The PBHG Funds, Inc.
[LOGO]
PBHG
SEMI-ANNUAL REPORT
September 30, 1998
<PAGE>
THE PBHG FUNDS, INC.
PBHG Family of Funds
PBHG Growth Funds
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 Value Funds
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Specialty Funds
PBHG International Fund
PBHG Cash Reserves Fund
PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund
1
<PAGE>
THE PBHG FUNDS, INC.
Table of Contents
Message to Shareholders 3
Portfolio Highlights and Statements of Net Assets
PBHG Growth Funds
- ---------------------------------------------------------------
PBHG Growth Fund 4
PBHG Emerging Growth Fund 9
PBHG Large Cap Growth Fund 14
PBHG Select Equity Fund 17
PBHG Core Growth Fund 20
PBHG Limited Fund 24
PBHG Large Cap 20 Fund 28
PBHG Value Funds
- ---------------------------------------------------------------
PBHG Large Cap Value Fund 30
PBHG Mid-Cap Value Fund 34
PBHG Small Cap Value Fund 38
PBHG Specialty Funds
- ---------------------------------------------------------------
PBHG International Fund 43
PBHG Cash Reserves Fund 46
PBHG Technology & Communications Fund 48
PBHG Strategic Small Company Fund 51
Statements of Assets and Liabilities 57
Statements of Operations 58
Statements of Changes in Net Assets 60
Financial Highlights 64
Notes to Financial Statements 66
2
<PAGE>
THE PBHG FUNDS, INC.
Message To Shareholders
Dear Fellow Shareholders:
The stock market experienced dramatic changes in the six months ended
September 30, 1998. Uncertainty was the defining feature of the period and with
uncertainty often comes volatility. The S & P 500 Index reached a record high on
July 17, 1998 then quickly began a downward trend, falling 14% from its high to
the end of September. The Russell 2000 Index reached its high on April 21, 1998
then fell over 25% through the end of September.
The market's recent decline is enough to unsettle even the most stalwart
investors. When, in the near term, the stock market is declining, it is hard to
focus on the fact that, in recent years, the United States has enjoyed one of
the longest bull markets in history. Nevertheless, it is important to remember
that our country has enjoyed a period of unprecedented prosperity.
In contrast, many foreign economies began to face a period of
unprecedented turmoil during the last year. For a long time, U. S. investors
remained uncertain about the effect, if any, this would have on our own economy.
Now, as recessionary and deflationary pressures plague Asia, Russia and some
Latin American countries, the market finally recognizes that it is difficult to
view the United States in isolation from the economic hardships facing other
nations. In the words of Alan Greenspan, "it is just not credible that the
United States can remain an oasis of prosperity unaffected by a world that is
experiencing greatly increased stress." When our trading partners, large and
small, experience problems, eventually the U.S. feels pain to some extent. The
degree to which we tolerate the pain depends, in part, on our domestic economic
health.
The stock market is believed to be a leading economic indicator. If this
is true, the market may be revealing that our economy is not as healthy as it
has been in recent years. Labor Secretary Alexis Herman believes, "it is a
different kind of picture this month, but it's still a solid picture. We still
have inflation in check and low unemployment. We are moving from spectacular
growth to solid growth." Perhaps that is the extent of the problem. Indeed, the
Federal Reserve thought the problem was serious enough to lower interest rates
twice to-date. Corporate earnings estimates for large, internationally exposed
companies have been declining for several months. Now, analysts are trimming
their earnings estimates for smaller, domestic companies.
In the last six months, we faced a market that placed less emphasis on
valuations and fundamentals, and more emphasis on liquidity and size. While
trying, this situation is not entirely surprising in a slowing economy. As
investors became more uncertain about the economy, they sought the perceived
safety of the largest, most liquid stocks and bonds. In this market environment,
the performance of the PBHG Funds followed suit -- our large
capitalization-oriented funds generally out-performed their small capitalization
counterparts. This is also not entirely surprising. On four occasions prior to
September 30, 1998, the PBHG Growth Fund, which is comprised of smaller
companies, experienced point-to-point declines of over 20%. However, in each
instance the Fund rebounded with average returns over the next six month of
32.5%. Persistence and patience are essential, as excess returns are often
earned abruptly, without warning, over a short period of time.
Until the market's attention turns back to fundamentals and valuations,
bigger may remain better. It is difficult to predict when changes in investors'
perceptions will occur. Similarly, we do not know how long the current market
decline will last, and perhaps it will have reversed by the time you receive
this report. We do believe that our patience in a challenging environment will
be rewarded over time.
With uncertainty often comes volatility and with volatility often comes
risk. While we do not necessarily welcome additional risk, we see the market's
recent volatility as an opportunity to invest in good companies at very
attractive prices. A long-term outlook is one of the most important factors in
achieving superior results.
We thank you for your continuing confidence in our funds, especially in
this time of uncertainty. We will continue to strive to provide you with the
performance you seek and the broad array of products you need.
[PHOTO] [PHOTO]
Sincerely,
/s/ Harold J. Baxter /s/ Gary L. Pilgrim
-------------------- -------------------
Harold J. Baxter Gary L. Pilgrim
Chairman President
The PBHG Funds, Inc. The PBHG Funds, Inc.
3
<PAGE>
THE PBHG FUNDS, INC.
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
PBHG Growth (PBHG Class) Fund
Russell 2000 Growth Index (4)
Lipper Mid-Cap Funds Average (5)
PBHG Growth
(PBHG Class) Russell 2000 Lipper Mid Cap
Fund Growth Index Funds Average
12/85 10000 10000 10000
3/86 11510 11482 11698
6/86 12680 12233 12843
9/86 11240 10245 11252
12/86 12394 10358 11690
3/87 16871 13175 14494
6/87 15080 12991 14601
9/87 17524 13413 15375
12/87 13832 9273 11808
3/88 14660 10888 13080
6/88 15684 11579 13994
9/88 14744 11260 13679
12/88 14780 11162 13789
3/89 15244 11991 14878
6/89 17004 12767 16184
9/89 19896 13907 18005
12/89 19109 13413 17652
3/90 19377 13057 17511
6/90 21823 13881 18891
9/90 15483 10259 15247
12/90 17266 11078 16767
3/91 22659 14462 20487
6/91 20664 13961 20295
9/91 23074 15467 22196
12/91 26179 16748 24503
3/92 25782 17207 24623
6/92 23544 15140 23128
9/92 23644 15433 23968
12/92 33612 18050 27342
3/93 34668 17726 27870
6/93 39822 18236 28544
9/93 47344 19938 30708
12/93 49312 20461 31460
3/94 47592 19629 30457
6/94 41591 18397 28931
9/94 49052 20112 31271
12/94 51654 19964 30915
3/95 54219 21058 33082
6/95 59998 23147 36007
9/95 70712 25779 39910
12/95 77660 26158 40544
3/96 82140 27662 43062
6/96 89348 29278 45362
9/96 91621 29027 46822
12/96 85290 29105 47862
3/97 69375 26052 44880
6/97 80420 30626 51877
9/97 90192 35808 59352
12/97 82433 32874 57429
3/98 91653 36780 64349
6/98 88212 31841 46512
9/98 65063 26917 51626
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 somewhat lower than a year ago.
(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 six month returns have not been annualized.
(3) 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
September 30, 1998 was -10.81%.
(4) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and capital
gains distributions, if any, but does not reflect fees, brokerage commissions,
or other expenses of investing.
(5) The Lipper 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Annualized Annualized Annualized
6 Months (2) One Year 3 Year 5 Year 10 Year
Return Return Return Return
---------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
PBHG Growth Fund-PBHG Class -29.01% -27.86% -2.74% 6.56% 16.00%
PBHG Growth Fund-Advisor Class (3) -29.09% -28.04% -2.90% 6.46% 15.95%
</TABLE>
Sector Weightings at September 30, 1998 (Unaudited)
Cash (7%)
Consumer (11%)
Financial (1%)
Health (13%)
Industrial/General
Manufacturing (2%)
Service (27%)
Technology (39%)
% of Total Porfolio Investments
4
<PAGE>
THE PBHG FUNDS, INC.
PBHG Growth Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Common Stocks -- 92.8%
Consumer -- 10.6%
Consumer Products Miscellaneous -- 0.2%
Fossil* 404,400 $ 5,510
Memberworks* 195,200 3,025
---------
8,535
- -------------------------------------------------------------
Entertainment/Movies -- 0.4%
Family Golf Centers* 777,900 13,808
---------
13,808
- -------------------------------------------------------------
Hotels/Resorts -- 0.5%
Prime Hospitality* 2,154,600 15,082
---------
15,082
- -------------------------------------------------------------
Packaged Goods/Cosmetics -- 2.0%
Helen of Troy Limited* 316,000 6,123
NBTY* 1,457,700 11,479
Rexall Sundown* 1,960,600 30,267
Twinlab* 749,700 19,211
---------
67,080
- -------------------------------------------------------------
Retail-Apparel -- 1.3%
American Eagle Outfitters* 419,300 14,518
Buckle* 214,000 3,852
Goodys Family Clothing* 2,021,300 24,256
---------
42,626
- -------------------------------------------------------------
Retail-Catalog -- 0.9%
MSC Industrial Direct, Cl A* 1,507,700 30,154
---------
30,154
- -------------------------------------------------------------
Retail-Discount Stores -- 1.6%
Dollar Tree Stores* 1,665,700 52,157
---------
52,157
- -------------------------------------------------------------
Retail-Home Furnishing -- 0.6%
Linens N Things* 729,700 20,067
---------
20,067
- -------------------------------------------------------------
Retail-Specialty -- 0.5%
Central Garden & Pet* 184,100 3,406
Party City* 968,500 12,711
---------
16,117
- -------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 2.0%
Whole Foods Market* 1,578,300 66,486
---------
66,486
- -------------------------------------------------------------
Specialty Food/Candy -- 0.6%
American Italian Pasta, Cl A* 801,100 21,029
---------
21,029
- -------------------------------------------------------------
Total Consumer (Cost $383,224) 353,141
---------
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Financial -- 0.9%
Insurance -- 0.9%
Mutual Risk Management Limited 851,400 $ 30,118
---------
30,118
---------
Total Financial (Cost $27,622) 30,118
---------
- -------------------------------------------------------------
Health -- 13.3%
Assisted Living -- 0.7%
Alternative Living Services* 894,700 23,933
---------
23,933
- -------------------------------------------------------------
Contract Research -- 0.0%
Icon ADR* 7,500 245
---------
245
- -------------------------------------------------------------
Health Care Management Services -- 1.5%
Access Health* 1,335,500 49,246
---------
49,246
- -------------------------------------------------------------
Hospital Supplies -- 0.9%
Safeskin* 945,000 29,827
---------
29,827
- -------------------------------------------------------------
Hospital/Nursing Management -- 0.8%
Res-Care* 1,423,550 26,692
---------
26,692
- -------------------------------------------------------------
Information Systems -- 2.0%
Cerner* 1,084,500 29,078
Medical Manager* 1,042,400 23,845
Medquist* 448,500 14,184
---------
67,107
- -------------------------------------------------------------
Medical Devices -- 1.1%
Arterial Vascular Engineering* 78,000 2,886
Minimed* 217,500 14,355
Theragenics* 1,448,000 20,544
---------
37,785
- -------------------------------------------------------------
Pharmaceutical Services -- 3.1%
Boron Lepore & Associates* 413,500 15,661
Express Scripts, Cl A* 1,068,900 87,917
---------
103,578
- -------------------------------------------------------------
Physician Practice Management -- 0.7%
Pediatrix Medical Group* 525,800 23,595
---------
23,595
- -------------------------------------------------------------
Special Outpatient Facility -- 2.5%
Renal Care Group* 1,136,000 29,110
Total Renal Care Holdings* 2,038,000 48,912
---------
78,022
---------
Total Health (Cost $382,018) 440,030
---------
- -------------------------------------------------------------
5
<PAGE>
THE PBHG FUNDS, INC.
PBHG Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Industrial/General Manufacturing -- 2.1%
Aerospace -- 0.1%
Kellstrom Industries* 223,300 $ 3,098
---------
3,098
- -------------------------------------------------------------
Auto-Related -- 0.5%
Gentex* 1,099,600 16,494
---------
16,494
- -------------------------------------------------------------
Multi-Industry -- 1.5%
Applied Power, Cl A 1,815,400 49,583
---------
49,583
---------
Total Industrial/General Manufacturing (Cost $82,998) 69,175
---------
- -------------------------------------------------------------
Service -- 27.0%
Advertising -- 1.6%
Lamar Advertising, Cl A* 1,900,700 53,220
---------
53,220
- -------------------------------------------------------------
Commercial Services -- 2.7%
Network Solutions, Cl A* 678,900 28,259
Pre Paid Legal* 848,300 21,685
United Rentals* 1,595,100 38,183
---------
88,127
- -------------------------------------------------------------
Communications Services -- 1.4%
IDT* 846,100 19,460
Pacific Gateway Exchange* 739,200 27,351
---------
46,811
- -------------------------------------------------------------
Consulting -- 1.0%
Metzler Group* 1,000,250 34,258
---------
34,258
- -------------------------------------------------------------
Educational Services -- 4.8%
Apollo Group, Cl A* 3,286,800 91,620
CBT Group ADR* 2,328,100 31,429
Devry* 1,502,200 35,208
---------
158,257
- -------------------------------------------------------------
Electronic Commerce -- 1.6%
Transaction Systems Architects* 1,539,000 54,634
---------
54,634
- -------------------------------------------------------------
Employment Services -- 2.5%
Century Business Services* 873,400 17,796
Metamor Worldwide* 1,127,500 31,006
Romac International* 856,900 15,424
Syntel* 824,300 18,341
---------
82,567
- -------------------------------------------------------------
Environmental -- 0.4%
US Liquids* 685,600 12,169
---------
12,169
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Information/Computer Services -- 0.7%
Systems & Computer Technology* 1,852,000 $ 23,845
---------
23,845
- -------------------------------------------------------------
Printing Services/Forms -- 0.5%
Mail-Well* 1,849,600 15,837
---------
15,837
- -------------------------------------------------------------
Systems Integrator -- 7.2%
Ciber* 1,582,000 31,937
Complete Business Solutions* 824,400 23,701
Computer Horizons* 828,300 20,656
Computer Task Group 854,100 25,036
Henry, Jack and Associates 382,300 18,255
Information Management Resources* 1,152,800 28,532
International Network Services* 622,800 25,846
Mastech* 768,800 18,499
Sapient* 826,000 28,187
Whittman-Hart* 1,055,800 19,400
---------
240,049
- -------------------------------------------------------------
Transactions Processing -- 2.6%
Concord EFS* 2,004,537 51,742
International Telecommunications
Data System* 675,700 19,595
Saville Systems ADR* 1,113,700 16,149
---------
87,486
---------
Total Service (Cost $886,341) 897,260
---------
- -------------------------------------------------------------
Technology -- 38.9%
Contract Manufacturing -- 0.6%
Flextronics International Limited* 598,600 21,213
---------
21,213
- -------------------------------------------------------------
Digital Video Related -- 4.7%
Engineering Animation* 833,400 39,795
Gemstar International* 2,275,800 105,540
Pinnacle Systems* 467,400 12,152
---------
157,487
- -------------------------------------------------------------
Electronic Components -- 0.2%
Artisan Components* 771,200 5,687
---------
5,687
- -------------------------------------------------------------
Networking Hardware -- 0.9%
Xircom* 300,400 7,360
Xylan* 1,670,600 22,135
---------
29,495
- -------------------------------------------------------------
Networking Security -- 0.6%
Checkpoint Software* 1,048,300 20,835
---------
20,835
- -------------------------------------------------------------
6
<PAGE>
THE PBHG FUNDS, INC.
PBHG Growth Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Networking Software -- 5.7%
Concord Communications* 167,500 $ 6,658
Legato Systems* 1,388,000 71,309
Veritas Software* 2,031,275 112,228
---------
190,195
- -------------------------------------------------------------
PC-Peripherals Manufacturing -- 0.2%
Xeikon NV ADR* 304,700 5,161
---------
5,161
- -------------------------------------------------------------
Precision Instruments -- 3.3%
Waters* 1,636,700 109,659
---------
109,659
- -------------------------------------------------------------
Semi-Conductor Manufacturing -- 3.9%
Applied Micro Circuits* 788,200 11,724
Level One Communications* 1,208,750 24,326
Micrel* 828,400 21,953
Microchip Technology* 1,090,600 23,857
MMC Networks* 792,800 12,982
Vitesse Semiconductor* 1,370,100 32,369
---------
127,211
- -------------------------------------------------------------
Software-Client/Server -- 8.3%
BEA Systems* 838,000 18,122
Citrix Systems* 1,930,750 137,083
Documentum* 272,200 10,786
Filenet* 1,258,700 17,622
Hyperion Solutions* 1,627,175 35,289
Microstrategy* 214,400 8,040
Peregrine Systems* 595,600 23,973
Progress Software* 996,000 25,772
---------
276,687
- -------------------------------------------------------------
Software-Database -- 0.1%
Platinum Software* 411,300 4,216
---------
4,216
- -------------------------------------------------------------
Software-Enterprise Resource Planning-- 0.7%
Great Plains Software* 158,100 7,470
TSI International Software Limited* 476,600 16,502
---------
23,972
- -------------------------------------------------------------
Software-Internet -- 0.5%
Mindspring Enterprise* 410,300 17,027
---------
17,027
- -------------------------------------------------------------
Software-Manufacturing -- 1.6%
Aspect Development* 1,223,900 48,191
---------
48,191
- -------------------------------------------------------------
Software-Other -- 0.6%
Software AG Systems* 1,183,100 20,113
---------
20,113
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ---------------------------------------------------------------
Software-Testing -- 1.1%
Mercury Interactive* 921,300 $ 36,564
---------
36,564
- -------------------------------------------------------------
Telecommunication Components -- 1.2%
Uniphase* 1,009,000 41,369
---------
41,369
- -------------------------------------------------------------
Telecommunications Equipment -- 2.8%
Excel Switching* 1,231,700 29,099
Gilat Satellite Networks Limited* 809,900 36,445
Inter-Tel* 539,600 6,981
Premisys Communications* 184,100 1,289
World Access* 831,400 16,836
---------
90,650
- -------------------------------------------------------------
Voice/Call Transaction Processing -- 1.9%
AVT* 630,500 14,265
Genesys Telecom Labs* 859,400 15,953
Geotel Communications* 1,265,600 34,013
---------
64,231
---------
Total Technology (Cost $1,073,355) 1,289,963
---------
Total Common Stock (Cost $2,835,558) 3,079,687
---------
- -------------------------------------------------------------
Repurchase Agreements -- 7.3%
Greenwich
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $72,034,122 (collaterized
by U.S. Treasury Instrument: total market
value $73,469,273) (a) $ 72,023 72,023
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $159,513,119 (collaterized
by U.S. Government Obligations: total
market value $162,678,422) (a) 159,489 159,489
Morgan Stanley
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $8,858,719 (collaterized
by U.S. Government Obligations: total
market value $9,058,132) (a) 8,857 8,857
---------
Total Repurchase Agreements (Cost $240,369) 240,369
---------
Total Investments-- 100.1% (Cost $3,075,927) 3,320,056
---------
- -------------------------------------------------------------
Other Assets and Liabilities -- (0.1%)
Other Assets and Liabilities, Net (1,916)
---------
- -------------------------------------------------------------
7
<PAGE>
THE PBHG FUNDS, INC.
PBHG Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Value (000)
- ---------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
400 million shares -- $0.001 par value)
based on 162,120,738 outstanding shares
of common stock $3,284,785
Fund shares of advisor class (authorized
200 million shares -- $0.001 par value)
based on 3,444,294 outstanding shares
of common stock 83,217
Accumulated net investment loss (24,315)
Accumulated net realized loss on investments (269,676)
Net unrealized appreciation on investments 244,129
----------
Total Net Assets-- 100.0% $3,318,140
==========
Net Asset Value, Offering and Redemption
Price Per Share-- PBHG Class $20.04
==========
Net Asset Value, Offering and Redemption
Price Per Share-- Advisor Class $19.94
==========
* 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.
8
<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
PBHG Emerging Russell 2000 Lipper Small
Growth Fund Growth Index Cap Funds
6/93 10000 10000 10000
9/93 12500 10933 10883
12/93 13100 11220 11157
3/94 13100 10764 10844
6/94 12008 10088 10260
9/94 14621 11029 11126
12/94 16216 10947 11096
3/95 17290 11548 11740
6/95 19384 12693 12799
9/95 22359 14136 14305
12/95 24072 14344 14600
3/96 25963 15169 15565
6/96 29159 16055 16754
9/96 29643 15918 17081
12/96 28184 15960 17506
3/97 22403 14286 16347
6/97 27033 16794 19139
9/97 30918 19636 22313
12/97 27149 18027 21199
3/98 30045 20169 23508
6/98 28758 19011 21895
9/98 23020 14759 17579
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.
(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 six month return has not been annualized.
(3) The PBHG Emerging Growth Fund commenced operations on June 15, 1993.
(4) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(5) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the funds in the category with all capital gains distributions and
income dividends reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Annualized Annualized Annualized
6 Months(2) One Year 3 Year 5 Year Inception
Return Return Return to Date(3)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PBHG Emerging Growth Fund -23.38% -25.55% 0.98% 12.99% 17.31%
- ----------------------------------------------------------------------------------------
</TABLE>
Sector Weightings at September 30, 1998 (Unaudited)
Cash (17%)
Transportation (3%)
Technology (28%)
Consumer (11%)
Energy (1%)
Financial (2%)
Health (13%)
Industrial/General
Manufacturing (1%)
Service (24%)
% of Total Porfolio Investments
9
<PAGE>
THE PBHG FUNDS, INC.
