[LOGO OMITTED]
THE PBHG FUNDS, INC.
PBHG Growth Fund
Advisor Class Shares
PROSPECTUS
July 31, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any Fund shares or determined whether this prospectus is
truthful or complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
AN INTRODUCTION TO THE PBHG FUNDS[R]
AND THIS PROSPECTUS
The PBHG Funds, Inc. is a mutual fund that offers a convenient and ~economical
means of investing in professionally managed portfolios of securities, called
Funds. This prospectus offers Advisor Class Shares of the PBHG Growth Fund, one
of the sixteen portfolios of The PBHG Funds, Inc.
Before investing, make sure the Fund's goal matches your own.
[BULLET] The PBHG Growth Fund is generally designed for long-term
investors, such as those saving for retirement, or investors that want a
fund that seeks to outperform the market in which it invests over the
long-term. This Fund may not be suitable for investors who require
regular income or stability of principal, or who are pursuing a short-term
investment goal, such as investing emergency reserves.
INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is the investment adviser
for the Fund.
This Prospectus contains important information you should know before investing
in the Fund and as a shareholder in the Fund. This information is arranged into
different sections for easy reading and future reference. To obtain more
information about the Fund, please refer to the back cover of this Prospectus.
<PAGE>
CONTENTS
FUND SUMMARY
- --------------------------------------------------------------------------------
PBHG Growth Fund ...................................................2
MORE ABOUT THE FUND
- --------------------------------------------------------------------------------
Risks & Returns ....................................................5
THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
The Investment Adviser ............................................12
YOUR INVESTMENT
- --------------------------------------------------------------------------------
Year 2000 .........................................................13
Pricing Fund Shares ...............................................13
Buying Shares .....................................................14
Selling Shares ....................................................15
General Policies ..................................................16
Distribution & Taxes ..............................................19
Distribution Arrangements .........................................20
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Financial Highlights ..............................................20
1
<PAGE>
PBHG Growth Fund
[ICON OMITTED] GOAL
The Fund seeks to provide investors with capital appreciation.
[ICON OMITTED] Main Investment Strategies
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of small and medium sized
companies. These companies generally have market capitalizations or annual
revenues of up to $2 billion. The growth securities in the Fund are primarily
common stocks that Pilgrim Baxter believes have strong earnings growth and
capital appreciation potential. Pilgrim Baxter uses its own fundamental
research, computer models and proprietary measures of growth in determining
which securities to buy and when to sell them for this Fund. The Fund may sell
a security for a variety of reasons, such as to invest in a company with more
attractive growth prospects.
The Fund may use options and futures contracts for hedging and risk management.
[ICON OMITTED] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.
The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.
The Fund emphasizes small and medium sized growth companies, so it is likely to
be more volatile than the stock market in general, as measured by the S&P 500[R]
Index. In addition, the growth securities in the Fund may never reach what
Pilgrim Baxter believes are their full earnings growth potential and may go down
in price.
The Fund's use of options and futures contracts may reduce returns or increase
volatility.
Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.
Your investment in the Fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.
[ICON OMITTED]
For more information on this Fund's investment strategies and the associated
risks, please refer to the More About the Funds section beginning on page 5.
2
<PAGE>
[ICON OMITTED] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell 2000 Growth Index, a widely
recognized, unmanaged index that tracks the performance of those securities in
the Russell 2000 Index with greater-than-average growth characteristics. The
Russell 2000 Index is an unmanaged index that measures the performance of 2,000
small cap companies. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.
------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART OMITTED]
1997 -3.62%
1998 0.32%
The Fund's year-to-date return as of 3/31/99 was -4.10%.
- ------------------------------
BEST QUARTER: Q4 1998 27.33%
WORST QUARTER: Q3 1998 -26.28%
- -------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/98
Past 1 Year Past 5 Years Past 10 Years
Growth Fund Advisor Class* 0.32% 10.82% 18.75%
Russell 2000 Growth Index 1.23% 10.22% 11.54%
* THE INCEPTION DATE OF THE PBHG GROWTH FUND -- ADVISOR CLASS WAS AUGUST 16,
1996. THE PERFORMANCE SHOWN FOR THE ADVISOR CLASS PRIOR TO ITS INCEPTION IS
BASED ON THE PERFORMANCE AND EXPENSES OF THE PBHG CLASS SHARES. THE AVERAGE
ANNUAL TOTAL RETURN OF THE ADVISOR CLASS FROM ITS INCEPTION DATE TO DECEMBER
31, 1998 WAS -0.05%.
