The PBHG Funds, Inc.
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ANNUAL REPORT
MARCH 31, 1999
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THE PBHG FUNDS, INC.
PBHG GROWTH FUNDS
PBHG Growth Fund
PBHG Emerging Growth Fund
PBHG Large Cap Growth Fund
PBHG Select Equity
Fund PBHG Core Growth Fund
PBHG Limited Fund
PBHG Large Cap 20 Fund
PBHG New Opportunities Fund
PBHG VALUE FUNDS
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
PBHG SPECIALTY FUNDS
PBHG International Fund
PBHG Cash Reserves Fund
PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund
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THE PBHG FUNDS, INC.
TABLE OF CONTENTS
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Message to Shareholders 3
PBHG Portfolio Managers 4
Management Discussion and Analysis 7
PBHG GROWTH FUNDS
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PBHG Growth Fund 8
PBHG Emerging Growth Fund 10
PBHG Large Cap Growth Fund 12
PBHG Select Equity Fund 14
PBHG Core Growth Fund 16
PBHG Limited Fund 18
PBHG Large Cap 20 Fund 20
PBHG New Opportunities Fund 22
PBHG VALUE FUNDS
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PBHG Large Cap Value Fund 24
PBHG Mid-Cap Value Fund 26
PBHG Small Cap Value Fund 28
PBHG Focused Value Fund 30
PBHG SPECIALTY FUNDS
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PBHG International Fund 32
PBHG Cash Reserves Fund 34
PBHG Technology &
Communications Fund 36
PBHG Strategic Small
Company Fund 38
Report of Independent Accountants 40
Statements of Net Assets/Schedules
of Investments 41
Statements of Asset and Liabilities 82
Statements of Operations 84
Statements of Changes in Net Assets 86
Financial Highlights 92
Notes to Financial Statements 94
Notice to Shareholders 98
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THE PBHG FUNDS, INC.
MESSAGE TO SHAREHOLDERS
[PHOTO OF HAROLD BAXTER OMITTED]
DEAR FELLOW SHAREHOLDERS:
We are pleased to send you The PBHG Funds, Inc. (the "Fund") Annual Report for
the year ended March 31, 1999. The past year presented us with great challenges,
from a strategic business initiative, to aggressive customer service
improvements and, of course, to a difficult investment environment. For over a
year, the market has exhibited a tremendous amount of volatility across all
asset classes. In a continuing trend, many investors flocked to larger
capitalization stocks and ignored smaller capitalization stocks. For this reason
and several others, a very wide disparity occurred among the performances of
different asset classes and investment styles. As you would expect with a
diversified offering of mutual funds, some of our funds performed beyond our
expectations while others struggled.
SERVICING OUR SHAREHOLDERS
We began as a one-product company 17 years ago. While we are proud of our roots
as small-cap growth investors, we realize, as you do, that no investment style
outperforms every year. For that reason, we continue to strive to offer
additional fund options to help you build your investment portfolio. Early in
1999 we added two new funds -- the PBHG New Opportunities Fund and the PBHG
Focused Value Fund. We now offer a total of sixteen no-load mutual funds that
provide a broad array of investment styles and capitalization ranges from which
to choose -- growth and value, diversified and concentrated, domestic and
international, micro-cap to large-cap.
Over the past year, PBHG Fund Services, the Funds' administrator, worked
tirelessly to improve all levels of service to our shareholders. We recently
redesigned our quarterly newsletter in an effort to make it more informative and
reader-friendly. As a result of extensive training, our shareholder service
center representatives can answer 90% of your calls within 20 seconds, with an
average response time of 7 seconds! To accommodate shareholders with varied
schedules, we offer the ability to check balances and initiate transactions
securely, either by telephone or via the Internet. In the coming months, we will
add an electronic mail feature to our web site, enabling shareholders to ask
questions when it is most convenient for them. In addition to added convenience,
our web site offers access to a wealth of information. It is updated regularly
with commentaries from our portfolio managers, with our own PBHG publications
and with investment research from respected Wall Street firms. We encourage you
to visit our site at www.pbhgfunds.com.
LOOKING FORWARD
We believe that both our successes and our failures strengthen our resolve and
improve our ability to face the challenges ahead. We know it was not an easy
year to stay the course. Many shareholders did not, which is why we more deeply
value those that did. We believe that those that have stayed with us will
ultimately be reworded with the kind of investment performance for which PBHG is
known. Thank you for your continued confidence in The PBHG Funds, Inc.
Sincerely,
/S/ SIGNATURE OMITTED
Harold J. Baxter
Chairman
The PBHG Funds, Inc.
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<PAGE>
THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
Gary L. Pilgrim, CFA
[PHOTO OF GARY L. PILGRIM OMITTED]
MANAGER
PBHG Growth Fund
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Gary L. Pilgrim is co-founder, Board member, President and Chief Investment
Officer of Pilgrim Baxter & Associates, Ltd. He is also the President of The
PBHG Funds, Inc. Gary has managed the PBHG Growth Fund since its inception in
1985. In addition, he is responsible for overseeing the investment management of
Pilgrim Baxter's institutional client portfolios, as well as the PBHG mutual
funds advised by Pilgrim Baxter. He is also responsible for overseeing the
firm's day-to-day securities trading and account control operations.
Throughout his 30-year career, Gary has specialized in growth stock
investing. He began his career at Philadelphia national Bank in the late 1960's,
starting as an equity analyst, later becoming Director of Research and then the
Chief Investment Officer of that bank's Trust Department. Gary holds a B.S.B.A
from the University of Tulsa and an M.B.A. from Drexel University. He is a
Chartered Financial Analyst and a member of the Financial Analysts of
Philadelphia, Inc.
Christine M. Baxter, CFA
[PHOTO OF CHRISTINE M. BAXTER OMITTED]
MANAGER
PBHG Emerging Growth Fund
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Christine M. Baxter has managed the PBHG Emerging Growth Fund since its
inception in 1993. In addition, she manages small-cap growth portfolios for
clients of Pilgrim Baxter & Associates, Ltd. When she joined the firm in 1991,
her responsibilities included fundamental and quantitative equity analysis and
the construction of the Pilgrim Baxter micro-cap investment universe. She holds
a B.A. from the University of Pennsylvania, as well as an M.B.A. from the
University of Pennsylvania's Wharton School of Business. Christine is a
Chartered Financial Analyst and a member of the Financial Analysts of
Philadelphia, Inc.
Jeffrey A. Wrona, CFA
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MANAGER
PBHG Technology &
Communications Fund
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Jeffrey A. Wrona is the manager of the PBHG Technology & Communications Fund. In
addition, he manages small- and mid-cap growth portfolios for clients of Pilgrim
Baxter & Associates, Ltd. Prior to joining the firm, Jeff was with Munder
Capital Management, where he was a Senior Portfolio Manager, as well as
co-founder of Munder's mid-cap growth product and the Munder NetNet Fund. His
prior industry experience includes securities analysis at Drexel Burnham
Lambert. Jeff began his business career as a product design engineer with Ford
Motor Company. He holds a bachelor's degree in engineering from the University
of Michigan and an M.B.A. from the University of Michigan. Jeff is a Chartered
Financial Analyst.
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THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
Gary D. Haubold, CFA
[PHOTO OF GARY D. HAUBOLD OMITTED]
MANAGER
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
CO-MANAGER
PBHG Strategic Small Company
Fund
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Gary D. Haubold is the Chief Investment Officer of Pilgrim Baxter Value
Investors, Inc. ("Value Investors"), the sub-adviser to the PBHG Value Funds. In
this capacity, he directs all investment, research and strategy activities for
Value Investors. He manages all of the PBHG Value mutual funds, and is the
co-manager of the PBHG Strategic Small Company Fund. Prior to joining Value
Investors, Gary was a Senior Portfolio Manager at Miller, Anderson & Sherrerd,
LLP, where he co-managed the MAS Small Cap Value and MAS Mid Cap Value mutual
funds. Previously, Gary was Head of Equity Research at Wood, Struthers &
Winthrop, where he also managed two value style mutual funds. Gary began his
investment career with Stein, Roe & Farnham as an equity analyst. He graduated
magna cum laude from Rice University with a degree in Engineering and holds an
M.B.A from the University of Pennsylvania's Wharton School of Business. Gary is
a Chartered Financial Analyst and is a member of the New York Society of
Security Analysts .
James D. McCall, CFA
[PHOTO OF JAMES D. MCCALL OMITTED]
MANAGER
PBHG Large Cap Growth Fund
PBHG Large Cap 20 Fund
PBHG Core Growth Fund
PBHG Select Equity Fund
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James D. McCall manages the PBHG Large Cap Growth Fund, the PBHG Large Cap 20
Fund, the PBHG Core Growth Fund and the PBHG Select Equity Fund. In addition, he
also manages large-cap growth assets for clients of Pilgrim Baxter & Associates,
Ltd. Prior to joining the firm in 1994, Jim was a Vice President and portfolio
manager with The First National Bank of Maryland, where he managed a growth
mutual fund investing across all capitalizations. Prior to that, Jim was
employed by Provident Mutual Management Co., where he managed a similar growth
mutual fund. Before entering the investment business, Jim spent ten years as a
hospital pharmacist in a variety of clinical and administrative capacities. He
holds a B.S. from the Philadelphia College of Pharmacy and Science, as well as
an M.B.A and M.S. in Pharmacy from the University of Utah. Jim is a Chartered
Financial Analyst.
Erin A. Piner
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MANAGER
PBHG Limited Fund
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Erin A. Piner manages the PBHG Limited Fund and focuses her research on the
smallest companies in the Pilgrim Baxter universe. In addition, she manages
micro-cap growth portfolios for clients of Pilgrim Baxter & Associates, Ltd.
Prior to joining the firm in 1995, Erin worked in the private client groups of
Kidder, Peabody & Co., Inc. and Paine Webber, Inc. (subsequent to its merger
with Kidder, Peabody). Erin holds a B.A. from the College of the Holy Cross. She
is currently a candidate in the Chartered Financial Analyst program.
FRANK P. SLATTERY
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MANAGER
PBHG New Opportunities Fund
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Frank P. "Quint" Slattery manages the PBHG New Opportunities Fund and is an
equity research analyst focusing on growth stocks. Prior to joining Pilgrim
Baxter in 1998, Quint was a financial analyst in the Investment Banking Energy
Group of Merrill Lynch & Co. He holds an A.B. degree from Princeton University.
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THE PBHG FUNDS, INC.
PBHG PORTFOLIO MANAGERS
James M. Smith, CFA
[PHOTO OF JAMES SMITH OMITTED]
CO-MANAGER
PBHG Strategic Small
Company Fund
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James M. Smith is the manager of the Growth portion of the PBHG Strategic Small
Company Fund. In addition, he manages small-cap growth portfolios for clients of
Pilgrim Baxter & Associates, Ltd. Jim possesses over twenty-five years of
investment experience in equity portfolio management and research. Prior to
joining Pilgrim Baxter, he managed a small-cap growth equity mutual fund for
Selected Financial Services. His prior service also includes employment with
Sears Investment Management Company as a Vice President responsible for emerging
growth and venture capital portfolios. Jim is a graduate of Washington & Lee
University, where he was inducted into Phi Beta Kappa. He also holds an M.B.A.
from Northwestern University. Jim is a Chartered Financial Analyst.
Andrew Preston, MSI
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MANAGER
PBHG International Fund
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Andrew Preston is the manager of the PBHG International Fund. He served as the
Fund's co-manager from 1995 through 1998. In 1985, he joined Murray Johnstone
International Limited, a registered investment adviser located in Glasgow,
Scotland. Murray Johnstone is a wholly-owned subsidiary of Murray Johnstone
Holdings Limited, which together have over $7 billion in assets under management
for institutional clients worldwide. Murray Johnstone Holdings Limited, with its
successors, has been in business since 1907.
Andrew currently serves as Portfolio Manager and Director (since 1993) of
Murray Johnston International Limited. He has managed investments in the United
Kingdom, the United States, Japan and Southeast Asia. Andrew holds a B.A. from
the University of Melbourne, where he majored in Economics and Far Eastern
Languages (Chinese and Japanese) and culture.
John C. Keogh
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MANAGER
PBHG Cash Reserves Fund
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John Keogh is a Senior Vice President and Partner at Wellington Management
Company, LLP, the investment sub-adviser for the PBHG Cash Reserves Fund.
Wellington is an investment management firm servicing public mutual funds,
employee benefit plans, endowments, foundations, and other institutions and
individuals. As of March 31, 1999, it had discretionary management authority
over $215 billion of assets. Wellington and its predecessor organizations have
provided investment advisory services to investment companies since 1933.
John is responsible for money market and other short duration portfolios at
Wellington, managing approximately $15 billion in this asset class. He is a
member of Wellington's Fixed Income Review Group and he chairs the firm's Short
Duration Bond Strategy Group, which develops guidelines for their portfolio
managers. John has the distinction of managing the first dollar-denominated
money market fund ever offered by a Japanese entity. Prior to joining Wellington
in 1983, he worked in the investment division of Connecticut National Bank. John
holds a B.A. in economics from Tufts University.
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THE PBHG FUNDS, INC.
MANAGEMENT DISCUSSION AND ANALYSIS
[PHOTO OF GARY L. PILGRIM OMITTED]
DEAR FELLOW SHAREHOLDERS:
Several major trends dominated the market during the twelve months ended March
31, 1999. Volatility drove indexes up and down sharply. Returns in the
technology sector far surpassed the returns of any other sector. Growth
strategies outperformed value strategies. Large-cap stocks outperformed
small-cap stocks. Superior performance was concentrated in the largest of the
large-cap stocks. Most active managers lagged their passive benchmarks.
In an article entitled "Hot Market Leaves Most Funds Cold", The Wall Street
Journal of April 5, 1999 examined the "chasm" of returns between fund types over
the last year. According to the article, "The average `large-growth' fund gained
an impressive 28.06% for the twelve months through March, while the average
`small value' fund sank a sickening 22.72%. The range in performance has `never
been anything close' to the recent disparity in the more than 20 years for which
Morningstar has data..." The PBHG Fund Family dramatically bears out that point.
For the fiscal year ended March 31, 1999, the PBHG Large Cap 20 Fund grew 52.52%
while the PBHG Small Cap Value Fund dropped 20.93%.
By the end of last summer, there was a raging debate over whether the stock
market had entered a bear market. At the end of August, all indexes were down
sharply from their highs reached earlier in the year, with small-caps hit the
hardest. At that time, fear gripped the market -- fear of a U.S. recession, fear
of global recession, fear of a credit squeeze and fear of a presidential
impeachment. The Federal Reserve tried to alleviate these fears by lowering
interest rates three times in three months beginning in September. And it
worked. By mid-October, the market turned around. Even small-caps rebounded.
With lower interest rates, strong employment data and an ever-spending consumer,
the fear of recession subsided. By early in the first quarter of 1999, not only
had all of the market's fears disappeared, they seemed to be groundless. The
economic statistics released throughout the first quarter brought very good news
indeed. The economy entered its eighth year of expansion with vigor. The Gross
Domestic Product for the fourth quarter of 1998 rose a healthy 6%. The Consumer
Price Index rose only 1.6% in 1998, the lowest rate since 1986. The Producer
Price Index actually fell .1% during 1998. The unemployment rate stands at a
decades low 4.2%.
With the Dow Jones Industrial Average topping 10,000, we have witnessed a
disturbing trend reported in the popular press. Dazzled by the returns produced
by large-cap stocks in recent years, some investors are considering abandoning
the concept of diversification. "Why hold small-cap stocks or international
stocks, when large-cap U.S. stocks have done so well?", they ask.
Diversification can seem painful when it works. Diversification rarely produces
the best short-term outcome, because that is not what it is designed to do.
Diversification is a long-term portfolio management strategy, built on decades
of financial data, not just the last five years' data.
In our opinion, when "advisors" begin to espouse a "new paradigm" that is
contrary to a very basic investment tenet, it is time for caution. History tells
us that styles go out of favor. Sometimes these style shifts last a quarter or
two. Sometimes they last years. Our flagship PBHG Growth Fund has suffered this
reality for nearly three years. Does that mean it is time to bet the ranch on
today's equivalent of the Nifty Fifty? Investors must decide this for
themselves. We believe diversification among investment styles still makes sense
for long-term investors.
Sincerely,
/S/ SIGNATURE OMITTED
Gary L. Pilgrim
President and Chief Investment Officer
Pilgrim Baxter & Associates, Ltd.
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<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Small to medium-sized growth companies.
STRATEGY: The PBHG Growth Fund seeks capital appreciation by investing primarily
in common stocks of small- and medium-sized U.S. growth companies. These
companies, in the opinion of Pilgrim Baxter, have an outlook for strong growth
in earnings and the potential for significant capital appreciation. The Fund is
aggressive and should be considered a long-term investment. The Fund is
currently making the majority of purchase selections in companies with market
capitalizations below $1 billion and intends to reduce or eliminate positions as
they approach the $4 billion level.
Performance
For the year ended March 31, 1999, the Fund's total return was -13.2% versus
the Russell 2000 Growth Index return of -11.0% and the Lipper Mid-Cap Funds
Index return of 1.9%. The year was mostly an uphill struggle, as the market and
the Fund experienced only one positive quarter (the quarter ending December 31,
1998) over the last four. Looking back, after their July peak and subsequent
decline to October lows, large-cap stocks resumed their leadership. The S&P 500
Index finished the fiscal year with a huge spread of outperformance over
small-cap indexes -- some 23 percentage points in the case of the Russell 2000
Growth Index. This disparity occurred despite a persistent backdrop of favorable
indicators of domestic economic activity. Several factors, such as political
instability and currency devaluations abroad, presidential impeachment
uncertainties and hedge fund crises, kept investors attracted to the securities
of large, liquid companies. Unnoticed in this embrace of the large-cap asset
class has been a gradual slowing of the earnings growth of the S&P 500 Index
from the above-normal growth levels of the past few years. Companies like
Coca-Cola and Gillette have reminded investors that, global franchise or not,
large-cap stocks are not bullet proof.
Our assertion last year that investors would look back at April of 1997 as a
capitulation low in small stocks was quickly followed by a lower low in October
of 1998. This is a good reminder that changes in market sentiment are hopelessly
difficult to predict. Nonetheless, we are optimistic that earnings eventually
win in the market. When that occurs, we believe our strategy of constructing a
portfolio of very rapidly growing companies that are meeting or exceeding
consensus earnings expectations will, again, prove to be productive. Today, our
portfolio companies have or expect to have earnings growth in excess of 40%, a
strong attraction for investors should sentiment towards small companies
improve.
Technology and service companies continue to dominate the portfolio's
weightings. Technology has been the portfolio's largest sector and provided the
largest positive contribution to portfolio returns. During the year, we
increased technology holdings and decreased all other sectors. However, one
reason that we underperformed the Russell 2000 Growth Index was an
under-exposure to the increasingly robust Internet weightings in the Index. Many
of the Internet stocks in the Index exceed the traditional definition of
small-cap stocks. Also, buying Internet stocks often means investing in
companies with no prospects of earnings over a reasonable period. Simply,
companies like these do not meet the purchase criteria upon which our discipline
is based. Another reason that we underperformed the Index was an underweighting
in energy stocks, which had very poor earnings due to a weak pricing
environment. Those stocks have enjoyed a burst of performance in the last two
months, after recent OPEC efforts to prop up oil prices.
Portfolio Highlights
As was the case in previous years, it is difficult this year to identify
examples of serious stock selection disappointments not accompanied by earnings
shortfalls. For instance, in the consumer sector, the earnings of General
Nutrition, Goody's Family Clothing, Party City and Family Golf Centers came up
short. Healthcare sector disappointments included Theragenics, Total Renal Care
and Pathogenisis. In the closely related areas of service and technology, our
poorest performing stocks were Computer Horizons, CBT Group, Saville Systems,
JDA Software and Filenet.
It is always uncomfortable to acknowledge our failures as stock pickers.
Nevertheless, it has never been a secret that emerging growth companies are
fragile and deserve their reputation as sources of "torpedos". However, in our
experience, a disciplined attention to the fundamentals of these companies and
to early warnings of trouble allow us to anticipate and avoid many of these
negative outcomes. Moreover, we believe this discipline will preserve the
opportunity to gain exposure to the kinds of successful growth companies that
have contributed to the Fund's unusually good years in the past.
In the last twelve months, we have enjoyed an affirming outcome from several
big winners, each built on a pattern of earnings surprise and positive earnings
revisions. Examples of such winners for the Fund include American Eagle
Outfitters, Linens `N Things and Gemstar in the consumer sector; and Netbank, a
new bank offering its services over the Internet, in the financial sector.
Healthcare successes include Minimed, Express Scripts and Medquist. Lastly, in
the areas of services and technology, we were pleased with the performances of
USWeb, Network Solutions (the Fund's largest gainer), RF Micro Devices, E-Tek
Dynamics, Micromuse, Mindspring and Geotel Communications (recently announced to
be acquired by Cisco).
Without a doubt, this has been a difficult year. We recognize that our
record and reputation have been diminished by recent returns. However, we
believe our potential as a vehicle for exposure to the small, most rapidly
growing companies of the day has not diminished. We appreciate your continued
investment in the Fund.
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<PAGE>
THE PBHG FUNDS, INC.
PBHG GROWTH FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG GROWTH FUND, PBHG CLASS, VERSUS
THE RUSSELL 2000 GROWTH INDEX AND THE LIPPER MID-CAP
FUNDS AVERAGE
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PBHG RUSSELL LIPPER MID-CAP
GROWTH FUND, 2000 FUNDS
PBHG CLASS GROWTH INDEX 4 AVERAGE 5
12/31/85 $10000 $10000 $10000
3/86 11510 11481 11696
3/87 16870 13175 14532
3/88 14665 10888 13034
3/89 15249 11991 14835
3/90 19383 13057 17418
3/91 22667 14462 20341
3/92 25790 17206 24334
3/93 34680 17726 27585
3/94 47609 19628 30081
3/95 54236 21057 32831
3/96 82168 27660 42562
3/97 68396 26051 44852
3/98 91685 36778 64304
3/99 79601 32718 64458
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Growth Fund-PBHG Class commenced operations on December 19, 1985.
3 The performance shown for the Advisor Class (formerly known as the Trust
Class) prior to its inception on August 16, 1996, is based on the
performance and expenses of the PBHG Class. Subsequent to August 16, 1996,
the performance is that of the Advisor Class and reflects the expenses
specific to the Advisor Class, which will cause its returns to be less than
those of the PBHG Class. The average annual total return of the PBHG Advisor
Class from its inception date to March 31, 1999 was -1.63%.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Mid-Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies with average market capitalizations and/or
revenues between $800 million and the average market capitalization of the
Wilshire 4500 Index. The performance figures are based on changes in net
asset value of the funds in the Index with all capital gains distributions
and income dividends reinvested. The Index is not intended to imply the
Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Annualized Annualized Annualized Annualized
One Year 3 Year 5 Year 10 Year Inception
Return Return Return Return to Date
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth Fund-PBHG Class 2 -13.18% -1.05% 10.83% 17.97% 16.90%
- ---------------------------------------------------------------------------------------
PBHG Growth Fund-Advisor Class 3 -13.41% -1.27% 10.68% 17.89% 16.85%
- ---------------------------------------------------------------------------------------
</TABLE>
Sector Weightings
at March 31, 1999
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Consumer Cyclical 10%
Consumer Non-Cyclical 1%
Financial 1%
Health Care 11%
Industrial 9%
Services 16%
Technology 49%
Cash 3%
% of Total Portfolio Investments
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<PAGE>
THE PBHG FUNDS, INC.
PBHG EMERGING GROWTH FUND
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Domestic emerging growth companies.
STRATEGY: The Fund's strategy is to invest in young, rapidly growing companies
with prospects for continued growth. The Fund will typically target the
following sectors: technology, healthcare, consumer, and service. The Fund will
remain diversified over a large number of securities.
Performance
The last year has been another difficult year for small-cap stocks. With the
Dow hitting 10,000 and the Internet craze creating billions of dollars of
valuation each week, some may ask why we continue to be so staunchly committed
to small, rapidly growing companies. We remain unfazed. While disappointed with
the continued underperformance, we believe that the small-cap sector in general
and the PBHG Emerging Growth Fund provide the investor with the potential for
explosive returns.
For the twelve months ended March 31, 1999, the PBHG Emerging Growth Fund
lost 19.9%, underperforming the Russell 2000 Growth Index, which lost 11.0%. The
negative relative performance was due in part to the Fund's lack of exposure to
Internet and larger capitalization companies that are included in the Russell
2000 Growth Index. The sector weightings in the portfolio have not changed
dramatically. At year-end, the portfolio was allocated as follows: technology,
41%; consumer, 18%; service, 12%; and healthcare, 11%.
Portfolio Highlights
We believe that companies that can achieve rapid sales and earnings growth
over sustained periods create the best investment opportunities. These companies
typically are first or very early to market with a new solution to a current
business problem. A rapid adoption of their solution can fuel explosive growth.
New Era of Networks (NEON), a company that provides integration software for
companies that utilize many various software programs, is an excellent example.
Using NEON's solution, companies can integrate their systems in a seamless and
time-effective manner. The company's products generate a real return on
investment for their customers. New Era of Networks generated a significant
amount of return for the Fund as well. The stock is up well over 200% from our
initial purchase (as of this writing the Fund has a 270% gain in its position).
We first invested in New Era of Networks during the first calendar quarter of
1998, when the company had less than $10 million in quarterly sales. In the most
recent reported quarter (3/99), the company had over $29 million in sales. The
company increased sales by 209% in 4 quarters! Profitability improved as well.
GeoTel is another core holding that has been able to sustain phenomenal growth.
In each quarter since we first invested in GeoTel, the company generated revenue
growth above 100%. In April of this year, Cisco announced its intention to buy
GeoTel for approximately $2 billion in stock. We enjoyed a gain of over 500% in
this position. Network Appliance is another stellar growth company that was up
over 180% for the year. In the quarter ended March 1999, the company reported
revenue of $75.6 million, versus $43.9 million in the quarter ended March 1998
and $65.6 million in the quarter ended December 1998. Companies like this, that
can generate 15% sequential revenue growth, and 72% annual growth while
maintaining profitability, continue to be the mainstay of the Fund's strategy.
We are even more encouraged by the fact that stellar companies can still
generate significant positive returns in a hostile small-cap environment, such
as the one we have experienced over the last twelve months.
In addition to our tried and true strategy of making long-term investments
in small, rapidly growing companies, occasionally we are able to make
opportunistic stock purchases when volatile markets create pricing anomalies. In
October of 1998, we purchased shares of Security Dynamics and VideoServer at
depressed valuations. Each position was sold later in the year for a gain of
over 100%.
Despite these bright spots, the year was disappointing overall. The market
mercilessly penalized small companies with deteriorating fundaments, especially
in the fall of 1998. Many of the Fund's holdings that fell into this category
generated losses in excess of 50%. Sirrom Capital, a financial service company
that makes loans to small companies, was forced to adjust the valuation of its
loan portfolio and consequently the stock suffered. Dataworks Technology had
difficulty meeting expectations after merging with another software company.
Renaissance Worldwide, an information technology staffing company, also ran into
trouble with acquisitions. Aris Corp., another IT services company, suffered
when their corporate training business slowed. Although the company maintained
growth and profitability, the valuation suffered dramatically. Throughout the
year, the portfolio was hurt by 29 positions that declined by 60% or more.
The Fund's real story of the year may be the lackluster stock performance of
those companies that continued to generate solid earnings growth. These
companies experienced multiple contractions with mediocre stock performance,
despite excellent earnings results. Unfortunately, the Fund held many examples
of this phenomenon. Polycom, a maker of audio and video conferencing equipment,
has experienced significant earnings and revenue growth and has a solid pipeline
of new products. Yet, from the time we first purchased the stock in July 1998
through the end of March 1999, the stock appreciated only 6.5%. Advent Software,
a maker of software applications for the institutional money manager market, has
increased revenues and earnings by over 40%. Nevertheless, the stock increased
only 5.26% for the twelve-month period. Genesis Microchip, which was held
through the period, generated a stock return of only 6.4%, though earnings
almost doubled to $0.19 in the last year. When the market for
small-capitalization stocks turns around, we believe that these companies
provide the Fund with enormous potential.
[PILLAR LOGO OMITTED] 10
<PAGE>
THE PBHG FUNDS, INC.
PBHG EMERGING GROWTH FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG EMERGING GROWTH FUND,
VERSUS THE RUSSELL 2000 GROWTH INDEX AND THE LIPPER SMALL CAP FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG RUSSELL LIPPER SMALL
EMERGING 2000 CAP FUNDS
GROWTH FUND GROWTH INDEX 3 AVERAGE 4
6/30/93 $10000 $10000 $10000
3/94 13100 10763 10845
3/95 17290 11547 11719
3/96 25963 15168 15482
3/97 22403 14285 16326
3/98 30045 20168 23470
3/99 24063 17942 19837
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Emerging Growth Fund commenced operations on June 14, 1993.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Small Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the funds
in the category with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Fund's past or future
performance.
Average Annual Total Return1
As of March 31, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Annualized Annualized Annualized
One Year 3 Year 5 Year Inception
Return Return Return to Date2
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Emerging Growth Fund -19.91% -2.50% 12.93% 16.60%
- -------------------------------------------------------------------------------------
</TABLE>
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 17%
Consumer Non-Cyclical 1%
Energy 1%
Health Care 11%
Industrial 6%
Services 12%
Technology 41%
Transportation 1%
Cash 10%
% of Total Portfolio Investments
11 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP GROWTH FUND
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Companies, with above $1 billion of market capitalization that, in
Pilgrim Baxter's opinion, have an outlook for strong growth in earnings and
potential for capital appreciation.
STRATEGY: The Fund consists of larger companies with historical and estimated
future growth rates of over 20%. The Fund strives to layer additional strong
investment ideas on top of the 20 "best ideas" found in the PBHG Large Cap 20
Fund to provide a more diversified investment opportunity for shareholders
interested in the large company arena.
In the current environment -- where very large, multinational, economically
sensitive corporations are experiencing slowing growth rates -- this Fund
attempts to isolate and harness the power of consistent, high-growth, large
companies that are less affected by economic cycles.
Performance
The PBHG Large Cap Growth Fund returned 15.9% for the fiscal year ended
March 31, 1999, compared to the 18.5% return of its benchmark, the S&P 500
Index. The underperformance relative to the benchmark can be traced to the
year's second fiscal quarter ended September 30, 1998. At that time, investors
went through a severe panic, fearing that serious economic problems in some of
the world's emerging markets would spill over into the U.S. and cause a
recession! Risk avoidance motivated most market participants in the extreme.
Investors seemed determined to sell all securities in which they had significant
profits and all securities that appeared to have above-average risk. In the
equity market, stocks that had performed well up to that point and stocks with
the highest price/earnings ratios (P/E) were sold aggressively. These
emotionally driven trading strategies negatively affected the Fund's
performance. Heading into the September quarter, the Fund had outperformed the
market and its average P/E was well above that of the market, given our
preference for high-growth companies. While we were able to recoup some of the
lost ground over the second half of the fiscal year, we were unable to catch the
benchmark by fiscal year-end. We humbly point out, however, that we did
outperform the majority of our peers, as the average return generated by the
universe of growth mutual funds (as categorized by Lipper Analytical Services)
was 13.6% over the same twelve-month period.
Technology, our largest sector, led this year's performance. Our best
performer was America OnLine, which benefited from the exploding popularity of
"going online", both among users and investors. Other less direct beneficiaries
of the Internet craze in the Fund included EMC Corp., Global Crossing, Cisco
Systems, MCI/Worldcom, and Qwest Communications. The tech sector made the
biggest contribution to the Fund's performance in each quarter of the fiscal
year and was the only sector to produce a positive return in every quarter. This
noteworthy consistency of performance may seem unusual, given that the
technology sector is often derided as being unpredictable and unmanageable.
However, in our opinion, technology is likely to remain the fastest growing
sector of our economy and thus the area to find the greatest number of
high-quality, fast-growing companies.
We also enjoyed strong performances from some non-technology companies
during the year. In the consumer cyclical sector, better-than-expected earnings
reports boosted the share prices of Staples, Harley-Davidson, and Home Depot. In
the healthcare sector, Pfizer and Eli Lilly benefited from new product
initiatives. In the services sector, Sapient's shares rose due to
better-than-expected earnings and an expanding recognition of the company's
rapidly growing service that helps corporate clients establish Internet
functionality.
Not all of our investments worked in the fiscal year. Deteriorating
fundamentals prompted the sale of a number of holdings, some before the share
price collapsed and, unfortunately, some after. We recognize that investors
dislike negative surprises. We plan to work harder in this fiscal year to
discern changes at the margin in the fundamental business trends of the
companies we own -- changes that portend negative outcomes going forward. While
we fully expect a few negative surprises, we will strive to better anticipate
them, and take the appropriate action.
Portfolio Highlights
Though we had a few disappointments during the year, having relatively large
positions in several of the market's top performers easily compensated for the
negative effects of our disappointing stocks. Fortunately, several Fund holdings
appreciated by more than 100% for the year.
Clearly, investors favored large-cap growth stocks above all others in the
fiscal year. Determining factors seemed to be sustainable, above-average rates
of growth in a challenging aggregate growth environment and trading liquidity
that allowed investors to react quickly if deemed necessary. In addition to the
strong business fundamentals evidenced by our companies, we think these two
factors also contributed to performance over the course of the fiscal year. At
least to some extent, we are grateful for having been in the right place at the
right time. Nonetheless, we continue to believe that high quality, strong,
secular (not cyclical) growth companies consistently represent the most
promising investment opportunities.
As we enter the new fiscal year, the equity markets are in a decidedly
bullish mood. While we do not expect a major sustained downdraft in equity
markets in the presence of a low interest rate environment, a stable U.S.
economy and an accommodating Federal Reserve, we also do not expect the current
euphoria to last all year. One feature we do expect the equity markets to have
in common with last year is volatility. The degree of short-term volatility
correlates directly with valuation levels. With valuations at historically high
levels, we do not expect many dull moments. While extreme volatility can make
for a harrowing existence, it also creates numerous opportunities. We hope to
continue taking advantage of these opportunities to strengthen the Fund for the
long-term.
Of course, we make all our investments with a view toward the long-term. In
our opinion, top quality growth companies share several characteristics that
contribute to sustained, above-average growth rates: superior technologies or
services, strong balance sheets, clear business models and management teams with
the ability to execute their strategies. We believe investors will continue to
seek companies with these characteristics.
[PILLAR LOGO OMITTED] 12
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP GROWTH FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG LARGE CAP GROWTH
FUND, VERSUS THE S&P 500 INDEX AND THE
LIPPER GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG LARGE CAP S&P 500 LIPPER GROWTH
GROWTH FUND INDEX 3 FUNDS AVERAGE 4
4/30/95 $10000 $10000 $10000
9/95 13160 11485 11679
3/96 14992 12829 12613
9/96 16870 13818 13589
3/97 14728 15371 14244
9/97 20140 19404 18239
3/98 23683 22744 20391
9/98 21459 21163 18025
9/99 27448 26949 23114
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- ----------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception
Return Return to Date2
- ----------------------------------------------------------------------
PBHG Large Cap Growth Fund 15.90% 22.33% 28.80%
- ----------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 23%
Financial 4%
Health Care 17%
Industrial 6%
Services 10%
Technology 37%
Cash 3%
% of Total Portfolio Investments
13 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG SELECT EQUITY FUND
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: Normally no more than 30 common stocks of companies that, in Pilgrim
Baxter's opinion, have a strong earnings growth outlook and potential for
capital appreciation.
STRATEGY: This portfolio is designed to concentrate our investments in
approximately 30 companies that we believe represent the best growth companies
in the market at a given time, regardless of company size. We purchase only
those high growth, high quality companies where we have the greatest confidence
in the company specific fundamental business characteristics.
Performance
The PBHG Select Equity Fund returned 7.4% for the fiscal year ended March
31, 1999, compared to the 18.5% return provided by the S&P 500 Index. In
general, the Fund's exposure to mid-cap and small-cap stocks hindered
performance. Specifically, we experienced a high number of negative "surprises",
mostly in the small-cap arena. Broadly speaking, our large-cap holdings
performed extremely well.
Technology, our largest sector, led this year's performance. Within that
sector, America Online was the Fund's star performer, as the company continued
to achieve favorable developments in the areas of subscriber growth and
advertising revenues and, of course, as the stock was propelled by "Internet
mania". Global Crossing also enjoyed strong share price appreciation, as the
company continued its progress in the build-out of its fiber optic undersea
cable network. The Fund's third biggest contributor was Dell Computer, which
continued its string of positive earnings surprises. Seven of our top ten
performers came from the technology sector, reinforcing our view that technology
remains the fastest growing sector of the U.S. economy. Given the competitive
advantage that U.S. technology companies currently enjoy versus the rest of the
world, we expect this sector will continue to present the largest number of
high-quality investment opportunities.
Our other heavily represented sectors -- services, healthcare, and consumer
cyclicals -- all had strong individual performers in the year. The leading
performance contributors in their respective sectors were as follows:
International Network Systems, in services; Genentech, in healthcare; and Clear
Channel Communications, in consumer cyclicals. We were fortunate to have no
exposure to the energy sector during the year. This group suffered severely
after oil and natural gas prices began to decline due to dramatic slowdowns in a
number of the world's regional economies. The Fund also benefited from our lack
of exposure to the basic materials sector, as the inability to raise prices in
this commodity-oriented sector made growth difficult to achieve.
As indicated above, not all of our Fund investments worked in the fiscal
year. Deteriorating fundamentals prompted the sale of a number of holdings, some
before the share price collapsed and, unfortunately, some after. We recognize
that investors dislike negative surprises. We plan to work harder in fiscal 2000
to discern changes at the margin in the fundamental business trends of the
companies we own-changes that portend negative outcomes going forward. While we
fully expect a few negative surprises, we will strive to better anticipate them,
and take the appropriate action.
Portfolio Highlights
The advantages of concentrated investing -- focusing on a limited number of
stocks that we are convinced have the greatest fundamental strengths in their
underlying businesses -- continues, in our view, to be a sound investment
approach. Though we had a number of disappointments during the year, we also saw
several holdings appreciate by more than 100% for the year. As a result, the
benefit of having several of the market's top performers compensated, at least
somewhat, for the negative effects of our disappointing stocks.