PBHG Emerging Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Common Stocks -- 85.5%
Consumer -- 11.6%
Entertainment/Movies -- 0.6%
Cinar Films, Cl B* 308,200 $ 5,528
---------
5,528
- -------------------------------------------------------------
Hotels/Resorts -- 0.2%
Resourtquest International* 80,700 711
Vistana* 101,300 1,304
---------
2,015
- -------------------------------------------------------------
Leisure/Recreational -- 1.7%
Action Performance* 138,400 3,737
Championship Auto Racing Team* 203,800 4,980
Sports Club* 454,000 2,838
Steiner Leisure Limited* 240,000 3,750
---------
15,305
- -------------------------------------------------------------
Packaged Goods/Cosmetics -- 1.1%
NBTY* 1,256,500 9,895
---------
9,895
- -------------------------------------------------------------
Restaurants -- 4.9%
Cheesecake Factory* 120,000 1,860
CKE Restaurants 346,790 10,317
Logan's Roadhouse* 500,950 8,391
Papa John's International* 659,900 21,777
---------
42,345
- -------------------------------------------------------------
Retail-Catalog -- 1.0%
DM Management* 373,550 3,012
Insight Enterprises* 57,225 1,616
PC Connection* 52,600 539
Wilmar Industries* 179,900 3,823
---------
8,990
- -------------------------------------------------------------
Retail-Specialty -- 0.5%
Horizon Organic Holding* 74,600 1,138
Sunglass Hut International* 616,800 3,546
---------
4,684
- -------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 1.6%
Whole Foods Market* 325,000 13,691
---------
13,691
---------
Total Consumer (Cost $102,893) 102,453
- -------------------------------------------------------------
Energy -- 0.8%
Power Production -- 0.4%
KTI* 215,100 3,925
---------
3,925
- -------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------
Seismic Services & Equipment -- 0.4%
Core Laboratories N.V.* 189,600 $ 3,271
---------
3,271
---------
Total Energy (Cost $9,060) 7,196
---------
- -------------------------------------------------------------
Financial -- 2.3%
Auto Finance -- 1.2%
Americredit* 430,400 10,491
---------
10,491
- -------------------------------------------------------------
Mortgage Related -- 0.2%
New Century Financial* 229,000 1,732
---------
1,732
- -------------------------------------------------------------
Specialty Finance -- 0.9%
Healthcare Financial Partners* 132,500 5,565
T&W Financial* 158,600 2,309
---------
7,874
---------
Total Financial (Cost $26,019) 20,097
---------
- -------------------------------------------------------------
Health -- 13.3%
Assisted Living -- 0.9%
Alternative Living Services* 159,100 4,256
Assisted Living Concepts* 251,500 3,568
---------
7,824
- -------------------------------------------------------------
Contract Research -- 2.1%
Kendle International* 125,800 4,120
Parexel International* 361,800 14,110
---------
18,230
- -------------------------------------------------------------
Drugs/Pharmaceuticals -- 2.8%
Medicis Pharmaceuticals, Cl A* 620,300 24,579
---------
24,579
- -------------------------------------------------------------
Health Care Management Services -- 1.2%
Advanced Paradigm* 169,700 5,134
Hooper Holmes 252,100 5,026
---------
10,160
- -------------------------------------------------------------
Information Systems -- 3.8%
IDX Systems* 25,000 1,325
Impath* 198,600 5,909
Medical Manager* 82,200 1,880
Medquist* 515,500 16,303
Quadramed* 409,300 8,237
---------
33,654
- -------------------------------------------------------------
Managed Care-Dental -- 0.2%
American Dental Partners* 243,300 2,098
---------
2,098
- -------------------------------------------------------------
Medical Devices -- 1.5%
Minimed* 97,600 6,442
Trex Medical* 560,300 7,144
---------
13,586
- -------------------------------------------------------------
10
<PAGE>
THE PBHG FUNDS, INC.
PBHG Emerging Growth Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Medical/Dental Distributors -- 0.3%
PSS World Medical* 150,000 $ 2,775
---------
2,775
- -------------------------------------------------------------
Pharmaceutical Services -- 0.5%
NCS Healthcare, Cl A* 249,600 4,399
---------
4,399
---------
Total Health (Cost $98,906) 117,305
---------
- -------------------------------------------------------------
Industrial/General Manufacturing -- 1.0%
Railroad -- 1.0%
Motivepower Industries* 340,900 7,969
---------
7,969
---------
Total Industrial/General Manufacturing (Cost $8,078) 7,969
---------
- -------------------------------------------------------------
Service -- 25.0%
Commercial Services -- 2.2%
Analytical Surveys* 101,500 2,360
Getty Images* 307,500 5,343
United Rentals* 499,000 11,945
---------
19,648
- -------------------------------------------------------------
Consulting -- 0.9%
Metzler Group* 222,000 7,604
---------
7,604
- -------------------------------------------------------------
Educational Services -- 0.2%
Edutrek International, Cl A* 279,300 1,955
---------
1,955
- -------------------------------------------------------------
Employment Service -- 3.1%
Metamor Worldwide* 186,900 5,140
RCM Technologies* 149,300 2,202
Romac International* 813,666 14,646
Vincam Group* 399,550 5,469
---------
27,457
- -------------------------------------------------------------
Environmental -- 2.8%
Casella Waste Systems, Cl A* 69,700 2,370
Superior Services* 539,400 15,204
Tetra Tech* 336,913 7,581
---------
25,155
- -------------------------------------------------------------
Information/Computer Services -- 4.4%
Aris* 543,700 10,602
Factset Research System* 173,000 5,482
Forrester Research* 262,200 9,570
Meta Group* 406,250 13,279
---------
38,933
- -------------------------------------------------------------
Marketing Information -- 0.8%
Abacus Direct* 139,300 7,104
---------
7,104
- -------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------
Printing Services/Forms -- 0.6%
Consolidated Graphics* 50,700 $ 1,926
Cunningham Graphics International* 263,400 3,227
---------
5,153
- -------------------------------------------------------------
Radio/Television -- 0.7%
Citadel Communications* 319,600 6,532
---------
6,532
- -------------------------------------------------------------
Systems Integrator -- 8.2%
Brightstar Information Technology
Group* 373,400 2,287
Cambridge Technology Partners* 296,400 6,613
Ciber* 506,100 10,217
Computer Horizons* 218,800 5,456
Computer Management Sciences* 38,100 543
DA Consulting Group* 64,500 984
Information Management Resources* 250,700 6,205
Intelligroup* 205,500 3,494
International Network Services* 91,000 3,776
Mastech* 291,800 7,021
Renaissance Worldwide* 751,240 9,860
Technology Solutions* 496,625 5,587
Whittman-Hart* 556,600 10,228
---------
72,271
- -------------------------------------------------------------
Transactions Processing -- 1.1%
Concord EFS* 120,000 3,097
Transaction Network Services* 250,000 6,375
---------
9,472
---------
Total Service (Cost $200,844) 221,284
---------
- -------------------------------------------------------------
Technology -- 28.3%
Contract Manufacturing -- 0.2%
Flextronics International Limited* 38,300 1,357
---------
1,357
- -------------------------------------------------------------
Data Communications -- 0.0%
DSET* 38,900 331
---------
331
- -------------------------------------------------------------
Data Storage -- 2.0%
Box Hill Systems* 180,500 1,591
Network Appliance* 329,700 16,691
---------
18,282
- -------------------------------------------------------------
Design Automation Software -- 0.1%
Summit Design* 180,000 1,283
---------
1,283
- -------------------------------------------------------------
Digital Video Related -- 1.0%
Engineering Animation* 56,000 2,674
Gemstar International* 78,100 3,622
Pinnacle Systems* 83,500 2,171
---------
8,467
- -------------------------------------------------------------
11
<PAGE>
THE PBHG FUNDS, INC.
PBHG Emerging Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Electronic Components -- 0.7%
II-VI* 368,600 $ 2,788
Power-One* 144,300 1,064
WPI Group* 301,100 1,995
---------
5,847
- -------------------------------------------------------------
Graphic/Image Process -- 0.6%
Splash Technologies Holdings* 382,300 5,448
---------
5,448
- -------------------------------------------------------------
Networking Hardware -- 0.9%
Apex PC Solutions* 268,600 5,271
Cybex Computer Products* 112,400 2,824
---------
8,095
- -------------------------------------------------------------
Networking Security -- 0.8%
Checkpoint Software* 346,500 6,887
---------
6,887
- -------------------------------------------------------------
Networking Software -- 1.6%
Legato Systems* 280,300 14,400
---------
14,400
- -------------------------------------------------------------
Precision Instruments -- 1.1%
Lecroy* 301,700 4,073
Waters* 89,600 6,003
---------
10,076
- -------------------------------------------------------------
Semi-Conductor Manufacturing -- 3.3%
Applied Micro Circuits* 141,200 2,100
Genesis Microchip* 52,100 492
MMC Networks* 15,000 246
Neomagic* 1,010,800 11,624
Sipex* 398,700 10,117
Vitesse Semiconductor* 190,100 4,491
---------
29,070
- -------------------------------------------------------------
Semi-Conductor Production Equipment -- 0.5%
Asyst Technologies* 32,100 224
Helix Technology 394,400 3,895
---------
4,119
- -------------------------------------------------------------
Software-Client/Server -- 5.7%
Advent Software* 377,800 12,916
Deltek Systems* 264,800 4,882
Documentum* 378,400 14,994
Filenet* 366,300 5,128
Mobius Management Systems* 38,800 233
Peregrine Systems* 303,300 12,208
---------
50,361
- -------------------------------------------------------------
Software-Desktop -- 0.4%
Macro Media* 204,200 3,318
---------
3,318
- -------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------
Software-Enterprise Resource Planning-- 2.0%
Best Software* 77,600 $ 1,862
Flexiinternational Software* 55,000 186
Great Plains Software* 328,900 15,541
---------
17,589
- -------------------------------------------------------------
Software-Internet -- 0.7%
Inso* 323,100 6,179
---------
6,179
- -------------------------------------------------------------
Software-Other -- 1.7%
New Era of Networks* 219,700 8,953
Software AG Systems* 344,600 5,858
---------
14,811
- -------------------------------------------------------------
Software-Testing -- 0.4%
Mercury Interactive* 82,500 3,274
---------
3,274
- -------------------------------------------------------------
Telecommunications Equipment -- 1.7%
Polycom* 325,300 4,290
Tekelec* 701,800 10,702
---------
14,992
- -------------------------------------------------------------
Voice/Call Transaction Processing -- 2.9%
AVT* 116,400 2,634
Genesys Telecom Labs* 419,700 7,791
Geotel Communications* 574,600 15,442
---------
25,867
---------
Total Technology (Cost $228,785) 250,053
---------
- -------------------------------------------------------------
Transportation -- 3.2%
Air -- 1.6%
Atlantic Coast Airlines* 210,000 4,909
Skywest 495,000 9,467
---------
14,376
- -------------------------------------------------------------
Surface Transportation -- 1.6%
Coach USA* 575,700 14,212
---------
14,212
---------
Total Transportation (Cost $39,771) 28,588
---------
Total Common Stock (Cost $714,356) 754,945
---------
- -------------------------------------------------------------
12
<PAGE>
THE PBHG FUNDS, INC.
PBHG Emerging Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------------
Repurchase Agreements -- 17.2%
Greenwich
5.60%, dated 09/30/98, matures
10/01/98, repurchase price
$81,499,249 (collaterized
by U.S. Government obligations:
total market value $83,124,449)(a) $81,487 $ 81,487
J.P. Morgan
5.60%, dated 09/30/98, matures
10/01/98, repurchase price
$60,834,726 (collaterized
by U.S. Government obligations:
total market value $62,041,902)(a) 60,825 60,825
Morgan Stanley
5.60%, dated 09/30/98, matures
10/01/98, repurchase price
$10,296,699 (collaterized
by U.S. Government obligations:
total market value $10,651,770)(a) 10,295 10,295
---------
Total Repurchase Agreements (Cost $152,607) 152,607
---------
Total Investments-- 102.7% (Cost $866,963) 907,552
---------
- -------------------------------------------------------------
Other Assets and Liabilities -- (2.7%)
Other Assets and Liabilities, Net (24,141)
---------
- -------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
400 million shares -- $0.001 par value)
based on 44,644,164 outstanding
shares of common stock 828,969
Accumulated net investment loss (4,666)
Accumulated net realized gain on investments 18,519
Net unrealized appreciation on investments 40,589
---------
Total Net Assets -- 100.0% $ 883,411
=========
Net Asset Value, Offering and Redemption
Price Per Share $19.79
======
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
Cl -- Class
13
<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 S&P 500 Index and the Lipper Growth Funds Average
PBHG Large Cap Lipper Growth
Growth Fund Funds Average S&P 500 Index
4/30/95 10000 10000 10000
6/95 10920 10748 10641
9/95 13160 11673 11467
12/95 13383 11944 12179
3/96 14992 12601 12832
6/96 16158 13178 13408
9/96 16870 13573 13822
12/96 16514 14308 14975
3/97 14727 14168 15376
6/97 18197 16412 18060
9/97 20139 18137 19413
12/97 20206 17920 19971
3/98 23681 20221 22747
6/98 24861 20659 23496
9/98 21459 17915 21164
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.
(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 six month return has not been annualized.
(3) The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
(4) 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.
(5) The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indexes.
The performance figures are based on changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Annualized Annualized
6 Months(2) One Year 3 Year Inception
Return Return to Date(3)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Large Cap Growth Fund -9.39% 6.55% 17.70% 24.47%
- --------------------------------------------------------------------------------------
</TABLE>
Sector Weightings at September 30, 1998 (Unaudited)
Cash (14%)
Technology (26%)
Consumer (10%)
Financial (4%)
Health (20%)
Industrial/General
Manufacturing (4%)
Service (22%)
% of Total Porfolio Investments
14
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP GROWTH FUND
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Common Stocks -- 86.4%
Consumer -- 9.7%
Building Material Chains -- 1.2%
Home Depot 40,600 $ 1,604
---------
1,604
- -------------------------------------------------------------
Entertainment/Movies -- 1.5%
Carnival, Cl A 62,800 1,998
---------
1,998
- -------------------------------------------------------------
Funeral Homes/Services -- 0.8%
Service Corporation International 33,700 1,074
---------
1,074
- -------------------------------------------------------------
Hotels/Resorts -- 0.9%
Marriott International, Cl A 48,200 1,151
---------
1,151
- -------------------------------------------------------------
Retail-Apparel -- 1.7%
Jones Apparel Group* 100,400 2,303
---------
2,303
- -------------------------------------------------------------
Retail-Discount Stores -- 0.6%
Family Dollar Stores 52,300 824
---------
824
- -------------------------------------------------------------
Retail-Office Products/Supplies -- 3.0%
Staples* 135,000 3,965
---------
3,965
---------
Total Consumer (Cost $10,542) 12,919
---------
- -------------------------------------------------------------
Energy -- 0.4%
Contract Drilling -- 0.4%
Transocean Offshore 16,000 555
---------
555
---------
Total Energy (Cost $777) 555
---------
- -------------------------------------------------------------
Financial -- 4.3%
Consumer Finance -- 2.7%
Associates First Capital 38,000 2,479
Newcourt Credit Group 41,600 1,087
---------
3,566
- -------------------------------------------------------------
Diversified Financial Services -- 0.4%
Heller Financial* 23,000 552
---------
552
- -------------------------------------------------------------
Mortgage Related -- 1.2%
MGIC Investment 41,200 1,519
---------
1,519
---------
Total Financial (Cost $5,042) 5,637
---------
- -------------------------------------------------------------
Health -- 19.9%
Contract Research -- 2.2%
Quintiles Transnational* 64,800 2,835
---------
2,835
- -------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------
Drugs/Pharmaceuticals -- 7.1%
Lilly (Eli) & Company 17,000 $ 1,331
Pfizer 35,000 3,708
Schering-Plough 26,300 2,724
Watson Pharmaceuticals* 34,900 1,771
---------
9,534
- -------------------------------------------------------------
Hospital -- 2.6%
Health Management Associates, Cl A* 184,800 3,373
---------
3,373
- -------------------------------------------------------------
Hospital Supplies -- 1.7%
Cardinal Health 22,200 2,292
---------
2,292
- -------------------------------------------------------------
Information Systems -- 2.6%
HBO & Company 117,100 3,381
---------
3,381
- -------------------------------------------------------------
Medical Devices -- 0.6%
Guidant 10,000 743
---------
743
- -------------------------------------------------------------
Pharmaceutical Services -- 2.2%
Omnicare 81,200 2,862
---------
2,862
- -------------------------------------------------------------
Special Outpatient Facility -- 0.9%
Healthsouth* 115,400 1,219
---------
1,219
---------
Total Health (Cost $17,839) 26,239
---------
- -------------------------------------------------------------
Industrial/General Manufacturing -- 3.9%
Auto-Related -- 2.1%
Harley-Davidson 92,900 2,729
---------
2,729
- -------------------------------------------------------------
Multi-Industry -- 1.8%
Danaher 78,800 2,364
---------
2,364
---------
Total Industrial/General Manufacturing (Cost $3,486) 5,093
---------
- -------------------------------------------------------------
Service -- 22.2%
Cellular Towers -- 0.9%
American Tower Systems* 48,600 1,239
---------
1,239
- -------------------------------------------------------------
Commercial Services -- 1.9%
Central Parking 49,700 2,504
---------
2,504
- -------------------------------------------------------------
Communications Services -- 3.0%
Global Crossing* 24,700 515
MCI Worldcom* 71,400 3,490
---------
4,005
- -------------------------------------------------------------
Distribution -- 0.1%
Ingram Micro* 3,200 172
---------
172
- -------------------------------------------------------------
15
<PAGE>
THE PBHG FUNDS, INC.
PBHG Large Cap Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Educational Services -- 2.0%
Apollo Group, Cl A* 71,837 $ 2,002
CBT Group ADR* 46,200 624
---------
2,626
- -------------------------------------------------------------
Employment Service -- 1.1%
Select Appointments* 80,000 1,390
---------
1,390
- -------------------------------------------------------------
Environmental -- 4.6%
Allied Waste Industries* 114,000 2,665
Waste Management* 71,417 3,432
---------
6,097
- -------------------------------------------------------------
Information/Computer Services -- 0.4%
Gartner Group, Cl A* 27,600 576
---------
576
- -------------------------------------------------------------
Radio/Television -- 4.8%
Chancellor Media, Cl A* 45,300 1,512
Clear Channel Communications* 73,800 3,505
Univision Communications* 42,000 1,250
---------
6,267
- -------------------------------------------------------------
Systems Integrator -- 2.3%
Cambridge Technology Partners* 58,000 1,294
Computer Horizons* 46,900 1,170
Keane* 14,700 516
---------
2,980
- -------------------------------------------------------------
Transactions Processing -- 1.1%
Fiserv* 30,900 1,423
---------
1,423
---------
Total Service (Cost $27,096) 29,279
---------
- -------------------------------------------------------------
Technology -- 25.7%
Computer Manufacturing -- 3.9%
Dell Computer* 77,600 5,102
---------
5,102
- -------------------------------------------------------------
Data Storage -- 3.0%
EMC* 68,200 3,900
---------
3,900
- -------------------------------------------------------------
Design Automation Software -- 0.4%
Parametric Technology* 52,000 523
---------
523
- -------------------------------------------------------------
Networking Hardware -- 3.2%
Cisco Systems* 67,125 4,149
---------
4,149
- -------------------------------------------------------------
Networking Software -- 0.4%
Networks Associates* 15,600 554
---------
554
- -------------------------------------------------------------
Semi-Conductor Manufacturing -- 1.5%
Linear Technology 38,300 1,915
---------
1,915
- -------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------------
Software-Client/Server -- 2.1%
Compuware* 47,500 $ 2,797
---------
2,797
- -------------------------------------------------------------
Software-Desktop -- 3.3%
Microsoft* 39,400 4,336
---------
4,336
- -------------------------------------------------------------
Software-Enterprise Resource Planning-- 2.9%
J.D. Edwards & Company* 54,700 2,625
Peoplesoft* 38,000 1,240
---------
3,865
- -------------------------------------------------------------
Software-Internet -- 3.2%
America Online* 38,000 4,228
---------
4,228
- -------------------------------------------------------------
Software-System/Mainframe -- 1.8%
BMC Software* 39,400 2,367
---------
2,367
---------
Total Technology (Cost $17,131) 33,736
---------
- -------------------------------------------------------------
Transportation -- 0.3%
Surface Transportation -- 0.3%
Coach USA* 13,900 343
---------
343
---------
Total Transportation (Cost $620) 343
---------
Total Common Stock (Cost $82,533) 113,801
---------
- -------------------------------------------------------------
Repurchase Agreement -- 13.7%
J.P. Morgan
5.60%, dated 09/30/98, matures
10/01/98, repurchase price $18,015,221
(collaterized by U.S. Government
Obligations: total market
value $18,372,707)(a) $18,012 18,012
---------
Total Repurchase Agreement (Cost $18,012) 18,012
---------
Total Investments-- 100.1% (Cost $100,545) 131,813
---------
- -------------------------------------------------------------
Other Assets and Liabilities -- (0.1%)
Other Assets and Liabilities, Net (172)
---------
- -------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 6,402,055 outstanding
shares of common stock 87,610
Accumulated net investment loss (532)
Accumulated net realized gain on investments 13,295
Net unrealized appreciation on investments 31,268
---------
Total Net Assets-- 100.0% $131,641
=========
Net Asset Value, Offering and Redemption
Price Per Share $20.56
=========
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
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 S&P 500 Index
and the Lipper Capital Appreciation Funds Average
PBHG Select Equity
S&P 500 Index (4)
Lipper Capital Appreciation Funds Average (5)
PBHG Select Lipper Capital
Equity Appreciation Avg. S&P 500 Index
4/95 10000 10000 10000
6/95 11685 10756 10641
9/95 14545 11813 11487
12/95 15510 12140 12179
3/96 17326 12859 12832
6/96 19603 13488 13408
9/96 21118 13795 13822
12/96 19852 14184 14975
3/97 16123 13733 15376
6/97 19568 15676 18060
9/97 22335 17738 19413
12/97 21210 17023 19971
3/98 24473 19067 22747
6/98 26466 19150 23496
9/98 21048 16524 21169
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.
(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 six month return has not been annualized.
(3) The PBHG Select Equity Fund commenced operations on April 5, 1995.
(4) 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.
(5) The Lipper Capital Appreciation Funds Average is an equally weighted
benchmark composed of mutual funds with the investment objective of maximum
capital appreciation. The performance figures are based on changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
Annualized Annualized
6 Months(2) One Year 3 Year Inception
Return Return to Date(3)
---------- -------- ---------- ----------
PBHG Select Equity Fund -14.00% -5.76% 13.11% 24.53%
Sector Weightings at September 30, 1998 (Unaudited)
Cash (17%)
Consumer (5%)
Health (12%)
Service (24%)
Technology (42%)
% of Total Porfolio Investments
17
<PAGE>
THE PBHG FUNDS, INC.
PBHG Select Equity Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------
Common Stocks -- 83.4%
Consumer -- 4.8%
Retail-Apparel -- 4.8%
Jones Apparel Group* 556,200 $ 12,758
---------
12,758
---------
Total Consumer (Cost $11,592) 12,758
---------
- -------------------------------------------------------------
Health -- 11.9%
Contract Research -- 6.0%
Quintiles Transnational* 364,400 15,943
---------
15,943
- -------------------------------------------------------------
Information Systems -- 5.9%
HBO & Company 543,000 15,679
---------
15,679
---------
Total Health (Cost $20,849) 31,622
---------
- -------------------------------------------------------------
Service -- 24.7%
Commercial Services -- 1.0%
Neff* 265,500 2,655
---------
2,655
- -------------------------------------------------------------
Communications Services -- 0.4%.
Global Crossing* 51,400 1,073
---------
1,073
- -------------------------------------------------------------
Educational Services -- 2.7%
CBT Group ADR* 402,000 5,427
National Computer Systems 59,500 1,755
---------
7,182
- -------------------------------------------------------------
Environmental -- 2.4%
Superior Services* 223,000 6,286
---------
6,286
- -------------------------------------------------------------
Radio/Television -- 6.0%
Clear Channel Communications* 338,200 16,065
---------
16,065
- -------------------------------------------------------------
Systems Integrator -- 11.9%
Computer Horizons* 235,700 5,878
International Network Services* 357,000 14,815
Keane* 315,500 11,082
---------
31,775
- -------------------------------------------------------------
Transactions Processing -- 0.3%
Saville Systems ADR* 49,000 710
---------
710
---------
Total Service (Cost $62,789) 65,746
---------
- -------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------------
Technology -- 42.0%
Computer-Manufacturing -- 6.9%
Dell Computer* 280,400 $ 18,436
---------
18,436
- -------------------------------------------------------------
Networking Software -- 10.9%
Concord Communications* 70,900 2,818
Legato Systems* 328,200 16,861
Networks Associates* 255,000 9,053
---------
28,732
- -------------------------------------------------------------
Software-Client/Server -- 4.8%
Citrix Systems* 161,550 11,470
Compuware* 23,700 1,395
---------
12,865
- -------------------------------------------------------------
Software-Desktop -- 0.7%
Visio* 82,500 1,985
---------
1,985
- -------------------------------------------------------------
Software-Enterprise Resource Planning -- 8.0%
J.D. Edwards & Company* 390,000 18,720
Peoplesoft* 79,400 2,590
---------
21,310
- -------------------------------------------------------------
Software-Internet -- 4.9%
America Online* 116,500 12,961
---------
12,961
- -------------------------------------------------------------
Software-System/Mainframe -- 2.1%
BMC Software* 93,200 5,598
---------
5,598
- -------------------------------------------------------------
Telecommunications Equipment -- 3.7%
Tekelec* 650,600 9,922
---------
9,922
---------
Total Technology (Cost $66,756) 111,809
---------
Total Common Stock (Cost $161,986) 221,935
---------
- -------------------------------------------------------------
Repurchase Agreement -- 17.3%
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $46,149,498 (collaterized
by U.S. Government Obligations: total
market value $47,065,267)(a) $46,142 46,142
Total Repurchase Agreement (Cost $46,142) 46,142
---------
Total Investments-- 100.7% (Cost $208,128) 268,077
---------
- -------------------------------------------------------------
Other Assets and Liabilities -- (0.7%)
Other Assets and Liabilities, Net (2,025)
---------
- -------------------------------------------------------------
<PAGE>
THE PBHG FUNDS, INC.
