PBHG FUNDS INC /, 497, 1999-08-09

PBHG FUNDS INC /
497, 1999-08-09

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[LOGO]
The PBHG Funds, Inc.

Prospectus
July 31, 1999

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 New Opportunities Fund
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
PBHG International Fund
PBHG Cash Reserves Fund
PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund

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>

[This page intentionally left blank]

<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 PBHG Class Shares of each Fund listed on the
cover.

Each Fund has its own investment goal and strategies for reaching that goal.
Before investing, make sure the Fund's goal matches your own.

o PBHG Cash Reserves Fund is designed for conservative investors who
want to receive current income from their investments. This Fund may
be suitable for investors who require stability of principal or who
are pursuing a short-term investment goal, such as investing emergency
reserves.

o Other PBHG Funds are 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.
These other Funds 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 each Fund. Pilgrim Baxter has retained certain sub-advisers to assist in
managing the Funds. For information about the sub advisers, see page 61 of the
prospectus.

This Prospectus contains important information you should know before investing
in any Fund and as a shareholder in a Fund. This information is arranged into
different sections for easy reading and future reference. To obtain more
information about the Funds, please refer to the back cover of this Prospectus.

<PAGE>

[This page intentionally left blank]

<PAGE>

Contents

FUND SUMMARIES
- --------------------------------------------------------------------------------
PBHG Growth Fund ....................... 4
PBHG Emerging Growth Fund .............. 7
PBHG Large Cap Growth Fund ............. 10
PBHG Select Equity Fund ................ 13
PBHG Core Growth Fund .................. 16
PBHG Limited Fund ...................... 19
PBHG Large Cap 20 Fund ................. 22
PBHG New Opportunities Fund ............ 25
PBHG Large Cap Value Fund .............. 28
PBHG Mid-Cap Value Fund ................ 31
PBHG Small Cap Value Fund .............. 34
PBHG Focused Value Fund ................ 37
PBHG International Fund ................ 40
PBHG Cash Reserves Fund ................ 43
PBHG Technology & Communications Fund... 46
PBHG Strategic Small Company Fund ...... 49

MORE ABOUT THE FUNDS
- --------------------------------------------------------------------------------
Risks & Returns......................... 53

THE INVESTMENT ADVISER
& SUB-ADVISERS
- --------------------------------------------------------------------------------

The Investment Adviser.................. 60
Pilgrim Baxter & Associates, Ltd.
The Sub-Advisers........................ 61
Pilgrim Baxter Value Investors, Inc.
("Value Investors")
Murray Johnstone International Limited
("Murray Johnstone")
Wellington Management Company, Ltd.
("Wellington Management")

YOUR INVESTMENT
- --------------------------------------------------------------------------------
Year 2000 .............................. 65
Pricing Fund Shares..................... 65
Buying Shares........................... 66
Selling Shares ......................... 67
General Policies........................ 68
Distribution & Taxes ................... 71

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Financial Highlights.................... 72

<PAGE>

PBHG Growth Fund

[LOGO] GOAL

The Fund seeks to provide investors with capital appreciation.

[LOGO] 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.

[LOGO] 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.

[LOGO] 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 54.

4 PBHG GROWTH FUND

<PAGE>

[LOGO] PERFORMANCE INFORMATION

The bar charts and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar charts show 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 charts 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.

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
29.29% -9.64% 51.63% 28.30% 46.71% 4.75% 50.35% 9.82% -3.35% 0.59%
</TABLE>

The Fund's year-to-date return as of 3/31/99 was -4.03%.

--------------------------------------
Best Quarter: Q4 1992 42.16%
Worst Quarter: Q3 1990 -29.05%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Past 1 Year Past 5 Years Past 10 Years
- --------------------------------------------------------------------------------
PBHG Class 0.59% 10.95% 18.82%
Russell 2000 Growth Index 1.23% 10.22% 11.54%

Note: The inception date of the Growth Fund was December 19, 1985.

PBHG GROWTH FUND 5

<PAGE>

[LOGO] 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 None
Other Expenses 0.47%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.32%
- --------------------------------------------------------------------------------

[LOGO] 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
- --------------------------------------------------------------------------------
PBHG Class $134 $418 $723 $1,590

6 PBHG GROWTH FUND

<PAGE>

PBHG Emerging Growth Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital.

[LOGO] 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 sized companies.
These companies generally have market capitalizations or annual revenues of up
to $500 million. The growth securities in the Fund are primarily common stocks
that Pilgrim Baxter believes have strong historical earnings growth and expected
earnings higher than the U.S. market as a whole, as measured by the S&P 500(R)
Index. 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.

[LOGO] 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 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.

[LOGO] 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 54.

PBHG EMERGING GROWTH FUND 7

<PAGE>

[LOGO] PERFORMANCE INFORMATION

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1994 1995 1996 1997 1998
------ ------ ------ ------ ------
23.78% 48.45% 17.08% -3.67% 3.00%

The Fund's year-to-date return as of 3/31/99 was -13.95%.

--------------------------------------
Best Quarter: Q4 1994 21.77%
Worst Quarter: Q1 1997 -20.51%

- --------------------------------------------------------------------------------

Average Annual Total Returns as of 12/31/98
Since Inception
Past 1 Year Past 5 Years (6/14/93)
- --------------------------------------------------------------------------------
Emerging Growth Fund 3.00% 16.38% 20.62%
Russell 2000 Growth Index 1.23% 10.22% 11.42%*

* The since inception return for the Russell 2000 Growth Index was calculated as
of June 1, 1993.

8 PBHG EMERGING GROWTH FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.49%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.34%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$136 $425 $734 $1,613

PBHG EMERGING GROWTH FUND 9

<PAGE>

PBHG Large Cap Growth Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital.

[LOGO] 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 large capitalization
companies. These companies generally have market capitalizations over
$1 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 also may use options and futures contracts for hedging and risk
management.

[LOGO] 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 financial markets, the company's individual
situation or industry changes.

While the growth securities in the Fund may never reach what Pilgrim Baxter
believes are their full earnings growth and capital appreciation potential and
may go down in price, the Fund's emphasis on large company securities may limit
some of the risk associated with growth investing because large company
securities tend to be less volatile than smaller company securities.

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.

[LOGO] 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 54.

10 PBHG LARGE CAP GROWTH FUND

<PAGE>

[LOGO] PERFORMANCE INFORMATION

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1996 1997 1998
------ ------ ------
23.40% 22.36% 30.42%

The Fund's year-to-date return as of 3/31/99 was 4.15%.

--------------------------------------
Best Quarter: Q2 1997 23.56%
Worst Quarter: Q3 1998 -13.69%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Past 1 Year Since Inception
(4/5/95)
- --------------------------------------------------------------------------------
Large Cap Growth Fund 30.42% 29.58%
S&P 500(R)Index 28.59% 29.56%*

* The since inception return for the S&P 500(R) Index was calculated as of
April 1, 1995.

PBHG LARGE CAP GROWTH FUND 11

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.50%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.25%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$127 $397 $686 $1,511

12 PBHG LARGE CAP GROWTH FUND

<PAGE>

PBHG Select Equity Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund will invest at least 65% of its total
assets in growth securities, such as common stocks, of no more than 30 small,
medium or large capitalization companies. 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.

[LOGO] MAIN INVESTMENT RISKS

The Fund invests in a limited number of stocks in order to achieve a potentially
greater investment return than a more widely diversified fund. As a result, the
price change of a single security, positive or negative, has a greater impact on
the Fund's net asset value and will cause its shares to fluctuate in value more
than it would in a more widely diversified fund.

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 financial markets, 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 growth securities in the Fund may never reach what Pilgrim Baxter believes
are their full earnings growth and capital appreciation potential and may go
down in price. In addition, the Fund may emphasize small, medium or large sized
growth companies. An investment in small or medium sized growth companies is
likely to make the Fund more volatile than the stock market in general, as
measured by the S&P 500(R) Index. However, the Fund may also emphasize large
company securities which may limit some of the risks associated with growth
investing because large company securities tend to be less volatile than smaller
company securities.

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.

[LOGO] 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 54.

PBHG SELECT EQUITY FUND 13

<PAGE>

[LOGO] PERFORMANCE INFORMATION

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1996 1997 1998
------ ------ ------
27.99% 6.84% 19.02%

The Fund's year-to-date return as of 3/31/99 was 4.09%.

--------------------------------------
Best Quarter: Q2 1997 21.37%
Worst Quarter: Q3 1998 -18.80%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Past 1 Year Since Inception
(4/5/95)
- --------------------------------------------------------------------------------
Select Equity Fund 19.02% 28.81%
S&P 500(R)Index 28.59% 29.56%*

* The since inception return for the S&P 500(R) Index was calculated as of
April 1, 1995.