3
<PAGE>
[ICON OMITTED] FEES AND EXPENSES
This table summarizes the shareholder fees and annual operating expenses you
would pay as an investor in the Fund. Shareholder fees are paid directly from
your account. Annual operating expenses are paid out of the Fund's assets. The
expenses listed below are based on the Fund's last fiscal year, ended March 31,
1999.
- -----------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES NONE
- -----------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees 0.25%
Other Expenses 0.47%
- -----------------------------------------------------
Total Annual Operating Expenses 1.57%
- -----------------------------------------------------
[ICOn OMITTED] Example
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. This example makes four
assumptions: 1) you invest $10,000 in the Fund for the time periods shown; 2)
you redeem all your shares at the end of those time periods; 3) you earn a 5%
return on your investment each year; and 4) the Fund's operating expenses remain
the same for the time periods shown. The example is hypothetical. Your actual
costs may be higher or lower.
- ----------------------------------------------------------------
Your Cost Over 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------
Advisor Class $160 $496 $855 $1,867
- ----------------------------------------------------------------
4
<PAGE>
MORE ABOUT THE FUNDS
[ICON OMITTED] RISKS AND RETURNS
This section takes a closer look at the investment strategies that make up the
Fund's risk and return characteristics.
In addition to the main investment strategy described in the Fund Summary
section of this Prospectus, the Fund may make other types of investments that
have different risk/return characteristics. These investments, the Fund's main
investment strategies and its risk/return characteristics are described in the
table set forth below. From time to time, the Fund may make investments and
pursue strategies different from those described in this Prospectus. Those
investments and strategies are described in the Statement of Additional
Information. The back cover of this Prospectus explains how you can get a copy
of the Statement of Additional Information.
The Fund may invest 100% of its total assets in cash or U.S. dollar-denominated
high quality short-term debt instruments for temporary defensive purposes, to
maintain liquidity or when economic or market conditions are unfavorable for
profitable investing. These types of investments typically have a lower yield
than other longer-term investments and lack the capital appreciation potential
of equity securities, like stocks. In addition, while these investments are
generally designed to limit the Fund's losses, they can prevent the Fund from
achieving its investment goal.
The Fund is actively managed, which means the Fund's manager may frequently buy
and sell securities. Frequent trading increases the Fund's turnover rate and may
increase transaction costs, such as brokerage commissions. Increased transaction
costs could detract from the Fund's performance. In addition, the sale of Fund
securities may generate capital gains which, when distributed, may be taxable to
you.
5
<PAGE>
- --------------------------------------------------------------------------------
SECURITIES
Shares representing ownership in a corporation. The Fund may invest in the
following types of securities: common and preferred stocks, convertible
securities, warrants and rights.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Security prices fluctuate over time. Security prices may fall as a result of
factors that relate to the company, such as management decisions or lower demand
for the company's products or services.
Security prices may fall because of factors affecting companies in a number of
industries, such as production costs.
Security prices may fall because of changes in the financial markets, such as
interest rates or currency exchange rate changes.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
Pilgrim Baxter maintains a long-term investment approach and focuses on
securities it believes can appreciate over an extended time frame, regardless of
interim fluctuations.
Under normal circumstances, the Fund intends to remain fully invested, with at
least 65% of its total assets in securities.
Pilgrim Baxter focuses its active management on securities selection, the area
it believes its commitment to fundamental research can most enhance the Fund's
performance.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Securities have generally outperformed more stable investments (such as bonds
and cash equivalents) over the long term.
- --------------------------------------------------------------------------------
GROWTH SECURITIES
Securities that Pilgrim Baxter believes have strong earnings growth and capital
appreciation potential and will grow faster than the economy as a whole.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
See Securities
Growth securities may be more sensitive to earnings changes than other
securities because they typically trade at higher earnings multiples.
The growth securities in the Fund may never reach what Pilgrim Baxter believes
are their full value and may even go down in price.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
See Securities
Growth securities may appreciate faster than non-growth securities.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
See Securities
In managing the Fund, Pilgrim Baxter uses its own software and research models
which incorporate important attributes of successful growth. A key attribute of
successful growth is earnings growth. Pilgrim Baxter's investment process is
extremely focused on earnings growth.