PBHG Select Equity Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Value (000)
- -------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 12,809,535 outstanding
shares of common stock $ 193,825
Accumulated net investment loss (1,517)
Accumulated net realized gain on investments 13,795
Net unrealized appreciation on investments 59,949
----------
Total Net Assets-- 100.0% $266,052
==========
Net Asset Value, Offering and Redemption
Price Per Share $20.77
==========
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements.
19
<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
PBHG Core Growth Fund
Russell 3000 Growth Index(4)
Lipper Growth Funds Average(5)
PBHG Core Russell 3000 Lipper Growth
Growth Fund Growth Index Funds Average
12/31/95 10000 10000 10000
3/96 11820 10541 10553
6/96 13800 11206 11029
9/96 14200 11557 11359
12/96 13280 12188 11974
3/97 10340 12122 11858
6/97 12230 14400 13735
9/97 12890 15612 15179
12/97 11990 15689 15001
3/98 13530 18015 16926
6/98 13560 18663 17290
9/98 10791 16749 14994
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 September 30, 1998 the Fund's holdings ranged from
roughly $97 million to $139.5 billion in market capitalization, with an average
size of $8.7 billion. While future changes in holdings will create some
variability, we do not expect the company size features of the fund to differ
substantially from what they are presently. Stock selection is exclusively
"bottom up", focusing on individual companies and the strength of their
fundamental business characteristics. Sector exposure is not predetermined, but
follows from the selection of the most attractive individual stocks.
(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 six month return has not been annualized.
(3) The PBHG Core Growth Fund commenced operations on January 2, 1996.
(4) 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.
(5) The Lipper Growth Funds Average is an equally weighted benchmark 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
Annualized
6 Months(2) One Year Inception
Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Core Growth Fund -20.25% -16.29% 2.80%
Sector Weightings at September 30, 1998 (Unaudited)
Cash (6%)
Consumer (10%)
Energy (2%)
Financial (1%)
Health (19%)
Industrial/General Manufacturing (2%)
Service (25%)
Technology (35%)
% of Total Portfolio Investments
20
<PAGE>
THE PBHG FUNDS, INC.
PBHG Core Growth Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------------
Common Stocks -- 94.0%
Consumer -- 10.4%
Building Material Chains -- 0.7%
Home Depot 18,000 $ 711
---------
711
- ----------------------------------------------------------------
Entertainment/Movies -- 3.7%
Carnival, Cl A 47,500 1,511
Family Golf Centers* 68,300 1,212
Premier Parks* 51,400 900
---------
3,623
- ----------------------------------------------------------------
Packaged Goods/Cosmetics -- 0.8%
NBTY* 87,300 687
---------
687
- ----------------------------------------------------------------
Retail-Apparel -- 0.9%
Jones Apparel Group* 40,000 918
---------
918
- ----------------------------------------------------------------
Retail-Office Products/Supplies -- 1.0%
Staples* 33,400 981
---------
981
- ----------------------------------------------------------------
Retail-Specialty -- 0.6%
Hibbet Sporting Goods* 25,100 629
---------
629
- ----------------------------------------------------------------
Retail-Supermarkets/Drug Stores -- 1.7%
Whole Foods Market* 39,200 1,651
---------
1,651
- ----------------------------------------------------------------
Specialty Food/Candy -- 1.0%
Suiza Foods* 30,300 947
---------
947
---------
Total Consumer (Cost $12,695) 10,147
---------
- ----------------------------------------------------------------
Energy -- 1.8%
Drilling Services & Equipment -- 0.6%
Varco International* 67,900 569
---------
569
- ----------------------------------------------------------------
Marine Construction -- 0.7%
Global Industries Limited* 58,200 673
---------
673
- ----------------------------------------------------------------
Vessel & Rig Construction -- 0.5%
Friede Goldman International* 31,800 501
---------
501
---------
Total Energy (Cost $2,817) 1,743
---------
- ----------------------------------------------------------------
Financial -- 1.0%
Specialty Finance -- 1.0%
Healthcare Financial Partners* 23,400 983
---------
983
---------
Total Financial (Cost $1,029) 983
---------
- ----------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------------
Health -- 18.7%
Assisted Living -- 1.4%
Sunrise Assisted Living* 41,800 $ 1,434
---------
1,434
- ----------------------------------------------------------------
Drugs/Pharmaceuticals -- 1.3%
Pfizer 12,400 1,314
---------
1,314
- ----------------------------------------------------------------
Hospital -- 2.3%
Health Management Associates, Cl A* 92,550 1,689
Province Healthcare* 15,100 514
---------
2,203
- ----------------------------------------------------------------
Hospital Supplies -- 1.3%
Safeskin* 39,900 1,259
---------
1,259
- ----------------------------------------------------------------
Information Systems -- 5.8%
HBO & Company 62,200 1,796
Medical Manager* 10,400 238
Medquist* 57,000 1,803
Quadramed* 90,200 1,815
---------
5,652
- ----------------------------------------------------------------
Medical Devices -- 3.3%
Guidant 25,200 1,871
Thermo Cardiosystems* 84,700 1,355
---------
3,226
- ----------------------------------------------------------------
Pharmaceutical Services -- 2.6%
Omnicare 72,100 2,542
---------
2,542
- ----------------------------------------------------------------
Special Outpatient Facility -- 0.7%
Healthsouth* 64,200 678
---------
678
---------
Total Health (Cost $18,538) 18,308
---------
- ----------------------------------------------------------------
Industrial/General Manufacturing -- 2.5%
Auto-Related -- 1.2%
Harley-Davidson 39,400 1,157
---------
1,157
- ----------------------------------------------------------------
Railroad -- 1.3%
Motivepower Industries* 53,500 1,251
---------
1,251
---------
Total Industrial/General Manufacturing
(Cost $2,104) 2,408
---------
- ----------------------------------------------------------------
Service -- 24.5%
Cellular Towers -- 1.2%
American Tower Systems* 46,900 1,196
---------
1,196
- ----------------------------------------------------------------
21
<PAGE>
THE PBHG FUNDS, INC.
PBHG Core Growth Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -----------------------------------------------------------------------
Commercial Services -- 3.0%
Central Parking 25,200 $ 1,269
DST Systems* 7,500 396
United Rentals* 52,600 1,259
--------
2,924
- --------------------------------------------------------------------
Communications Services -- 1.6%
MCI Worldcom* 32,000 1,564
--------
1,564
- --------------------------------------------------------------------
Educational Services -- 1.5%
Apollo Group, Cl A* 51,350 1,431
--------
1,431
- --------------------------------------------------------------------
Environmental -- 1.7%
Waste Management* 34,000 1,634
--------
1,634
- --------------------------------------------------------------------
Marketing Information -- 1.6%
Abacus Direct* 31,200 1,591
--------
1,591
- --------------------------------------------------------------------
Radio/Television -- 4.4%
Chancellor Media, Cl A* 36,300 1,212
Clear Channel Communications* 32,200 1,529
Jacor Communications* 30,500 1,544
--------
4,285
- --------------------------------------------------------------------
Systems Integrator -- 6.9%
Cambridge Technology Partners* 51,400 1,147
Computer Horizons* 51,500 1,284
Ecsoft Group ADR* 63,200 1,304
RWD Technologies* 132,000 2,970
--------
6,705
- --------------------------------------------------------------------
Transactions Processing -- 2.6%
International Telecommunications
Data Systems* 76,050 2,206
Saville Systems ADR* 24,900 361
--------
2,567
--------
Total Service (Cost $22,365) 23,897
--------
- --------------------------------------------------------------------
Technology -- 34.6%
Computer Manufacturing -- 2.2%
Dell Computer* 32,600 2,144
--------
2,144
- --------------------------------------------------------------------
Contract Manufacturing -- 0.3%
Celestica* 22,000 279
--------
279
- --------------------------------------------------------------------
Data Storage -- 2.2%
EMC* 37,700 2,156
--------
2,156
- --------------------------------------------------------------------
Market
Description Shares Value (000)
- -----------------------------------------------------------------------
Design Automation Software -- 2.5%
Cadence Design Systems* 75,200 $ 1,923
Summit Design* 79,900 569
--------
2,492
- --------------------------------------------------------------------
Networking Hardware -- 3.4%
Ascend Communications* 25,800 1,174
Cisco Systems* 27,000 1,669
Xylan* 39,200 519
--------
3,362
- --------------------------------------------------------------------
Networking Security -- 1.2%
Axent Technologies* 63,300 1,179
--------
1,179
- --------------------------------------------------------------------
Networking Software -- 1.5%
Networks Associates* 40,875 1,451
--------
1,451
- --------------------------------------------------------------------
Semi-Conductor Manufacturing -- 0.6%
Applied Micro Circuits* 36,700 546
--------
546
- --------------------------------------------------------------------
Software-Client/Server -- 8.3%
BEA Systems* 96,900 2,096
Citrix Systems* 29,000 2,059
Compuware* 34,700 2,043
Documentum* 23,600 935
Filenet* 72,400 1,014
--------
8,147
- --------------------------------------------------------------------
Software-Desktop -- 0.7%
Macro Media* 41,800 679
--------
679
- --------------------------------------------------------------------
Software-Enterprise Resource Planning -- 2.9%
J.D. Edwards & Company* 58,600 2,813
--------
2,813
- --------------------------------------------------------------------
Software-Internet -- 1.8%
America Online* 15,500 1,724
--------
1,724
- --------------------------------------------------------------------
Software-Other -- 2.1%
Lernout & Hauspie* 37,500 1,507
Software Ag Systems* 32,500 552
--------
2,059
- --------------------------------------------------------------------
Software-System/Mainframe -- 2.3%
BMC Software* 37,800 2,270
--------
2,270
- --------------------------------------------------------------------
Telecommunications Equipment -- 1.3%
Intervoice* 6,700 154
Tekelec* 73,600 1,122
--------
1,276
- --------------------------------------------------------------------
22
<PAGE>
THE PBHG FUNDS, INC.
PBHG Core Growth Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Shares/Face Market
Description Amount (000) Value (000)
- ----------------------------------------------------------------------
Voice/Call Transaction Processing -- 1.3%
Geotel Communications* 46,600 $ 1,252
--------
1,252
--------
Total Technology (Cost $29,191) 33,829
--------
- --------------------------------------------------------------------
Transportation -- 0.5%
Surface Transportation -- 0.5%
Coach USA* 19,100 472
--------
472
--------
Total Transportation (Cost $574) 472
--------
Total Common Stock (Cost $89,313) 91,787
--------
- --------------------------------------------------------------------
Repurchase Agreement -- 5.9%
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $5,787,471 (collaterized
by U.S. Government Obligations:
total market value $5,902,315) (a) $5,787 5,787
--------
Total Repurchase Agreement (Cost $5,787) 5,787
--------
Total Investments-- 99.9% (Cost $95,100) 97,574
--------
- --------------------------------------------------------------------
Other Assets and Liabilities -- 0.1%
Other Assets and Liabilities, Net 133
--------
- --------------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 9,055,500 outstanding
shares of common stock 140,696
Accumulated net investment loss (2,094)
Accumulated net realized loss on investments (43,369)
Net unrealized appreciation on investments 2,474
--------
Total Net Assets-- 100.0% $97,707
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share $10.79
------
------
* 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.
23
<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
PBHG Limited Fund
Russell 2000 Growth Index(4)
Lipper Small Company Funds Average(5)
Russell 2000 Lipper Small Cap
PBHG Limited Fund Growth Index Funds Average
6/30/96 10000 10000 10000
9/96 11010 9914 10195
12/96 11083 9941 10449
3/97 9084 8898 9757
6/97 11454 10460 11424
9/97 13622 12229 13318
12/97 12863 11228 12653
3/98 14606 12562 14031
6/98 14057 11841 13400
9/98 11691 9193 10579
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.
(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 six month return has not been annualized.
(3) The PBHG Limited Fund commenced operations on July 1, 1996.
(4) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(5) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the Funds in the category with all capital gains distributions and
income dividends revinested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
Annualize
6 Months(2) One Year Inception
Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Limited Fund -19.96% -14.17% 7.17%
Sector Weightings at September 30, 1998 (Unaudited)
Cash (17%)
Consumer (11%)
Energy (2%)
Financial (1%)
Health (20%)
Service (24%)
Technology (25%)
% of Total Portfolio Investments
24
<PAGE>
THE PBHG FUNDS, INC.
PBHG Limited Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -------------------------------------------------------------------------
Common Stocks -- 82.9%
Consumer -- 10.7%
Hotels/Resorts -- 0.1%
Resourtquest International* 10,400 $ 92
-------
92
- ----------------------------------------------------------------------
Leisure/Recreational -- 2.0%
American Coin Merchandising* 94,300 1,238
Sports Club* 208,900 1,305
-------
2,543
- ----------------------------------------------------------------------
Packaged Goods/Cosmetics -- 1.8%
French Fragrances* 121,900 884
Natural Alternatives International* 104,400 1,279
-------
2,163
- ----------------------------------------------------------------------
Restaurants -- 2.5%
Logan's Roadhouse* 67,600 1,132
PJ America* 131,200 2,017
-------
3,149
- ----------------------------------------------------------------------
Retail-Apparel -- 1.8%
Chicos* 142,300 2,295
-------
2,295
- ----------------------------------------------------------------------
Retail-Catalog -- 1.6%
DM Management* 158,800 1,280
Insight Enterprises* 7,800 220
PC Connection* 8,100 83
Wilmar Industries* 21,200 451
-------
2,034
- ----------------------------------------------------------------------
Retail-Specialty -- 0.1%
Horizon Organic Holding* 10,000 152
-------
152
- ----------------------------------------------------------------------
Shoe Manufacturing -- 0.8%
Maxwell Shoe* 85,700 1,018
-------
1,018
-------
Total Consumer (Cost $17,590) 13,446
-------
- ----------------------------------------------------------------------
Energy -- 2.1%
Power Production -- 2.1%
KTI* 141,600 2,584
-------
2,584
-------
Total Energy (Cost $2,568) 2,584
-------
- ----------------------------------------------------------------------
Financial -- 1.2%
Investment Firms -- 0.7%
Pilgrim America Capital* 48,400 926
-------
926
- ----------------------------------------------------------------------
Mortgage Related -- 0.2%
New Century Financial* 31,200 236
-------
236
- ----------------------------------------------------------------------
Market
Description Shares Value (000)
- -------------------------------------------------------------------------
Specialty Finance -- 0.3%
T&W Financial* 21,900 $ 319
-------
319
-------
Total Financial (Cost $2,027) 1,481
-------
- ----------------------------------------------------------------------
Health -- 20.1%
Assisted Living -- 0.7%
Assisted Living Concepts* 60,300 855
-------
855
- ----------------------------------------------------------------------
Contract Research -- 3.0%
Kendle International* 116,600 3,818
-------
3,818
- ----------------------------------------------------------------------
Drugs/Pharmaceuticals -- 3.3%
Medco Research* 110,100 2,388
Medicis Pharmaceutical, Cl A* 43,150 1,710
-------
4,098
- ----------------------------------------------------------------------
Health Care Management Services -- 1.8%
Hooper Holmes 112,900 2,251
-------
2,251
- ----------------------------------------------------------------------
Health Care-Services -- 2.3%
Laser Vision Centers* 245,100 2,911
-------
2,911
- ----------------------------------------------------------------------
Information Systems -- 7.2%
Impath* 26,400 785
Mecon* 290,100 2,176
Medquist* 121,100 3,830
Quadramed* 107,500 2,163
-------
8,954
- ----------------------------------------------------------------------
Managed Care-Dental -- 0.2%
American Dental Partners* 32,100 277
-------
277
- ----------------------------------------------------------------------
Medical Devices -- 1.6%
Resmed* 38,300 1,992
-------
1,992
-------
Total Health (Cost $17,870) 25,156
-------
- ----------------------------------------------------------------------
Service -- 23.8%
Commercial Services -- 0.3%
Analytical Surveys* 13,800 321
-------
321
- ----------------------------------------------------------------------
Distribution -- 1.6%
Scansource* 129,900 2,046
-------
2,046
- ----------------------------------------------------------------------
Educational Services -- 0.1%
Edutrek International, Cl A* 11,400 80
-------
80
- ----------------------------------------------------------------------
25
<PAGE>
THE PBHG FUNDS, INC.
PBHG Limited Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- -----------------------------------------------------------------------
Employment Services -- 2.2%
RCM Technologies* 173,400 $ 2,558
Romac International* 112,800 2,031
Vincam Group* 54,150 741
--------
5,330
- ---------------------------------------------------------------------
Environmental -- 1.7%
Casella Waste Systems, Cl A* 7,400 252
Superior Services* 68,100 1,919
--------
2,171
- ---------------------------------------------------------------------
Information/Computer Services -- 5.0%
Forrester Research* 49,700 1,814
Meta Group* 56,750 1,855
--------
3,669
- ---------------------------------------------------------------------
Marketing Information -- 3.3%
Abacus Direct* 19,200 979
Market Facts 112,400 3,119
--------
4,098
- ---------------------------------------------------------------------
Printing Services/Forms -- 0.5%
Consolidated Graphics* 6,800 258
Cunningham Graphics International* 33,700 413
--------
671
- ---------------------------------------------------------------------
Radio/Television -- 0.7%
Citadel Communications* 42,200 862
--------
862
- ---------------------------------------------------------------------
Systems Integrator -- 8.4%
A Consulting Team* 15,800 150
Atlantic Data Services* 71,900 1,079
Brightstar Information Technology Group* 378,500 2,318
Computer Management Sciences* 5,150 74
Cotelligent Group* 112,300 1,972
DA Consulting Group* 7,200 110
Intelligroup* 156,300 2,657
Tier Technologies* 57,100 942
Whittman-Hart* 64,400 1,183
--------
10,485
--------
Total Service (Cost $25,327) 29,733
--------
- ---------------------------------------------------------------------
Technology -- 25.0%
Data Storage -- 0.2%
Box Hill Systems* 22,700 200
--------
200
- ---------------------------------------------------------------------
Design Automation Software -- 1.0%
Summit Design* 175,600 1,251
--------
1,251
- ---------------------------------------------------------------------
Digital Video Related -- 2.9%
Engineering Animation* 29,700 1,418
Pinnacle Systems* 11,100 289
Videoserver* 177,700 1,910
--------
3,617
- ---------------------------------------------------------------------
Market
Description Shares Value (000)
- -----------------------------------------------------------------------
Electronic Components -- 1.3%
II-VI* 48,700 $ 368
Power-One* 142,400 1,050
WPI Group* 83,100 551
--------
1,969
- ---------------------------------------------------------------------
Graphic/Image Process -- 1.0%
Splash Technologies Holdings* 88,500 1,261
--------
1,261
- ---------------------------------------------------------------------
Networking Hardware -- 3.0%
Apex PC Solutions* 33,600 660
Cybex Computer Products* 123,750 3,109
--------
3,769
- ---------------------------------------------------------------------
Precision Instruments -- 0.9%
Lecroy* 51,200 691
--------
691
- ---------------------------------------------------------------------
Semi-Conductor Manufacturing -- 2.2%
Genesis Microchip* 43,800 414
Neomagic* 138,400 1,592
Sipex* 30,000 761
--------
2,767
- ---------------------------------------------------------------------
Semi-Conductor Production Equipment-- 0.0%
Asyst Technologies* 4,300 30
--------
30
- ---------------------------------------------------------------------
Software-Client/Server -- 1.9%
Advent Software* 52,100 1,781
Deltek Systems* 33,900 625
--------
2,406
- ---------------------------------------------------------------------
Software-Enterprise Resource Planning -- 4.3%
Best Software* 108,800 2,611
Flexiinternational Software* 189,500 640
Great Plains Software* 45,100 2,131
--------
5,382
- ---------------------------------------------------------------------
Software-Other -- 1.7%
New Era of Networks* 52,300 2,131
--------
2,131
- ---------------------------------------------------------------------
Voice/Call Transaction Processing -- 4.6%
AVT* 163,900 3,708
Geotel Communications* 76,800 2,063
--------
5,771
--------
Total Technology (Cost $25,111) 31,245
--------
Total Common Stock (Cost $90,493) 103,645
--------
- ---------------------------------------------------------------------
26
<PAGE>
THE PBHG FUNDS, INC.
PBHG Limited Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- --------------------------------------------------------------------------
Repurchase Agreement -- 17.4%
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $21,762,307 (collaterized
by U.S. Government Obligations:
total market value $22,194,149)(a) $21,760 $ 21,760
--------
Total Repurchase Agreement (Cost $21,760) 21,760
--------
Total Investments -- 100.3% (Cost $112,253) 125,405
--------
- -----------------------------------------------------------------------
Other Assets and Liabilities -- (0.3%)
Other Assets and Liabilities, Net (400)
--------
- -----------------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 11,089,389 outstanding
shares of common stock 100,959
Accumulated net investment loss (646)
Accumulated net realized gain on investments 11,540
Net unrealized appreciation on investments 13,152
--------
Total Net Assets -- 100.0% $125,005
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share $11.27
------
------
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
27
<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 S&P 500
Index and the Lipper Growth Funds Average
PBHG Large Lipper Growth
Cap 20 Fund Funds Average S&P 500 Index
11/30/96 10000 10000 10000
12/96 9841 9843 9802
3/97 9260 9748 10065
6/97 11523 11291 11822
9/97 12915 12477 12707
12/97 13085 12331 13072
3/98 15998 13913 14894
6/98 17589 14191 15385
9/98 16708 12281 13858
PBHG Large Cap 20 Fund
S&P 500 Index (4)
Lipper Growth Funds Average (5)
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.
(1) Past performance of the period is not predictive of future performance. The
investment return and principal value of an investment will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2) The six month return has not been annualized.
(3) The PBHG Large Cap 20 Fund commenced operations on December 2, 1996.
(4) 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.
(5) The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose
long-term earnings are expected to grow significantly faster than the
earnings of the stocks represented in the major unmanaged stock indexes.
The performance figures are based on changes in net asset value of the
funds in the category with all capital gains distributions and income
dividends reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
Annualize
6 Months(2) One Year Inception
Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Large Cap 20 Fund 4.44% 29.38% 32.27%
- --------------------------------------------------------------------------------
Sector Weightings at September 30, 1998 (Unaudited)
Cash (13%)
Consumer (12%)
Health (17%)
Service (19%)
Technology (39%)
% of Total Porfolio Investments
28
<PAGE>
THE PBHG FUNDS, INC.