Clearly, investors favored large-cap growth stocks above all others in the
fiscal year. Determining factors seemed to be sustainable, above-average rates
of growth in a challenging aggregate growth environment and trading liquidity
that allowed investors to react quickly if deemed necessary. In addition to the
strong business fundamentals evidenced by our large-cap companies, we think
these two factors also contributed to the Fund's performance over the course of
the fiscal year. Nonetheless, we continue to believe that high quality, strong,
secular growth companies OF ALL SIZES consistently represent the most promising
investment opportunities.
As we enter the new fiscal year, the equity markets are in a decidedly
bullish mood. While we do not expect a major sustained downdraft in equity
markets in the presence of a low interest rate environment, a stable U.S.
economy and an accommodating Federal Reserve, we also do not expect the current
euphoria to last all year. One feature we do expect the equity markets to have
in common with last year is volatility. The degree of short-term volatility
correlates directly with valuation levels. With valuations at historically high
levels, we do not expect many dull moments. While extreme volatility can make
for a harrowing existence, it also creates numerous opportunities. We hope to
continue taking advantage of these opportunities to strengthen the Portfolio for
the long-term.
Of course, we make all our investments with a view toward the long-term. In
our opinion, top quality growth companies share several characteristics that
contribute to sustained, above-average growth rates: superior technologies or
services, strong balance sheets, clear business models and management teams with
the ability to execute their strategies. We believe investors will continue to
seek companies with these characteristics.
[PILLAR LOGO OMITTED] 14
<PAGE>
THE PBHG FUNDS, INC.
PBHG SELECT EQUITY FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG SELECT EQUITY FUND, VERSUS THE S&P 500
INDEX AND THE LIPPER CAPITAL APPRECIATION FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG SELECT S&P 500 LIPPER CAPITAL
EQUITY FUND INDEX 3 APPRECIATION FUNDS AVERAGE 4
4/30/95 $10000 $10000 $10000
9/95 14545 11485 11841
3/96 17326 12829 12885
9/96 21119 13818 13772
3/97 16124 15371 13746
9/97 22337 19404 17769
3/98 24474 22744 19169
9/98 21048 21163 16600
3/99 26276 26949 21366
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Select Equity Fund commenced operations on April 5, 1995.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Capital Appreciation Funds Average is an equally weighted
benchmark composed of mutual funds with the investment objective of maximum
capital appreciation. The performance figures are based on changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The Index is not intended to
imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- ------------------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception
Return Return to Date2
- ------------------------------------------------------------------------------
PBHG Select Equity Fund 7.37% 14.89% 28.07%
- ------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 11%
Health Care 3%
Industrial 1%
Services 5%
Technology 70%
Cash 10%
% of Total Portfolio Investments
15 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG CORE GROWTH FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities that are believed to
have superior long-term growth prospects and the potential for long-term capital
appreciation. The Fund may invest in companies of any size.
STRATEGY: At year-end, the Fund's holdings ranged from $449 million to $461
billion in market capitalization. At year-end, the average holding had a market
capitalization of $36.2 billion. For comparison purposes, the average holding at
year-end last year had an average market capitalization of $12.4 billion. Most
of the increase in average market capitalization occurred beginning in November
of 1998, as the new portfolio manager moved to increase portfolio exposure to
several larger companies in order to better diversify the Fund's holdings in the
technology sector. These moves increased the Fund's exposure in the recovering
semi-conductor and semi-conductor capital-equipment sectors and reduced exposure
in enterprise software, where fundamentals continued to deteriorate. Increased
exposure to the data networking sector and the continued out-performance of
large capitalization stocks also contributed to the increase in average market
capitalization.
Performance
The Core Growth Fund returned 3.9%, compared with the 24.4% of the Russell
3000 Growth Index and the 8.9% return of the Russell Mid Cap Growth Index for
the year ended March 31, 1999.
Much of the Fund's under-performance occurred early in the year. Prior to a
portfolio restructuring in October 1998, the Fund's average market
capitalization was much smaller than that of the Index. Larger capitalization
stocks continued to outperform smaller equities during 1998. For the twelve
months ended March 31, 1999, the S&P 500 Index, an index of large capitalization
stocks was up 18.5%, while the Russell 2000, an index of small capitalization
stocks was down -16.3%.
We are disappointed with the Fund's under-performance for the year. However,
we are greatly encouraged by the relative performance that has occurred since
its portfolio was restructured at the end of October. The addition of larger
capitalization companies has resulted in a higher average market capitalization
for the Fund. Nevertheless, it is important to point out that the Fund has not
given up on the small capitalization part of the market. The average market
capitalization figure is somewhat misleading because many of the stocks we added
in the fourth quarter of 1998 were significantly larger than the largest stocks
in the Russell Mid Cap Growth Index. A closer comparison between the Fund's
holdings and the stocks in the Russell Mid Cap Growth Index reveals that the
Fund is still over-weighted in smaller capitalization stocks, although
significantly less so than it was four to five months ago. Our smaller
capitalization companies continue to exhibit excellent fundamentals and are at
all-time low valuation levels relative to larger capitalization stocks.
Portfolio Highlights
One of the prevalent investment themes during 1998 was the astounding growth
of the Internet and its impact on the way we live and work. Because the medium
has grown so quickly, it is getting increasingly difficult to find companies
that are not affected by it. This is especially the case in the technology
sector of our economy. The growth of the Internet is one of the significant
factors that drove technology stocks to new heights. All of the portfolio's top
five performers for 1998 were technology stocks and, in a sign of its growing
pervasiveness, all five can be linked to the Internet in some way. While the
Fund has stayed away from some of the more speculative Internet issues,
especially those with less mature business models, we believe the Fund is poised
to benefit from some of the impressive growth the Internet is creating.
The Fund's top performer, America Online, is an on-line service provider.
The company provides services such as e-mail, chat, news, information and
Internet access to its subscribers. America Online was added to the S&P 500
Index during 1998, a symbolic indication of the rapid maturation of the
Internet. Because the Internet is essentially a large network, increasing
amounts of data are exchanged as more people get online. Our second best
performer, Global Crossing, is building a global, next generation fiber-optic
network that will help carry burgeoning amounts of data traffic.
Another top performer, New Era of Networks, is a provider of enterprise
software called "middle-ware". "Middle-ware" is software that helps link
together mainframe systems with the PC and Unix based "client-server" systems
that have proliferated in large corporations. "Middle-ware" enables corporate
client-server users to access previously difficult to obtain data residing on
older mainframe systems. The proliferation of data that has occurred during this
decade has also created the need for more data storage. Top performer EMC makes
intelligent storage systems for corporate networks. Rounding out the top five
performers was Macromedia, a maker of web development software.
For every positive growth trend we can identify for the last year, there is
another sector or sub-sector of the economy that is moving in the opposite
direction. During 1997 and early 1998, many technology companies were enjoying
spectacular growth due to the need to fix Year 2000 problems. As the Year 2000
drew nearer, some of the software and information technology integration
companies that originally benefited from this trend began to suffer, as their
customers became more and more unwilling to change their systems. This type of
change in a growth trend usually results in earnings misses and this case was no
different. While such "blow-ups" are certainly disappointing, they often help us
to understand broader changes that are occurring in the economy. Earnings
disappointments at four of our under-performers, software companies Saville
Systems, Radiant Systems and Filenet and at Cambridge Technology Partners, a
large integrator of enterprise software and systems certainly resulted, in part,
from management missteps or company-specific issues. However, they also
represented early indicators of some of the difficulties to come in the
enterprise software sector.
A fifth disappointment, Global Industries, fell victim to a difficult
environment in the energy sector. Energy stocks suffered greatly in 1998, as
petroleum and other commodity prices fell on the heels of a slowdown in global
growth that occurred as a result of economic problems in Latin America, Asia and
other emerging markets.
As we move forward, we will compare our performance with the Russell Mid Cap
Index, because this index more accurately reflects the all capitalization
strategy of the PBHG Core Growth Fund. The Russell 3000 Growth Index is
primarily a large-cap growth index. While we believe that our diversification
with regard to market capitalization increased returns and reduced risk, we
remain dedicated to maintaining a relevant exposure to companies of all sizes.
Therefore, we expect that the portfolio will be well positioned when relative
performance improves in the small-cap area.
16 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG CORE GROWTH FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG CORE GROWTH FUND, VERSUS THE
RUSSELL MID CAP GROWTH INDEX, THE RUSSELL 3000
GROWTH INDEX AND THE
LIPPER GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG RUSSELL RUSSELL LIPPER
CORE MID-CAP 3000 GROWTH
GROWTH GROWTH GROWTH FUNDS
FUND INDEX 3 INDEX 4 AVERAGE 5
12/31/95 $10000 $10000 $10000 $10000
3/96 11820 10645 10542 10548
9/96 14200 11419 11557 11364
3/97 10341 11321 12123 11916
9/97 12891 14804 15615 15257
3/98 13531 16114 18019 17057
9/98 10791 13415 16749 15078
3/99 14062 17547 22407 19335
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Core Growth Fund commenced operations on December 29, 1995.
3 The Russell Mid Cap Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with a higher price to book ratio and
higher forecasted growth values. The Index reflects the reinvestment of
income dividends and capital gain distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Fund's past or future performance.
4 The Russell 3000 Growth Index is an unmanaged index comprised of those
securities in the Russell 1000 and Russell 2000 Indexes with a greater-than
average growth orientation. The Index reflects the reinvestment of income
dividends and capital gains distributions, if any, but does not reflect
fees, brokerage commissions, or other expenses of investing. The Index is
not intended to imply the Fund's past or future performance.
5 The Lipper Growth Funds Average is an equally weighted bench-mark composed
of mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- -----------------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception
Return Return to Date2
- -----------------------------------------------------------------------------
PBHG Core Growth Fund 3.92% 5.96% 11.04%
- -----------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 26%
Energy 2%
Financial 2%
Health Care 11%
Industrial 12%
Services 9%
Technology 36%
Cash 2%
% of Total Portfolio Investments
17 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LIMITED FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: A diversified portfolio of equity securities of companies that are
believed, by Pilgrim Baxter, to have superior long-term growth prospects and
potential for long-term capital appreciation.
STRATEGY: The Fund invests in companies under $250 million in market
capitalization or annual revenues. The Fund is currently closed to investment by
new shareholders in order to help protect achievement of its investment
objective.
Performance
For the year ended March 31, 1999, the Fund's total return was -11.0%
relative to -11.0% for the Russell 2000 Growth Index and -14.7% for the Lipper
Small Cap Funds Index.
It is almost impossible to discuss the performance of the Fund over the past
twelve months without commenting on the generally hostile environment that has
existed for small-cap stocks. With the historically low valuations and solid
fundamentals of many small companies, we believe that there has never been a
time where small-cap stocks have been more oversold or undervalued. As the risk
adverse market continued to favor liquidity, small stocks painfully and
consistently under-performed their large-cap counterparts, despite their solid
earnings growth.
Ironically, the notorious month of October brought with it the only respite
these small companies experienced during this fiscal year. While the Russell
2000 Growth Index posted a dramatic loss of 18.5% during the first six trading
days of October, the Index finished up 5.2% for the month and 23.7% for the
quarter ended December 31, 1998. Similarly the PBHG Limited Fund dropped 18.5%
from the end of September through October 8, 1998, but finished down only 0.10%
for the month and posted a strong 24.4% return for the quarter. Technology
stocks provided the performance leadership for the Fund during this rebound, but
all other sectors contributed positively as well. More than delivering the
small-cap investor a much needed break from the abysmal returns experienced to
that point, the rally staged by small company growth stocks lent support to our
belief that those companies with exceptional fundamentals and the highest
sustainable growth rates would outperform over time.
As larger stocks continued to produce better returns than smaller ones
during the first calendar quarter of 1999, the Fund's lack of exposure to the
technology sector's best performers, Internet companies, only exacerbated its
relative performance woes. If the Index's 30% weighting in stocks with a market
capitalization greater than $1.0 billion was not enough to generate better
relative returns in this environment, the extraordinary returns of the
Internet-related stocks certainly played a role. According to Claudia Mott of
Prudential Securities, the Internet-related companies that make up 12.6% of the
Russell 2000 Growth Index contributed 5.5% of the return during this quarter.
Without those names, the Index would have lost 7.2% for the quarter. The
valuations of these companies exploded as investors sought to understand and
capture the potential of this new frontier in communications technology.
Although we recognize the importance of the medium, buying Internet stocks would
often require investing in companies with no prospect of earnings over a
reasonable period, thus failing to meet the criteria upon which our discipline
is based. We continue to limit our exposure in this phenomenon to those small
companies with strong earnings growth who are benefiting from their exposure to
the market opportunity created by the increasing demand for Internet access and
services.
Portfolio Highlights
The performance of small growth stocks during the quarter ended December 31,
1998, certainly gave us an indication of the potential contained within so many
of our severely battered holdings. As the market begins to embrace these
historically low valuations, where earnings growth and future earnings growth
expectations have remained robust, we believe our high-quality small growth
holdings stand poised to benefit.
Throughout the disappointing performance period of the past twelve months,
the characteristics of the Fund have remained consistent. Committed to owning
the fastest growing small growth companies with superior fundamentals, the Fund
continued to boast a position weighted average earnings per share growth for the
last twelve months above 65% and a position weighted average estimated earnings
per share growth for the next twelve months above 45%. Despite their stellar
fundamental performance, many of our holdings provided minimal positive
contributions. One of our larger holdings, Advent Software, posted a paltry 5.3%
return for the year ended March 31, 1999, yet delivered positive earnings
surprises with earnings and revenue growth greater than 40% over that same time
period. Advent, a maker of software systems for the investment management
business, suffered not only by virtue of its small-cap status but also as
investors perceived the company would have difficulty selling its products into
the investment and banking industry if the much-feared global banking crisis
ensued. Advent proved that sales of its mission-critical software would not
suffer as the outlook dimmed for many large investment banks, closing the
largest deal in its corporate history with Merrill Lynch during the same quarter
that Merrill Lynch announced a large scale downsizing of its labor force.
Outside the malaise afflicting small company stocks, the Fund also had its
fair share of traditional winners and losers during the fiscal year ended March
31, 1999. New Era of Networks and GeoTel Communications are two notable winners.
Providing a comprehensive enterprise application integration platform that
enables customers to integrate packaged, legacy and web-based applications, New
Era of Networks has delivered earnings and revenue growth well above 100% for
the past five quarters. Although the company now sits beyond our traditional
definition of a small-cap stock, we originated the position in the first
calendar quarter of 1998 when the company's quarterly revenue was only $10
million and its market capitalization was below $250 million. The Fund held the
position through the fiscal year, posting a 465% return. We purchased GeoTel
Communications in May of 1997 as a much smaller company. Since then, it has been
a core holding of the Fund and has sustained extremely strong growth rates in
both earnings and revenue. GeoTel's stock performance mirrored the company's
strong business, posting a 232% gain over the twelve-month period.
Some examples of companies owned by the Fund that did not measure up to our
growth expectations were Edutrek International and FlexiInternational. Sold
during the period, Edutrek and FlexiInternational both reported severe earnings
disappointments related to their exposure to international economies and the
global banking merger environment, respectively. Particularly disappointing for
us was the performance of QuadraMed. Plagued by legitimate investor concerns
regarding future sales and earnings for healthcare information systems companies
as the "nuclear winter" of Y2K approached, QuadraMed's stock price suffered
along with its peers, despite producing strong growth through the difficult
environment. When QuadraMed ultimately expressed caution regarding its
customers' expected buying patterns for the second half of 1999, the reality of
missed execution caught up with the stock price and we sold our holding.
Overall, fiscal year 1999 was a difficult year for small-cap stocks but we
remain confident that as the market begins to embrace these historically low
valuations, investing in the highest-quality, fastest-growing small companies
will reward our investors over the long-term.
[PILLAR LOGO OMITTED] 18
<PAGE>
THE PBHG FUNDS, INC.
PBHG LIMITED FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG LIMITED FUND, VERSUS THE
RUSSELL 2000 GROWTH INDEX AND THE LIPPER SMALL CAP
FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG LIMITED RUSSELL 2000 LIPPER SMALL CAP
FUND GROWTH INDEX 3 FUNDS AVERAGE 4
6/30/96 $10000 $10000 $10000
9/96 11011 9914 10200
12/96 11083 9941 10464
3/97 9085 8898 9783
6/97 11454 10460 11456
9/97 13623 12230 13355
12/97 12864 11228 12693
3/98 14607 12562 14091
6/98 14058 11841 13512
9/98 11692 9193 10621
12/98 14542 11367 12657
3/99 12998 11176 11902
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Limited Fund commenced operations on June 28, 1996.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Small Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the Funds
in the category with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Fund's past or future
performance.
Average Annual Total Return1
As of March 31, 1999
- ------------------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- ------------------------------------------------------------------------------
PBHG Limited Fund -11.01% 9.98%
- ------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 14%
Consumer Non-Cyclical 4%
Health Care 10%
Industrial 2%
Services 15%
Technology 43%
Cash 12%
% of Total Portfolio Investments
19 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP 20 FUND
Portfolio Profile
OBJECTIVE: Long-term growth of capital.
INVESTS IN: A limited number of larger capitalization companies (no more than
20) that have above-average potential for capital appreciation.
STRATEGY: The Fund is different from other PBHG Funds in two key ways: it
invests only in large capitalization companies (over $1 billion) and it
concentrates investments in just 20 stocks. This non-diversified Fund seeks
large capitalization stocks that present the best opportunities for meaningful
capital appreciation in the foreseeable future. Our strategy involves looking
beyond the financial data and analysts' reports to find some dynamic within a
company that may not be fully appreciated and that, when exploited, can lead to
positive earnings surprises and upward revisions of future growth expectations.
Performance
The PBHG Large Cap 20 Fund returned 52.5% for the fiscal year ended March
31, 1999. This compares favorably to the returns provided by our benchmark, the
S&P 500 Index at 18.5%.
Technology, our largest sector, led this year's strong performance. Six of
our top ten performers were technology stocks. Better-than-expected earnings
reports from companies like EMC Corp. and Microsoft drove their strong share
price appreciation. Being perceived as a direct or indirect beneficiary of the
exploding popularity of "going online" benefited Fund holdings like America
Online, Cisco Systems, and MCI/Worldcom.
The tech sector made the biggest contribution to Fund performance in each
quarter of the year ended March 31, 1999, and was the only sector to produce a
positive return in every quarter. This noteworthy consistency of performance may
seem unusual, given that the technology sector is often derided as being
unpredictable and unmanageable. However, in our opinion, technology is likely to
remain the fastest growing sector of our economy and, thus, the area to find the
greatest number of high-quality, fast-growing companies.
Our other heavily represented sectors-services, healthcare, and consumer
cyclical-all contributed positively to the Fund's performance in the year,
though with greater quarterly variability. The leading contributors from their
respective sectors were MCI/ Worldcom in services, Guidant in healthcare, and
Staples in consumer cyclical.
We were fortunate to have no exposure to the energy sector during the year,
as this group was punished severely after oil and natural gas prices began to
decline due to dramatic slowdowns in a number of the world's regional economies.
We were also fortunate to have sold our holdings in the financial services
sector in July, prior to the global liquidity scare that negatively affected
many stocks in that sector.
Not all of the Fund's investments worked during the last twelve months.
Deteriorating fundamentals prompted the sale of a number of holdings, some
before their share price collapsed and, unfortunately, some after. We recognize
that investors dislike negative surprises. We plan to work harder in the next
twelve months to discern changes at the margin in the fundamental business
trends of the companies we own-changes that portend negative outcomes going
forward. While we fully expect a few negative surprises, we will strive to
better anticipate them and take the appropriate action.
Portfolio Highlights
The advantages of concentrated investing -- focusing on a limited number of
stocks that we are convinced have the greatest fundamental strengths in their
underlying businesses -- were borne out in the results of the Large Cap 20 Fund
during the last year. Though we had a few disappointments, having several of the
market's top performers easily compensated for the negative effects of our
disappointing stocks. Fortunately, several holdings appreciated by more than
100% for the year.
Clearly, investors favored large-cap growth stocks above all others in the
fiscal year. Determining factors seemed to be sustainable, above-average rates
of growth in a challenging aggregate growth environment and trading liquidity
that allowed investors to react quickly if deemed necessary. In addition to the
strong business fundamentals evidenced by our companies, we think these two
factors also contributed to performance over the course of the fiscal year. At
least to some extent, we are grateful for having been in the right place at the
right time. Nonetheless, we continue to believe that high quality, strong,
secular (not cyclical) growth companies consistently represent the most
promising investment opportunities.
As we enter the new fiscal year, the equity markets are in a decidedly
bullish mood. While we do not expect a major sustained downdraft in equity
markets in the presence of a low interest rate environment, a stable U.S.
economy and an accommodating Federal Reserve, we also do not expect the current
euphoria to last all year. One feature we do expect the equity markets to have
in common with last year is volatility. The degree of short-term volatility
correlates directly with valuation levels. With valuations at historically high
levels, we do not expect many dull moments. While extreme volatility can make
for a harrowing existence, it also creates numerous opportunities. We hope to
continue taking advantage of these opportunities to strengthen the Portfolio for
the long-term.
Of course, we make all our investments with a view toward the long-term. In
our opinion, top quality growth companies share several characteristics that
contribute to sustained, above-average growth rates: superior technologies or
services, strong balance sheets, clear business models and management teams with
the ability to execute their strategies. We believe investors will continue to
seek companies with these characteristics.
[PILLAR LOGO OMITTED] 20
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP 20 FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG LARGE CAP 20 FUND,
VERSUS THE S&P 500 INDEX AND THE LIPPER
GROWTH FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG LARGE CAP 20 FUND S&P 500 INDEX 3 LIPPER GROWTH FUNDS AVERAGE 4
11/30/96 $10000 $10000 $10000
12/96 9841 9802 9849
3/97 9260 10066 9743
6/97 11523 11822 11288
9/97 12915 12708 12462
12/97 13085 13072 12330
3/98 15998 14895 13930
6/98 17590 15386 14197
9/98 16708 13858 12308
12/98 21960 16810 15105
3/99 24400 17647 15764
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap 20 Fund commenced operations on November 29, 1996.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Growth Funds Average is an equally weighted benchmark composed of
mutual funds, each of which normally invests in companies whose long-term
earnings are expected to grow significantly faster than the earnings of the
stocks represented in the major unmanaged stock indexes. The performance
figures are based on changes in net asset value of the funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- -----------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- -----------------------------------------------------------------------
PBHG Large Cap 20 Fund 52.52% 46.54%
- -----------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 22%
Health Care 14%
Industrial 4%
Services 10%
Technology 39%
Registered Investment Company 3%
Cash 8%
% of Total Portfolio Investments
21 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG NEW OPPORTUNITIES FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Equity securities of small and medium sized growth companies. The
Fund does not have a delineated predisposition to set sector or sub-sector
allocations.
STRATEGY: The PBHG New Opportunities Fund is a diversified portfolio intended to
deliver capital appreciation by identifying and investing in the fastest growing
stocks of small- and medium-sized growth companies. With generally similar
weightings amongst the holdings and no predetermined sector or sub-sector
allocation, the Fund is intended to own the highest quality, rapidly growing,
emerging small companies. When identifying and reviewing the names that make-up
the portfolio, the Fund incorporates Pilgrim Baxter's proprietary quantitative
model coupled with an extensive top-down and bottom-up growth-oriented
fundamental review. A majority of the Fund's purchases are in companies with
market capitalizations below $1 billion.
Performance
The PBHG New Opportunities Fund returned 21.8% from inception (February 12,
1999) to March 31, 1999, compared to its benchmark, the Russell 2000 Growth
Index, which returned -0.6%. For the month of March, the Fund returned 17.1%,
while the Russell 2000 Growth index returned 3.6%.
The Fund has a very limited operating history. Performance was strong
through the end of March 31, primarily due to its heavy technology weighting.
Major contributors held during the period that significantly assisted
performance included the following: Micromuse, RF Micro Devices, Mips
Technologies, Infospace.Com, Aware, SDL Inc., Go2net and Network Solutions. As
of March 31, 1999, the Fund's holdings were divided among four economic sectors
as follows: technology, 80%; healthcare, 8%; consumer, 4%; and service, 4%.
Portfolio Highlights
As evidenced by the small-cap rally in the fourth quarter of 1998, we
believe there has been a return of investor interest in small growth companies
since the capitulation low established on October 8, 1998.
At that time, investors were becoming aware of the combination of
increasingly attractive relative valuation and relative earnings outlooks
against the backdrop of a low interest rate environment. Investor appetite was
insatiable for companies with strong earnings prospects, and they gravitated
toward companies that would offer them the fastest growth. We believe this
interest in small-cap companies may continue into the second quarter, and could
generate significant returns in the small-cap technology sector. Internet and
Internet-related technology names were the best contributors to the Fund's
performance in the first quarter, and the technology sector heavily influenced
the performance of the PBHG New Opportunities Fund. Top performers among
Internet names included: Intraware, PSINet, Infospace.com, GO2net and Network
Solutions; as well as two newly public companies, Neon Systems and Flashnet.
While initial public offerings contributed some generous returns for the
Fund since its inception, the theme of both our best and worst stocks continues
to be predictable and familiar to Pilgrim Baxter's growth style of investment
management. When our portfolio companies met or exceeded earnings expectations,
the stocks tended to do well. The reverse was also painfully apparent. Our worst
performers generally fell into the camp of those companies that either posted
poor earnings or, later, revised earlier growth prospects downward. Some of the
companies that exhibited one or both of these characteristics were:
Pathogenisis, Engineering Animation and FVC.com.
All in all, the first quarter of 1999 was a volatile one. Nevertheless, we
are satisfied that our stock selection tools proved reasonably robust and
reaffirmed our confidence in our philosophy and strategy. While a small-cap fund
bears the risks that a company within the portfolio will disappoint or overall
market conditions will deteriorate, it is our belief that investing in the
highest growth companies will reward our investors over the long-term.
[PILLAR LOGO OMITTED] 22
<PAGE>
THE PBHG FUNDS, INC.
PBHG NEW OPPORTUNITIES FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG NEW OPPORTUNITIES FUND,
VERSUS THE RUSSELL 2000 GROWTH INDEX AND THE LIPPER
CAPITAL APPRECIATION FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG NEW RUSSELL 2000 LIPPER CAPITAL
OPPORTUNITIES GROWTH APPRECIATION
FUND INDEX 3 AVERAGE 4
2/28/99 $10000 $10000 $10000
3/99 11714 10356 10504
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 Total return has not been annualized. The PBHG New Opportunities Fund
commenced operations on February 12, 1999.
3 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
4 The Lipper Capital Appreciation Funds Average is an equally weighted
benchmark composed of mutual funds, with the investment objective of maximum
capital appreciation. The performance figures are based on changes in net
asset value of the funds in the category with all capital gains
distributions and income dividends reinvested. The Index is not intended to
imply the Fund's past or future performance.
Cumulative Total Return1
As of March 31, 1999
- --------------------------------------------------------------------------------
Cumulative Return
Inception to Date2
- --------------------------------------------------------------------------------
PBHG New Opportunities Fund 21.82%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 4%
Health Care 8%
Services 4%
Technology 80%
Cash 4%
% of Total Portfolio Investments
23 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP VALUE FUND
Portfolio Profile
OBJECTIVE: Long-term growth of capital and income.
INVESTS IN: A diversified portfolio of equity securities of large capitalization
companies.
STRATEGY: The Fund invests in companies with market capitalizations in excess of
$1 billion which in Value Investors' opinion, are undervalued or overlooked by
the market. In selecting investments for the Fund, Value Investors emphasize
fundamental investment value and consider factors such as: the relationship of a
company's potential earning power to the current market price of its stock;
continuing dividend income and the potential for increased dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; and potential for favorable business
developments.
Performance
For the fiscal year ended March 31, 1999, the PBHG Large Cap Value Fund's
total return was 20.3% versus 18.5% for the S&P 500 Index and 5.1% for the
Russell 1000 Value Index.
The first quarter of 1999 was another difficult quarter for investors who
did not own only the largest capitalization stocks. Investors' time frames have
become increasingly short-term oriented over the past ten years. No one today
seems to have any patience for equity investments that lack an obvious,
immediate pay-off. Thus, virtually all of the upside market action in the
quarter concentrated very narrowly in two areas: (1) mega-cap S&P 500 companies
whose share prices benefit from the huge inflows into index funds; and (2) the
stock of any company whose current business trend has been linked in some
fashion to the Internet. Though we are certain that this highly focused, manic
momentum cannot continue forever, we are also chagrined that it has continued so
much longer than we initially expected.
Portfolio Highlights
The twelve months ended March 31, 1999 contained the worst of times and the
best of times. For the first six months, the S&P 500 returned -7.0% as contagion
from the Asian currency panic spread to Russia and Latin America. Then the
Federal Reserve provided a burst of liquidity to quench the crisis, and the S&P
500 rallied to a 27.3% return over the remaining half of the fiscal year.
Unfortunately, the Fed easing that sparked the rally ended almost as soon as
it had begun. Federal Reserve easings have historically been very beneficial for
subsequent stock market returns, but past easings have rarely been as muted and
short-lived as the Fed action last fall. With the current fed funds rate at
4.75% and inflation running around 1%-2%, Alan Greenspan has ample room to lower
short-term interest rates over the course of 1999 if he chooses. Recent Federal
Reserve pronouncements suggest that lower short-term interest rates are unlikely
over the near-term. However, we are optimistic that a slowing U.S. economy may
prompt the Fed to ease more actively in the second half of the year. Until then,
we expect the market to trade sideways in volatile fashion.
There have been no major changes in our investment strategy. We remain fully
invested and are concentrating our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Auto manufacturers and financial services look
attractive to us, with Ford, Federal-Mogul, Hartford Life and "Freddie Mac"
ranking as significant holdings in those sectors. We are also working hard to
find undiscovered companies that should benefit substantially from the rapid
growth of Internet commerce. Galileo International, a leading provider of
real-time airline reservations data, is clearly benefited by burgeoning
e-commerce, yet its stock trades at an un-Internet multiple of only 23 times
this year's estimated earnings of $2.20 per share.
[PILLAR LOGO OMITTED] 24
<PAGE>
THE PBHG FUNDS, INC.
PBHG LARGE CAP VALUE FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG LARGE CAP VALUE FUND,
VERSUS THE S&P 500 INDEX, THE RUSSELL 1000 VALUE
INDEX AND THE LIPPER GROWTH & INCOME FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG S&P RUSSELL 1000 LIPPER GROWTH
LARGE CAP 500 VALUE & INCOME
VALUE FUND INDEX 3 INDEX 4 FUNDS AVERAGE 5
12/31/96 $10000 $10000 $10000 $10000
3/97 10110 10268 10256 10116
6/97 11560 12060 11768 11572
9/97 12450 12963 12940 12613
12/97 12562 13335 13518 12712
3/98 14101 15194 15095 14206
6/98 14339 15695 15163 14240
9/98 13201 14137 13407 12462
12/98 16925 17148 15632 14683
3/99 16962 18002 15856 14943
1 Performance is historical and not indicative of future results. The
investment Preturn and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Large Cap Value Fund commenced operations on January 2, 1997.
3 The S&P 500 Index is a capitalization weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Russell 1000 Value Index is an unmanaged index comprised of those
securities in the Russell 1000 Index with lower price-to-book ratios and
lower forecasted growth values. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Fund's past or future performance.
5 The Lipper Growth & Income Funds Average is an equally weighted benchmark
composed of mutual funds, each of which combines growth of earnings with an
income requirement for level and/or rising dividends. The performance
figures are based on changes in net asset value of the Funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- --------------------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- --------------------------------------------------------------------------------
PBHG Large Cap Value Fund 20.29% 26.52%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Basic Materials 2%
Consumer Cyclical 24%
Consumer Non-Cyclical 7%
Energy 4%
Financial 22%
Health Care 3%
Industrial 6%
Services 3%
Technology 14%
Transportation 2%
Utilities 9%
Cash 4%
% of Total Portfolio Investments
25 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG MID-CAP VALUE FUND
Portfolio Profile
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk.
INVESTS IN: Common stocks and other equity securities of companies with market
capitalizations in the range of companies represented by the Standard & Poor's
Mid Cap 400 Index ("S&P 400"), which are considered to be undervalued based on
certain proprietary measures of value.
STRATEGY: The Fund typically invests in equity securities of companies
with between $200 million and $5 billions in market capitalization. In selecting
investments for the Fund, Value Investors emphasizes fundamental investment
value and considers the following factors, among others, in identifying and
analyzing a security's fundamental value and capital appreciation potential: the
relationship of a company's potential earning power to the current price of its
stock; current dividend income and the potential for dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; strong competitive advantages; and
potential for favorable business developments.
Performance
For the quarter ended March 31, 1999, the PBHG Mid-Cap Value Fund's total
return was -3.5% versus -6.4% for the S&P 400. For the fiscal year, the Fund's
total return was 8.4% versus 0.4% for the S&P 400. We are pleased to be off to a
good start in our first full year of operations, and we look forward to serving
you again in fiscal 2000.
The first quarter was another difficult quarter for investors who did not
own only the largest capitalization stocks. While the large cap oriented S&P 500
Index returned 5.0% for the three months ended March 31, 1999, the mid cap
sector of the market lagged badly. Given the -6.4% return of the S&P 400, the
performance differential between large- and mid-cap stocks amounted to an
unusually high quarterly gap of -11.4%!
It appears that investors' time frames have become increasingly short-term
oriented over the past ten years. No one today seems to have any patience for
equity investments that lack an obvious, immediate pay-off. Thus, virtually all
of the upside market action in the quarter concentrated very narrowly in two
areas: (1) mega-cap S&P 500 companies whose share prices benefit from the huge
inflows into index funds; and (2) the stock of any company whose current
business trend has been linked in some fashion to the Internet. Though we are
certain that this highly focused, manic momentum cannot continue forever, we are
also chagrined that it has continued so much longer than we initially expected.
Portfolio Highlights
The fiscal year just ended contained the worst of times and the best of
times. For the first six months, the S&P 400 returned -16.3% as contagion from
the Asian currency panic spread to Russia and Latin America. Then the Federal
Reserve provided a burst of liquidity to quench the crisis, and the S&P 400
rallied to a 20.5% return over the remaining half of the fiscal year.
Unfortunately, the Fed easing that sparked the rally ended almost as soon as
it had begun. Federal Reserve easings have historically been very beneficial for
subsequent stock market returns, but past easings have rarely been as muted and
short-lived as the Fed action last fall. With the current fed funds rate at
4.75% and inflation running around 1%-2%, Alan Greenspan has ample room to lower
short-term interest rates over the course of 1999 if he chooses. Recent Federal
Reserve pronouncements suggest that lower short-term interest rates are unlikely
over the near-term. However, we are optimistic that a slowing U.S. economy may
prompt the Fed to ease more actively in the second half of the year. Until then,
we expect the market to trade sideways in volatile fashion.
There have been no major changes in our investment strategy. We remain fully
invested and are concentrating our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Newspaper stocks look attractive to us, and
Knight-Ridder is a significant holding of the Fund. Many investors expect
competition from on-line Internet services to rapidly siphon off the classified
advertising that is the foundation of newspaper profitability. Although the
Internet is a legitimate long-term competitive issue, we do not expect any
noticeable near-term impact on newspapers' profitability. If Knight-Ridder
reports hearty sales and earnings gains throughout 1999 as we expect, then
investors' fears should be alleviated and the shares should appreciate nicely.
[PILLAR LOGO OMITTED] 26
<PAGE>
THE PBHG FUNDS, INC.
PBHG MID-CAP VALUE FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG MID-CAP VALUE FUND, VERSUS THE S&P
MID CAP 400 INDEX AND THE LIPPER MID CAP FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG MID-CAP S&P 400 LIPPER MID
VALUE FUND MID-CAP INDEX 3 CAP FUNDS AVERAGE 4
4/30/97 $10000 $10000 $10000
6/97 11410 11180 11397
9/97 14300 12975 13028
12/97 14149 13083 12632
3/98 16107 14523 14163
6/98 15896 14211 13972
9/98 13906 12156 11446
12/98 18087 15583 14129
3/99 17451 14589 14081
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Mid-Cap Value Fund commenced operations on May 1, 1997.
3 The S&P Mid Cap 400 Index is an unmanaged capitalization-weighted index that
measures the performance of the mid-range sector of the U.S. stock market.
The Index reflects the reinvestment of income dividends and capital gains
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the Fund's
past or future performance.
4 The Lipper Mid Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which by prospectus or portfolio practice invests
primarily in companies with market capitalizations less than $5 billion at
the time of purchase. The performance figures are based on changes in net
asset value of the Funds in the category with all capital gains
distributions and income dividends reinvested. The Index is not intended to
imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- -------------------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- -------------------------------------------------------------------------------
PBHG Mid-Cap Value Fund 8.35% 33.69%
- -------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIECHART OMITTED, PLOT POINTS FOLLOW]
Basic Materials 1%
Consumer Cyclical 16%
Consumer Non-Cyclical 3%
Energy 7%
Financial 17%
Health Care 9%
Industrial 7%
Services 5%
Technology 14%
Transportation 3%
Utilities 8%
Cash 10%
% of Total Portfolio Investments
27 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG SMALL CAP VALUE FUND
Portfolio Profile
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk.
INVESTS IN: A diversified portfolio of common stocks of small companies with
market capitalizations similar to companies represented by the Russell 2000
Index, that are considered to be relatively undervalued based on certain
proprietary measures of value.
STRATEGY: The Fund typically invests in equity securities of companies with
between $57 million and $610 million in market capitalization. In selecting
investments for the Fund, Value Investors emphasizes fundamental investment
value and considers the following factors, among others, in identifying and
analyzing a security's fundamental value and capital appreciation potential: the
relationship of a company's potential earning power to the current price of its
stock; current dividend income and the potential for dividend growth; low
price/earnings ratio relative to either that company's historical results or the
current ratios for other similar companies; strong competitive advantages; and
potential for favorable business developments.
Performance
For the quarter ended March 31, 1999, the PBHG Small Cap Value Fund's total
return was -12.7% versus -5.4% for the Russell 2000 Index. For the fiscal year,
the Fund's total return was -20.9% versus -16.3% for the Russell 2000 Index.