14 PBHG SELECT EQUITY FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------

Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------

Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.49%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.34%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------

$136 $425 $734 $1,613

PBHG SELECT EQUITY FUND 15

<PAGE>

PBHG Core Growth Fund

[LOGO] GOAL

The Fund seeks to provide investors with capital appreciation.

[LOGO] 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, medium or large
capitalization companies. 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 also may use options and futures contracts for hedging and risk
management.

[LOGO] 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 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 growth securities in the Fund may never reach what Pilgrim Baxter believes
are their full earnings growth and capital appreciation potential and may go
down in price. In addition, the fund may emphasize small, medium or large sized
companies. An investment in small and medium sized companies is likely to make
the Fund more volatile than the stock market in general, as measured by the S&P
500(R) Index. However, the Fund may also emphasize large company securities
which may limit some of the risk associated with growth investing because large
company securities tend to be less volatile than smaller company securities.

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.

[LOGO] 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 54.

16 PBHG CORE GROWTH FUND

<PAGE>

[LOGO] 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 Midcap Growth Index and the
Russell 3000 Growth Index. The Russell Midcap Growth Index is a widely
recognized, unmanaged index that measures the performance of the 800 smallest
issuers in the Russell 1000 Index with greater-than-average growth
characteristics. The Russell 1000 Index is an unmanaged index that measures the
performance of 1,000 large cap companies. The Russell 3000 Growth Index is an
unmanaged index comprised of those securities in the Russell 1000 and Russell
2000 Indexes with greater-than-avearage 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.

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1996 1997 1998
------ ------ ------
32.80% -9.71% 7.42%

The Fund's year-to-date return as of 3/31/99 was 9.16%.

--------------------------------------
Best Quarter: Q4 1998 19.37%
Worst Quarter: Q1 1997 -22.14%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Since Inception
Past 1 Year (12/29/95)
- --------------------------------------------------------------------------------
Core Growth Fund 7.42% 8.79%
Russell Midcap Growth Index 17.87% 19.28%*
Russel 3000 Growth Index(1) 24.14% 25.84%*

* The since inception returns for the Russell Midcap Growth Index and Russell
3000 Growth Index were calculated as of 12/29/95.

(1) Going forward, the Fund will compare its performance with the Russell Midcap
Index only, because this index more accurately reflects the all
capitalization strategy of the Fund.

PBHG CORE GROWTH FUND 17

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------

Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.60%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.45%

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$148 $459 $792 $1,735

18 PBHG CORE GROWTH FUND

<PAGE>

PBHG Limited Fund

This fund is currently offered only to existing shareholders. Existing
shareholders may open new accounts, provided that any new account is registered
in the same name or has the same social security or taxpayer identification
number as the existing shareholder's account.

[LOGO] GOAL

The Fund seeks to provide investors with long-term capital appreciation.

[LOGO] 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 sized companies.
These companies generally have market capitalizations or annual revenues of up
to $250 million. The growth securities in the Fund are primarily common stocks
that Pilgrim Baxter believes have strong historical earnings growth and expected
earnings higher than the U.S. market as a whole, as measured by the S&P 500(R)
Index. 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.

[LOGO] 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'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.

[LOGO] 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 54.

PBHG LIMITED FUND 19

<PAGE>

[LOGO] PERFORMANCE INFORMATION

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1997 1998
------ ------
16.07% 13.05%

The Fund's year-to-date return as of 3/31/99 was -10.62%.

--------------------------------------
Best Quarter: Q2 1997 26.08%
Worst Quarter: Q1 1997 -18.03%

- --------------------------------------------------------------------------------

Average Annual Total Returns as of 12/31/98
Since Inception
Past 1 Year (6/28/96)
- --------------------------------------------------------------------------------
Limited Fund 13.05% 16.09%
Russell 2000 Growth Index 1.23% 5.25%

20 PBHG LIMITED FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.40%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.40%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$143 $443 $766 $1,680

PBHG LIMITED FUND 21

<PAGE>

PBHG Large Cap 20 Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund, a non-diversified fund, will invest at
least 65% of its total assets in growth securities, such as common stocks, of no
more than 20 large capitalization companies. These companies generally have
market capitalizations over $1 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.

[LOGO] MAIN INVESTMENT RISKS

The Fund is non-diversified which means as compared to a diversified fund, it
invests a higher percentage of its assets in a limited number of stocks in order
to achieve a potentially greater investment return than a more diversified fund.
As a result, the price change of a single security, positive or negative, has a
greater impact on the Fund's net asset value and will cause its shares to
fluctuate in value more than it would in a more widely diversified fund.

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 financial markets, company's individual
situation, or industry changes.

While the growth securities in the Fund may never reach what Pilgrim Baxter
believes are their full earnings growth and capital appreciation potential and
may go down in price, the Fund's emphasis on large company securities may limit
some of the risks associated with growth investing because large company
securities tend to be less volatile than smaller company securities.

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.

[LOGO] 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 54.

22 PBHG LARGE CAP 20 FUND

<PAGE>

[LOGO] PERFORMANCE INFORMATION

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

---------------------------
Calendar Year Total Returns

1997 1998
------ ------
32.96% 67.83%

The Fund's year-to-date return as of 3/31/99 was 11.11%.

---------------------------------------
Best Quarter: Q4 1998 31.43%
Worst Quarter: Q1 1997 -5.90%

- --------------------------------------------------------------------------------

Average Annual Total Returns as of 12/31/98

Since Inception
Past 1 Year (11/29/96)
- --------------------------------------------------------------------------------
Large Cap 20 Fund 67.83% 45.76%
S&P 500(R)Index 28.59% 28.25%

PBHG LARGE CAP 20 FUND 23

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.42%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.27%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$129 $403 $697 $1,534

24 PBHG LARGE CAP 20 FUND

<PAGE>

PBHG New Opportunities Fund

This fund will close to new investors at the close of business on the Business
Day on which its net assets first exceed $150 million (Closing Day). After
Closing Day, only the following investments will be accepted: (a) subsequent
investments by persons who were shareholders on Closing Day; (b) new and
subsequent investments made by certain clients and employees of Pilgrim Baxter
and its affiliates; and (c) new and subsequent investments by certain pension
plans. For more detail, please see the Purchases and Redemptions section in the
Statement of Additional Information.

[LOGO] GOAL

The Fund seeks to provide investors with capital appreciation.

[LOGO] 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 companies in economic
sectors which the Adviser believes have above-average long-term growth
potential. These companies generally have market capitalizations under
$1 billion. The growth securities in the Fund are primarily common stocks. The
sectors that the Adviser believes have above-average long-term growth potential
will change as the economy changes. As a result, the Fund may or may not be
invested in these or other sectors at any time. In addition, the Fund may
emphasize one or more sectors. For example, the Fund may invest 100% of its
total assets in one sector. 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.

[LOGO] 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's emphasis on certain sectors of the economy may make the Fund's
performance more susceptible to economic, political or regulatory developments
in that sector. As a result, the Fund's net asset value may fluctuate more than
other equity investments.

The Fund may emphasize companies with market capitalizations under $1 billion,
so it may 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 long-term 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.

[LOGO] 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 54.

PBHG NEW OPPORTUNITIES FUND 25

<PAGE>

[LOGO] PERFORMANCE INFORMATION

Performance information for this Fund will be presented once the Fund has
completed investment operations for a full calendar year.

[LOGO] 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. Since
the Fund did not commence investment operations until February 12, 1999, "Other
Expenses" is based on estimated amounts the Fund expects to pay during the
current fiscal year.

- --------------------------------------------------------------------------------

Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.59%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.59%
- --------------------------------------------------------------------------------
Fee Waiver (and/or Expense Reimbursement) 0.09%
Net Expenses 1.50%*
- --------------------------------------------------------------------------------

* This is the actual total fund operating expense you will pay as an investor in
this Fund for the current fiscal year ending March 31, 2000. That's because
Pilgrim Baxter has contractually agreed to waive that portion, if any, of the
annual management fees payable by the Fund and to pay certain expenses of the
Fund to the extent necessary to ensure that the total annual fund operating
expenses do not exceed 1.50%. You should know that in any fiscal year in which
the Fund's assets are greater than $75 million and its total annual fund
operating expenses are less than 1.50%, the Fund's Board of Directors may elect
to reimburse Pilgrim Baxter for any fees it waived or expenses it reimbursed on
the Fund's behalf during the previous two fiscal years. To date, the Board has
made no reimbursement election.