PBHG Large Cap 20 Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------------------
Common Stocks -- 87.0%
Consumer -- 12.2%
Building Material Chains -- 4.0%
Home Depot 378,900 $14,967
-------
14,967
- -------------------------------------------------------------------------
Entertainment/Movies -- 4.3%
Carnival, Cl A 512,600 16,307
-------
16,307
- -------------------------------------------------------------------------
Retail-Office Products/Supplies -- 3.9%
Staples* 493,700 14,502
-------
14,502
-------
Total Consumer (Cost $50,050) 45,776
-------
- -------------------------------------------------------------------------
Health -- 16.8%
Drugs/Pharmaceuticals -- 4.2%
Pfizer 150,700 15,965
-------
15,965
- -------------------------------------------------------------------------
Information Systems -- 5.0%
HBO & Company 651,600 18,815
-------
18,815
- -------------------------------------------------------------------------
Medical Devices -- 5.5%
Guidant 276,900 20,560
-------
20,560
- -------------------------------------------------------------------------
Special Outpatient Facility -- 2.1%
Healthsouth* 746,800 7,888
-------
7,888
-------
Total Health (Cost $71,091) 63,228
-------
- -------------------------------------------------------------------------
Service -- 18.9%
Communications Services -- 5.0%
MCI Worldcom* 382,400 18,690
-------
18,690
- -------------------------------------------------------------------------
Distribution -- 0.5%
Ingram Micro Systems* 36,000 1,928
-------
1,928
- -------------------------------------------------------------------------
Environmental -- 4.5%
Waste Management* 352,700 16,951
-------
16,951
- -------------------------------------------------------------------------
Radio/Television -- 8.9%
Chancellor Media, Cl A* 392,300 13,093
Clear Channel Communications* 429,300 20,392
-------
33,485
- -------------------------------------------------------------------------
Total Service (Cost $69,783) 71,054
-------
- -------------------------------------------------------------------------
Technology -- 39.1%
Computer-Manufacturing -- 6.6%
Dell Computer* 376,000 24,722
-------
24,722
- -------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------------------------------
Data Storage -- 6.0%
EMC* 395,000 $ 22,589
--------
22,589
- --------------------------------------------------------------------------
Networking Hardware -- 8.8%
Ascend Communications* 273,100 12,426
Cisco Systems* 337,375 20,854
--------
33,280
- --------------------------------------------------------------------------
Software-Client/Server -- 5.7%
Compuware* 363,700 21,413
--------
21,413
- --------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 0.9%
Peoplesoft* 99,200 3,236
--------
3,236
- --------------------------------------------------------------------------
Software-Internet -- 4.5%
America Online* 151,100 16,810
--------
16,810
- --------------------------------------------------------------------------
Software-System/Mainframe -- 6.6%
BMC Software* 415,900 24,981
--------
24,981
--------
Total Technology (Cost $95,507) 147,031
--------
Total Common Stock (Cost $286,431) 327,089
--------
- --------------------------------------------------------------------------
Repurchase Agreement -- 13.4%
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $50,232,126 (collaterized
by U.S. Government Obligations:
total market value $51,228,910) (a) $50,224 50,224
--------
Total Repurchase Agreement (Cost $50,224) 50,224
--------
Total Investments -- 100.4% (Cost $336,655) 377,313
--------
- --------------------------------------------------------------------------
Other Assets and Liabilities -- (0.4%)
Other Assets and Liabilities, Net (1,502)
--------
- --------------------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 22,519,758 outstanding
shares of common stock 323,715
Accumulated net investment loss (682)
Accumulated net realized gain on investments 12,120
Net unrealized appreciation on investments 40,658
--------
Total Net Assets -- 100.0% $375,811
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share $16.69
------
------
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
29
<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
PBHG Large Cap Value Fund
Russell 1000 Value Index (4)
Lipper Growth & Income Funds Average (5)
Lipper Growth
PBHG Large Russell 1000 & Income
Cap Value Fund Value Index Funds Average
12/31/96 10000 10000 10000
3/97 10110 10256 10116
6/97 11560 11768 11569
9/97 12450 12940 12610
12/97 12562 13518 12709
3/98 14101 15094 14186
6/98 14339 15162 14211
9/98 13201 13407 12469
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.
(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 six month return has not been annualized.
(3) The PBHG Large Cap Value Fund commenced operations on January 2, 1997.
(4) 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.
(5) 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Annualized
One Year Inception
6 Months(2) Return to Date(3)
----------- -------- -----------
PBHG Large Cap Value Fund -6.38% 6.03% 17.22%
- --------------------------------------------------------------------------------
Sector Weightings at September 30, 1998 (Unaudited)
Cash (2%)
Utilities/Income (6%)
Transportation (4%)
Technology (22%)
Service/Diversified (6%)
Healthcare (12%)
Financial (16%)
Energy (5%)
Consumer Staples (4%)
Consumer Cyclical (12%)
Capital Goods (6%)
Basic Materials (5%)
% of Total Portfolio Investments
30
<PAGE>
THE PBHG FUNDS, INC.
PBHG Large Cap Value Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Common Stocks -- 94.9%
Basic Materials -- 3.6%
Chemicals -- 1.5%
Imperial Chemical Industries 11,100 $ 352
Solutia 28,500 643
--------
995
- -------------------------------------------------------------
Paper & Forest Products -- 2.1%
Louisiana Pacific 14,900 304
Potlatch 32,800 1,117
--------
1,421
--------
Total Basic Material (Cost $3,015) 2,416
--------
- -------------------------------------------------------------
Capital Goods -- 5.5%
Building Supplies -- 2.7%
American Standard* 12,400 327
Masco 16,100 396
Owens Corning 23,600 768
USG 7,600 329
--------
1,820
- -------------------------------------------------------------
Environmental -- 0.3%
Waste Management* 4,200 202
--------
202
- -------------------------------------------------------------
Machinery -- 0.5%
Illinois Tool Works 6,300 343
--------
343
- -------------------------------------------------------------
Office Equipment -- 2.0%
Lexmark International Group* 13,300 922
Xerox 5,200 441
--------
1,363
--------
Total Capital Goods (Cost $3,602) 3,728
--------
- -------------------------------------------------------------
Consumer Cyclical -- 12.0%
Apparel & Textiles -- 1.7%
VF 30,900 1,147
--------
1,147
- -------------------------------------------------------------
Autos/Trucks -- 0.8%
Ford Motor 11,600 544
--------
544
- -------------------------------------------------------------
Broadcasting & Recreation -- 1.0%
Eastman Kodak 8,300 642
--------
642
- -------------------------------------------------------------
Homebuilding -- 0.2%
Centex 3,900 134
--------
134
- -------------------------------------------------------------
Printing & Publishing -- 0.9%
Gannett 5,200 279
New York Times, Cl A 12,300 338
--------
617
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Restaurants & Lodging -- 1.4%
McDonald's 4,500 $ 269
Royal Caribbean Cruises 24,400 648
--------
917
- -------------------------------------------------------------
Retailing-General -- 3.8%
Federated Department Stores* 36,900 1,342
May Department Stores 9,300 479
Sears Roebuck 1,800 79
TJX 39,900 711
--------
2,611
- -------------------------------------------------------------
Wholesalers -- 2.2%
Dayton Hudson 5,500 197
K Mart* 13,000 155
Lowes 19,000 605
Wal-Mart Stores 9,800 535
--------
1,492
--------
Total Consumer Cyclical (Cost $8,973) 8,104
--------
- -------------------------------------------------------------
Consumer Staples -- 4.5%
Beverages -- 0.4%
Anheuser Busch 5,600 302
--------
302
- -------------------------------------------------------------
Cosmetics & Toiletries -- 1.2%
Dial 39,600 817
--------
817
- -------------------------------------------------------------
Food & Drug Retailers -- 0.2%
Supervalue 4,500 105
--------
105
- -------------------------------------------------------------
Food Producers -- 1.9%
Heinz (HJ) 13,000 664
Hershey Foods 5,300 363
Quaker Oats 4,000 236
--------
1,263
- -------------------------------------------------------------
Tobacco -- 0.8%
Philip Morris 11,800 544
--------
544
--------
Total Consumer Staples (Cost $2,929) 3,031
--------
- -------------------------------------------------------------
Energy -- 5.0%
Coal & Gas Pipeline -- 2.5%
Coastal 17,600 594
Columbia Energy Group 2,500 147
El Paso Energy 28,800 934
--------
1,675
- -------------------------------------------------------------
Oil & Gas Exploration & Production-- 2.5%
Ashland 9,800 453
Exxon 12,900 905
Phillips Petroleum 7,200 325
--------
1,683
--------
Total Energy (Cost $3,259) 3,358
--------
- -------------------------------------------------------------
31
<PAGE>
THE PBHG FUNDS, INC.
PBHG Large Cap Value Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Financial -- 15.9%
Banks -- 7.1%
Amsouth Bancorporation 27,900 $ 952
Comerica 11,800 647
Fleet Financial Group 1,500 110
Hibernia, Cl A 39,200 566
Mellon Bank 19,500 1,074
Nationsbank 3,700 198
PNC Bank 22,100 994
Summit Bancorp 6,200 233
--------
4,774
- -------------------------------------------------------------
Financial Services -- 7.3%
American Express 19,600 1,522
Fannie Mae 26,400 1,696
Federal Home Loan Mortgage 21,300 1,053
Merrill Lynch & Co 3,000 142
Morgan Stanley Dean Witter 4,600 198
Paine Webber Group 8,000 240
Travelers Group 2,500 94
--------
4,945
- -------------------------------------------------------------
Insurance -- 1.5%
Allstate 4,100 171
Marsh & McLennan 50 2
PMI Group 18,800 860
--------
1,033
--------
Total Financial (Cost $12,052) 10,752
--------
- -------------------------------------------------------------
Healthcare -- 11.4%
Medical Services -- 1.2%
Cardinal Health 3,200 330
Tenet Healthcare* 17,000 489
--------
819
- -------------------------------------------------------------
Medical Supplies -- 0.5%
Becton Dickinson & Co 8,600 354
--------
354
- -------------------------------------------------------------
Pharmaceuticals -- 9.7%
Abbott Laboratories 23,200 1,008
Allergan 1,800 105
Baxter International 3,100 184
Bristol-Myers Squibb 19,800 2,057
Lilly (Eli) & Co 8,300 650
Pharmacia & Upjohn 4,300 216
Schering-Plough 17,600 1,823
Warner-Lambert 6,600 498
--------
6,541
--------
Total Healthcare (Cost $6,865) 7,714
--------
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Services/Diversified -- 5.8%
Business Services -- 2.5%
Dun & Bradstreet* 16,600 $ 448
Galileo International 4,100 155
Interpublic Group 20,400 1,100
RH Donnelley 1,500 19
--------
1,722
- -------------------------------------------------------------
Conglomerates -- 3.3%
Allied Signal 5,200 184
General Electric 8,500 676
Honeywell 11,800 756
Trinity Industries 8,900 289
Tyco International Limited 5,500 304
--------
2,209
--------
Total Services/Diversified (Cost $3,997) 3,931
--------
- -------------------------------------------------------------
Technology -- 21.5%
Communication Equipment -- 1.2%
Cisco Systems* 13,100 810
--------
810
- -------------------------------------------------------------
Computer & Related -- 3.0%
Dell Computer* 7,200 473
IBM 4,400 563
Hewlett Packard 3,000 159
Newbridge Networks* 3,600 65
Storage Technology* 29,000 737
--------
1,997
- -------------------------------------------------------------
Electronics & Semiconductors -- 6.0%
Intel 37,200 3,190
Micron Technology 22,500 685
Synopsys* 6,300 210
--------
4,085
- -------------------------------------------------------------
Software & Services -- 4.0%
Oracle* 10,000 291
Microsoft* 20,000 2,201
Sabre Group Holdings* 6,500 195
--------
2,687
- -------------------------------------------------------------
Telecommunication Services -- 7.3%
Ameritech 10,400 493
Bell South 14,400 1,083
Century Telephone Enterprise 14,300 676
GTE 2,200 121
MCI Worldcom* 13,400 655
US West 36,400 1,909
--------
4,937
--------
Total Technology (Cost $13,775) 14,516
--------
- -------------------------------------------------------------
Transportation -- 4.2%
Airlines -- 3.4%
AMR* 10,000 554
Continental Airlines* 46,400 1,752
--------
2,306
- -------------------------------------------------------------
32
<PAGE>
THE PBHG FUNDS, INC.
PBHG Large Cap Value Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Shares/Face Market
Description Amount (000) Value (000)
- ----------------------------------------------------------------
Railroads -- 0.8%
Burlington Northern Santa Fe 16,900 $ 541
--------
541
--------
Total Transportation (Cost $3,322) 2,847
--------
- -------------------------------------------------------------
Utilities/Income -- 5.5%
Electric Power -- 5.2%
Central & Southwest 22,500 643
Consolidated Edison 4,600 240
DTE Energy 8,400 380
Edison International 13,200 339
Florida Progress 21,100 914
Houston Industries 2,800 87
Wisconsin Energy 29,500 931
--------
3,534
- -------------------------------------------------------------
Natural Gas -- 0.3%
Consolidated National Gas 3,200 174
--------
174
--------
Total Utilities/Income (Cost $3,483) 3,708
--------
Total Common Stock (Cost $65,272) 64,105
--------
- -------------------------------------------------------------
Preferred Stocks -- 2.0%
Basic Materials -- 1.3%
Metals & Mining -- 1.3%
Placer Dome 38,800 905
--------
905
--------
Total Basic Materials (Cost $1,001) 905
--------
- -------------------------------------------------------------
Utilities/Income -- 0.7%
Electric Power -- 0.7%
Pacificorp 17,100 439
--------
439
--------
Total Utilities/Income ($447) 439
--------
Total Preferred Stocks (Cost $1,448) 1,344
--------
- -------------------------------------------------------------
Repurchase Agreement -- 1.9%
Morgan Stanley
5.25%, dated 09/30/98, matures 10/01/98,
repurchase price $1,252,352 (collaterized
by U.S. Treasury Instruments:
total market value $1,283,223)(a) $1,252 1,252
--------
Total Repurchase Agreement (Cost $1,252) 1,252
--------
Total Investments -- 98.8% (Cost $67,972) 66,701
--------
- -------------------------------------------------------------
Other Assets and Liabilities -- 1.2%
Other Assets and Liabilities, Net 830
--------
- -------------------------------------------------------------
Market
Description Value (000)
- ----------------------------------------------------------------
Net Assets:
Fund shares of pbhg class (authorized 200 million
shares -- $0.001 par value) based on 5,542,172
outstanding shares of common stock $ 59,138
Accumulated net investment income 555
Accumulated net realized gain on investments 9,109
Net unrealized depreciation on investments (1,271)
--------
Total Net Assets-- 100.0% $ 67,531
========
Net Asset Value, Offering and Redemption
Price Per Share $ 12.18
========
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
33
<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
PBHG Mid-Cap Value Fund
S&P 400 Mid-Cap Index (4)
Lipper Mid-Cap Funds Average (5)
PBHG Mid-Cap S&P 400 Lipper Mid-Cap
Value Fund Mid-Cap Index Funds Average
4/97 10000 10000 10000
5/97 10740 10874 10995
6/97 11410 11180 11408
7/97 12890 12285 12327
8/97 13241 12270 12270
9/97 14301 12976 13053
10/97 13761 12412 12454
11/97 13871 12595 12448
12/97 14150 13083 12624
1/98 14140 12834 12436
2/98 15445 13897 13517
3/98 16107 14524 14145
6/98 15896 14211 13966
9/98 13906 12156 11452
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.
(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 six month return has not been annualized.
(3) The PBHG Mid-Cap Value Fund commenced operations on May 1, 1997.
(4) 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.
(5) 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Annualized
One Year Inception
6 Months(2) Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund -13.66% -2.75% 26.16%
- --------------------------------------------------------------------------------
Sector Weightings at September 30, 1998 (Unaudited)
Utilities/Income (13%)
Transportation (5%)
Technology (15%)
Services/Diversified (4%)
Healthcare (5%)
Financial (21%)
Energy (1%)
Consumer Staples (5%)
Consumer Cyclical (15%)
Capital Goods (7%)
Basic Materials (9%)
% of Total Portfolio Investments
34
<PAGE>
THE PBHG FUNDS, INC.
PBHG Mid-Cap Value Fund
Schedule of Investments
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Common Stocks -- 95.7%
Basic Materials -- 8.3%
Chemicals -- 1.9%
Solutia 34,500 $ 778
--------
778
- -------------------------------------------------------------
Chemicals-Specialty -- 2.0%
Crompton and Knowles 42,200 615
Engelhard 13,000 230
--------
845
- -------------------------------------------------------------
Paper & Forest Products -- 4.4%
Louisiana-Pacific 14,600 298
Potlatch 45,900 1,563
--------
1,861
--------
Total Basic Materials (Cost $4,324) 3,484
--------
- -------------------------------------------------------------
Capital Goods -- 6.2%
Building Supplies -- 3.7%
American Standard* 12,100 319
Lafarge 9,400 269
Owens Corning 14,100 459
USG 11,400 493
--------
1,540
- -------------------------------------------------------------
Environmental -- 0.4%
Waste Management* 3,200 154
--------
154
- -------------------------------------------------------------
Machinery -- 0.8%
Ingersoll Rand 3,000 114
Terex* 16,100 240
--------
354
- -------------------------------------------------------------
Office Equipment -- 1.3%
Lexmark International Group* 8,100 562
--------
562
--------
Total Capital Goods (Cost $2,611) 2,610
--------
- -------------------------------------------------------------
Consumer Cyclical -- 16.2%
Apparel & Textiles -- 4.5%
Jones Apparel Group* 14,800 339
Fruit of The Loom, Cl A* 11,600 175
Ralph Lauren* 22,500 449
Tommy Hilfiger* 7,900 324
VF 15,800 586
--------
1,873
- -------------------------------------------------------------
Broadcasting & Recreation -- 2.3%
Eastman Kodak 4,900 379
Electronic Arts* 12,000 526
International Game Technology 2,400 45
--------
950
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Furniture/Appliances -- 1.6%
Dorel Industries, Cl B* 50,000 $ 650
Mohawk Industries* 800 22
--------
672
- -------------------------------------------------------------
Homebuilding -- 0.3%
DR Horton 7,200 115
--------
115
- -------------------------------------------------------------
Printing & Publishing -- 0.2%
New York Times, Cl A 3,800 105
--------
105
- -------------------------------------------------------------
Resturants & Lodging -- 1.0%
Host Marriott* 1,300 17
Royal Caribbean Cruises 15,900 422
--------
439
- -------------------------------------------------------------
Retailing-General -- 5.3%
Federated Department Stores* 14,700 535
Fingerhut 19,600 215
May Department Stores 7,600 391
Neiman-Marcus Group 14,900 322
TJX 21,600 385
Tweeter Home Entertainment Group* 27,500 375
--------
2,223
- -------------------------------------------------------------
Wholesalers -- 1.0%
Family Dollar Stores 6,300 99
Lowes 7,200 229
Office Depot* 3,200 72
--------
400
--------
Total Consumer Cyclical (Cost $7,596) 6,777
--------
- -------------------------------------------------------------
Consumer Staples -- 5.1%
Cosmetics & Toiletries -- 0.6%
Dial 11,500 237
--------
237
- -------------------------------------------------------------
Food & Drug Retailers -- 0.6%
Supervalue 11,200 261
--------
261
- -------------------------------------------------------------
Food Producers -- 3.9%
Flowers Industries 12,500 273
Fresh Del Monte Produce* 14,200 242
Heinz (H J) 7,200 368
International Home Foods* 16,600 224
Quaker Oats 100 6
Ralcorp Holdings* 16,300 228
Universal Foods 14,100 294
--------
1,635
--------
Total Consumer Staples (Cost $2,317) 2,133
--------
- -------------------------------------------------------------
35
<PAGE>
THE PBHG FUNDS, INC.
PBHG Mid-Cap Value Fund
Schedule of Investments
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Energy -- 1.2%
Coal & Gas Pipeline -- 1.1%
Coastal 3,900 $ 132
Columbia Energy Group 2,200 129
El Paso Energy 7,000 227
--------
488
- -------------------------------------------------------------
Oil & Gas Exploration & Production-- 0.1%
Phillips Petroleum 500 22
--------
22
--------
Total Energy (Cost $444) 510
--------
- -------------------------------------------------------------
Financial -- 20.2%
Banks -- 17.6%
Amsouth Bancorporation 23,200 792
Commerce Bancshares 13,000 512
Dime Bancorp 7,900 200
First Tennessee National 14,000 382
Fleet Financial Group 3,000 220
Hibernia, Cl A 45,300 654
Mellon Bank 14,800 815
Mercantile Bankshares 25,100 706
M&T Bank 200 92
North Fork Bancorporation 25,800 516
Old Kent Financial 8,000 237
Peoples Heritage Financial Group 19,900 357
PNC Bank 13,000 585
Summit Bancorp 16,900 634
Trustmark 15,900 247
UST 20,800 439
--------
7,388
- -------------------------------------------------------------
Financial Services -- 2.6%
American Express 4,800 373
Jefferies Group 9,100 241
Lehman Brothers Holding 2,000 56
Metris 6,241 291
PaineWebber Group 4,000 120
--------
1,081
--------
Total Financial (Cost $9,483) 8,469
--------
- -------------------------------------------------------------
Healthcare -- 4.9%
Medical Services -- 1.7%
Allegiance 800 24
Bergen Brunswig 2,800 141
Beverly Enterprises* 22,400 179
Cardinal Health 1,100 113
Tenet Healthcare* 1,100 32
Total Renal Care Holdings* 9,700 233
--------
722
- -------------------------------------------------------------
Medical Supplies -- 1.0%
Hillenbrand 4,200 206
--------
206
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Pharmaceuticals -- 2.7%
Abbott Laboratories 4,100 $ 178
Allergan 1,100 64
Barr Laboratories* 9,100 276
Idexx Laboratories* 13,600 325
Lilly (Eli) & Co 2,300 180
Mylan Labs 3,200 95
--------
1,118
--------
Total Healthcare (Cost $1,993) 2,046
--------
- -------------------------------------------------------------
Services/Diversified -- 4.1%
Business Services -- 3.1%
Galileo International 1,700 64
Interpublic Group 11,600 626
Omnicom Group 600 27
Personnel Group of America* 10,400 128
Robert Half International* 7,000 302
Snyder Communications* 4,600 154
--------
1,301
- -------------------------------------------------------------
Conglomerates -- 1.0%
Honeywell 6,400 410
--------
410
--------
Total Services/Diversified (Cost $1,738) 1,711
--------
- -------------------------------------------------------------
Technology -- 14.4%
Communication Equipment -- 0.9%
Comverse Technology* 6,200 253
Fore Systems* 8,000 133
--------
386
- -------------------------------------------------------------
Computer & Related -- 3.0%
Banyan Systems* 13,200 39
Gateway 2000* 2,900 151
Newbridge Networks* 2,800 50
Quantum* 16,600 263
Storage Technology* 26,300 669
Unisys* 5,000 114
--------
1,286
- -------------------------------------------------------------
Electronics & Semiconductors -- 3.0%
Cadence Design Systems* 6,600 169
Intel 2,000 172
Lattice Semiconductor* 10,000 247
Micron Technology 14,200 432
Synopsys* 7,000 233
--------
1,253
- -------------------------------------------------------------
Software & Services -- 4.5%
BMC Software* 4,000 240
Compuware* 4,000 236
Intuit* 1,700 79
Parametric Technology* 18,000 181
Sabre Group Holdings* 24,200 726
Sterling Software* 14,800 408
--------
1,870
- -------------------------------------------------------------
36
<PAGE>
THE PBHG FUNDS, INC.