Pilgrim Baxter considers selling a security when its anticipated appreciation is
no longer probable, alternative investments offer superior appreciation
prospects or the risk of a decline in its market price is too great.
6
<PAGE>
- --------------------------------------------------------------------------------
FOREIGN EQUITY SECURITIES
Securities of foreign issuers, including ADRs. ADRs are certificates issued by a
U.S. bank that represent a stated number of shares of a foreign corporation that
the bank holds in its vault. An ADR is bought and sold in the same manner as
U.S. securities.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Foreign security prices may fall due to political instability, changes in
currency exchange rates, foreign economic conditions or inadequate regulatory
and accounting standards.
These risks tend to be greater in emerging markets.
Foreign issuers may be less prepared than U.S. companies to handle Year
2000-related computer problems.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Favorable exchange rate movements could generate gains or reduce losses.
Foreign investments, which represent a major portion of the world's securities,
offer attractive potential performance and opportunities for diversification.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Fund does not invest in emerging markets and limits the amount of total
assets it invests in foreign securities to 10%.
7
<PAGE>
- --------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS
High quality, short-term U.S. and foreign debt instruments denominated in U.S.
dollars, including bank obligations (such as CDs, time deposits, bankers'
acceptances, and banknotes) commercial paper, corporate obligations (including
asset backed securities) government obligations (such as U.S. Treasury, agency
or foreign government securities) short-term obligations issued by state and
local governments and repurchase agreements.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Money market instrument prices fluctuate over time.
Money market instrument prices may fall as a result of factors that relate to
the issuer, such as a rating downgrade.
Money market instrument prices may fall because of changes in the financial
markets, such as interest rate changes.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Fund follows strict SEC rules about credit risk, maturity and
diversification of its investments.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Money market instruments have greater short-term liquidity, capital preservation
and income potential than longer- term investments such as stocks.
- --------------------------------------------------------------------------------
SMALL AND MEDIUM SIZED COMPANY SECURITIES
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Smaller company securities involve greater risk and price volatility than
larger, more established companies because they tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
See securities/growth securities/value securities.
Pilgrim Baxter focuses on smaller companies with strong balance sheets that it
expects to exceed consensus earnings expectations.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Smaller company securities may appreciate faster than those of larger, more
established companies for many reasons. For example, smaller companies tend to
have younger product lines whose distribution and revenues are still maturing.
8
<PAGE>
- --------------------------------------------------------------------------------
FUTURES AND OPTIONS
A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on changes in the value of a securities index. An option contract is the
right to buy or sell a set quantity of an underlying instrument at a
pre-determined price. A forward foreign currency contract is an obligation to
buy or sell a given currency on a future date and at a set price.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
A futures or option contract used to hedge the Fund or special securities may
not fully offset the underlying position.
A futures or option contract used for risk management may not have the intended
effects and may result in losses or missed investment opportunities.
The counterparty to a futures or option contract could default.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
A futures or option contract that correlates well with the underlying position
can reduce or eliminate losses at low cost.
The Fund could make money and protect against losses if Pilgrim Baxter's
analysis proves correct.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Fund may use futures and options contracts for hedging and risk management,
i.e., to establish or adjust exposure to particular securities, markets or
currencies; to manage the Fund's exposure relative to its benchmark.
The Fund's aggregate initial margin deposit to establish a futures contract may
not exceed 5% of its net assets. In addition, the total market value of the
Fund's futures contracts may not exceed 50% of the Fund's net assets. The Fund
may not invest more than 10% of its net assets in options.
The Fund only establishes hedges that it expects will be highly correlated with
underlying securities positions.
The Fund will not consider using futures or options contracts unless it would be
cost-effective.
The Fund maintains assets sufficient to meet its obligations under the contract
in a segregated margin account with a custodian bank.
9
<PAGE>
- --------------------------------------------------------------------------------
TECHNOLOGY OR COMMUNICATIONS COMPANY SECURITIES
Securities of companies that rely extensively on technology or communications in
their product development or operations or are expected to benefit from
technological advances and improvements.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Technology or communications company securities are strongly affected by
worldwide scientific and technological developments and governmental policies,
and, therefore, are generally more volatile than companies not dependent upon or
associated with technology or communications issues.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Fund seeks to strike a balance among the industries in which it invests so
that no one industry dominates the Fund's investments.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Technology or communications company securities offer investors significant
growth potential because they may be responsible for breakthrough products or
technologies or may be positioned to take advantage of cutting-edge,
technology-related developments.
