mid-Cap Value Fund
- --------------------------
PBHG Class
1998 (12) $10.00 $(0.01) $6.00 -- $(0.69) $15.30 61.06%+
- --------------------------
PBHG Small Cap Value Fund
- --------------------------
PBHG Class
1998 (12) $10.00 $(0.03) $6.15 -- $(0.74) $15.38 62.27%+
- --------------------------
PBHG International Fund
- --------------------------
PBHG Class
1998 $11.26 $(0.03) $1.83 -- $(1.02) $12.04 17.46%
1997 10.55 -- 0.71 -- -- 11.26 6.73%
1996 9.13 (0.04) 1.46 -- -- 10.55 15.55%
1995 (11) 10.00 (0.03) (0.80) -- (0.04) 9.13 (8.33)%+
- --------------------------
PBHG Cash Reserves Fund
- --------------------------
PBHG Class
1998 $1.00 $0.05 -- $(0.05) -- $1.00 5.13%
1997 1.00 0.05 -- (0.05) -- 1.00 4.89%
1996 (6) 1.00 0.05 -- (0.05) -- 1.00 5.24%*
- --------------------------
PBHG Technology &
Communications Fund
- --------------------------
PBHG Class
1998 $14.63 $(0.23) $5.72 -- $(0.85) $19.27 38.29%
1997 12.48 (0.05) 2.55 -- (0.35) 14.63 19.59%
1996 (7) 10.00 (0.02) 2.50 -- -- 12.48 24.82%+
- --------------------------
PBHG Strategic Small
Company Fund
- --------------------------
PBHG Class
1998 $ 8.86 $(0.11) $5.01 -- $(0.87) $12.89 56.54%
1997 (10) 10.00 -- (1.14) -- -- 8.86 (11.40)%+
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Net Investment of Expenses Income (Loss)
Assets Ratio Income to Average to Average
End of Expenses (Loss) Net Assets Net Assets Portfolio Average
of Period to Average to Average (Excluding (Excluding Turnover Commision
(000) Net Assets Net Assets Waivers) Waivers) Rate Rate (13)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------
PBHG Mid-Cap Value Fund
- --------------------------
PBHG Class
1998 (12) $54,173 1.47%* (0.17)%* 1.47%* (0.17)%* 399.96% $0.0583
- --------------------------
PBHG Small Cap Value Fund
- --------------------------
PBHG Class
1998 (12) $125,834 1.49%* (0.52)%* 1.49%* (0.52)%* 263.04% $0.0582
- --------------------------
PBHG International Fund
- --------------------------
PBHG Class
1998 $20,905 2.00% (0.13)% 2.00% (0.13)% 85.94% $0.0306
1997 21,265 2.22% (0.32)% 2.22% (0.32)% 74.82% 0.0287
1996 11,243 2.25% (0.22)% 3.03% (1.00)% 140.26% n/a
1995 (11) 15,236 2.25%* (0.43)%* 2.36%* (0.54)%* 81.72% n/a
- --------------------------
PBHG Cash Reserves Fund
- --------------------------
PBHG Class
1998 $117,574 0.68% 5.00% 0.68% 5.00% n/a n/a
1997 341,576 0.68% 4.79% 0.68% 4.79% n/a n/a
1996 (6) 99,001 0.70%* 5.05%* 0.88%* 4.87%* n/a n/a
- --------------------------
PBHG Technology &
Communications Fund
- --------------------------
PBHG Class
1998 $495,697 1.30% (0.91)% 1.30% (0.91)% 259.89% $0.0477
1997 493,156 1.33% (0.59)% 1.33% (0.59)% 289.91% 0.0365
1996 (7) 61,772 1.50%* (0.50)%* 2.00%* (1.00)%* 125.99% n/a
- --------------------------
PBHG Strategic Small
Company Fund
- --------------------------
PBHG Class
1998 $111,983 1.45% (0.92)% 1.45% (0.92)% 215.46% $0.0574
1997 (10) 61,382 1.50%* 0.18%* 1.50%* 0.18%* 88.88% 0.0562
</TABLE>
* Annualized
+ Total returns have not been annualized.