PBHG Mid-Cap Value Fund
Schedule of Investments
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Internet Services -- 1.2%
America Online* 4,700 $ 523
--------
523
- -------------------------------------------------------------
Telecommunication Services -- 1.8%
Century Telephone Enterprises 11,700 553
Nextel Comunications, Cl A* 9,000 182
--------
735
--------
Total Technology (Cost $6,059) 6,053
--------
- -------------------------------------------------------------
Transportation -- 4.8%
Airlines -- 4.1%
AMR* 8,900 493
Continental Airlines* 21,800 823
Midway Airlines* 31,100 307
US Airways Group* 1,600 81
--------
1,704
- -------------------------------------------------------------
Railroads -- 0.4%
Burlington Northern Santa Fe 3,400 109
Kansas City Southern 2,000 70
--------
179
- -------------------------------------------------------------
Trucking & Shipping -- 0.3%
CNF Transportation 4,800 140
--------
140
--------
Total Transportation (Cost $2,510) 2,023
--------
- -------------------------------------------------------------
Utilities/Income -- 10.3%
Electric Power -- 10.3%
Baltimore Gas & Electric 3,300 110
Calenergy* 13,400 355
Central & Southwest 9,100 260
Conectiv, Cl A 312 12
Consolidated Edison 2,500 130
DTE Energy 5,700 258
Edison International 8,400 216
Florida Progress 9,800 425
Houston Industries 5,800 181
Idaho Power 14,200 477
Kansas City Power & Light 2,800 85
LG&E Energy 20,500 571
New Century Energies 2,100 102
New England Electric 1,600 66
Potomac Electric Power 12,600 334
Western Resources 8,600 356
Wisconsin Energy 11,800 372
--------
4,310
--------
Total Utilities/Income (Cost $4,076) 4,310
--------
Total Common Stock (Cost $43,151) 40,126
--------
Total Investments -- 95.7% (Cost $43,151) $40,126
========
* Non-Income Producing Security
(a) -- Tri-Party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
37
<PAGE>
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
PBHG Small Cap Value Fund
Russell 2000 Index(4)
Lipper Small Cap Funds Average(5)
PBHG Small-Cap Russell Lipper Small Cap
Value Fund 2000 Index Funds Average
4/97 10000 10000 10000
5/97 10880 11113 11193
6/97 11880 11590 11791
7/97 13070 12129 12536
8/97 13371 12406 12764
9/97 14551 13315 13726
10/97 14211 12730 13127
11/97 14201 12647 12939
12/97 14540 12869 13042
1/98 14519 12665 12823
2/98 15616 13601 13820
3/98 16288 14162 14462
6/98 15098 13501 13853
9/98 11838 10872 10915
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.
(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 six month return has not been annualized.
(3) The PBHG Small Cap Value Fund commenced operations on May 1, 1997.
(4) 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.
(5) 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Annualized
6 Months(2) One Year Inception
Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Small Cap Value Fund -26.98% -18.64% 12.62%
- --------------------------------------------------------------------------------
Sector Weightings at September 30, 1998 (Unaudited)
Transportation (6%)
Technology (11%)
Services/
Diversified (7%)
Healthcare (8%)
Financial (23%)
Energy (1%)
Consumer Staples (4%)
Consumer
Cyclical (22%)
Capital Goods (13%)
Basic Materials (2%)
Utilities/Income (3%)
% of Total Portfolio Investments
38
<PAGE>
THE PBHG FUNDS, INC.
PBHG Small Cap Value Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Common Stocks -- 98.9%
Basic Materials -- 2.2%
Chemicals -- 0.5%
Solutia 17,600 $ 397
--------
397
- -------------------------------------------------------------
Chemicals-Specialty -- 1.4%
Crompton & Knowles 73,100 1,065
--------
1,065
- -------------------------------------------------------------
Paper & Forest Products -- 0.3%
Potlatch 7,200 245
--------
245
--------
Total Basic Materials (Cost $2,683) 1,707
--------
- -------------------------------------------------------------
Capital Goods -- 12.6%
Aerospace/Defense -- 0.3%
Aeroflex* 1,700 17
Applied Signal Technology* 3,100 38
BE Aerospace* 4,000 88
Cordant Technologies 1,500 64
Gulfstream Aerospace* 800 32
--------
239
- -------------------------------------------------------------
Building Supplies -- 2.0%
Lone Star 2,200 132
NCI Building Systems* 5,000 99
Southdown 17,600 792
USG 8,400 363
Watsco 14,000 210
--------
1,596
- -------------------------------------------------------------
Electrical Equipment -- 1.0%
C&D Technologies 28,200 673
Oak Industries* 5,100 138
--------
811
- -------------------------------------------------------------
Machinery -- 7.8%
Commonwealth Industries 77,700 631
Denison International* 26,000 390
Essex International* 35,300 605
Gehl* 14,300 195
Greenbrier 85,100 1,207
Jlg Industries 34,400 548
Kaydon 2,100 55
Mueller Industries* 4,800 122
NN Ball and Roller 28,000 224
Terex* 5,000 75
Tower Automotive* 19,400 383
Wolverine Tube* 38,500 811
Zebra Technologies* 22,200 744
--------
5,990
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Office Equipment -- 1.5%
Interface, Cl A 39,600 $ 475
Knoll* 6,200 136
Miller (Herman) 10,700 211
Polycom* 29,300 386
--------
1,208
--------
Total Capital Goods (Cost $12,955) 9,844
--------
- -------------------------------------------------------------
Consumer Cyclical -- 21.5%
Apparel & Textiles -- 5.0%
Dan River* 63,800 702
Fruit of The Loom, Cl A* 10,500 158
Gerber Childrenwear* 700 5
I.C. Isaacs & Company* 122,000 244
Kellwood 25,200 677
Nautica Enterprises* 30,000 561
Ralph Lauren* 29,600 590
Timberland, Cl A* 26,700 975
--------
3,912
- -------------------------------------------------------------
Auto/Truck Parts -- 3.1%
Delco Remy International* 120,300 1,346
Meritor Automotive 39,200 591
Smith (A.O.) 2,000 39
Standard Motor Products 3,200 78
Stoneridge* 23,600 382
--------
2,436
- -------------------------------------------------------------
Broadcasting and Recreation -- 0.0%
Midway Games* 3,000 35
--------
35
- -------------------------------------------------------------
Furniture/Appliances -- 3.4%
Dorel Industries, Cl B* 149,000 1,937
Furniture Brands International* 5,200 101
Mohawk Industries* 21,100 578
--------
2,616
- -------------------------------------------------------------
Homebuilding -- 4.7%
Beazer Homes USA* 23,000 474
Champion Enterprises* 5,100 119
Crossman Communities* 50,000 1,006
D R Horton 50,200 803
Kaufman & Broad Home 21,800 511
Lennar 5,200 116
Pulte 19,200 472
Ryland Group 2,800 68
US Home* 3,200 94
--------
3,663
- -------------------------------------------------------------
Restaurants & Lodging -- 1.8%
Foodmaker* 56,000 879
Rare Hospitality International* 47,000 505
--------
1,384
- -------------------------------------------------------------
39
<PAGE>
THE PBHG FUNDS, INC.
PBHG Small Cap Value Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Retailing-General -- 2.0%
DM Management* 57,200 $ 461
Fingerhut 2,700 30
Neiman-Marcus Group 13,100 283
Tweeter Home Entertainment Group* 57,800 788
--------
1,562
- -------------------------------------------------------------
Wholesalers -- 1.5%
BJ's Wholesale Club* 23,100 849
Michaels Stores* 9,700 247
Midas 1,900 46
Shopko Stores 1,200 39
--------
1,181
--------
Total Consumer Cyclical (Cost $21,029) 16,789
--------
- -------------------------------------------------------------
Consumer Staples -- 4.3%
Containers -- 0.1%
Aptargroup 4,300 98
--------
98
- -------------------------------------------------------------
Food & Drug Retailers -- 0.2%
Longs Drug Stores 3,200 129
--------
129
- -------------------------------------------------------------
Food Producers -- 4.0%
Earthgrains 8,400 260
Fresh Del Monte Produce* 41,500 705
International Home Foods* 20,200 273
Ralcorp Holdings* 56,000 784
Universal Foods 52,000 1,085
--------
3,107
--------
Total Consumer Staples (Cost $3,799) 3,334
--------
- -------------------------------------------------------------
Energy -- 1.0%
Energy Services -- 0.2%
Horizon Offshore* 26,000 172
--------
172
- -------------------------------------------------------------
Oil & Gas Exploration & Production -- 0.8%
Devon Energy 13,100 432
Vintage Petroleum 18,200 209
--------
641
--------
Total Energy (Cost $914) 813
--------
- -------------------------------------------------------------
Financial -- 22.4%
Banks -- 12.4%
Amsouth Bancorporation 13,800 471
Carolina First 5,400 119
City National 21,200 664
Commercial Bank of New York 20,000 328
Commercial Federal 3,100 73
Corus Bankshares 1,000 34
D&N Financial 11,100 221
Downey Financial 25,400 605
Florida Banks* 73,300 550
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Banks -- continued
Hubco 8,000 $ 203
Imperial Bancorp* 4,600 70
Mercantile Bankshares 19,000 534
North Fork Bank of New York 74,750 1,495
Pacific Bank 32,400 1,409
Republic Bancorp 5,125 69
Staten Island Bancorp 11,400 205
Summit Bancorp 13,000 488
Trustmark 26,600 412
UST 68,700 1,451
Valley National Bancorp 10,900 285
--------
9,686
- -------------------------------------------------------------
Financial Services -- 8.9%
Budget Group* 22,100 504
Everen Capital 39,500 958
GATX 9,700 321
Investment Technology Group* 27,000 736
Jefferies Group 9,700 257
Legg Mason 95,800 2,521
Liberty Financial 5,900 156
Raymond James Finance 20,550 430
Rollins Truck Leasing 500 6
Waddell & Reed Financial, Cl A 52,000 988
--------
6,877
- -------------------------------------------------------------
Insurance -- 1.1%
Enhance Financial Services Group 6,000 177
Financial Securities Assurance Holdings14,300 697
--------
874
--------
Total Financial (Cost $20,393) 17,437
--------
- -------------------------------------------------------------
Healthcare -- 7.6%
Medical Services -- 4.6%
Bergen Brunswig 6,200 314
Beverly Enterprises* 68,100 545
Compdent* 5,000 68
HCR Manor Care* 38,200 1,120
Health Management Systems* 2,400 18
PSS World Medical* 20,000 370
Quorum Health Group* 32,700 531
Total Renal Care Holdings* 25,000 600
--------
3,566
- -------------------------------------------------------------
Medical Supplies -- 0.4%
Adac Laboratories 5,800 139
Curative Health Services* 1,100 34
Invacare 5,700 134
--------
307
- -------------------------------------------------------------
Pharmaceuticals -- 2.6%
Barr Laboratories* 25,600 777
Idexx Laboratories* 47,100 1,125
Roberts Pharmaceutical* 5,600 107
--------
2,009
--------
Total Healthcare (Cost $5,854) 5,882
--------
- -------------------------------------------------------------
40
<PAGE>
THE PBHG FUNDS, INC.
PBHG Small Cap Value Fund
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Services/Diversified -- 7.1%
Business Services -- 4.7%
Acnielson* 16,600 $ 369
ADVO Systems* 3,200 78
Interim Services* 26,900 553
Labor Ready* 5,000 73
Merrill 30,000 471
NCO Group* 800 22
Ogden 5,100 145
Personnel Group of America* 36,800 453
RCM Technologies* 8,600 127
True North Communications 45,100 1,001
Viad 10,500 282
Valassis Communications* 2,900 116
--------
3,690
- -------------------------------------------------------------
Conglomerates -- 2.4%
Ametek 9,200 159
Mark IV Industries 6,100 89
Metris 860 40
Pentair 31,200 1,006
United Dominion Industries 32,300 585
--------
1,879
--------
Total Services/Diversified (Cost $6,810) 5,569
--------
- -------------------------------------------------------------
Technology -- 11.1%
Communication Equipment -- 0.8%
Comverse Technology* 14,400 589
--------
589
- -------------------------------------------------------------
Computer & Related -- 2.7%
Banyan Systems* 35,300 104
Brightpoint* 47,000 361
Brooktrout Technology* 19,000 258
Diamond Multimedia Systems* 75,000 352
Jetfax* 34,500 86
Scansource* 47,600 750
Sequent Computer* 19,800 172
Splash Technologies Holdings* 3,000 43
--------
2,126
- -------------------------------------------------------------
Electronic Components -- 0.0%
Fusion Systems* 3,000 0
--------
0
- -------------------------------------------------------------
Electronics & Semiconductors -- 2.3%
Aehr Test Systems* 60,500 219
C-Cube Microsystems* 27,600 483
Cirrus Logic* 18,000 108
DSP Communications* 10,000 83
Lattice Semiconductor* 21,600 535
Micrel* 14,700 389
--------
1,817
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Software & Services -- 5.3%
Acxiom* 21,700 $ 538
Aris* 2,000 39
Axent Technologies* 12,000 224
Business Objects ADR* 47,000 587
Clarify* 8,500 85
Datastream Systems* 6,000 105
Information Advantage Software* 9,000 42
Informix* 49,200 246
Intelligroup* 6,000 102
Learning Company* 19,600 388
Parametric Technology* 46,300 466
Platinum Technology* 25,000 450
Project Software & Development* 4,100 54
Sterling Software* 25,900 714
Symantec* 9,400 124
--------
4,164
--------
Total Technology (Cost $11,228) 8,696
--------
- -------------------------------------------------------------
Transportation -- 5.7%
Airlines -- 4.1%
Alaska Airgroup* 10,400 354
America West Holdings* 2,000 25
ASA Holdings 35,400 1,257
Continental Airlines* 11,900 449
Midway Airlines* 109,200 1,078
Skywest 600 12
--------
3,175
- -------------------------------------------------------------
Trucking & Shipping -- 1.6%
Atlas Air* 1,000 29
CNF Transportation 24,200 705
Jevic Transportation* 16,000 114
M.S. Carriers* 5,000 99
USfreightways 15,100 300
--------
1,247
--------
Total Transportation (Cost $5,841) 4,422
--------
- -------------------------------------------------------------
Utilities/Income -- 3.4%
Electric Power -- 0.1%
Conectiv, Cl A 725 27
Eastern Utilities Association 800 21
--------
48
- -------------------------------------------------------------
Natural Gas -- 0.2%
Indiana Energy 5,600 175
Wicor 700 17
--------
192
- -------------------------------------------------------------
41
<PAGE>
THE PBHG FUNDS, INC.
PBHG Small Cap Value Fund
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Reits -- 3.1%
Arden Realty Group 10,400 $ 232
Berkshire Realty 73,600 768
Brandywine Realty Trust 20,800 398
Excel Legacy* 3,300 10
Gables Residential Trust 2,100 56
Highwoods Properties 15,300 425
Pennsylvania Real Estate
Investment Trust 6,800 139
Parkway Properties 4,300 131
Sun Communities 1,100 37
Weingarten Realty 5,000 205
--------
2,401
--------
Total Utilities/Income (Cost $2,922) 2,641
--------
Total Common Stock (Cost $94,428) 77,134
--------
Total Investments-- 98.9% (Cost $94,428) 77,134
--------
- -------------------------------------------------------------
Other Assets and Liabilities -- 1.1%
Other Assets and Liabilities, Net 879
--------
- -------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares $0.001 par value)
based on 6,947,377 outstanding
shares of common stock 97,332
Undistributed net investment loss (364)
Accumulated net realized loss on investments (1,661)
Net unrealized depreciation on investments (17,294)
--------
Total Net Assets-- 100.0% $78,013
========
Net Asset Value, Offering and Redemption
Price Per Share $ 11.23
========
* 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.
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
PBHG International Fund
F.T. S&P World Index, Non-U.S., in U.S. Dollars(4)
Pilgrim Baxter
International F.T. S&P World
Equity Fund Index, Non-U.S.
6/94 10000 10000
3/95 9203 10007
3/96 10634 11274
3/97 11350 11466
3/98 13332 13438
6/98 12971 13334
9/98 11427 11342
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Non-U.S. companies.
STRATEGY: The Fund continues to provide a diversified portfolio of equity
securities of non-U.S. issuers. Country selection is a significant part of the
Fund's investment process.
(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 six month return has not been annualized.
(3) The PBHG International Fund commenced operations on June 14, 1994.
(4) 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.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Annualized Annualized
6 Months(2) One Year 3 Year Inception
Return Return to Date(3)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG International Fund -14.29% -10.38% 5.63% 3.06%
- ------------------------------------------------------------------------------------
</TABLE>
Country Weightings at September 30, 1998 (Unaudited)
United Kingdom (19%)
Japan (17%)
France (10%)
Germany (12%)
Switzerland (3%)
Netherlands (10%)
Singapore (2%)
Italy (6%)
Spain (4%)
Belgium (4%)
Ireland (3%)
Other (10%)
% of Total Portfolio Investments
43
<PAGE>
THE PBHG Funds, In
Statement of Net Assets
------------------------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Foreign Common Stock -- 94.3%
Belgium -- 3.7%
Fortis 1,903 $ 470
------
470
- -------------------------------------------------------------
Chile -- 0.7%
Sociedad Quimica Y Minera 3,000 87
------
87
- -------------------------------------------------------------
France -- 10.1%
Rhone-Poulenc, Cl A 7,085 297
Suez Lyonnaise Des Eaux 3,081 525
Total 3,737 471
------
1,293
- -------------------------------------------------------------
Germany -- 11.2%
Allianz 882 274
Allianz AG 65 20
Mannesmann 5,660 518
Marschollek Lauten 803 404
Volkswagen 3,050 220
------
1,436
- -------------------------------------------------------------
Hong Kong -- 2.1%
China Telecom 80,000 126
Hutchison Whampoa 26,000 137
------
263
- -------------------------------------------------------------
Ireland -- 3.0%
Allied Irish Bank 7,909 117
Bank of Ireland 15,070 268
------
385
- -------------------------------------------------------------
Italy -- 5.3%
Telecom Italia Spa 50,550 349
T.I.M. 57,061 333
------
682
- -------------------------------------------------------------
Japan -- 16.9%
Bridgestone 9,000 181
Fuji Machine 7,000 183
Fuji Photo Film 6,000 206
Fujitsu 22,000 190
Inax 61,000 218
Marudai Food 93,000 184
Matsushita Communications 6,000 215
Mitsui 27,000 111
NTT 28 204
Ricoh 15,000 138
Sumitomo Bank 17,000 118
Yamanouchi Pharmaceutical 10,000 215
------
2,163
- -------------------------------------------------------------
Mexico -- 1.1%
Empresas Moderna* 3,500 85
Grupo Industrial Durango* 11,000 60
------
145
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Netherlands -- 9.3%
ING Groep 7,340 $ 331
Konin. PTT 5,136 159
TNT Post Group 5,136 131
VNU 13,750 568
------
1,189
- -------------------------------------------------------------
New Zealand -- 2.1%
Telecom Corp of N.Z. 70,000 268
------
268
- -------------------------------------------------------------
Norway -- 0.7%
Petroleum Geo Services ADR* 5,598 89
------
89
- -------------------------------------------------------------
Portugal -- 0.9%
Portugal Telecom 3,250 118
------
118
- -------------------------------------------------------------
Singapore -- 2.2%
City Developments 40,000 87
Singapore Press Holdings 22,968 191
------
278
- -------------------------------------------------------------
Spain -- 3.8%
Superdiplo 5,074 132
Telefonica De Espana 9,579 350
------
482
- -------------------------------------------------------------
Switzerland -- 2.9%
Zurich Allied 753 375
------
375
- -------------------------------------------------------------
United Kingdom -- 18.3%
Abbey National 8,400 145
Barclays 5,700 93
BPB Industries 21,100 85
British Aerospace 28,000 170
British Petroleum 8,000 122
British Telecom 16,300 220
Cadbury Schweppes 8,200 106
Kingfisher 22,800 211
Ladbroke 50,000 186
Lloyds TSB Group 13,000 145
Misys 16,000 141
Norwich Union* 24,700 191
Safeway 9,700 45
Shell Transportation & Trading 24,000 145
Smithkline Beecham 18,400 202
Vodafone Group 12,300 143
------
2,350
------
Total Foreign Common Stock (Cost $10,524) 12,073
------
- -------------------------------------------------------------
44
<PAGE>
Market
Description Shares Value (000)
- ------------------------------------------------------------------------
Foreign Preferred Stock -- 2.1%
Brazil -- 2.1%
Brahma 6,432 $ 3
Cemig ADR* 7,342 170
Petrobras ADR 10,000 102
-------
275
-------
Total Foreign Preferred Stock (Cost $472) 275
-------
Total Investments-- 96.4% (Cost $10,996) 12,348
-------
- ---------------------------------------------------------------------
Other Assets and Liabilities -- 3.6%
Other Assets and Liabilities, Net 463
-------
- ---------------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 1,241,559 outstanding
shares of common stock 11,079
Accumulated net investment loss (14)
Accumulated net realized gain on investments 396
Net unrealized appreciation on investments 1,350
-------
Total Net Assets -- 100.0% $12,811
-------
-------
Net Asset Value, Offering and Redemption
Price Per Share $10.32
------
------
* Non-Income Producing Security
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
45
<PAGE>
THE PBHG FUNDS, INC.
PBHG Cash Reserves Fund
Comparison of total return, as of September 30, 1998
for the PBHG Cash Reserves Fund, versus
the Lipper Money Market Funds Average(1)
PBHG Cash Reserves Fund
Lipper Money Market Funds Average
PBHG Cash IBC Financial Lipper Money
Reserves Fund First Tier Average Market Funds Average
4/30/95 10000 10000 10000
6/95 10090 10091 10090
9/95 10222 10226 10221
12/95 10355 10360 10352
3/96 10480 10485 10475
6/96 10603 10608 10595
9/96 10732 10735 10720
12/96 10863 10864 10847
3/97 10992 10992 10973
6/97 11129 11127 11105
9/97 11270 11266 11241
12/97 11415 11408 11380
3/98 11556 11548 11517
6/98
9/98
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.
(1) Performance is historical and not indicative of future results.
Sector Weightings at September 30, 1998 (Unaudited)
Certificates of Deposit (11%)
Commercial Paper (65%)
Corporate Obligations (1%)
Cash (23%)
% of Total Portfolio Investments
46
<PAGE>
THE PBHG FUNDS, INC.
Schedule of Investments
- ------------------------------------
As of September 30, 1998 (Unaudited)
PBHG Cash Reserves Fund
Market
Description Shares Value (000)
- -------------------------------------------------------------------------
Certificates of Deposits -- 9.9%
Bank of Nova Scotia N.Y.
5.83%, 10/02/98 3,000 $ 3,000
Bank One Wisconsin
5.55%, 02/26/99 2,000 2,000
Chase Manhattan
5.70%, 07/02/99 2,000 1,999
Deutsche Bank Financial
5.82%, 05/04/99 3,000 2,999
Rabobank Nederland N.V.
5.75%, 04/27/99 2,500 2,499
Societe Generale N.Y.