26 PBHG NEW OPPORTUNITIES FUND

<PAGE>

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years
- --------------------------------------------------------------------------------
$153 $493

PBHG NEW OPPORTUNITIES FUND 27

<PAGE>

PBHG Large Cap Value Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital and income.
Current income is a secondary objective.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
large market capitalizations. These companies generally have market
capitalizations greater than $1 billion. The value securities in the Fund are
primarily common stocks that Pilgrim Baxter and Value Investors believe are
currently underpriced using certain financial measurements, such as their
price-to-earnings ratios, dividend income potential and earnings power. Pilgrim
Baxter and Value Investors use their own fundamental research, computer models
and proprietary measures of value in managing this Fund. The Fund may sell a
security for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals.

The Fund may use options and futures contracts for hedging and risk management.

[LOGO] 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.

While the value securities in the Fund may never reach what Pilgrim Baxter and
Value Investors believe are their full worth and may go down in price, the
Fund's emphasis on large company securities may limit some of the risk
associated with value investing because large company securities tend to be less
volatile than smaller company securities.

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.

[LOGO] 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 54.

28 PBHG LARGE CAP VALUE FUND

<PAGE>

[LOGO] 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 S&P 500(R) Index and the Russell
1000 Value Index. The S&P 500 Index is a widely recognized, unmanaged index that
measures the performance of large cap stocks across all major industries. The
Russell 1000 Value Index is an unmanaged index of those securities in the
Russell 1000 Index with lower price-to-book ratios and lower forecasted growth
values. The Russell 1000 Index is an unmanaged index that measures the
performance of 1,000 large 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

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1997 1998
---- ----
25.62% 34.74%

The Fund's year-to-date return as of 3/31/99 was 0.22%.

- --------------------------------------------
Best Quarter: Q4 1998 28.21%
Worst Quarter: Q3 1998 -7.94%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
Since Inception
Past 1 Year (12/31/96)
- --------------------------------------------------------------------------------
Large Cap Value Fund 34.74% 30.10%
S&P 500(R)Index 28.59% 28.25%
Russel 1000 Value Index* 27.03% 29.90%

* Going forward, the Fund will compare its performance with the S&P 500 Index
only, because this index is more widely recognized as representing the large cap
segment of the market.

PBHG LARGE CAP VALUE FUND 29

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None

- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.65%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.36%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.01%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$103 $322 $558 $1,236

30 PBHG LARGE CAP VALUE FUND

<PAGE>

PBHG Mid Cap Value Fund

[LOGO] GOAL

The Fund seeks to provide investors with above-average total return over a 3 to
5 year market cycle, consistent with reasonable risk.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
market capitalizations within the range of the S&P Midcap 400 Index. Currently,
the companies in the S&P Midcap 400 Index have market capitalizations between
$200 million and $5 billion. The value securities in the Fund are primarily
common stocks that Pilgrim Baxter and Value Investors believe are currently
underpriced using certain financial measurements, such as their
price-to-earnings ratios, dividend income potential and earnings power. Pilgrim
Baxter and Value Investors use their own fundamental research, computer models
and proprietary measures of value in managing this Fund. The Fund may sell a
security for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals. The Fund's sector weightings are generally within 5%
of the S&P Midcap 400's sector weightings. In addition, the Fund generally has a
lower price-to-earnings ratio than the S&P Midcap 400 Index.

The Fund may use options and futures contracts for hedging and risk management.

[LOGO] 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 value securities of medium sized 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 value securities in the Fund may never reach what
Pilgrim Baxter and Value Investors believe are their full worth 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.

[LOGO] 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 54.

PBHG MID-CAP VALUE FUND 31
<PAGE>

[LOGO] PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The performance table compares the
Fund's performance over time to that of the S&P Midcap 400 Index, a widely
recognized, unmanaged index that tracks the performance of 400 mid-cap stocks.
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

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1998
----
27.84%

The Fund's year-to-date return as of 3/31/99 was -3.52%.

- --------------------------------------------
Best Quarter: Q4 1998 30.07%
Worst Quarter: Q3 1998 -12.52%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
Past 1 Year Since Inception
(4/30/97)
- --------------------------------------------------------------------------------
Mid-Cap Value Fund 27.84% 42.56%
S&P Midcap 400 Index 19.06% 30.36%

32 PBHG MID-CAP VALUE FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------

Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.48%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.33%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$135 $421 $729 $1,601

PBHG MID-CAP VALUE FUND 33

<PAGE>

PBHG Small Cap Value Fund

[LOGO] GOAL

The Fund seeks to provide investors with above-average total return over a 3 to
5 year market cycle, consistent with reasonable risk.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
market capitalizations within the range of the Russell 2000 Index. Currently,
the companies in the Russell 2000 have market capitalizations between $100
million and $1.5 billion. The value securities in the Fund are primarily common
stocks that Pilgrim Baxter and Value Investors believe are currently underpriced
using certain financial measurements, such as their price-to-earnings ratios,
dividend income potential and earnings power. Pilgrim Baxter and Value Investors
use their own fundamental research, computer models and proprietary measures of
value in managing this Fund. The Fund may sell a security for a variety of
reasons, such as when it becomes overvalued or shows deteriorating fundamentals.
The Fund's sector weightings are generally within 10% of the Russell 2000's
sector weightings. In addition, the Fund generally has lower price-to-earnings
and price-to-book value ratios than the Russell 2000 Index.

The Fund also may use options and futures contracts for hedging and risk
management.

[LOGO] 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, a 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 value securities of smaller sized 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 value securities in the Fund may never reach what
Pilgrim Baxter and Value Investors believe are their full worth 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.

[LOGO] For more information on this Fund's investment strategies and the
associated risks, please see the Investment Table beginning on page 54.

34 PBHG SMALL CAP VALUE FUND

<PAGE>

[LOGO] PERFORMANCE INFORMATION

The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The performance table compares the
Fund's performance over time to that of the Russell 2000 Index, a widely
recognized, unmanaged index that tracks the performance of 2,000 small cap
stocks. 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 Return

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1998
----
1.13%

The Fund's year-to-date return as of 3/31/99 was -12.73%.

- -------------------------------------------

Best Quarter: Q4 1998 24.20%
Worst Quarter: Q3 1998 -21.59%

- --------------------------------------------------------------------------------

Average Annual Total Returns as of 12/31/98
Past 1 Year Since Inception
(4/30/97)
- --------------------------------------------------------------------------------
Small Cap Value Fund 1.13% 25.94%
Russell 2000 Index -2.56% 14.54%

PBHG SMALL CAP VALUE FUND 35

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.48%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.48%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$151 $468 $808 $1,768

36 PBHG SMALL CAP VALUE FUND

<PAGE>

PBHG Focused Value Fund

[LOGO] GOAL

The Fund seeks to provide investors with above-average total returns over a 3 to
5 year market cycle.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund, a non-diversified fund, invests at
least 65% of its total assets in value securities, such as common stocks of
small, medium or large capitalization companies. The value securities in the
Fund are primarily common stocks that Pilgrim Baxter and Value Investors believe
are currently underpriced using certain financial measurements, such as their
price-to-earnings ratios, dividend income potential and earnings power. Pilgrim
Baxter and Value Investors use their own fundamental research, computer models
and proprietary measures of value in managing this Fund. The Fund may sell a
security for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals.

The Fund also may use options and futures contracts for hedging and risk
management.

[LOGO] MAIN INVESTMENT RISKS

The Fund is non-diversified which means, as compared to a diversified fund, it
invests a higher percentage of its assets in a limited number of stocks in order
to achieve a potentially greater investment return than a more diversified fund.
As a result, the price change of a single security, positive or negative, has a
greater impact on the Fund's net asset value and will cause its shares to
fluctuate in value more than it would in a more widely diversified fund.

The value of your investment in the Fund will go up and down, which means you
could lose money.

The value securities in the Fund may never reach what Pilgrim Baxter and Value
Investors believe are their full worth and may go down in price. In addition,
the Fund may emphasize small, medium or large sized value companies. An
investment in smaller and medium sized companies is likely to make the Fund more
volatile than the stock market in general, as measured by the S&P 500(R) Index.
However, the Fund may also emphasize large company securities which may limit
some of the risks associated with value investing because large company
securities tend to be less volatile than smaller company securities.

[LOGO] 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 54.

PBHG FOCUSED VALUE FUND 37

<PAGE>

[LOGO] PERFORMANCE INFORMATION

Performance information for this Fund will be presented once the Fund has
completed investment operations for a full calendar year.