1. The information set forth in this table for the period prior to June 2,
1994 is the financial data of the Pilgrim Baxter Growth Fund, a series of
the Advisor's Inner Circle II Fund. PBHG Growth Fund aquired the assets and
assumed the liabilities of the Pilgrim Baxter Growth Fund on June 2, 1994.
2. The PBHG Growth Fund Advisor Class commenced operations on August 19, 1996.
3. The information set forth in this table for the periods prior to June 2,
1994 is the financial data of the Pilgrim Baxter Emerging Growth Fund, a
series of the Advisors' Inner Circle Fund. PBHG Emerging Growth Fund
acquired the assets and assumed the liabilities of the Pilgrim Baxter
Emerging Growth Fund on June 2, 1994. The PBHG Emerging Growth Fund
retained the October 31 fiscal year end of its predecessor only for fiscal
year 1994. PBHG Emerging Growth Fund changed its fiscal year end to March
31 in 1995 and reported financial information for the fiscal period from
November 1, 1994 to March 31, 1995.
4. Per share calculations were performed using average shares for the period.
5. PBHG Core Growth Fund commenced operations on January 2, 1996.
6. PBHG Large Cap Growth Fund, the PBHG Select Equity Fund, and the PBHG Cash
Reserves Fund commenced operations on April 5, 1995.
7. PBHG Technology & Communications Fund commenced operations on October 2,
1995.
8. PBHG Limited Fund commenced operations on July 1, 1996.
9. PBHG Large Cap 20 Fund commenced operations on December 1, 1996.
10. PBHG Large Cap Value Fund and the PBHG Strategic Small Company Fund
commenced operations on January 2, 1997.
11. PBHG International Fund commenced operations on June 14, 1994.
12. PBHG Mid-Cap Value and the PBHG Small Cap Value Funds commenced operations
May 1, 1997.
13. Average commision rate paid per share for security purchases and sales
during the period. Presentation of the rate is only required for fiscal
years beginning after September 1, 1995.
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
85
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The PBHG Funds, Inc.
================================================================================
Notes to Financial Statements
- --------------------------------------------------------------------------------
As of March 31, 1998
1. Organization
The PBHG Funds, Inc. (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company with fourteen series: the PBHG Growth Fund (the "Growth
Fund"), the PBHG Emerging Growth Fund (the "Emerging Growth Fund"), the PBHG
Large Cap Growth Fund (the "Large Cap Growth Fund"), the PBHG Select Equity Fund
(the "Select Equity Fund"), the PBHG Core Growth Fund (the "Core Growth Fund"),
the PBHG Limited Fund (the "Limited Fund"), the PBHG Large Cap 20 Fund (the
"Large Cap 20 Fund"), the PBHG Large Cap Value Fund (the "Large Cap Value
Fund"), the PBHG Mid-Cap Value Fund (the "Mid-Cap Value Fund"), the PBHG Small
Cap Value Fund (the "Small Cap Value Fund"), the PBHG International Fund (the
"International Fund"), the PBHG Technology & Communications Fund (the
"Technology & Communications Fund"), and the PBHG Strategic Small Company Fund
("the Strategic Small Company Fund"), (collectively referred to as the "Equity
Portfolios"), and the PBHG Cash Reserves Fund (the "Cash Reserves Fund") (each a
"Portfolio" and, collectively, the "Portfolios"). Each Portfolio is classified
as a diversified management investment company, with the exception of the Large
Cap 20 Fund which is classified as a nondiversified management investment
company. Each Portfolio's prospectus provides a description of its investment
objectives, policies and investment strategies. The Fund is registered to offer
two classes of shares, PBHG Class and Advisor Class, formerly known as the
"Trust Class." Currently, the Advisor Class of shares is only offered by the
Growth Fund. The assets of each Portfolio are segregated, and a shareholder's
interest is limited to the Portfolio in which shares are held.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies followed by
the Portfolios.