- --------------------------------------------------------------------------------
OTC SECURITIES
Securities not listed and traded on an organized exchange, but bought and sold
through a computer network.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
OTC securities are not traded as often as securities listed on an exchange. So,
if the Fund were to sell an OTC security, it might have to offer the security at
a discount or sell it in smaller share lots over an extended period of time.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
Pilgrim Baxter uses a highly disciplined investment process that seeks to, among
other things, identify quality investments that will enhance the Fund's
performance.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Increases the number of potential investments for the Fund.
OTC securities may appreciate faster than exchange-traded securities because
they are typically securities of younger, growing companies.
10
<PAGE>
- --------------------------------------------------------------------------------
ILLIQUID SECURITIES
Securities that do not have a ready market and cannot be easily sold, if at all,
at approximately the price that the Fund has valued them.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
The Fund may have difficulty valuing these securities precisely.
The Fund may be unable to sell these securities at the time or price it desires.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Fund may not invest more than 15% of its net assets in illiquid securities.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Illiquid securities may offer more attractive yields or potential growth than
comparable widely traded securities.
- --------------------------------------------------------------------------------
RESTRICTED SECURITIES
Privately placed securities whose resale is restricted under securities law.
POTENTIAL RISKS
- --------------------------------------------------------------------------------
Restricted securities may be difficult to value because market quotations may
not be readily available.
Because of the restrictions in resale of these securities, the Fund may not be
able to find a qualified buyer or may not be able to sell these securities at
the time or price it desires.
POLICIES TO BALANCE RISK AND RETURN
- --------------------------------------------------------------------------------
The Growth Fund is not currently permitted to invest in restricted securities.
POTENTIAL RETURNS
- --------------------------------------------------------------------------------
Restricted securities may offer more attractive yields or potential growth than
comparable widely traded securities.
11
<PAGE>
THE INVESTMENT ADVISER
[ICON OMITTED] THE INVESTMENT ADVISOR
Pilgrim Baxter & Associates, Ltd., 825 Duportail Road, Wayne, PA 19087, is the
investment advisor for the Fund. Founded in 1982, Pilgrim Baxter currently
manages approximately $11 billion in assets for pension and profit-sharing
plans, charitable institutions, corporations, trusts, estates and other
investment companies.
Pilgrim Baxter believes that discipline and consistency are important to
long-term investment success. This belief is reflected in its investment
process. Pilgrim Baxter uses a quantitative and fundamental investment process
that is extremely focused on earnings growth.
Pilgrim Baxter's decision to sell a security depends on many factors. Generally
speaking, however, Pilgrim Baxter considers selling a security when its
anticipated appreciation is no longer probable, alternative investments offer
more superior appreciation prospects or the risk of a decline in its market
price is too great.
As investment adviser, Pilgrim Baxter makes investment decisions for the Growth
Fund. The Fund's Board of Directors supervises Pilgrim Baxter and establishes
policies that Pilgrim Baxter must follow in its day-to-day investment management
activities.
INVESTMENT PROCESS
- --------------------------------------------------------------------------------
Pilgrim Baxter begins its investment process by creating a universe of rapidly
growing companies that possess certain growth characteristics. That universe is
continually updated. Pilgrim Baxter then ranks each company in its universe
using proprietary software and research models that incorporate attributes of
successful growth like positive earnings surprises, upward earnings estimate
revisions, and accelerating sales and earnings growth. Finally, using its own
fundamental research and a bottom-up approach to investing, Pilgrim Baxter
evaluates each company's earnings quality and whether the company can sustain
its current growth trend. Pilgrim Baxter believes that through this highly
disciplined investment process, it is able to construct a portfolio of
investments with strong growth characteristics.
For the fiscal year ended March 31, 1999, the effective management fee paid by
the Growth Fund to Pilgrim Baxter was 0.85%.
Gary L. Pilgrim, CFA has managed the Growth Fund since its inception in 1985. He
is the Chief Investment Officer and President of Pilgrim Baxter and has been a
growth stock manager for over 30 years.
12
<PAGE>
- --------------------------------------------------------------------------------
YOUR INVESTMENT
[ICON OMITTED] YEAR 2000
The Fund could be adversely affected if the computer systems used by Pilgrim
Baxter or the Fund's other service providers do not properly process and
calculate date-related information relating to the Year 2000. While year
2000-related computer problems could have a negative effect on the Fund, both in
its operations and in its investments, The PBHG Funds, Inc. is working with
Pilgrim Baxter and the Fund's other service providers to avoid such problems.
