PBHG FUNDS INC /, 485BPOS, 2000-07-28

PBHG FUNDS INC /
485BPOS, 2000-07-28

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The PBHG Funds, Inc.

Prospectus
July 31, 2000

PBHG Growth Fund
PBHG Emerging Growth Fund
PBHG Large Cap Growth Fund
PBHG Select Equity Fund
PBHG Core Growth Fund
PBHG Limited Fund
PBHG Large Cap 20 Fund
PBHG New Opportunities Fund
PBHG Large Cap Value Fund
PBHG Mid-Cap Value Fund
PBHG Small Cap Value Fund
PBHG Focused Value Fund
PBHG International Fund
PBHG Cash Reserves Fund
PBHG Technology & Communications Fund
PBHG Strategic Small Company Fund

PBHG Global Technology & Communications Fund

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved any Fund shares or determined whether this prospectus is
truthful or complete. Anyone who tells you otherwise is committing a crime.
<PAGE>

[This page intentionally left blank]
<PAGE>

AN INTRODUCTION TO THE PBHG FUNDS(R) AND THIS PROSPECTUS

The PBHG Funds, Inc. is a mutual fund that offers a convenient and economical
means of investing in professionally managed portfolios of securities, called
Funds. This prospectus offers PBHG Class Shares of each Fund listed on the
cover.

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

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

[BULLET] Other PBHG Funds are generally designed for long-term investors, such
as those saving for retirement, or investors that want a fund that
seeks to outperform the market in which it invests over the long-term.
These other Funds may not be suitable for investors who require
regular income or stability of principal, or who are pursuing a
short-term investment goal, such as investing emergency reserves.

INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter") is the investment adviser
for each Fund. Pilgrim Baxter has retained certain sub-advisers to assist in
managing the Funds. For information about the sub advisers, see page 63 of the
prospectus.

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

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[This page intentionally left blank]
<PAGE>

CONTENTS

FUND SUMMARIES
--------------------------------------------------------------------------------
PBHG Growth Fund ................................... 4
PBHG Emerging Growth Fund .......................... 7
PBHG Large Cap Growth Fund ......................... 10
PBHG Select Equity Fund ............................ 13
PBHG Core Growth Fund .............................. 16
PBHG Limited Fund .................................. 19
PBHG Large Cap 20 Fund ............................. 22
PBHG New Opportunities Fund ........................ 25
PBHG Large Cap Value Fund .......................... 28
PBHG Mid-Cap Value Fund ............................ 31
PBHG Small Cap Value Fund .......................... 34
PBHG Focused Value Fund ............................ 37
PBHG International Fund ............................ 40
PBHG Cash Reserves Fund ............................ 43
PBHG Technology & Communications Fund .............. 46
PBHG Strategic Small Company Fund .................. 50

PBHG Global Technology &
Communications Fund ............................... 53

MORE ABOUT THE FUNDS
--------------------------------------------------------------------------------
Risks & Returns .................................... 56

THE INVESTMENT ADVISER
& SUB-ADVISERS
--------------------------------------------------------------------------------
The Investment Adviser ............................. 62
Pilgrim Baxter & Associates, Ltd.
The Sub-Advisers ................................... 63
Pilgrim Baxter Value Investors, Inc.
("Value Investors")
Murray Johnstone International Limited
("Murray Johnstone")
Wellington Management Company, Ltd.
("Wellington Management")

YOUR INVESTMENT
--------------------------------------------------------------------------------
Pricing Fund Shares ................................ 67
Buying Shares ...................................... 68
Selling Shares ..................................... 69
General Policies ................................... 70
Distribution & Taxes ............................... 73

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Financial Highlights ............................... 74

<PAGE>

PBHG GROWTH FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with capital appreciation.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of small and medium sized
companies. These companies generally have market capitalizations or annual
revenues of up to $2 billion. The growth securities in the Fund are primarily
common stocks that Pilgrim Baxter believes have strong earnings growth and
capital appreciation potential. Pilgrim Baxter uses its own fundamental
research, computer models and proprietary measures of growth in determining
which securities to buy and when to sell them for this Fund. The Fund may sell a
security for a variety of reasons, such as to invest in a company with more
attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

The Fund emphasizes small and medium sized growth companies, so it is likely to
be more volatile than the stock market in general, as measured by the S&P 500(R)
Index. In addition, the growth securities in the Fund may never reach what
Pilgrim Baxter believes are their full earnings growth potential and may go down
in price. Although the Fund strives to achieve its goal, it cannot guarantee
that the goal will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

4 PBHG GROWTH FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell 2000 Growth Index, a widely
recognized, unmanaged index that tracks the performance of those securities in
the Russell 2000 Index with greater-than-average growth characteristics. The
Russell 2000 Index is an unmanaged index that measures the performance of 2,000
small cap companies. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
PBHG CLASS
1990 1991 1992 1993 1994 1995
-9.64% 51.63% 28.3% 46.71% 4.75% 50.35%

1996 1997 1998 1999
9.82% -3.35% 0.59% 92.45%

ADVISOR CLASS
1997 1998 1999
-3.62% 0.32% 91.97%

The Fund's year-to-date return as of 6/30/00 were: PBHG Class 13.42%;
Advisor Class 13.33%.

--------------------------------------------------------------------------------
PBHG Class Advisor Class
Best Quarter: Q4 1999 64.55% Q4 1999 64.44%
Worst Quarter: Q3 1990 -29.05% Q3 1998 -26.28%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Past 1 Year Past 5 Years Past 10 Years
--------------------------------------------------------------------------------
PBHG Class 92.45% 25.31% 23.64%
Advisor Class 91.97% 25.10% 23.54%
Russell 2000 Growth Index 43.10% 18.99% 13.51%

*Note: The inception date of the Growth Fund - PBHG Class was December 19, 1985.
The inception date of the PBHG Growth Fund - Advisor Class was August 16, 199
The performance shown for the Advisor Class prior to its inception is based on
the performance and expenses of the PBHG Class. The average annual total return
of the Advisor Class from its inception date to December 31, 1999 was 21.27%.

PBHG GROWTH FUND 5
<PAGE>

[Graphic Omitted] FEES AND EXPENSES
This table summarizes the shareholder fees and annual operating expenses you
would pay as an investor in the Fund. Shareholder fees are paid directly from
your account. Annual operating expenses are paid out of the Fund's assets. The
expenses listed below are based on the Fund's last fiscal year, ended March 31,
2000.

--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE PBHG ADVISOR
CLASS CLASS
--------------------------------------------------------------------------------
SHAREHOLDER FEES None None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.85% 0.85%
Distribution and/or Service (12b-1) Fees None 0.25%
Other Expenses 0.38% 0.38%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.23% 1.48%
--------------------------------------------------------------------------------

EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. This example makes four
assumptions: 1) you invest $10,000 in the Fund for the time periods shown; 2)
you redeem all your shares at the end of those time periods; 3) you earn a 5%
return on your investment each year; and 4) the Fund's operating expenses remain
the same for the time periods shown. The example is hypothetical. Your actual
costs may be higher or lower.

--------------------------------------------------------------------------------
YOUR COST OVER
1 Year Years 5 Years 10 Years
--------------------------------------------------------------------------------
PBHG Class $125 $390 $676 $1,489
PBHG Advisor Class $151 $468 $808 $1,768

6 PBHG GROWTH FUND

<PAGE>

PBHG EMERGING GROWTH FUND
[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term growth of capital.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of small sized companies.
These companies generally have market capitalizations or annual revenues of up
to $500 million. The growth securities in the Fund are primarily common stocks
that Pilgrim Baxter believes have strong historical earnings growth and expected
earnings higher than the U.S. market as a whole, as measured by the S&P 500(R)
Index. Pilgrim Baxter uses its own fundamental research, computer models and
proprietary measures of growth in determining which securities to buy and when
to sell them for this Fund. The Fund may sell a security for a variety of
reasons, such as to invest in a company with more attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

The Fund emphasizes small sized growth companies, so it is likely to be more
volatile than the stock market in general, as measured by the S&P 500(R) Index.
In addition, the growth securities in the Fund may never reach what Pilgrim
Baxter believes are their full earnings growth potential and may go down in
price.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

PBHG EMERGING GROWTH FUND 7

<PAGE>

PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell 2000 Growth Index, a widely
recognized, unmanaged index that tracks the performance of those securities in
the Russell 2000 Index with greater-than-average growth orientation. The Russell
2000 Index is an unmanaged index that measures the performance of 2,000 small
cap companies. Both the chart and the table assume reinvestment of dividends and
distributions. Of course, the Fund's past performance does not indicate how it
will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
1994 1995 1996 1997 1998 1999
23.78% 48.45% 17.08% -3.67% 3.00% 48.34%

The Fund's year-to-date return as of 6/30/00 was 13.20%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 45.85%
Worst Quarter: Q1 1997 -20.51%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year Past 5 Years (6/14/93)
--------------------------------------------------------------------------------
Emerging Growth Fund 48.34% 20.67% 24.48%
Russell 2000 Growth Index 43.10% 18.99% 15.74%*