Security Valuation -- Investment securities of the Equity Portfolios that are
listed on a securities exchange for which market quotations are available are
valued at the last quoted sales price on each business day. If there is no such
reported sale, these securities and unlisted securities for which market
quotations are readily available, are valued at the last bid price. Short-term
investments may be valued at amortized cost which approximates market value.
Foreign securities in the International Fund are valued based upon quotations
from the primary market in which they are traded. The values of investment
securities held by the Cash Reserves Fund are stated at amortized cost, which
approximates market value. Under this valuation method, acquisition discounts
and premiums are accreted and amortized ratably to maturity and are included in
interest income.
Security Transactions and Investment Income -- Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during the respective
holding periods.
Dividends -- Dividends from net investment income for the Equity Portfolios are
declared annually, if available. Dividends from net investment income for the
Cash Reserves Fund are declared daily and paid monthly. Distributions of net
realized capital gains, for all portfolios, are generally made to shareholders
annually.
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of March 31, 1998, primarily attributable to
certain net operating losses, which for tax purposes, are not available to
offset future income or have been used to offset net short-term capital gains,
have been reclassified to the following accounts:
Accumulated Net
Paid-In-Capital Realized Gain
(000) (000)
--------------- --------------
Growth Fund $41,659 $ --
Emerging Growth Fund 12,144 4
Large Cap Growth Fund 1,073 --
Select Equity Fund 4,351 --
Core Growth Fund 1,354 --
Limited Fund -- 1,198
Large Cap 20 Fund 182 692
Mid-Cap Value Fund -- 54
Small Cap Value Fund -- 288
International Fund -- 38
Technology & Communications Fund 624 4,858
Strategic Small Company Fund -- 930
These reclassifications have no effect on net assets or net asset value per
share.
Federal Income Taxes -- It is each Portfolio's intention to qualify or continue
to qualify as a regulated investment company for Federal income tax purposes and
to distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
Net Asset Value Per Share -- The net asset value per share is calculated each
business day by dividing the total value of each Portfolio's assets, less
liabilities, by the number of shares outstanding.
Repurchase Agreements -- Securities pledged as collateral for repurchase
agreements are held by the custodian bank until the respective agreements
mature. Provisions of the repurchase agreements and procedures adopted by
Pilgrim Baxter & Associates, Ltd. (the "Adviser") ensure that the market value
of the collateral including accrued interest thereon, is sufficient in the event
of default by the counterparty. If the counterparty defaults and the value of
the collateral declines, or if the counterparty enters into insolvency
proceedings, realization of the collateral by a Portfolio may be delayed or
limited.
Futures Transactions -- Certain Portfolios invest in futures contracts solely
for the purpose of hedging existing portfolio securities, or securities that the
Portfolio intends to purchase, against fluctuations in value caused by changes
in prevailing market conditions. These Portfolios may enter into futures
contracts subject to prospectus defined limitations. Upon entering into a
futures contract, the Portfolio is required to deposit cash or pledge U.S.
Government securities of an initial margin. Subsequent payments, which are
dependent on the daily fluctuations in the value of the underlying security or
securities, are made or received by the Portfolio each day (daily variation
margin) and are recorded as unrealized gains or losses until the contracts are
closed. When the contracts are closed, the Portfolio records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the closing
transaction and the Portfolio's basis in the contracts. Risks of entering into
futures contracts include the possibility that there will not be a perfect price
correlation between the futures contracts and the underlying securities. Second,
it is possible that a lack of liquidity for futures contracts could exist in the
secondary market, resulting in an inability to close a futures position prior to
its maturity date. Third, the purchase of a futures contract involves the risk
that a Portfolio could lose more than the original margin deposit required to
initiate a futures transaction.
86
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The PBHG Funds, Inc.
================================================================================
Foreign Currency Translation -- The books and records of the International Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(I) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at
the relevant rates of exchange prevailing on the respective dates of
such transactions.