Testing of year 2000-related computer problems on the Fund's mission-critical
systems should be completed by summer, 1999. The Fund does not expect to incur
any material costs related to its year 2000 initiatives. No assurances, though,
can be provided that the Fund will not be adversely impacted by year
2000-related computer problems.
- --------------------------------------------------------------------------------
[ICON OMITTED] PRICING FUND SHARES
The Fund prices its investments for which market quotations are readily
available at market value. Short-term investments are priced at amortized cost,
which approximates market value. All other investments are priced at fair value
as determined in good faith by the Fund's Board of Directors. If the Fund holds
securities quoted in foreign currencies, it translates that price into U.S.
dollars at current exchange rates. Because foreign markets may be open at
different times than the New York Stock Exchange, the price of the Fund's shares
may change on days when its shares are not available for purchase or sale.
NET ASSET VALUE (NAV)
- --------------------------------------------------------------------------------
The price of the Fund's shares is based on the Fund's net asset value (NAV). The
Fund's NAV equals the value of its assets, less its liabilities, divided by the
number of its outstanding shares. Fund shares are priced every day at the close
of regular trading on the New York Stock Exchange. Fund shares are not priced on
days that the New York Stock Exchange is closed.
13
<PAGE>
[ICON OMITTED] BUYING SHARES
You may purchase shares of the Fund directly through the Fund's transfer agent.
The price per share you will pay to invest in the Fund is its net asset value
per share (NAV) next calculated after the transfer agent or other authorized
representative accepts your order. The Fund's NAV is calculated at the close of
trading on the New York Stock Exchange, normally 4:00 p.m. Eastern time, each
day the exchange is open for business. The Fund's assets are generally valued at
their market price. However, if a market price is unavailable or if the assets
have been affected by events occurring after the close of trading, the Fund's
board of directors may use another method that it believes reflects fair value.
You may also purchase shares of the Fund through certain broker-dealers or other
financial institutions that are authorized to sell you shares of the Fund. Such
financial institutions may charge you a fee for this service in addition to the
Fund's NAV.
CONCEPTS TO UNDERSTAND
- --------------------------------------------------------------------------------
Traditional IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made.
Spousal IRA: an IRA funded by a working spouse in the name of a nonworking
spouse.
Roth IRA: an IRA with non-deductible contributions, and tax-free growth of
assets and distributions to pay retirement expenses, provided certain conditions
are met.
Education IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses.
FOR MORE COMPLETE IRA INFORMATION, CONSULT A PBHG SHAREHOLDER SERVICES
REPRESENTATIVE OR A TAX ADVISOR.
- --------------------------------------------------------------------------------
MINIMUM INVESTMENTS
Initial Additional
- --------------------------------------------------------------------------------
REGULAR ACCOUNTS $ 2,500 no minimum
UNIFORM GIFTS/TRANSFER
TO MINOR ACCOUNTS $ 500 no minimum
TRADITIONAL IRAS $ 2,000 no minimum
ROTH IRAS $ 2,000 no minimum
EDUCATIONAL IRAS $ 500 no minimum
SYSTEMATIC
INVESTMENT PLANS1 $ 500 $25
(SIP)
1 PROVIDED A SIP IS ESTABLISHED, THE MINIMUM INITIAL INVESTMENT FOR THE FUND
IS $500 ALONG WITH A MONTHLY SYSTEMATIC INVESTMENT OF $25 OR MORE.
14
<PAGE>
[ICON OMITTED] SELLING SHARES
You may sell your shares at NAV any day the New York Stock Exchange is open for
business. Sale orders received by the Fund's transfer agent or other authorized
representatives by 4:00 p.m. Eastern time will be priced at the Fund's next
calculated NAV. The Fund generally sends payment for your shares the business
day after your order is received. Under unusual circumstances, the Fund may
suspend redemptions or postpone payment for up to seven days. Also, if the Fund
has not yet collected payment for the shares you are selling, it may delay
paying out the proceeds on your sale until payment has been collected up to 15
days from the date of purchase. You may also sell shares of the Fund through
certain broker-dealers or other financial institutions at which you maintain an
account. Such financial institutions may charge you a fee for this service.