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

8 PBHG EMERGING GROWTH FUND

<PAGE>

--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$126 $393 $681 $1,500

PBHG EMERGING GROWTH FUND 9

<PAGE>

PBHG LARGE CAP GROWTH FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term growth of capital.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of large capitalization
companies. These companies generally have market capitalizations over $1
billion. The growth securities in the Fund are primarily common stocks that
Pilgrim Baxter believes have strong earnings growth and capital appreciation
potential. Pilgrim Baxter uses its own fundamental research, computer models and
proprietary measures of growth in determining which securities to buy and when
to sell them for this Fund. The Fund may sell a security for a variety of
reasons, such as to invest in a company with more attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in financial markets, the company's individual
situation or industry changes.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

10 PBHG LARGE CAP GROWTH FUND

<PAGE>

PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the S&P 500(R) Index, a widely
recognized, unmanaged index that measures the performance of large cap stocks
across all major industries. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
1996 1997 1998 1999
23.40% 22.36% 30.42% 67.06%

The Fund's year-to-date return as of 6/30/00 was 20.01%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 59.55%
Worst Quarter: Q3 1998 -13.69%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (4/5/95)
--------------------------------------------------------------------------------
Large Cap Growth Fund 67.06% 36.81%
S&P 500(R) Index 21.04% 27.74%*

*The since inception return for the S&P 500(R) Index was calculated from March
31, 1995.

PBHG LARGE CAP GROWTH FUND 11

<PAGE>

--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES NONE
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 0.75%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.42%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.17%
--------------------------------------------------------------------------------

[Graphic Omitted] EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. This example makes four
assumptions: 1) you invest $10,000 in the Fund for the time periods shown; 2)
you redeem all your shares at the end of those time periods; 3) you earn a 5%
return on your investment each year; and 4) the Fund's operating expenses remain
the same for the time periods shown. The example is hypothetical. Your actual
costs may be higher or lower.

12 PBHG LARGE CAP GROWTH FUND

<PAGE>

PBHG SELECT EQUITY FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term growth of capital.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund will invest at least 65% of its total
assets in growth securities, such as common stocks, of no more than 30 small,
medium or large capitalization companies. The growth securities in the Fund are
primarily common stocks that Pilgrim Baxter believes have strong earnings growth
and capital appreciation potential. Pilgrim Baxter uses its own fundamental
research, computer models and proprietary measures of growth in determining
which securities to buy and when to sell them for this Fund. The Fund may sell a
security for a variety of reasons, such as to invest in a company with more
attractive growth prospects.

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

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

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in financial markets, company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

PBHG SELECT EQUITY FUND 13
<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the S&P 500(R) Index, a widely
recognized, unmanaged index that measures the performance of large cap stocks
across all major industries. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
1996 1997 1998 1999
27.99% 6.84% 19.02% 160.89%

The Fund's year-to-date return as of 6/30/00 was 28.33%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 35.98%
Worst Quarter: Q3 1998 -18.80%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (4/5/95)
--------------------------------------------------------------------------------
Select Equity Fund 160.89% 49.62%
S&P 500(R) Index 21.04% 27.74%*

*The since inception return for the S&P 500(R) Index was calculated from March
31, 1995.

14 PBHG SELECT EQUITY FUND

<PAGE>

--------------------------------------------------------------------------------
Your Cost Over
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$120 $375 $649 $1,432

PBHG SELECT EQUITY FUND 15

<PAGE>

PBHG CORE GROWTH FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with capital appreciation.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the fund invests at least 65% of its total
assets in growth securities, such as common stocks, of small, medium or large
capitalization companies. The growth securities in the Fund are primarily common
stocks that Pilgrim Baxter believes have strong earnings growth and capital
appreciation potential. Pilgrim Baxter uses its own fundamental research,
computer models and proprietary measures of growth in determining which
securities to buy and when to sell them for this Fund. The Fund may sell a
security for a variety of reasons, such as to invest in a company with more
attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in financial markets, the company's individual
situation or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

16 PBHG CORE GROWTH FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell Midcap Growth Index. The
Russell Midcap Growth Index is a widely recognized, unmanaged index that
measures the performance of the 800 smallest issuers in the Russell 1000 Index
with greater-than-average growth characteristics. The Russell 1000 Index is an
unmanaged index that measures the performance of 1,000 large cap companies. Both
the chart and the table assume reinvestment of dividends and distributions. Of
course, the Fund's past performance does not indicate how it will perform in the
future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
1996 1997 1998 1999
32.80% -9.71% 7.42% 97.59%

The Fund's year-to-date return as of 6/30/00 was 17.49%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 54.71%
Worst Quarter: Q1 1997 -22.14%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99

Since Inception
Past 1 Year (12/29/95)
--------------------------------------------------------------------------------
Core Growth Fund 97.59% 26.33%
Russell Midcap Growth Index 51.30% 26.58%

PBHG CORE GROWTH FUND 17

<PAGE>

FEES AND EXPENSES
This table summarizes the shareholder fees and annual operating expenses you
would pay as an investor in the Fund. Shareholder fees are paid directly from
your account. Annual operating expenses are paid out of the Fund's assets. The
expenses listed below are based on the Fund's last fiscal year, ended March 31,
2000.

*THESE ARE THE EXPENSES YOU SHOULD EXPECT TO PAY AS AN INVESTOR IN THIS FUND
FOR THE FISCAL YEAR ENDING MARCH 31, 2001. HOWEVER, YOU SHOULD KNOW THAT FOR
THE FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY AGREED
TO WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY THE
FUND AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO ENSURE
THAT THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 1.50%. YOU SHOULD
ALSO KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER THAN
$75 MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN 1.50%,
THE FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR ANY
FEES IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE
PREVIOUS TWO FISCAL YEARS. THE BOARD MADE NO REIMBURSEMENT ELECTION DURING THE
FISCAL YEAR ENDED MARCH 31, 2000.

18 PBHG CORE GROWTH FUND

<PAGE>

PBHG LIMITED FUND
THIS FUND IS CURRENTLY OFFERED ONLY TO EXISTING SHAREHOLDERS. EXISTING
SHAREHOLDERS MAY OPEN NEW ACCOUNTS, PROVIDED THAT ANY NEW ACCOUNT IS REGISTERED
IN THE SAME NAME OR HAS THE SAME SOCIAL SECURITY OR TAXPAYER IDENTIFICATION
NUMBER AS THE EXISTING SHAREHOLDER'S ACCOUNT.

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term capital appreciation.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of small sized companies.
These companies generally have market capitalizations or annual revenues of up
to $250 million. The growth securities in the Fund are primarily common stocks
that Pilgrim Baxter believes have strong historical earnings growth and expected
earnings higher than the U.S. market as a whole, as measured by the S&P 500(R)
Index. Pilgrim Baxter uses its own fundamental research, computer models and
proprietary measures of growth in determining which securities to buy and when
to sell them for this Fund. The Fund may sell a security for a variety of
reasons, such as to invest in a company with more attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.
PBHG LIMITED FUND 19

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell 2000 Growth Index, a widely
recognized, unmanaged index that tracks the performance of those securities in
the Russell 2000 Index with greater-than-average growth characteristics. The
Russell 2000 Index is an unmanaged index that measures the performance of 2,000
small cap stocks. Both the chart and the table assume reinvestment of dividends
and distributions. Of course, the Fund's past performance does not indicate how
it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1997 1998 1999
16.07% 13.05% 71.70%

The Fund's year-to-date return as of 6/30/00 was 19.94%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 49.84%
Worst Quarter: Q1 1997 -18.03%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (6/28/96)
--------------------------------------------------------------------------------
Limited Fund 71.70% 29.79%
Russell 2000 Growth Index* 43.10% 14.91%

*The since inception returns for the Russell 2000 Growth Index was calculated
as of June 30, 1996.

20 PBHG LIMITED FUND

<PAGE>

PBHG LIMITED FUND 21
<PAGE>

PBHG LARGE CAP 20 FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term growth of capital.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund, a non-diversified fund, will invest at
least 65% of its total assets in growth securities, such as common stocks, of no
more than 20 large capitalization companies. These companies generally have
market capitalizations over $1 billion. The growth securities in the Fund are
primarily common stocks that Pilgrim Baxter believes have strong earnings growth
and capital appreciation potential. Pilgrim Baxter uses its own fundamental
research, computer models and proprietary measures of growth in determining
which securities to buy and when to sell them for this Fund. The Fund may sell a
security for a variety of reasons, such as to invest in a company with more
attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The Fund is non-diversified which means as compared to a diversified fund, it
invests a higher percentage of its assets in a limited number of stocks in order
to achieve a potentially greater investment return than a more diversified fund.
As a result, the price change of a single security, positive or negative, has a
greater impact on the Fund's net asset value and will cause its shares to
fluctuate in value more than it would in a diversified fund.
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in financial markets, company's individual
situation, or industry changes.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

22 PBHG LARGE CAP 20 FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the S&P(R) 500 Index, a widely
recognized, unmanaged index that measures the performance of large cap stocks
across all major industries. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS
[BAR CHART]
1997 1998 1999
32.96% 67.83% 102.94%

The Fund's year-to-date return as of 6/30/00 was 12.03%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 75.65%
Worst Quarter: Q1 1997 -5.90%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (11/29/96)
--------------------------------------------------------------------------------
Large Cap 20 Fund 102.94% 62.25%
S&P 500(R) Index* 21.04% 25.91%

*The since inception returns for the S&P 500(R) Index was calculated as of
11/30/96.