The first quarter was another difficult quarter for investors who did not
own the largest capitalization stocks. While the large-cap oriented S&P 500
index returned 5.0% for the three months ended March 31, 1999, the small cap
sector of the market lagged badly. Given the -5.4% return of Russell 2000 Index,
the performance differential between large and small cap stocks amounted to an
unusually high quarterly gap of -10.4%!
It appears that investors' time frames have become increasingly short-term
oriented over the past ten years. No one today seems to have any patience for
equity investments that lack an obvious, immediate pay-off. Thus, virtually all
of the upside market action in the quarter and the fiscal year concentrated very
narrowly in two areas: (1) mega-cap S&P 500 companies whose share prices benefit
from the huge inflows into index funds; and (2) the stock of any company whose
current business trend has been linked in some fashion to the Internet. Though
we are certain that this highly focused, manic momentum cannot continue forever,
we are also chagrined that it has continued so much longer than we initially
expected.
Portfolio Highlights
The fiscal year just ended was an unusually poor year for small cap-stock
investors. Given the positive 18.5% return of the large-cap oriented S&P 500
Index for the twelve months ended March 31, 1999, the outperformance
differential versus the Russell 2000 Index was an almost unprecedented 34.7%.
Since the results of the businesses underlying each index are not that
different, over this period the relative valuation of small-cap stocks has been
radically compressed versus large-cap valuations. Consider this admittedly
simple example: both General Electric and Financial Security Assurance have
stable earnings growth rates of 12%-14%, yet GE trades at 34.1 times earnings
versus 12.6 times for FSA! While there are some differences in the respective
companies' mix of businesses, we would argue that the most telling reason for
GE's inflated valuation is its large size and membership in the S&P 500 Index.
We are not about to predict when or how the bizarre valuation differential
between large and small stocks will end, but we are confident it will close
eventually.
There have been no major changes in our investment strategy. We remain fully
invested and are concentrating our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Most of our top holdings have solid growth
prospects, yet are valued at less than 15 times this year's earnings. Perhaps
the most extreme example is Personnel Group of America, a quality provider of
temporary help services, which is valued by the stock market at less than 7
times this year's estimated earnings. For investors with an intermediate-to-long
term time horizon, this may be an excellent time to invest in small-cap stocks,
although we are somewhat concerned that relative valuations will not begin to
improve until the Federal Reserve begins its next round of easing monetary
policy.
[PILLAR LOGO OMITTED] 28
<PAGE>
THE PBHG FUNDS, INC.
PBHG SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG SMALL CAP VALUE FUND,
VERSUS THE RUSSELL 2000 INDEX AND THE LIPPER SMALL CAP FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG SMALL RUSSELL 2000 LIPPER SMALL
CAP VALUE FUND INDEX 3 CAP FUNDS AVERAGE 4
4/30/97 $10000 $10000 $10000
6/97 11800 11590 11791
9/97 14551 13314 13745
12/97 14539 12868 13064
3/98 16228 14163 14503
6/98 15098 13503 13907
9/98 11838 10782 10931
12/98 14703 12541 13027
3/99 12832 11861 12250
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Small Cap Value Fund commenced operations on May 1, 1997.
3 The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
securities in the Russell 3000 Index. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing.
4 The Lipper Small Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net assets value of the
Funds in the Index with all capital gains distributions and income dividends
reinvested.
Average Annual Total Return1
As of March 31, 1999
- -------------------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- -------------------------------------------------------------------------------
PBHG Small Cap Value Fund -20.93% 13.88%
- -------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Basic Materials 3%
Consumer Cyclical 22%
Consumer Non-Cyclical 3%
Energy 3%
Financial 26%
Health Care 8%
Industrial 5%
Services 5%
Technology 17%
Transportation 5%
Utilities 3%
% of Total Portfolio Investments
29 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG FOCUSED VALUE FUND
Portfolio Profile
OBJECTIVE: Above-average total return over a market cycle of three to five
years, consistent with reasonable risk, by investing in common stocks and other
equity securities of large, medium and small companies which are considered to
be relatively undervalued based on certain proprietary measures of value.
INVESTS IN: The Fund, a non-diversified portfolio, intends to invest a majority
of its assets in equity securities deemed to be undervalued. Use of our
disciplined approach may result in investment selections that are considerably
out of favor or contrary to the conventional investment consensus. The Fund may
invest in securities of companies that are considered financially sound based on
their operating history, but which may be experiencing temporary earnings
pressure due to adverse business conditions that may be company or industry
specific or due to unfavorable publicity.
STRATEGY: The Fund takes a unique approach to value investing. When screening
the universe of stocks, we discard the 25% most expensive stocks (as most value
investors would), but we also disregard the 25% of the universe that have the
poorest business fundamentals, regardless of valuation. Thus, while most value
investors love the cheapest stocks, we will only buy cheap stocks that have good
profit prospects. Using this unique approach, we always balance a potential
investment's valuation against its growth prospects.
Our goal is to produce market-beating returns by concentrating assets in the
most promising investment candidates we can identify. This concentrated approach
will likely produce investment returns that vary considerably from the S&P 500
Index. The impact of a change in value, positive or negative, of a single
holding may be magnified.
Performance
For the month ended March 31, 1999, the Fund's total return was 2.1% versus
4.0% for the S&P 500 Index. Since inception on February 12, 1999, the Fund's
total return was 1.4% versus 4.7% for the S&P 500 Index.
Investors' time frames have become increasingly short-term oriented. No one
today seems to have any patience for holding stocks that lack an obvious,
immediate pay-off. Thus, virtually all of the recent upside market action has
been concentrated narrowly in two areas: (1) mega-cap S&P 500 companies whose
share prices benefit from the huge inflows into index funds; and (2) the stock
of any company whose current business trend has been linked in some fashion to
the Internet. Though we are certain that this highly focused, manic momentum
cannot continue forever, we are also chagrined that it has continued so much
longer than we initially expected.
Portfolio Highlights
The twelve months ended March 31, 1999 presented a noxious witches' brew of
stock market dynamics. As measured by the Russell 1000 Growth and Value Index,
growth stocks returned 28.11% versus a mere 5.1% for value stocks. Furthermore,
over the same period, the large-cap oriented S&P 500 Index outperformed the
small-cap Russell 2000 Index by a whopping 34.7%. Clearly, value stocks and
small-cap stocks were a hostile place to invest over the past fiscal year.
We are confident that this will not always be the case, however. The strong
performance of large-cap growth stocks has dramatically outpaced the investment
value of the underlying businesses. As a result, by far the best opportunities
reside in the value and small-cap sectors of the market, where investor neglect
has created highly unusual discrepancies. Consider this simple example: a rough
rule of thumb notes that stocks generally trade at approximately 1 times their
growth rate -- so an earnings growth rate of 15% justifies a multiple of 15, 25%
growth justifies a 25 P/E, etc. While this heuristic still has utility for
small- and mid-cap stocks, large-cap stocks have levitated to ridiculous
valuations. General Electric has a stable earnings growth rate of 12%-14%, yet
its shares are valued at 34.1 times projected 1999 earnings per share! In
contrast, shares of Hartford Life (a leading life insurance company with a
stable growth rate of 14%-15%) are valued at only 16.5 times projected 1999
earnings per share. While there are some differences in the respective
companies' mix of businesses, we would argue that the most telling reason for
GE's inflated valuation is its large size and membership in the S&P 500 Index.
We are not about to predict when or how the bizarre valuation differential
between large and small stocks will end, but we feel certain it will close
eventually.
There have been no major changes in our investment strategy. We remain fully
invested and are focusing our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Most of our top holdings have solid growth
prospects, yet are valued at very reasonable multiples of this year's earnings.
Perhaps the most extreme example is Personnel Group of America, a quality
provider of temporary help services, which is valued by the stock market at less
than 7 times this year's estimated earnings. For investors with an
intermediate-to-long term time horizon, this is an excellent time to be
investing in value stocks in general and in small-cap value stocks in
particular.
[PILLAR LOGO OMITTED] 30
<PAGE>
THE PBHG FUNDS, INC.
PBHG FOCUSED VALUE FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE PBHG FOCUSED VALUE FUND, VERSUS THE S&P
500 INDEX AND THE LIPPER GROWTH & INCOME FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG S&P 500 LIPPER
FOCUSED COMPOSITE GROWTH & INCOME
VALUE FUND INDEX 3 AVERAGE 4
2/28/99 $10000 $10000 $10000
3/99 10205 10400 10327
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 Total return has not been annualized. The PBHG Focused Value Fund commenced
operations on February 12, 1999.
3 The S&P 500 Index is a capitalization-weighted index of 500 stocks. The
index is designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries. The Index is not intended to imply the Fund's past or
future performance.
4 The Lipper Growth & Income Funds Average is an equally weighted benchmark
composed of mutual funds, each of which combines growth of earnings with an
income requirement for level and/or rising dividends. The performance
figures are based on changes in net asset value of the funds in the category
with all capital gains distributions and income dividends reinvested. The
Index is not intended to imply the Fund's past or future performance.
Cumulative Total Return1
As of March 31, 1999
- --------------------------------------------------------------------------------
Cumulative Return
Inception to Date2
- --------------------------------------------------------------------------------
PBHG Focused Value Fund 1.36%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Basic Materials 1%
Consumer Cyclical 31%
Consumer Non-Cyclical 2%
Energy 8%
Financial 21%
Industrial 2%
Services 9%
Technology 16%
Transportation 3%
Cash 7%
% of Total Portfolio Investments
31 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG INTERNATIONAL FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Equity securities of non-U.S. companies.
STRATEGY: The Fund provides a diversified portfolio of equity securities of
non-U.S. issuers. Country selection is a significant part of the Fund's
investment process. The Fund will invest primarily in a diversified portfolio of
equity securities of non-U.S. issuers. Country selection is a significant part
of the investment process employed by Murray Johnstone International Limited,
the Fund's sub-adviser. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in securities of issuers in at least three
countries other than the United States. The Fund may invest more than 25% of its
total assets in the securities of issuers whose principal activities are in
specific countries or geographic regions, including emerging markets. The term
"emerging markets" applies to any country which is generally considered to be an
emerging or developing country by the international financial community.
Performance
For the twelve months ended March 31, 1999, the PBHG International Fund
returned 1.4% compared to its benchmark, the Morgan Stanley Capital
International Europe, Australia and Far East ("EAFE") Index, which returned 6.1%
and the F.T. S&P World Index, Non-U.S. return of 11.8%.
The past year was a volatile one for all markets, reaching a trough in
September and climbing steadily back in the second half. For the first six
months, the contagion from the emerging markets and the Far East spread to
Russia, which collapsed in August/September. Ultimately, it also spread to South
Africa and Latin America. The weakness in global markets turned around in
September, after the Federal Reserve Board lowered interest rates the first of
three times. Soon the dollar-sensitive markets in the Far East and Europe began
a steady recovery. Other regions took longer to turn around.
Throughout 1998, Europe remained a haven of safety. Initially, investors
believed that European corporations had little exposure to Asia or the emerging
markets, with the possible exception of Eastern Europe and Russia. At the same
time, a separate series of themes was driving Europe, the most important of
which was the move towards a single currency, the Euro. In the convergence
process, interest rates were coming down in the eleven participating countries,
eventually settling around 3%. In addition, company reporting was becoming more
transparent, highlighting the winners and losers across the region, leading to
an increase in merger and acquisition activity. The combination of these factors
led to very strong returns in Europe, making it one of the best performing
market areas in 1998. In 1999, many investors began to move assets out of Europe
and into Japan. This movement of assets, combined with lower growth rates in
many European economies, caused the Euro to weaken. Unfortunately, internal
squabbling within the European Commission also marred the most recent quarter.
As a result of these factors, Europe became the major underperforming region of
the international markets during the quarter ended March 31, 1999.
Japan also marked a turnaround in the second half of the past year. As a
result of yet another package of financial support measures for the banking
system, lower taxes and spending plans, sentiment improved. More importantly,
increasing numbers of corporations were announcing plans to restructure their
operations in an attempt to return to profitability. In the last quarter of
1998, the market made modest progress in local terms and the Yen rebounded
strongly as assets were repatriated to Japan. Consequently, the Japanese market
was one of the strongest, in dollar terms, for the quarter. Foreigners were
heavy buyers of Japan through the first quarter of 1999. Prior to this, many
were underweighted in the market and did not want to be left behind if it indeed
turned. Although the outlook for Japan is still poor, many believe that after
years of decline, the economy is close to turning the corner. During the first
quarter of 1999, the markets began to anticipate this potential turnaround. Due
to a combination of asset allocation and stock selection during the past year,
the Fund's return in the Japanese market was almost double the Index return at
29.4% versus 15.3%.
Although the collapse in Asia began with the emerging markets, as it
gathered pace investors were forced to realize profits wherever they existed. In
this phase, the mature markets of Hong Kong, Singapore, and to a lesser extent,
Australia and New Zealand also came under pressure. Prices contracted
significantly in September, following the collapse in Russia. The rebound
following the Fed's change of policy was equally dramatic. In the six months
ended March 31, 1999, the MSCI Hong Kong Index returned 39.3% in dollars, MSCI
Australia, 23.7%, MSCI New Zealand, 30.4% and MSCI Singapore, 54.7%. By
reinvesting in these markets in late September, the Fund's twelve-month return
in the South East Asian region was 14.2% versus the benchmark's -4.6%.
South Africa and Latin America proved to be the most troubled regions during
the year. Investors, now nervous of countries running large fiscal or trade
deficits, turned their attention to Latin America. Brazil was running a budget
deficit of over 9%. Many investors began to withdraw capital from the country,
thus putting pressure on the currency. In spite of government measures to stem
the outflow with higher interest rates and the introduction of a series of
higher tax measures, they could not turn the tide. In January 1999, the
government let the Real float. Although it collapsed approximately 60%, this
decision marked the turning point for the Brazilian equity market. In local
terms, it began a recovery. Not until March did it turn around in dollar terms.
When it did, the change was dramatic -- switching from a deficit of 26% in the
beginning of 1999, to a surplus of 6.8% by the end of March. As confidence
returned and interest rates were cut, recovery has continued and has been
reflected in Mexico and, to a lesser extent, in Chile. Although the emerging
markets represented the Fund's poorest performing segment in the past year, from
the beginning of 1999 Brazil and Mexico have rebounded strongly in dollar terms.
Investment Strategy
In early 1998 we became cautious about the markets of the Far East.
Consequently, we reduced their overweighted position to a market weight. As the
situation continued to deteriorate, we sold all of the Fund's holdings in Hong
Kong, Australia and New Zealand. By September, we believed that action on a
global scale was required to prevent a major financial calamity. We also
believed that some stability was coming into the currencies and current accounts
of markets in the Far East and that those markets were very cheap. In late
September 1998, we reinvested in Hong Kong, Singapore and New Zealand. Indeed,
interest rates were cut in late September and again on two more occasions before
the end of the year.
To finance the investments in Asia, we reduced exposure to Europe. This also
proved to be a correct decision, given that the European markets underperformed
the Asian markets after interest rates turned. During the second half of the
year, we also built up the Fund's assets in Japan. Again, this strategy proved
to be timely for the reasons noted above: the strength in the currency in the
period to December and strong market in the quarter ended March 1999.
Market Outlook for 1999
In our opinion, the key features for the remainder of 1999 will be the rate
of growth in the U.S. and the Federal Reserve's policy on interest rates. Also
important is whether growth in Europe begins to pick up and whether Japan can
indeed return to a growth path. At their last meeting, the Fed governors left
interest rates unchanged, satisfied that growth so far in 1999 was not
proceeding at the same pace as growth in late 1998. Forecasts early in the year
expected growth in the U.S. to moderate through this year. Recently, forecasts
were revised upward. Nevertheless, we believe that there is still no evidence of
inflation in the U.S., and thus, if the Fed decides to tighten rates it will
make only a small adjustment. This will be important for Europe where slower
growth has already led to lower rates. In Japan, we believe the combination of
progress from the government and restructuring from corporations can result in
an improvement in corporate profits and an improvement in the economy in
general. As a result, we expect the Japanese stock market to continue to
perform, even though domestic sales of stock, to unwind cross-holdings, will
continue. Finally, with stability in the U.S. and a continuation of low interest
rates, we believe that the outlook for the emerging markets will continue to
improve through the coming months.
[PILLAR LOGO OMITTED] 32
<PAGE>
THE PBHG FUNDS, INC.
PBHG INTERNATIONAL FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN THE PBHG
INTERNATIONAL FUND, VERSUS THE MSCI EAFE INDEX, AND THE F.T.
S&P WORLD INDEX, NON-U.S., IN U.S. DOLLARS
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PILGRIM BAXTER MORGAN STANLEY F. T. S&P
INTERNATIONAL MSCI EAFE WORLD INDEX,
EQUITY FUND INDEX 3 NON-U.S. 4
6/30/94 $10000 $10000 $10000
3/95 9203 10094 10007
3/96 10634 11339 11274
3/97 11350 11504 11466
3/98 13332 13645 13438
3/99 13521 14472 15024
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG International Fund commenced operations on June 15, 1994.
3 The MSCI EAFE Index is the Morgan Stanley Capital International Index for
Europe, Australia and the Far East developed markets. It includes 60% of the
largest publicly traded companies in those regions by market capitalization
and is sector weighted. The index reflects the reinvestment of income
dividends and capital gain distributions, if any, but does not reflect fees,
brokerage commissions, or other expenses of investing. The Index is not
intended to imply the Fund's past or future performance.
4 The F.T. S&P World Index, Non-U.S., in U.S. Dollars consists of the largest
international companies which have been selected based on market
capitalization, ability to be purchased by international investors and the
degree to which the companies reflect the weightings of industries within
their respective countries. The returns of the Index reflect the
reinvestment of income dividends and capital gains distributions. The Index
is not intended to imply the Fund's past or future performance.
Average Annual Total Return1
As of March 31, 1999
- -------------------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception
Return Return to Date2
- -------------------------------------------------------------------------------
PBHG International Fund 1.42% 8.33% 6.41%
- -------------------------------------------------------------------------------
Country Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Argentina 2%
Australia 2%
Brazil 2%
Chile 1%
France 10%
Germany 11%
Hong Kong 2%
Ireland 2%
Italy 9%
Japan 23%
Mexico 2%
Netherlands 5%
New Zealand 2%
Portugal 1%
Singapore 2%
Spain 2%
Switzerland 2%
United Kingdom 20%
% of Total Portfolio Investments
33 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG CASH RESERVES FUND
Portfolio Profile
OBJECTIVE: Preserve principal value & maintain a high degree of liquidity while
providing current income.
INVESTS IN: Money market securities.
STRATEGY: The Fund's strategy is to be fully invested in a diversified
portfolio of short-term, high-quality money market securities.
Performance
For the 12 months ended March 31, 1999, the PBHG Cash Reserves Fund returned
4.8% compared to 4.7% for the Lipper Money Market Funds Average.
Market Highlights
The U.S. enjoyed yet another year of strong economic growth as consumer
spending and business investment both remained at high levels. Notwithstanding
this economic strength, inflation remained well under control and bond yields
fell considerably over the course of the year. The U.S. bond market's role as a
safe haven was highlighted on several occasions during the year as credit
concerns in a variety of markets kept demand for U.S. Treasury securities high.
This was especially true in the third calendar quarter of 1998, when what
started as a flight to quality became a stampeding rush to liquidity. Financial
turmoil in several emerging markets spread quickly to the developed markets as a
number of high-profile investment funds were forced to unwind massive amounts of
leverage. The Federal Reserve acted rapidly to defuse a potential crisis.
Through three rate cuts between September and the end of November, it lowered
interest rates to 4.75%. The Fed also informally arranged a `work out' of the
most leveraged hedge fund. By the end of the year, it was apparent that the
corrective action had the intended effect, and U.S. bond market investors
entered 1999 much as they had 1998 -- wondering when the juggernaut U.S. economy
would show signs of slowing.
The money markets were not immune from market upheaval. Even liquidity at
the short end of the yield curve became difficult. Spreads widened as brokerage
houses, already experiencing mounting capital losses, became less able (or
willing) to provide normal levels of liquidity. Some firms had the added burden
of having to deny recurrent rumors of their own demise. Yields followed the Fed
moves down. Nevertheless, asset flows into money market portfolios continued to
be heavy, topping out at a record $1.3 trillion in assets for 1998. Asset-backed
commercial paper continued its rapid growth within the money market universe and
now accounts for one-third of the commercial paper outstanding.
The strong economic growth evident at year-end and into 1999 will keep the
Federal Reserve on hold as we move forward. We believe the domestic economy will
slow in coming months if, as we expect, consumer spending, which propelled
growth last year, slows from its robust pace. In our opinion, Asia's ongoing
malaise, combined with Latin America's weakness, will continue to depress an
already struggling manufacturing sector. We believe that falling import and
commodity prices will help keep inflation at low levels.
Portfolio Highlights
The key to relative outperformance in money market investing often lies in
having the conviction to make decisions away from consensus opinion.
Unfortunately, even if these decisions are right, the differences in performance
are often so small they remain virtually unnoticed. In addition, these decisions
must be made within very tight constraints in order to maintain the level of
conservatism shareholders expect from the PBHG Cash Reserves Fund, and provide
the level of liquidity that the Fund requires.
Early in the past year, many market participants thought that the Federal
Reserve would raise short-term interest rates. We thought otherwise and, thus,
invested in securities with longer maturities than the average money market
fund. This turned out to be a crucial decision. The key to outperformance in the
last twelve months was to have a longer average maturity before the market began
to price in the possibility of rate cuts by the Fed in late summer. By the end
of July, the PBHG Cash Reserves Fund had an average maturity of 79 days. The
maximum average maturity a money-market fund can have is 90 days. The advantage
of buying securities with longer maturities is locking-in a given yield for a
longer period of time. As securities mature in a money market fund, the
portfolio manager must reinvest the cash. If interest rates fall, cash must be
reinvested at lower yields. In a falling interest rate environment, the best
strategy is to put off, for as long as possible, this reinvestment at lower
yields. This is exactly how the PBHG Cash Reserves Fund outperformed its
competitor average.
[PILLAR LOGO OMITTED] 34
<PAGE>
THE PBHG FUNDS, INC.
PBHG CASH RESERVES FUND
COMPARISON OF TOTAL RETURN, AS OF MARCH 31,
1999 FOR THE PBHG CASH RESERVES
FUND, VERSUS THE LIPPER MONEY
MARKET FUNDS AVERAGE1
[BAR GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG CASH RESERVES FUND LIPPER MONEY MARKET FUNDS AVERAGE
ONE YEAR 4.84% 4.70%
1 Performance is historical and not indicative of future results.
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Certificates of Deposit 7%
Commercial Paper 68%
Corporate Obligations 2%
Cash 23%
% of Total Portfolio Investments
35 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG TECHNOLOGY & COMMUNICATIONS FUND
Portfolio Profile
OBJECTIVE: Long-term capital appreciation.
INVESTS IN: Companies whose products or services are based on or delivered with
technology. Also invests in companies that link businesses, consumers and other
entities through communications technology.
STRATEGY: The Fund's strategy is to be invested in technology and related
companies exhibiting extraordinary rates of growth in earnings and revenue. As
of year-end March 31, 1999, the funds 38 holdings ranged from $686 million to
$461 billion in market capitalization. At year-end, the average holding had a
market capitalization of $36.1 billion. For comparison purposes, the average
holding as of year-end March 31, 1998 had an average market capitalization of
$1.81 billion. Most of the increase in average market capitalization began in
May of 1998, as the new portfolio managers moved to increase portfolio exposure
to several larger companies in order to better diversify the Fund's holdings
within the various sub-sectors of the technology group. These moves increased
the Fund's exposure in the recovering semi-conductor and semi-conductor
capital-equipment sectors and reduced exposure in enterprise software, where
fundamentals continued to deteriorate. The move from a predominately small-cap
focus also allowed the fund to benefit from the strong growth trends occurring
in areas such as fiber optics, data networking and the Internet.
Performance
The Technology & Communications Fund returned 45.3% compared with the 43.8%
return of the Pacific Stock Exchange (PSE) High Technology Index and the 36.6%
return of the Soundview Technology Index for the year ended March 31, 1999. We
are pleased with this performance, given that larger capitalization stocks
continued to outperform smaller equities during the past twelve months. For the
twelve months ended March 31, 1999, the S&P 500 Index, an index of large
capitalization stocks was up 18.5%, while the Russell 2000, an index of small
capitalization stocks was down -11.0%.
As one might expect, the theme of small-cap under-performance carried over
into the technology sector. As noted above, the Soundview Technology Index,
which has an average market capitalization that is less than half of the PSE
Index, under-performed over the last twelve months.
Portfolio Highlights
In early fall of 1998, we began to shift our emphasis away from software
companies, which then represented approximately 30% of the portfolio. At that
time, we anticipated that firms would become increasingly reluctant to purchase
and implement new software, preferring instead to focus on addressing Y2K issues
and implementing Y2K compliant software purchased in 1998. As of March 31, 1999,
software companies represent just under 10% of the portfolio. We are pleased to
report that the software stocks held in the portfolio through the first quarter
performed well, despite the poor performance of the sub-sector in general. At
the end of last year, we began to increase the portfolio's exposure to Internet
service providers, a sub-sector that has performed well this quarter. At the
beginning of 1999, we increased the portfolio's weighting in semiconductor
companies and semiconductor capital equipment companies. Recently these
companies have rallied strongly, breaking a three-year cycle of disappointing
performance. The Fund's returns for the first quarter of 1999 benefited from the
strength of this rebound.
The business outlook for technology firms can change quickly. We believe
that investment managers need to be able to react quickly to, as well as
anticipate, the changing landscape of this sector. At no time is this more
likely to be true than in 1999, when Year 2000 issues will cause more
opportunities and more disappointments than in a typical year. Fortunately, the
Fund is small enough, in terms of assets under management, to be actively
managed.
At the start of 1999, we had minimal exposure to the high flying Internet
"portal" companies, preferring instead to focus on firms providing access,
services and bandwidth to the Internet. This included the Internet service
providers (ISPs) and the facilities-based, high-speed telecom service providers.
Both groups performed very well in the first quarter.
During the first three months of 1999, Internet stocks have been, by far,
the best performing group. While many of these companies are doing well
fundamentally, most are not making money and carry extremely high valuations
that are unprecedented in the market. That is not to say the stocks should go
down. What it does mean is that this group of stocks will likely be very
volatile and can ill afford to have any disappointment regarding their
fundamentals. Nevertheless, there are some compelling dynamics working for this
industry that will likely continue, including massive consolidations, tremendous
traffic growth and growing e-commerce initiatives. For all of these reasons, we
enter the next fiscal year with a significant weighting (approximately 21%) in
Internet companies. The fund also owns an even greater number of companies that
benefit from the growth of the Internet. Although the fund has lagged pure-play
Internet funds year-to-date, we believe shareholders wanting broader exposure to
the technology world, without the extreme volatility inherent in Internet
stocks, are well served with this strategy.
As we have already noted, the Technology & Communications Fund began the
fiscal year as a small-cap focused fund. Despite the restructuring that occurred
during 1998, the holdings in the Technology & Communications fund remain, on
average, significantly smaller than the average stock in the PSE index. We are
pleased that we were able to restructure the fund and out-perform the PSE, while
maintaining our exposure to many exciting small and mid-cap companies.
As we move forward, we will compare our performance with the Soundview
Technology Index, as this index more accurately reflects the all capitalization
strategy in the PBHG Technology & Communications Fund. While we believe that our
diversification with regard to market capitalization and the technology sector
increased returns and reduced risk, we remain dedicated to maintaining a
relevant exposure to companies of all sizes. Therefore, we expect that the
portfolio will be well positioned when relative performance improves in the
small-cap area.
[PILLAR LOGO OMITTED] 36
<PAGE>
THE PBHG FUNDS, INC.
PBHG TECHNOLOGY & COMMUNICATIONS FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE PBHG TECHNOLOGY & COMMUNICATIONS FUND,
VERSUS THE SOUNDVIEW TECHNOLOGY INDEX, THE PACIFIC STOCK EXCHANGE
HIGH TECHNOLOGY INDEX AND THE LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG PACIFIC STOCK LIPPER SCIENCE
TECHNOLOGY SOUNDVIEW EXCHANGE & TECHNOLOGY
& COMMUNICATION TECHNOLOGY HIGH TECHNOLOGY FUNDS
FUND INDEX 3 INDEX 4 AVERAGE 5
9/30/95 $10000 $10000 $10000 $10000
3/96 12481 10833 9898 9502
9/96 16641 13470 10944 10804
3/97 14926 12990 11953 10366
9/97 22414 18558 16636 14621
3/98 20641 17429 17148 14853
9/98 17995 15451 15879 13732
3/99 29997 23796 24722 22817
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Technology & Communications Fund commenced operations on October 2,
1995.
3 The Soundview Technology Index is an equal dollar weighted index designed to
measure the performance of the technology industry. It is comprised of 100
major technology companies chosen by Soundview Financial Group. The Index
reflects the reinvestment of income dividends and capital gain
distributions, if any, but does not reflect fees, brokerage commissions, or
other expenses of investing. The Index is not intended to imply the Fund's
past or future performance.
4 The Pacific Stock Exchange High Technology Index is a price-weighted index
of the top 100 U.S. technology stocks. The Index reflects the reinvestment
of income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Fund's past or future performance.
5 The Lipper Science & Technology Funds Average is an equally weighted
benchmark composed of mutual funds, each of which normally invests more than
65% of its equity portfolio in science and technology stocks. The
performance figures are based on changes in net asset value of the funds in
the category with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Fund's past or future
performance.
Average Annual Total Return1
As of March 31, 1999
- --------------------------------------------------------------------------------
Annualized Annualized
One Year 3 Year Inception
Return Return to Date2
- --------------------------------------------------------------------------------
PBHG Technology & Communications Fund 45.33% 33.95% 36.82%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Consumer Cyclical 2%
Industrial 9%
Services 3%
Technology 80%
Cash 6%
% of Total Portfolio Investments
37 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
PBHG STRATEGIC SMALL COMPANY FUND
Portfolio Profile
OBJECTIVE: Growth of capital.
INVESTS IN: Equity securities of small companies having a market capitalization
or annual revenues of up to $750 million.
STRATEGY: The Fund invests in companies poised for rapid and dynamic growth
("growth companies") and companies that are undervalued or overlooked by the
market ("value securities") in a proportion that depends on the Advisers' view
of current economic or market conditions and their long-term investment outlook.
Performance
For the fiscal year ended March 31, 1999, the fund's total return was -14.5%
versus the Russell 2000 Index return of -16.3%, the Russell 2000 Growth Index
return of -11.0%, and the Morningstar Median Return of Small Blend funds of
- -21.2%. The total return for the growth portion of the Fund's portfolio, at
- -3.9% contributed to the strong relative performance of the fund versus the
indices, and this pattern of growth significantly outperforming value continued
during the March quarter. After enduring a very difficult environment for small
company investing in the summer, provoked largely by concerns over the apparent
collapse of Asian and South American economies, the Fund recovered strongly in
the December quarter as investors again recalibrated their thoughts on required
risk premiums in small cap equities.
The Fund is structured to allow its assets to be proactively allocated
between the growth style employed by Pilgrim Baxter & Associates, Ltd. and the
value style utilized by Pilgrim Baxter Value Investors, Inc. Since inception,
the Fund has maintained a neutral allocation (approximately 50/50) with
adjustments for market movements made with the flow of funds into and out the
Fund. At March 31, 1999 the split of assets was 47% growth and 53% value. The
juxtaposition of two distinct styles of small company investing in one product
is intended to provide some moderating impact during difficult stock market
environments, while permitting the achievement of competitive long term returns.
The performance achieved by the Fund in fiscal 1999 is consistent with this
view.
Portfolio Highlights --Growth
Looking first at the growth portion of the Fund, technology exposure has
been significantly increased versus a year ago, equaling 54% of assets at March
31, 1999. Our systematic bottoms-up approach to identifying positive earnings
dynamics has pushed the Fund toward technology, because this is where we find
the greatest raw material with the features we prize -- rapid growth combined
with better than expected earnings performance. Indeed, in technology, there are
more quality companies to choose from and, on average, these companies have
yielded larger positive earnings surprises than observed elsewhere. Key
technology holdings such as RF Micro Devices, Network Appliance, and New Era of
Networks continue their outstanding fundamental performance; Geotel, a top
holding is under contract to be acquired by Cisco at a substantial premium.
Other important sector exposures for the growth portion of the portfolio include
Business Services (10%), Health Care (10%), and Consumer (14%).
When one considers that the average latest 12 months earning growth rate
across all companies in the growth portion of the Fund is 78%, one should not be
surprised that occasional unexpected earnings disappointments will cause
significant price declines and loss realizations on individual securities. The
Fund attempts to control issuer risk by avoiding large positions, and more
importantly, by quickly reacting to deteriorating fundamentals. Recent
eliminations by reason of deteriorating earnings include Sykes, Quadramed, Symer
and Wind River.
While the speculative behavior of Internet stocks was on everyone's mind in
early calendar 1999, the lack of earnings, the inflated market values, and the
generally immature and untested nature of issuers' business models have caused
the Fund to deliberately reject direct participation in these names. While this
earnings based discipline has resulted in the sacrifice of some near term
investment performance, we are comfortable that indirect exposure to the growth
of the Internet is more prudent and appropriate at this time. Hence, the Fund
has chosen to focus on highly profitable companies for whom Internet initiatives
represent a source of incremental earnings power on top of already strong
fundamentals. Examples of this strategy include Insite Enterprises, a
telemarketer of personal computers and related accessories, for whom a new and
robust web site has accelerated the company growth rate; and Pegasus Systems,
which offers hotel and travel agent data processing services, and which recently
has introduced an exciting new product accommodating room reservations over the
internet.
1999 has commenced with significant continuing headwinds for small cap
investing, despite the upside penetration by the Dow Jones Industrial Average of
the historic 10,000 level. The initial Federal Reserve interest rate cuts in the
fourth quarter of 1998 in response to international financial crises has not
been reinforced with additional cuts in 1999. This break from the historical
pattern of more sustained and deeper easing after an initial Federal Reserve
action has put small cap stocks at a temporary disadvantage. Nevertheless, we
remain optimistic for 1999, as our best portfolio companies continue to produce
impressive earnings growth while maintaining strong control of their business
models.
Portfolio Highlights --Value
Our fundamental long-term view of the small-cap value market is also quite
favorable. Despite the strong performance of large-cap stocks over the past
twelve months, small-cap stocks have lagged badly. Given the POSITIVE 18.5%
return of the large-cap oriented S&P 500 Index for the twelve months ended March
31, 1999, the outperformance differential versus the Russell 2000 was an almost
unprecedented 34.7%. Much of the difference can be attributed to strong
performance of the very large "mega-cap" stocks, whose heavy weighting in the
S&P 500 Index attracts steady investment flows from passive index fund buyers.
Though we are confident that this highly focused, large-cap momentum cannot
continue forever, we are also chagrined that it has continued so much longer
than we initially expected.
Since the results of the businesses underlying each index are not that
different, over this period the relative valuation of small-cap stocks has been
radically compressed versus large-cap valuations. Consider this admittedly
simple example: both General Electric and Financial Security Assurance have
stable earnings growth rates of 12%-14%, yet GE trades at 34.1 times earnings
versus 12.6 times for FSA! While there are some differences in the respective
companies' mix of businesses, we would argue that the most telling reason for
GE's inflated valuation is its large size and membership in the S&P 500 Index.
We are not about to predict when or how the bizarre valuation differential
between large and small stocks will end, but are confident it will close
eventually.
There have been no major changes in our investment strategy. We remain fully
invested and are concentrating our attention on identifying stocks that offer an
attractive trade-off between valuation, growth prospects and the business
fundamentals of the enterprise. Most of our top holdings have solid growth
prospects, yet are valued at less than 15 times this year's earnings. Perhaps
the most extreme example is Personnel Group of America, a quality provider of
temporary help services, which is valued by the stock market at less than 7
times this year's estimated earnings. For investors with an intermediate-to-long
term time horizon, this may be an excellent time to invest in small-cap stocks,
although we are somewhat concerned that relative valuations will not begin to
improved until the Federal Reserve begins its next round of easing monetary
policy.
[PILLAR LOGO OMITTED] 38
<PAGE>
THE PBHG FUNDS, INC.
PBHG STRATEGIC SMALL COMPANY FUND
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN
THE PBHG STRATEGIC SMALL COMPANY FUND, VERSUS THE RUSSELL 2000
INDEX, THE RUSSELL 2000 GROWTH INDEX AND THE LIPPER SMALL CAP
FUNDS AVERAGE
[LINE GRAPH OMITTED, PLOT POINTS FOLLOW]
PBHG RUSSELL RUSSELL LIPPER SMALL
STRATEGIC SMALL 2000 2000 CAP FUNDS
COMPANY FUND INDEX 3 GROWTH INDEX 4 AVERAGE 5
12/31/96 $10000 $10000 $10000 $10000
3/97 8860 9482 8951 9353
6/97 11130 11019 10522 10952
9/97 13439 12659 12302 12768
12/97 12566 12235 11295 12135
3/98 13869 13466 12636 13472
6/98 13071 12838 11911 12918
9/98 10002 10252 9248 10154
12/98 12833 11924 11434 12100
3/99 11855 11277 11242 11379
1 Performance is historical and not indicative of future results. The
investment return and principal value of an investment will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
2 The PBHG Strategic Small Company Fund commenced operations on January 2,
1997.
3 The Russell 2000 Index is an unmanaged index comprised of the 2,000 smallest
securities in the Russell 3000 Index. The Index reflects the reinvestment of
income dividends and capital gains distributions, if any, but does not
reflect fees, brokerage commissions, or other expenses of investing. The
Index is not intended to imply the Fund's past or future performance.
4 The Russell 2000 Growth Index is an unmanaged index comprised of those
securities in the Russell 2000 Index with a greater-than-average growth
orientation. The Index reflects the reinvestment of income dividends and
capital gains distributions, if any, but does not reflect fees, brokerage
commissions, or other expenses of investing. The Index is not intended to
imply the Fund's past or future performance.