The International Fund does not isolate that portion of gains and losses on
investment securities that is due to changes in the foreign exchange rates from
that which is due to changes in market prices of such securities.
The International Fund reports gains and losses on foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income or loss for Federal
income tax purposes.
Forward Foreign Currency Exchange Contracts -- In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Fund may enter into forward foreign currency exchange contracts.
Foreign currency exchange contracts are recorded at market value. Certain risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or losses
arising from such transactions are included in net realized gain (loss) from
foreign currency transactions. At March 31, 1998 the International Fund had
$1,049 in unrealized depreciation on such foreign currency contracts.
Other -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class specific expenses, such as
12b-1 service fees, are borne by that class. Income, other expenses and realized
and unrealized gains and losses of a Portfolio are allocated to the respective
class on the basis of the relative net assets each day.
All organizational costs incurred with the start up of the Emerging Growth Fund,
the Core Growth Fund, the Select Equity Fund, the Large Cap Growth Fund, the
Technology & Communications Fund, the Limited Fund, the Large Cap 20 Fund, the
Large Cap Value Fund, the Mid-Cap Value Fund, the Small Cap Value Fund, the
Strategic Small Company Fund, the International Fund and the Cash Reserves Fund
are being amortized on a straight line basis over a period of sixty months. In
the event that any of the initial shares of the Portfolio are redeemed by any
holder thereof during the period that the Portfolio is amortizing its
organizational costs, the redemption proceeds payable to the holder thereof will
be reduced by the unamortized organizational costs in the same ratio as the
number of initial shares being redeemed bears to the number of initial shares
outstanding at the time of redemption.
Use of Estimates in the Preparation of Financial Statements -- The preparation
of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. Investment Advisory Fees, Administrative Fees and Other Transactions with
Affiliates
The Fund and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
paid a monthly fee at an annual rate of 0.85% of the average daily net assets of
the Growth, Emerging Growth, Core Growth, Select Equity, Technology &
Communications, Large Cap 20, and Mid-Cap Value Funds, 0.75% of the average
daily net assets of the Large Cap Growth Fund, 0.65% of the Large Cap Value
Fund, 1.00% of the average daily net assets of the Limited, Small Cap Value,
Strategic Small Company and International Funds, and 0.30% of the average daily
net assets of the Cash Reserves Fund.
In the interest of limiting expenses of the Portfolios, the Adviser has entered
into expense limitation agreements with the Fund ("Expense Limitation
Agreements"), with respect to the Core Growth, Technology & Communications,
Limited, Large Cap 20, Large Cap Value, Mid-Cap Value, Small Cap Value,
Strategic Small Company and International Funds, pursuant to which the Adviser
has agreed to waive or limit its fees and to assume other expenses of the
Portfolios to the extent necessary to limit the total annual expenses (expressed
as a percentage of the Portfolios' average daily net assets) to 1.50% for the
Core Growth, Technology & Communications, Limited, Large Cap 20, Large Cap
Value, Mid-Cap Value, Small Cap Value, and Strategic Small Company Funds and
2.25% for the International Fund. Reimbursement by the Portfolios of the
advisory fees waived or limited and other expenses paid by the Adviser pursuant
to the Expense Limitation Agreements during any of the previous two fiscal years
may be made at a later date when the Portfolios have reached a sufficient asset
size to permit reimbursement to be made without causing the total annual expense
rate to exceed 1.50% for the Core Growth, Technology & Communications, Limited,
Large Cap 20, Large Cap Value, Mid-Cap Value, Small Cap Value, and Strategic
Small Company Funds and 2.25% for the International Fund. Consequently, no
reimbursement by a Portfolio will be made unless: (i) the Portfolio's assets
exceed $75 million; (ii) the Portfolio's total annual expense ratio is less than
1.50% for the Core Growth, Technology & Communications, Limited, Large Cap 20,
Large Cap Value, Mid-Cap Value, Small Cap Value and Strategic Small Company
Funds and 2.25% for the International Fund, and (iii) the payment of such
reimbursement was approved by the Board of Directors on a quarterly basis. At
March 31, 1998, the amount of advisory fee waivers and reimbursement of third
party expenses by the Adviser subject to reimbursement were immaterial.