PBHG LARGE CAP 20 FUND 23

<PAGE>

24 PBHG LARGE CAP 20 FUND

PBHG NEW OPPORTUNITIES FUND
THIS FUND IS CURRENTLY OFFERED ONLY TO THE FOLLOWING INVESTORS: (1) SUBSEQUENT
INVESTMENTS BY PERSONS WHO WERE SHAREHOLDERS ON OR BEFORE NOVEMBER 12, 1999; (B)
NEW AND SUBSEQUENT INVESTMENTS MADE BY CERTAIN CLIENTS AND EMPLOYEES OF PILGRIM
BAXTER AND ITS AFFILIATES; AND (C) NEW AND SUBSEQUENT INVESTMENTS BY CERTAIN
PENSIONS PLANS.

[Graphic Omitted] GOAL
The Fund seeks to provide investors with capital appreciation.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in growth securities, such as common stocks, of companies in economic
sectors which the Adviser believes have above-average long-term growth
potential. These companies generally have market capitalizations or annual
revenues under $1 billion. The growth securities in the Fund are primarily
common stocks. The sectors that the Adviser believes have above-average
long-term growth potential will change as the economy changes. As a result, the
Fund may or may not be invested in these or other sectors at any time. In
addition, the Fund may emphasize one or more sectors. For example, the Fund may
invest 100% of its total assets in one sector. Pilgrim Baxter uses its own
fundamental research, computer models and proprietary measures of growth in
determining which securities to buy and when to sell them for this Fund. The
Fund may sell a security for a variety of reasons, such as to invest in a
company with more attractive growth prospects.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

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

The Fund may emphasize companies with market capitalizations under $1 billion,
so it may be more volatile than the stock market in general, as measured by the
S&P 500(R) Index. In addition, the growth securities in the Fund may never reach
what Pilgrim Baxter believes are their full long-term growth potential and may
go down in price.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved. Your investment in the Fund is not a bank deposit. It is not
insured or guaranteed by the FDIC or any other government agency.

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

PBHG NEW OPPORTUNITIES FUND 25

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
Performance information for this Fund will be presented once the Fund has
completed investment operations for a full calendar year.

26 PBHG NEW OPPORTUNITIES FUND

<PAGE>

PBHG NEW OPPORTUNITIES 27

<PAGE>

PBHG LARGE CAP VALUE FUND

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

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

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and th
associated risks, please refer to the More About the Funds section beginning on
page 56.

28 PBHG LARGE CAP VALUE FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the S&P 500(R) Index, a widely
recognized, unmanaged index that measures the performance of large cap stocks
across all major industries. Both the chart and the table assume reinvestment of
dividends and distributions. Of course, the Fund's past performance does not
indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1997 1998 1999
25.62% 34.74% 11.06%

The Fund's year-to-date return as of 6/30/00 was 7.84%.

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

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (12/31/96)
--------------------------------------------------------------------------------
Large Cap Value Fund 11.06% 23.41%
S&P 500(R) Index 21.04% 27.56%

PBHG LARGE CAP VALUE FUND 29
[Graphic Omitted] FEES AND EXPENSES

This table summarizes the shareholder fees and annual operating expenses you
would pay as an investor in the Fund. Shareholder fees are paid directly from
your account. Annual operating expenses are paid out of the Fund's assets. The
expenses listed below are based on the Fund's last fiscal year, ended March 31,
2000.

YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
$113 $353 $612 $1,352

30 PBHG LARGE CAP VALUE FUND

<PAGE>

PBHG MID-CAP VALUE FUND

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

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund invests at least 65% of its total
assets in value securities, such as common stocks, issued by companies with
market capitalizations within the range of the S&P Midcap 400 Index. Currently,
the companies in the S&P Midcap 400 Index have market capitalizations between
$200 million and $5 billion. The value securities in the Fund are primarily
common stocks that Pilgrim Baxter and Value Investors believe are currently
underpriced using certain financial measurements, such as their price-to-
earnings ratios, dividend income potential and earnings power. Pilgrim Baxter
and Value Investors use their own fundamental research, computer models and
proprietary measures of value in managing this Fund. The Fund may sell a
security for a variety of reasons, such as when it becomes overvalued or shows
deteriorating fundamentals. The Fund's sector weightings are generally within
10% of the S&P Midcap 400's sector weightings. In addition, the Fund generally
has a lower price-to-earnings ratio than the S&P Midcap 400 Index.

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

The Fund emphasizes value securities of medium sized companies, so it is likely
to be more volatile than the stock market in general, as measured by the S&P
500(R) Index. In addition, the value securities in the Fund may never reach what
Pilgrim Baxter and Value Investors believe are their full worth and may go down
in price.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, risks, please refer to the More About the Funds section
beginning on page 56.
PBHG MID-CAP VALUE FUND 31

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The performance table compares the
Fund's performance over time to that of its benchmark, the S&P Midcap(R) 400
Index, a widely recognized, unmanaged index that tracks the performance of 400
mid-cap stocks, and the S&P BARRA MidCap Value Index, a widely recognized,
unmanaged index that tracks the performance of those S&P MidCap 400 companies
with lower price-to-book ratios and forecasted growth rates. Both the chart and
the table assume reinvestment of dividends and distributions. Of course, the
Fund's past performance does not indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1998 1999
27.84% 21.72%

The Fund's year-to-date return as of 6/30/00 was 16.72%.

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

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (4/30/97)
--------------------------------------------------------------------------------
Mid-Cap Value Fund 21.72% 34.37%
S&P Midcap 400 Index 14.72% 24.34%
S&P Midcap 400/BARRA Value Index 2.32% 13.69%

32 PBHG MID-CAP VALUE FUND

<PAGE>

PBHG MID-CAP VALUE FUND 33

PBHG SMALL CAP VALUE FUND

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

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

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, a company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

The Fund emphasizes value securities of smaller sized companies, so it is likely
to be more volatile than the stock market in general, as measured by the S&P
500(R) Index. In addition, the value securities in the Fund may never reach what
Pilgrim Baxter and Value Investors believe are their full worth and may go down
in price.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

34 PBHG SMALL CAP VALUE FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The performance table compares the
Fund's performance over time to that of its benchmark, the Russell 2000 Index, a
widely recognized, unmanaged index that tracks the performance of 2,000 small
cap stocks, and the Russell 2000 Value Index, a widely-recognized, unmanaged
index that tracks the performance of those Russell 2000 companies with lower
price-to-book ratios and forecasted growth rates. Both the chart and the table
assume reinvestment of dividends and distributions. Of course, the Fund's past
performance does not indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1998 1999
1.13% 18.63%

The Fund's year-to-date return as of 6/30/00 was 28.12%.

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

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (4/30/97)
--------------------------------------------------------------------------------
Small Cap Value Fund 18.63% 23.15%
Russell 2000 Index 21.26% 17.02%
Russell 2000 Value Index -1.49% 7.07%

PBHG SMALL CAP VALUE FUND 35

<PAGE>

--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.58%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.58%
--------------------------------------------------------------------------------
Fee Waiver (and/or Expense Reimbursement) 0.08%
Net Expenses 1.50%*
--------------------------------------------------------------------------------
*THIS IS THE ACTUAL TOTAL FUND OPERATING EXPENSE YOU WOULD HAVE PAID AS AN
INVESTOR IN THIS FUND FOR THE FISCAL YEAR ENDED MARCH 31, 2001. THAT'S BECAUSE
FOR THE FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY
AGREED TO WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY
THE FUND AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO
ENSURE THAT THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 1.50%. YOU
SHOULD KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER THAN
$75 MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN 1.50%,
THE FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR ANY
FEES IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE
PREVIOUS TWO FISCAL YEARS. THE BOARD MADE NO REIMBURSEMENT ELECTION DURING
FISCAL YEAR ENDED MARCH 31, 2000.

36 PBHG SMALL CAP VALUE FUND

<PAGE>

PBHG FOCUSED VALUE FUND

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

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

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

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

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

[Graphic Omitted] PERFORMANCE INFORMATION
Performance information for this Fund will be presented once the Fund has
completed investment operations for a full calendar year.