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 1.82%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 2.67%
- --------------------------------------------------------------------------------
Fee Waiver (and/or Expense Reimbursement) 1.17%
Net Expenses 1.50%*
- --------------------------------------------------------------------------------

* This is the actual total fund operating expense you will pay as an investor in
this Fund for the fiscal year ending March 31, 2000. That's because Pilgrim
Baxter has contractually agreed to waive that portion, if any, of the annual
management fees payable by the Fund and to pay certain expenses of the Fund to
the extent necessary to ensure that the total annual fund operating expenses do
not exceed 1.50%. You should know that in any fiscal year in which the Fund's
assets are greater than $75 million and its total annual fund operating expenses
are less than 1.50%, the Fund's Board of Directors may elect to reimburse
Pilgrim Baxter for any fees it waived or expenses it reimbursed on the Fund's
behalf during the previous two fiscal years. To date, the Board has made no
reimbursement election.

38 PBHG FOCUSED VALUE FUND

<PAGE>

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years
- --------------------------------------------------------------------------------
$153 $718

PBHG FOCUSED VALUE FUND 39

<PAGE>

PBHG International Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term capital appreciation.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in foreign equity securities of companies in at least three countries
other than the United States. Currently, the Fund principally focuses its
investments in those countries represented in the Morgan Stanley Capital
International Europe Australia and Far East Index. Nonetheless, more than 25% of
the Fund's total assets may be invested in companies whose principal activities
are in specific countries or geographic regions, including countries generally
considered to be an emerging or developing country by the international finance
community. The Fund may sell a security for a variety of reasons, such as to
invest in another company or country offering superior investment opportunities.

The Fund also may use options and futures contracts for hedging and risk
managment.

[LOGO] 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 foreign equity
securities and companies with smaller market capitalizations. Investments in
foreign securities involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. Companies
with smaller market capitalizations 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 foreign equity securities in the Fund may never reach what Murray Johnstone
believes are their full capital appreciation potential and may go down in price.

Investments in emerging or developing countries may be subject to extreme
volatility because, in general, these countries economies are less well
developed, their political structures are less stable and their financial
markets are less liquid than more developed nations.

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.

[LOGO] 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 54.

40 PBHG INTERNATIONAL FUND

<PAGE>

[LOGO] 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 Morgan Stanley Capital International
Europe Australia and Far East Index (MSCI EAFE) and the FT S&P World Index
Non-U.S., in U.S. Dollars (FT S&P). The MSCI EAFE is a widely recognized,
unmanaged index that tracks the performance of 60% of the publicly traded
companies in Europe, Australia and the Far East. The FT S&P is an unmanaged
index that consists of the larger international companies which have been
selected based on market capitalization and ability to be purchased by
international investors. 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

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1995 1996 1997 1998
---- ---- ---- ----
2.05% 12.66% 3.48% 12.74%

The Fund's year-to-date return as of 3/31/99 was 2.56%.

- --------------------------------------------
Best Quarter: Q4 1998 15.36%
Worst Quarter: Q3 1998 -12.24%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
Past 1 Year Since Inception
(6/5/94)
- ----------------------------------------------------------------------------
International Fund 12.74% 6.18%
MSCI EAFE Index 20.00% 8.40%*
FT S&P Index(1) 16.18% 7.22%*

* The since inception returns for the MSCI EAFE and FT S&P were calculated as of
June 1, 1994.

(1) Going forward, the Fund will compare its performance with the MSCI EAFE
Index only, because this index more accurately reflects the Funds investment
focus on those companies in countries that make up the MSCI EAFE Index.

PBHG INTERNATIONAL FUND 41

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.97%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.97%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$200 $618 $1,062 $2,296

42 PBHG INTERNATIONAL FUND

<PAGE>

PBHG Cash Reserves Fund

[LOGO] GOAL

The Fund seeks to provide investors with current income while preserving
principal and maintaining liquidity.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests exclusively in short-term U.S.
dollar-denominated debt obligations of U.S. or foreign issuers. These
obligations must be rated in one of the two highest rating categories by any two
nationally recognized rating organizations or unrated securities that Pilgrim
Baxter or Wellington Management determines are of comparable quality. The Fund's
holdings are primarily U.S. money market instruments, such as CDs, commercial
paper and corporate obligations, that Pilgrim Baxter and Wellington Management
believe offer the most attractive income potential without undue risk. The Fund
may sell a security for a variety of reasons, such as to respond to a change in
an issuer's financial condition.

[LOGO] MAIN INVESTMENT RISKS

Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund.

Your investment in the Fund is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency.

The price of the money market instruments in the Fund will fluctuate. These
price movements may occur because of, among other things, changes in the
financial markets or the issuer's individual financial situation. These risks
are greater for foreign money market instruments. Investments in foreign money
market instruments involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject.

Although the Fund strives to maintain a consistent share price and to achieve
its goal, it cannot guarantee that the constant share price or goal will be
achieved.

[LOGO] 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 54.

PBHG CASH RESERVES FUND 43

<PAGE>

[LOGO] PERFORMANCE INFORMATION

Calendar Year Total Returns
---------------------------

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1996 1997 1998
---- ---- ----
4.91% 5.08% 5.00%

The Fund's year-to-date return as of 3/31/99 was 1.09%.

- ----------------------------------------------
Best Quarter: Q4 1997 1.28%
Worst Quarter: Q2 1996 1.18%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98
Past 1 Year Since Inception
(4/4/95)
- --------------------------------------------------------------------------------
Cash Reserves Fund 5.00% 5.07%
Lipper Money Market Funds
Average 4.84% 4.99%*

* The since inception return for the Lipper Money Market Funds Average was
calculated as of April 1, 1995.

To obtain information about the Fund's yield, call 1-800-433-0051.

44 PBHG CASH RESERVES FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.30%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.40%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.70%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$72 $224 $390 $871

PBHG CASH RESERVES FUND 45

<PAGE>

PBHG Technology & Communications Fund

[LOGO] GOAL

The Fund seeks to provide investors with long-term growth of capital. Current
income is incidental to the Fund's goal.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund will invest at least 65% of its total
assets in common stocks of companies that rely extensively on technology or
communications in their product development or operations, are expected to
benefit from technological advances and improvements, or may be experiencing
exceptional growth in sales and earnings driven by technology or communications
related products and services. These companies may be in different industries,
such as computer software and hardware, network and cable broadcasting, defense
and data storage and retrieval, and biotechnology. The Fund invests in companies
that may be responsible for breakthrough products or technologies or may be
positioned to take advantage of cutting-edge developments. The Fund's holdings
may range from smaller companies developing new technologies or pursuing
scientific breakthroughs to large, blue chip firms with established track
records in developing and marketing scientific advances. 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.

[LOGO] 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.

Securities of technology and communications companies are strongly affected by
worldwide scientific and technological developments and governmental policies
and, therefore, are generally more volatile than securities of companies not
dependent upon or associated with technology and communications issues.

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.

[LOGO] 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 54.

46 PBHG TECHNOLOGY & COMMUNICATIONS FUND

<PAGE>

[LOGO] 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 Soundview Technology Index and the
Pacific Stock Exchange High Technology Index. The Soundview Technology Index is
a widely recognized, unmanaged index that measures the performance of 100 major
technology stocks, as chosen by Soundview Financial Group. The Pacific Stock
Exchange High Technology Index is a price-weighted index of the top 100 U.S.
technology stocks. 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
---------------------------

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1996 1997 1998
---- ---- ----
54.42% 3.32% 26.00%

The Fund's year-to-date return as of 3/31/99 was 28.62%.

- -----------------------------------------------
Best Quarter: Q4 1998 29.60%
Worst Quarter: Q4 1997 -17.42%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Since Inception
Past 1 Year (10/2/95)
- --------------------------------------------------------------------------------
Technology & Communications Fund 26.00% 29.72%
Soundview Technology Index 42.33% 26.63%
Pacific Stock Exchange High Technology Index* 54.61% 27.56%

* Going forward, the Fund will compare its performance with the Soundview
Technology Index only, as this index more accurately reflects the all
capitalization strategy in the Fund.

PBHG TECHNOLOGY & COMMUNICATIONS FUND 47

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 0.85%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.49%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.34%
- --------------------------------------------------------------------------------

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------
Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$136 $425 $734 $1,613

48 PBHG TECHNOLOGY & COMMUNICATIONS FUND

<PAGE>

PBHG Strategic Small Company Fund

[LOGO] GOAL

The Fund seeks to provide investors with growth of capital.