5 The Lipper Small Cap Funds Average is an equally weighted benchmark composed
of mutual funds, each of which limits its investments, by prospectus or
portfolio practice, to companies on the basis of the size of the company.
The performance figures are based on changes in net asset value of the Funds
in the category with all capital gains distributions and income dividends
reinvested. The Index is not intended to imply the Fund's past or future
performance.
Average Annual Total Return1
As of March 31, 1999
- --------------------------------------------------------------------------------
Annualized
One Year Inception
Return to Date2
- --------------------------------------------------------------------------------
PBHG Strategic Small Company Fund -14.52% 7.87%
- --------------------------------------------------------------------------------
Sector Weightings
at March 31, 1999
[PIE CHART OMITTED, PLOT POINTS FOLLOW]
Basic Materials 2%
Consumer Cyclical 20%
Consumer Non-Cyclical 1%
Energy 2%
Financial 11%
Health Care 8%
Industrial 8%
Services 8%
Technology 34%
Transportation 3%
Utilities 2%
Cash 1%
% of Total Portfolio Investments
[PILLAR LOGO OMITTED] 39
<PAGE>
THE PBHG FUNDS, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF THE PBHG FUNDS, INC.:
In our opinion, the accompanying statements of net assets for the PBHG Growth
Fund, PBHG Emerging Growth Fund, PBHG Large Cap Growth Fund, PBHG Select Equity
Fund, PBHG Core Growth Fund, PBHG Limited Fund, PBHG Large Cap 20 Fund, and PBHG
Strategic Small Company Fund, and the statements of assets and liabilities,
including the schedules of investments, for the 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, and
PBHG Technology & Communications Fund of The PBHG Funds, Inc. (the "Fund"), and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of each Fund at March 31, 1999, the results of its operations for the
year (or period) then ended, the changes in its net assets for each of the two
years (or periods) in the period then ended, and the financial highlights for
each of the periods presented commencing April 1, 1996, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at March 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above. The financial highlights of the Fund for the fiscal
periods presented prior to the year ended March 31, 1997 were audited by other
independent accountants whose report dated April 29, 1996 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 29, 1999
40 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 99.1%
CONSUMER CYCLICAL -- 10.1%
AUDIO/VIDEO PRODUCTS -- 3.1%
Gemstar International Group* 1,217,600 $ 91,624
Polycom* 636,900 11,942
----------
103,566
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 1.1%
Aviation Sales* 283,400 12,611
Insight Enterprises* 925,350 22,902
----------
35,513
- --------------------------------------------------------------------------------
PRINTING-COMMERCIAL -- 0.9%
Consolidated Graphics* 491,300 28,372
----------
28,372
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.1%
American Eagle Outfitters* 512,300 36,726
----------
36,726
- --------------------------------------------------------------------------------
RETAIL-AUTO PARTS -- 0.7%
O'Reilly Automotive* 535,100 23,946
----------
23,946
- --------------------------------------------------------------------------------
RETAIL-BEDDING -- 1.4%
Linens `N Things* 1,008,900 45,779
----------
45,779
- --------------------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.4%
MSC Industrial Direct, Cl A* 680,900 11,575
----------
11,575
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.8%
Dollar Tree Stores* 898,800 27,807
----------
27,807
- --------------------------------------------------------------------------------
RETAIL-VARIETY STORE -- 0.6%
99 Cents Only Stores* 441,400 18,732
----------
18,732
----------
TOTAL CONSUMER CYCLICAL (COST $224,083) 332,016
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 0.7%
FOOD-MISCELLANEOUS/DIVERSIFIED -- 0.7%
American Italian Pasta, Cl A*+ 978,500 24,463
----------
24,463
----------
TOTAL CONSUMER NON-CYCLICAL (COST $31,678) 24,463
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 1.6%
PROPERTY/CASUALTY INSURANCE -- 1.0%
Mutual Risk Management Limited 891,400 34,096
----------
34,096
- --------------------------------------------------------------------------------
S&L/THRIFTS-SOUTHERN US -- 0.6%
Net.Bank* 265,800 18,074
----------
18,074
----------
TOTAL FINANCIAL (COST $40,989) 52,170
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HEALTH CARE -- 11.5%
DIALYSIS CENTERS -- 0.9%
Renal Care Group* 1,499,700 $ 29,431
----------
29,431
- --------------------------------------------------------------------------------
HEALTH CARE COST CONTAINMENT -- 0.5%
Medquist* 508,700 15,261
----------
15,261
- --------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 1.3%
Dendrite International* 529,700 11,819
Medical Manager*+ 1,290,000 29,831
----------
41,650
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.2%
Minimed* 378,900 38,506
----------
38,506
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.5%
King Pharmaceuticals* 563,100 15,626
Medicis Pharmaceutical, Cl A* 987,400 29,622
Pathogenesis* 323,000 4,300
----------
49,548
- --------------------------------------------------------------------------------
MEDICAL-HMO -- 3.5%
Express Scripts, Cl A*+ 1,365,200 117,322
----------
117,322
- --------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 0.4%
Province Healthcare* 679,200 12,565
----------
12,565
- --------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 1.0%
Res-Care*+ 1,457,050 32,875
----------
32,875
- --------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 0.5%
Resmed* 590,200 16,673
----------
16,673
- --------------------------------------------------------------------------------
THERAPEUTICS -- 0.7%
Biomatrix* 307,600 23,993
----------
23,993
----------
TOTAL HEALTH CARE (COST $301,972) 377,824
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 9.4%
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 3.4%
Flextronics International* 1,484,200 75,694
Gentex* 1,772,600 38,222
----------
113,916
- --------------------------------------------------------------------------------
INSTRUMENTS-CONTROLS -- 1.5%
Microchip Technology* 1,395,100 48,305
----------
48,305
- --------------------------------------------------------------------------------
41 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 2.6%
Waters* 824,051 $ 86,577
----------
86,577
- --------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 1.4%
Uniphase* 388,900 44,772
----------
44,772
- --------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.5%
US Liquids*+ 802,100 17,245
----------
17,245
----------
TOTAL INDUSTRIAL (COST $158,099) 310,815
----------
- --------------------------------------------------------------------------------
SERVICES -- 16.2%
ADVERTISING SALES -- 1.9%
Lamar Advertising, Cl A* 1,857,200 63,029
----------
63,029
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 1.3%
Lason* 431,900 24,294
Prepaid Legal Services* 819,300 20,073
----------
44,367
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES-FINANCE -- 3.3%
Century Business Services* 1,055,300 11,542
Concord EFS* 1,813,637 49,988
NCO Group* 599,800 22,193
Profit Recovery Group* 610,800 24,127
----------
107,850
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 2.3%
Complete Business Solutions* 875,400 17,180
Sapient* 449,600 32,090
Whittman-Hart* 1,197,000 25,735
----------
75,005
- --------------------------------------------------------------------------------
CONSULTING SERVICES -- 2.2%
Metzler Group* 1,014,850 31,841
USWeb* 973,100 40,140
----------
71,981
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 1.4%
United Rentals* 1,674,800 47,732
----------
47,732
- --------------------------------------------------------------------------------
SCHOOLS -- 3.8%
Apollo Group, Cl A* 1,831,700 54,722
Devry* 1,531,100 44,402
Sylvan Learning Systems* 874,800 23,948
----------
123,072
----------
TOTAL SERVICES (COST $410,154) 533,036
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TECHNOLOGY -- 49.6%
APPLICATIONS SOFTWARE -- 9.9%
Citrix Systems* 1,935,700 $ 73,798
Genesys Telecommunications
Laboratories* 898,400 13,532
Great Plains Software* 296,300 11,463
I2 Technologies* 127,700 3,396
Iona Technologies ADR* 551,100 16,740
New Era of Networks* 609,900 41,321
Peregrine Systems* 1,567,200 52,697
Progress Software*+ 1,032,000 35,217
Siebel Systems* 1,398,100 66,410
Software AG Systems* 1,373,100 11,500
----------
326,074
- --------------------------------------------------------------------------------
CIRCUITS -- 2.4%
Micrel* 466,900 23,374
Vitesse Semiconductor* 1,070,200 54,179
----------
77,553
- --------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 0.3%
AVT* 398,300 9,509
----------
9,509
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 2.1%
Axent Technologies* 570,300 13,723
Check Point Software Technologies* 1,324,600 56,958
----------
70,681
- --------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 1.1%
Engineering Animation*+ 833,400 35,107
----------
35,107
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 6.1%
Aspect Development*+ 1,654,800 38,474
Bindview Development* 575,300 17,906
Business Objects ADR* 782,100 23,219
Mercury Interactive* 1,766,800 62,942
Micromuse*+ 898,100 41,313
Microstrategy*+ 878,400 16,909
----------
200,763
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.7%
Henry (Jack) & Associates 481,200 17,684
Maxwell Technologies* 281,600 6,583
----------
24,267
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.8%
Veritas Software* 1,126,843 90,993
----------
90,993
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.6%
Best Software* 202,300 2,731
Fundtech Limited*+ 675,300 20,343
Tsi International Software Limited* 589,000 28,751
----------
51,825
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 42
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 0.9%
Advantage Learning Systems* 705,000 $ 21,899
CBT Group ADR* 602,600 6,892
----------
28,791
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 4.1%
Applied Micro Circuits* 846,700 36,196
Artisan Components*+ 741,300 3,846
Mips Technologies* 471,400 28,755
Qlogic* 521,800 35,026
SDL* 126,700 11,498
Transwitch* 451,400 20,426
----------
135,747
- --------------------------------------------------------------------------------
FIBER OPTICS -- 0.7%
E-Tek Dynamics* 630,400 22,616
----------
22,616
- --------------------------------------------------------------------------------
INTERNET CONTENT -- 4.0%
Critical Path* 69,000 5,313
Infospace.com* 141,800 12,567
Network Solutions, Cl A*+ 1,086,800 114,929
----------
132,809
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 2.6%
Broadvision* 639,500 38,210
Mindspring Enterprises* 549,700 47,309
----------
85,519
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 0.6%
Concord Communications* 359,300 20,480
----------
20,480
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 2.7%
FVC.com* 680,100 8,671
International Network Services* 798,800 55,866
Visual Networks* 661,900 24,739
----------
89,276
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 1.4%
Electronics For Imaging* 701,700 27,366
Xeikon ADR* 660,500 18,081
----------
45,447
- --------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 1.5%
Gilat Satellite Networks Limited* 844,300 50,658
----------
50,658
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.8%
Excel Switching* 1,587,500 33,338
Geotel Communications* 1,302,200 59,738
----------
93,076
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.3%
RF Micro Devices* 462,500 $ 44,255
----------
44,255
----------
TOTAL TECHNOLOGY (COST $1,072,319) 1,635,446
----------
TOTAL COMMON STOCK (COST $2,239,294) $3,265,770
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.7%
J.P. Morgan
4.94%, dated 03/31/99,
matures 04/01/99, repurchase price
$34,346,920 (collateralized by U.S.
Government Agency Instruments:
total market value $35,029,663) (A)$34,342 34,342
Barclays
4.94%, dated 03/31/99,
matures 04/01/99, repurchase price
$55,065,278 (collateralized by U.S.
Government Agency Instruments:
total market value $56,159,062) (A) 55,059 55,059
----------
TOTAL REPURCHASE AGREEMENTS (COST $89,401) 89,401
----------
TOTAL INVESTMENTS-- 101.8% (COST $2,328,695) 3,355,171
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.8%)
Payable for securities purchased (45,589)
Other assets and liabilities (14,607)
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (60,196)
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 131,746,770
outstanding shares of common stock 2,500,029
Fund Shares of Advisor Class (authorized 200 million
shares -- $0.001 par value) based on 2,720,366
outstanding shares of common stock 63,931
Accumulated net realized loss on investments (295,461)
Net unrealized appreciation on investments 1,026,476
----------
TOTAL NET ASSETS-- 100.0% $3,294,975
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- PBHG CLASS $24.51
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE-- ADVISOR CLASS $24.35
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
+ -- Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. The total market value of
investments in affiliated companies as of March 31, 1999 was $527,873,348.
The accompanying notes are an integral part of the financial statements.
43 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG EMERGING GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 92.9%
CONSUMER CYCLICAL -- 17.1%
APPAREL MANUFACTURERS -- 0.8%
Tarrant Apparel Group* 139,900 $ 5,876
----------
5,876
- --------------------------------------------------------------------------------
AUDIO/VIDEO PRODUCTS -- 2.0%
Polycom* 783,100 14,683
----------
14,683
- --------------------------------------------------------------------------------
COLLECTIBLES -- 2.3%
Action Performance* 576,000 17,352
----------
17,352
- --------------------------------------------------------------------------------
PRINTING-COMMERCIAL -- 1.3%
Consolidated Graphics* 162,600 9,390
----------
9,390
- --------------------------------------------------------------------------------
RADIO -- 1.6%
Citadel Communications* 346,300 11,514
----------
11,514
- --------------------------------------------------------------------------------
RECREATIONAL CENTERS -- 0.4%
Sports Club* 569,900 2,885
----------
2,885
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.3%
American Eagle Outfitters* 40,000 2,867
Bebe Stores* 42,500 1,743
Children's Place* 100,100 2,696
Pacific Sunwear of California* 58,300 2,026
----------
9,332
- --------------------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.4%
Delia's* 95,800 3,018
----------
3,018
- --------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 1.1%
Electronics Boutique* 565,800 7,850
----------
7,850
- --------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.1%
Tweeter Home Entertainment Group* 23,400 755
----------
755
- --------------------------------------------------------------------------------
RETAIL-MAIL ORDER -- 1.2%
DM Management*+ 562,650 8,791
----------
8,791
- --------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 4.2%
Dave and Buster's* 368,100 7,546
Papa John's International* 411,100 18,140
PJ America* 113,400 2,608
Taco Cabana, Cl A* 295,500 2,604
----------
30,898
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
RETAIL-VARIETY STORE -- 0.1%
99 Cents Only Stores* 25,000 $ 1,061
----------
1,061
- --------------------------------------------------------------------------------
TRAVEL SERVICES -- 0.3%
Pegasus Systems* 58,500 2,333
----------
2,333
- --------------------------------------------------------------------------------
TOTAL CONSUMER CYCLICAL (COST $102,853) 125,738
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 1.4%
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.2%
Blyth Industries* 90,000 2,126
Fossil* 216,500 6,455
----------
8,581
- --------------------------------------------------------------------------------
FOOD-DAIRY PRODUCTS -- 0.2%
Horizon Organic Holding* 112,100 1,653
----------
1,653
----------
TOTAL CONSUMER NON-CYCLICAL (COST $10,312) 10,234
----------
- --------------------------------------------------------------------------------
ENERGY -- 0.7%
OIL & GAS DRILLING -- 0.1%
Atwood Oceanics* 26,100 783
----------
783
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.2%
Varco International* 150,600 1,676
----------
1,676
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.4%
BJ Services* 108,600 2,545
----------
2,545
----------
TOTAL ENERGY (COST $3,754) 5,004
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 11.2%
HEALTH CARE COST CONTAINMENT -- 0.5%
Hooper Holmes 229,100 3,580
----------
3,580
- --------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 0.6%
Dendrite International* 215,400 4,806
----------
4,806
- --------------------------------------------------------------------------------
MEDICAL LABS & TESTING SERVICES -- 0.2%
Impath* 69,900 1,712
----------
1,712
- --------------------------------------------------------------------------------
MEDICAL LASER SYSTEMS -- 1.7%
Laser Vision Centers* 306,100 11,670
Summit Technology* 82,900 912
----------
12,582
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 44
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG EMERGING GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.7%
Minimed* 80,200 $ 8,150
Osteotech* 128,100 4,403
----------
12,553
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.3%
Medicis Pharmaceutical, Cl A* 314,750 9,443
----------
9,443
- --------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.5%
American Dental Partners*+ 425,200 3,348
----------
3,348
- --------------------------------------------------------------------------------
PHARMACY SERVICES -- 3.3%
Advanced Paradigm* 386,400 24,416
----------
24,416
- --------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 1.4%
Resmed* 365,400 10,323
----------
10,323
----------
TOTAL HEALTH CARE (COST $62,103) 82,763
----------
- --------------------------------------------------------------------------------
NDUSTRIAL -- 6.6%
ELECTRONIC COMPONENTS-MISCELLANEOUS-- 3.7%
Flextronics International* 455,800 23,246
Sawtek* 115,000 3,881
----------
27,127
- --------------------------------------------------------------------------------
ENVIRONMENTAL CONSULTING & ENGINEERING -- 1.0%
Tetra Tech* 332,913 7,012
----------
7,012
- --------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 0.6%
Uniphase* 38,800 4,467
----------
4,467
- --------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.8%
Motivepower Industries* 248,200 6,236
----------
6,236
- --------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 0.5%
Casella Waste Systems, Cl A* 174,700 3,942
----------
3,942
----------
TOTAL INDUSTRIAL (COST $27,883) 48,784
----------
- --------------------------------------------------------------------------------
SERVICES -- 12.8%
ADVERTISING SALES -- 0.8%
Lamar Advertising, Cl A* 182,400 6,190
----------
6,190
- --------------------------------------------------------------------------------
ADVERTISING SERVICES -- 1.2%
Getty Images* 438,700 9,213
----------
9,213
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 0.8%
Cunningham Graphics International* 258,000 $ 3,386
Market Facts* 109,900 2,418
----------
5,804
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 4.8%
Brightstar Information
Technology Group* 253,000 980
DA Consulting Group* 137,000 1,353
Factset Research System* 278,850 12,060
International Integration* 169,000 5,408
Mastech* 26,500 345
Mecon* 88,000 616
Sapient* 91,000 6,495
Tier Technologies, Cl B* 141,200 1,227
Whittman-Hart* 302,500 6,504
----------
34,988
- --------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.1%
Forrester Research* 258,200 7,843
----------
7,843
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 0.8%
RCM Technologies* 507,500 5,582
----------
5,582
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 3.3%
Avis Rent A Car* 325,300 9,007
Rental Service* 118,400 2,072
United Rentals* 471,000 13,423
----------
24,502
- --------------------------------------------------------------------------------
RESEARCH & DEVELOPMENT -- 0.0%
Kendle International* 800 16
----------
16
- --------------------------------------------------------------------------------
TOTAL SERVICES (COST $83,970) 94,138
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 41.8%
APPLICATIONS SOFTWARE -- 11.9%
Clarify* 297,800 7,947
Great Plains Software* 328,400 12,705
IMR Global* 540,300 9,590
Made2manage Systems* 96,300 843
New Era of Networks* 248,600 16,843
Peregrine Systems* 646,600 21,742
Progress Software* 186,300 6,357
Rational Software* 417,300 11,189
----------
87,216
- --------------------------------------------------------------------------------
CIRCUITS -- 1.4%
Celestica* 93,900 3,046
Genesis Microchip* 299,900 7,123
----------
10,169
- --------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 1.3%
AVT* 399,500 9,538
----------
9,538
- --------------------------------------------------------------------------------
45 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG EMERGING GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.2%
Axent Technologies* 350,400 $ 8,432
----------
8,432
- --------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 0.1%
Engineering Animation* 16,000 674
----------
674
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 11.2%
Actuate Software* 174,400 5,755
Advent Software* 408,800 20,440
Business Objects ADR* 647,000 19,208
Macromedia* 442,000 20,028
Mercury Interactive* 165,000 5,878
Onyx Software* 80,700 3,157
Quadramed* 498,300 3,800
Verity* 127,200 4,261
----------
82,527
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.7%
Brooktrout Technology* 340,800 3,578
Henry (Jack) & Associates 22,500 827
RWD Technologies* 50,900 888
----------
5,293
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 1.0%
Box Hill Systems* 95,000 487
Neomagic* 720,800 7,163
----------
7,650
- --------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.2%
Cybex Computer Products* 100,000 1,794
----------
1,794
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.6%
Remedy* 219,200 3,069
TSI International Software Limited* 31,800 1,552
----------
4,621
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 0.8%
Qlogic* 20,000 1,342
Transwitch* 105,500 4,774
----------
6,116
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.7%
Broadvision* 88,500 5,288
----------
5,288
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 2.9%
Concur Technologies* 3,600 162
Legato Systems* 408,800 21,104
----------
21,266
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.1%
Apex PC Solutions* 840,300 $ 11,712
International Network Services* 115,000 8,043
MMC Networks* 342,800 5,485
Network Appliance* 234,400 11,866
----------
37,106
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.9%
Excel Switching* 70,400 1,478
Geotel Communications* 263,600 12,093
Meltia International* 50,000 650
----------
14,221
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.8%
Proxim* 94,200 2,708
RF Micro Devices* 29,800 2,852
----------
5,560
----------
TOTAL TECHNOLOGY (COST $230,484) 307,471
----------
- --------------------------------------------------------------------------------
TRANSPORTATION -- 1.3%
AIRLINES -- 1.3%
Skywest 330,000 9,529
----------
9,529
----------
TOTAL TRANSPORTATION (COST $6,985) 9,529
----------
TOTAL COMMON STOCK (COST $528,344) 683,661
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 10.0%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $63,434,533 (collateralized
by U.S. Government Agency Instruments:
total market value $64,694,450) (A)$63,426 63,426
J.P. Morgan Agency
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $10,001,356 (collateralized
by U.S. Government Agency Instruments:
total market value $10,200,619) (A) 10,000 10,000
----------
TOTAL REPURCHASE AGREEMENTS (COST $73,426) 73,426
----------
TOTAL INVESTMENTS-- 102.9% (COST $601,770) 757,087
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (2.9%)
OTHER ASSETS AND LIABILITIES, NET (21,079)
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 400 million
shares -- $0.001 par value) based on 35,717,353
outstanding shares of common stock 617,503
Accumulated net realized loss on investments (36,812)
Net unrealized appreciation on investments 155,317
----------
TOTAL NET ASSETS-- 100.0% $736,008
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $20.61
----------
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
ADR -- American Depository Receipt
Cl -- Class
+ -- Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. The total market value of
investments in affiliated companies as of March 31, 1999 was $12,139,856.
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 46
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG LARGE CAP GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 95.5%
CONSUMER CYCLICAL -- 22.9%
APPAREL MANUFACTURERS -- 0.8%
Jones Apparel Group* 40,600 $ 1,134
----------
1,134
- --------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 4.7%
Clear Channel Communications* 73,800 4,949
Fox Entertainment Group* 66,500 1,804
----------
6,753
- --------------------------------------------------------------------------------
CRUISE LINES -- 2.1%
Carnival 62,800 3,050
----------
3,050
- --------------------------------------------------------------------------------
MOTORCYCLE/MOTOR SCOOTER -- 3.0%
Harley-Davidson 74,300 4,272
----------
4,272
- --------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 1.8%
Home Depot 40,600 2,527
----------
2,527
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 3.5%
BJ's Wholesale Club* 29,700 785
Family Dollar Stores 72,300 1,663
Wal-Mart Stores 28,000 2,581
----------
5,029
- --------------------------------------------------------------------------------
RETAIL-DRUG STORE -- 0.9%
CVS 28,600 1,359
----------
1,359
- --------------------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 3.7%
Staples* 164,100 5,395
----------
5,395
- --------------------------------------------------------------------------------
RETAIL-REGIONAL DEPARTMENT STORES -- 1.0%
Kohl's* 20,400 1,446
----------
1,446
- --------------------------------------------------------------------------------
TELEVISION -- 1.4%
Univision Communications* 40,900 2,045
----------
2,045
----------
TOTAL CONSUMER CYCLICAL (COST $18,830) 33,010
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 3.7%
DIVERSIFIED FINANCIAL SERVICES -- 2.4%
Associates First Capital, Cl A 76,000 3,420
----------
3,420
- --------------------------------------------------------------------------------
FINANCE-OTHER SERVICES -- 1.3%
Heller Financial 23,000 541
Newcourt Credit Group 47,500 1,285
----------
1,826
----------
TOTAL FINANCIAL (COST $3,832) 5,246
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HEALTH CARE -- 16.8%
MEDICAL INFORMATION SYSTEMS -- 0.2%
IMS Health 10,000 $ 331
----------
331
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 2.2%
Guidant 52,400 3,170
----------
3,170
- --------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.2%
Genentech 19,600 1,737
----------
1,737
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 6.4%
Lilly (Eli) & Company 17,000 1,443
Pfizer 35,000 4,856
Schering-Plough 52,600 2,910
----------
9,209
- --------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 1.1%
Watson Pharmaceuticals* 36,500 1,611
----------
1,611
- --------------------------------------------------------------------------------
MEDICAL-HOSPITALS -- 1.2%
Health Management Associates, Cl A* 135,100 1,646
----------
1,646
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 3.4%
Cardinal Health 33,300 2,198
McKesson HBOC 40,478 2,671
----------
4,869
- --------------------------------------------------------------------------------
PHARMACY SERVICES -- 1.1%
Omnicare 81,200 1,548
----------
1,548
----------
TOTAL HEALTH CARE (COST $16,173) 24,121
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 5.5%
DIVERSIFIED MANUFACTURING OPERATIONS-- 2.9%
Danaher 78,800 4,118
----------
4,118
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.4%
Teradyne* 11,900 649
----------
649
- --------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 2.2%
Waste Management 71,417 3,169
----------
3,169
----------
TOTAL INDUSTRIAL (COST $4,629) 7,936
----------
- --------------------------------------------------------------------------------
47 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG LARGE CAP GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
SERVICES -- 10.4%
COMMERCIAL SERVICES -- 2.6%
Central Parking 37,500 $ 1,294
Quintiles Transnational* 64,800 2,446
----------
3,740
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.6%
Sapient* 33,300 2,377
----------
2,377
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 1.5%
Select Appointments ADR* 80,000 2,135
----------
2,135
- --------------------------------------------------------------------------------
SCHOOLS -- 1.1%
Apollo Group, Cl A* 52,137 1,558
----------
1,558
- --------------------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 3.6%
MCI Worldcom* 58,800 5,207
----------
5,207
----------
TOTAL SERVICES (COST $9,964) 15,017
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 36.2%
CIRCUITS -- 2.7%
Linear Technology 76,600 3,926
----------
3,926
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 6.6%
BMC Software* 39,400 1,460
Compuware* 95,000 2,268
Microsoft* 65,200 5,844
----------
9,572
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 5.2%
EMC* 48,100 6,145
Veritas Software* 17,400 1,405
----------
7,550
- --------------------------------------------------------------------------------
COMPUTERS-MICRO -- 1.1%
Dell Computer * 37,400 1,529
----------
1,529
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 1.2%
Fiserv* 30,900 1,657
----------
1,657
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 4.3%
Intel 14,600 1,735
Kla-Tencor* 23,100 1,122
Motorola 12,500 916
Novellus Systems* 16,900 931
Texas Instruments 14,900 1,479
----------
6,183
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 6.2%
America Online* 50,100 $ 7,315
PSIN* 37,300 1,587
----------
8,902
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 0.7%
Networks Associates* 32,300 991
----------
991
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 3.9%
Cisco Systems* 51,425 5,634
----------
5,634
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 3.7%
Global Crossing Limited* 65,200 3,015
Qwest Communications International* 32,300 2,329
----------
5,344
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 0.6%
American Tower Systems* 37,500 919
----------
919
----------
TOTAL TECHNOLOGY (COST $23,673) 52,207
----------
TOTAL COMMON STOCK (COST $77,101) 137,537
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.4%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $4,984,431 (collateralized
by U.S. Government Obligations: total
market value $5,083,431) (A) $4,984 4,984
----------
TOTAL REPURCHASE AGREEMENT (COST $4,984) 4,984
----------
TOTAL INVESTMENTS-- 98.9% (COST $82,085) 142,521
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 1.1%
Receivable for securities sold 1,822
Other assets and liabilities (254)
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET 1,568
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 5,863,303
outstanding shares of common stock 75,077
Accumulated net realized gain on investments 8,576
Net unrealized appreciation on investments 60,436
----------
TOTAL NET ASSETS-- 100.0% $144,089
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $24.57
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 48
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG SELECT EQUITY FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK --90.6%
CONSUMER CYCLICAL -- 11.4%
APPAREL MANUFACTURERS -- 1.3%
Jones Apparel Group* 104,400 $ 2,917
----------
2,917
- --------------------------------------------------------------------------------
BROADCAST SERVICE/PROGRAMMING -- 10.1%
Clear Channel Communications* 302,300 20,273
Fox Entertainment Group* 133,400 3,618
----------
23,891
----------
TOTAL CONSUMER CYCLICAL (COST $8,811) 26,808
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 2.9%
MEDICAL-BIOMEDICAL/GENETIC -- 2.9%
Genentech 76,800 6,806
----------
6,806
----------
TOTAL HEALTH CARE (COST $5,484) 6,806
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 0.5%
BUILDING & CONSTRUCTION-MISCELLANEOUS -- 0.5%
Dycom Industries* 30,300 1,318
----------
1,318
----------
TOTAL INDUSTRIAL (COST $1,142) 1,318
----------
- --------------------------------------------------------------------------------
SERVICES -- 5.0%
COMMERCIAL SERVICES -- 5.0%
Quintiles Transnational* 310,600 11,725
----------
11,725
----------
TOTAL SERVICES (COST $10,680) 11,725
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 70.8%
APPLICATIONS SOFTWARE -- 6.4%
Citrix Systems* 177,500 6,767
Keane* 196,400 4,186
New Era of Networks* 62,600 4,241
----------
15,194
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 2.7%
Verisign* 41,300 6,360
----------
6,360
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 10.0%
Bindview Development* 426,900 13,287
Compuware* 150,300 3,588
Macromedia* 148,600 6,734
----------
23,609
- --------------------------------------------------------------------------------
COMPUTERS-MICRO -- 2.1%
Dell Computer* 120,500 4,926
----------
4,926
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 1.0%
Advantage Learning Systems* 76,600 $ 2,379
----------
2,379
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 6.2%
Altera* 106,600 6,343
Intel 70,200 8,345
----------
14,688
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 14.7%
America Online* 164,400 24,003
Broadvision* 91,600 5,473
Inktomi* 60,000 5,145
----------
34,621
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 9.5%
Concord Communications* 107,200 6,110
Legato Systems* 210,000 10,841
Networks Associates* 174,300 5,349
----------
22,300
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 8.4%
International Network Services* 283,700 19,841
----------
19,841
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 7.8%
Amdocs Limited* 110,500 2,390
Global Crossing Limited* 344,000 15,910
----------
18,300
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.0%
RF Micro Devices* 49,900 4,775
----------
4,775
----------
TOTAL TECHNOLOGY (COST $90,355) 166,993
----------
TOTAL COMMON STOCK (COST $116,472) 213,650
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.5%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $24,763,005 (collateralized
by U.S. Government Obligations: total
market value $25,254,841) (A) $24,760 24,760
----------
TOTAL REPURCHASE AGREEMENT (COST $24,760) 24,760
----------
TOTAL INVESTMENTS-- 101.1% (COST $141,232) 238,410
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.1%)
Payable for securities purchased (4,053)
Receivable for securities sold 2,502
Other assets and liabilities (955)
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (2,506)
----------
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 49
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG SELECT EQUITY FUND
Market
Description Value (000)
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 9,096,068
outstanding shares of common stock $ 107,620
Accumulated net realized gain on investments 31,106
Net unrealized appreciation on investments 97,178
----------
TOTAL NET ASSETS-- 100.0% $ 235,904
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $25.93
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 50
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG CORE GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 99.2%
CONSUMER CYCLICAL -- 26.1%
BROADCAST SERVICE/PROGRAMMING -- 1.8%
Fox Entertainment Group* 57,900 $ 1,570
----------
1,570
- --------------------------------------------------------------------------------
CABLE TELEVISION -- 1.3%
Mediaone Group* 17,100 1,086
----------
1,086
- --------------------------------------------------------------------------------
CRUISE LINES -- 1.7%
Carnival 30,900 1,501
----------
1,501
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 0.6%
CDW Computer Centers* 8,300 573
----------
573
- --------------------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 1.1%
Cinar, Cl B* 40,300 927
----------
927
- --------------------------------------------------------------------------------
MOTORCYCLE/MOTOR SCOOTER -- 2.3%
Harley-Davidson 34,500 1,984
----------
1,984
- --------------------------------------------------------------------------------
RADIO -- 3.2%
Jacor Communications* 36,900 2,804
----------
2,804
- --------------------------------------------------------------------------------
RESORTS/THEME PARKS -- 3.3%
Premier Parks* 77,100 2,872
----------
2,872
- --------------------------------------------------------------------------------
RETAIL-BEDDING -- 1.7%
Linens `N Things* 31,700 1,438
----------
1,438
- --------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 1.8%
Home Depot 24,400 1,519
----------
1,519
- --------------------------------------------------------------------------------
RETAIL-DRUG STORE -- 0.6%
Duane Reade* 18,700 521
----------
521
- --------------------------------------------------------------------------------
RETAIL-INTERNET -- 0.8%
Ticketmaster Online-City Search* 20,100 676
----------
676
- --------------------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 1.8%
Staples* 48,450 1,593
----------
1,593
- --------------------------------------------------------------------------------
RETAIL-REGIONAL DEPARTMENT STORES -- 2.3%
Kohl's* 27,500 1,949
----------
1,949
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TELEVISION -- 1.8%
Univision Communications* 30,700 $ 1,535
----------
1,535
----------
TOTAL CONSUMER CYCLICAL (COST $16,619) 22,548
----------
- --------------------------------------------------------------------------------
ENERGY -- 1.9%
OIL-FIELD SERVICES -- 1.9%
BJ Services* 56,300 1,320
Hanover Compressor* 12,000 318
----------
1,638
----------
TOTAL ENERGY (COST $1,411) 1,638
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 1.7%
FINANCE-INVESTMENT BANKER/BROKER -- 0.6%
Schwab (Charles) 5,200 500
----------
500
- --------------------------------------------------------------------------------
FINANCE-OTHER SERVICES -- 1.1%
Newcourt Credit Group 35,200 952
----------
952
----------
TOTAL FINANCIAL (COST $1,608) 1,452
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 10.9%
HEALTH CARE COST CONTAINMENT -- 1.8%
Medquist* 51,700 1,551
----------
1,551
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 2.1%
Guidant 30,600 1,851
----------
1,851
- --------------------------------------------------------------------------------
MEDICAL-BIOMEDICAL/GENETIC -- 1.4%
Amgen* 15,800 1,183
----------
1,183
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.6%
Medimmune* 18,200 1,077
Pfizer 8,700 1,207
----------
2,284
- --------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 1.2%
Watson Pharmaceuticals* 24,300 1,072
----------
1,072
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 1.8%
Cardinal Health 23,100 1,525
----------
1,525
----------
TOTAL HEALTH CARE (COST $7,789) 9,466
----------
- --------------------------------------------------------------------------------
51 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG CORE GROWTH FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INDUSTRIAL -- 12.7%
DIVERSIFIED MANUFACTURING OPERATIONS-- 3.0%
Corning 30,400 $ 1,824
Danaher 14,300 747
----------
2,571
- --------------------------------------------------------------------------------
ELECTRIC PRODUCTS-MISCELLANEOUS -- 1.3%
Jabil Circuit* 28,300 1,146
----------
1,146
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.6%
Teradyne* 25,200 1,375
----------
1,375
- --------------------------------------------------------------------------------
ELECTRONICS-MILITARY -- 1.4%
L-3 Communications* 27,100 1,253
----------
1,253
- --------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 3.3%
Uniphase* 25,000 2,878
----------
2,878
- --------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 2.1%
Applied Materials* 15,500 956
Motivepower Industries* 33,300 837
----------
1,793
----------
TOTAL INDUSTRIAL (COST $9,062) 11,016
----------
- --------------------------------------------------------------------------------
SERVICES -- 9.0%
ADVERTISING SALES -- 2.4%
Outdoor Systems* 68,000 2,040
----------
2,040
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 2.7%
Abacus Direct* 16,100 1,320
Quintiles Transnational* 26,600 1,004
----------
2,324
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 1.7%
United Rentals* 52,400 1,494
----------
1,494
- --------------------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 2.2%
MCI Worldcom* 21,700 1,922
----------
1,922
----------
TOTAL SERVICES (COST $6,043) 7,780
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 36.9%
CIRCUITS -- 2.5%
Celestica* 22,000 714
Linear Technology 28,500 1,461
----------
2,175
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.3%
Verisign* 7,400 $ 1,140
----------
1,140
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.8%
Macromedia* 23,900 1,083
Microsoft* 15,200 1,362
----------
2,445
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 4.6%
EMC* 18,000 2,299
Veritas Software* 21,200 1,712
----------
4,011
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 7.1%
Intel 7,700 915
Kla-Tencor* 16,300 792
PMC Sierra* 7,100 505
SDL* 7,000 635
Transwitch* 21,500 973
Xilinx* 56,800 2,304
----------
6,124
- --------------------------------------------------------------------------------
FIBER OPTICS -- 0.6%
E-Tek Dynamics* 13,700 491
----------
491
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 6.0%
America Online* 21,000 3,066
PSINet* 50,100 2,132
----------
5,198
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 3.3%
Cisco Systems* 26,200 2,871
----------
2,871
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 4.9%
Amdocs Limited* 79,200 1,713
Global Crossing Limited* 54,600 2,525
----------
4,238
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 1.9%
Aware* 14,600 686
Geotel Communications* 20,200 927
----------
1,613
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.9%
American Tower Systems* 47,200 1,157
Powerwave Technologies* 15,900 451
----------
1,608
----------
TOTAL TECHNOLOGY (COST $18,947) 31,914
----------
TOTAL COMMON STOCK (COST $61,479) 85,814
----------
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 52
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
------------------------
As of March 31, 1999
PBHG CORE GROWTH FUND
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.4%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $2,090,603 (collateralized
by U.S. Government Obligations: total market
value $2,132,127) (A) $2,091 $ 2,091
----------
TOTAL REPURCHASE AGREEMENT (COST $2,091) 2,091
----------
TOTAL INVESTMENTS-- 101.6% (COST $63,570) 87,905
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (1.6%)
OTHER ASSETS AND LIABILITIES, NET (1,420)
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 6,151,225
outstanding shares of common stock 101,078
Undistributed net investment income 3
Accumulated net realized loss on investments (38,931)
Net unrealized appreciation on investments 24,335
----------
TOTAL NET ASSETS-- 100.0% $ 86,485
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $14.06
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
53 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG LIMITED FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 88.3%
CONSUMER CYCLICAL -- 14.5%
AUDIO/VIDEO PRODUCTS -- 0.9%
Polycom* 54,700 $ 1,026
----------
1,026
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 1.6%
Scansource* 95,600 1,709
----------
1,709
- --------------------------------------------------------------------------------
RADIO -- 1.7%
Citadel Communications* 55,700 1,852
----------
1,852
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 0.9%
Chico's Fas* 7,400 159
Children's Place* 29,300 789
----------
948
- --------------------------------------------------------------------------------
RETAIL-CATALOG SHOPPING -- 0.5%
Delia's* 18,800 592
----------
592
- --------------------------------------------------------------------------------
RETAIL-COMPUTER EQUIPMENT -- 1.2%
Electronics Boutique* 89,900 1,247
----------
1,247
- --------------------------------------------------------------------------------
RETAIL-MAIL ORDER -- 2.1%
DM Management* 142,700 2,230
----------
2,230
- --------------------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 0.4%
School Specialty* 23,400 458
----------
458
- --------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 5.2%
Dave and Buster's* 68,000 1,394
PJ America* 89,900 2,068
Rare Hospitality International* 59,300 815
Taco Cabana, Cl A* 154,300 1,360
----------
5,637
----------
TOTAL CONSUMER CYCLICAL (COST $13,417) 15,699
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 3.7%
CONSUMER PRODUCTS-MISCELLANEOUS -- 1.6%
Fossil* 57,900 1,726
----------
1,726
- --------------------------------------------------------------------------------
FOOD-DAIRY PRODUCTS -- 1.1%
Horizon Organic Holding* 82,900 1,223
----------
1,223
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOOD-RETAIL -- 1.0%
Wild Oats Markets* 38,300 $ 1,039
----------
1,039
----------
TOTAL CONSUMER NON-CYCLICAL (COST $3,674) 3,988
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 9.9%
HEALTH CARE COST CONTAINMENT -- 1.1%
Hooper Holmes 72,600 1,134
----------
1,134
- --------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 0.1%
Sunquest Information Systems* 9,600 113
----------
113
- --------------------------------------------------------------------------------
MEDICAL LABS & TESTING SERVICES -- 0.3%
Impath* 12,000 294
----------
294
- --------------------------------------------------------------------------------
MEDICAL LASER SYSTEMS -- 1.9%
Laser Vision Centers* 36,500 1,391
Summit Technology* 57,900 637
----------
2,028
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.9%
Molecular Devices* 37,100 1,002
----------
1,002
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 3.1%
Medco Research* 88,000 2,288
Medicis Pharmaceutical, Cl A* 35,025 1,051
----------
3,339
- --------------------------------------------------------------------------------
MEDICAL-OUTPATIENT/HOME MEDICAL -- 0.7%
American Dental Partners* 102,000 803
----------
803
- --------------------------------------------------------------------------------
RESPIRATORY PRODUCTS -- 1.8%
Resmed* 68,800 1,944
----------
1,944
----------
TOTAL HEALTH CARE (COST $6,879) 10,657
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 2.5%
INDUSTRIAL AUTOMATION/ROBOTICS -- 0.9%
Brooks Automation* 44,100 987
----------
987
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.4%
Surmodics* 24,400 341
----------
341
- --------------------------------------------------------------------------------
NON-HAZARDOUS WASTE DISPOSAL -- 1.2%
Waste Connections* 55,300 1,320
----------
1,320
----------
TOTAL INDUSTRIAL (COST $2,278) 2,648
----------
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 54
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG LIMITED FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
SERVICES -- 14.7%
COMMERCIAL SERVICES -- 1.9%
Cunningham Graphics International* 31,100 $ 408
Market Facts* 77,700 1,710
----------
2,118
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 10.8%
4Front Technologies* 116,400 1,229
Brightstar Information Technology
Group* 89,600 347
Factset Research Systems 57,950 2,506
International Integration* 77,300 2,474
Mecon*+ 330,300 2,312
Tier Technologies, Cl B* 174,000 1,512
Whittman-Hart* 58,700 1,262
----------
11,642
- --------------------------------------------------------------------------------
CONSULTING SERVICES -- 0.9%
Forrester Research* 33,100 1,005
----------
1,005
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 1.1%
Hall Kinion & Associates* 117,200 733
RCM Technologies* 39,100 430
----------
1,163
----------
TOTAL SERVICES (COST $14,123) 15,928
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 43.0%
APPLICATIONS SOFTWARE -- 7.7%
Ardent Software* 27,200 437
Clarify* 100,500 2,682
Exchange Applications* 32,600 819
Genesys Telecommunications
Laboratories* 50,400 759
Great Plains Software* 43,700 1,691
Made2manage Systems* 35,300 309
New Era of Networks* 23,800 1,612
----------
8,309
- --------------------------------------------------------------------------------
CIRCUITS -- 3.2%
Genesis Microchip* 65,100 1,546
Power Integration* 60,800 1,931
----------
3,477
- --------------------------------------------------------------------------------
COMMUNICATIONS SOFTWARE -- 2.2%
AVT* 98,300 2,347
----------
2,347
- --------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 0.3%
Engineering Animation* 7,500 316
----------
316
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 17.3%
Actuate Software* 79,100 $ 2,610
Advent Software* 61,300 3,065
Bindview Development* 103,200 3,212
Brio Technology* 12,000 254
Business Objects ADR* 69,300 2,057
Excalibur Technologies* 52,600 687
Micromuse* 79,500 3,657
Pervasive Software* 67,200 1,201
Quadramed* 70,400 537
Verity* 41,000 1,374
----------
18,654
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.7%
Brooktrout Technology* 72,200 758
----------
758
- --------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.2%
Cybex Computer Products* 11,825 212
----------
212
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 3.8%
Catalyst International* 117,100 1,215
Fundtech Limited* 38,200 1,151
TSI International Software Limited* 34,200 1,669
----------
4,035
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 2.6%
Act Manufacturing* 30,900 512
Transwitch* 51,100 2,312
----------
2,824
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 1.0%
MMC Networks* 69,900 1,118
----------
1,118
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 2.2%
Geotel Communications* 52,300 2,399
----------
2,399
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.8%
Microwave Power Devices* 49,100 393
Proxim* 55,100 1,584
----------
1,977
----------
TOTAL TECHNOLOGY (COST $30,423) 46,426
----------
TOTAL COMMON STOCK (COST $70,794) 95,346
----------
- --------------------------------------------------------------------------------
55 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG LIMITED FUND
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 12.1%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $13,084,481 (collateralized
by U.S. Government Obligations: total
market value $13,344,362) (A) $13,083 $ 13,083
----------
TOTAL REPURCHASE AGREEMENT (COST $13,083) 13,083
----------
TOTAL INVESTMENTS-- 100.4% (COST $83,877) 108,429
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (0.4%)
Payable for securities purchased (1,528)
Receivable for securities sold 1,468
Other assets and liabilities (358)
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (418)
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 9,038,936
outstanding shares of common stock 75,504
Accumulated net investment loss (3)
Accumulated net realized gains on investments 7,958
Net unrealized appreciation on investments 24,552
----------
TOTAL NET ASSETS-- 100.0% $ 108,011
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $11.95
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
+ -- Considered an affiliated company as the Fund owns more than 5% of the
outstanding voting securities of such company. The total market value of
investments in affiliated companies as of March 31, 1999 was $2,312,100.