*THIS IS THE ACTUAL TOTAL FUND OPERATING EXPENSE YOU WILL PAY AS AN INVESTOR IN
THIS FUND FOR THE CURRENT FISCAL YEAR ENDED MARCH 31, 2001. THAT'S BECAUSE FOR
THE FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY AGREED
TO WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY THE
FUND AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO ENSURE
THAT THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 1.50%. YOU SHOULD
KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER THAN $75
MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN 1.50%, THE
FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR ANY FEES
IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE PREVIOUS
TWO FISCAL YEARS. TO DATE, THE BOARD HAS MADE NO REIMBURSEMENT ELECTION DURING
FISCAL YEAR MARCH 31, 2000.

38 PBHG FOCUSED VALUE FUND

<PAGE>

--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years 5 Years 10 Years
$153 $485 $840 $1,841

PBHG FOCUSED VALUE FUND 39

PBHG INTERNATIONAL FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term capital appreciation.

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

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for foreign equity
securities and companies with smaller market capitalizations. Investments in
foreign securities involve risks relating to political, social and economic
developments abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are subject. Companies
with smaller market capitalizations tend to have more limited product lines,
markets and financial resources and may be dependent on a smaller management
group than larger, more established companies.

The foreign equity securities in the Fund may never reach what Murray Johnstone
believes are their full capital appreciation potential and may go down in price.
Investments in emerging or developing countries may be subject to extreme
volatility because, in general, these countries economies are less well
developed, their political structures are less stable and their financial
markets are less liquid than more developed nations.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

40 PBHG INTERNATIONAL FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Morgan Stanley Capital International
Europe Australia and Far East Index (MSCI EAFE). The MSCI EAFE is a widely
recognized, unmanaged index that tracks the performance of 60% of the publicly
traded companies in Europe, Australia and the Far East. Both the chart and the
table assume reinvestment of dividends and distributions. Of course, the Fund's
past performance does not indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1995 1996 1997 1998 1999
2.05% 12.66% 3.48% 12.74% 26.51%

The Fund's year-to-date return as of 6/30/00 was -10.54%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 20.13%
Worst Quarter: Q3 1998 -12.24%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year Past 5 Years (6/5/94)
--------------------------------------------------------------------------------
International Fund 26.51% 11.15% 9.58%
MSCI EAFE Index 26.96% 12.83% 11.42%*

*The since inception return for the MSCI EAFE was calculated as of June 1, 1994.

41 PBHG INTERNATIONAL FUND

<PAGE>

*THESE ARE THE EXPENSES YOU SHOULD EXPECT TO PAY AS AN INVESTOR IN THIS FUND
FOR THE FISCAL YEAR ENDING MARCH 31, 2001. HOWEVER, YOU SHOULD KNOW THAT FOR
THE FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY AGREED
TO WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY THE
FUND AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO ENSURE
THAT THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 2.25%. YOU SHOULD
ALSO KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER THAN
$75 MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN 2.25%,
THE FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR ANY
FEES IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE
PREVIOUS TWO FISCAL YEARS. THE BOARD MADE NO REIMBURSEMENT ELECTION DURING THE
FISCAL YEAR ENDED MARCH 31, 2000.

42 PBHG INTERNATIONAL FUND
<PAGE>

PBHG CASH RESERVES FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with current income while preserving
principal and maintaining liquidity.

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

[Graphic Omitted] MAIN INVESTMENT RISKS
Although the Fund seeks to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the Fund. Your investment in
the Fund is not a bank deposit. It is not insured or guaranteed by the FDIC or
any other government agency. The price of the money market instruments in the
Fund will fluctuate. These price movements may occur because of, among other
things, changes in the financial markets or the issuer's individual financial
situation. These risks are greater for foreign money market instruments.
Investments in foreign money market instruments involve risks relating to
political, social and economic developments abroad, as well as risks resulting
from the differences between the regulations to which U.S. and foreign issuers
and markets are subject. Although the Fund strives to maintain a consistent
share price and to achieve its goal, it cannot guarantee that the constant share
price or goal will be achieved.

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

PBHG CASH RESERVES FUND 43

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Lipper Money Market Funds Average, a
widely recognized, composite of money market funds that invest in the highest
credit quality short-term money market instruments. Both the chart and the table
assume reinvestment of dividends and distributions. Of course, the Fund's past
performance does not indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

PBHG CASH RESERVES FUND
[BAR CHART]
1996 1997 1998 1999
4.91% 5.08% 5.00% 4.60%

The Fund's year-to-date return as of 6/30/00 was 2.75%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1997 1.28%
Worst Quarter: Q2 1999 1.06%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (4/4/95)
--------------------------------------------------------------------------------
Cash Reserves Fund 4.60% 4.98%
Lipper Money Market Funds Average 4.49% 4.91%*

*The since inception return for the Lipper Money Market Funds Average was
calculated from March 31, 1995.

TO OBTAIN INFORMATION ABOUT THE FUND'S YIELD, CALL 1-800-433-0051.

PBHG CASH RESERVES FUND 45

<PAGE>

PBHG CASH RESERVES FUND 45
<PAGE>

PBHG TECHNOLOGY & COMMUNICATIONS FUND

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

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund, a non-diversified fund, will invest at
least 65% of its total assets in common stocks of companies doing business in
the technology and communications sectors of the market. In addition, the Fund
is concentrated which means it will invest 25% or more of its total assets in
one or more of the industries within these sectors. These industries may include
computer software and hardware, network and cable broadcasting, semiconductors,
defense and data storage and retrieval, and biotechnology. The Fund invests in
companies that may be responsible for breakthrough products or technologies or
may be positioned to take advantage of cutting-edge developments. The Fund's
holdings may range from smaller companies developing new technologies or
pursuing scientific breakthroughs to large, blue chip firms with established
track records in developing, using or marketing scientific advances. The Fund
may sell a security for a variety of reasons, such as to invest in a company
with more attractive growth prospects.

The Fund is concentrated which means, compared to a non-concentrated fund, it
invests a higher percentage of its assets in specific industries within the
technology and communications sectors of the market in order to achieve a
potentially greater investment return. As a result, the economic, political and
regulatory developments in a particular industry, positive or negative, have a
greater impact on the Fund's net asset value and will cause its shares to
fluctuate more that if the Fund did not concentrate its investments. The value
of your investment in the Fund will go up and down, which means you could lose
money.

46 PBHG TECHNOLOGY & COMMUNICATIONS FUND

<PAGE>

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for companies with
smaller market capitalizations because they tend to have more limited product
lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

PBHG TECHNOLOGY & COMMUNICATIONS FUND 47

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Soundview Technology Index, a widely
recognized, unmanaged index that measures the performance of 100 major
technology stocks, as chosen by Soundview Financial Group. Both the chart and
the table assume reinvestment of dividends and distributions. Of course, the
Fund's past performance does not indicate how it will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BRA CHART]
1996 1997 1998 1999
54.42% 3.32% 26.00% 243.89%

The Fund's year-to-date return as of 6/30/00 was 16.53%.

--------------------------------------------------------------------------------
Best Quarter: Q4 1999 111.54%
Worst Quarter: Q4 1997 -17.42%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (9/29/95)
--------------------------------------------------------------------------------
Technology & Communications Fund 243.89% 63.29%
Soundview Technology Index 129.79% 45.68%*

*The since inception return for the Soundview Technology Index was September
30, 1995. Prior to November 2, 1999, the Fund was diversified and did not
concentrate its investments. Therefore, the Fund's performance prior to
November 2, 1999 may not be indicative of how it will perform in the future.

48 PBHG TECHNOLOGY & COMMUNICATIONS FUND

<PAGE>

PBHG TECHNOLOGY & COMMUNICATIONS FUND 49

<PAGE>

PBHG STRATEGIC SMALL COMPANY FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with growth of capital.

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

[Graphic Omitted] MAIN INVESTMENT RISKS
The value of your investment in the Fund will go up and down, which means you
could lose money.

The Fund emphasizes growth and value securities of smaller sized companies, so
it is likely to be more volatile than the stock market in general, as measured
by the S&P 500(R) Index. In addition, the growth and value securities in the
Fund may never reach what Pilgrim Baxter and Value Investors believe are their
full potential worth and may go down in price.

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on this Fund's investment strategies and the
associated risks, please refer to the More About the Funds section beginning on
page 56.

50 PBHG STRATEGIC SMALL COMPANY FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. The bar chart shows you how the Fund's
performance has varied from year to year. The performance table compares the
Fund's performance over time to that of the Russell 2000 Index, widely
recognized, unmanaged index that tracks the performance of 2000 small cap
stocks. Both the chart and the table assume reinvestment of dividends and
distributions. Of course, the Fund's past performance does not indicate how it
will perform in the future.

--------------------------------------------------------------------------------
CALENDAR YEAR TOTAL RETURNS

[BAR CHART]
1997 1998 1999
25.67% 2.13% 51.79%

The Fund's year-to-date return as of 6/30/00 was 26.40%.