[LOGO] MAIN INVESTMENT STRATEGIES

Under normal market conditions, the Fund invests at least 65% of its total
assets in growth and value securities, such as common stocks, of small sized
companies. These companies generally have market capitalizations or annual
revenues of up to $750 million. The growth securities in the Fund are primarily
common stocks that Pilgrim Baxter believes have strong earnings growth and
capital appreciation potential. The value securities in the Fund are primarily
common stocks that Pilgrim Baxter and Value Investors believe are currently
underpriced using certain financial measurements, such as their
price-to-earnings ratios. Pilgrim Baxter and Value Investors strategically
adjust the mix of growth and value securities in the Fund, depending upon
economic and market conditions. As a result, at times the Fund may be more
heavily invested in growth securities and at other times the Fund may be more
heavily invested in value securities. Pilgrim Baxter and Value Investors use
their own fundamental research, computer models and proprietary measures of
growth and value in managing this Fund.

The Fund also may use options and futures contracts for hedging and risk
management.

[LOGO] MAIN INVESTMENT RISKS

The value of your investment in the Fund will go up and down, which means you
could lose money.

The Fund emphasizes growth and value securities of smaller sized 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 and value securities in the
Fund may never reach what Pilgrim Baxter and Value Investors believe are their
full potential worth 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.

[LOGO] 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 54.

PBHG STRATEGIC SMALL COMPANY FUND 49

<PAGE>

[LOGO] 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 Index and Russell 2000
Growth Index. The Russell 2000 Index is a widely recognized, unmanaged index
that tracks the performance of 2000 small cap stocks. The Russell 2000 Growth
Index is an unmanaged index that measures the performance of those securities in
the Russell 2000 Index with greater than average growth orientation. 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
---------------------------

[GRAPHIC]

In the printed version of the document, a line graph appears which depicts
the following plot points:

1997 1998
---- ----
25.67% 2.13%

The Fund's year-to-date return as of 3/31/99 was -7.62%.

- -----------------------------------------
Best Quarter: Q4 1998 28.30%
Worst Quarter: Q3 1998 -23.48%

- --------------------------------------------------------------------------------
Average Annual Total Returns as of 12/31/98

Since Inception
Past 1 Year (12/31/96)
- --------------------------------------------------------------------------------
Strategic Small Company Fund 2.13% 13.29%
Russell 2000 Index -2.56% 9.19%
Russell 2000 Growth Index* 1.23% 6.93%

* Going forward, the Fund will compare its performance with the Russell 2000
Index only, because this index more accurately reflects the Funds investment
strategy to invest in both Growth and Value securities.

50 PBHG STRATEGIC SMALL COMPANY FUND

<PAGE>

[LOGO] FEES AND EXPENSES

- --------------------------------------------------------------------------------
Fees and Expenses Table

Shareholder Fees None
- --------------------------------------------------------------------------------
Annual Fund Operating Expenses
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.54%
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 1.54%
- --------------------------------------------------------------------------------
Fee Waiver (and/or Expense Reimbursement 0.04%
Net Expenses 1.50%*
- --------------------------------------------------------------------------------

PBHG STRATEGIC SMALL COMPANY FUND 51

<PAGE>

[LOGO] EXAMPLE

- --------------------------------------------------------------------------------

Your Cost Over

1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$153 $483 $836 $1,831

52 PBHG STRATEGIC SMALL COMPANY FUND

<PAGE>

More About the Funds

[LOGO] RISKS AND RETURNS

This section takes a closer look at the investment strategies that make up each
Fund's risk and return characteristics.

In addition to the main investment strategies described in the Fund Summaries
section of this Prospectus, each Fund may make other types of investments that
have different risk/return characteristics. These investments, the Funds' main
investment strategies and their risk/return characteristics are described in the
table set forth below. From time to time, a 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.

Each 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 a Fund's losses, they can prevent a Fund from
achieving its investment goal.

Each Fund is actively managed, which means a Fund's manager may frequently buy
and sell securities. Frequent trading increases a Fund's turnover rate and may
increase transaction costs, such as brokerage commissions. Increased transaction
costs could detract from a Fund's performance. In addition, the sale of Fund
securities may generate capital gains which, when distributed, may be taxable
to you.

<PAGE>

- --------------------------------------------------------------------------------
SECURITIES

Shares representing ownership in a corporation. Each Fund (except the Cash
Reserves 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, Value Investors and Murray Johnstone maintain a long-term
investment approach and focus on securities they believe can appreciate over an
extended time frame, regardless of interim fluctuations.

Under normal circumstances, each Fund (except the Cash Reserves Fund) intends to
remain fully invested, with at least 65% of its total assets in securities.

Pilgrim Baxter, Value Investors and Murray Johnstone focus their active
management on securities selection, the area they believe their commitment to
fundamental research can most enhance a 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 a 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.

<PAGE>

- --------------------------------------------------------------------------------
VALUE SECURITIES

Securities that Value Investors believes are currently underpriced using certain
financial measurements, such as their price-to-earnings ratio, earnings power,
dividend income potential, and competitive advantages.

Potential Risks
- --------------------------------------------------------------------------------
See securities.

Value companies may have experienced adverse business developments or may be
subject to special risks that have caused their securities to be out of favor.
The value securities in the Fund may never reach what Value Investors believes
are their full value and may even go down in price.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
See securities.

In managing a Fund, Value Investors uses its own research, computer models and
measures of value. Value Investors considers selling a security when it becomes
overvalued relative to the market, shows deteriorating fundamentals or falls
short of Value Investors' expectations.

Potential Returns
- --------------------------------------------------------------------------------
See securities.

Value securities may produce significant capital appreciation as the market
recognizes their full value.

- --------------------------------------------------------------------------------
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. As a result, the
International Fund's investments in emerging markets may be considered
speculative.

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
- --------------------------------------------------------------------------------
In managing the International Fund, Murray Johnstone uses its own software and
research models. Murray Johnstone seeks to invest in companies with strong
growth potential in those countries with the best investment opportunities.

Murray Johnstone considers selling a security when another company or country
offer superior investment opportunities, the risk associated with a particular
currency becomes too great or the security falls short of Murray Johnstone's
expectations.

Every other Fund does not invest in emerging markets and limits the amount of
total assets it invests in foreign securities as follows: Growth, Emerging
Growth, Large Cap Growth, Select Equity, Limited, Large Cap 20, New
Opportunities, Technology & Communications: 10% and Core Growth, Large Cap
Value, Mid-Cap Value, Small Cap Value, Focused Value, Strategic Small Company:
15%. ADRs are not included in these limits.

<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.

The money market instruments in the Cash Reserve Fund may never reach what
Pilgrim Baxter and Wellington Management believe are their full income
potential.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
The Cash Reserves 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.

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.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
See securities/growth securities/value securities.

Pilgrim Baxter and Value Investors focus on smaller companies with strong
balance sheets that they expect to exceed consensus earnings expectations.

56
<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.

A Fund could make money and protect against losses if Pilgrim Baxter's, Value
Investors' or Murray Johnstone's analysis proves correct.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
Each 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 a Fund's exposure relative to its benchmark.

Each 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 each
funds futures contracts may not exceed 50% of the Fund's net assets (except not
exceeding 20% of net assets with respect to the International Fund.)

Each Fund may not invest more than 10% of its net assets in options (except the
Cash Reserves Fund, which may not invest in options.)

The International Fund generally will not hedge its currency exposure because
currency considerations are an integral part of Murray Johnstone's investment
process. However, the Fund may use forward foreign currency contracts to hedge
exchange rates, a particular security or position.

A Fund only establishes hedges that it expects will be highly correlated with
underlying securities positions.

No Fund considers using futures or options contracts unless it would be
cost-effective.

Each Fund maintains assets sufficient to meet its obligations under the contract
in a segregated margin account with a custodian bank.

57
<PAGE>
- --------------------------------------------------------------------------------
WHEN ISSUED AND DELAYED SECURITIES

Securities subject to settlement on a future date

Potential Risks
- --------------------------------------------------------------------------------
When a Fund buys these securities, it could be exposed to leverage risk if it
does not use segregated accounts.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
Only the Small Cap Value, Mid-Cap Value and Large Cap Value Funds are permitted
to invest in these securities. These Funds use segregated accounts to offset
leverage risk.

Potential Returns
- --------------------------------------------------------------------------------
A Fund can take advantage of attractive investment opportunities.

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.

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.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
Each Fund seeks to strike a balance among the industries in which it invests so
that no one industry dominates the Fund's investments.

- --------------------------------------------------------------------------------
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.

Potential Returns
- --------------------------------------------------------------------------------
Increases the number of potential investments for a Fund.