WRITTEN REDEMPTION ORDERS
- --------------------------------------------------------------------------------
Some circumstances require written sell orders along with
signature guarantees.
These include:
[BULLET] Redemptions in excess of $50,000
[BULLET] Requests to send proceeds to a different address or payee
[BULLET] Requests to send proceeds to an address that has been changed within
the last 30 days
[BULLET] Requests to wire proceeds to a different bank account
A SIGNATURE GUARANTEE helps to protect you against fraud. You can obtain one
from most banks or securities dealers, but not from a notary public. For joint
accounts, each signature must be guaranteed. Please call us to ensure that your
signature guarantee is authentic.
- --------------------------------------------------------------------------------
LIMITATIONS ON SELLING SHARES BY PHONE
Proceeds
sent by Minimum Maximum
- --------------------------------------------------------------------------------
Check no minimum $50,000
Wire* no minimum no maximum
ACH no minimum no maximum
Please note that the banking instructions to be used for wire and ACH
redemptions must be established on your account in advance of placing your sell
order.
*WIRE FEE IS $10 PER FEDERAL RESERVE WIRE
15
<PAGE>
[ICON OMITTED] GENERAL POLICIES
[BULLET] The Fund may reject or suspend acceptance of purchase orders.
[BULLET] The Fund reserves the right to make redemptions in securities rather
than in cash if the redemption amount exceeds $250,000 or 1% of the NAV of the
Fund.
[BULLET] Payment for telephone purchases must be received by the Fund's transfer
agent within seven days or you may be liable for any losses the Fund incurs as a
result of the cancellation of your purchase order.
[BULLET] When placing a purchase, sale or exchange order through an authorized
representative, it is the representative's responsibility to promptly transmit
your order to the Fund's transfer agent so that you may receive that same day's
NAV.
[BULLET] SEI Trust Company, the custodian for PBHG Traditional, Roth and
Education IRA accounts, currently charges a $10 annual custodial fee to
Traditional and Roth IRA accounts and a $7 annual custodial fee to Educational
IRA accounts. This fee will be automatically charged to your account if not
received by the announced due date, usually in mid-August.
[BULLET] Because of the relatively high cost of maintaining smaller accounts,
the Fund charges an annual fee of $12 if your account balance drops below the
minimum investment amount because of redemptions. Minimum investment amounts are
identified in the table on page 66. For non-retirement accounts, the Fund may
close your account and send you the proceeds if your account balance remains
below the minimum investment amount for over 60 days.
EXCHANGES BETWEEN FUNDS
You may exchange some or all Advisor Class Shares of the Fund for Advisor Class
Shares of any other PBHG Fund that has Advisor Class Shares. Advisor Class
Shares of the Fund may not be exchanged for PBHGClass Shares. Currently, Advisor
Class Shares are only available for the Growth Fund. Simply mail, telephone or
use the Fund's internet website to provide your exchange instructions to the
transfer agent. There is currently no fee for exchanges, however, the Fund may
change or terminate this privilege on 60 days notice.
16
<PAGE>
TO OPEN AN ACCOUNT
- --------------------------------------------------------------------------------
IN WRITING
Complete the application.
Mail your completed application and a check to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
- --------------------------------------------------------------------------------
BY TELEPHONE
Call us at 1-800-433-0051 to receive an account application and receive an
account number.
WIRE Have your bank send your investment to:
[BULLET] United Missouri Bank of Kansas City, N.A.
[BULLET] ABA# 10-10-00695
[BULLET] Account # 98705-23469
[BULLET] Fund Name
[BULLET] Your name
[BULLET] Your Social Security or tax ID
number
[BULLET] Your account number
Return the account application.
- --------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE
(ACH)*
VIA THE INTERNET
[BULLET] Visit the PBHG Funds website at http://www.pbhgfunds.com.
[BULLET] Enter the "open account" screen and follow the instructions for
completing an account application.
TO ADD TO AN ACCOUNT
- --------------------------------------------------------------------------------
IN WRITING
Fill out an investment slip:
Mail the slip and the check to:
The PBHG Funds, Inc.
P.O. Box 419534
Kansas City, Missouri 64121-9534
- --------------------------------------------------------------------------------
BY TELEPHONE
Wire Have your bank send your investment to:
[BULLET] United Missouri Bank of Kansas
City, N.A.