Best Quarter: Q4 1999 36.16%
Worst Quarter: Q3 1998 -23.48%

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
Since Inception
Past 1 Year (12/31/96)
Strategic Small Company Fund 51.79% 24.89%
Russell 2000 Index 21.26% 13.08%

PBHG STRATEGIC SMALL COMPANY FUND 51

<PAGE>

--------------------------------------------------------------------------------
FEES AND EXPENSES TABLE
SHAREHOLDER FEES None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.00%
Distribution and/or Service (12b-1) Fees None
Other Expenses 0.55%
--------------------------------------------------------------------------------
Total Annual Operating Expenses 1.55%
--------------------------------------------------------------------------------
Fee Waiver (and/or Expense Reimbursement) 0.05%
Net Expenses 1.50%*
--------------------------------------------------------------------------------
*THIS IS THE ACTUAL TOTAL FUND OPERATING EXPENSE YOU WILL PAY AS AN INVESTOR IN
THIS FUND FOR THE CURRENT FISCAL YEAR ENDED MARCH 31, 2001. THAT'S BECAUSE
FOR THE FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY
AGREED TO WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY
THE FUND AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO
ENSURE THAT THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 1.50%. YOU
SHOULD KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER
THAN $75 MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN
1.50%, THE FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR
ANY FEES IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE
PREVIOUS TWO FISCAL YEARS. THE BOARD MADE NO REIMBURSEMENT ELECTION DURING
FISCAL YEAR ENDED MARCH 31, 2000.

52 PBHG STRATEGIC SMALL COMPANY FUND

<PAGE>

PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND

[Graphic Omitted] GOAL
The Fund seeks to provide investors with long-term growth of capital.

[Graphic Omitted] MAIN INVESTMENT STRATEGIES
Under normal market conditions, the Fund, a non-diversified fund, will invest at
least 65% of its total assets in common stocks of U.S. and non-U.S. companies
and American Depository Receipts ("ADRs") of non-U.S. companies doing business
in the technology and communications sectors of the market. In addition, the
Fund is concentrated which means it will invest 25% or more of its total assets
in one or more of the industries within these sectors. These industries may
include computer software and hardware, network and cable broadcasting,
semiconductors, defense and data storage and retrieval, and biotechnology.

The Fund invests in companies that may be responsible for breakthrough products
or technologies or may be positioned to take advantage of cutting-edge
developments. These companies will be in at least three different countries, one
of which may include the U.S. Some of these countries may be considered emerging
or developing by the international finance community. The Fund's holdings may
range from smaller companies developing new technologies or pursuing scientific
breakthroughs to large, blue chip firms with established track records in
developing, using or marketing scientific advances.

Pilgrim Baxter uses its own fundamental research, computer models and
proprietary measures of growth and business momentum in managing this Fund. The
Fund may sell a security for a variety of reasons, such as a deterioration in
fundamentals or to invest in a company with more attractive growth prospects.

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

PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND 53

<PAGE>

The price of the securities in the Fund will fluctuate. These price movements
may occur because of changes in the financial markets, the company's individual
situation, or industry changes. These risks are greater for foreign equity
securities and companies with smaller market capitalizations. Investments in
foreign equity securities involve risks relating to political, social and
economic developments abroad, as well as risks resulting from the differences
between the regulations to which U.S. and foreign issuers and markets are
subject. Companies with smaller market capitalizations tend to have more limited
product lines, markets and financial resources and may be dependent on a smaller
management group than larger, more established companies.

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

Although the Fund strives to achieve its goal, it cannot guarantee that the goal
will be achieved.

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

[logo omitted] For more information on the Fund's investment strategies and the
associated risks, please refer to the More About the Fund section beginning on
page 56.

54 PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND

<PAGE>

[Graphic Omitted] PERFORMANCE INFORMATION
Performance information for the Fund will be presented once the Fund has
completed investment operations for a full calendar year.

[Graphic Omitted] FEES AND EXPENSES
This table summarizes the shareholder fees and annual operating expenses you
would pay as an investor in the Fund. Shareholder fees are paid directly from
your account. Annual operating expenses are paid out of the Fund's assets. Since
the Fund commenced operations on June 1, 2000, "Other Expenses" is based on
estimated amounts the Fund expects to pay during the current fiscal year.

*THESE ARE THE EXPENSES YOU SHOULD EXPECT TO PAY AS AN INVESTOR IN THIS FUND FOR
THE FISCAL YEAR ENDING MARCH 31, 2001. HOWEVER, YOU SHOULD KNOW THAT FOR THE
FISCAL YEAR ENDING MARCH 31, 2001, PILGRIM BAXTER HAS CONTRACTUALLY AGREED TO
WAIVE THAT PORTION, IF ANY, OF THE ANNUAL MANAGEMENT FEES PAYABLE BY THE FUND
AND TO PAY CERTAIN EXPENSES OF THE FUND TO THE EXTENT NECESSARY TO ENSURE THAT
THE TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 2.15%. YOU SHOULD ALSO
KNOW THAT IN ANY FISCAL YEAR IN WHICH THE FUND'S ASSETS ARE GREATER THAN $75
MILLION AND ITS TOTAL ANNUAL FUND OPERATING EXPENSES ARE LESS THAN 2.15%, THE
FUND'S BOARD OF DIRECTORS MAY ELECT TO REIMBURSE PILGRIM BAXTER FOR ANY FEES
IT WAIVED OR EXPENSES IT REIMBURSED ON THE FUND'S BEHALF DURING THE PREVIOUS
TWO FISCAL YEARS. THE BOARD MADE NO REIMBURSEMENT ELECTION DURING THE FISCAL
YEAR ENDED MARCH 31, 2000.

--------------------------------------------------------------------------------
YOUR COST OVER
1 Year 3 Years
--------------------------------------------------------------------------------
$203 $627

PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND 55
<PAGE>

MORE ABOUT THE FUNDS

[Logo Omitted] RISKS AND RETURNS

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

In addition to the main investment strategies described in the Fund Summaries
section of this Prospectus, each Fund may make other types of investments that
have different risk/return characteristics. These investments, the Funds' main
investment strategies and their risk/return characteristics are described in the
table set forth on the following pages. From time to time, a Fund may make
investments and pursue strategies different from those described in this
Prospectus. Those non-principal investments and strategies are described in the
Statement of Additional Information. The back cover of this Prospectus explains
how you can get a copy of the Statement of Additional Information.

Each Fund may invest 100% of its total assets in cash or U.S. dollar-denominated
high quality short-term debt instruments for temporary defensive purposes, to
maintain liquidity or when economic or market conditions are unfavorable for
profitable investing. These types of investments typically have a lower yield
than other longer-term investments and lack the capital appreciation potential
of equity securities, like stocks. In addition, while these investments are
generally designed to limit a Fund's losses, they can prevent a Fund from
achieving its investment goal.

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

56
<PAGE>

--------------------------------------------------------------------------------
SECURITIES
Shares representing ownership or the right to ownership in a corporation. Each
Fund (except the Cash Reserves Fund) may invest in the following types of
securities: common and preferred stocks, convertible securities, warrants and
rights.

POTENTIAL RISKS
--------------------------------------------------------------------------------
Security prices fluctuate over time. Security prices may fall as a result of
factors that relate to the company, such as management decisions or lower demand
for the company's products or services.

Security prices may fall because of factors affecting companies in a number of
industries, such as increased production costs.

Security prices may fall because of changes in the financial markets, such as
interest rates or currency exchange rate changes.

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Securities have generally outperformed more stable investments (such as bonds
and cash equivalents) over the long term.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
Pilgrim Baxter, Value Investors and Murray Johnstone maintain a long-term
investment approach and focus on securities they believe can appreciate over an
extended time frame, regardless of interim fluctuations.

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

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

--------------------------------------------------------------------------------
GROWTH SECURITIES
Securities that Pilgrim Baxter believes have or are expected to have strong
sales and earnings growth and capital appreciation potential and will grow
faster than the economy as a whole.

POTENTIAL RISKS
--------------------------------------------------------------------------------
See Securities.

Growth securities may be more sensitive to earnings changes in business momentum
and earnings than other securities because they typically trade at higher
earnings multiples.

The growth securities in the Fund may never reach what Pilgrim Baxter believes
are their full value and may even go down in price.

POTENTIAL RETURNS
See Securities.
--------------------------------------------------------------------------------
Growth securities may appreciate faster than non-growth securities.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
See Securities.

In managing a Fund, Pilgrim Baxter uses its own software and research models
which incorporate important attributes of successful growth. A key attribute of
successful growth is positive business momentum as demonstrated by earnings or
revenue and sales growth, among other factors. Pilgrim Baxter's investment
process is extremely focused on companies which exhibit positive business
momentum.