OTC securities may appreciate faster than exchange-traded securities because
they are typically securities of younger, growing companies.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
Pilgrim Baxter, Value Investors and Murray Johnstone use a highly disciplined
investment process that seeks to, among other things, identify quality
investments that will enhance a Fund's performance.

58
<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
- --------------------------------------------------------------------------------
A Fund may have difficulty valuing these securities precisely.

A Fund may be unable to sell these securities at the time or price it desires.

Potential Returns
- --------------------------------------------------------------------------------
Illiquid securities may offer more attractive yields or potential growth than
comparable widely traded securities.

Policies to Balance Risk and Return
- --------------------------------------------------------------------------------
The Cash Reserves Fund may not invest more than 10% of its net assets in
illiquid securities.

Every other Fund may not invest more than 15% of its net assets in illiquid
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, a 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
- --------------------------------------------------------------------------------
Each Fund limits the amount of total assets it invests in restricted securities
as follows: Large Cap Growth, Select Equity, Core Growth, Limited, Large Cap 20,
New Opportunities, International, Cash Reserves, Technology & Communications:
10% and Large Cap Value, Mid-Cap Value, Small Cap Value, Focused Value,
Strategic Small Company: 15%. The Growth and Emerging Growth Funds are not
currently permitted to invest in restricted securities.

59
<PAGE>

The Investment Adviser & Subadvisers

[LOGO] THE INVESTMENT ADVISOR

Pilgrim Baxter & Associates, Ltd., 825 Duportail Road, Wayne, PA 19087, is the
investment advisor for each 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,
Emerging Growth, Large Cap Growth, Select Equity, Core Growth, Limited, Large
Cap 20, New Opportunities and Technology & Communications Funds, and for the
growth portion of the Strategic Small Company Fund. Pilgrim Baxter oversees the
investment decisions made by Value Investors as sub-adviser for the Large Cap
Value, Mid-Cap Value, Small Cap Value and Focused Value Funds, and for the value
portion of the Strategic Small Company Fund, Murray Johnstone as sub-adviser for
the International Fund and Wellington Management as sub-adviser for the Cash
Reserves Funds. The Funds' Board of Directors supervises Pilgrim Baxter and the
sub-advisers and establishes policies that Pilgrim Baxter and the sub-advisers
must follow in their 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 propriety 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.

60
<PAGE>

[LOGO] THE SUB-ADVISERS

Pilgrim Baxter Value Investors, Inc., 825 Duportail Road, Wayne, PA 19087, is a
wholly-owned subsidiary of Pilgrim Baxter. Founded in 1940, Value Investors
currently manages $1.5 billion for pension and profit sharing plans, charitable
institutions, trusts, estates and other investment companies.

Value Investors' investment process, like that of Pilgrim Baxter, is both
quantitative and fundamental. In seeking to identify attractive investment
opportunities for the Small Cap Value, Mid-Cap Value, Large Cap Value and
Focused Value Funds and the value portion of the Strategic Small Company Fund,
Value Investors first creates a universe of more than 8,000 companies whose
current share price seems lower than the current or future worth. Then, using
its own computer models and measures of value, Value Investors creates a
sub-universe of statistically attractive value companies. Value Investors
considers factors like a company's earnings power vs. its current stock price,
its dividend income potential, its price-to-earnings ratio vs. similar
companies, its competitive advantages, like brand or trade name or market niche,
its management team and its current and future business prospects. Lastly, using
its own fundamental research and a bottom-up approach to investing, Value
Investors identifies those companies which are currently out of market favor but
have the potential to achieve significant appreciation as the marketplace
recognizes their fundamental value.

Value Investors' decision to sell a security depends on many factors. Generally
speaking, however, Value Investors considers selling a security when it becomes
overvalued relative to the market, shows deteriorating fundamentals or falls
short of Value Investors' expectations.

Murray Johnstone International Limited, 11 West Nile Street, Glasgow, Scotland
is a U.S. registered investment adviser. Founded in 1989, Murray Johnstone
currently manages $6 billion for institutional clients worldwide.

The investment process of Murray Johnstone, like that of Pilgrim Baxter, is both
quantitative and fundamental. In seeking to identify attractive investment
opportunities for the International Fund, Murray Johnstone uses twenty factors,
like currency considerations, to score and rank a universe of countries and
geographic regions according to investment potential. Then, using its own
fundamental research, Murray Johnstone identifies individual companies with
superior growth records and expectations, sound balance sheets and high cash
flow generation. Each company's investment value is evaluated based on factors
like relative price performance, upward earnings estimate revisions, improving
balance sheets and strength of management. Murray Johnstone's decision to sell a
security depends on many factors. Generally speaking, however, Murray Johnstone
considers selling a security when another company or country offers superior
investment opportunities, the risk associated with a particular currency becomes
too great, or the security falls short of Murray Johnstone's expectations.

61
<PAGE>

Wellington Management Company, LLP, 75 State Street, Boston, MA is the
sub-adviser for the PBHG Cash Reserves Fund. Wellington Management and its
predecessor organizations have provided investment advisory services to
investment companies since 1928 and to investment counseling clients since 1960.
As of April 30, 1999, Wellington Management held discretionary management
authority with respect to more than $221 billion of assets.

In managing the PBHG Cash Reserves Fund, Wellington Management uses a top-down
strategy and bottom-up security selection, to seek securities with an acceptable
maturity, that are marketable and liquid, offer competitive yields and are
issued by issuers that are on a sound financial footing. Wellington Management
also considers factors such as the anticipated level of interest rates and the
maturity of individual securities relative to the maturity of the Fund as a
whole. The purchase of single rated or unrated securities by Pilgrim Baxter or
Wellington Management is subject to the approval or ratification by the Fund's
Board of Directors.

For the fiscal year ended March 31, 1999, Pilgrim Baxter waived a portion of its
fee so that the effective management fee paid by each Fund was as follows:

Growth Fund 0.85%
Emerging Growth Fund 0.85%
Large Cap Growth Fund 0.75%
Select Equity Fund 0.85%
Core Growth Fund 0.85%
Limited Fund 1.00%
Large Cap 20 Fund 0.85%
New Opportunities Fund 0.91%

Large Cap Value Fund 0.65%
Mid-Cap Value Fund 0.85%
Small Cap Value Fund 1.00%
Focused Value Fund 0.00%
International Fund 1.00%
Cash Reserves Fund 0.30%
Technology & Communications
Fund 0.85%
Strategic Small Company Fund 0.96%

The New Opportunities and Focused Value Funds did not begin investment
operations until February 12, 1999. As investment adviser to this Fund, Pilgrim
Baxter is entitled to receive a fee, calculated daily and payable monthly, at
the annual rate of 1.00% of the New Opportunities Fund's and 0.85% of the
Focused Value Fund's average daily net assets.

Each sub-adviser is entitled to receive a fee from Pilgrim Baxter equal to a
percentage of the daily net assets of each of these Portfolios.

62
<PAGE>

Growth Fund 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.

Emerging Growth Christine M. Baxter, CFA, has managed the Emerging
Fund Growth Fund since its inception in 1993. She has been a
growth stock manager and analyst specializing in small
and micro-cap stocks for 8 years.

Large Cap Growth These funds are managed by a team of investment
Fund/Select Equity professionals led by Gary L. Pilgrim. Mr. Pilgrim's
Fund/Large Cap 20 Fund experience is discussed under the Growth Fund.

New Opportunities Frank P. Slattery has managed the New Opportunities
Fund Fund since its inception. He joined Pilgrim Baxter in
1998 as a growth stock analyst. Prior to joining
Pilgrim Baxter, Mr. Slattery worked for two years as a
financial analyst with Merrill Lynch & Co. In 1995 Mr.
Slattery was pursuing his Bachelor Degree at Princeton
University.

Limited Fund Erin Piner has managed the Limited Fund since October,
1998. She joined Pilgrim Baxter in 1995 as an equity
analyst. Prior to joining Pilgrim Baxter, Ms. Piner
worked for four years in the client services group of
PaineWebber, Inc.

63
<PAGE>

Small Cap Value Fund/ Jerome J. Heppelmann, CFA, has managed the Small Cap
Mid-Cap Value Fund Value and Mid-Cap Value Funds since June, 1999. He
joined Pilgrim Baxter in 1994 as a Vice President of
Marketing/Client Service and since 1997 has been a
member of Value Investors Equity team. Prior to joining
Pilgrim Baxter, Mr. Heppelmann worked in the Investment
Advisory Group for SEI Investments.