Pilgrim Baxter Value Investors, Inc. (formerly Newbold's Asset Management,
Inc.), a wholly-owned subsidiary of the Adviser serves as the sub-adviser to the
Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund and the Strategic
Small Company Fund. For its services provided pursuant to its Investment
Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim Baxter Value
Investors receives a fee from the Adviser at an annual rate of 0.40%, 0.50%,
0.65% and 0.30%, respectively, of the average daily net assets of the Large Cap
Value Fund, Mid-Cap Value Fund, Small Cap Value Fund and the Strategic Small
Company Fund. Pilgrim Baxter Value Investors receives no fees directly from the
Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund or the Strategic
Small Company Fund.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the
sub-adviser to the International Fund. For its services provided pursuant to its
Investment Sub-Advisory Agreement with the Adviser and the Fund, Murray
Johnstone receives a fee from the Adviser at an annual rate of 0.50% of the
International Fund's average daily net assets. Murray Johnstone receives no fees
directly from the International Fund, and may periodically reduce its
sub-advisory fee.
Wellington Management Company, LLP ("WMC") serves as the sub-adviser to the Cash
Reserves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMCis entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum annual fee of $50,000. WMC may, from time
to time, waive all or a portion
87
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The PBHG Funds, Inc.
================================================================================
Notes to Financial Statements - Concluded
- --------------------------------------------------------------------------------
As of March 31, 1998
of its fee from the Adviser. WMC receives no fees directly from the Cash
Reserves Fund.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of each Portfolio.
SEI Investments Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in SEI Fund
Resources (the "Sub-Administrator"). The Sub-Administrator is an affiliate of
the Fund's Distributor and assists the Administrator in providing administrative
services to the Fund. For acting in this capacity, the Administrator pays the
Sub-Administrator a fee at the annual rate of 0.07% of the average daily net
assets of each Portfolio with respect to $2.5 billion of the total average daily
net assets of the Fund, and a fee at the annual rate of 0.025% of the average
daily net assets of each Portfolio with respect to the total daily net assets of
the Fund in excess of $2.5 billion. Effective May 1, 1998 the Administrator will
pay the Sub-Administrator a fee equal to the greater of $35,000 per Portfolio
and $5,000 per additional class of shares or at the annual rate of 0.04% of the
average daily assets of each Portfolio with respect to the first $2.5 billion of
the total average daily net assets of (i) the Fund, (ii) PBHG Insurance Series
Fund, Inc., and (iii) PBHG Advisor Funds, Inc., other fund families managed by
the Adviser (collectively known as the "PBHG Fund Family"), 0.02% of the next
$7.5 billion of the average daily assets of each portfolio in the PBHG Fund
Family, and 0.02% of the average daily net assets of each portfolio in the PBHG
Fund Family in excess of $10 billion.
The Fund and SEI Investments Distribution Co. (the "Distributor") are parties to
a Distribution Agreement. The Distributor receives no fees for its distribution
services. The Fund has adopted a Service Plan (the "Plan") on behalf of the
Advisor Class shares pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan provides for the payment by the Fund of up to 0.25% of the
average daily net assets of the Advisor Class shares for certain distribution
and shareholder services. Currently only the Growth Fund has Advisor Class
shareholders.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent of
the Fund. From time to time, the Fund may pay amounts to third parties that
provide sub-transfer agency and other administrative services relating to the
Fund to persons who beneficially own interests in the Fund. CoreStates Bank,
N.A. serves as the custodian for the Growth Fund, the Emerging Growth Fund, the
Core Growth Fund, the Select Equity Fund, the Large Cap Growth Fund, the
Technology & Communications Fund, the Limited Fund, the Large Cap 20 Fund, the
Large Cap Value Fund, the Mid-Cap Value Fund, the Small Cap Value Fund, the
Strategic Small Company Fund, and the Cash Reserves Fund. The Northern Trust
Company serves as the custodian for the International Fund.