Pilgrim Baxter considers selling a security when its anticipated appreciation is
no longer probable, alternative investments offer superior appreciation
prospects, the risk of a decline in its market price is too great or a
deterioration in business fundamentals occurs or is expected to occur.

57
<PAGE>

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

POTENTIAL RISKS
--------------------------------------------------------------------------------
See securities.

Value companies may have experienced adverse business developments or may be
subject to special risks that have caused their securities to be out of favor.

The value securities in the Fund may never reach what Value Investors believes
are their full value and may even go down in price.

POTENTIAL RETURNS
--------------------------------------------------------------------------------
See Securities.

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

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
See securities.

In managing a Fund, Value Investors uses its own research, computer models and
measures of value.

Value Investors considers selling a security when it becomes overvalued relative
to the market, shows deteriorating fundamentals or falls short of Value
Investors' expectations.

FOREIGN EQUITY SECURITIES
--------------------------------------------------------------------------------

Securities of foreign issuers, including ADRs, EDRs and GDRs. ADRs are
certificates issued by a U.S. bank that represent a stated number of shares of a
foreign corporation that the bank holds in its vault. An ADR is bought and sold
in the same manner as U.S. securities. EDRs and GDRs are also receipts that
represent a stated number of shares of a foreign corporation, only that they are
issued by a non-U.S. bank or a foreign branch of U.S. bank. An ADR is bought and
sold in the same manner as U.S. securities and is priced in U.S. dollars. EDRs
and GDRs are generally designed for use on foreign exchanges and are typically
not priced in U.S. dollars. ADRs, EDRs and GDRs each carry most of the risks of
investing directly in foreign equity securities.

POTENTIAL RISKS
--------------------------------------------------------------------------------
Foreign security prices may fall due to political instability, changes in
currency exchange rates, foreign economic conditions or inadequate regulatory
and accounting standards. These risks tend to be greater in emerging markets. As
a result, the International and Global Technology & Communications Fund's
investments in emerging markets may be considered speculative.

The adoption of the euro as the common currency of the European Economic an
Monetary Union (the "EMU") presents some uncertainties and possible risks, such
as changes in relative strength and value of major world currencies, adverse tax
consequences, and increased price competition among and between EMU and non-EMU
countries. These uncertainties and possible risks could adversely affect the
Funds.

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Favorable exchange rate movements could generate gains or reduce losses.
Foreign investments, which represent a major portion of the world's securities,
offer attractive potential performance and opportunities for diversification.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------

Murray Johnstone, in managing the International Fund, and Pilgrim Baxter, in
managing the Global Technology & Communications Fund, each seek to invest in
companies with strong growth potential in those countries with the best
investment opportunities.

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

58
<PAGE>

MONEY MARKET INSTRUMENTS
--------------------------------------------------------------------------------
High quality, short-term U.S. and foreign debt instruments denominated in U.S.
dollars, including bank obligations (such as CDs, time deposits, bankers'
acceptances, and banknotes) commercial paper, corporate obligations (including
asset backed securities) government obligations (such as U.S. Treasury, agency
or foreign government securities) short-term obligations issued by state and
local governments and repurchase agreements.

POTENTIAL RISKS
--------------------------------------------------------------------------------
Money market instrument prices fluctuate over time.

Money market instrument prices may fall as a result of factors that relate to
the issuer, such as a rating downgrade.

Money market instrument prices may fall because of changes in the financial
markets, such as interest rate changes.

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

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Money market instruments have greater short-term liquidity, capital preservation
and income potential than longer-term investments such as stocks.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
The Cash Reserves Fund follows strict SEC rules about credit risk, maturity and
diversification of its investments.

SMALL AND MEDIUM SIZED COMPANY SECURITIES

POTENTIAL RISKS
--------------------------------------------------------------------------------

Small and medium sized company securities involve greater risk and price
volatility than larger, more established companies because they tend to have
more limited product lines, markets and financial resources and may be dependent
on a smaller management group.

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Small and medium sized company securities may appreciate faster than those of
larger, more established companies for many reasons. For example, small and
medium sized companies tend to have younger product lines whose distribution and
revenues are still maturing.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
See Securities/Growth Securities/Value Securities.

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

59
<PAGE>

TECHNOLOGY OR COMMUNICATIONS COMPANY SECURITIES
--------------------------------------------------------------------------------
Securities of companies that rely extensively on technology or communications in
their product development or operations or are expected to benefit from
technological advances and improvements.

POTENTIAL RISKS
--------------------------------------------------------------------------------

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

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Technology or communications company securities offer investors significant
growth potential because they may be responsible for breakthrough products or
technologies or may be positioned to take advantage of cutting-edge,
technology-related developments.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------

Except for the Technology & Communications Fund and Global Technology &
Communications Fund, each Fund seeks to strike a balance among the industries in
which it invests so that no one industry dominates the Fund's investments.

OTC SECURITIES
--------------------------------------------------------------------------------
Securities not listed and traded on an organized exchange, but bought and sold
through a computer network.

POTENTIAL RISKS
--------------------------------------------------------------------------------
OTC securities are not traded as often as securities listed on an exchange. So,
if the Fund were to sell an OTC security, it might have to offer the security at
a discount or sell it in smaller share lots over an extended period of time.

POTENTIAL RETURNS
--------------------------------------------------------------------------------
Increases the number of potential investments for a Fund.
OTC securities may appreciate faster than exchange-traded securities because
they are typically securities of younger, growing companies.

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
Pilgrim Baxter, Value Investors and Murray Johnstone use a highly disciplined
investment process that seeks to, among other things, identify quality
investments that will enhance a Fund's performance.

<PAGE>

ILLIQUID SECURITIES
--------------------------------------------------------------------------------
Securities that do not have a ready market and cannot be easily sold, if at all,
at approximately the price that the Fund has valued them.

POTENTIAL RISKS
--------------------------------------------------------------------------------
A Fund may have difficulty valuing these securities precisely. A Fund may be
unable to sell these securities at the time or price it desires.

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

POLICIES TO BALANCE RISK AND RETURN
--------------------------------------------------------------------------------
The Cash Reserves Fund may not invest more than 10% of its net assets in
illiquid securities. Every other Fund may not invest more than 15% of its net
assets in illiquid securities.

<PAGE>

THE INVESTMENT ADVISER & SUBADVISERS

[Logo Omitted] THE INVESTMENT ADVISOR

Pilgrim Baxter & Associates, Ltd., 825 Duportail Road, Wayne, PA 19087, is the
investment advisor for each Fund. Founded in 1982, Pilgrim Baxter currently
manages approximately $23 billion in assets for pension and profit-sharing
plans, charitable institutions, corporations, trusts, estates and other
investment companies. Pilgrim Baxter believes that discipline and consistency
are important to long-term investment success. This belief is reflected in its
investment process. Pilgrim Baxter uses a quantitative and fundamental
investment process that is extremely focused on business momentum, as
demonstrated by such things as earnings or revenue and sales growth. Pilgrim
Baxter's decision to sell a security depends on many factors. Generally
speaking, however, Pilgrim Baxter considers selling a security when its
anticipated appreciation is no longer probable, alternative investments offer
more superior appreciation prospects, the risk of a decline in its market price
is too great or a deterioration in business fundamentals occurs or is expected
to occur. As investment adviser, Pilgrim Baxter makes investment decisions for
the Growth, Emerging Growth, Large Cap Growth, Select Equity, Core Growth,
Limited, Large Cap 20, New Opportunities, Technology & Communications and Global
Technology & Communications Funds, and for the growth portion of the Strategic
Small Company Fund. Pilgrim Baxter oversees the investment decisions made by
Value Investors as sub-adviser for the Large Cap Value, Mid-Cap Value, Small Cap
Value and Focused Value Funds, and for the value portion of the Strategic Small
Company Fund, Murray Johnstone as sub-adviser for the International Fund and
Wellington Management as sub-adviser for the Cash Reserves Funds. The Funds'
Board of Directors supervises Pilgrim Baxter and the sub-advisers and
establishes policies that Pilgrim Baxter and the sub-advisers must follow in
their day-to-day investment management activities.

INVESTMENT PROCESS
--------------------------------------------------------------------------------
Pilgrim Baxter begins its investment process by creating a universe of rapidly
growing companies that possess certain growth characteristics. That universe is
continually updated. Pilgrim Baxter then ranks each company in its universe
using proprietary software and research models that incorporate attributes of
successful growth like positive earnings surprises, upward earnings estimate
revisions, and accelerating sales and earnings growth. Finally, using its own
fundamental research and a bottom-up approach to investing, Pilgrim Baxter
evaluates each company's business momentum, earnings quality and whether the
company can sustain its current growth trend. Pilgrim Baxter believes that
through this highly disciplined investment process, it is able to construct a
portfolio of investments with strong growth characteristics.