5.68%, 03/22/99 2,000 2,000
Svenska Handelsbanken
5.74%, 06/01/99 2,000 1,999
Total Certificates of Deposit (Cost $16,496) 16,496
--------
- ----------------------------------------------------------------------
Commercial Paper -- 58.9%
AC Acquisition Holding Company
5.82%, 10/01/98 5,000 5,000
Aesop Funding
5.55%, 10/09/98 3,500 3,496
Chrysler Financial Corporation
5.05%, 02/19/99 3,000 2,941
CIT Group Holdings
5.37%, 02/09/99 2,000 1,961
Corporate Receivables
6.00%, 10/01/98 5,500 5,500
Daimler-Benz
5.85%, 10/01/98 5,000 5,000
Eureka Securities
5.50%, 10/30/98 4,000 3,982
Falcon Asset SEC
5.50%, 12/01/98 4,000 3,963
Ford Motor Company
5.52%, 10/01/98 4,000 4,000
Fortunate Brands
5.51%, 11/05/98 4,000 3,979
General Electric Capital
5.43%, 02/22/99 4,000 3,913
General Re Corporation
5.49%, 10/14/98 3,000 2,994
GMAC
5.52%, 11/20/98 4,000 3,969
Goldman Sachs Group Lp
5.50%, 10/28/98 4,000 3,983
Greenwich Funding
5.55%, 10/02/98 4,000 3,999
Greyhawk Funding
5.55%, 10/16/98 4,000 3,991
Hubbell
5.85%, 10/01/98 5,500 5,500
IBM
5.50%, 10/22/98 5,000 4,984
Kitty Hawk Funding
5.50%, 02/26/99 2,000 1,955
New York Life Capital
5.50%, 10/21/98 3,000 2,991
Shares/Face Market
Description Amount (000) Value (000)
- -------------------------------------------------------------------------
Commercial Paper -- continued
Park Avenue Receivables
5.51%, 10/05/98 4,000 $ 3,997
Quebec Province
5.51%, 12/23/98 3,565 3,520
Riverwoods Funding
5.50%, 11/13/98 4,000 3,974
Statoil
5.48%, 11/06/98 4,000 3,978
Xerox Credit
5.50%, 10/06/98 4,500 4,496
--------
Total Commerical Paper (Cost $98,066) 98,066
--------
- ----------------------------------------------------------------------
Corporate Obligations -- 1.2%
J.P. Morgan & Company MTN
5.75%, 03/10/99 2,000 2,000
Total Corporate Obligations(Cost $2,000) 2,000
--------
- ----------------------------------------------------------------------
Repurchase Agreement -- 20.9%
Lehman
5.75%, dated 09/30/98, matures 10/01/98,
repurchase price $34,705,542 (collaterized
by U.S. Government Obligations:
total market value $35,396,690) $34,700 34,700
--------
Total Repurchase Agreement (Cost $34,700) 34,700
--------
Total Investments-- 90.9% (Cost $151,262) $151,262
--------
--------
MTN -- Medium Term Note
The accompanying notes are an integral part of the financial statements.
47
<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
PBHG Technology & Communications Fund
Pacific Stock Exchange High Technology Index(4)
Lipper Science & Technology Funds Average(5)
<TABLE>
<CAPTION>
PBHG Technology & Pacific Exchange Lipper Science &
Communication Fund Technology 100 Index Technology Funds Average
<S> <C> <C> <C>
9/30/95 10000 10000 10000
12/95 11602 9919 9440
3/96 12483 9899 9493
6/96 14973 10245 10174
9/96 16644 10945 10802
12/96 17917 11955 11339
3/97 14927 11955 10317
6/97 18641 13958 12195
9/97 22415 16638 14554
12/97 18510 14392 12611
3/98 20643 17149 14750
6/98 20332 17164 14234
9/98 17995 15879 13563
</TABLE>
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 typically exhibiting extraordinary rates of growth in earnings and
revenue with high profitability levels. These companies tend to be experiencing
improvements in business momentum, are leaders in their industries and possess
the ability to exceed the market's expectations of their business models. The
Fund's 52 holdings as of September 30, 1998, range in market capitalization from
$76 million to $255 billion, with a current average and median market
capitalization of $15.8 billion and $2 billion, respectively.
(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 six month return has not been annualized.
(3) The PBHG Technology & Communications Fund commenced operations on October
2, 1995.
(4) The Pacific Stock Exchange High Technology Index is a price-weighted index
of the top 100 U.S. technology stocks. The Index reflects the reinvestment
of income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
(5) The Lipper Science & Technology Funds Average is an equally weighted
benchmark composed of mutual funds, each of which normally invests more
than 65% of its equity portfolio in science and technology stocks. The
performance figures are based on changes in net asset value of the funds in
the category with all capital gains distributions and income dividends
reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Annualized Annualized
6 Months(2) One Year 3 Year Inception
Return Return to Date(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Technology & Communications Fund -12.82% -19.71% 21.64% 21.62%
- -------------------------------------------------------------------------------------------------
</TABLE>
Sector Weightings at September 30, 1998 (Unaudited)
Cash (8%)
Service (16%)
Technology (76%)
% of Total Portfolio Investments
48
<PAGE>
THE PBHG FUNDS, INC.
Statement of Net Assets
- ------------------------------------
As of September 30, 1998 (Unaudited)
PBHG Technology & Communications Fund
Market
Description Shares Value (000)
- ----------------------------------------------------------------------------
Common Stocks -- 94.7%
Consumer -- 0.3%
Consumer Products Miscellaneous -- 0.3%
Ziff-Davis* 127,800 $ 927
--------
927
--------
Total Consumer (Cost $1,332) 927
--------
- --------------------------------------------------------------------------
Service -- 16.8%
Cellular Towers -- 1.3%
American Tower Systems* 158,900 4,052
--------
4,052
- --------------------------------------------------------------------------
Commercial Services -- 1.3%
Getty Images* 218,500 3,797
--------
3,797
- --------------------------------------------------------------------------
Communications Services -- 3.7%
Global Crossing* 158,900 3,317
Qwest Communications* 124,900 3,911
Worldcom, Cl A* 88,600 4,330
--------
11,558
- --------------------------------------------------------------------------
Consulting -- 0.7%
Diamond Technology Partners, Cl A* 135,900 2,242
--------
2,242
- --------------------------------------------------------------------------
Educational Services -- 3.5%
Apollo Group, Cl A* 252,600 7,041
National Computer Systems 128,300 3,785
--------
10,826
- --------------------------------------------------------------------------
Information/Computer Service -- 0.2%
Sungard Data Systems* 23,600 744
--------
744
- --------------------------------------------------------------------------
Printing Services/Forms -- 1.3%
Consolidated Graphics* 103,500 3,933
--------
3,933
- --------------------------------------------------------------------------
Systems Integrator -- 4.7%
Computer Horizons* 65,700 1,638
Ecsoft Group ADR* 84,400 1,741
Information Management Resources* 100,000 2,475
Intelligroup* 226,600 3,852
Technology Solutions* 122,400 1,377
Tier Technologies* 218,400 3,604
--------
14,687
- --------------------------------------------------------------------------
Transaction Processing -- 0.1%
Ebay* 6,000 270
--------
270
--------
Total Service (Cost $47,953) 52,109
--------
Market
Description Shares Value (000)
- ----------------------------------------------------------------------------
Technology -- 77.6%
Computer Manufacturing -- 3.4%
Compaq Computers 279,800 $ 8,849
Sun Microsystems* 35,300 1,758
--------
10,607
- --------------------------------------------------------------------------
Contract Manufacturing -- 2.0%
Solectron* 130,300 6,254
--------
6,254
- --------------------------------------------------------------------------
Data Communications -- 0.6%
DSET* 224,000 1,904
--------
1,904
- --------------------------------------------------------------------------
Data Storage -- 5.9%
EMC* 321,000 18,357
--------
18,357
- --------------------------------------------------------------------------
Digital Video Related -- 1.4%
Gemstar International Group* 91,700 4,253
--------
4,253
- --------------------------------------------------------------------------
Networking Hardware -- 7.9%
Ascend Communications* 151,300 6,884
Cisco Systems* 157,350 9,726
Fore Systems* 471,000 7,831
--------
24,441
- --------------------------------------------------------------------------
Networking Software -- 5.0%
Legato Systems* 98,400 5,055
Veritas Software* 189,250 10,456
--------
15,511
- --------------------------------------------------------------------------
Semi-Conductor Manufacturing -- 14.3%
Advanced Micro Devices* 291,900 5,418
Altera* 149,100 5,237
Applied Micro Circuits* 155,400 2,312
Intel 169,100 14,500
Micron Technology 225,600 6,867
Texas Instruments 58,900 3,107
Transwitch* 134,900 2,015
Vitesse Semiconductor* 211,900 5,006
--------
44,462
- --------------------------------------------------------------------------
Software-Client/Server -- 14.4%
Bea Systems* 83,300 1,802
Citrix Systems* 159,350 11,314
Compuware* 426,700 25,122
Documentum* 127,600 5,056
HNC Software* 29,300 1,190
--------
44,484
- --------------------------------------------------------------------------
Software-Desktop -- 1.6%
Microsoft* 44,500 4,898
--------
4,898
- --------------------------------------------------------------------------
49
<PAGE>
Share/Face Market
Description Amount(000) Value (000)
- --------------------------------------------------------------------------------
Software-Enterprise Resource Planning -- 5.4%
J.D. Edwards & Company* 350,900 $ 16,843
--------
16,843
- ------------------------------------------------------------------------------
Software-Internet -- 1.0%
Mindspring Enterprise* 77,700 3,225
--------
3,225
- ------------------------------------------------------------------------------
Software-Manufacturing -- 0.9%
Aspect Development* 74,800 2,945
--------
2,945
- ------------------------------------------------------------------------------
Software-Other -- 3.9%
Lernout & Hauspie* 70,700 2,841
New Era of Networks* 194,600 7,930
Software AG Systems* 74,200 1,261
--------
12,032
- ------------------------------------------------------------------------------
Software-System/Mainframe -- 3.4%
BMC Software* 174,600 10,487
--------
10,487
- ------------------------------------------------------------------------------
Telecommunications Components -- 4.0%
Uniphase* 299,700 12,288
--------
12,288
- ------------------------------------------------------------------------------
Telecommunications Equipment -- 2.5%
Tekelec* 509,500 7,770
--------
7,770
--------
Total Technology (Cost $207,162) 240,761
--------
Total Common Stock (Cost $256,447) 293,797
--------
- ------------------------------------------------------------------------------
Repurchase Agreement -- 7.7%
J.P. Morgan
5.60%, dated 09/30/98, matures 10/01/98,
repurchase price $23,860,740 (collaterized
by U.S. Government Obligations: total
market value $24,334,222) (a) $23,857 23,857
--------
Total Repurchase Agreement (Cost $23,857) 23,857
--------
Total Investments-- 102.4% (Cost $280,304) 317,654
--------
- ------------------------------------------------------------------------------
Other Assets and Liabilities -- (2.4%)
Other Assets and Liabilities, Net (7,262
--------
- ------------------------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 18,481,120 outstanding
shares of common stock $254,382
Accumulated net investment loss (1,982
Accumulated net realized gain on investments 20,642
Net unrealized appreciation on investments 37,350
--------
Total Net Assets -- 100.0% $310,392
--------
--------
Net Asset Value, Offering and Redemption
Price Per Share $16.80
------
------
* 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.
50
<PAGE>
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
PBHG Strategic Small Company Fund
Russell 2000 Growth Index(4)
Lipper Small Company Funds Average(5)
PBHG Strategic Russell 2000 Lipper Small
Small Company Fund Growth Index Cap Funds Average
12/31/96 10000 10000 10000
3/97 8860 8951 9338
6/97 11130 10522 10933
9/97 13439 12302 12746
12/97 12566 11295 12110
3/98 13869 12636 13428
6/98 13071 11911 12900
9/98 10002 9248 10124
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.
(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 six month return has not been annualized.
(3) The PBHG Strategic Small Company Fund commenced operations on January 2,
1997.
(4) The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing.
(5) The Lipper Small Company Funds Average is an equally weighted benchmark
composed of mutual funds, each of which limits its investments, by
prospectus or portfolio practice, to companies on the basis of the size of
the company. The performance figures are based on changes in net asset
value of the Funds in the category with all capital gains distributions and
income dividends reinvested.
Average Annual Total Return(1)
As of September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Annualized
6 Months(2) One Year Inception
Return to Date(3)
- --------------------------------------------------------------------------------
PBHG Strategic Small Company Fund -27.93% -25.57% 0.02%
- --------------------------------------------------------------------------------
Sector Weightings at September 30, 1998 (Unaudited)
Basic Materials (1%)
Capital Goods (9%)
Consumer (18%)
Energy (1%)
Financial (12%)
Health (9%)
Industrial/General Manufacturing (1%)
Service (14%)
Technology (25%)
Transportation (5%)
Utilities (3%)
Cash (2%)
% of Total Portfolio Investments
51
<PAGE>
THE PBHG FUNDS, INC.
PBHG Strategic Small Company Fund
Statement of Net Assets
- -----------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Common Stocks-- 96.2%
Basic Materials -- 0.7%
Chemicals -- 0.2%
Solutia 4,600 $ 104
--------
104
- -------------------------------------------------------------
Chemicals-Specialty -- 0.5%
Crompton & Knowles 20,800 303
--------
303
--------
Total Basic Materials (Cost $660) 407
--------
- -------------------------------------------------------------
Capital Goods -- 9.2%
Aerospace/Defense -- 0.1%
BE Aerospace* 3,000 66
SBS Technologies* 500 13
--------
79
- -------------------------------------------------------------
Building Supplies -- 1.0%
NCI Building Systems* 4,200 83
Southdown 10,400 468
USG 1,000 43
--------
594
- -------------------------------------------------------------
Electrical Equipment -- 0.3%
C&D Technologies 7,400 177
--------
177
- -------------------------------------------------------------
Machinery -- 7.2%
Commonwealth Industries 74,000 601
Denison International* 82,000 1,230
Essex International* 16,600 284
Gehl* 6,200 84
Greenbrier 21,700 308
JLG Industries 13,400 214
Kaynar Technologies* 69,000 932
Tower Automotive* 6,100 120
Wolverine Tube* 16,000 337
--------
4,110
- -------------------------------------------------------------
Office Equipment -- 0.6%
Interface, Cl A 14,200 170
Knoll* 3,200 70
Miller (Herman) 6,100 121
--------
361
--------
Total Capital Goods (Cost $7,200) 5,321
--------
- -------------------------------------------------------------
Consumer -- 4.4%
Entertainment/Movies -- 0.6%
Cinar Films, Cl B* 19,500 350
--------
350
- -------------------------------------------------------------
Leisure/Recreational -- 0.2%
Travel Services International* 7,500 102
--------
102
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Packaged Goods/Cosmetics -- 0.2%
Usana* 11,000 $ 140
--------
140
- -------------------------------------------------------------
Retail-Apparel -- 0.7%
Chicos, FAS* 24,400 394
--------
394
- -------------------------------------------------------------
Retail-Catalog -- 0.9%
Insight Enterprises* 15,650 442
PC Connection* 5,300 54
--------
496
- -------------------------------------------------------------
Retail-Discount Stores -- 0.6%
Dollar Tree Stores* 11,500 360
--------
360
- -------------------------------------------------------------
Retail-Specialty -- 0.6%
Hibbett Sporting Goods* 9,200 231
Sunglass Hut International* 20,000 115
--------
346
- -------------------------------------------------------------
Shoe Manufacturing -- 0.3%
Maxwell Shoe* 12,500 148
--------
148
- -------------------------------------------------------------
Specialty Food/Candy -- 0.3%
Suiza Foods* 5,000 156
--------
156
--------
Total Consumer (Cost $2,572) 2,492
--------
- -------------------------------------------------------------
Consumer Cyclical -- 10.9%
Apparel & Textiles -- 2.4%
Dan River* 33,400 367
Fruit of The Loom, Cl A* 2,800 42
I.C. Isaacs & Company* 150,000 300
Kellwood 11,000 296
Nautica Enterprises* 4,000 75
Ralph Lauren* 7,200 144
Timberland, Cl A* 5,100 186
--------
1,410
- -------------------------------------------------------------
Auto/Truck Parts -- 2.6%
Delco Remy International* 78,900 882
Meritor Automotive 8,500 128
Smith (A.O.) 3,100 61
Standard Motor Products 2,000 49
Stoneridge* 22,100 358
--------
1,478
- -------------------------------------------------------------
Broadcasting & Recreation -- 0.1%
Midway Games* 3,000 35
--------
35
- -------------------------------------------------------------
52
<PAGE>
THE PBHG FUNDS, INC.
PBHG Strategic Small Company Fund
Statement of Net Assets
-----------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Furniture & Appliances -- 1.2%
Dorel Industries, Cl B* 28,000 $ 364
Mohawk Industries* 11,800 323
--------
687
- -------------------------------------------------------------
Homebuilding -- 1.9%
Champion Enterprises* 3,300 77
DR Horton 28,000 448
Lennar 19,600 437
Pulte 6,000 147
--------
1,109
- -------------------------------------------------------------
Resturants & Lodging -- 0.5%
Foodmaker* 19,600 308
--------
308
- -------------------------------------------------------------
Retailing-General -- 1.4%
DM Management* 21,400 173
Neiman-Marcus Group 11,100 240
Tweeter Home Entertainment Group* 27,400 373
--------
786
- -------------------------------------------------------------
Wholesalers -- 0.8%
BJ's Wholesale Club* 9,200 338
Pier 1 Imports 14,250 107
--------
445
--------
Total Consumer Cyclical (Cost $8,576) 6,258
--------
- -------------------------------------------------------------
Consumer Staples -- 2.8%
Food & Drug Retailers -- 0.2%
Longs Drug Stores 2,300 92
--------
92
- -------------------------------------------------------------
Food Producers -- 2.5%
Earthgrains 2,100 65
Fresh Del Monte Produce* 26,800 456
International Home Foods* 4,100 56
Ralcorp Holdings* 29,300 410
Universal Foods 21,100 440
--------
1,427
- -------------------------------------------------------------
Tobacco -- 0.1%
Standard Commercial 12,700 94
--------
94
--------
Total Consumer Staples (Cost $1,899) 1,613
--------
- -------------------------------------------------------------
Energy -- 1.2%
Energy Services -- 0.4%
Horizon Offshore* 31,600 209
--------
209
- -------------------------------------------------------------
Oil & Gas Exploration & Production -- 0.4%
Vintage Petroleum 20,400 235
--------
235
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Vessel & Rig Construction -- 0.4%
Friede Goldman International* 15,000 $ 236
--------
236
--------
Total Energy (Cost $1,061) 680
--------
- -------------------------------------------------------------
Financial -- 11.3%
Banks -- 4.3%
City National 10,600 332
Commerical Bank of New York 15,100 247
D&N Financial 2,500 50
Downey Financial 5,200 124
Florida Banks* 29,900 224
Flushing Financial 4,600 101
Imperial Bancorp* 2,500 38
North Fork Bank of New York 5,100 102
Pacific Bank 13,600 592
UST 26,800 566
Valley National Bancorp 3,700 97
--------
2,473
- -------------------------------------------------------------
Consumer Finance -- 0.5%
Metris Companies 6,500 303
--------
303
- -------------------------------------------------------------
Financial Services -- 4.2%
Affiliated Managers Group* 7,200 130
Budget Group* 6,300 144
Everen Capital 14,000 339
Investment Technology* 17,100 466
Legg Mason 29,200 768
Liberty Financial 15,200 401
Raymond James Financal 8,300 174
Rollins Truck Leasing 700 8
--------
2,430
- -------------------------------------------------------------
Insurance -- 0.1%
Enhance Financial Services Group 2,100 62
--------
62
- -------------------------------------------------------------
Investment Firms -- 0.7%
Pilgrim America Capital* 22,500 430
--------
430
- -------------------------------------------------------------
Mortgage Related -- 0.2%
Federal Agricultural Mortgage* 2,500 87
--------
87
- -------------------------------------------------------------
Specialty Finance -- 1.3%
Healthcare Financial Partners* 15,000 630
T&W Financial* 7,500 109
--------
739
--------
Total Financial (Cost $7,243) 6,524
--------
- -------------------------------------------------------------
53
<PAGE>
THE PBHG FUNDS, INC.
PBHG Strategic Small Company Fund
Statement of Net Assets
- -----------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Health -- 8.8%
Contract Research -- 1.6%
Icon ADR* 7,500 $ 245
Kendle International* 20,000 655
--------
900
- -------------------------------------------------------------
Hospital Supplies -- 0.4%
Xomed Surgical Products* 6,000 247
--------
247
- -------------------------------------------------------------
Information Systems -- 2.3%
Medical Manager* 15,000 343
Medquist* 18,800 594
Quadramed* 20,000 403
--------
1,340
- -------------------------------------------------------------
Medical Devices -- 0.6%
Sabratek* 15,300 346
--------
346
- -------------------------------------------------------------
Medical Services -- 2.0%
Bergen Brunswig 1,800 91
Beverly Enterprises* 38,800 310
HCR Manor Care* 11,200 328
Health Management Systems* 3,300 25
Quorum Health Group* 17,300 281
Total Renal Care Holdings* 4,300 103
--------
1,138
- -------------------------------------------------------------
Medical Supplies -- 0.1%
Adac Laboratories 2,000 48
Curative Health Services* 1,100 34
--------
82
- -------------------------------------------------------------
Pharmaceutical Services -- 1.8%
Barr Laboratories* 6,200 188
Boron Lepore & Associates* 10,000 379
Idexx Laboratories* 18,200 435
Roberts Pharmaceutical* 2,300 44
--------
1,046
--------
Total Health (Cost $4,896) 5,099
--------
- -------------------------------------------------------------
Industrial/General Manufacturing -- 1.3%
Aerospace -- 0.5%
Kellstrom Industries* 20,000 277
--------
277
- -------------------------------------------------------------
Railroad -- 0.8%
Motivepower Industries* 20,000 468
--------
468
--------
Total Industrial/General Manufacturing (Cost $900) 745
--------
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Service -- 10.8%
Commercial Services -- 1.7%
Inspire Insurance Solutions* 15,000 $ 354
Kroll-O'gara* 5,000 117
SM&A* 10,400 179
United Rentals* 12,700 304
--------
954
- -------------------------------------------------------------
Communications Services -- 0.5%
Pacific Gateway Exchange* 7,400 274
--------
274
- -------------------------------------------------------------
Consulting -- 0.5%
Diamond Technology Partners, Cl A* 17,500 289
--------
289
- -------------------------------------------------------------
Employment Services -- 1.4%
AHL Services* 12,900 422
Syntel* 18,000 401
--------
823
- -------------------------------------------------------------
Environmental -- 0.8%
American Disposal Service* 12,500 487
--------
487
- -------------------------------------------------------------
Information/Computer Services -- 0.9%
Forrester Research* 15,000 548
--------
548
- -------------------------------------------------------------
Marketing Information -- 0.8%
Abacus Direct* 9,000 459
--------
459
- -------------------------------------------------------------
Printing Services/Forms -- 0.2%
Consolidated Graphics* 3,700 140
--------
140
- -------------------------------------------------------------
Radio/Television -- 0.4%
Citadel Communications* 11,300 231
--------
231
- -------------------------------------------------------------
Real Estate -- 0.2%
CB Richard Ellis Services* 5,000 100
--------
100
- -------------------------------------------------------------
Systems Integrator -- 2.8%
Ciber* 7,500 152
Cognizant Tech Solutions* 10,000 155
Complete Business Solutions* 17,500 503
SPR* 26,250 604
Tier Technologies* 12,500 206
--------
1,620
- -------------------------------------------------------------
Telemarketing -- 0.6%
Snyder Communications* 10,000 335
--------
335
- -------------------------------------------------------------
Total Service (Cost $5,164) 6,260
--------
- -------------------------------------------------------------
54
<PAGE>
THE PBHG FUNDS, INC.