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 56
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG LARGE CAP 20 FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 92.0%
CONSUMER CYCLICAL -- 22.6%
BROADCAST SERVICE/PROGRAMMING -- 7.4%
Clear Channel Communications* 483,900 $ 32,452
Fox Entertainment Group* 439,200 11,913
----------
44,365
- --------------------------------------------------------------------------------
CRUISE LINES -- 4.9%
Carnival 607,200 29,487
----------
29,487
- --------------------------------------------------------------------------------
RETAIL-BUILDING PRODUCTS -- 5.3%
Home Depot 511,000 31,810
----------
31,810
- --------------------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 5.0%
Staples* 924,150 30,381
----------
30,381
----------
TOTAL CONSUMER CYCLICAL (COST $97,304) 136,043
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 15.0%
MEDICAL INSTRUMENTS -- 5.9%
Guidant 589,400 35,659
----------
35,659
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 3.9%
Pfizer 168,200 23,338
----------
23,338
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 5.2%
Cardinal Health 473,750 31,267
----------
31,267
----------
TOTAL HEALTH CARE (COST $71,442) 90,264
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 3.9%
MACHINERY-GENERAL INDUSTRIAL -- 3.9%
Applied Materials* 383,200 23,639
----------
23,639
----------
TOTAL INDUSTRIAL (COST $25,525) 23,639
----------
- --------------------------------------------------------------------------------
SERVICES -- 10.3%
COMMERCIAL SERVICES -- 3.9%
Quintiles Transnational* 629,200 23,752
----------
23,752
- --------------------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 6.4%
MCI Worldcom* 439,100 38,888
----------
38,888
----------
TOTAL SERVICES (COST $48,179) 62,640
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TECHNOLOGY -- 40.2%
COMPUTER SOFTWARE -- 7.3%
Compuware* 684,300 $ 16,338
Microsoft* 306,600 27,479
----------
43,817
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 7.7%
EMC* 363,900 46,488
----------
46,488
- --------------------------------------------------------------------------------
COMPUTERS-MICRO -- 1.0%
Dell Computer* 151,000 6,172
----------
6,172
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 3.5%
Intel 177,100 21,053
----------
21,053
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 10.3%
America Online* 423,200 61,787
----------
61,787
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 6.4%
Cisco Systems* 351,375 38,498
----------
38,498
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 4.0%
Frontier 235,800 12,232
Global Crossing Limited* 262,300 12,131
----------
24,363
----------
TOTAL TECHNOLOGY (COST $115,263) 242,178
----------
TOTAL COMMON STOCK (COST $357,713) 554,764
----------
- --------------------------------------------------------------------------------
REGISTERED INVESTMENT COMPANY -- 3.5%
FINANCIAL -- 3.5%
INVESTMENT COMPANY -- 3.5%
S&P 500 Depository Receipt 163,500 20,979
----------
20,979
----------
TOTAL FINANCIAL (COST $21,279) 20,979
----------
TOTAL REGISTERED INVESTMENT COMPANY (COST $21,279) 20,979
----------
- --------------------------------------------------------------------------------
57 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG LARGE CAP 20 FUND
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 8.1%
Greenwich Agency
4.91%, dated 03/31/99,
matures 04/01/99, repurchase price
$15,207,938 (collateralized by U.S.
Government Obligations: total market
value $15,512,657) (A) $15,206 $ 15,206
J.p. Morgan Mortgage
4.91%, dated 03/31/99,
matures 04/01/99, repurchase price
$17,411,337 (collateralized by U.S.
Government Obligations: total market
value $17,769,721) (A) 17,409 17,409
Morgan Stanley
4.91%, dated 03/31/99,
matures 04/01/99, repurchase price
$16,468,845 (collateralized by U.S.
Government Obligations: total market
value $16,866,467) (A) 16,467 16,467
----------
TOTAL REPURCHASE AGREEMENTS (COST $49,082) 49,082
----------
TOTAL INVESTMENTS-- 103.6% (COST $428,074) 624,825
----------
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- (3.6%)
Payable for securities purchased (24,092)
Other assets and liabilities 2,344
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET (21,748)
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 25,026,897
outstanding shares of common stock 376,251
Accumulated net investment loss (2)
Accumulated net realized gain on investments 30,077
Net unrealized appreciation on investments 196,751
----------
TOTAL NET ASSETS-- 100.0% $ 603,077
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $24.10
----------
* Non-income producing security
(A) -- Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 58
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
------------------------
As of March 31, 1999
PBHG NEW OPPORTUNITIES FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 99.0%
CONSUMER CYCLICAL -- 4.2%
AUDIO/VIDEO PRODUCTS -- 2.3%
Gemstar International Group* 5,100 $ 384
----------
384
- --------------------------------------------------------------------------------
RETAIL-OFFICE SUPPLIES -- 1.9%
School Specialty* 16,300 319
----------
319
----------
TOTAL CONSUMER CYCLICAL (COST $634) 703
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 8.1%
MEDICAL LASER SYSTEMS -- 4.0%
Summit Technology* 28,200 310
Visx* 3,400 366
----------
676
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.0%
King Pharmaceuticals* 12,100 336
----------
336
- --------------------------------------------------------------------------------
THERAPEUTICS -- 2.1%
Biomatrix* 4,400 343
----------
343
----------
TOTAL HEALTH CARE (COST $1,052) 1,355
----------
- --------------------------------------------------------------------------------
SERVICES -- 3.7%
CONSULTING SERVICES -- 1.9%
USWeb* 7,600 313
----------
313
- --------------------------------------------------------------------------------
DIRECT MARKETING -- 1.8%
M.D.C. Communications* 34,100 307
----------
307
----------
TOTAL SERVICES (COST $527) 620
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 83.0%
APPLICATIONS SOFTWARE -- 13.2%
Citrix Systems* 9,200 351
Exchange Applications* 16,100 405
I2 Technologies* 13,100 348
Ixos Software ADR* 6,500 328
New Era of Networks* 5,800 393
Peregrine Systems* 11,600 390
----------
2,215
- --------------------------------------------------------------------------------
COMPUTER GRAPHICS -- 1.9%
Engineering Animation* 7,600 320
----------
320
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 10.1%
Bindview Development* 14,000 $ 436
Excalibur Technologies* 14,200 186
Mercury Interactive* 9,800 349
Micromuse* 8,700 400
Microstrategy* 16,700 321
----------
1,692
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 3.9%
Fundtech Limited* 10,800 325
TSI International Software Limited* 6,800 332
----------
657
- --------------------------------------------------------------------------------
EDUCATIONAL SOFTWARE -- 1.8%
CBT Group ADR* 25,900 296
----------
296
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 14.4%
ARM Holdings ADR* 2,600 345
Broadcom* 5,200 320
Hi/Fn* 8,800 330
Mips Technologies* 5,200 317
PMC Sierra* 5,000 356
SDL* 4,300 390
Transwitch* 7,900 358
----------
2,416
- --------------------------------------------------------------------------------
FIBER OPTICS -- 2.2%
E-Tek Dynamics* 10,000 359
----------
359
- --------------------------------------------------------------------------------
INTERNET CONTENT -- 8.8%
Critical Path* 5,000 385
Go2net* 2,500 332
Infospace.com* 4,500 399
Network Solutions, Cl A* 3,400 359
----------
1,475
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 5.8%
Broadvision* 5,500 329
Mindspring Enterprises* 3,500 301
PSINet* 7,800 332
----------
962
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 4.0%
Concur Technologies 8,100 366
Open Text* 6,000 189
Talx* 16,500 107
----------
662
- --------------------------------------------------------------------------------
59 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG NEW OPPORTUNITIES FUND
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 7.2%
Fore Systems* 18,000 $ 340
FVC.com* 15,000 191
International Network Services* 5,300 371
Visual Networks* 8,300 310
----------
1,212
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 7.5%
Aware* 7,400 348
Excel Switching* 14,800 311
Geotel Communications* 7,600 348
Orckit Communications Limited* 12,200 254
----------
1,261
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 2.2%
RF Micro Devices* 3,800 364
----------
364
----------
TOTAL TECHNOLOGY (COST $11,019) 13,891
----------
TOTAL COMMON STOCK (COST $13,232) 16,569
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.4%
Morgan Stanley
4.50%, dated 03/31/99, matures 04/01/99,
repurchase price $746,313 (collateralized
by U.S. Treasury Instruments: total market
value $764,877) (A) $746 746
----------
TOTAL REPURCHASE AGREEMENT (COST $746) 746
----------
TOTAL INVESTMENTS-- 103.4% (COST $13,978) $ 17,315
----------
Percentages indicated are based on net assets of $16,741,723.
* Non-income producing security
(A) -- Tri-party repurchase agreement
ADR -- American Depository Receipt
Cl -- Class
[PILLAR LOGO OMITTED] 60
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG LARGE CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 92.3%
BASIC MATERIALS -- 0.4%
FORESTRY -- 0.4%
Weyerhaeuser 3,200 $ 178
----------
178
----------
TOTAL BASIC MATERIALS (COST $191) 178
----------
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 23.4%
APPLIANCES -- 0.7%
Maytag 5,200 314
----------
314
- --------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT -- 2.4%
Federal-Mogul 25,000 1,075
----------
1,075
- --------------------------------------------------------------------------------
AUTO-CARS/LIGHT TRUCKS -- 6.0%
Ford Motor Company 37,000 2,100
General Motors 6,600 573
----------
2,673
- --------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 1.5%
Centex 20,500 684
----------
684
- --------------------------------------------------------------------------------
MULTIMEDIA -- 2.5%
Gannett 10,600 668
Time Warner 6,200 440
----------
1,108
- --------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 1.2%
Knight-Ridder 11,000 550
----------
550
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.4%
TJX Companies 4,800 163
----------
163
- --------------------------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORE -- 4.5%
May Department Stores 51,700 2,023
----------
2,023
- --------------------------------------------------------------------------------
TOYS -- 2.8%
Hasbro 43,800 1,267
----------
1,267
- --------------------------------------------------------------------------------
TRAVEL SERVICES -- 1.4%
Sabre Group Holdings* 13,700 622
----------
622
----------
TOTAL CONSUMER CYCLICAL (COST $10,314) 10,479
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 6.8%
BREWERY -- 1.0%
Anheuser-Busch 5,600 426
----------
426
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COSMETICS & TOILETRIES -- 0.9%
Kimberly-Clark 8,700 $ 417
----------
417
- --------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 1.6%
General Mills 2,900 219
Heinz (H J) 5,200 246
Quaker Oats 2,600 163
Sara Lee 4,400 109
----------
737
- --------------------------------------------------------------------------------
FOOD-RETAIL -- 1.4%
Kroger* 10,800 647
----------
647
- --------------------------------------------------------------------------------
SOAP & CLEANING PREPARATION -- 1.9%
Clorox 7,200 844
----------
844
----------
TOTAL CONSUMER NON-CYCLICAL (COST $3,065) 3,071
----------
- --------------------------------------------------------------------------------
ENERGY -- 3.7%
OIL COMPANIES-EXPLORATION & PRODUCTION -- 2.1%
Vastar Resources 19,600 936
----------
936
- --------------------------------------------------------------------------------
OIL COMPANIES-INTEGRATED -- 0.3%
Imperial Oil Limited 8,500 163
----------
163
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 1.3%
Tidewater 22,500 582
----------
582
----------
TOTAL ENERGY (COST $1,530) 1,681
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 21.8%
DIVERSIFIED FINANCIAL SERVICES -- 1.3%
Citigroup 9,200 588
----------
588
- --------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 1.4%
Merrill Lynch 5,100 451
Paine Webber Group 4,200 167
----------
618
- --------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 3.5%
Fannie Mae 2,100 145
Federal Home Loan Mortgage Company 25,200 1,440
----------
1,585
- --------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 2.0%
Ambac Financial Group 16,900 913
----------
913
- --------------------------------------------------------------------------------
61 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG LARGE CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE-- 2.3%
Affiliated Managers Group* 13,000 $ 338
T. Rowe Price & Associates 20,100 691
----------
1,029
- --------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 5.0%
Hartford Life, Cl A 40,400 2,222
----------
2,222
- --------------------------------------------------------------------------------
MONEY CENTER BANKS -- 1.9%
Chase Manhattan 10,600 862
----------
862
- --------------------------------------------------------------------------------
MULTI-LINE INSURANCE -- 1.1%
American International Group 2,300 277
Hartford Financial Services 3,800 216
----------
493
- --------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 3.3%
Fleet Financial Group 11,000 414
Huntington Bancshares 10,300 319
Mellon Bank 3,600 253
PNC Bank 6,100 339
Wells Fargo 5,100 179
----------
1,504
----------
TOTAL FINANCIAL (COST $9,305) 9,814
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 3.1%
MEDICAL-DRUGS -- 0.3%
Schering-Plough 2,100 116
----------
116
- --------------------------------------------------------------------------------
MEDICAL-HMO -- 1.7%
Humana* 44,200 762
----------
762
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 1.1%
Bergen Brunswig 24,700 494
----------
494
----------
TOTAL HEALTH CARE (COST $1,469) 1,372
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 6.4%
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS-- 1.5%
Owens Corning 6,800 216
Vulcan Materials 10,900 450
----------
666
- --------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 3.4%
Tyco International Limited 21,600 1,550
----------
1,550
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 1.5%
Teradyne* 12,400 677
----------
677
----------
TOTAL INDUSTRIAL (COST $2,832) 2,893
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
SERVICES -- 2.8%
COMMERCIAL SERVICE-FINANCE -- 0.6%
Block (H&R) 5,000 $ 237
----------
237
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.8%
SunGard Data Systems* 9,100 364
----------
364
- --------------------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 1.4%
MCI Worldcom* 7,200 638
----------
638
----------
TOTAL SERVICES (COST $985) 1,239
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 13.4%
CIRCUITS -- 0.6%
Linear Technology 4,900 251
----------
251
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 4.5%
Adobe Systems 15,500 880
Computer Associates International 15,200 541
Microsoft* 6,800 609
----------
2,030
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS 0.2%
NCR* 2,100 105
----------
105
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.0%
Seagate Technology* 30,200 893
----------
893
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 3.9%
Intel 6,000 713
Motorola 5,700 418
Texas Instruments 3,600 357
Xilinx* 6,900 280
----------
1,768
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 0.5%
Novell* 8,000 201
----------
201
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 0.9%
Lexmark International Group, Cl A* 3,400 380
----------
380
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 0.8%
Lucent Technologies 1,500 162
Tellabs* 2,200 215
----------
377
----------
TOTAL TECHNOLOGY (COST $4,900) 6,005
----------
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 62
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG LARGE CAP VALUE FUND
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
TRANSPORTATION -- 2.2%
TRANSPORTATION-RAIL -- 2.2%
Union Pacific 18,100 $ 967
----------
967
----------
TOTAL TRANSPORTATION (COST $911) 967
----------
- --------------------------------------------------------------------------------
UTILITIES -- 8.3%
ELECTRIC-INTEGRATED -- 2.5%
Florida Progress 30,200 1,140
----------
1,140
- --------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.5%
AGL Resources 13,400 235
----------
235
- --------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 2.0%
Ameritech 1,400 81
Century Telephone Enterprise 7,400 520
SBC Communications 5,900 278
----------
879
- --------------------------------------------------------------------------------
TELEPHONE-LOCAL -- 2.3%
Bellsouth 14,700 589
US West 8,300 457
----------
1,046
- --------------------------------------------------------------------------------
TELEPHONE-LONG DISTANCE -- 1.0%
AT&T 5,600 447
----------
447
----------
TOTAL UTILITIES (COST $3,667) 3,747
----------
TOTAL COMMON STOCK (COST $39,169) 41,446
----------
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 1.3%
BASIC MATERIALS -- 1.3%
GOLD MINING -- 1.3%
Placer Dome 8.625% 25,200 586
----------
586
----------
TOTAL BASIC MATERIALS (COST $650) 586
----------
TOTAL PREFERRED STOCK (COST $650) 586
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.7%
J.p. Morgan Mortgage
4.95%, dated 03/31/99, matures
04/01/99, repurchase price $1,678,571
(collateralized by U.S. Government
Obligations: total market
value $1,711,911) (A) $1,678 $ 1,678
----------
TOTAL REPURCHASE AGREEMENT (COST $1,678) 1,678
----------
TOTAL INVESTMENTS-- 97.3% (COST $41,497) $43,710
----------
Percentages indicated are based on net assets of $44,922,199.
*Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
63 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 91.8%
BASIC MATERIALS -- 0.7%
FORESTRY -- 0.7%
Weyerhaeuser 6,600 $ 366
----------
366
----------
TOTAL BASIC MATERIALS (COST $394) 366
----------
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 16.8%
APPLIANCES -- 1.0%
Maytag 10,000 604
----------
604
- --------------------------------------------------------------------------------
ENTERTAINMENT SOFTWARE -- 1.0%
Acclaim Entertainment* 64,000 572
----------
572
- --------------------------------------------------------------------------------
HOTELS & MOTELS -- 0.5%
Extended Stay America* 26,400 269
----------
269
- --------------------------------------------------------------------------------
PUBLISHING-NEWSPAPERS -- 2.6%
Knight-Ridder 29,700 1,485
----------
1,485
- --------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 0.4%
Best Buy* 4,400 229
----------
229
- --------------------------------------------------------------------------------
RETAIL-HOME FURNISHINGS -- 1.8%
Pier 1 Imports 125,000 1,016
----------
1,016
- --------------------------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORE -- 4.8%
May Department Stores 69,850 2,733
----------
2,733
- --------------------------------------------------------------------------------
RUBBER-TIRES -- 0.5%
Cooper Tire and Rubber 14,200 261
----------
261
- --------------------------------------------------------------------------------
TOYS -- 2.4%
Hasbro 47,500 1,374
----------
1,374
- --------------------------------------------------------------------------------
TRAVEL SERVICES -- 1.8%
Sabre Group Holdings* 22,300 1,012
----------
1,012
----------
TOTAL CONSUMER CYCLICAL (COST $8,878) 9,555
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 2.8%
FOOD-MEAT PRODUCTS -- 0.4%
IBP 10,200 190
----------
190
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 0.5%
Aurora Foods* 18,200 $ 298
----------
298
- --------------------------------------------------------------------------------
FOOD-RETAIL -- 1.9%
American Stores 33,400 1,102
----------
1,102
----------
TOTAL CONSUMER NON-CYCLICAL (COST $1,682) 1,590
----------
- --------------------------------------------------------------------------------
ENERGY -- 7.0%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 2.6%
Devon Energy 25,600 706
Vastar Resources 16,200 773
----------
1,479
- --------------------------------------------------------------------------------
OIL COMPANY-INTEGRATED -- 0.8%
Imperial Oil Limited 24,700 472
----------
472
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 1.0%
Input/Output* 85,200 538
----------
538
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 2.6%
Tidewater 58,200 1,506
----------
1,506
----------
TOTAL ENERGY (COST $3,807) 3,995
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 17.3%
COMMERCIAL BANKS-CENTRAL US -- 0.5%
Marshall & Ilsley 5,000 277
----------
277
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-EASTERN US -- 0.3%
UST 8,800 192
----------
192
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 2.8%
CCB Financial 13,900 751
First Virginia Banks 6,600 302
Hibernia, Cl A 40,500 532
----------
1,585
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 0.5%
Pacific Century Financial 14,200 296
----------
296
- --------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 2.6%
Ambac Financial Group 18,100 978
Financial Security Assurance 9,700 481
----------
1,459
- --------------------------------------------------------------------------------
INSURANCE BROKERS- 0.7%
Marsh & McLennan 5,400 401
----------
401
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 64
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE-- 4.0%
Affiliated Managers Group* 26,600 $ 692
T. Rowe Price & Associates 28,000 962
Waddell & Reed Financial, Cl A 30,500 625
----------
2,279
- --------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 4.0%
Hartford Life, Cl A 41,100 2,261
----------
2,261
- --------------------------------------------------------------------------------
SUPER-REGIONAL BANKS-US -- 1.9%
Fleet Financial Group 14,800 557
Mellon Bank 2,300 162
PNC Bank 6,700 372
----------
1,091
----------
TOTAL FINANCIAL (COST $9,982) 9,841
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 9.2%
DISPOSABLE MEDICAL PRODUCTS -- 1.2%
Bard (C.R.) 14,200 717
----------
717
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.8%
Biovail International* 19,200 739
Dura Pharmaceuticals* 19,200 271
----------
1,010
- --------------------------------------------------------------------------------
MEDICAL-HMO -- 2.5%
Humana* 51,600 890
Trigon Healthcare* 16,000 548
----------
1,438
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 3.1%
Bergen Brunswig 57,900 1,158
Syncor* 21,500 599
----------
1,757
- --------------------------------------------------------------------------------
VETERINARY DIAGNOSTICS -- 0.6%
Veterinary Centers of America* 24,000 339
----------
339
----------
TOTAL HEALTH CARE (COST $5,510) 5,261
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 7.4%
AEROSPACE/DEFENSE -- 0.7%
Cordant Technologies 10,100 402
----------
402
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS-- 0.6%
Owens Corning 5,200 166
Vulcan Materials 4,800 198
----------
364
- --------------------------------------------------------------------------------
CONTAINERS-METAL/GLASS -- 0.6%
Ball 6,700 314
----------
314
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
DIVERSIFIED MANUFACTURING OPERATIONS-- 3.0%
National Services Industry 14,200 $ 484
Tyco International Limited 4,500 323
Varian Associates 23,200 899
----------
1,706
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.5%
Teradyne* 26,400 1,440
----------
1,440
----------
TOTAL INDUSTRIAL (COST $4,176) 4,226
----------
- --------------------------------------------------------------------------------
SERVICES -- 5.4%
COMPUTER SERVICES -- 2.2%
Complete Business Solutions* 24,000 471
SunGard Data Systems* 19,100 764
----------
1,235
- --------------------------------------------------------------------------------
DIRECT MARKETING -- 1.2%
Advo* 34,900 674
----------
674
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 2.0%
Interim Services* 17,200 258
Modis Professional Services* 88,800 805
Romac International* 10,100 86
----------
1,149
----------
TOTAL SERVICES (COST $3,136) 3,058
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 14.3%
CIRCUITS -- 1.6%
Analog Devices* 18,300 545
Linear Technology 7,500 384
----------
929
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 2.7%
Adobe Systems 27,300 1,549
----------
1,549
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.3%
NCR* 3,000 150
----------
150
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 2.7%
Seagate Technology* 52,700 1,558
----------
1,558
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 0.6%
Informix * 46,000 339
----------
339
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 4.1%
Altera* 10,400 619
Lattice Semiconductor* 6,000 273
Texas Instruments 4,200 417
Xilinx* 25,300 1,026
----------
2,335
- --------------------------------------------------------------------------------
65 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG MID-CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 0.7%
Novell* 16,000 $ 403
----------
403
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 1.2%
Lexmark International Group, Cl A* 4,900 548
Splash Technology Holdings* 24,000 145
----------
693
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 0.4%
Tellabs* 2,000 196
----------
196
----------
TOTAL TECHNOLOGY (COST $6,800) 8,152
----------
- --------------------------------------------------------------------------------
TRANSPORTATION -- 2.8%
AIRLINES -- 0.6%
Midway Airlines* 31,100 366
----------
366
- --------------------------------------------------------------------------------
TRANSPORTATION-RAIL -- 2.2%
Union Pacific 23,100 1,234
----------
1,234
----------
TOTAL TRANSPORTATION (COST $1,698) 1,600
----------
- --------------------------------------------------------------------------------
UTILITIES -- 8.1%
ELECTRIC-INTEGRATED -- 4.4%
Conectiv, Cl A 312 11
DTE Energy 9,600 369
Florida Progress 46,800 1,767
Puget Sound Energy 14,200 327
----------
2,474
- --------------------------------------------------------------------------------
ENERGY-ALTERNATE SOURCES -- 0.5%
Midamerican Energy Holdings* 11,000 308
----------
308
- --------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 2.5%
AGL Resources 82,000 1,440
----------
1,440
- --------------------------------------------------------------------------------
TELEPHONE-INTEGRATED -- 0.7%
Century Telephone Enterprise 5,900 415
----------
415
----------
TOTAL UTILITIES (COST $5,064) 4,637
----------
TOTAL COMMON STOCK (COST $51,127) 52,281
----------
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 10.6%
J.P. Morgan Agency
4.87%, dated 03/31/99, matures
04/01/99, repurchase price $6,043,207
(collateralized by U.S. Government
Obligations: total market
value $6,172,437) (A) $6,042 $ 6,042
----------
TOTAL REPURCHASE AGREEMENT (COST $6,042) 6,042
----------
TOTAL INVESTMENTS-- 102.4% (COST $57,169) $ 58,323
----------
Percentages indicated are based on net assets of $56,981,273.
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 66
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 97.4%
BASIC MATERIALS -- 2.5%
METAL-ALUMINUM -- 0.9%
Commonwealth Industries 67,700 $ 609
----------
609
- --------------------------------------------------------------------------------
PAPER & RELATED PRODUCTS -- 0.5%
Wausau-Mosinee Paper 22,500 315
----------
315
- --------------------------------------------------------------------------------
STEEL-PRODUCERS -- 1.1%
AK Steel Holding 34,400 776
----------
776
----------
TOTAL BASIC MATERIALS (COST $2,340) 1,700
----------
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 21.7%
APPAREL MANUFACTURERS -- 0.7%
Isaacs I.C. & Company* 108,000 135
Kellwood 16,100 355
----------
490
- --------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL-- 1.8%
Delco Remy International* 120,300 1,098
Meritor Automotive 7,300 113
Tower Automotive* 4,100 76
----------
1,287
- --------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT -- 0.1%
Standard Motor Products 3,100 64
----------
64
- --------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 2.5%
Beazer Homes Usa* 23,000 483
Crossmann Communities* 11,500 229
Horton (D.R.) 41,900 702
M.D.C. Holdings 4,900 70
Pulte 12,000 250
----------
1,734
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 2.3%
Owens & Minor 68,100 690
Scansource* 47,600 851
Tristar Research* 7,000 64
----------
1,605
- --------------------------------------------------------------------------------
ENTERTAINMENT SOFTWARE -- 1.1%
Acclaim Entertainment* 90,000 804
----------
804
- --------------------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 0.7%
Timberland, Cl A* 7,800 492
----------
492
- --------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.4%
Dorel Industries, Cl B* 16,000 270
----------
270
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
HOTELS & MOTELS -- 1.3%
Extended Stay America* 87,700 $ 894
----------
894
- --------------------------------------------------------------------------------
PRINTING-COMMERCIAL -- 0.5%
Merrill 26,000 348
----------
348
- --------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 2.2%
Tweeter Home Entertainment Group* 47,600 1,535
----------
1,535
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.7%
BJ's Wholesale Club* 18,400 486
----------
486
- --------------------------------------------------------------------------------
RETAIL-DRUG STORE -- 0.2%
Duane Reade* 5,400 151
----------
151
- --------------------------------------------------------------------------------
RETAIL-HOME FURNISHINGS -- 1.5%
Pier 1 Imports 128,500 1,044
----------
1,044
- --------------------------------------------------------------------------------
RETAIL-MUSIC STORE -- 0.3%
Trans World Entertainment* 17,300 190
----------
190
- --------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 1.6%
Buffets* 100,800 996
Rare Hospitality International* 11,000 151
----------
1,147
- --------------------------------------------------------------------------------
RUBBER-TIRES -- 0.7%
Bandag* 17,100 481
----------
481
- --------------------------------------------------------------------------------
TEXTILE-HOME FURNISHINGS -- 2.3%
Mohawk Industries* 52,900 1,587
----------
1,587
- --------------------------------------------------------------------------------
TEXTILE-PRODUCTS -- 0.8%
Dan River, Cl A* 63,800 542
----------
542
----------
TOTAL CONSUMER CYCLICAL (COST $17,269) 15,151
----------
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 2.9%
FOOD-BAKING -- 1.1%
Earthgrains 34,700 770
----------
770
- --------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 1.8%
Aurora Foods* 15,000 245
Ralcorp Holdings* 11,200 213
Universal Foods 37,800 780
----------
1,238
----------
TOTAL CONSUMER NON-CYCLICAL (COST $2,118) 2,008
----------
- --------------------------------------------------------------------------------
67 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
ENERGY -- 3.2%
OIL COMPANIES-EXPLORATION & PRODUCTION-- 1.3%
Barrett Resources* 14,400 $ 361
Devon Energy 3,500 96
Vintage Petroleum 51,100 460
----------
917
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.8%
Input/Output* 84,400 533
----------
533
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 1.1%
Core Laboratories N.V.* 45,200 794
----------
794
----------
TOTAL ENERGY (COST $2,350) 2,244
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 25.6%
COMMERCIAL BANKS-EASTERN US -- 3.1%
Commercial Bank of New York 20,000 260
Hubco 11,200 376
UST 68,700 1,501
----------
2,137
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-SOUTHERN US -- 0.9%
Carolina First 5,400 119
Trustmark 26,600 523
----------
642
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 3.8%
Bancwest 11,000 467
Pacific Bank 64,800 1,361
Pacific Century Financial 15,200 317
Westamerica Bancorporation 15,200 481
----------
2,626
- --------------------------------------------------------------------------------
FINANCIAL GUARANTEE INSURANCE -- 3.2%
Financial Security Assurance 44,400 2,203
----------
2,203
- --------------------------------------------------------------------------------
FINANCE - INVESTMENT BANKER/BROKER-- 2.9%
EVEREN Capital 25,300 495
Legg Mason 41,900 1,411
Raymond James Financial 4,350 86
----------
1,992
- --------------------------------------------------------------------------------
INSURANCE BROKERS -- 0.2%
Gallegher (Arthur J.) 2,500 115
----------
115
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICES-- 3.7%
Affiliated Managers Group* 49,600 1,290
Waddell & Reed Financial, Cl A 64,500 1,322
----------
2,612
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.3%
ARM Financial Group, Cl A 16,200 $ 242
----------
242
- --------------------------------------------------------------------------------
PROPERTY/CASUALTY INSURANCE -- 0.6%
Stewart Information Services 12,700 426
----------
426
- --------------------------------------------------------------------------------
REITS-APARTMENTS -- 0.9%
Berkshire Realty 35,700 400
Essex Property Trust 3,800 99
Pennsylvania Real Estate
Investment Trust 6,800 127
----------
626
- --------------------------------------------------------------------------------
REITS-DIVERSIFIED -- 0.6%
Duke Realty Investments 19,200 413
National Golf Properties 1,700 37
----------
450
- --------------------------------------------------------------------------------
REITS-OFFICE PROPERTY -- 1.2%
Mack-Cali Realty 29,300 861
----------
861
- --------------------------------------------------------------------------------
REITS-REGIONAL MALLS -- 1.0%
CBL & Associates Properties 24,200 563
Taubman Centers 13,300 163
----------
726
- --------------------------------------------------------------------------------
REITS-SHOPPING CENTERS -- 0.7%
Glimcher Realty Trust 32,800 472
----------
472
- --------------------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 2.5%
Roslyn Bancorp 19,500 329
Staten Island Bancorp 35,800 615
Webster Financial 28,000 809
----------
1,753
----------
TOTAL FINANCIAL (COST $19,207) 17,883
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 7.6%
HOSPITAL BEDS/EQUIPMENT -- 0.2%
Invacare 6,600 160
----------
160
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 2.2%
Biovail International* 4,100 158
Dura Pharmaceuticals* 31,000 438
King Pharmaceuticals* 32,500 902
----------
1,498
- --------------------------------------------------------------------------------
MEDICAL-GENERIC DRUGS -- 0.6%
Alpharma 11,400 447
----------
447
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 68
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
MEDICAL-HMO -- 0.4%
Trigon Healthcare* 7,500 $ 257
----------
257
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 3.6%
Amerisource Health* 73,000 2,496
----------
2,496
- --------------------------------------------------------------------------------
VETERINARY DIAGNOSTICS -- 0.6%
Veterinary Centers of America* 31,200 441
----------
441
----------
TOTAL HEALTH CARE (COST $5,174) 5,299
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 5.1%
AEROSPACE/DEFENSE -- 0.1%
Cordant Technologies 1,800 71
----------
71
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS -- 0.2%
Dal-Tile International* 14,800 134
----------
134
- --------------------------------------------------------------------------------
BUILDING PRODUCT-CEMENT/AGGREGATE -- 0.6%
Southdown 7,400 397
----------
397
- --------------------------------------------------------------------------------
CONTAINERS-METAL/GLASS -- 0.7%
Ball 10,200 479
----------
479
- --------------------------------------------------------------------------------
ELECTRONIC PARTS DISTRIBUTOR -- 0.2%
Kent Electronics* 16,000 159
----------
159
- --------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.4%
Millipore 10,700 258
----------
258
- --------------------------------------------------------------------------------
MACHINERY-CONSTRUCTION & MINING -- 1.0%
JLG Industries 49,600 676
----------
676
- --------------------------------------------------------------------------------
MACHINERY-FARM -- 0.3%
Gehl* 14,300 211
----------
211
- --------------------------------------------------------------------------------
METAL PROCESSORS & FABRICATORS -- 0.6%
Mueller Industries* 13,300 298
NN Ball and Roller 28,000 159
----------
457
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.0%
Aptargroup 800 21
----------
21
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TRANSPORTATION-EQUIPMENT & LEASING-- 1.0%
Greenbrier Companies 76,700 $ 729
----------
729
----------
TOTAL INDUSTRIAL (COST $4,385) 3,592
----------
- --------------------------------------------------------------------------------
SERVICES -- 4.3%
COMMERCIAL SERVICES -- 1.2%
Plexus* 29,200 814
----------
814
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.2%
4Front Technologies* 13,600 143
----------
143
- --------------------------------------------------------------------------------
DIRECT MARKETING -- 0.4%
Advo* 15,000 290
----------
290
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 2.5%
Modis Professional Services* 27,400 248
Personnel Group of America* 108,900 783
Romac International* 88,200 750
----------
1,781
----------
TOTAL SERVICES (COST $3,172) 3,028
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 16.7%
APPLICATIONS SOFTWARE -- 0.8%
Software AG Systems* 16,300 136
Timberline Software 31,666 360
Vantive* 5,100 62
----------
558
- --------------------------------------------------------------------------------
CIRCUITS -- 1.4%
Hadco* 30,500 961
----------
961
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.7%
Ansys* 73,200 503
----------
503
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 0.4%
Brooktrout Technology* 23,600 248
----------
248
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.8%
Hutchinson Technology* 21,800 542
----------
542
- --------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.5%
Diamond Multimedia Systems* 61,500 377
----------
377
- --------------------------------------------------------------------------------
69 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG SMALL CAP VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 5.4%
Documentum* 66,600 $ 1,153
Informix* 59,000 435
Reynolds & Reynolds* 63,700 1,210
Sterling Software* 9,600 228
Sybase* 97,700 776
----------
3,802
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 1.8%
Actel* 19,500 320
Lattice Semiconductor* 7,300 333
Novellus Systems* 7,000 386
Zoran* 14,500 237
----------
1,276
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 0.8%
Splash Technology Holdings* 93,800 569
----------
569
- --------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 2.7%
Advanced Fibre Communication* 83,000 796
Antec* 18,000 387
Applied Signal Technology* 20,900 131
Excel Switching* 26,900 565
----------
1,879
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 1.4%
Pinnacle Holdings* 62,300 942
----------
942
----------
TOTAL TECHNOLOGY (COST $13,505) 11,657
----------
- --------------------------------------------------------------------------------
TRANSPORTATION -- 4.9%
AIRLINES -- 3.4%
Amtran* 9,300 177
Mesaba Holdings* 66,600 893
Midway Airlines* 109,200 1,283
----------
2,353
- --------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.6%
Airborne Freight 7,900 246
Eagle USA Airfreight* 6,900 224
----------
470
- --------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 0.9%
Landstar Systems* 16,000 530
M.S. Carriers* 3,000 79
----------
609
----------
TOTAL TRANSPORTATION (COST $4,097) 3,432
----------
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
UTILITIES -- 2.9%
ELECTRIC-INTEGRATED -- 1.1%
Central Hudson Gas Electric 4,300 $ 154
Conectiv, Cl A 725 26
Idacorp 4,100 120
Puget Sound Energy 18,200 420
----------
720
- --------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.9%
Wicor 31,400 636
----------
636
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER -- 0.9%
Calpine* 17,600 641
----------
641
----------
TOTAL UTILITIES (COST $2,063) 1,997
----------
TOTAL COMMON STOCK (COST $75,680) 67,991
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.1%
Morgan Stanley
4.50%, dated 03/31/99, matures
04/01/99, repurchase price $76,639
(collateralized by U.S. Treasury
Instruments: total market
value $78,545) (A) $ 77 77
----------
TOTAL REPURCHASE AGREEMENT (COST $77) 77
----------
TOTAL INVESTMENTS-- 97.5% (COST $75,757) $ 68,068
----------
Percentages indicated are based on net assets of $69,787,139.