<PAGE>
[Logo Omitted] THE SUB-ADVISERS

Pilgrim Baxter Value Investors, Inc., 825 Duportail Road, Wayne, PA 19087, is a
wholly-owned subsidiary of Pilgrim Baxter. Founded in 1940, Value Investors
currently manages $500 million for pension and profit sharing plans, charitable
institutions, trusts, estates and other investment companies. Value Investors'
investment process, like that of Pilgrim Baxter, is both quantitative and
fundamental. In seeking to identify attractive investment opportunities for the
Small Cap Value, Mid-Cap Value, Large Cap Value and Focused Value Funds and the
value portion of the Strategic Small Company Fund, Value Investors first creates
a universe of more than 8,000 companies whose current share price seems lower
than the current or future worth. Then, using its own computer models and
measures of value, Value Investors creates a sub-universe of statistically
attractive value companies. Value Investors considers factors like a company's
earnings power vs. its current stock price, its dividend income potential, its
price-to-earnings ratio vs. similar companies, its competitive advantages, like
brand or trade name or market niche, its management team and its current and
future business prospects. Lastly, using its own fundamental research and a
bottom-up approach to investing, Value Investors identifies those companies
which are currently out of market favor but have the potential to achieve
significant appreciation as the marketplace recognizes their fundamental value.
Value Investors' decision to sell a security depends on many factors. Generally
speaking, however, Value Investors considers selling a security when it becomes
overvalued relative to the market, shows deteriorating fundamentals or falls
short of Value Investors' expectations. Murray Johnstone International Limited,
11 West Nile Street, Glasgow, Scotland is a U.S. registered investment adviser.
Founded in 1989, Murray Johnstone currently manages $ billion for institutional
clients worldwide. The investment process of Murray Johnstone, like that of
Pilgrim Baxter, is both quantitative and fundamental. In seeking to identify
attractive investment opportunities for the International Fund, Murray Johnstone
uses twenty factors, like currency considerations, to score and rank a universe
of countries and geographic regions according to investment potential. Then,
using its own fundamental research, Murray Johnstone identifies individual
companies with superior growth records and expectations, sound balance sheets
and high cash flow generation. Each company's investment value is evaluated
based on factors like relative price performance, upward earnings estimate
revisions, improving balance sheets and strength of management. Murray
Johnstone's decision to sell a security depends on many factors. Generally
speaking, however, Murray Johnstone considers selling a security when another
company or country offers superior investment opportunities, the risk associated
with a particular currency becomes too great, or the security falls short of
Murray Johnstone's expectations.

<PAGE>

Wellington Management Company, LLP, 75 State Street, Boston, MA is the
sub-adviser for the PBHG Cash Reserves Fund. Wellington Management and its
predecessor organizations have provided investment advisory services to
investment companies since 1928 and to investment counseling clients since 1960.
As of April 30, 1999, Wellington Management held discretionary management
authority with respect to more than $ billion of assets. In managing the PBHG
Cash Reserves Fund, Wellington Management uses a top-down strategy and bottom-up
security selection, to seek securities with an acceptable maturity, that are
marketable and liquid, offer competitive yields and are issued by issuers that
are on a sound financial footing. Wellington Management also considers factors
such as the anticipated level of interest rates and the maturity of individual
securities relative to the maturity of the Fund as a whole. The purchase of
single rated or unrated securities by Pilgrim Baxter or Wellington Management is
subject to the approval or ratification by the Fund's Board of Directors. For
the fiscal year ended March 31, 2000, Pilgrim Baxter waived a portion of its fee
for the Small Cap Value, Focused Value and Strategic Small Company Funds, so
that the effective management fee paid by each Fund was as follows:

Growth Fund 0.85% Large Cap Value Fund 0.65%
Emerging Growth Fund 0.85% Mid-Cap Value Fund 0.85%
Large Cap Growth Fund 0.75% Small Cap Value Fund 0.92%
Select Equity Fund 0.85% Focused Value Fund 0.80%
Core Growth Fund 0.85% International Fund 1.00%
Limited Fund 1.00% Cash Reserves Fund 0.30%
Large Cap 20 Fund 0.85% Technology &
New Opportunities Fund 1.00% Communications Fund 0.85%
Strategic Small Company Fund 0.95%

The Global Technology & Communications Fund did not begin investment operations
until June 1, 2000. As investment adviser to this Fund, Pilgrim Baxter is
entitled to receive a fee, calculated daily and payable monthly, at the annual
rate of 1.5% of the Fund's average daily net assets. Each sub-adviser is
entitled to receive a fee from Pilgrim Baxter equal to a percentage of the daily
net assets of each sub-advised Funds.

<PAGE>

Growth Fund/New Opportunities Fund Gary L. Pilgrim, CFA has managed the Growth
Fund since its inception in 1985. He
has managed the New Opportunities Fund
since April 21, 2000. Mr. Pilgrim is
the Chief Investment Officer and
President of Pilgrim Baxter and has
been a growth stock manager for over 30
years.

Large Cap Growth Fund/ Michael S. Sutton, CFA, has managed the
Large Cap 20 Fund/ Large Cap Growth and Large Cap 20 Funds
Select Equity Fund since November, 1999. He has managed the
Select Equity Fund since April 24,
2000. Mr. Sutton joined Pilgrim Baxter
in October 1999 from Loomis, Sayles &
Co., where he worked for seven years as
a portfolio manager of several large
cap growth portfolios. Prior to that,
Mr. Sutton was a large cap growth
portfolio manager with Stein, Roe &
Farnham.

Limited Fund/Emerging Growth Fund Erin A. Piner has managed the Limited
Fund since October, 1998. She has
managed the Emerging Growth Fund since
January 2000. Ms. Piner joined Pilgrim
Baxter in 1995 as an equity analyst.
Prior to joining Pilgrim Baxter, Ms. Piner
worked for four years in the client service
group of PaineWebber, Inc.

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

<PAGE>

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

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

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

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

Cash Reserves Fund John C. Keogh has managed this Fund since
its inception in 1995. Mr. Keogh joined
Wellington Management in 1983 as an
assistant portfolio manager and has served
as a portfolio manager since 1990.

Global Technology & Michael K. Ma has managed this Fund since
Communications Fund its inception on June 1, 2000. Mr. Ma
joined Pilgrim Baxter in October 1999 as a
senior technology analyst. Prior to joining
Pilgrim Baxter, Mr. Ma worked for two and
one-half years as an Equity Research
Analyst in the Telecommunications Services
Group of Deutsche Bank Securities, Inc.
Prior to that, he worked for four years as
a Portfolio Manger and Research Assistant
with United States Trust Company of New
York, first as a research assistant and
then after 1994 as a portfolio manager.

<PAGE>

YOUR INVESTMENT

[Logo Omitted] PRICING FUND SHARES
Cash Reserves Fund shares are priced at 2:00 p.m. Eastern time on each day the
New York Stock Exchange is open. Cash Reserves Fund shares are not priced on
days that the New York Stock Exchange is closed. The Cash Reserves Fund prices
its investments at amortized cost, which approximates market value. Each other
Fund prices its investments for which market quotations are readily available at
market value. Short-term investments are priced at amortized cost, which
approximates market value. All other investments are priced at fair value as
determined in good faith by the Fund's Board of Directors. If a Fund holds
securities quoted in foreign currencies, it translates that price into U.S.
dollars at current exchange rates. Because foreign markets may be open at
different times than the New York Stock Exchange, the price of a Fund's shares
may change on days when its shares are not available for purchase or sale.

NET ASSET VALUE (NAV)
--------------------------------------------------------------------------------
The price of a Fund's shares is based on that Fund's net asset value (NAV). A
Fund's NAV equals the value of its assets, less its liabilities, divided by the
number of its outstanding shares. Fund shares are priced every day at the close
of regular trading on the New York Stock Exchange. Fund shares are not priced on
days that the New York Stock Exchange is closed.
67

<PAGE>

[Logo Omitted] BUYING SHARES
You may purchase shares of each fund directly through the Fund's transfer agent.
Except for the Cash Reserve Fund, the price per share you will pay to invest in
a Fund is its net asset value per share (NAV) next calculated after the transfer
agent or other authorized representative accepts your order. If you purchase
shares of the Cash Reserve Fund by wire transfer in the form of Federal Funds,
the price per share you will pay is that Fund's next calculated net asset value.
If you purchase shares of the Cash Reserve Fund by check or other negotiable
bank draft, the price per share you will pay is that Fund's net asset value as
calculated on the next business day after receipt of the check or bank draft.
Except for the Cash Reserves Fund, each Fund's NAV is calculated at the close
of trading on the New York Stock Exchange, normally 4:00 p.m. Eastern time, each
day the exchange is open for business. Each Fund's assets are generally valued
at their market price. However, if a market price is unavailable or if the
assets have been affected by events occurring after the close of trading, the
Fund's board of directors may use another method that it believes reflects fair
value. The Cash Reserves Fund uses the amortized cost method to value its
securities and generally calculates its NAV at 2:00 p.m. Eastern time each day
the New York Stock Exchange is open. You may also purchase shares of each Fund
through certain broker-dealers or other financial institutions that are
authorized to sell you shares of the Funds. Such financial institutions may
charge you a fee for this service in addition to the Fund's NAV.