Large Cap Value Fund Ray McCaffrey, CFA, has managed the Large Cap Value
Fund since June, 1999. He joined Value Investors as a
portfolio manager and analyst in 1997. Prior to joining
Value Investors, Mr. McCaffrey worked for 2 years as a
portfolio manager and analyst at Pitcairn Trust
Company. His 10 years of investment experience also
include positions at Cypress Capital Management,
Independence Capital Management and Fidelity Bank.

International Fund Andrew V. Preston has managed this Fund since April,
1999. He co-managed this Fund from July, 1995 through
April, 1999. Mr. Preston joined Murray Johnstone
International Limited in 1985 and has served as a
portfolio manager and director since 1993.

Technology & Jeffrey Wrona, CFA has managed the Technology &
Communications Fund/ Communications Fund since May, 1998. He co-managed this
Core Growth Fund Fund from May, 1998 through May, 1999. Mr. Wrona has
managed the Core Growth Fund since May, 1999. Mr. Wrona
joined Pilgrim Baxter in 1997 after seven years as a
senior portfolio manager with Munder Capital Management
and today manages several other funds at Pilgrim
Baxter.

Strategic Small James M. Smith, CFA has co-managed this Fund since its
Company Fund inception in 1996. He manages the growth portion of
this Fund. Mr. Smith joined Pilgrim Baxter in 1993 as a
portfolio manager and has over 20 years of equity
portfolio management experience. Mr. Heppelmann manages
the value portion of this Fund. His experience is
discussed under the Small Cap Value and Mid-Cap Value
Funds. Mr. Heppelmann has co-managed this fund since
June, 1999.

64
<PAGE>

Your Investment
[LOGO] YEAR 2000

A Fund could be adversely affected if the computer systems used by Pilgrim
Baxter, the Fund's sub-advisers 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
a Fund, both in its operations and in its investments, The PBHG Funds, Inc. is
working with Pilgrim Baxter, the Funds' sub-advisers and the Funds' other
service providers to avoid such problems. Testing of year 2000-related computer
problems on the Funds' mission-critical systems should be completed by summer,
1999. The Funds do not expect to incur any material costs related to their year
2000 initiatives. No assurances, though, can be provided that a Fund will not be
adversely impacted by year 2000-related computer problems.

[LOGO] PRICING FUND SHARES

Cash Reserves Fund shares are priced at 2:00 p.m. Eastern time on each day the
New York Stock Exchange is open. Cash Reserves Fund shares are not priced on
days that the New York Stock Exchange is closed. The Cash Reserves Fund prices
its investments at amortized cost, which approximates market value.

Each other 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 a 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 a Fund's shares
may change on days when its shares are not available for purchase or sale.

Net Asset Value (NAV)
- --------------------------------------------------------------------------------
The price of a Fund's shares is based on that Fund's net asset value (NAV). A
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.

65
<PAGE>
[LOGO] BUYING SHARES

You may purchase shares of each fund directly through the Fund's transfer agent.
The price per share you will pay to invest in a Fund is its net asset value per
share (NAV) next calculated after the transfer agent or other authorized
representative accepts your order. Except for the Cash Reserves Fund, each
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.
Each 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. The Cash Reserves Fund uses
the amortized cost method to value its securities and generally calculates its
NAV at 2:00 p.m. Eastern time each day the New York Stock Exchange is open.

You may also purchase shares of each Fund through certain broker-dealers or
other financial institutions that are authorized to sell you shares of the
Funds. Such financial institutions may charge you a fee for this service in
addition to the Fund's NAV.

- --------------------------------------------------------------------------------
Minimum Investments

Initial Additional
- --------------------------------------------------------------------------------
Regular accounts

New Opportunities Fund $10,000 $ 0

Limited Fund(1) $ 5,000 $ 0

Strategic Small Company
Fund $ 5,000 $ 0

Each Other Fund $ 2,500 $ 0

Uniform Gifts/Transfer
to Minor Accounts $ 500 $ 0

Traditional IRAs $ 2,000 no minimum

Roth IRAs $ 2,000 no minimum

Educational IRAs $ 500 no minimum

Systematic Investment Plans(2) $ 500 $25
(SIP)

(1) The Limited Fund is currently closed to new investors

(2) Provided a SIP is established, the minimum initial investment for each Fund
is $500 along with a monthly systematic investment of $25 or more.

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.

66
<PAGE>

[LOGO] 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 (2:00 p.m. Eastern time for the Cash
Reserves Fund) 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 each 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.

- --------------------------------------------------------------------------------
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

Written Redemption Orders
- --------------------------------------------------------------------------------
Some circumstances require written sell orders along with signature guarantees.

These include:

o Redemptions in excess of $50,000

o Requests to send proceeds to a different address or payee

o Requests to send proceeds to an address that has been changed within the last
30 days

o 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.

67
<PAGE>
[LOGO] GENERAL POLICIES

o Each Fund may reject or suspend acceptance of purchase orders.

o Each 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.

o 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.

o 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.

o 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.

o 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 of your shares in a fund with any other fund
identified in this prospectus. However, exchanges into the Limited Fund may be
made only by investors who are current shareholders of that Fund, as it is
currently closed to new investors. 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. Please note that exchanges into the
PBHG Cash Reserves Fund from another PBHG fund may be made only four (4) times a
year.

68
<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:
o United Missouri Bank of Kansas
City, N.A.
o ABA# 10-10-00695
o Account # 98705-23469
o Fund Name
o Your name
o Your Social Security or tax ID
number
o Your account number

Return the account application.

- ------ By Automated Clearing House ---------------------------------------------
(ACH)*

- ------ Via the Internet --------------------------------------------------------
o Visit the PBHG Funds website at http://www.pbhgfunds.com.
o 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:
o United Missouri Bank of Kansas City, N.A.
o ABA# 10-10-00695
o Account # 98705-23469
o Fund Name
o Your name
o Your Social Security or tax ID number
o Your account number

- ------ By Automated Clearing House ---------------------------------------------
(ACH)*
o Complete the bank information section on the account application.
o Attach a voided check or deposit slip to the account application.
o 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 --------------------------------------------------------
o Complete the bank information section on the account application.
o Enter the "Your Account" section of the website and follow the
instructions for purchasing shares.

69
<PAGE>

TO SELL SHARES

- ------ By Mail -----------------------------------------------------------------

Write a letter of instruction that includes:
o your name(s) and signature(s)
o your account number
o the fund name
o the dollar amount you wish to sell
o how and where to send 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

o 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 ---------------------------------------------------------------------

o Complete the bank information section on the account application.
o 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.

70
<PAGE>

[LOGO] DISTRIBUTION AND TAXES

Each 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 a 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 a 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.

- --------------------------------------------------------------------------------
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

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.

71
<PAGE>

[LOGO] FINANCIAL HIGHLIGHTS

A 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;

Net Realized and Distri- Distri- Net Net
Asset Net Unrealized butions butions Asset Assets Ratio
Value Investment Gains or from Net from Value End of Expenses
Beginning Income (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
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBHG Class
1999(4) $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(1) 14.67 (0.05) 2.09 -- $(0.01) 16.70 13.92 % 1,014,832 1.50%

PBHG Advisor Class
1999(4) $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 Emerging Growth Fund
- -------------------------

PBHG Class
1999(4) $25.83 $(0.18) $ (4.96) -- $(0.08) $20.61 (19.91)% $ 736,008 1.34%
1998 19.26 (0.24) 6.81 -- -- 25.83 34.11 % 1,404,157 1.27%
1997 23.07 (0.11) (2.87) -- (0.83) 19.26 (13.71)% 1,195,620 1.28%
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16 % 689,705 1.47%
1995(3),(4) 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64 %+ 411,866 1.50%*

- --------------------------
PBHG Large Cap Growth Fund
- --------------------------

PBHG Class
1999(4) $22.69 $(0.16) $ 3.53 -- $(1.49) $24.57 15.90 % $144,089 1.25%
1998 14.26 (0.19) 8.82 -- (0.20) 22.69 60.80 % 145,662 1.22%
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)% 119,971 1.23%
1996(6) 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47 %* 53,759 1.50%*

- -----------------------
PBHG Select Equity Fund
- -----------------------

PBHG Class
1999(4) $24.15 $(0.21) $ 1.99 -- -- $25.93 7.37 % $235,904 1.34%
1998 15.91 (0.44) 8.68 -- -- 24.15 51.79 % 336,076 1.35%
1997 17.27 (0.13) (1.03) -- $(0.20) 15.91 (6.94)% 372,486 1.26%
1996(6) 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75 %* 202,796 1.50%*

<CAPTION>
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
- ----------------
<S> <C> <C> <C> <C> <C>
PBHG Class
1999(4) (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(1) (0.69)% 1.50% (0.69)% 118.75%