PBHG Strategic Small Company Fund
Statement of Net Assets
-----------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Services/Diversified -- 3.1%
Business Services -- 2.4%
Acnielson* 11,400 $ 254
Interim Services* 11,600 238
Personnel Group of America* 18,000 222
RCM Technologies* 5,100 75
True North Communications* 20,000 444
Valassis Communications* 2,300 92
Viad 2,100 56
--------
1,381
- --------------------------------------------------------------
Conglomerates -- 0.7%
Mark IV Industries 3,000 44
Pentair 4,700 152
United Dominion Industries 13,100 237
--------
433
--------
Total Services/Diversified (Cost $2,156) 1,814
--------
- --------------------------------------------------------------
Technology -- 24.7%
Communication Equipment -- 0.6%
Comverse Technology* 7,900 323
--------
323
- --------------------------------------------------------------
Computer & Related -- 0.9%
Banyan Systems* 8,800 26
Brightpoint* 19,000 146
Brooktrout Technology* 5,400 73
Diamond Multimedia Systems* 20,000 94
HMT Technology* 8,000 62
Jetfax* 4,000 10
Sequent Computer* 6,200 54
Splash Technologies Holdings* 4,000 57
--------
522
- --------------------------------------------------------------
Data Storage -- 1.3%
Network Appliance* 14,700 744
--------
744
- --------------------------------------------------------------
Design Automation Software -- 0.2%
Summit Design* 20,000 143
--------
143
- --------------------------------------------------------------
Digital Video Related -- 0.8%
Engineering Animation* 9,500 454
--------
454
- --------------------------------------------------------------
Electronics & Semiconductors -- 1.5%
Aehr Test Systems* 85,000 308
C-Cube Microsystems* 9,400 164
Cirrus Logic* 10,700 64
DSP Communications* 3,100 26
Lattice Semiconductor* 7,700 191
Micrel* 5,000 132
--------
885
- -------------------------------------------------------------
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Embedded Software -- 0.6%
Wind River Systems* 7,500 $ 354
--------
354
- -------------------------------------------------------------
Networking Hardware -- 1.0%
Apex PC Solutions* 17,500 343
Cybex Computer Products* 9,500 239
--------
582
- -------------------------------------------------------------
Networking Software -- 1.7%
Concord Communications* 6,300 251
Legato Systems* 14,000 719
--------
970
- -------------------------------------------------------------
Semi-Conductor Manufacturing -- 1.3%
Applied Micro Circuits* 17,500 261
Vitesse Semiconductor* 20,000 473
--------
734
- -------------------------------------------------------------
Software & Services -- 2.7%
Acxiom* 9,000 223
Clarify* 2,500 25
Datastream Systems* 4,000 70
Informix* 20,700 104
Learning Company* 13,940 276
Parametric Technology* 15,900 160
Platinum Technology* 13,200 238
Project Software & Development* 1,700 23
Sterling Software* 15,200 419
Symantec* 4,500 59
--------
1,597
- -------------------------------------------------------------
Software-Client/Server -- 3.2%
Business Objects ADR* 24,000 300
Dendrite International 30,000 716
Filenet* 20,000 280
Pegasystems* 10,600 163
Peregrine Systems* 8,900 358
--------
1,817
- -------------------------------------------------------------
Software-Desktop -- 0.9%
Macromedia* 12,500 203
Visio* 12,500 301
--------
504
- -------------------------------------------------------------
Software-Enterprise Resource Planning -- 1.6%
Best Software* 20,000 480
Great Plains Software* 3,400 160
TSI International Software Limited* 7,500 260
--------
900
- -------------------------------------------------------------
Software-Internet -- 0.3%
Inso* 9,400 180
--------
180
- -------------------------------------------------------------
Software-Manufacturing -- 0.6%
Symix Systems* 20,000 365
--------
365
- -------------------------------------------------------------
55
<PAGE>
THE PBHG FUNDS, INC.
PBHG Strategic Small Company Fund
Statement of Net Assets
- -----------------------
As of September 30, 1998 (Unaudited)
Market
Description Shares Value (000)
- ----------------------------------------------------------------
Software-Other -- 1.7%
Caere* 27,500 $ 292
New Era of Networks* 17,500 713
--------
1,005
- -------------------------------------------------------------
Telecommunication Components -- 0.4%
Uniphase* 5,000 205
--------
205
- -------------------------------------------------------------
Telecommunications Equipment -- 1.6%
Intervoice* 12,500 287
Polycom* 23,000 303
Tekelec* 22,500 343
--------
933
- -------------------------------------------------------------
Voice/Call Transaction Processing -- 1.8%
Geotel Communications* 30,000 806
Periphonics* 27,500 227
--------
1,033
--------
Total Technology (Cost $13,571) 14,250
--------
- -------------------------------------------------------------
Transportation -- 4.6%
Airlines -- 2.6%
Alaska Airgroup* 4,900 167
ASA Holdings 10,000 355
Continental Airlines* 7,200 272
Midway Airlines* 53,600 529
Midwest Express Holdings* 4,500 151
Skywest 1,900 36
--------
1,510
- -------------------------------------------------------------
Surface Transportation -- 0.8%
Cary International* 11,400 171
Coach USA* 11,800 291
--------
462
- -------------------------------------------------------------
Trucking & Shipping -- 1.2%
Atlas Air* 1,200 34
CNF Transportation 9,600 280
Swift Transaportation* 4,000 70
USfreightways 15,600 310
--------
694
--------
Total Transporation (Cost $3,421) 2,666
--------
- -------------------------------------------------------------
Utilities/Income -- 2.4%
Reits -- 2.4%
Berkshire Realty 31,800 332
Developers Diversified Realty 18,200 332
Excel Legacy* 2,700 8
Highwoods Properties 16,400 455
Pennsylvania Real Estate Investment
Trust 12,000 246
--------
1,373
--------
Total Utilities/Income (Cost $1,547) 1,373
--------
Total Common Stock (Cost $60,866) 55,502
--------
- -------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- ----------------------------------------------------------------
Repurchase Agreement -- 2.1%
J.P. Morgan
5.60%, dated 09/30/98,
matures 10/01/98, repurchase
price $1,191,944 (collaterized
by U.S. Government Obligations:
total market value $1,215,596)(a) $1,192 $ 1,192
----------
Total Repurchase Agreement
(Cost $ 1,192) 1,192
----------
Total Investments-- 98.3%
(Cost $62,058) 56,694
----------
- ---------------------------------------------------------------
Other Assets and Liabilities -- 1.7%
Other Assets and Liabilities, Net 1,002
----------
- ---------------------------------------------------------------
Net Assets:
Fund shares of PBHG class (authorized
200 million shares -- $0.001 par value)
based on 6,210,051 outstanding shares
of common stock 61,188
Accumulated net investment loss (411)
Accumulated net realized gain on investments 2,283
Net unrealized depreciation on investments (5,364)
----------
Total Net Assets -- 100.0% $57,696
==========
Net Asset Value, Offering and Redemption
Price Per Share $9.29
==========
* 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.
Statements of Assets and Liabilities (000)
------------------------------------------
September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
------------- -------------
PBHG PBHG
Mid-Cap Value Cash Reserves
Fund Fund
------------- -------------
<S> <C> <C>
Assets:
Investment securities (Cost $43,151 and $151,262 respectively) at market value $ 40,126 $151,262
Accrued Income 54 580
Receivable for capital shares sold 35 15,775
Receivable for investment securities sold 4,602 --
-------- --------
Total assets 44,817 167,617
-------- --------
Liabilities:
Payable for investment securities purchased 2,022 --
Payable for income distribution -- 477
Payable for capital shares redeemed 528 682
Bank overdraft 291 28
Accrued Expenses 44 46
-------- --------
Total liabilities 2,885 1,233
-------- --------
Net Assets:
Portfolio shares (authorized 200 million and 1.8 billion shares,
respectively for each of the PBHG Mid-Cap Value and Cash Reserves
Funds -- $0.001 par value) based on 3,174,934 and 166,377,761
outstanding shares of beneficial interest 42,301 166,378
Accumulated net investment loss (17) --
Accumulated net realized gain on investments 2,673 6
Net unrealized depreciation on investments (3,025) --
-------- --------
Net assets $ 41,932 $166,384
======== ========
Net Asset Value, Offering and Redemption Price Per Share $ 13.21 $ 1.00
======== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
THE PBHG FUNDS, INC.
Statements of Operations (000)
-------------------------------------------------------
For the Six Months Ended September 30, 1998 (Unaudited)
<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
----------- ----------- --------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends $ 261 $ 476 $ 106 $ 40 $ 30 $ 4
Interest 5,684 2,644 240 519 137 431
Less: Foreign Taxes Withheld -- -- -- -- -- --
----------- ----------- -------- -------- -------- --------
Total Investment Income 5,945 3,120 346 559 167 435
----------- ----------- -------- -------- -------- --------
Expenses:
Investment Advisory Fees 19,435 4,981 541 1,335 572 775
Administrative Fees 3,430 879 108 236 101 116
Transfer Agent Fees 5,619 1,480 178 385 226 125
Registration and Filing Fees 199 64 7 21 22 9
Printing Fees 708 175 21 44 24 24
Professional Fees 291 90 8 20 12 10
Custodian Fees 132 35 6 8 7 5
Insurance and Other Fees 163 31 4 16 -- 6
Directors' Fees 54 26 1 2 1 1
Amortization of Deferred Organizational
Costs -- -- 1 1 1 4
Line of Credit 125 32 3 8 5 4
Distribution Fees (1) 104 -- -- -- -- --
----------- ----------- -------- -------- -------- --------
Total Expenses 30,260 7,793 878 2,076 971 1,079
----------- ----------- -------- -------- -------- --------
Net Investment Income (Loss) (24,315) (4,673) (532) (1,517) (804) (644)
----------- ----------- -------- -------- -------- --------
Net Realized Gain (Loss) from Security
Transactions (97,415) 16,911 5,973 25,795 11,596 6,020
Net Realized Loss on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments (1,306,405) (304,115) (20,091) (69,190) (37,324) (38,457)
----------- ----------- -------- -------- -------- --------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions (1,403,820) (287,204) (14,118) (43,395) (25,728) (32,437)
----------- ----------- -------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting
from Operations $(1,428,135) $ (291,877) $(14,650) $(44,912) $(26,532) $(33,081)
=========== =========== ======== ======== ======== ========
1. All distribution fees are incurred in the Advisor Class
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
<CAPTION>
---------- --------- ------- --------- ------------- --------
PBHG PBHG PBHG PBHG PBHG
Large Cap Large Cap Mid-Cap Small Cap PBHG Cash
20 Value Value Value International Reserves
Fund Fund Fund Fund Fund Fund
---------- --------- ------- --------- ------------- --------
Investment Income: <C>
<S> <C> <C> <C> <C> <C>
Dividends $ 160 $ 597 $ 270 $ 360 $ 212 $ --
Interest 942 46 31 64 15 3,624
Less: Foreign Taxes Withheld -- -- -- -- (6) --
------- -------- -------- -------- -------- ------
Total Investment Income 1,102 643 301 424 221 3,624
------- -------- -------- -------- -------- ------
Expenses:
Investment Advisory Fees 1,261 240 211 560 90 192
Administrative Fees 222 56 37 84 14 96
Transfer Agent Fees 214 36 61 124 28 112
Registration and Filing Fees 10 3 2 1 10 10
Printing Fees 32 7 6 15 2 18
Professional Fees 15 4 3 8 1 7
Custodian Fees 7 8 5 6 16 --
Insurance and Other Fees 14 3 3 4 5 --
Directors' Fees 2 -- -- 1 -- 1
Amortization of Deferred Organizational
Costs 3 1 2 2 -- 12
Line of Credit 4 2 1 7 -- --
Distribution Fees (1) -- -- -- -- -- --
------- -------- -------- -------- -------- ------
Total Expenses 1,784 360 331 812 166 448
------- -------- -------- -------- -------- ------
Net Investment Income (Loss) (682) 283 (30) (388) 55 3,176
------- -------- -------- -------- -------- ------
Net Realized Gain (Loss) from Security
Transactions 7,044 1,536 (727) (8,057) 216 2
Net Realized Loss on Foreign Currency
Transactions -- -- -- -- (14) --
Net Change in Unrealized Appreciation
(Depreciation) on Investments (6,777) (6,377) (6,334) (23,676) (2,333) --
------- -------- -------- -------- -------- ------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions 267 (4,841) (7,061) (31,733) (2,131) 2
------- -------- -------- -------- -------- ------
Increase (Decrease) in Net Assets Resulting
from Operations $ (415) $ (4,558) $ (7,091) $(32,121) $ (2,076) $3,178
======= ======== ======== ======== ======== ======
-------------- -------------
PBHG PBHG
Technology & Strategic
Communications Small Company
Fund Fund
-------------- -------------
Investment Income:
<S> <C> <C>
Dividends $ 17 $ 155
Interest 761 60
Less: Foreign Taxes Withheld -- --
-------- --------
Total Investment Income 778 215
-------- --------
Expenses:
Investment Advisory Fees 1,717 431
Administrative Fees 303 65
Transfer Agent Fees 578 106
Registration and Filing Fees 33 5
Printing Fees 62 14
Professional Fees 26 6
Custodian Fees 14 7
Insurance and Other Fees 11 --
Directors' Fees 3 1
Amortization of Deferred Organizational
Costs 1 2
Line of Credit 12 2
Distribution Fees (1) -- --
-------- --------
Total Expenses 2,760 639
-------- --------
Net Investment Income (Loss) (1,982) (424)
-------- --------
Net Realized Gain (Loss) from Security
Transactions 41,429 (203)
Net Realized Loss on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments (90,357) (24,130)
-------- --------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions (48,928) (24,333)
-------- --------
Increase (Decrease) in Net Assets Resulting
from Operations $(50,910) $(24,757)
======== ========
</TABLE>
59
<PAGE>
THE PBHG FUNDS, INC.
Statements of Changes in Net Assets (000) -- Continued
- --------------------------------------------------------------------------------
For the six month period ended
September 30, 1998 (unaudited) and
the period ending March 31, 1998.
<TABLE>
<CAPTION>
------------------------ ----------------------- ---------------------
PBHG PBHG PBHG
Growth Emerging Growth Large Cap Growth
Fund Fund Fund
------------------------ ------------------------ ---------------------
4/1/98 4/1/97 4/1/98 4/1/97 4/1/98 4/1/97
to to to to to to
9/30/98 3/31/98 9/30/98 3/31/98 9/30/98 3/31/98
----------- ---------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ (24,315) $ (41,659) $ (4,673) $ (12,141) $ (532) $ (1,073)
Net Realized Gain (Loss) from Security
Transactions (97,415) 140,179 16,911 52,716 5,973 14,465
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (1,306,405) 1,461,423 (304,115) 384,540 (20,091) 49,242
---------- ---------- ---------- ---------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (1,428,135) 1,559,943 (291,877) 425,115 (14,650) 62,634
---------- ---------- ---------- ---------- -------- --------
Distributions to Shareholders From:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security Transactions -- -- -- -- -- (1,402)
---------- ---------- ---------- ---------- -------- --------
Total Distributions -- -- -- -- -- (1,402)
---------- ---------- ---------- ---------- -------- --------
Capital Share Transactions:
PBHG Class
Shares Issued 1,263,182 2,552,092 916,736 1,875,607 96,202 174,995
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- 1,233
Shares Redeemed (1,951,430) (3,392,800) (1,145,605) (2,092,185) (95,573) (211,769)
---------- ---------- ---------- ---------- -------- --------
Total PBHG Class Transactions (688,248) (840,708) (228,869) (216,578) 629 (35,541)
---------- ---------- ---------- ---------- -------- --------
Advisor Class
Shares Issued 13,277 72,982 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed (6,361) (11,739) -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Total Advisor Class Transactions 6,916 61,243 -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (681,332) (779,465) (228,869) (216,578) 629 (35,541)
---------- ---------- ---------- ---------- -------- --------
Total Increase (Decrease) in Net Assets (2,109,467) 780,478 (520,746) 208,537 (14,021) 25,691
---------- ---------- ---------- ---------- -------- --------
Net Assets:
Beginning of Period 5,427,607 4,647,129 1,404,157 1,195,620 145,662 119,971
---------- ---------- ---------- ---------- -------- --------
End of Period $3,318,140 $5,427,607 $ 883,411 $1,404,157 $131,641 $145,662
========== ========== ========== ========== ======== ========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 50,972 102,864 39,766 80,964 4,193 9,034
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- 66
Shares Redeemed (77,958) (133,809) (49,490) (88,673) (4,211) (11,093)
---------- ---------- ---------- ---------- -------- --------
Total PBHG Class Share Transactions (26,986) (30,945) (9,724) (7,709) (18) (1,993)
---------- ---------- ---------- ---------- -------- --------
Advisor Class
Shares Issued 532 3,017 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed (260) (462) -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Total Advisor Class Share Transactions 272 2,555 -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Net Increase (Decrease) in Shares Outstanding (26,714) (28,390) (9,724) (7,709) (18) (1,993)
========== ========== ========== ========== ======== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
THE PBHG FUNDS, INC.
- -------------------------------
For the six month period ended
September 30, 1998 (unaudited) and
the period ending March 31, 1998.
<TABLE>
<CAPTION>
----------------------- ------------------------ ------------------------
PBHG PBHG PBHG
Select Equity Core Growth Limited
Fund Fund Fund
----------------------- ------------------------ ------------------------
4/1/98 4/1/97 4/1/98 4/1/97 4/1/98 4/1/97
to to to to to to
9/30/98 3/31/98 9/30/98 3/31/98 9/30/98 3/31/98
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ (1,517) $ (4,351) $ (804) $ (2,644) $ (644) $ (1,200)
Net Realized Gain (Loss) from Security
Transactions 25,795 21,675 11,596 (5,477) 6,020 11,738
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (69,190) 140,704 (37,324) 79,526 (38,457) 64,636
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (44,912) 158,028 (26,532) 71,405 (33,081) 75,174
-------- -------- -------- -------- -------- --------
Distributions to Shareholders From:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security Transactions -- -- -- -- -- (5,376)
-------- -------- -------- -------- -------- --------
Total Distributions -- -- -- -- -- (5,376)
-------- -------- -------- -------- -------- --------
Capital Share Transactions:
PBHG Class
Shares Issued 100,802 122,632 87,976 110,417 5,059 19,454
Shares Issued upon Reinvestment of Distribution -- -- -- -- -- 5,219
Shares Redeemed (125,914) (317,070) (129,247) (300,307) (25,141) (53,823)
-------- -------- -------- -------- -------- --------
Total PBHG Class Transactions (25,112) (194,438) (41,271) (189,890) (20,082) (29,150)
-------- -------- -------- -------- -------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Advisor Class Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (25,112) (194,438) (41,271) (189,890) (20,082) (29,150)
-------- -------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets (70,024) (36,410) (67,803) (118,485) (53,163) 40,648
-------- -------- -------- -------- -------- --------
Net Assets:
Beginning of Period 336,076 372,486 165,510 283,995 178,168 137,520
-------- -------- -------- -------- -------- --------
End of Period $266,052 $336,076 $ 97,707 $165,510 $125,005 $178,168
======== ======== ======== ======== ======= ========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 4,288 6,144 7,082 9,459 402 1,549
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- 442
Shares Redeemed (5,393) (15,642) (10,259) (24,681) (1,966) (4,532)
-------- -------- -------- -------- -------- --------
Total PBHG Class Share Transactions (1,105) (9,498) (3,177) (15,222) (1,564) (2,541)
-------- -------- -------- -------- -------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Advisor Class Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Shares Outstanding (1,105) (9,498) (3,177) (15,222) (1,564) (2,541)
======== ======== ======== ======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
----------------------
PBHG
Large Cap 20
Fund
----------------------
4/1/98 4/1/97
to to
9/30/98 3/31/98
-------- ---------
<S> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ (682) $ (857)
Net Realized Gain (Loss) from Security
Transactions 7,044 8,307
Net Realized Gain (Loss) on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (6,777) 52,271
-------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (415) 59,721
-------- --------
Distributions to Shareholders From:
Net Investment Income -- --
Net Realized Gains from Security Transactions -- --
-------- --------
Total Distributions -- --
-------- --------
Capital Share Transactions:
PBHG Class
Shares Issued 424,816 228,573
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed (241,221) (165,482)
-------- --------
Total PBHG Class Transactions 183,595 63,091
-------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
-------- --------
Total Advisor Class Transactions -- --
-------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions 183,595 63,091
-------- --------
Total Increase (Decrease) in Net Assets 183,180 122,812
-------- --------
Net Assets:
Beginning of Period 192,631 69,819
-------- --------
End of Period $375,811 $192,631
======== ========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 24,807 17,218
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed (14,341) (12,712)
-------- --------
Total PBHG Class Share Transactions 10,466 4,506
-------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
-------- --------
Total Advisor Class Share Transactions -- --
-------- --------
Net Increase (Decrease) in Shares Outstanding 10,466 4,506
======== ========
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
61
<PAGE>
THE PBHG FUNDS, INC.
Statements of Changes in Net Assets (000) -- Continued
- ------------------------------------------------------
For the six month period ended
September 30, 1998 (unaudited) and
the period ending March 31, 1998.
<TABLE>
<CAPTION>
---------------------- ---------------------- --------------------
PBHG PBHG PBHG
Large Cap Value Mid-Cap Value Small Cap Value
Fund Fund Fund
---------------------- ---------------------- ----------------------
4/1/98 4/1/97 4/1/98 5/1/971(1) 4/1/98 5/1/971(1)
to to to to to to
9/30/98 3/31/98 9/30/98 3/31/98 9/30/98 3/31/98
------- ------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 283 $ 555 $ (30) $ (41) $ (388) $ (264)
Net Realized Gain (Loss) from Security
Transactions 1,536 12,603 (727) 5,307 (8,057) 10,557
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (6,377) 5,906 (6,334) 3,309 (23,676) 6,382
------- ------- ------- ------- ------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations (4,558) 19,064 (7,091) 8,575 (32,121) 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 9,174 60,032 30,049 95,035 54,717 209,518
Shares Transferred -- 10,076 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- 5,275 -- 1,731 -- 3,541
Shares Redeemed (13,561) (38,860) (35,199) (49,315) (70,417) (100,027)
------- ------- ------- ------- ------- --------
Total PBHG Class Transactions (4,387) 36,523 (5,150) 47,451 (15,700) 113,032
------- ------- ------- ------- ------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- --------
Total Advisor Class Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (4,387) 36,523 (5,150) 47,451 (15,700) 113,032
------- ------- ------- ------- ------- --------
Total Increase (Decrease) in Net Assets (8,945) 50,214 (12,241) 54,173 (47,821) 125,834
------- ------- ------- ------- ------- --------
Net Assets:
Beginning of Period 76,476 26,262 54,173 -- 125,834 --
------- ------- ------- ------- ------- --------
End of Period $67,531 $76,476 $41,932 $54,173 $78,013 $125,834
======= ======= ======= ======= ======= ========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 704 5,169 2,010 7,022 3,772 15,018
Shares Transferred(2) -- 989 -- -- -- --
Shares Issued upon Reinvestment of Distributions -- 460 -- 132 -- 264
Shares Redeemed (1,040) (3,337) (2,377) (3,612) (5,004) (7,103)
------- ------- ------- ------- ------- --------
Total PBHG Class Share Transactions (336) 3,281 (367) 3,542 (1,232) 8,179
------- ------- ------- ------- ------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
------- ------- ------- ------- ------- --------
Total Advisor Class Share Transactions -- -- -- -- -- --
------- ------- ------- ------- ------- --------
Net Increase (Decrease) in Shares Outstanding (336) 3,281 (367) 3,542 (1,232) 8,179
======= ======= ====== ====== ======= ========
</TABLE>
(1) The PBHG Mid-Cap Value and PBHG Small Cap Value Funds commenced
operations on May 1, 1997
(2) 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.