Effective January 2, 1998 the Fund entered into a shareholder servicing
agreement with PBHG Fund Services to provide shareholder support and other
shareholder account-related services. PBHG Fund Services has, in turn,
contracted with UAM Shareholder Service Center, Inc. to assist in the provision
of those services.
Officers and directors of the Fund who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
for their services from the Fund.
4. Investment Transactions
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Equity Portfolios for the period ended
March 31, 1998 were as follows:
Purchases Sales
(000) (000)
---------- ----------
Growth Fund $4,812,926 $5,521,549
Emerging Growth Fund 1,322,948 1,471,046
Large Cap Growth Fund 59,485 102,338
Select Equity Fund 261,866 457,958
Core Growth Fund 170,736 357,128
Limited Fund 118,832 144,369
Large Cap 20 Fund 149,267 99,226
Large Cap Value Fund 245,403 217,483
Mid-Cap Value Fund 147,999 102,635
Small Cap Value Fund 238,747 140,257
International Fund 17,358 20,339
Technology & Communications Fund 1,439,385 1,617,814
Strategic Small Company Fund 224,141 212,337
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolios and the total cost of securities for Federal income tax
purposes at March 31, 1998 are as follows:
Total Cost
Net of Securities
Unrealized for Federal
Unrealized Unrealized Appreciation/ Income Tax
Appreciation Depreciation (Depreciation) Purposes
(000) (000) (000) (000)
---------- ------------ -------------- ------------
Growth Fund $1,605,110 $ 54,576 $1,550,534 $3,980,167
Emerging Growth
Fund 377,570 32,866 344,704 1,041,294
Large Cap Growth
Fund 51,756 397 51,359 90,669
Select Equity
Fund 130,598 1,459 129,139 202,909
Core Growth
Fund 43,542 3,744 39,798 125,162
Limited Fund 53,450 1,841 51,609 127,912
Large Cap 20
Fund 47,750 315 47,435 146,443
Large Cap Value
Fund 5,455 349 5,106 69,111
Mid-Cap Value
Fund 4,005 696 3,309 51,318
Small Cap Value
Fund 10,307 3,925 6,382 113,992
International Fund 4,370 687 3,683 16,765
Technology &
Communications
Fund 133,451 5,744 127,707 384,089
Strategic Small
Company Fund 22,813 4,047 18,766 93,450
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The PBHG Funds, Inc.
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Subsequent to October 31, 1997, the following Portfolios had recognized net
capital losses that have been deferred to 1998 for tax purposes and can be used
to offset future capital gains at March 31, 1999. The Portfolios also had
capital loss carryforwards at March 31, 1998, that can be used to offset future
capital gains.
Post Capital Loss Capital Loss
10/31/97 Carryovers Carryovers
Loss Deferral Expiring 2005 Expiring 2006
------------- ------------- -------------
Growth Fund 177,970,492 -- --
Select Equity Fund 5,116,882 -- 6,884,443
Core Growth Fund* 53,271,490 14,962,879 --
Technology &
Communications
Fund 8,526,590 -- --
* The Capital Loss Carryover for the Core Growth Fund expires on August 31,
2005. This Fund has an August 31 year end for Federal Income Tax Purposes.
5. Concentration of Credit Risk
The Cash Reserves Fund invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within one of the two
highest ratings categories assigned by a nationally recognized statistical
rating agency, or, if not rated, are believed to be of comparable quality. The
ability of the issuers of the securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry,
state or region.
The International Fund invests in securities of foreign issuers in various
countries. These investments may involve certain considerations and risks not
typically associated with investments in the United States, as a result of,
among other factors, the possibility of future political and economic
developments and the level of governmental supervision and regulation of
securities markets in the respective countries.