* Non-income producing security
(A) -- Tri-party repurchase agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 70
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG FOCUSED VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 98.0%
BASIC MATERIALS -- 1.1%
FORESTRY -- 1.1%
Weyerhaeuser 700 $ 39
----------
39
----------
TOTAL BASIC MATERIALS (COST $42) 39
----------
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 32.3%
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL -- 1.3%
Delphi Automotive Systems* 2,700 48
----------
48
- --------------------------------------------------------------------------------
AUTO-CARS/LIGHT TRUCKS -- 4.7%
Ford Motor Company 3,000 170
----------
170
- --------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 2.9%
Centex 3,200 107
----------
107
- --------------------------------------------------------------------------------
ENTERTAINMENT SOFTWARE -- 2.6%
Acclaim Entertainment* 10,600 95
----------
95
- --------------------------------------------------------------------------------
HOME FURNISHINGS -- 2.9%
O'Sullivan Industries* 7,700 106
----------
106
- --------------------------------------------------------------------------------
MULTIMEDIA -- 5.6%
Gannett 1,100 69
Time Warner 1,900 135
----------
204
- --------------------------------------------------------------------------------
RETAIL-HOME FURNISHINGS -- 2.0%
Pier 1 Imports 9,100 74
----------
74
- --------------------------------------------------------------------------------
RETAIL-MAJOR DEPARTMENT STORE -- 5.6%
May Department Stores 5,250 205
----------
205
- --------------------------------------------------------------------------------
TOYS -- 3.3%
Hasbro 4,200 122
----------
122
- --------------------------------------------------------------------------------
TRAVEL SERVICES -- 1.4%
Sabre Group Holdings* 1,100 50
----------
50
----------
TOTAL CONSUMER CYCLICAL (COST $1,164) 1,181
----------
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 2.3%
BREWERY -- 2.3%
Anheuser-Busch 1,100 $ 84
----------
84
----------
TOTAL CONSUMER NON-CYCLICAL (COST $81) 84
----------
- --------------------------------------------------------------------------------
ENERGY -- 8.0%
OIL COMPANY-EXPLORATION & PRODUCTION-- 2.3%
Vastar Resources 1,800 86
----------
86
- --------------------------------------------------------------------------------
OIL COMPANY INTEGRATED -- 1.4%
Imperial Oil Limited 2,600 50
----------
50
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 2.3%
Input/Output* 13,300 84
----------
84
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 2.0%
Tidewater 2,800 72
----------
72
----------
TOTAL ENERGY (COST $278) 292
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 22.1%
COMMERCIAL BANKS-SOUTHERN US -- 0.3%
CCB Financial 200 11
----------
11
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 1.1%
Pacific Century Financial 2,000 42
----------
42
- --------------------------------------------------------------------------------
FINANCE-MORTGAGE LOAN/BANKER -- 4.2%
Federal Home Loan Mortgage Company 2,700 154
----------
154
- --------------------------------------------------------------------------------
INSURANCE BROKERS -- 1.8%
Marsh & McLennan 900 67
----------
67
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE -- 8.1%
Affiliated Managers Group* 11,400 296
----------
296
- --------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 6.6%
Hartford Life, Cl A 4,400 242
----------
242
----------
TOTAL FINANCIAL (COST $799) 812
----------
- --------------------------------------------------------------------------------
71 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG FOCUSED VALUE FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INDUSTRIAL -- 2.2%
DIVERSIFIED MANUFACTURING OPERATIONS-- 2.2%
Tyco International Limited 1,100 $ 79
----------
79
----------
TOTAL INDUSTRIAL (COST $80) 79
----------
- --------------------------------------------------------------------------------
SERVICES -- 10.1%
COMPUTER SERVICES -- 4.6%
SunGard Data Systems* 4,200 168
----------
168
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 5.5%
Modis Professional Services* 8,000 73
Personnel Group of America* 5,300 38
Romac International* 10,600 90
----------
201
----------
TOTAL SERVICES (COST $355) 369
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 16.8%
COMPUTER SOFTWARE -- 1.2%
Computer Associates International 1,200 43
----------
43
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 4.3%
Seagate Technology* 5,300 157
----------
157
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 2.7%
Documentum* 5,800 100
----------
100
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 5.6%
Texas Instruments 1,000 99
Xilinx* 2,000 81
Zoran* 1,500 25
----------
205
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.0%
Excel Switching* 5,300 111
----------
111
----------
TOTAL TECHNOLOGY (COST $648) 616
----------
- --------------------------------------------------------------------------------
TRANSPORTATION -- 3.1%
TRANSPORTATION-AIR FREIGHT -- 3.1%
Airborne Freight 3,600 112
----------
112
----------
TOTAL TRANSPORTATION (COST $153) 112
----------
TOTAL COMMON STOCK (COST $3,600) 3,584
----------
- --------------------------------------------------------------------------------
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 7.4%
Morgan Stanley
4.50%, dated 03/31/99, matures 04/01/99,
repurchase price $273,832 (collateralized
by U.S. Treasury Instruments: total market
value $280,643) (A) $273 $ 273
----------
TOTAL REPURCHASE AGREEMENT (COST $273) 273
----------
TOTAL INVESTMENTS-- 105.4% (COST $3,873) $ 3,857
----------
Percentages indicated are based on net assets of $3,658,055.
* Non-income producing security
(A) -- Tri-party Repurchase Agreement
Cl -- Class
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 72
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG INTERNATIONAL FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOREIGN COMMON STOCK -- 107.4%
ARGENTINA -- 2.2%
Telecom Argentina* 4,500 $ 124
YPF SA Sponsored ADR 4,500 142
----------
266
- --------------------------------------------------------------------------------
AUSTRALIA -- 2.4%
National Australia Bank* 16,000 291
----------
291
- --------------------------------------------------------------------------------
BRAZIL -- 2.3%
Companhia Paranaese* 21,000 157
Telesp Part ADR* 6,200 128
----------
285
- --------------------------------------------------------------------------------
CHILE -- 0.7%
Cia Telecom Chile ADR 3,700 87
----------
87
- --------------------------------------------------------------------------------
FRANCE -- 10.3%
Axa-Uap 2,812 372
Equant* 4,163 313
Suez Lyonnaise Des Eaux* 3,081 569
----------
1,254
- --------------------------------------------------------------------------------
GERMANY -- 11.8%
Allianz* 947 288
Mannesmann* 5,660 721
Marschollek Lauten* 803 434
----------
1,443
- --------------------------------------------------------------------------------
HONG KONG -- 1.7%
Hutchison Whampoa 26,000 205
----------
205
- --------------------------------------------------------------------------------
IRELAND -- 1.9%
Allied Irish Bank* 7,909 136
Bank of Ireland* 4,886 102
----------
238
- --------------------------------------------------------------------------------
ITALY -- 9.1%
Assic Generali* 4,783 191
Telecom Italia Mobile* 57,061 383
Telecom Italia* 50,550 536
----------
1,110
- --------------------------------------------------------------------------------
JAPAN -- 24.9%
Bridgestone* 8,000 203
Fuji Machine* 5,000 179
Fuji Photo Film* 4,000 151
Fujitsu* 14,000 224
Inax* 25,000 169
Kurita Water* 12,000 196
Matsushita Communications* 4,000 270
Nippon Comsys* 14,000 196
NTT 21 205
Olympus Optical* 12,000 157
Rohm Company Limited* 1,000 119
Secom* 2,000 189
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
JAPAN -- CONTINUED
Sharp* 19,000 $ 200
Sumitomo Bank* 14,000 189
Ushio* 19,000 202
Yamanouchi Pharmaceutical* 6,000 189
----------
3,038
- --------------------------------------------------------------------------------
MEXICO -- 2.6%
Cifra Sa Adr `V'* 8,000 124
Empresas La Moderna SA ADR* 3,500 83
Tubos Acero Mexico ADR* 12,000 108
----------
315
- --------------------------------------------------------------------------------
NETHERLANDS -- 5.7%
Ing Groep 7,340 404
Vnu Ver Ned Uitg Bezit* 7,498 292
----------
696
- --------------------------------------------------------------------------------
NEW ZEALAND -- 2.3%
Telecom Corp of N.Z.* 58,000 283
----------
283
- --------------------------------------------------------------------------------
PORTUGAL -- 1.2%
Portugal Telecom* 3,250 145
----------
145
- --------------------------------------------------------------------------------
SINGAPORE -- 2.6%
City Developments* 40,000 208
Singapore Press Holdings* 10,000 111
----------
319
- --------------------------------------------------------------------------------
SPAIN -- 2.3%
Superdiplo SA* 5,074 120
Telefonica De Espana 3,895 165
----------
285
- --------------------------------------------------------------------------------
SWITZERLAND -- 2.2%
Zurich Allied 423 270
----------
270
- --------------------------------------------------------------------------------
UNITED KINGDOM -- 21.2%
Abbey National* 12,000 246
Barclays 7,400 212
Bp Amoco* 10,000 170
British Aerospace* 18,000 120
British Telecom 15,000 245
Cadbury Schweppes* 9,000 130
Ladbroke* 30,000 137
Lloyds TSB Group* 20,000 302
Norwich Union* 25,000 172
Pearson* 10,500 239
Smithkline Beecham* 18,400 265
Smiths Industries* 8,000 117
Vodafone* 13,000 241
----------
2,596
----------
TOTAL FOREIGN COMMON STOCK (COST $9,465) 13,126
----------
- --------------------------------------------------------------------------------
73 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG INTERNATIONAL FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOREIGN PREFERRED STOCK -- 0.0%
BRAZIL -- 0.0%
Brahma* 6,432 $ 3
----------
3
----------
TOTAL FOREIGN PREFERRED STOCK (COST $1) 3
----------
TOTAL INVESTMENTS-- 107.4% (COST $9,466) $ 13,129
----------
Percentages indicated are based on net assets of $12,219,722.
* Non-income producing security
ADR -- American Depository Receipt
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 74
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
-----------------------
As of March 31, 1999
PBHG CASH RESERVES FUND
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 6.6%
Chase Manhattan De
5.70%, 07/02/99 $ 2,000 $ 1,999
Deutsche Bank Financial
5.82%, 05/04/99 3,000 3,000
Rabobank Nederland N.V.
5.75%, 04/27/99 2,500 2,500
Svenska Handelsbanken N.Y.
5.74%, 06/01/99 2,000 2,000
----------
TOTAL CERTIFICATES OF DEPOSIT (COST $9,499) 9,499
----------
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 63.7%
Abbey National
4.85%, 04/06/99 1,705 1,704
American General Financial
4.87%, 04/14/99 3,000 2,995
Apreco
4.87%, 05/25/99 3,000 2,978
Archer-Daniels Midland
4.75%, 05/11/99 3,720 3,700
Associates
4.81%, 05/27/99 4,000 3,970
Becton Dickinson
4.85%, 06/04/99 4,000 3,966
Ciesco LP
5.05%, 04/01/99 4,000 4,000
Columbia University
4.80%, 05/21/99 4,000 3,973
Deere John Capital
4.82%, 04/16/99 4,000 3,992
Enterprise Funding
4.85%, 06/23/99 942 931
Eureka Securities
4.87%, 04/23/99 4,000 3,988
Ford Motor Credit
5.03%, 04/20/99 4,000 3,989
Fortune Brands
4.84%, 08/31/99 3,500 3,428
General Electric Capital
4.83%, 06/04/99 4,000 3,965
Generale Bank
4.88%, 04/07/99 3,000 2,998
Gmac
4.80%, 05/11/99 4,000 3,979
Goldman Sachs Group
4.85%, 05/20/99 4,000 3,974
Greyhawk Funding
4.87%, 05/14/99 4,000 3,977
Monsanto
4.78%, 07/01/99 4,000 3,952
Mont Blanc Capital
4.92%, 04/08/99 4,000 3,996
Morgan Stanley Dean Witter
4.85%, 05/19/99 4,000 3,974
New York Times
4.85%, 04/13/99 4,000 3,994
Park Avenue Receivable
4.86%, 04/26/99 3,000 2,990
Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- CONTINUED
Prudential Funding
4.78%, 05/05/99 $ 3,500 $ 3,484
Times Mirror
4.82%, 06/21/99 4,000 3,957
Yale University
4.82%, 05/21/99 3,000 2,980
----------
TOTAL COMMERCIAL PAPER (COST $91,834) 91,834
----------
- --------------------------------------------------------------------------------
CORPORATE OBLIGATIONS -- 2.0%
Harris Bankcorp
5.00%, 02/04/00 3,000 3,000
----------
TOTAL CORPORATE OBLIGATIONS (COST $3,000) 3,000
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 21.4%
J.P. Morgan
5.00%, dated 03/31/99, matures 04/01/99,
repurchase price $30,438,401 (collateralized
by U.S. Government Obligations: total
market value $30,434,427) (A) 30,000 30,000
Lehman Brothers
4.93%, dated 03/31/99, matures 04/01/99,
repurchase price $856,117 (collateralized
by U.S. Government Obligations: total
market value $896,301) 856 856
----------
TOTAL REPURCHASE AGREEMENTS (COST $30,856) 30,856
----------
TOTAL INVESTMENTS-- 93.7% (COST $135,189) $ 135,189
----------
Percentages indicated are based on net assets of $144,239,937.
(A) -- Tri-party repurchase agreement
The accompanying notes are an integral part of the financial statements.
75 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
SCHEDULE OF INVESTMENTS
- -----------------------
As of March 31, 1999
PBHG TECHNOLOGY & COMMUNICATIONS FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
COMMON STOCK -- 92.3%
CONSUMER CYCLICAL -- 2.1%
CABLE TELEVISION -- 1.1%
Mediaone Group* 95,600 $ 6,071
----------
6,071
- --------------------------------------------------------------------------------
RETAIL-INTERNET -- 0.9%
Ticketmaster Online-City Search* 146,800 4,936
----------
4,936
----------
TOTAL CONSUMER CYCLICAL (COST $12,057) 11,007
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 9.8%
DIVERSIFIED MANUFACTURING OPERATIONS -- 1.9%
Corning 173,400 10,404
----------
10,404
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 2.0%
Teradyne* 192,800 10,519
----------
10,519
- --------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 1.7%
Uniphase* 81,300 9,360
----------
9,360
- --------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 4.2%
Applied Materials* 274,300 16,921
Kla-Tencor* 114,400 5,556
----------
22,477
----------
TOTAL INDUSTRIAL (COST $31,598) 52,760
----------
- --------------------------------------------------------------------------------
SERVICES -- 2.8%
TELEPHONE-LONG DISTANCE -- 2.8%
MCI Worldcom* 171,000 15,144
----------
15,144
----------
TOTAL SERVICES (COST $14,785) 15,144
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 77.6%
APPLICATIONS SOFTWARE -- 0.3%
New Era of Networks* 24,200 1,640
----------
1,640
- --------------------------------------------------------------------------------
CELLULAR TELECOMMUNICATIONS -- 1.4%
Sprint (PCS Group)* 163,500 7,245
----------
7,245
- --------------------------------------------------------------------------------
CIRCUITS -- 3.3%
Linear Technology 258,400 13,243
Vitesse Semiconductor* 83,800 4,242
----------
17,485
- --------------------------------------------------------------------------------
COMPUTER DATA SECURITY -- 1.5%
Verisign* 53,400 8,224
----------
8,224
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 3.3%
Microsoft* 195,400 17,513
----------
17,513
- --------------------------------------------------------------------------------
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
COMPUTERS-INTEGRATED SYSTEMS -- 2.4%
ASM Lithography Holdings* 289,500 $ 13,027
----------
13,027
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 8.8%
EMC* 248,500 31,746
Veritas Software* 191,350 15,451
----------
47,197
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 22.9%
Altera* 175,200 10,424
LSI Logic* 1,244,900 38,825
Motorola 208,200 15,251
Taiwan Semiconductor* 699,900 16,535
Texas Instruments 55,200 5,479
Transwitch* 102,200 4,625
Xilinx* 782,800 31,752
----------
122,891
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 18.8%
America Online* 317,400 46,340
Concentric Network* 146,200 10,928
Lycos* 41,300 3,554
Mindspring Enterprises* 77,700 6,687
Onemain.com* 13,100 475
PSINet* 394,000 16,770
Verio* 343,200 15,830
----------
100,584
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 5.7%
Cisco Systems* 199,950 21,907
Fore Systems* 456,300 8,627
----------
30,534
- --------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES -- 9.3%
Amdocs Limited* 259,800 5,618
Frontier 209,900 10,889
Global Crossing Limited* 215,000 9,944
Level 3 Communications* 129,100 9,400
Qwest Communications International* 196,300 14,152
----------
50,003
----------
TOTAL TECHNOLOGY (COST $274,859) 416,343
----------
TOTAL COMMON STOCK (COST $333,299) 495,254
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 6.0%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures
04/01/99, repurchase price $32,027,454
(collateralized by U.S. Government
Obligations: total market
value $32,663,513) (A) $32,023 32,023
----------
TOTAL REPURCHASE AGREEMENT (COST $32,023) 32,023
----------
TOTAL INVESTMENTS-- 98.3% (COST $365,322) $ 527,277
----------
Percentages indicated are based on net assets of $536,404,824.
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 76
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK -- 98.1%
BASIC MATERIALS -- 2.2%
METAL-ALUMINUM -- 1.4%
Commonwealth Industries 74,000 $ 666
----------
666
- --------------------------------------------------------------------------------
PAPER & RELATED PRODUCTS -- 0.3%
Wausau-Mosinee Paper 9,900 139
----------
139
- --------------------------------------------------------------------------------
STEEL-PRODUCERS -- 0.5%
AK Steel Holding 11,100 250
----------
250
----------
TOTAL BASIC MATERIALS (COST $1,741) 1,055
----------
- --------------------------------------------------------------------------------
CONSUMER CYCLICAL -- 19.7%
APPAREL MANUFACTURERS -- 1.8%
Isaacs I.C. & Company* 136,500 171
Kellwood 7,000 154
Tarrant Apparel Group* 12,500 525
----------
850
- --------------------------------------------------------------------------------
ATHLETIC FOOTWEAR -- 0.7%
K-Swiss, Cl A 13,000 328
----------
328
- --------------------------------------------------------------------------------
AUDIO/VIDEO PRODUCTS -- 0.5%
Polycom* 12,500 234
----------
234
- --------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-ORIGINAL-- 1.7%
Delco Remy International* 76,500 698
Meritor Automotive 8,500 132
----------
830
- --------------------------------------------------------------------------------
AUTO/TRUCK PARTS & EQUIPMENT-REPLACEMENT -- 0.1%
Standard Motor Products 1,500 31
----------
31
- --------------------------------------------------------------------------------
BUILDING-RESIDENTIAL/COMMERCIAL -- 1.1%
Horton (D.R.) 15,600 261
M.D.C. Holdings 1,700 24
Pulte 12,000 250
----------
535
- --------------------------------------------------------------------------------
DISTRIBUTION/WHOLESALE -- 2.1%
Insight Enterprises* 22,500 557
Owens & Minor 23,800 241
Scansource* 9,000 161
United Stationers 4,000 61
----------
1,020
- --------------------------------------------------------------------------------
ENTERTAINMENT SOFTWARE -- 0.7%
Acclaim Entertainment* 38,700 346
----------
346
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
FOOTWEAR & RELATED APPAREL -- 0.5%
Timberland, Cl A* 4,000 $ 252
----------
252
- --------------------------------------------------------------------------------
HOME FURNISHINGS -- 0.6%
Dorel Industries, Cl B* 18,000 304
----------
304
- --------------------------------------------------------------------------------
HOTELS & MOTELS -- 0.5%
Extended Stay America* 23,800 242
----------
242
- --------------------------------------------------------------------------------
MOTION PICTURES & SERVICES -- 0.9%
Cinar, Cl B* 17,500 403
----------
403
- --------------------------------------------------------------------------------
RADIO -- 0.7%
Citadel Communications* 10,000 333
----------
333
- --------------------------------------------------------------------------------
RETAIL-APPAREL/SHOE -- 1.0%
Bebe Stores* 5,000 205
Chico's Fas* 12,500 269
----------
474
- --------------------------------------------------------------------------------
RETAIL-CONSUMER ELECTRONICS -- 1.5%
Tweeter Home Enterprise Group* 22,400 722
----------
722
- --------------------------------------------------------------------------------
RETAIL-DISCOUNT -- 0.4%
BJ's Wholesale Club* 6,900 182
----------
182
- --------------------------------------------------------------------------------
RETAIL-HOME FURNISHINGS -- 1.0%
Pier 1 Imports 57,400 466
----------
466
- --------------------------------------------------------------------------------
RETAIL-RESTAURANTS -- 0.4%
Buffets* 18,200 180
----------
180
- --------------------------------------------------------------------------------
RUBBER-TIRES -- 0.4%
Bandag* 7,300 205
----------
205
- --------------------------------------------------------------------------------
TEXTILE-HOME FURNISHINGS -- 1.9%
Mohawk Industries* 30,600 918
----------
918
- --------------------------------------------------------------------------------
TEXTILE-PRODUCTS -- 0.5%
Dan River, Cl A* 29,000 247
----------
247
- --------------------------------------------------------------------------------
TOYS -- 0.1%
Jakks Pacific* 3,500 65
----------
65
- --------------------------------------------------------------------------------
77 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
TRAVEL SERVICES -- 0.6%
Pegasus Systems* 7,500 $ 299
----------
299
----------
TOTAL CONSUMER CYCLICAL (COST $9,929) 9,466
- --------------------------------------------------------------------------------
CONSUMER NON-CYCLICAL -- 1.1%
FOOD-BAKING -- 0.1%
Earthgrains 2,900 64
----------
64
- --------------------------------------------------------------------------------
FOOD-MISCELLANEOUS/DIVERSIFIED -- 1.0%
Ralcorp Holdings* 7,800 148
Universal Foods 15,900 328
----------
476
----------
TOTAL CONSUMER NON-CYCLICAL (COST $559) 540
----------
- --------------------------------------------------------------------------------
ENERGY -- 2.5%
MARINE SERVICES -- 0.3%
Horizon Offshore* 19,800 134
----------
134
- --------------------------------------------------------------------------------
OIL COMPANIES-EXPLORATION & PRODUCTION-- 1.3%
Barrett Resources* 4,600 115
Devon Energy 9,500 262
Vintage Petroleum 28,100 253
----------
630
- --------------------------------------------------------------------------------
OIL FIELD MACHINERY & EQUIPMENT -- 0.5%
Input/Output* 40,000 253
----------
253
- --------------------------------------------------------------------------------
OIL-FIELD SERVICES -- 0.4%
Core Laboratories N.v.* 9,200 162
----------
162
----------
TOTAL ENERGY (COST $1,298) 1,179
----------
- --------------------------------------------------------------------------------
FINANCIAL -- 10.8%
COMMERCIAL BANKS-EASTERN US -- 1.6%
Commercial Bank of New York 15,100 196
UST 26,800 586
----------
782
- --------------------------------------------------------------------------------
COMMERCIAL BANKS-WESTERN US -- 1.9%
Bancwest 7,500 319
Pacific Bank 27,200 571
----------
890
- --------------------------------------------------------------------------------
FINANCE-INVESTMENT BANKER/BROKER -- 2.0%
EVEREN Capital 14,000 274
Legg Mason 18,000 606
Raymond James Financial 3,700 73
----------
953
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT/ADVISOR SERVICE-- 1.7%
Affiliated Managers Group* 8,100 $ 210
Pilgrim America Capital* 15,000 285
Waddell & Reed Financial, Cl A 15,200 312
----------
807
- --------------------------------------------------------------------------------
LIFE/HEALTH INSURANCE -- 0.2%
ARM Financial Group, Cl A 5,200 78
----------
78
- --------------------------------------------------------------------------------
REITS-APARTMENTS -- 0.7%
Berkshire Realty 17,400 195
Pennsylvania Real Estate
Investment Trust 8,700 162
----------
357
- --------------------------------------------------------------------------------
REITS-DIVERSIFIED -- 0.3%
Duke Realty Investments 6,200 133
National Golf Properties 1,300 29
----------
162
- --------------------------------------------------------------------------------
REITS-OFFICE PROPERTY -- 0.8%
Mack-Cali Realty 13,400 394
----------
394
- --------------------------------------------------------------------------------
REITS-REGIONAL MALLS -- 0.5%
CBL & Associates Properties 7,200 168
Taubman Centers 4,500 55
----------
223
- --------------------------------------------------------------------------------
S&L/THRIFTS-EASTERN US -- 1.1%
Roslyn Bancorp 7,400 125
Webster Financial 14,000 404
----------
529
----------
TOTAL FINANCIAL (COST $5,622) 5,175
----------
- --------------------------------------------------------------------------------
HEALTH CARE -- 7.5%
HEALTH CARE COST CONTAINMENT -- 0.9%
Eclipsys* 7,100 150
Medquist* 10,000 300
----------
450
- --------------------------------------------------------------------------------
MEDICAL INFORMATION SYSTEMS -- 1.0%
Dendrite International* 11,500 257
Medical Manager* 10,000 231
----------
488
- --------------------------------------------------------------------------------
MEDICAL INSTRUMENTS -- 1.0%
Xomed Surgical Products* 12,500 490
----------
490
- --------------------------------------------------------------------------------
MEDICAL LASER SYSTEMS -- 0.3%
Laser Vision Centers * 3,500 133
----------
133
- --------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.7%
Molecular Devices* 5,000 135
Osteotech* 5,900 203
----------
338
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 78
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
MEDICAL-DRUGS -- 1.2%
Dura Pharmaceuticals* 2,700 $ 38
King Pharmaceuticals* 11,000 305
Roberts Pharmaceutical* 10,000 208
----------
551
- --------------------------------------------------------------------------------
MEDICAL-HMO -- 0.3%
Trigon Healthcare* 4,200 144
----------
144
- --------------------------------------------------------------------------------
MEDICAL-WHOLESALE DRUG DISTRIBUTION-- 1.9%
Amerisource Health* 27,000 923
----------
923
- --------------------------------------------------------------------------------
VETERINARY DIAGNOSTICS -- 0.2%
Veterinary Centers of America* 7,000 99
----------
99
----------
TOTAL HEALTH CARE (COST $3,409) 3,616
----------
- --------------------------------------------------------------------------------
INDUSTRIAL -- 7.7%
AEROSPACE/DEFENSE-EQUIPMENT -- 0.2%
Cordant Technologies 500 20
Kellstrom Industries* 4,600 73
----------
93
- --------------------------------------------------------------------------------
BUILDING & CONSTRUCTION PRODUCTS-MISCELLANEOUS -- 0.1%
Dal-Tile International* 3,100 28
----------
28
- --------------------------------------------------------------------------------
BUILDING PRODUCTS-CEMENT/AGGREGATE-- 0.2%
Southdown 1,400 75
----------
75
- --------------------------------------------------------------------------------
CONTAINERS-METAL/GLASS -- 0.6%
Ball 6,500 305
----------
305
- --------------------------------------------------------------------------------
ELECTRONIC MEASURING INSTRUMENTS -- 0.3%
Anaren Microwave* 6,500 158
----------
158
- --------------------------------------------------------------------------------
ELECTRONIC PARTS DISTRIBUTOR -- 0.1%
Kent Electronics* 5,700 57
----------
57
- --------------------------------------------------------------------------------
INDUSTRIAL AUTOMATION/ROBOTICS -- 0.4%
Cognex* 7,900 187
----------
187
- --------------------------------------------------------------------------------
INSTRUMENTS-SCIENTIFIC -- 0.2%
Millipore 4,300 104
----------
104
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
LASERS-SYSTEMS/COMPONENTS -- 1.6%
Cymer* 10,000 $ 199
Uniphase* 5,000 575
----------
774
- --------------------------------------------------------------------------------
MACHINERY-CONSTRUCTION & MINING -- 0.6%
JLG Industries 19,600 267
----------
267
- --------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL -- 0.7%
Motivepower Industries* 12,500 314
----------
314
- --------------------------------------------------------------------------------
METAL PRODUCTS-FASTENERS -- 2.3%
Kaynar Technogolies* 40,000 1,120
----------
1,120
- --------------------------------------------------------------------------------
MISCELLANEOUS MANUFACTURING -- 0.0%
Aptargroup 300 8
----------
8
- --------------------------------------------------------------------------------
TRANSPORTATION-EQUIPMENT & LEASING-- 0.4%
Greenbrier Companies 21,700 206
----------
206
----------
TOTAL INDUSTRIAL (COST $2,941) 3,696
----------
- --------------------------------------------------------------------------------
SERVICES -- 7.8%
COMMERCIAL SERVICES -- 0.2%
Innotrac* 5,000 82
----------
82
- --------------------------------------------------------------------------------
COMPUTER SERVICES -- 1.1%
Cognizant Technology Solutions* 17,500 485
Computer Horizons* 5,000 55
----------
540
- --------------------------------------------------------------------------------
CONSULTING SERVICES -- 1.9%
Diamond Technology Partners* 12,500 288
Forrester Research* 7,500 228
Professional Detailing* 9,400 246
USWeb* 4,000 165
----------
927
- --------------------------------------------------------------------------------
DIRECT MARKETING -- 0.4%
Advo* 10,900 211
----------
211
- --------------------------------------------------------------------------------
HUMAN RESOURCES -- 2.9%
AHL Services* 12,900 265
Modis Professional Services* 8,800 80
Personnel Group of America* 19,100 137
RCM Technologies* 10,400 114
Romac International* 91,500 778
----------
1,374
- --------------------------------------------------------------------------------
79 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
- -----------------------
As of March 31, 1999
PBHG STRATEGIC SMALL COMPANY FUND
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
RENTAL AUTO/EQUIPMENT -- 0.7%
Avis Rent A Car* 5,100 $ 141
United Rentals* 7,500 214
----------
355
- --------------------------------------------------------------------------------
SECURITY SERVICES -- 0.6%
Kroll-O'Gara* 10,000 271
----------
271
----------
TOTAL SERVICES (COST $3,602) 3,760
----------
- --------------------------------------------------------------------------------
TECHNOLOGY -- 34.0%
APPLICATIONS SOFTWARE -- 5.0%
Clarify* 12,500 334
Great Plains Software* 10,000 387
New Era of Networks* 10,000 677
Peregrine Systems* 14,800 498
Rational Software* 10,000 268
Symix Systems* 7,500 114
Timberline Software 10,799 123
----------
2,401
- --------------------------------------------------------------------------------
CIRCUITS -- 2.1%
Hadco* 10,000 315
Power Integration* 10,000 317
Vitesse Semiconductor* 7,800 395
----------
1,027
- --------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 5.1%
Actuate Software* 10,000 330
Ansys* 15,000 103
Bindview Development* 10,000 311
Brio Technology* 10,000 211
Business Objects ADR* 10,000 297
Macromedia* 11,500 521
Smith-Gardner & Associates* 20,000 283
Structural Dynamics Research* 4,600 88
Verity* 10,000 335
----------
2,479
- --------------------------------------------------------------------------------
COMPUTERS-MEMORY DEVICES -- 0.3%
Hutchinson Technology* 5,700 142
----------
142
- --------------------------------------------------------------------------------
COMPUTERS-PERIPHERAL EQUIPMENT -- 0.8%
Cybex Computer Products* 15,000 269
Diamond Multimedia Systems* 20,000 123
----------
392
- --------------------------------------------------------------------------------
COMPUTERS-VOICE RECOGNITION -- 0.4%
Intervoice* 17,500 192
----------
192
- --------------------------------------------------------------------------------
Market
Description Shares Value (000)
- --------------------------------------------------------------------------------
DATA PROCESSING/MANAGEMENT -- 3.9%
American Management Systems 4,800 $ 164
Documentum* 17,000 294
Informix* 27,000 199
Reynolds & Reynolds* 16,100 306
Sterling Software* 9,700 230
Sybase* 36,800 292
TSI International Software Limited* 7,500 366
----------
1,851
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS-SEMICONDUCTORS-- 4.5%
Actel* 10,600 174
Applied Micro Circuits* 9,700 415
Cypress Semiconductor* 13,000 117
Novellus Systems* 2,000 110
Qlogic* 7,000 470
SDL* 4,400 399
Transwitch* 10,000 453
----------
2,138
- --------------------------------------------------------------------------------
INTERNET SOFTWARE -- 0.6%
Broadvision* 5,000 299
----------
299
- --------------------------------------------------------------------------------
NETWORK SOFTWARE -- 1.9%
Concord Communications* 7,000 399
Concur Technologies* 100 5
Legato Systems* 7,500 387
Wall Data* 8,000 115
----------
906
- --------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 1.8%
Apex PC Solutions* 15,000 209
Network Appliance* 12,600 638
----------
847
- --------------------------------------------------------------------------------
PRINTERS & RELATED PRODUCTS -- 0.5%
Splash Technology Holdings* 42,000 255
----------
255
- --------------------------------------------------------------------------------
SATELLITE TELECOMMUNICATIONS -- 0.2%
Gilat Communications Limited* 5,900 82
----------
82
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT -- 3.8%
Advanced Fibre* 35,000 336
Antec* 10,300 221
Aware* 4,300 202
Excel Switching* 5,800 122
Geotel Communications* 17,500 803
Melita International* 11,500 149
----------
1,833
- --------------------------------------------------------------------------------
[PILLAR LOGO OMITTED] 80
<PAGE>
THE PBHG FUNDS, INC.