62
<PAGE>
<TABLE>
<CAPTION>
----------------------- ---------------------- ----------------------
PBHG PBHG PBHG Technology &
International Cash Reserves Communications
Fund Fund Fund
----------------------- ---------------------- ----------------------
4/1/98 4/1/97 4/1/98 4/1/97 4/1/98 4/1/97
to to to to to to
9/30/98 3/31/98 9/30/98 3/31/98 9/30/98 3/31/98
-------- -------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ 55 $ (26) $ 3,176 $ 9,338 $ (1,982) $ (5,482)
Net Realized Gain (Loss) from Security
Transactions 216 1,631 2 5 41,429 4,812
Net Realized Gain (Loss) on Foreign Currency
Transactions (14) (22) -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (2,333) 2,014 -- -- (90,357) 179,889
--------- ----------- ----------- ---------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations (2,076) 3,597 3,178 9,343 (50,910) 179,219
--------- ----------- ----------- ---------- ----------- -----------
Distributions to Shareholders From:
Net Investment Income -- -- (3,176) (9,338) -- --
Net Realized Gains from Security Transactions -- (1,541) -- -- -- (26,386)
--------- ----------- ----------- ---------- ----------- -----------
Total Distributions -- (1,541) (3,176) (9,338) -- (26,386)
--------- ----------- ----------- ---------- ----------- -----------
PBHG Class
Shares Issued 29,228 49,801 1,490,266 1,974,482 581,474 910,539
Shares Transferred -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- 1,478 2,386 9,128 -- 25,100
Shares Redeemed (35,246) (53,695) (1,443,844) (2,207,617) (715,869) (1,085,931)
--------- ----------- ----------- ---------- ----------- -----------
Total PBHG Class Transactions (6,018) (2,416) 48,808 (224,007) (134,395) (150,292)
--------- ----------- ----------- ---------- ----------- -----------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
--------- ----------- ----------- ---------- ----------- -----------
Total Advisor Class Transactions -- -- -- -- -- --
--------- ----------- ----------- ---------- ----------- -----------
Capital Share Transactions (6,018) (2,416) 48,808 (224,007) (134,395) (150,292)
--------- ----------- ----------- ---------- ----------- -----------
Total Increase (Decrease) in Net Assets (8,094) (360) 48,810 (224,002) (185,305) 2,541
--------- ----------- ----------- ---------- ----------- -----------
Net Assets:
Beginning of Period 20,905 21,265 117,574 341,576 495,697 493,156
--------- ----------- ----------- ---------- ----------- -----------
End of Period 12,811 $ 20,905 $ 166,384 $ 117,574 $ 310,392 $ 495,697
========= =========== =========== ========== =========== ===========
PBHG Class
Shares Issued 2,482 4,207 1,490,266 1,974,482 31,802 49,980
Shares Transferred(2) -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- 143 2,386 9,128 -- 1,474
Shares Redeemed (2,976) (4,503) (1,443,844) (2,207,617) (39,046) (59,449)
-------- ------- ---------- ---------- -------- ----------
Total PBHG Class Share Transactions (494) (153) 48,808 (224,007) (7,244) (7,995)
--------- ----------- ----------- ---------- ----------- -----------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
--------- ----------- ----------- ---------- ----------- -----------
Total Advisor Class Share Transactions -- -- -- -- -- --
--------- ----------- ----------- ---------- ----------- -----------
Net Increase (Decrease) in Shares Outstanding (494) (153) 48,808 (224,007) (7,244) (7,995)
========= =========== =========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
-----------------------
PBHG Strategic
Small Company
Fund
-----------------------
4/1/98 4/1/97
to to
9/30/98 3/31/98
-------- ---------
<S> <C> <C>
Investment Activities:
Net Investment Income (Loss) $ (424) $ (945)
Net Realized Gain (Loss) from Security
Transactions (203) 13,618
Net Realized Gain (Loss) on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (24,130) 25,036
------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations (24,757) 37,709
------- --------
Distributions to Shareholders From:
Net Investment Income -- --
Net Realized Gains from Security Transactions -- (8,154)
------- --------
Total Distributions -- (8,154)
------- --------
Capital Share Transactions:
PBHG Class
Shares Issued 14,644 127,228
Shares Transferred -- --
Shares Issued upon Reinvestment of Distributions -- 7,759
Shares Redeemed (44,174) (113,941)
------- --------
Total PBHG Class Transactions (29,530) 21,046
------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
------- --------
Total Advisor Class Transactions -- --
------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (29,530) 21,046
------- --------
Total Increase (Decrease) in Net Assets (54,287) 50,601
------- --------
Net Assets:
Beginning of Period 111,983 61,382
------- --------
End of Period $57,696 $111,983
======= ========
Shares Issued and Redeemed:
PBHG Class
Shares Issued 1,254 10,645
Shares Transferred (2) -- --
Shares Issued upon Reinvestment of Distributions -- 684
Shares Redeemed (3,734) (9,564)
------- --------
Total PBHG Class Share Transactions (2,480) 1,765
------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
------- --------
Total Advisor Class Share Transactions -- --
------- --------
Net Increase (Decrease) in Shares Outstanding (2,480) 1,765
======= ========
</TABLE>
63
<PAGE>
THE PBHG FUNDS, INC.
Financial Highlights
- --------------------------------------------------------------------------------
For a Share Outstanding Throughout Each Fiscal Year or Period
For the Period Ended September 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Realized
Net and Net Net
Asset Net Unrealized Distributions Distributions Asset Assets
Value Investment Gains or from Net from Value End of
Beginning Income (Losses) on Investment Capital End of Total Period
of Period (Loss) Securities Income Gains Period Return (000)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------
PBHG Growth Fund
- ----------------
PBHG Class
1998** $28.23 $(0.23) $(7.96) -- -- $20.04 (29.01)%+ $3,249,472
1998 21.06 (0.26) 7.43 -- -- 28.23 34.05% 5,338,380
1997 25.30 (0.10) (4.14) -- -- 21.06 (16.76)% 4,634,138
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50% 3,298,666
1995 14.67 (0.05) 2.09 -- $(0.01) 16.70 13.92% 1,014,832
1994(1) 10.83 (0.03) 4.06 -- (0.19) 14.67 37.28% 319,059
PBHG Advisor Class
1998** $28.12 $(0.14) $(8.04) -- -- $19.94 (29.09)%+ $68,668
1998 21.03 (0.15) 7.24 -- -- 28.12 33.71% 89,227
1997(2) 25.42 (0.06) (4.33) -- -- 21.03 (17.27)%+ 12,991
- -------------------------
PBHG Emerging Growth Fund
- -------------------------
PBHG Class
1998** $25.83 $(0.18) $(5.86) -- -- $19.79 (23.38)%+ $ 883,411
1998 19.26 (0.24) 6.81 -- -- 25.83 34.11% 1,404,157
1997 23.07 (0.11) (2.87) -- $(0.83) 19.26 (13.71)% 1,195,620
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16% 689,705
1995(3,4) 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64%+ 411,866
1994(3) 13.22 (0.03) 2.38 -- (0.98) 14.59 19.64% 113,329
- --------------------------
PBHG Large Cap Growth Fund
- --------------------------
PBHG Class
1998** $22.69 $(0.08) $(2.05) -- -- $20.56 (9.39)%+ $ 131,641
1998 14.26 (0.19) 8.82 -- $(0.20) 22.69 60.80% 145,662
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)% 119,971
1996(6) 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47%* 53,759
- -----------------------
PBHG Select Equity Fund
- -----------------------
PBHG Class
1998** $24.15 $(0.17) $(3.21) -- -- $20.77 (14.00)%+ $ 266,052
1998 15.91 (0.44) 8.68 -- -- 24.15 51.79% 336,076
1997 17.27 (0.13) (1.03) -- $(0.20) 15.91 (6.94)% 372,486
1996(6) 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75%* 202,796
- ---------------------
PBHG Core Growth Fund
- ---------------------
PBHG Class
1998** $13.53 $(0.24) $(2.50) -- -- $10.79 (20.25)%+ $ 97,707
1998 10.34 (0.33) 3.52 -- -- 13.53 30.85% 165,510
1997 11.82 (0.09) (1.39) -- -- 10.34 (12.52)% 283,995
1996(5) 10.00 -- 1.82 -- -- 11.82 18.20%+ 31,092
- -----------------
PBHG Limited Fund
- -----------------
PBHG Class
1998** $14.08 $(0.07) $(2.74) -- -- $11.27 (19.96)%+ $ 125,005
1998 9.05 (0.10) 5.53 -- $(0.40) 14.08 60.78% 178,168
1997(8) 10.00 0.02 (0.93) $(0.03) (0.01) 9.05 (9.15)%+ 137,520
- ----------------------
PBHG Large Cap 20 Fund
- ----------------------
PBHG Class
1998** $15.98 $(0.04) $ 0.75 -- -- $16.69 4.44%+ $ 375,811
1998 9.25 (0.07) 6.80 -- -- 15.98 72.76% 192,631
1997(9) 10.00 (0.01) (0.73) $(0.01) -- 9.25 (7.40)%+ 69,819
- -------------------------
PBHG Large Cap Value Fund
- -------------------------
PBHG Class
1998** $13.01 $ 0.05 $(0.88) -- -- $12.18 (6.38)%+ $ 67,531
1998 10.11 0.02 3.84 $(0.06) $(0.90) 13.01 39.47% 76,476
1997(10) 10.00 0.02 0.09 -- -- 10.11 1.10%+ 26,262
<CAPTION>
Ratio
of Net
Ratio Investment
of Net Ratio Income
Investment of Expenses (Loss)
Ratio of Income to Average to Average
Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ----------------
PBHG Growth Fund
- ----------------
PBHG Class
1998** 1.32%* (1.06)%* 1.32%* (1.06)%* 38.98%
1998 1.26% (0.74)% 1.26% (0.74)% 94.21%
1997 1.25% (0.69)% 1.25% (0.69)% 64.89%
1996 1.48% (0.79)% 1.48% (0.79)% 44.64%
1995 1.50% (0.69)% 1.50% (0.69)% 118.75%
1994(1) 1.55% (0.78)% 1.59% (0.82)% 94.28%
PBHG Advisor Class
1998** 1.57%* (1.31)%* 1.57%* (1.31)%* 38.98%
1998 1.51% (1.02)% 1.51% (1.02)% 94.21%
1997(2) 1.53%* (1.11%)* 1.53%* (1.11%)* 64.89%
- -------------------------
PBHG Emerging Growth Fund
- -------------------------
PBHG Class
1998** 1.33%* (0.80)%* 1.33%* (0.80%)* 37.38%
1998 1.27% (0.80%) 1.27% (0.80%) 95.21%
1997 1.28% (0.36)% 1.28% (0.36)% 47.75%
1996 1.47% (0.42)% 1.47% (0.42)% 97.05%
1995(3,4) 1.50%* (0.08%)* 1.50%* (0.08%)* 27.50%
1994(3) 1.45% (0.77)% 1.45% (0.77)% 95.75%
- --------------------------
PBHG Large Cap Growth Fund
- --------------------------
PBHG Class
1998** 1.22%* (0.74)%* 1.22%* (0.74)%* 22.96%
1998 1.22% (0.79)% 1.22% (0.79)% 46.56%
1997 1.23% (0.47)% 1.23% (0.47)% 51.70%
1996(6) 1.50%* (0.66%)* 2.07%* (1.23%)* 116.75%
- -----------------------
PBHG Select Equity Fund
- -----------------------
PBHG Class
1998** 1.32%* (0.97)%* 1.32%* (0.97)%* 21.00%
1998 1.35% (1.15)% 1.35% (1.15)% 72.16%
1997 1.26% (0.76)% 1.26% (0.76)% 71.70%
1996(6) 1.50%* (0.74%)* 1.73%* (0.97)%* 206.22%
- ---------------------
PBHG Core Growth Fund
- ---------------------
PBHG Class
1998** 1.44%* (1.19)%* 1.44%* (1.19)%* 41.66%
1998 1.35% (1.07)% 1.35% (1.07)% 72.78%
1997 1.36% (0.77)% 1.36% (0.77)% 46.75%
1996(5) 1.50%* (0.18)%* 2.92%* (1.60)%* 17.00%
- -----------------
PBHG Limited Fund
- -----------------
PBHG Class
1998** 1.39%* (0.83)%* 1.39%* (0.83)%* 38.31%
1998 1.40% (0.72)% 1.40% (0.72)% 81.36%
1997(8) 1.42%* 0.33%* 1.42%* 0.33%* 75.46%
- ----------------------
PBHG Large Cap 20 Fund
- ----------------------
PBHG Class
1998** 1.20%* (0.46)%* 1.20%* (0.46)%* 33.88%
1998 1.41% (0.79)% 1.41% (0.79)% 98.27%
1997(9) 1.50%* 0.17%* 1.50%* 0.17%* 43.98%
- -------------------------
PBHG Large Cap Value Fund
- -------------------------
PBHG Class
1998** 0.97%* 0.77%* 0.97%* 0.77%* 305.19%
1998 1.17% 0.98% 1.17% 0.98% 403.59%
1997(10) 1.50%* 1.61%* 1.74%* 1.37%* 0.00%
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Realized
Net and Net Net
Asset Net Unrealized Distributions Distributions Asset Assets
Value Investment Gains or from Net from Value End of
Beginning Income (Losses) on Investment Capital End of Total Period
of Period (Loss) Securities Income Gains Period Return (000)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------
PBHG Mid-Cap Value Fund
- -----------------------
PBHG Class
1998** $15.30 $(0.01) $(2.08) -- -- $13.21 (13.66)%+ $ 43,932
1998(12) 10.00 (0.01) 6.00 -- $(0.69) 15.30 61.06%+ 54,173
- -------------------------
PBHG Small Cap Value Fund
- -------------------------
PBHG Class
1998** $15.38 $(0.06) $(4.09) -- -- $11.23 (26.98)%+ $ 78,013
1998(12) 10.00 (0.03) 6.15 -- $(0.74) 15.38 62.27%+ 125,834
- -----------------------
PBHG International Fund
- -----------------------
PBHG Class
1998** $12.04 $ 0.03 $(1.75) -- -- $10.32 (14.29)%+ $ 12,811
1998 11.26 (0.03) 1.83 -- $(1.02) 12.04 17.46% 20,905
1997 10.55 -- 0.71 -- -- 11.26 6.73% 21,265
1996 9.13 (0.04) 1.46 -- -- 10.55 15.55% 11,243
1995(11) 10.00 (0.03) (0.80) -- (0.04) 9.13 (8.33)%+ 15,236
- -----------------------
PBHG Cash Reserves Fund
- -----------------------
PBHG Class
1998** $ 1.00 $ 0.02 -- $(0.02) -- $1.00 2.51%+ $ 166,384
1998 1.00 0.05 -- (0.05) -- 1.00 5.13% 117,574
1997 1.00 0.05 -- (0.05) -- 1.00 4.89% 341,576
1996(6) 1.00 0.05 -- (0.05) -- 1.00 5.24%* 99,001
- -------------------------------------
PBHG Technology & Communications Fund
- -------------------------------------
PBHG Class
1998** $19.27 $(0.22) $(2.25) -- -- $16.80 (12.82)%+ $ 310,392
1998 14.63 (0.23) 5.72 -- $(0.85) 19.27 38.29% 495,697
1997 12.48 (0.05) 2.55 -- (0.35) 14.63 19.59% 493,156
1996(7) 10.00 (0.02) 2.50 -- -- 12.48 24.82%+ 61,772
- ---------------------------------
PBHG Strategic Small Company Fund
- ---------------------------------
PBHG Class
1998** $12.89 $(0.11) $(3.49) -- -- $ 9.29 (27.93)%+ $ 57,696
1998 8.86 (0.11) 5.01 -- $(0.87) 12.89 56.54% 111,983
1997(10) 10.00 -- (1.14) -- -- 8.86 (11.40)%+ 61,382
<CAPTION>
Ratio
of Net
Ratio Investment
of Net Ratio Income
Investment of Expenses (Loss)
Ratio of Income to Average to Average
Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------
PBHG Mid-Cap Value Fund
- -----------------------
PBHG Class
1998** 1.34%* (0.12)%* 1.34%* (0.12)%* 409.81%
1998(12) 1.48%* (0.17)%* 1.48%* (0.17)%* 399.96%
- -------------------------
PBHG Small Cap Value Fund
- -------------------------
PBHG Class
1998** 1.45%* (0.69)%* 1.45%* (0.69)%* 146.11%
1998(12) 1.49% (0.52)%* 1.49%* (0.52)% 263.04%
- -----------------------
PBHG International Fund
- -----------------------
PBHG Class
1998** 1.91%* (0.59)%* 1.91%* (0.59)%* 22.78%
1998 2.00% (0.13)% 2.00% (0.13)% 85.94%
1997 2.22% (0.32)% 2.22% (0.32)% 74.82%
1996 2.25% (0.22)% 3.03% (1.00)% 140.26%
1995(11) 2.25%* (0.43)%* 2.36%* (0.54)%* 81.72%
- -----------------------
PBHG Cash Reserves Fund
- -----------------------
PBHG Class
1998** 0.70%* 4.95%* 0.70%* 4.95%* n/a
1998 0.68% 5.00% 0.68% 5.00% n/a
1997 0.68% 4.79% 0.68% 4.79% n/a
1996(6) 0.70%* 5.05%* 0.88%* 4.87%* n/a
- -------------------------------------
PBHG Technology & Communications Fund
- -------------------------------------
PBHG Class
1998** 1.37%* (0.98)%* 1.37%* (0.98)%* 116.27%
1998 1.30% (0.91)% 1.30% (0.91)% 259.89%
1997 1.33% (0.59)% 1.33% (0.59)% 289.91%
1996(7) 1.50%* (0.50)%* 2.00%* (1.00)%* 125.99%
- ---------------------------------
PBHG Strategic Small Company Fund
- ---------------------------------
PBHG Class
1998** 1.48%* (0.98)%* 1.48%* (0.98)%* 65.71%
1998 1.45% (0.92)% 1.45% (0.92)% 215.46%
1997(10) 1.50%* 0.18%* 1.50%* 0.18%* 88.88%
</TABLE>
- ----------
* Annualized
** For the six month period ended September 30, 1998
+ 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 assetts
and 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. The 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) The PBHG Core Growth Fund commenced operations on January 2, 1996.
(6) The PBHG Large Cap Growth Fund, the PBHG Select Equity Fund, and the PBHG
Cash Reserves Fund commenced operations on April 5, 1995.
(7) The PBHG Technology & Communications Fund commenced operations on
October 2, 1995.
(8) The PBHG Limited Fund commenced operations on July 1, 1996.
(9) The PBHG Large Cap 20 Fund commenced operations on December 1, 1996.
(10) The PBHG Large Cap Value Fund and the PBHG Strategic Small Company Fund
commenced operations on January 2, 1997.
(11) The PBHG International Fund commenced operations on June 14, 1994.
(12) The PBHG Mid-Cap Value and the PBHG Small Cap Value Funds commenced
operations 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.
65
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THE PBHG FUNDS, INC.
Notes to Financial Statements
- ------------------------------------
As of September 30, 1998 (unaudited)
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 as 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
66
<PAGE>
THE PBHG FUNDS, INC.
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.
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 September 30, 1998 the International Fund had
$1,385 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
September 30, 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.
67
<PAGE>
THE PBHG FUNDS, INC.
Notes to Financial Statements -- Concluded
- ------------------------------------
As of September 30, 1998 (unaudited)
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, WMC is entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum annual fee of $50,000. WMC may, from time
to time, waive all or a portion of its fee from the Adviser. WMC receives no
fees directly from the Cash Reserves Fund.
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 Investments
Mutual Funds Services (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 pays 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. First Union National
Bank, 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 six months ended
September 30, 1998 were as follows:
Purchases Sales
(000) (000)
---------- -----
Growth Fund $1,656,371 $2,346,036
Emerging Growth Fund 392,751 694,389
Large Cap Growth Fund 29,977 38,711
Select Equity Fund 60,115 120,813
Core Growth Fund 53,244 97,368
Limited Fund 52,464 83,673
Large Cap 20 Fund 237,081 86,274
Large Cap Value Fund 214,812 217,472
Mid-Cap Value Fund 196,110 202,903
Small Cap Value Fund 154,021 160,560
International Fund 301 745
Technology &
Communications Fund 427,768 542,356
Strategic Small Company Fund 53,875 83,524
The aggregate gross unrealized appreciation and depreciation of securities held
by the Portfolios and the total cost of securities for Federal income tax
purposes at September 30, 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 $694,858 $450,729 $244,129 $3,075,927
Emerging Growth Fund 148,495 107,906 40,589 866,963
Large Cap Growth Fund 37,579 6,311 31,268 100,545
Select Equity Fund 74,604 14,655 59,949 208,128
Core Growth Fund 15,971 13,497 2,474 95,100
Limited Fund 25,775 12,623 13,152 112,253
Large Cap 20 Fund 66,345 25,687 40,658 336,655
Large Cap Value Fund 3,626 4,897 (1,271) 67,972
Mid-Cap Value Fund 1,399 4,424 (3,025) 43,151
Small Cap Value Fund 1,649 18,943 (17,294) 94,428
International Fund 2,539 1,189 1,350 10,996
Technology &
Communications Fund 51,588 14,238 37,350 280,304
Strategic Small Company
Fund 6,336 11,702 (5,364) 62,058
68
<PAGE>
THE PBHG FUNDS, INC.
Subsequent to October 31, 1997, the following Portfolios had recognized net
capital losses that have been deferred to 1999 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 (ii) PBHG Insurance
Series Fund, Inc. and (iii) PBHG Advisor Funds, Inc. Draws on the line of credit
will bear interest at the Federal Funds Rate plus 0.40%. As of September 30,
1998, none of the Funds had an outstanding borrowing. Listed below are the funds
which had outstanding balances during the six month period ended September 30,
1998:
Maximum Average Daily Weighted
Amount Outstanding Average
Borrowed Balance Interest Rate
-------- ----------- --------------
Growth Fund $12,500,000 $ 85,246 5.93%
Core Growth Fund $ 1,100,000 $ 18,033 5.78%
Small Cap Value Fund $ 2,700,000 $160,109 6.01%
Technology &
Communications
Fund $ 2,000,000 $ 21,858 5.90%
69
<PAGE>
The PBHG Funds, Inc.
[LOGO]
P.O. Box 419534
Kansas City, MO 64141-6534
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor
SEI Investments Distribution Co.
To open an account, receive account information
or request literature call 1-800-433-0051