6. Acquisition
On September 29, 1997 the net assets of the Newbold Equity Fund of the UAM Funds
Trust were acquired by the PBHG Large Cap Value Fund pursuant to an agreement
and plan of reorganization dated June 26, 1997. The transaction was structured
for tax purposes to qualify as a tax-free reorganization under the Internal
Revenue Code. Prior to reorganization, the Newbold Equity Portfolio had net
assets of $12,288,371 and 1,206,437 shares outstanding. After the
reorganization, PBHG Large Cap Value Fund issued 988,606 shares at an NAV of
$12.43. The combined asssets after the reorganization were $70,925,600. The
acquired unrealized appreciation at September 29, 1997 of the Newbold Equity
Fund was $2,212,713.
7. Line of Credit
Each Portfolio may borrow, an amount up to its prospectus defined limitations,
from a committed line of credit available to (i) the Fund and (ii) PBHG
Insurance Series Fund, Inc. Draws on the line of credit will bear interest at
the Federal Funds Rate plus 0.40%. As of March 31, 1998, none of the Funds had
an outstanding borrowing. For the period ending March 31, 1998, the maximum
amount borrowed was $2,800,000, the average outstanding was $30,137, and the
daily weighted average interest rate was 5.79% for the Core Growth Fund. No
other Fund had any borrowings during the period ended March 31, 1998.
- --------------------------------------------------------------------------------
Shareholder Voting Results (unaudited)
There was a special meeting held on December 3, 1997, that was adjourned until
January 17, 1998, at which the shareholders of the PBHG Large Cap 20 Fund voted
on a proposal to change the subclassification of the Fund from a diversified
investment company to a non-diversified investment company. The following were
the results of the vote:
Shares Voted % of Vote % of Total
------------ --------- ----------
For 3,786,069 86.18% 45.54%
Against 283,999 6.46% 3.42%
Abstain 323,560 7.36% 3.89%
--------- ------ ------
Total 4,393,628 100.00% 52.85%
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The PBHG Funds, Inc.
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Notice to Shareholders (unaudited)
For shareholders that do not have a March 31, 1998 taxable year end, this notice
is for informational purposes only. For shareholders with a March 31, 1998
taxable year end, please consult your tax adviser as to the pertinence of this
notice.
For the fiscal year ended March 31, 1998, the Funds are designating net capital
gains and qualifying dividends with regard to distributions paid during the year
as follows:
<TABLE>
<CAPTION>
(A) (B)
Net Ordinary (C)
Capital Gains Income Total (D)
Distributions Distributions Distributions Qualifying
Fund (Tax Basis) (Tax Basis) (Tax Basis) Dividends(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Growth 0% 0% 0% 0%
Emerging Growth 0% 0% 0% 0%
Core Growth 0% 0% 0% 0%
Select Equity 0% 0% 0% 0%
Large Cap Growth 100% 0% 100% 0%
Technology & Communications 0% 100% 100% 2%
Limited 33% 67% 100% 1%
Large Cap 20 0% 0% 0% 0%
Large Cap Value 6% 94% 100% 6%
Strategic Small Company 0% 100% 100% 2%
International 61% 39% 100% 0%
Cash Reserves 0% 100% 100% 0%
Mid-Cap Value 0% 0% 0% 0%
Small Cap Value 0% 100% 100% 4%
============================================================================================================
</TABLE>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
* Items (A) and (B) are based on a percentage of each portfolio's
distributions.
** Item (D) is based on a percentage of ordinary income distributions of each
portfolio.
None of the Portfolios qualify in California, Connecticut, or New York to
pass through exempt interest dividends from U.S. government obligations.
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The PBHG Funds, Inc
[LOGO]
P.O. Box 419534
Kansas City, MO 64141-6534
Investment Adviser:
Pilgrim Baxtex & Associates, Ltd.
Distributor
SEI Investments Distribution Co.
To open an account, receive account information
or request literature call 1-800-433-0051