STATEMENT OF NET ASSETS
-----------------------
As of March 31, 1999
PBHG STRATEGIC SMALL COMPANY FUND
Shares/Face Market
Description Amount (000) Value (000)
- --------------------------------------------------------------------------------
WIRELESS EQUIPMENT -- 3.1%
Microwave Power Devices* 10,000 $ 80
Pinnacle Holdings* 22,300 337
Proxim* 10,000 287
RF Micro Devices* 8,000 766
----------
1,470
----------
TOTAL TECHNOLOGY (COST $11,454) 16,314
----------
- --------------------------------------------------------------------------------
TRANSPORTATION -- 2.9%
AIRLINES -- 2.1%
Alaska Airgroup* 4,300 204
Mesaba Holdings* 12,100 162
Midway Airlines* 53,600 630
----------
996
- --------------------------------------------------------------------------------
TRANSPORTATION-AIR FREIGHT -- 0.5%
Eagle USA Airfreight* 7,700 250
----------
250
- --------------------------------------------------------------------------------
TRANSPORTATION-TRUCK -- 0.3%
Landstar Systems* 5,000 166
----------
166
----------
TOTAL TRANSPORTATION (COST $1,556) 1,412
----------
- --------------------------------------------------------------------------------
UTILITIES -- 1.9%
ELECTRIC INTEGRATED -- 0.8%
Central Hudson Gas Electric 1,700 61
Idacorp 2,900 85
Puget Sound Energy 9,100 210
----------
356
- --------------------------------------------------------------------------------
GAS-DISTRIBUTION -- 0.4%
Wicor 10,000 203
----------
203
- --------------------------------------------------------------------------------
INDEPENDENT POWER PRODUCER -- 0.7%
Calpine* 9,200 335
----------
335
----------
TOTAL UTILITIES (COST $919) 894
----------
TOTAL COMMON STOCK (COST $43,030) 47,107
----------
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 1.6%
J.P. Morgan Mortgage
4.95%, dated 03/31/99, matures 04/01/99,
repurchase price $779,414 (collateralized
by U.S. Government Obligations: total
market value $794,895) (A) $779 779
----------
TOTAL REPURCHASE AGREEMENT (COST $779) 779
----------
TOTAL INVESTMENTS-- 99.7% (COST $43,809) 47,886
----------
Market
Description Value (000)
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES -- 0.3%
Receivable for securities sold $ 1,497
Payable for securities purchased (1,228)
Other assets and liabilities (126)
----------
TOTAL OTHER ASSETS AND LIABILITIES, NET 143
----------
- --------------------------------------------------------------------------------
NET ASSETS:
Fund Shares of PBHG Class (authorized 200 million
shares -- $0.001 par value) based on 4,556,028
outstanding shares of common stock 42,126
Undistributed net investment income 19
Accumulated net realized gain on investments 1,807
Net unrealized appreciation on investments 4,077
----------
TOTAL NET ASSETS-- 100.0% $ 48,029
----------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE $ 10.54
----------
* Non-Income Producing Security
(A) -- Tri-Party Repurchase Agreement
Adr -- American Depository Receipt
Cl -- Class
The accompanying notes are an integral part of the financial statements.
81 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES (000)
- --------------------------------------------------------------------------------
March 31, 1999
<TABLE>
<CAPTION>
--------------- ------------- ------------
PBHG PBHG PBHG
NEW LARGE CAP MID-CAP
OPPORTUNITIES VALUE VALUE
FUND FUND FUND
--------------- ------------- ------------
<S> <C> <C> <C>
ASSETS:
Investment securities (Cost $13,978, $41,497, $57,169, $75,757, $3,873,
$9,466, $135,189 and $365,322 respectively) at market value $17,315 $43,710 $58,323
Cash -- -- --
Dividends and interest receivable 1 36 51
Receivable for capital shares sold 98 42 14
Receivable for investment securities sold 999 3,671 8,200
Other assets 1 -- --
------- ------- -------
Total assets 18,414 47,459 66,588
------- ------- -------
LIABILITIES:
Payable for investment securities purchased 1,656 2,420 9,455
Payable for income distribution -- -- --
Payable for capital shares redeemed -- 60 120
Line of credit borrowing -- -- --
Accrued expenses 16 57 32
------- ------- -------
Total liabilities 1,672 2,537 9,607
------- ------- -------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG New
Opportunities, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap
Value, PBHG Focused Value, PBHG International, PBHG Cash Reserves and
PBHG Technology and Communications Funds -- $0.001 par value) based on
1,016,765, 3,243,949, 3,776,618, 6,132,424, 349,610, 1,053,621,
144,229,072 and 19,441,571
outstanding shares of common stock 14,192 34,714 43,999
Undistributed net investment income/distributions in excess of
net investment income -- 72 6
Accumulated net realized gain (loss) on investments 489 7,923 11,822
Net unrealized appreciation (depreciation) on investments and
foreign currency translation 2,061 2,213 1,154
------- ------- -------
NET ASSETS $16,742 $44,922 $56,981
------- ------- -------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $16.47 $13.85 $15.09
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
----------- -------------- -------------
PBHG PBHG
SMALL CAP FOCUSED PBHG
VALUE VALUE INTERNATIONAL
FUND FUND FUND
----------- -------------- -------------
<S> <C> <C>
ASSETS:
Investment securities (Cost $13,978, $41,497, $57,169, $75,757, $3,873,
$9,466, $135,189 and $365,322 respectively) at market value $68,068 $ 3,857 $ 13,129
Cash -- -- 723
Dividends and interest receivable 45 -- 32
Receivable for capital shares sold 2,478 15 2
Receivable for investment securities sold 3,944 229 25
Other assets -- 3 --
------- ------ -------
Total assets 74,535 4,104 13,911
------- ------ -------
LIABILITIES:
Payable for investment securities purchased 3,800 441 --
Payable for income distribution -- -- --
Payable for capital shares redeemed 185 -- 1,640
Line of credit borrowing 700 -- --
Accrued expenses 63 5 51
------- ------ -------
Total liabilities 4,748 446 1,691
------- ------ -------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG New
Opportunities, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap
Value, PBHG Focused Value, PBHG International, PBHG Cash Reserves and
PBHG Technology and Communications Funds -- $0.001 par value) based on
1,016,765, 3,243,949, 3,776,618, 6,132,424, 349,610, 1,053,621,
144,229,072 and 19,441,571
outstanding shares of common stock 85,999 3,626 8,563
Undistributed net investment income/distributions in excess of
net investment income 40 -- (33)
Accumulated net realized gain (loss) on investments (8,563) 87 22
Net unrealized appreciation (depreciation) on investments and
foreign currency translation (7,689) (55) 3,668
------- ------ -------
NET ASSETS $69,787 $3,658 $12,220
------- ------ -------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $11.38 $10.46 $11.60
------- ------ -------
</TABLE>
<TABLE>
<CAPTION>
------------ ----------------
PBHG PBHG
CASH TECHNOLOGY &
RESERVES COMMUNICATIONS
FUND FUND
------------ ----------------
<S> <C> <C>
ASSETS:
Investment securities (Cost $13,978, $41,497, $57,169, $75,757, $3,873,
$9,466, $135,189 and $365,322 respectively) at market value $135,189 $527,277
Cash -- --
Dividends and interest receivable 512 2
Receivable for capital shares sold 27,619 19,934
Receivable for investment securities sold -- 10,343
Other assets 1 3
-------- --------
Total assets 163,321 557,559
-------- --------
LIABILITIES:
Payable for investment securities purchased -- 19,462
Payable for income distribution 443 --
Payable for capital shares redeemed 18,598 1,019
Line of credit borrowing -- --
Accrued expenses 41 673
-------- --------
Total liabilities 19,082 21,154
-------- --------
NET ASSETS:
Portfolio shares (authorized 200 million shares for each of the PBHG New
Opportunities, PBHG Large Cap Value, PBHG Mid-Cap Value, PBHG Small Cap
Value, PBHG Focused Value, PBHG International, PBHG Cash Reserves and
PBHG Technology and Communications Funds -- $0.001 par value) based on
1,016,765, 3,243,949, 3,776,618, 6,132,424, 349,610, 1,053,621,
144,229,072 and 19,441,571
outstanding shares of common stock 144,230 284,532
Undistributed net investment income/distributions in excess of
net investment income 3 --
Accumulated net realized gain (loss) on investments 6 89,918
Net unrealized appreciation (depreciation) on investments and
foreign currency translation -- 161,955
-------- --------
NET ASSETS $144,239 $536,405
-------- --------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $1.00 $27.59
-------- --------
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
82 & 83 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF OPERATIONS (000)
- ------------------------------
For the Period Ended March 31, 1999
<TABLE>
<CAPTION>
--------- --------- --------- --------- --------- --------- ---------
PBHG PBHG PBHG
PBHG EMERGING LARGE CAP PBHG PBHG PBHG LARGE CAP
GROWTH GROWTH GROWTH SELECT EQUITY CORE GROWTH LIMITED 20
FUND FUND FUND FUND FUND FUND FUND
--------- --------- --------- --------- --------- --------- ---------
4/1/98 4/1/98 4/1/98 4/1/98 4/1/98 4/1/98 4/1/98
to to to to to to to
3/31/99 3/31/99 3/31/99 3/31/99 3/31/99 3/31/99 3/31/99
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 516 $ 526 $ 221 $ 49 $ 57 $ 10 $ 432
Interest 12,843 5,024 535 1,195 275 823 2,011
Less: Foreign Taxes Withheld -- -- -- -- -- -- --
--------- --------- ------- ------- ----- -------- --------
Total Investment Income 13,359 5,550 756 1,244 332 833 2,443
--------- --------- ------- ------- ----- -------- --------
EXPENSES:
Investment Advisory Fees 34,307 8,747 1,056 2,394 972 1,399 3,318
Administrative Fees 6,054 1,544 211 423 172 210 585
Transfer Agent Fees 9,943 2,593 377 720 395 229 736
Registration and Filing Fees 316 107 14 39 35 18 26
Printing Fees 1,310 353 52 95 41 46 144
Professional Fees 628 168 18 46 19 20 58
Custodian Fees 246 69 11 17 13 13 20
Insurance and Other Fees 254 68 9 28 6 13 29
Directors' Fees 87 36 2 5 2 2 5
Amortization of Deferred
Organizational Costs -- -- 2 2 1 7 6
Line of Credit Expenses 185 58 8 15 6 7 17
Interest Expense 3 -- -- -- 1 -- --
Distribution Fees 1 193 -- -- -- -- -- --
--------- --------- ------- ------- ----- -------- --------
TOTAL EXPENSES 53,526 13,743 1,760 3,784 1,663 1,964 4,944
--------- --------- ------- ------- ----- -------- --------
Waiver and Reimbursement -- -- -- -- -- -- --
Advisory Fee Recaptured -- -- -- -- -- -- --
--------- --------- ------- ------- ----- -------- --------
Net Expenses 53,526 13,743 1,760 3,784 1,663 1,964 4,944
--------- --------- ------- ------- ----- -------- --------
NET INVESTMENT INCOME (LOSS) (40,167) (8,193) (1,004) (2,540) (1,331) (1,131) (2,501)
--------- --------- ------- ------- ----- -------- --------
Net Realized Gain (Loss) from
Security Transactions3 (123,200) (34,951) 11,109 45,647 16,034 9,385 32,587
Net Realized Loss on Foreign
Currency Transactions -- -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments (524,058) (189,387) 9,077 (31,961) (15,463) (27,057) 149,316
--------- --------- ------- ------- ----- -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS (647,258) (224,338) 20,186 13,686 571 (17,672) 181,903
--------- --------- ------- ------- ----- -------- --------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $(687,425) $(232,531) $19,182 $11,146 $(760) $(18,803) $179,402
--------- --------- ------- ------- ----- -------- --------
</TABLE>
<TABLE>
<CAPTION>
----------- --------- --------- --------- --------- ---------
PBHG PBHG PBHG PBHG PBHG
NEW LARGE CAP MID-CAP SMALL CAP FOCUSED PBHG
OPPORTUNITIES VALUE VALUE VALUE VALUE INTERNATIONAL
FUND FUND FUND FUND FUND FUND
----------- --------- --------- --------- --------- ---------
2/12/99 2 4/1/98 4/1/98 4/1/98 2/12/99 2 4/1/98
to to to to to to
3/31/99 3/31/99 3/31/99 3/31/99 3/31/99 3/31/99
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ -- $ 1,008 $ 737 $ 681 $ 3 $316
Interest 11 99 128 106 2 28
Less: Foreign Taxes Withheld -- -- -- -- -- (24)
------ ------- ------ -------- ---- ----
Total Investment Income 11 1,107 865 787 5 320
------ ------- ------ -------- ---- ----
EXPENSES:
Investment Advisory Fees 16 450 551 1,024 3 160
Administrative Fees 2 104 97 154 1 24
Transfer Agent Fees 2 75 132 239 3 70
Registration and Filing Fees 3 8 7 9 1 16
Printing Fees -- 16 14 30 -- 5
Professional Fees 1 9 6 14 -- 3
Custodian Fees -- 18 17 18 1 24
Insurance and Other Fees -- 7 5 4 -- 12
Directors' Fees -- 1 1 2 -- 1
Amortization of Deferred
Organizational Costs -- -- 4 4 -- --
Line of Credit Expenses -- 3 3 4 -- --
Interest Expense -- 2 24 12 -- --
Distribution Fees 1 -- -- -- -- -- --
------ ------- ------ -------- ---- ----
TOTAL EXPENSES 24 693 861 1,514 9 315
------ ------- ------ -------- ---- ----
Waiver and Reimbursement (1) -- -- -- (4) --
Advisory Fee Recaptured -- 9 -- -- -- --
------ ------- ------ -------- ---- ----
Net Expenses 23 702 861 1,514 5 315
------ ------- ------ -------- ---- ----
NET INVESTMENT INCOME (LOSS) (12) 405 4 (727) -- 5
------ ------- ------ -------- ---- ----
Net Realized Gain (Loss) from
Security Transactions3 566 17,489 11,898 (8,356) 93 624
Net Realized Loss on Foreign
Currency Transactions -- -- -- -- -- (61)
Net Change in Unrealized Appreciation
(Depreciation) on Investments 2,061 (2,893) (2,155) (14,071) (55) (15)
------ ------- ------ -------- ---- ----
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 2,627 14,596 9,743 (22,427) 38 548
------ ------- ------ -------- ---- ----
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $2,615 $15,001 $9,747 $(23,154) $38 $553
------ ------- ------ -------- ---- ----
</TABLE>
<TABLE>
<CAPTION>
--------- --------- ---------
PBHG PBHG PBHG
CASH TECHNOLOGY & STRATEGIC
RESERVES COMMUNICATIONS SMALL
FUND FUND COMPANY FUND
--------- --------- ---------
4/1/98 4/1/98 4/1/98
to to to
3/31/99 3/31/99 3/31/99
--------- --------- ---------
INVESTMENT INCOME:
<S> <C> <C> <C>
Dividends $ -- $ 123 $ 285
Interest 7,108 1,402 106
Less: Foreign Taxes Withheld -- -- --
------ -------- --------
Total Investment Income 7,108 1,525 391
------ -------- --------
EXPENSES:
Investment Advisory Fees 393 3,440 730
Administrative Fees 197 607 110
Transfer Agent Fees 217 1,026 206
Registration and Filing Fees 14 63 15
Printing Fees 42 124 22
Professional Fees 18 60 9
Custodian Fees 26 29 18
Insurance and Other Fees 7 23 1
Directors' Fees 2 7 2
Amortization of Deferred
Organizational Costs 1 2 5
Line of Credit Expenses -- 21 4
Interest Expense -- 9 2
Distribution Fees 1 -- -- --
------ -------- --------
TOTAL EXPENSES 917 5,411 1,124
------ -------- --------
Waiver and Reimbursement -- -- (28)
Advisory Fee Recaptured -- -- --
------ -------- --------
Net Expenses 917 5,411 1,096
------ -------- --------
NET INVESTMENT INCOME (LOSS) 6,191 (3,886) (705)
------ -------- --------
Net Realized Gain (Loss) from
Security Transactions3 6 119,887 2,035
Net Realized Loss on Foreign
Currency Transactions -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments -- 34,248 (14,689)
------ -------- --------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS 6 154,135 (12,654)
------ -------- --------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $6,197 $150,249 $(13,359)
------ -------- --------
<FN>
1. All distribution fees are incurred in the Advisor Class.
2. The PBHG New Opportunities and PBHG Focused Value Funds commenced operations
on February 12, 1999.
3. Included in net realized gain from security transactions for the PBHG Large
Cap Value Fund were gains of $7,589,804 from an in-kind redemption.
</FN>
</TABLE>
Amounts designated as "-" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
84 & 85 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000)
- -----------------------------------------
<TABLE>
<CAPTION>
-------------------------- -------------------------- --------------------------
PBHG PBHG PBHG
GROWTH EMERGING GROWTH LARGE CAP GROWTH
FUND FUND FUND
-------------------------- -------------------------- --------------------------
4/1/98 4/1/97 4/1/98 4/1/97 4/1/98 4/1/97
to to to to to to
3/31/99 3/31/98 3/31/99 3/31/98 3/31/99 3/31/98
----------- ----------- ---------- ----------- ----------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (40,167) $ (41,659) $ (8,193) $ (12,141) $ (1,004) $ (1,073)
Net Realized Gain (Loss) from Security
Transactions (123,200) 140,179 (34,951) 52,716 11,109 14,465
Net Realized (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (524,058) 1,461,423 (189,387) 384,540 9,077 49,242
---------- ---------- ---------- ---------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations (687,425) 1,559,943 (232,531) 425,115 19,182 62,634
---------- ---------- ---------- ---------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security Transactions -- -- (3,473) -- (9,078) (1,402)
---------- ---------- ---------- ---------- -------- --------
Total Distributions -- -- (3,473) -- (9,078) (1,402)
---------- ---------- ---------- ---------- -------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 2,989,888 2,552,092 2,067,441 1,875,607 130,237 174,995
Shares Issued upon Reinvestment
of Distributions -- -- 3,287 -- 8,663 1,233
Shares Redeemed (4,423,533) (3,392,800) (2,502,873) (2,092,185) (150,577) (211,769)
---------- ---------- ---------- ---------- -------- --------
Total PBHG Class Transactions (1,433,645) (840,708) (432,145) (216,578) (11,677) (35,541)
---------- ---------- ---------- ---------- -------- --------
Advisor Class
Shares Issued 21,461 72,982 -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- -- --
Shares Redeemed (33,023) (11,739) -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Total Advisor Class Transactions (11,562) 61,243 -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Increase (Decrease) in Net Assets Derived
from Capital Share Transactions (1,445,207) (779,465) (432,145) (216,578) (11,677) (35,541)
---------- ---------- ---------- ---------- -------- --------
Total Increase (Decrease) in Net Assets (2,132,632) 780,478 (668,149) 208,537 (1,573) 25,691
---------- ---------- ---------- ---------- -------- --------
NET ASSETS:
Beginning of Period 5,427,607 4,647,129 1,404,157 1,195,620 145,662 119,971
---------- ---------- ---------- ---------- -------- --------
End of Period $3,294,975 $5,427,607 $ 736,008 $1,404,157 $144,089 $145,662
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 126,179 102,864 93,873 80,964 5,693 9,034
Shares Issued upon Reinvestment
of Distributions -- -- 155 -- 409 66
Shares Redeemed (183,539) (133,809) (112,679) (88,673) (6,659) (11,093)
---------- ---------- ---------- ---------- -------- --------
Total PBHG Class Share Transactions (57,360) (30,945) (18,651) (7,709) (557) (1,993)
---------- ---------- ---------- ---------- -------- --------
Advisor Class
Shares Issued 902 3,017 -- -- -- --
Shares Issued upon Reinvestment
of Distributions -- -- -- -- -- --
Shares Redeemed (1,354) (462) -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Total Advisor Class Share Transactions (452) 2,555 -- -- -- --
---------- ---------- ---------- ---------- -------- --------
Net Increase (Decrease) in Shares Outstanding (57,812) (28,390) (18,651) (7,709) (557) (1,993)
---------- ---------- ---------- ---------- -------- --------
---------- ---------- ---------- ---------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
------------------------ ------------------------- -------------------------
PBHG PBHG PBHG
SELECT EQUITY CORE GROWTH LIMITED
FUND FUND FUND
------------------------ ------------------------- -------------------------
4/1/98 4/1/97 4/1/98 4/1/97 4/1/98 4/1/97
to to to to to to
3/31/99 3/31/98 3/31/99 3/31/98 3/31/99 3/31/98
---------- --------- --------- ----------- --------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (2,540) $ (4,351) $ (1,331) $ (2,644) $ (1,131) $ (1,200)
Net Realized Gain (Loss) from Security
Transactions 45,647 21,675 16,034 (5,477) 9,385 11,738
Net Realized (Loss) on Foreign Currency
Transactions -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (31,961) 140,704 (15,463) 79,526 (27,057) 64,636
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations 11,146 158,028 (760) 71,405 (18,803) 75,174
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- -- -- --
Net Realized Gains from Security Transactions -- -- -- -- (5,915) (5,376)
-------- -------- -------- -------- -------- --------
Total Distributions -- -- -- -- (5,915) (5,376)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 193,042 122,632 203,788 110,417 9,499 19,454
Shares Issued upon Reinvestment of Distributions -- -- -- -- 5,730 5,219
Shares Redeemed (304,360) (317,070) (282,053) (300,307) (60,668) (53,823)
-------- -------- -------- -------- -------- --------
Total PBHG Class Transactions (111,318) (194,438) (78,265) (189,890) (45,439) (29,150)
-------- -------- -------- -------- -------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Advisor Class Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (111,318) (194,438) (78,265) (189,890) (45,439) (29,150)
-------- -------- -------- -------- -------- --------
Total Increase (Decrease) in Net Assets (100,172) (36,410) (79,025) (118,485) (70,157) 40,648
-------- -------- -------- -------- -------- --------
NET ASSETS:
Beginning of Period 336,076 372,486 165,510 283,995 178,168 137,520
-------- -------- -------- -------- -------- --------
End of Period $235,904 $336,076 $ 86,485 $165,510 $108,011 $178,168
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 8,480 6,144 16,673 9,459 777 1,549
Shares Issued upon Reinvestment of Distributions -- -- -- -- 484 442
Shares Redeemed (13,299) (15,642) (22,754) (24,681) (4,876) (4,532)
-------- -------- -------- -------- -------- --------
Total PBHG Class Share Transactions (4,819) (9,498) (6,081) (15,222) (3,615) (2,541)
-------- -------- -------- -------- -------- --------
Advisor Class
Shares Issued -- -- -- -- -- --
Shares Issued upon Reinvestment of Distributions -- -- -- -- -- --
Shares Redeemed -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Advisor Class Share Transactions -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net Increase (Decrease) in Shares Outstanding (4,819) (9,498) (6,081) (15,222) (3,615) (2,541)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
------------------------
PBHG
LARGE CAP 20
FUND
------------------------
4/1/98 4/1/97
to to
3/31/99 3/31/98
--------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income (Loss) $ (2,501) $ (857)
Net Realized Gain (Loss) from Security
Transactions 32,587 8,307
Net Realized (Loss) on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions 149,316 52,271
-------- --------
Net Increase (Decrease) in Net Assets
Resulting from Operations 179,402 59,721
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- --
Net Realized Gains from Security Transactions (5,087) --
-------- --------
Total Distributions (5,087) --
-------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 747,561 228,573
Shares Issued upon Reinvestment of Distributions 4,843 --
Shares Redeemed (516,273) (165,482)
-------- --------
Total PBHG Class Transactions 236,131 63,091
-------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
-------- --------
Total Advisor Class Transactions -- --
-------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions 236,131 63,091
-------- --------
Total Increase (Decrease) in Net Assets 410,446 122,812
-------- --------
NET ASSETS:
Beginning of Period 192,631 69,819
-------- --------
End of Period $603,077 $192,631
-------- --------
-------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 40,903 17,218
Shares Issued upon Reinvestment of Distributions 254 --
Shares Redeemed (28,184) (12,712)
-------- --------
Total PBHG Class Share Transactions 12,973 4,506
-------- --------
Advisor Class
Shares Issued -- --
Shares Issued upon Reinvestment of Distributions -- --
Shares Redeemed -- --
-------- --------
Total Advisor Class Share Transactions -- --
-------- --------
Net Increase (Decrease) in Shares Outstanding 12,973 4,506
-------- --------
-------- --------
<FN>
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
86 & 87 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- Continued
- ------------------------------------------------------
<TABLE>
<CAPTION>
----------------- -------------------------- ---------------------------
PBHG PBHG PBHG
NEW OPPORTUNITIES LARGE CAP VALUE MID-CAP VALUE
FUND FUND FUND
----------------- -------------------------- ---------------------------
2/12/994 4/1/98 4/1/97 4/1/98 5/1/971
to to to to to
3/31/99 3/31/99 3/31/98 3/31/99 3/31/98
----------- ---------- ----------- ----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (12) $ 405 $ 555 $ 4 $ (41)
Net Realized Gain (Loss) from Security
Transactions 566 17,489 12,603 11,898 5,307
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions 2,061 (2,893) 5,906 (2,155) 3,309
------- ------- ------- ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations 2,615 15,001 19,064 9,747 8,575
------- ------- ------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- (579) (343) -- --
Distributions in excess of net investment income -- -- -- -- --
Net Realized Gains from Security Transactions -- (9,589) (5,030) (3,487) (1,853)
------- ------- ------- ------- -------
Total Distributions -- (10,168) (5,373) (3,487) (1,853)
------- ------- ------- ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 4,982 38,949 60,032 130,518 95,035
Shares Transfered 2 9,767 -- 10,076 -- --
Shares Issued upon Reinvestment of Distributions -- 9,896 5,275 3,287 1,731
Shares Redeemed 3 (622) (85,232) (38,860) (137,257) (49,315)
------- ------- ------- ------- -------
Total PBHG Class Transactions 14,127 (36,387) 36,523 (3,452) 47,451
------- ------- ------- ------- -------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions 14,127 (36,387) 36,523 (3,452) 47,451
------- ------- ------- ------- -------
Total Increase (Decrease) in Net Assets 16,742 (31,554) 50,214 2,808 54,173
------- ------- ------- ------- -------
NET ASSETS:
Beginning of Period -- 76,476 26,262 54,173 --
------- ------- ------- ------- -------
End of Period $16,742 $44,922 $76,476 $56,981 $54,173
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 336 2,866 5,169 9,105 7,022
Shares Transfered 2 723 -- 989 -- --
Shares Issued upon Reinvestment of Distributions -- 762 460 286 132
Shares Redeemed 3 (42) (6,262) (3,337) (9,156) (3,612)
------- ------- ------- ------- -------
Total PBHG Class Share Transactions 1,017 (2,634) 3,281 235 3,542
------- ------- ------- ------- -------
Net Increase (Decrease) in Shares Outstanding 1,017 (2,634) 3,281 235 3,542
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
-------------------------- ------------ -------------------------
PBHG PBHG PBHG
SMALL CAP VALUE FOCUSED VALUE INTERNATIONAL
FUND FUND FUND
-------------------------- ------------ -------------------------
4/1/98 5/1/971 2/12/994 4/1/98 4/1/97
to to to to to
3/31/99 3/31/98 3/31/99 3/31/99 3/31/98
----------- ---------- ---------- ----------- ---------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Investment Income (Loss) $ (727) $ (264) $ -- $ 5 $ (26)
Net Realized Gain (Loss) from Security
Transactions (8,356) 10,557 93 624 1,631
Net Realized Gain (Loss) on Foreign Currency
Transactions -- -- -- (61) (22)
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions (14,071) 6,382 (55) (15) 2,014
--------- -------- ------ ------- -------
Net Increase (Decrease) in Net Assets Resulting
from Operations (23,154) 16,675 38 553 3,597
--------- -------- ------ ------- -------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- (5) --
Distributions in excess of net investment income -- -- -- (201) --
Net Realized Gains from Security Transactions (6,608) (3,873) -- (498) (1,541)
--------- -------- ------ ------- -------
Total Distributions (6,608) (3,873) -- (704) (1,541)
--------- -------- ------ ------- -------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 122,004 209,518 3,079 54,185 49,801
Shares Transfered 2 -- -- 1,294 -- --
Shares Issued upon Reinvestment of Distributions 5,980 3,541 -- 687 1,478
Shares Redeemed 3 (154,269) (100,027) (753) (63,406) (53,695)
--------- -------- ------ ------- -------
Total PBHG Class Transactions (26,285) 113,032 3,620 (8,534) (2,416)
--------- -------- ------ ------- -------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (26,285) 113,032 3,620 (8,534) (2,416)
--------- -------- ------ ------- -------
Total Increase (Decrease) in Net Assets (56,047) 125,834 3,658 (8,685) (360)
--------- -------- ------ ------- -------
NET ASSETS:
Beginning of Period 125,834 -- -- 20,905 21,265
--------- -------- ------ ------- -------
End of Period $ 69,787 $125,834 $3,658 $12,220 $20,905
--------- -------- ------ ------- -------
--------- -------- ------ ------- -------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 9,257 15,018 297 4,707 4,207
Shares Transfered 2 -- -- 126 -- --
Shares Issued upon Reinvestment of Distributions 486 264 -- 61 143
Shares Redeemed 3 (11,790) (7,103) (73) (5,450) (4,503)
--------- -------- ------ ------- -------
Total PBHG Class Share Transactions (2,047) 8,179 350 (682) (153)
--------- -------- ------ ------- -------
Net Increase (Decrease) in Shares Outstanding (2,047) 8,179 350 (682) (153)
--------- -------- ------ ------- -------
--------- -------- ------ ------- -------
</TABLE>
<TABLE>
<CAPTION>
-------------------------
PBHG
CASH RESERVES
FUND
-------------------------
4/1/98 4/1/97
to to
3/31/99 3/31/98
----------- ----------
INVESTMENT ACTIVITIES:
<S> <C> <C>
Net Investment Income (Loss) $ 6,191 $ 9,338
Net Realized Gain (Loss) from Security
Transactions 6 5
Net Realized Gain (Loss) on Foreign Currency
Transactions -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments and Foreign
Currency Transactions -- --
-------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations 6,197 9,343
-------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income (6,192) (9,338)
Distributions in excess of net investment income -- --
Net Realized Gains from Security Transactions -- --
-------- --------
Total Distributions (6,192) (9,338)
-------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 3,499,237 1,974,482
Shares Transfered 2 -- --
Shares Issued upon Reinvestment of Distributions 4,628 9,128
Shares Redeemed 3 (3,477,205) (2,207,617)
-------- --------
Total PBHG Class Transactions 26,660 (224,007)
-------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions 26,660 (224,007)
-------- --------
Total Increase (Decrease) in Net Assets 26,665 (224,002)
-------- --------
NET ASSETS:
Beginning of Period 117,574 341,576
-------- --------
End of Period $144,239 $117,574
-------- --------
-------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 3,499,237 1,974,482
Shares Transfered 2 -- --
Shares Issued upon Reinvestment of Distributions 4,628 9,128
Shares Redeemed 3 (3,477,205) (2,207,617)
-------- --------
Total PBHG Class Share Transactions 26,660 (224,007)
-------- --------
Net Increase (Decrease) in Shares Outstanding 26,660 (224,007)
-------- --------
-------- --------
<FN>
1. The PBHG Mid-Cap Value and PBHG Small Cap Value Funds commenced operations on May 1, 1997.
2. Net asset value of shares issued in connection with the transfer of the Newbold's
Equity Fund and PBHG Advisor Funds, Inc. Reference note 6 of the Notes to Financial Statements.
3. Included in capital shares redeemed for the PBHG Large Cap Value Fund was an in-kind redemption
on January 4, 1999 of 3,232,902 shares and $44,452,402.
4. The PBHG New Opportunities and PBHG Focused Value Funds commenced operations on February 12, 1999.
</FN>
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
88 & 89 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS (000) -- Concluded
- ------------------------------------------------------
<TABLE>
<CAPTION>
------------------------- ---------------------------
PBHG TECHNOLOGY & PBHG STRATEGIC
COMMUNICATIONS SMALL COMPANY
FUND FUND
------------------------- ---------------------------
4/1/98 4/1/97 4/1/98 4/1/97
to to to to
3/31/99 3/31/98 3/31/99 3/31/98
--------- ----------- ----------- -----------
INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (3,886) $ (5,482) $ (705) $ (945)
Net Realized Gain (Loss) from Security Transactions 119,887 4,812 2,035 13,618
Net Realized (Loss) on Foreign Currency Transactions -- -- -- --
Net Change in Unrealized Appreciation (Depreciation) on
Investments and Foreign Currency Transactions 34,248 179,889 (14,689) 25,036
---------- ---------- ------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations 150,249 179,219 (13,359) 37,709
---------- ---------- ------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income -- -- -- --
Net Realized Gains from Security Transactions (5,296) (26,386) (2,717) (8,154)
---------- ---------- ------- --------
Total Distributions (5,296) (26,386) (2,717) (8,154)
---------- ---------- ------- --------
CAPITAL SHARE TRANSACTIONS:
PBHG Class
Shares Issued 1,546,866 910,539 43,247 127,228
Shares Issued upon Reinvestment of Distributions 4,857 25,100 2,579 7,759
Shares Redeemed (1,655,968) (1,085,931) (93,704) (113,941)
---------- ---------- ------- --------
Total PBHG Class Transactions (104,245) (150,292) (47,878) 21,046
---------- ---------- ------- --------
Increase (Decrease) in Net Assets Derived from
Capital Share Transactions (104,245) (150,292) (47,878) 21,046
---------- ---------- ------- --------
Total Increase (Decrease) in Net Assets 40,708 2,541 (63,954) 50,601
---------- ---------- ------- --------
NET ASSETS:
Beginning of Period 495,697 493,156 111,983 61,382
---------- ---------- ------- --------
End of Period $536,405 $495,697 $48,029 $111,983
---------- ---------- ------- --------
---------- ---------- ------- --------
SHARES ISSUED AND REDEEMED:
PBHG Class
Shares Issued 75,144 49,980 3,991 10,645
Shares Issued upon Reinvestment of Distributions 249 1,474 249 684
Shares Redeemed (81,676) (59,449) (8,374) (9,564)
---------- ---------- ------- --------
Total PBHG Class Share Transactions (6,283) (7,995) (4,134) 1,765
---------- ---------- ------- --------
Net Increase (Decrease) in Shares Outstanding (6,283) (7,995) (4,134) 1,765
---------- ---------- ------- --------
---------- ---------- ------- --------
</TABLE>
Amounts designated as "--" are either $0 or have been rounded to $0.
The accompanying notes are an integral part of the financial statements.
[PILLAR LOGO OMITTED] 90
<PAGE>
THE PBHG FUNDS, INC.