[BULLET] ABA# 10-10-00695
[BULLET] Account # 98705-23469
[BULLET] Fund Name
[BULLET] Your name
[BULLET] Your Social Security or tax ID
number
[BULLET] Your account number
- --------------------------------------------------------------------------------
BY AUTOMATED CLEARING HOUSE
(ACH)*
[BULLET] Complete the bank information section on the account application.
[BULLET] Attach a voided check or deposit slip to the account application.
[BULLET] The maximum purchase allowed through ACH is $100,000 and this option
must be established on your account 15 days prior to initiating a transaction.
VIA THE INTERNET
[BULLET] Complete the bank information section on the account application.
[BULLET] Enter the "Your Account" section of the website and follow the
instructions for purchasing shares.
17
<PAGE>
TO SELL SHARES
- --------------------------------------------------------------------------------
BY MAIL
Write a letter of instruction that includes:
[BULLET] your name(s) and signature(s)
[BULLET] your account number
[BULLET] the fund name
[BULLET] the dollar amount your wish to sell
[BULLET] how and where to sent the proceeds
If required, obtain a signature guarantee (see "Selling Shares")
Mail your request to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
- --------------------------------------------------------------------------------
SYSTEMATIC WITHDRAW PLAN
Permits you to have payments of $50 or more mailed or automatically transferred
from your Fund accounts to your designated checking or savings account
[BULLET] Complete the applicable section on the account application
NOTE: Must maintain a minimum account balance of $5,000 or more.
- --------------------------------------------------------------------------------
BY TELEPHONE
Sales orders may be placed by telephone provided this option was selected on
your account application. Please call 1-800-433-0051. Note: sales from IRA
accounts may not be made by telephone and must be made in writing.
ACH
[BULLET] Complete the bank information section on the account application .
[BULLET] Attach a voided check or deposit slip to the account application .
NOTE: sale proceeds sent via ACH will not be posted to your bank account until
the second business day following the transaction.
- --------------------------------------------------------------------------------
WIRE
Sale proceeds may be wired at your request. Be sure the Fund has your wire
instructions on file.
There is a $10 charge for each wire sent by the Fund.
18
<PAGE>
[ICON OMITTED] DISTRIBUTION AND TAXES
The Fund pays shareholders dividends from its net investment income and
distributions from its net realized capital gains at least once a year, if
available. These dividends and distributions will be reinvested in the Fund
unless you instruct the Fund otherwise. There are no fees on reinvestments.
Alternatively, you may elect to receive your dividends and distributions in cash
in the form of a check, wire or ACH.
Unless your investment is in an IRA or other tax-exempt account, your dividends
and distributions will be taxable whether you receive them in cash or reinvest
them. Dividends (including short-term capital gains distributions) are taxed at
the ordinary income rate. Distributions of long-term capital gains are taxable
at the long-term capital gains rate, regardless of how long you have been in the
Fund. Long-term capital gains tax rates are described in the table below.
A sale or exchange of the Fund may also generate a tax liability unless your
account is tax-exempt. There are two types of tax liabilities you may incur from
a sale or exchange. (1) Short-term capital gains will apply if you sell or
exchange the Fund up to 12 months after buying it. (2) Long-term capital gains
will apply to Funds sold or exchanged after 12 months. The table below describes
the tax rates for each.
TAXES ON TRANSACTIONS
- --------------------------------------------------------------------------------
The tax status of your distributions for each calendar year will be detailed in
your annual tax statement from the Fund. Because everyone's tax situation is
unique, always consult your tax professional about federal, state and local tax
consequences.
- --------------------------------------------------------------------
TAXABILITY OF DISTRIBUTIONS
Type of Tax rate for Tax rate for
Distribution 15% bracket 28% bracket
- --------------------------------------------------------------------
Dividends Ordinary income Ordinary income
rate rate
Short-term Ordinary income Ordinary income
Capital Gains rate rate
Long-term 10% 20%
Capital Gains
19
<PAGE>
[ICON OMITTED] DISTRIBUTION ARRANGEMENTS
The Fund, on behalf of the Growth Fund, has adopted a Service Plan pursuant to
which the Growth Fund pays Rule 12b-1 shareholder servicing fees at an aggregate
rate of up to 0.25% of the Growth Fund's average daily net assets attributable
to Advisor Class shares. The shareholder servicing fee is intended to compensate
financial intermediaries, plan fiduciaries, and investment professionals for
providing personal services, distribution support services, and/or account
maintenance services to beneficial owners of the Advisor Class shares. Because
these fees are paid out of the Advisor Class assets on an on-going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
- --------------------------------------------------------------------------------
[ICON OMITTED] FINANCIAL HIGHLIGHTS
The Fund's financial highlights help you understand its recent financial
performance. The total returns represent the rate that you would have earned or
lost on an investment in the Fund, assuming you reinvested all Fund
distributions. PricewaterhouseCoopers LLP has audited the information contained
in these financial highlights. Its report and the Fund's financial statements
are included in the Fund's Annual Report to Shareholders, which is available,
free of charge, upon request.