PBHG Advisor Class
1999(4) (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 Emerging Growth Fund
- -------------------------

PBHG Class
1999(4) (0.80)% 1.34% (0.80)% 101.53%
1998 (0.80)% 1.27% (0.80)% 95.21%
1997 (0.36)% 1.28% (0.36)% 47.75%
1996 (0.42)% 1.47% (0.42)% 97.05%
1995(3),(4) (0.08)%* 1.50%* (0.08)%* 27.50%

- --------------------------
PBHG Large Cap Growth Fund
- --------------------------

PBHG Class
1999(4) (0.71)% 1.25% (0.71)% 46.16%
1998 (0.79)% 1.22% (0.79)% 46.56%
1997 (0.47)% 1.23% (0.47)% 51.70%
1996(6) (0.66)%* 2.07%* (1.23)%* 116.75%

- -----------------------
PBHG Select Equity Fund
- -----------------------

PBHG Class
1999(4) (0.90)% 1.34% (0.90)% 56.59%
1998 (1.15)% 1.35% (1.15)% 72.16%
1997 (0.76)% 1.26% (0.76)% 71.70%
1996(6) (0.74)%* 1.73%* (0.97)%* 206.22%
</TABLE>

72 & 73

<PAGE>

[LOGO] Financial Highlights (continued)

Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets
Value Investment Unrealized from Net from Value End
Beginning Income Gains or (Losses) Investment Capital End Total of Period
of Period (Loss) on Securities Income Gains of Period Return (000)
- ------------------------------------------------------------------------------------------------------------------------------
- ---------------------
PBHG Core Growth Fund
- ---------------------

PBHG Class
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999(4) $13.53 $(0.14) $0.67 -- -- $14.06 3.92% $ 86,485
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
1999(4) $14.08 $(0.10) $(1.45) -- $(0.58) $11.95 (11.01)% $108,011
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
1999(4) $15.98 $(0.12) $8.46 -- $(0.22) $24.10 52.52% $603,077
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 New Opportunities Fund
- ---------------------------

PBHG Class
1999(4,13) $13.52 $(0.01) $2.96 -- -- $16.47 21.82%+ $16,742

- -------------------------
PBHG Large Cap Value Fund
- -------------------------

PBHG Class
1999 $13.01 $0.08 $2.45 $(0.10) $(1.59) $13.85 20.29% $44,922
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

- -----------------------
PBHG Mid-Cap Value Fund
- -----------------------

PBHG Class
1999 $15.30 -- $0.92 -- $(1.13) $15.09 8.35% $56,981
1998(12) 10.00 $(0.01) 6.00 -- (0.69) 15.30 61.06 %+ 54,173

- -------------------------
PBHG Small Cap Value Fund
- -------------------------

PBHG Class
1999(4) $15.38 $(0.09) $(3.06) -- $(0.85) $11.38 (20.93)% $ 69,787
1998(12) 10.00 (0.03) 6.15 -- (0.74) 15.38 62.27 %+ 125,834

- -----------------------
PBHG Focused Value Fund
- -----------------------

PBHG Class
1999(13) $10.32 -- $0.14 -- -- $10.46 1.36%+ $3,658

- -----------------------
PBHG International Fund
- -----------------------

PBHG Class
1999(14) $12.04 $(0.14) $0.29 $(0.17) $(0.42) $11.60 1.42% $12,220
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

Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Ratio Income to Average to Average
of Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
- -------------------------------------------------------------------------------
- ---------------------
PBHG Core Growth Fund
- ---------------------

PBHG Class
<S> <C> <C> <C> <C> <C> <C>
1999(4) 1.45% (1.16)% 1.45% (1.16)% 120.93%
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
1999(4) 1.40% (0.81)% 1.40% (0.81)% 111.07%
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
1999(4) 1.27% (0.64)% 1.27% (0.64)% 76.41%
1998 1.41% (0.79)% 1.41% (0.79)% 98.27%
1997(9) 1.50%* 0.17 %* 1.50%* 0.17 %* 43.98%

- ---------------------------
PBHG New Opportunities Fund
- ---------------------------

PBHG Class
1999(4,13) 1.50%* (0.80)%* 1.59%* (0.89)%* 109.43%

- -------------------------
PBHG Large Cap Value Fund
- -------------------------

PBHG Class
1999 1.01% 0.59% 1.01% 0.59% 568.20%
1998 1.17% 0.98 % 1.17% 0.98 % 403.59%
1997(10) 1.50%* 1.61 %* 1.74%* 1.37 %* 0.00%

- -----------------------
PBHG Mid-Cap Value Fund
- -----------------------

PBHG Class
1999 1.33% 0.01% 1.33% 0.01% 732.73%
1998(12) 1.47%* (0.17)%* 1.47%* (0.17)%* 399.96%

- -------------------------
PBHG Small Cap Value Fund
- -------------------------

PBHG Class
1999(4) $15.38 $(0.09) $(3.06) -- $(0.85)
1998(12) 10.00 (0.03) 6.15 -- (0.74)

- -----------------------
PBHG Focused Value Fund
- -----------------------

PBHG Class
1999(13) $10.32 -- $0.14 -- --

- -----------------------
PBHG International Fund
- -----------------------

PBHG Class
1999(14) $12.04 $(0.14) $0.29 $(0.17) $(0.42)
1998 11.26 (0.03) 1.83 -- (1.02)
1997 10.55 -- 0.71 -- --
1996 9.13 (0.04) 1.46 -- --
1995(11) 10.00 (0.03) (0.80) -- (0.04)
</TABLE>

74 & 75

<PAGE>

[LOGO] Financial Highlights (continued)

Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets
Value Investment Unrealized from Net from Value End
Beginning Income Gains or (Losses) Investment Capital End Total of Period
of Period (Loss) on Securities Income Gains of Period Return (000)
- ---------------------------------------------------------------------------------------------------------------------------------
- -----------------------
PBHG Cash Reserves Fund
- -----------------------

PBHG Class
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $1.00 $0.05 -- $(0.05) -- $1.00 4.84% $144,239
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
1999(4) $19.27 $(0.19) $8.80 -- $(0.29) $27.59 45.33% $536,405
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
1999(4) $12.89 $(0.11) $(1.78) -- $(0.46) $10.54 (14.52)% $ 48,029
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

Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Ratio Income to Average to Average
of Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
- -----------------------------------------------------------------------------
- ------------------
PBHG Cash Reserves
- ------------------

PBHG Class
1999 0.70% 4.72% 0.70% 4.72% 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
1999(4) 1.34% (0.96)% 1.34% (0.96)% 276.07%
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 Companion Fund
- -----------------------------------

PBHG Class
1999(4) 1.50% (0.97)% 1.54% (1.01)% 140.89%
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

+ 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 acquired the assets and assumed
the liabilities of the Pilgrim Baxter Growth Fund on June 2, 1994.

(2) The PBHG Growth Fund Advisor Class commenced operations on August 16,
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 Advisor's Inner Circle Fund. PBHG Emerging Growth Fund acquired the
assets and assumed the liabilities of the Pilgrim Baxter Emerging Growth Fund on
June 2, 1994. The PBHG Emerging Growth Fund retained the October 31 fiscal year
end of its predecessor only for fiscal year 1994. PBHG Emerging Growth 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 December 29, 1995.

(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
September 29, 1995.

(8) The PBHG Limited Fund commenced operations on June 28, 1996.

(9) The PBHG Large Cap 20 Fund commenced operations on November 29, 1996.

(10) The PBHG Large Cap Value Fund and the PBHG Strategic Small Company Fund
commenced operations on December 31, 1996.

(11) The PBHG International Fund commenced operations on June 15, 1994.

(12) The PBHG Mid-Cap Value and the PBHG Small Cap Value Funds commenced
operations April 30, 1997.

(13) The PBHG New Opportunities Fund and the PBHG Focused Value Fund commenced
operations on February 12, 1999.

(14) Distributions from net investment income include $0.1659 of distribution in
excess of net investment income.

Amounts designated as "-" are either $0 or have been rounded to $0.

76 & 77

<PAGE>

For More Information

The PBHG Funds, Inc.
- -------------------------
SEC file number 811-04391

For investors who want more information about the funds, the following documents
are available free upon request:

Statement of Additional Information (SAI)
Provides more information about the funds and is incorporated into this
Prospectus by reference.

Annual/Semi-annual Reports
Provides financial and performance information about the Funds and their
investments and a discussion of the market conditions and investment strategies
that significantly affected each Fund's 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.

PBHG Prospectus -- 7/99