[This page intentionally left blank]
91 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
FINANCIAL HIGHLIGHTS
- --------------------
For a Share Outstanding Throughout Each Period
For the Period Ended March 31, 1999
<TABLE>
<CAPTION>
Ratio
of Net
Net Net Net Investment
Asset Net Realized and Distributions Distributions Asset Assets Ratio Income
Value Investment Unrealized from Net from Value End of Expenses (Loss)
Beginning Income Gains or (Losses) Investment Capital End Total of Period to Average to Average
of Period (Loss) on Securities Income Gains of Period Return (000) Net Assets Net Assets
- ---------------------------------------------------------------------------------------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1999 4 $28.23 $(0.24) $ (3.48) -- -- $24.51 (13.18)% $3,228,740 1.32% (0.99)%
1998 21.06 (0.26) 7.43 -- -- 28.23 34.05 % 5,338,380 1.26% (0.74)%
1997 25.30 (0.10) (4.14) -- -- 21.06 (16.76)% 4,634,138 1.25% (0.69)%
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50% 3,298,666 1.48% (0.79)%
1995 1 14.67 (0.05) 2.09 -- $(0.01) 16.70 13.92% 1,014,832 1.50% (0.69)%
PBHG ADVISOR CLASS
1999 4 $28.12 $(0.30) $ (3.47) -- -- $24.35 (13.41)% $66,235 1.57% (1.24)%
1998 21.03 (0.15) 7.24 -- -- 28.12 33.71% 89,227 1.51% (1.02)%
1997 2 25.42 (0.06) (4.33) -- -- 21.03 (17.27)%+ 12,991 1.53%* (1.11)%*
- -------------------------
PBHG EMERGING GROWTH FUND
- -------------------------
PBHG CLASS
1999 4 $25.83 $(0.18) $ (4.96) -- $(0.08) $20.61 (19.91)% $ 736,008 1.34% (0.80)%
1998 19.26 (0.24) 6.81 -- -- 25.83 34.11 % 1,404,157 1.27% (0.80)%
1997 23.07 (0.11) (2.87) -- (0.83) 19.26 (13.71)% 1,195,620 1.28% (0.36)%
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16% 689,705 1.47% (0.42)%
1995 3,4 14.59 (0.01) 1.56 -- (0.04) 16.10 10.64%+ 411,866 1.50%* (0.08)%*
- --------------------------
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% (0.71)%
1998 14.26 (0.19) 8.82 -- (0.20) 22.69 60.80% 145,662 1.22% (0.79)%
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)% 119,971 1.23% (0.47)%
1996 6 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47%* 53,759 1.50%* (0.66)%*
- -----------------------
PBHG SELECT EQUITY FUND
- -----------------------
PBHG CLASS
1999 4 $24.15 $(0.21) $ 1.99 -- -- $25.93 7.37% $235,904 1.34% (0.90)%
1998 15.91 (0.44) 8.68 -- -- 24.15 51.79% 336,076 1.35% (1.15)%
1997 17.27 (0.13) (1.03) -- $(0.20) 15.91 (6.94)% 372,486 1.26% (0.76)%
1996 6 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75%* 202,796 1.50%* (0.74)%*
- ---------------------
PBHG CORE GROWTH FUND
- ---------------------
PBHG CLASS
1999 4 $13.53 $(0.14) $0.67 -- -- $14.06 3.92% $ 86,485 1.45% (1.16)%
1998 10.34 (0.33) 3.52 -- -- 13.53 30.85% 165,510 1.35% (1.07)%
1997 11.82 (0.09) (1.39) -- -- 10.34 (12.52)% 283,995 1.36% (0.77)%
1996 5 10.00 -- 1.82 -- -- 11.82 18.20%+ 31,092 1.50%* (0.18)%*
- -----------------
PBHG LIMITED FUND
- -----------------
PBHG CLASS
1999 4 $14.08 $(0.10) $(1.45) -- $(0.58) $11.95 (11.01)% $108,011 1.40% (0.81)%
1998 9.05 (0.10) 5.53 -- (0.40) 14.08 60.78% 178,168 1.40% (0.72)%
1997 8 10.00 0.02 (0.93) $(0.03) (0.01) 9.05 (9.15)%+ 137,520 1.42%* 0.33%*
- ----------------------
PBHG LARGE CAP 20 FUND
- ----------------------
PBHG CLASS
1999 4 $15.98 $(0.12) $8.46 -- $(0.22) $24.10 52.52% $603,077 1.27% (0.64)%
1998 9.25 (0.07) 6.80 -- -- 15.98 72.76% 192,631 1.41% (0.79)%
1997 9 10.00 (0.01) (0.73) $(0.01) -- 9.25 (7.40)%+ 69,819 1.50%* 0.17%*
- ---------------------------
PBHG NEW OPPORTUNITIES FUND
- ---------------------------
PBHG CLASS
1999 4,13 $13.52 $(0.01) $2.96 -- -- $16.47 21.82%+ $16,742 1.50%* (0.80)%*
- -------------------------
PBHG LARGE CAP VALUE FUND
- -------------------------
PBHG CLASS
1999 $13.01 $0.08 $2.45 $(0.10) $(1.59) $13.85 20.29% $44,922 1.01% 0.59%
1998 10.11 0.02 3.84 (0.06) (0.90) 13.01 39.47% 76,476 1.17% 0.98%
1997 10 10.00 0.02 0.09 -- -- 10.11 1.10%+ 26,262 1.50%* 1.61%*
</TABLE>
<TABLE>
<CAPTION>
Ratio
of Net
Ratio Investment
of Expenses Income (Loss)
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
- --------------------------------------------------
- ----------------
PBHG GROWTH FUND
- ----------------
PBHG CLASS
<S> <C> <C> <C> <C>
1999 4 1.32% (0.99)% 80.51%
1998 1.26% (0.74)% 94.21%
1997 1.25% (0.69)% 64.89%
1996 1.48% (0.79)% 44.64%
1995 1 1.50% (0.69)% 118.75%
PBHG ADVISOR CLASS
1999 4 1.57% (1.24)% 80.51%
1998 1.51% (1.02)% 94.21%
1997 2 1.53%* (1.11)%* 64.89%
- -------------------------
PBHG EMERGING GROWTH FUND
- -------------------------
PBHG CLASS
1999 4 1.34% (0.80)% 101.53%
1998 1.27% (0.80)% 95.21%
1997 1.28% (0.36)% 47.75%
1996 1.47% (0.42)% 97.05%
1995 3,4 1.50%* (0.08)%* 27.50%
- --------------------------
PBHG LARGE CAP GROWTH FUND
- --------------------------
PBHG CLASS
1999 4 1.25% (0.71)% 46.16%
1998 1.22% (0.79)% 46.56%
1997 1.23% (0.47)% 51.70%
1996 6 2.07%* (1.23)%* 116.75%
- -----------------------
PBHG SELECT EQUITY FUND
- -----------------------
PBHG CLASS
1999 4 1.34% (0.90)% 56.59%
1998 1.35% (1.15)% 72.16%
1997 1.26% (0.76)% 71.70%
1996 6 1.73%* (0.97)%* 206.22%
- ---------------------
PBHG CORE GROWTH FUND
- ---------------------
PBHG CLASS
1999 4 1.45% (1.16)% 120.93%
1998 1.35% (1.07)% 72.78%
1997 1.36% (0.77)% 46.75%
1996 5 2.92%* (1.60)%* 17.00%
- -----------------
PBHG LIMITED FUND
- -----------------
PBHG CLASS
1999 4 1.40% (0.81)% 111.07%
1998 1.40% (0.72)% 81.36%
1997 8 1.42%* 0.33%* 75.46%
- ----------------------
PBHG LARGE CAP 20 FUND
- ----------------------
PBHG CLASS
1999 4 1.27% (0.64)% 76.41%
1998 1.41% (0.79)% 98.27%
1997 9 1.50%* 0.17%* 43.98%
- ---------------------------
PBHG NEW OPPORTUNITIES FUND
- ---------------------------
PBHG CLASS
1999 4,13 1.59%* (0.89)%* 109.43%
- -------------------------
PBHG LARGE CAP VALUE FUND
- -------------------------
PBHG CLASS
1999 1.01% 0.59% 568.20%
1998 1.17% 0.98% 403.59%
1997 10 1.74%* 1.37%* 0.00%
</TABLE>
[PILLAR LOGO OMITTED] 92
<PAGE>
THE PBHG FUNDS, INC.
<TABLE>
<CAPTION>
Ratio
of Net
Net Net Net Investment
Asset Net Realized and Distributions Distributions Asset Assets Ratio Income
Value Investment Unrealized from Net from Value End of Expenses (Loss)
Beginning Income Gains or (Losses) Investment Capital End Total of Period to Average to Average
of Period (Loss) on Securities Income Gains of Period Return (000) Net Assets Net Assets
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------
PBHG MID-CAP VALUE FUND
- -----------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999 $15.30 -- $0.92 -- $(1.13) $15.09 8.35% $56,981 1.33% 0.01%
1998 12 10.00 $(0.01) 6.00 -- (0.69) 15.30 61.06%+ 54,173 1.47%* (0.17)%*
- -------------------------
PBHG SMALL CAP VALUE FUND
- -------------------------
PBHG CLASS
1999 4 $15.38 $(0.09) $(3.06) -- $(0.85) $11.38 (20.93)% $ 69,787 1.48% (0.71)%
1998 12 10.00 (0.03) 6.15 -- (0.74) 15.38 62.27%+ 125,834 1.49%* (0.52)%*
- -----------------------
PBHG FOCUSED VALUE FUND
- -----------------------
PBHG CLASS
1999 13 $10.32 -- $0.14 -- -- $10.46 1.36%+ $3,658 1.50%* 0.09%*
- -----------------------
PBHG INTERNATIONAL FUND
- -----------------------
PBHG CLASS
1999 14 $12.04 $(0.14) $0.29 $(0.17) $(0.42) $11.60 1.42% $12,220 1.97% (0.35)%
1998 11.26 (0.03) 1.83 -- (1.02) 12.04 17.46% 20,905 2.00% (0.13)%
1997 10.55 -- 0.71 -- -- 11.26 6.73% 21,265 2.22% (0.32)%
1996 9.13 (0.04) 1.46 -- -- 10.55 15.55% 11,243 2.25% (0.22)%
1995 11 10.00 (0.03) (0.80) -- (0.04) 9.13 (8.33)%+ 15,236 2.25%* (0.43)%*
- -----------------------
PBHG CASH RESERVES FUND
- -----------------------
PBHG CLASS
1999 $1.00 $0.05 -- $(0.05) -- $1.00 4.84% $144,239 0.70% 4.72%
1998 1.00 0.05 -- (0.05) -- 1.00 5.13% 117,574 0.68% 5.00%
1997 1.00 0.05 -- (0.05) -- 1.00 4.89% 341,576 0.68% 4.79%
1996 6 1.00 0.05 -- (0.05) -- 1.00 5.24%* 99,001 0.70%* 5.05%*
- -------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -------------------------------------
PBHG CLASS
1999 4 $19.27 $(0.19) $8.80 -- $(0.29) $27.59 45.33% $536,405 1.34% (0.96)%
1998 14.63 (0.23) 5.72 -- (0.85) 19.27 38.29% 495,697 1.30% (0.91)%
1997 12.48 (0.05) 2.55 -- (0.35) 14.63 19.59% 493,156 1.33% (0.59)%
1996 7 10.00 (0.02) 2.50 -- -- 12.48 24.82%+ 61,772 1.50%* (0.50)%*
- ---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
- ---------------------------------
PBHG CLASS
1999 4 $12.89 $(0.11) $(1.78) -- $(0.46) $10.54 (14.52)% $ 48,029 1.50% (0.97)%
1998 8.86 (0.11) 5.01 -- (0.87) 12.89 56.54% 111,983 1.45% (0.92)%
1997 10 10.00 -- (1.14) -- -- 8.86 (11.40)%+ 61,382 1.50%* 0.18%*
</TABLE>
<TABLE>
<CAPTION>
Ratio
of Net
Ratio Investment
of Expenses Income (Loss)
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
- ----------------------------------------------
- -----------------------
PBHG MID-CAP VALUE FUND
- -----------------------
PBHG CLASS
<S> <C> <C> <C>
1999 1.33% 0.01% 732.73%
1998 12 1.47%* (0.17)%* 399.96%
- -------------------------
PBHG SMALL CAP VALUE FUND
- -------------------------
PBHG CLASS
1999 4 1.48% (0.71)% 273.87%
1998 12 1.49%* (0.52)%* 263.04%
- -----------------------
PBHG FOCUSED VALUE FUND
- -----------------------
PBHG CLASS
1999 13 2.67%* (1.08)%* 173.09%
- -----------------------
PBHG INTERNATIONAL FUND
- -----------------------
PBHG CLASS
1999 14 1.97% (0.35)% 59.74%
1998 2.00% (0.13)% 85.94%
1997 2.22% (0.32)% 74.82%
1996 3.03% (1.00)% 140.26%
1995 11 2.36%* (0.54)%* 81.72%
- -----------------------
PBHG CASH RESERVES FUND
- -----------------------
PBHG CLASS
1999 0.70% 4.72% n/a
1998 0.68% 5.00% n/a
1997 0.68% 4.79% n/a
1996 6 0.88%* 4.87%* n/a
- -------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
- -------------------------------------
PBHG CLASS
1999 4 1.34% (0.96)% 276.07%
1998 1.30% (0.91)% 259.89%
1997 1.33% (0.59)% 289.91%
1996 7 2.00%* (1.00)%* 125.99%
- ---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
- ---------------------------------
PBHG CLASS
1999 4 1.54% (1.01)% 140.89%
1998 1.45% (0.92)% 215.46%
1997 10 1.50%* 0.18%* 88.88%
<FN>
* 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.
</FN>
</TABLE>
Amounts designated as "-" are either $0 or have been rounded to $0.
93 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
As of March 31, 1999
1. ORGANIZATION
The PBHG Funds, Inc. (the "Fund"), a Maryland corporation, is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company with sixteen series: the PBHG Growth Fund (the "Growth
Fund"), the PBHG Emerging Growth Fund (the "Emerging Growth Fund"), the PBHG
Large Cap Growth Fund (the "Large Cap Growth Fund"), the PBHG Select Equity Fund
(the "Select Equity Fund"), the PBHG Core Growth Fund (the "Core Growth Fund"),
the PBHG Limited Fund (the "Limited Fund"), the PBHG Large Cap 20 Fund (the
"Large Cap 20 Fund"), the PBHG New Opportunities Fund (the "New Opportunities
Fund"), the PBHG Large Cap Value Fund (the "Large Cap Value Fund"), the PBHG
Mid-Cap Value Fund (the "Mid-Cap Value Fund"), the PBHG Small Cap Value Fund
(the "Small Cap Value Fund"), the PBHG Focused Value Fund (the "Focused Value
Fund"), the PBHG International Fund (the "International Fund"), the PBHG
Technology & Communications Fund (the "Technology & Communications Fund"), and
the PBHG Strategic Small Company Fund (the "Strategic Small Company Fund"),
(collectively referred to as the "Equity Portfolios"), and the PBHG Cash
Reserves Fund (the "Cash Reserves Fund") (each a "Portfolio" and, collectively,
the "Portfolios"). Each Portfolio is classified as a diversified management
investment company, with the exception of the Large Cap 20 and the Focused Value
Funds which are classified as non-diversified management investment companies.
Each Portfolio's prospectus provides a description of it's investment
objectives, policies and investment strategies. The Fund is registered to offer
two classes of shares, PBHG Class and Advisor Class, formerly known as the
"Trust Class." Currently, the Advisor Class of shares is only offered by the
Growth Fund. The assets of each Portfolio are segregated, and a shareholder's
interest is limited to the Portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies followed by
the Portfolios.
SECURITY VALUATION -- Investment securities of the Equity Portfolios that are
listed on a securities exchange and for which market quotations are available
are valued at the last quoted sales price on each business day (normally 4:00 pm
Eastern time). If there is no such reported sale, these securities and unlisted
securities for which market quotations are readily available, are valued at the
last bid price. However, debt securities (other than short-term obligations),
including listed issues, are valued on the basis of valuations furnished by a
pricing service which utilizes electronic data processing techniques to
determine valuations for normal institutional size trading units of debt
securities, without exclusive reliance upon exchange or over-the-counter prices.
Short-term investments may be valued at amortized cost which approximates market
value. Foreign securities are valued based upon quotations from the primary
market in which they are traded, and are translated from the local currency into
U.S. dollars using current exchange rates. In addition, if quotations are not
readily available, or if the values have been materially affected by events
occurring after the closing of a foreign market, assets may be valued by another
method that the Board of Directors believes accurately reflects fair value. The
values of investment securities held by the Cash Reserves Fund are stated at
amortized cost, which approximates market value. Under this valuation method,
acquisition discounts and premiums are accreted and amortized ratably to
maturity and are included in interest income.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Dividend income and distributions to shareholders are recognized on the
ex-dividend date; interest income is recognized on the accrual basis. Costs used
in determining realized capital gains and losses on the sale of investment
securities are those of the specific securities sold adjusted for the accretion
and amortization of acquisition discounts and premiums during the respective
holding periods.
DIVIDENDS -- Dividends from net investment income for the Equity Portfolios are
declared annually, if available. Dividends from net investment income for the
Cash Reserves Fund are declared daily and paid monthly. Distributions of net
realized capital gains, for all portfolios, are generally made to shareholders
annually.
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under generally accepted
accounting principles. These book/tax differences are either temporary or
permanent in nature. To the extent these differences are permanent, they are
charged or credited to paid-in-capital or accumulated net realized gain, as
appropriate, in the period that the differences arise. Accordingly, the
following permanent differences as of March 31, 1999, primarily attributable to
certain net operating losses and with respect to the Large Cap Value Fund an
in-kind redemption, which for tax purposes, are not available to offset future
income or have been used to offset net short-term capital gains, have been
reclassified to the following accounts:
ACCUMULATED NET
PAID-IN-CAPITAL REALIZED GAIN
(000) (000)
--------------- ---------------
Growth Fund $(40,167) $ --
Emerging Growth Fund (8,190) 4
Large Cap Growth Fund (227) (777)
Select Equity Fund 1 (2,541)
Core Growth Fund (2,624) --
Limited Fund (98) (1,032)
Large Cap 20 Fund -- (2,499)
New Opportunities Fund 65 (77)
Large Cap Value Fund 7,576 (7,550)
Mid-Cap Value Fund -- 11
Small Cap Value Fund (748) 5
Focused Value 6 (6)
International Fund -- (223)
Cash Reserves Fund -- (4)
Technology & Communications Fund -- (3,886)
Strategic Small Company Fund (714) 3
These reclassifications have no effect on net assets or net asset value per
share.
FEDERAL INCOME TAXES -- It is each Portfolio's intention to qualify or continue
to qualify as a regulated investment company for Federal income tax purposes and
to distribute all of its taxable income and net capital gains. Accordingly, no
provision has been made for Federal income taxes.
NET ASSET VALUE PER SHARE -- The net asset value per share is calculated each
business day by dividing the total value of each Portfolio's assets, less
liabilities, by the number of shares outstanding.
REPURCHASE AGREEMENTS -- Securities pledged as collateral for repurchase
agreements are held by a third party custodian bank until the respective
agreements mature. Provisions of the repurchase agreements and procedures
adopted by Pilgrim Baxter & Associates, Ltd. (the "Adviser") require that the
market value of the collateral including accrued interest thereon, is sufficient
in the event of default by the counterparty. If the counterparty defaults and
the value of the collateral declines, or if the counterparty enters into
insolvency proceedings, realization of the collateral by a Portfolio may be
delayed or limited.
[PILLAR LOGO OMITTED] 94
<PAGE>
THE PBHG FUNDS, INC.
FOREIGN CURRENCY TRANSLATION -- The books and records of the International Fund
are maintained in U.S. dollars. Foreign currency amounts are translated into
U.S. dollars on the following basis:
(I) market value of investment securities, other assets and liabilities at
the current rate of exchange; and
(II) purchases and sales of investment securities, income and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The International Fund does not isolate that portion of gains and losses on
investment securities that is due to changes in the foreign exchange rates from
that which is due to changes in market prices of such securities.
The International Fund reports gains and losses on foreign currency related
transactions as components of realized gains for financial reporting purposes,
whereas such components are treated as ordinary income or loss for Federal
income tax purposes.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the
International Fund may enter into forward foreign currency exchange contracts.
Foreign currency exchange contracts are recorded at market value. Certain risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts. Realized gains or losses
arising from such transactions are included in net realized gain (loss) from
foreign currency transactions. At March 31, 1999 the International Fund did not
hold any foreign currency contracts.
OTHER -- Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses are prorated to the
Portfolios on the basis of relative net assets. Class specific expenses, such as
12b-1 service fees, are borne by that class. Income, other expenses and realized
and unrealized gains and losses of a Portfolio are allocated to the respective
class on the basis of the relative net assets each day.
All organizational costs incurred with the start up of the Core Growth Fund, the
Select Equity Fund, the Large Cap Growth Fund, the Technology & Communications
Fund, the Limited Fund, the Large Cap 20 Fund, the Large Cap Value Fund, the
Mid-Cap Value Fund, the Small Cap Value Fund, the Strategic Small Company Fund
and the Cash Reserves Fund are being amortized on a straight line basis over a
period of sixty months. In the event that any of the initial shares of the
Portfolio are redeemed by any holder thereof during the period that the
Portfolio is amortizing its organizational costs, the redemption proceeds
payable to the holder thereof will be reduced by the unamortized organizational
costs in the same ratio as the number of initial shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS -- The preparation
of financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND OTHER TRANSACTIONS WITH
AFFILIATES
The Fund and the Adviser are parties to an Investment Advisory Agreement (the
"Advisory Agreement"). Under the terms of the Advisory Agreement, the Adviser is
paid a monthly fee at an annual rate of 0.85% of the average daily net assets of
the Growth, Emerging Growth, Select Equity, Core Growth, Large Cap 20, Mid-Cap
Value, Focused Value and Technology and Communications Funds, 0.75% of the
average daily net assets of the Large Cap Growth Fund, 0.65% of the Large Cap
Value Fund, 1.00% of the average daily net assets of the Limited, New
Opportunities, Small Cap Value, International and Strategic Small Company Funds,
and 0.30% of the average daily net assets of the Cash Reserves Fund.
In the interest of limiting expenses of the Portfolios, the Adviser has entered
into expense limitation agreements with the Fund ("Expense Limitation
Agreements"), with respect to the Core Growth, Limited, Large Cap 20, New
Opportunities, Large Cap Value, Mid-Cap Value, Small Cap Value, Focused Value
and Strategic Small Company Funds, pursuant to which the Adviser has agreed to
waive or limit its fees and to assume other expenses of the Portfolios to the
extent necessary to limit the total annual expenses (expressed as a percentage
of the Portfolios' average daily net assets) to 1.50% and to not more than 2.25%
of the average daily net assets of the International Fund. Reimbursement by the
Portfolios of the advisory fees waived or limited and other expenses paid by the
Adviser pursuant to the Expense Limitation Agreements during any of the previous
two fiscal years may be made at a later date when the Portfolios have reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense rate of each Portfolio to exceed 1.50% for the Core Growth,
Limited, Large Cap 20, New Opportunities, Large Cap Value, Mid-Cap Value, Small
Cap Value, Focused Value and Strategic Small Company Funds and 2.25% for the
International Fund. Consequently, no reimbursement by a Portfolio will be made
unless: (i) the Portfolio's assets exceed $75 million; (ii) the Portfolio's
total annual expense ratio is less than 1.50% for the Core Growth, Limited,
Large Cap 20, New Opportunities, Large Cap Value, Mid-Cap Value, Small Cap
Value, Focused Value and Strategic Small Company Funds and 2.25% for the
International Fund, and (iii) the payment of such reimbursement was approved by
the Board of Directors on a quarterly basis. At March 31, 1999, the amount of
advisory fee waiver and reimbursement of third party expenses by the Adviser
subject to possible reimbursement were as follows:
Strategic Small Company Fund $27,500
Focused Value Fund $3,862
New Opportunities Fund $1,340
Pilgrim Baxter Value Investors, Inc. (formerly Newbold's Asset Management,
Inc.), a wholly-owned subsidiary of the Adviser serves as the sub-adviser to the
Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund, Focused Value
Fund and the Strategic Small Company Fund. For its services provided pursuant to
its Investment Sub-Advisory Agreement with the Adviser and the Fund, Pilgrim
Baxter Value Investors receives a fee from the Adviser at an annual rate of
0.40%, 0.50%, 0.65%, 0.40% and 0.30%, respectively, of the average daily net
assets of the Large Cap Value Fund, Mid-Cap Value Fund, Small Cap Value Fund,
Focused Value Fund and the Strategic Small Company Fund. Pilgrim Baxter Value
Investors receives no fees directly from the Large Cap Value Fund, Mid-Cap Value
Fund, Small Cap Value Fund, Focused Value Fund or the Strategic Small Company
Fund.
Murray Johnstone International, Ltd. ("Murray Johnstone") serves as the
sub-adviser to the International Fund. For its services provided pursuant to its
Investment Sub-Advisory Agreement with the Adviser and the Fund, Murray
Johnstone receives a fee from the Adviser at an annual rate of 0.50% of the
International Fund's average daily net assets. Murray Johnstone receives no fees
directly from the International Fund, and may periodically reduce its
sub-advisory fee.
Wellington Management Company, LLP ("WMC") serves as the sub-adviser to the Cash
Reserves Fund. For its services provided pursuant to the Investment Sub-Advisory
Agreement with the Adviser and the Fund, WMC is entitled to receive a fee from
the Adviser, computed daily and paid monthly, at an annual rate equal to 0.075%
of the Cash Reserves Fund's average daily net assets up to and including $500
million and 0.020% of the Cash Reserves Fund's average daily net assets over
$500 million, but subject to a minimum
95 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS -- Concluded
- ------------------------------------------
As of March 31, 1999
annual fee of $50,000. WMC may, from time to time, waive all or a portion of its
fee from the Adviser. WMC receives no fees directly from the Cash Reserves Fund.
PBHG Fund Services (the "Administrator"), a wholly-owned subsidiary of the
Adviser, provides the Fund with administrative services, including regulatory
reporting and all necessary office space, equipment, personnel and facilities.
For these administrative services, the Administrator receives a fee, which is
calculated daily and paid monthly, at an annual rate of 0.15% of the average
daily net assets of each Portfolio.
SEI Investments Management Corporation, a wholly-owned subsidiary of SEI
Investments Company, is the owner of all beneficial interest in SEI Mutual Fund
Services (the "Sub-Administrator"). The Sub-Administrator is an affiliate of the
Fund's distributor and assists the Administrator in providing administrative
services to the Fund. For acting in this capacity, the Administrator pays the
Sub-Administrator a fee at the annual rate of 0.04% of the average daily assets
of each portfolio with respect to the first $2.5 billion of the total average
daily net assets of (i) the Fund, and (ii) The PBHG Insurance Series Fund, Inc.,
another fund family managed by the Adviser (collectively known as the "PBHG Fund
Family"), 0.025% of the next $7.5 billion of the average daily assets of each
portfolio in the PBHG Fund Family, and 0.02% of the average daily net assets of
each portfolio in the PBHG Fund Family in excess of $10 billion.
The Fund has entered into an agreement with SEI Investments to manage the
investments of repurchase agreements for the Funds. For its services the
Liquidity Desk received $238,141 for the year ended March 31, 1999.
The Fund and SEI Investments Distribution Co. (the "Distributor") are parties to
a Distribution Agreement. The Distributor receives no fees for its distribution
services. The Fund has adopted a Service Plan (the "Plan") on behalf of the
Advisor Class shares pursuant to Rule 12b-1 under the Investment Company Act of
1940. The Plan provides for the payment by the Fund of up to 0.25% of the
average daily net assets of the Advisor Class shares for certain distribution
and shareholder services. Currently only the Growth Fund has Advisor Class
shareholders.
DST Systems, Inc. serves as the transfer agent and dividend disbursing agent of
the Fund. From time to time, the Fund may pay amounts to third parties that
provide sub-transfer agency and other administrative services relating to the
Fund to persons who beneficially own interests in the Fund. First Union Bank,
N.A. serves as the custodian for each of the Portfolios except the International
Fund. The Northern Trust Company serves as the custodian for the International
Fund.
The Fund has entered into a shareholder servicing agreement with PBHG Fund
Services to provide shareholder support and other shareholder account-related
services. PBHG Fund Services has, in turn, contracted with UAM Shareholder
Service Center, Inc. ("UAMSSC") to assist in the provision of those services.
UAMSSC receives no fees directly from the Portfolios.
SHAREHOLDER SERVICE FEES (INCLUDING OUT OF POCKET EXPENSES) PAID TO PBHG FUND
SERVICES FOR THE FISCAL YEAR ENDED MARCH 31, 1999 WERE (000):
Growth Fund $2,216
Emerging Growth Fund 766
Large Cap Growth Fund 129
Select Equity Fund 260
Core Growth Fund 184
Limited Fund 103
Large Cap 20 Fund 234
New Opportunities Fund --
Large Cap Value Fund 41
Mid-Cap Value Fund 50
Small Cap Value Fund 63
Focused Value Fund --
International Fund 36
Cash Reserve Fund 105
Technology & Communications Fund 362
Strategic Small Company Fund 78
Officers and directors of the Fund who are or were officers of the Adviser,
Administrator, Sub-Administrator and the Distributor received no compensation
from the Fund.
4. INVESTMENT TRANSACTIONS
The cost of securities purchased and the proceeds from securities sold, other
than short-term investments, for the Equity Portfolios for the period ended
March 31, 1999 were as follows:
PURCHASES SALES
(000) (000)
-------------- -------------
Growth Fund $3,070,591 $4,329,422
Emerging Growth Fund 953,112 1,388,899
Large Cap Growth Fund 60,130 79,433
Select Equity Fund 145,984 272,046
Core Growth Fund 133,231 209,610
Limited Fund 138,717 192,989
Large Cap 20 Fund 489,817 271,992
New Opportunities Fund 28,119 18,678
Large Cap Value Fund 380,104 425,619
Mid-Cap Value Fund 448,756 460,197
Small Cap Value Fund 272,587 297,574
Focused Value Fund 8,213 5,980
International Fund 1,266 1,726
Technology & Communications Fund 1,068,397 1,184,590
Strategic Small Company Fund 100,360 150,083
Sales of the PBHG Large Cap Value Fund included an in-kind redemption of
$44,051,945 of investment securities in exchange for 3,232,902 shares of the
Fund on January 4, 1999.
[PILLAR LOGO OMITTED] 96
<PAGE>
THE PBHG FUNDS, INC.
The book aggregate gross unrealized appreciation and depreciation of securities
held by the Portfolios at March 31, 1999 are as follows:
NET
UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
APPRECIATION DEPRECIATION (DEPRECIATION)
(000) (000) (000)
------------ ------------ -------------
Growth Fund $1,205,313 $178,837 $1,026,476
Emerging Growth Fund 202,741 47,424 155,317
Large Cap Growth Fund 62,887 2,451 60,436
Select Equity Fund 99,308 2,130 97,178
Core Growth Fund 26,404 2,069 24,335
Limited Fund 29,284 4,732 24,552
Large Cap 20 Fund 208,444 11,693 196,751
New Opportunities Fund 3,668 331 3,337
Large Cap Value Fund 3,306 1,093 2,213
Mid-Cap Value Fund 3,126 1,972 1,154
Small Cap Value Fund 3,279 10,968 (7,689)
Focused Value Fund 114 130 (16)
International Fund 3,717 54 3,663
Technology &
Communications Fund 166,081 4,126 161,955
Strategic Small
Company Fund 9,927 5,850 4,077
The difference between book and tax cost basis at March 31, 1999 was immaterial.
The Portfolios had the following capital loss carryforwards at March 31, 1999,
that can be used to offset future capital gains.
Capital Loss Capital Loss Capital Loss
Carryovers Carryovers Carryovers
Expiring 2005 Expiring 2006 Expiring 2007
------------- ------------- -------------
Growth Fund 8,022,850 -- 271,063,916
Emerging Growth Fund -- -- 31,196,165
Core Growth Fund 10,246,114 28,445,344 --
Small Cap Value Fund -- -- 8,064,419
5. CONCENTRATIONS
The Cash Reserves Fund invests primarily in a portfolio of money market
instruments maturing in 397 days or less whose ratings are within one of the two
highest ratings categories assigned by a nationally recognized statistical
rating agency, or, if not rated, are believed to be of comparable quality. The
ability of the issuers of the securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry,
state or region.
The International Fund invests in securities of foreign issuers in various
countries. These investments may involve certain considerations and risks not
typically associated with investments in the United States, as a result of,
among other factors, the possibility of future political and economic
developments and the level of governmental supervision and regulation of
securities markets in the respective countries.
6. ACQUISITION
On September 29, 1997 the net assets of the Newbold Equity Portfolio of the UAM
Funds Trust were acquired by the PBHG Large Cap Value Fund pursuant to an
agreement and plan of re-organization dated June 26, 1997. The transaction was
structured for tax purposes to qualify as a tax-free reorganization under the
Internal Revenue Code. Prior to reorganization, the Newbold Equity Portfolio had
net assets of $12,288,371 and 1,206,437 shares outstanding. After the
reorganization, PBHG Large Cap Value Fund issued 988,606 shares at an NAV of
$12.43. The combined assets after the reorganization were $70,925,600. The
acquired unrealized appreciation at September 29, 1997 of the Newbold Equity
Fund was $2,212,713.
On February 12, 1999 the net assets of the PBHG Advisor Core Value Fund and the
PBHG Advisor New Opportunities Fund, both series of the PBHG Advisor Funds, Inc.
were acquired by the PBHG Focused Value Fund and the PBHG New Opportunities Fund
respectively, pursuant to an agreement and plan of reorganization dated February
12, 1999. The transaction was structured to qualify as a tax-free reorganization
under the Internal Revenue Code. Prior to reorganization the PBHG Advisor Core
Value and PBHG Advisor New Opportunities had net assets of $1,294,123 and
$9,766,893, respectively, shares outstanding of 125,435 and 722,618
respectively, and NAV's of $10.32 and $13.52, respectively. The PBHG Focused
Value and the PBHG New Opportunities Funds were deemed to be the accounting
survivors of the tax-free reorganizations, accordingly each Portfolio's
performance history for financial reporting and advertising purposes began on
February 12, 1999.
7. LINE OF CREDIT
Each Portfolio may borrow, an amount up to its prospectus defined limitations,
from a $500 million committed line of credit available to (i) the Funds and (ii)
The PBHG Insurance Series Fund, Inc. Borrowings from the line of credit will
bear interest at the Federal Funds Rate plus 0.40%. As of March 31, 1999, the
Small Cap Value Fund had an outstanding borrowing of $700,000. Listed below are
the Funds which had outstanding balances during the fiscal year ended March 31,
1999.
MAXIMUM AVERAGE DAILY WEIGHTED
AMOUNT OUTSTANDING AVERAGE
BORROWED BALANCE INTEREST RATE
--------- ----------- --------------
Growth Fund $12,500,000 $ 42,740 5.93%
Technology &
Communications Fund 19,200,000 128,767 5.49%
Core Growth Fund 2,100,000 18,082 5.59%
Strategic Small
Company Fund 1,700,000 31,507 5.23%
Large Cap Value Fund 1,700,000 27,123 5.16%
Mid-Cap Value Fund 22,100,000 475,890 5.09%
Small Cap Value Fund 3,100,000 228,493 5.65%
97 [PILLAR LOGO OMITTED]
<PAGE>
THE PBHG FUNDS, INC.
NOTICE TO SHAREHOLDERS (unaudited)
- ----------------------------------
For shareholders that do not have a March 31, 1999 taxable year end, this notice
is for informational purposes only. For shareholders with a March 31, 1999
taxable year end, please consult your tax adviser as to the pertinence of this
notice.
For the fiscal year ended March 31, 1999, the Funds are designating net capital
gains and qualifying dividends with regard to distributions paid during the year
as follows:
<TABLE>
<CAPTION>
(A) (B)
Net Ordinary (C) (E)
Capital Gains Income Total (D) Foreign
Distributions Distributions Distributions Qualifying Tax
Fund (Tax Basis) (Tax Basis) (Tax Basis) Dividends (1) Credit (2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Growth ........................... 0.0% 0.0% 0.0% 0.0% 0.0%
Emerging Growth .................. 100.0% 0.0% 100.0% 0.0% 0.0%
Core Growth ...................... 0.0% 0.0% 0.0% 0.0% 0.0%
Select Equity .................... 0.0% 0.0% 0.0% 0.0% 0.0%
Large Cap Growth ................. 100.0% 0.0% 100.0% 0.0% 0.0%
Technology & Communications ...... 100.0% 0.0% 100.0% 0.0% 0.0%
Limited .......................... 57.03% 42.97% 100.0% 1.0% 0.0%
Large Cap 20 ..................... 14.69% 85.31% 100.0% 0.0% 0.0%
Large Cap Value .................. 15.73% 84.27% 100.0% 6.33% 0.0%
Strategic Small Company .......... 7.37% 92.63% 100.0% 2.0% 0.0%
International .................... 55.02% 44.98% 100.0% 0.0% 10.14%
Cash Reserves .................... 0.0% 100.0% 100.0% 0.0% 0.0%
Mid-Cap Value .................... 0.0% 100.0% 100.0% 0.0% 0.0%
Small Cap Value .................. .22% 99.78% 100.0% 4.10% 0.0%
Focused Value .................... 0.0% 0.0% 0.0% 0.0% 0.0%
New Opportunities ................ 0.0% 0.0% 0.0% 0.0% 0.0%
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction.
(2) The foreign tax credit represents dividends which qualify for the foreign
tax credit and is a percentage of "Ordinary Income Distributors".
* Items (A) and (B) are based on a percentage of each portfolio's distributions.
** Item (D) is based on a percentage of ordinary income distributions of each portfolio.
</FN>
</TABLE>
None of the Portfolios qualify in California, Connecticut, or New York to
pass through exempt interest dividends from U.S. government obligations.
[PILLAR LOGO OMITTED] 98
<PAGE>
THE PBHG FUNDS, INC.
NOTICE TO SHAREHOLDERS (unaudited)
FOR TAXPAYERS FILING ON A CALENDAR YEAR BASIS, THIS NOTICE IF FOR INFORMATIONAL
PURPOSES ONLY.
The PBHG Funds, Inc. - International Fund has made an election under ss.853 of
the Internal Revenue Code (the "Code") to provide a foreign tax deduction or
credit to their shareholders for the fiscal year ended March 31, 1999. The
information provided is pertinent to taxpayers who meet the following two
criteria:
1.) they file a U.S. Federal Income Tax Return and
2.) held shares of the fund on the December 10, 1998 dividend record date
and satisfy the applicable requirements of the Code.
The amount per share of income from, and foreign taxes paid to, each country is
listed in the following schedules.
<TABLE>
<CAPTION>
Gross Foreign
Dividends Tax Paid
Country Per Share Per Share
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Australia .................................... 0.00443 0.00017
Brazil ....................................... 0.00403 0.00007
Canada ....................................... 0.00281 0.00022
Switzerland .................................. 0.00569 0.00072
Chile ........................................ 0.00010 0.00002
Germany ...................................... 0.01177 0.00090
Denmark ...................................... 0.00604 0.00077
Spain ........................................ 0.00901 0.00111
Finland ...................................... 0.00676 0.00084
United Kingdom ............................... 0.06198 0.00619
Hong Kong .................................... 0.00089 0.00000
Ireland ...................................... 0.00240 0.00050
India ........................................ 0.00025 0.00000
Italy ........................................ 0.00258 0.00032
Japan ........................................ 0.01159 0.00140
Mexico ....................................... 0.00129 0.00000
Malaysia ..................................... 0.00023 0.00005
Netherlands .................................. 0.01058 0.00124
Norway ....................................... 0.00162 0.00020
New Zealand .................................. 0.00170 0.00021
Philippines .................................. 0.00022 0.00005
Sweden ....................................... 0.01052 0.00007
Singapore .................................... 0.00130 0.00032
Thailand ..................................... 0.00023 0.00002
------- -------
0.15803 0.01539
------- -------
------- -------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<FN>
Please consult your tax advisor for proper treatment of this information.
</FN>
</TABLE>
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<PAGE>
THE PBHG FUNDS, INC.
[This page is intentionally left blank.]
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<PAGE>
THE PBHG FUNDS, INC.
[PILLAR LOGO OMITTED]
P.O. Box 419534
Kansas City, MO 64141-6534
Investment Adviser:
Pilgrim Baxter & Associates, Ltd.
Distributor:
SEI Investments Distribution Co.
To open an account, receive account information or request literature, visit our
web site at www.pbhgfunds.com or call 1-800-433-0051