FOR A SHARE OUTSTANDING THROUGHOUT EACH FISCAL YEAR OR PERIOD ENDED MARCH 31;
<TABLE>
<CAPTION>
Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets Ratio
Value Investment Unrealized from Net from Value End of Expenses
Beginning Income Gains or (Losses) Investment Capital End Total of Period to Average
of Period (Loss) on Securities Income Gains of Period Return (000) Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG ADVISOR CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1 $28.12 $(0.30) $ (3.47) - - $24.35 (13.41)% $66,235 1.57%
1998 21.03 (0.15) 7.24 - - 28.12 33.71 % 89,227 1.51%
1997 2 25.42 (0.06) (4.33) - - 21.03 (17.27)%+ 12,991 1.53%*
PBHG CLASS
1999 1 $28.23 $(0.24) $ (3.48) - - $24.51 (13.18)% $3,228,740 1.32%
1998 21.06 (0.26) 7.43 - - 28.23 34.05 % 5,338,380 1.26%
1997 25.30 (0.10) (4.14) - - 21.06 (16.76)% 4,634,138 1.25%
1996 16.70 (0.06) 8.66 - - 25.30 51.50 % 3,298,666 1.48%
1995 3 14.67 (0.05) 2.09 - $(0.01) 16.70 13.92 % 1,014,832 1.50%
Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Income to Average to Average
(Loss) Net Assets Net Assets Portfolio
to Average (Excluding (Excluding Turnover
Net Assets Waivers) Waivers) Rate
- ---------------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG ADVISOR CLASS
1999 1 (1.24)% 1.57% (1.24)% 80.51%
1998 (1.02)% 1.51% (1.02)% 94.21%
1997 2 (1.11)%* 1.53%* (1.11)%* 64.89%
PBHG CLASS
1999 1 (0.99)% 1.32% (0.99)% 80.51%
1998 (0.74)% 1.26% (0.74)% 94.21%
1997 (0.69)% 1.25% (0.69)% 64.89%
1996 (0.79)% 1.48% (0.79)% 44.64%
1995 3 (0.69)% 1.50% (0.69)% 118.75%
<FN>
1 PER SHARE CALCULATIONS WERE PERFORMED USING AVERAGE SHARES FOR THE PERIOD.
2 THE PBHG GROWTH FUND ADVISOR CLASS COMMENCED OPERATIONS ON AUGUST 16, 1996.
3 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 ACQUIRED THE ASSETS AND
ASSUMED THE LIABILITIES OF THE PILGRIM BAXTER GROWTH FUND ON JUNE 2, 1994.
AMOUNTS DESIGNATED AS "-" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
</FN>
</TABLE>
20 & 21
<PAGE>
[ICON OMITTED] FOR MORE INFORMATION
THE PBHG FUNDS, INC.
- -------------------------
SEC FILE NUMBER 811-04391
For investors who want more information about the Fund, the following documents
are available free upon request:
STATEMENT OF ADDITIONAL INFORMATION
(SAI) Provides more information about the Fund and is incorporated into this
Prospectus by reference.
ANNUAL/SEMI-ANNUAL REPORTS
Provides financial and performance information about the Fund and its
investments and a discussion of the market conditions and investment strategies
that significantly affected its performance during the last fiscal year or
half-year.
TO OBTAIN INFORMATION
- ----------------------------
BY TELEPHONE
Call 1-800-433-0051
BY MAIL
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, MO 64121-9534
VIA THE INTERNET
www.pbhgfunds.com
Text-only versions of these documents and this Prospectus are available by
visiting the SEC's Public Reference Room in Washington, D.C. (1-800-SEC-0330) or
by sending your request and a duplicating fee to the SEC's Public Reference
Room, Washington, D.C. 20549-6009. Text-only versions also may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov.
INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd.
DISTRIBUTOR
SEI Investments Distribution Co.
ADV Pro - 7/99