--------------------------------------------------------------------------------
MINIMUM INVESTMENTS
Initial Additional
--------------------------------------------------------------------------------
REGULAR ACCOUNTS
New Opportunities Fund1 $10,000 no minimum
Limited Fund1 $ 5,000 no minimum
Strategic Small
Company Fund $ 5,000 no minimum
Each Other Fund $ 2,500 no minimum
Uniform Gifts/Transfer
to Minor Accounts $ 500 no minimum
TRADITIONAL IRAS $ 2,000 no minimum
ROTH IRAS $ 2,000 no minimum
EDUCATIONAL IRAS $ 500 no minimum
SYSTEMATIC INVESTMENT $ 500 $25
PLANS2 (SIP)
1THE LIMITED AND NEW OPPORTUNITIES FUNDS ARE CURRENTLY CLOSED TO NEW INVESTORS.
2PROVIDED A SIP IS ESTABLISHED, THE MINIMUM INITIAL INVESTMENT
FOR EACH FUND IS $500 ALONG WITH A MONTHLY SYSTEMATIC INVESTMENT OF $25 OR
MORE.

CONCEPTS TO UNDERSTAND
--------------------------------------------------------------------------------
Traditional IRA: an individual retirement account. Your contributions may or may
not be deductible depending on your circumstances. Assets grow tax-deferred;
withdrawals and distributions are taxable in the year made. Spousal IRA: an IRA
funded by a working spouse in the name of a nonworking spouse. Roth IRA: an IRA
with non-deductible contributions, and tax-free growth of assets and
distributions to pay retirement expenses, provided certain conditions are met.
Education IRA: an IRA with nondeductible contributions, and tax-free growth of
assets and distributions, if used to pay certain educational expenses. For more
complete IRA information, consult a PBHG Shareholder Services Representative or
a tax advisor.

68
<PAGE>

[Logo Omitted] SELLING SHARES
You may sell your shares at NAV any day the New York Stock Exchange is open for
business. Sale orders received by the Fund's transfer agent or other authorized
representatives by 4:00 p.m. Eastern time (2:00 p.m. Eastern time for the Cash
Reserves Fund) will be priced at the Fund's next calculated NAV. The Fund
generally sends payment for your shares the business day after your order is
accepted. Under unusual circumstances, the Fund may suspend redemptions or
postpone payment for up to seven days. Also, if the Fund has not yet collected
payment for the shares you are selling, it may delay paying out the proceeds on
your sale until payment has been collected up to 15 days from the date of
purchase. You may also sell shares of each Fund through certain broker-dealers
or other financial institutions at which you maintain an account. Such financial
institutions may charge you a fee for this service.

--------------------------------------------------------------------------------
LIMITATIONS ON SELLING SHARES BY PHONE
Proceeds
sent by Minimum Maximum
--------------------------------------------------------------------------------
Check no minimum $50,000
per day
Wire* no minimum no maximum
ACH no minimum no maximum

Please note that the banking instructions to be used for wire and ACH
redemptions must be established on your account in advance of placing your
sell order.
*WIRE FEE IS $10 PER FEDERAL RESERVE WIRE

WRITTEN REDEMPTION ORDERS
--------------------------------------------------------------------------------
Some circumstances require written sell orders along with signature guarantees.
These include:
[BULLET] Redemptions in excess of $50,000
[BULLET] Requests to send proceeds to a different address or payee
[BULLET] Requests to send proceeds to an address that has been changed within
the last 30 days o Requests to wire proceeds to a different bank
account

A SIGNATURE GUARANTEE
helps to protect you against fraud. You can obtain one from most banks or
securities dealers, but not from a notary public. For joint accounts, each
signature must be guaranteed. Please call us to ensure that your signature
guarantee is authentic.

69
<PAGE>

[Logo Omitted] GENERAL POLICIES

[BULLET] Each Fund may reject or suspend acceptance of purchase orders.
[BULLET] Each Fund reserves the right to make redemptions in securities rather
than in cash if the redemption amount exceeds $250,000 or 1% of the NAV
of the Fund.
[BULLET] Payment for telephone purchases must be received by the Fund's transfer
agent within seven days or you may be liable for any losses the Fund
incurs as a result of the cancellation of your purchase order.
[BULLET] When placing a purchase, sale or exchange order through an authorized
representative, it is the representative's responsibility to promptly
transmit your order to the Fund's transfer agent so that you may
receive that same day's NAV. o SEI Trust Company, the custodian for
PBHG Traditional, Roth and Education IRA accounts, currently charges a
$10 annual custodial fee to Traditional and Roth IRA accounts and a $7
annual custodial fee to Educational IRA accounts. This fee will be
automatically charged to your account if not received by the announced
due date, usually in mid-August.

[BULLET] Because of the relatively high cost of maintaining smaller accounts,
the Fund charges an annual fee of $12 if your account balance drops
below the minimum investment amount because of redemptions. Minimum
investment amounts are identified in the table on page 66. For non-
retirement accounts, the Fund, may upon prior notice, close your
account and send you the proceeds if your account balance remains below
the minimum investment amount for over 60 days. Due to you redeeming
or exchanging out of the Fund.

EXCHANGES BETWEEN FUNDS
You may exchange some or all of your shares in a fund with any other fund
identified in this prospectus. However, exchanges into the Limited Fund may be
made only by investors who are current shareholders of that Fund, as it is
currently closed to new investors. Exchanges into the New Opportunities Fund may
be made only by persons who were shareholders on or before November 12, 1999,
the day this fund closed to new investors. Simply mail, telephone or use the
Fund's internet website to provide your exchange instructions to the transfer
agent. There is currently no fee for exchanges, however, the Fund may change or
terminate this privilege on 60 days notice. Please note that exchanges into the
PBHG Cash Reserves Fund from another PBHG fund may be made only four (4) times a
year.

70
<PAGE>

TO OPEN AN ACCOUNT
--IN WRITING-----------------------
Complete the application.

Mail your completed application and a check to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534

--BY TELEPHONE---------------------
Call us at 1-800-433-0051 to receive an account application and receive an
account number.

WIRE Have your bank send your investment to:
o United Missouri Bank of Kansas
City, N.A.
[BULLET] ABA# 10-10-00695
[BULLET] Account # 98705-23469
[BULLET] Fund Name
[BULLET] Your name
[BULLET] Your Social Security or tax ID number
[BULLET] Your account number

Return the account application.

--BY AUTOMATED CLEARING------------
HOUSE (ACH)*

--VIA THE INTERNET-----------------
[BULLET] Visit the PBHG Funds website at http://www.pbhgfunds.com.
[BULLET] Enter the "open account" screen and follow the instructions for
completing an account application.

TO ADD TO AN ACCOUNT
-----------------------------------
Fill out an investment slip:

Mail the slip and the check to:
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534
-----------------------------------
WIRE Have your bank send your investment to:
[BULLET] United Missouri Bank of Kansas City, N.A.
[BULLET] ABA# 10-10-00695
[BULLET] Account # 98705-23469
[BULLET] Fund Name
[BULLET] Your name
[BULLET] Your Social Security or tax ID number
[BULLET] Your account number
-----------------------------------
[BULLET] Complete the bank information section on the account application.
[BULLET] Attach a voided check or deposit slip to the account application.
[BULLET] The maximum purchase allowed through ACH is $100,000 and this option
must be established on your account 15 days prior to initiating a
transaction.
-----------------------------------
[BULLET] Complete the bank information section on the account application.
[BULLET] Enter the "Your Account" section of the website and follow the
instructions for purchasing shares.

71
<PAGE>

TO SELL SHARES
--BY MAIL--------------------------
Write a letter of instruction that includes:
[BULLET] your name(s) and signature(s)
[BULLET] your account number
[BULLET] the fund name
[BULLET] the dollar amount your wish to sell
[BULLET] how and where to send the proceeds

If required, obtain a signature guarantee (see "Selling Shares") Mail your
request to:

The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, Missouri 64121-9534

--SYSTEMATIC WITHDRAW PLAN---------
Permits you to have payments of $50 or more mailed or automatically transferred
from your Fund accounts to your designated checking or savings account

[BULLET] Complete the applicable section on the account application

Note: Must maintain a minimum account balance of $5,000 or more.

--By Telephone---------------------
Sales orders may be placed by telephone provided this option was selected on
your account application. Please call 1-800-433-0051.

Note: sales from IRA accounts may not be made by telephone and must be made in
writing.

--ACH------------------------------
[BULLET] Complete the bank information section on the account application.
[BULLET] Attach a voided check or deposit slip to the account application.

Note: sale proceeds sent via ACH will not be posted to your bank account until
the second business day following the transaction.

--WIRE-----------------------------
Sale proceeds may be wired at your request. Be sure the Fund has your wire
instructions on file.

There is a $10 charge for each wire sent by the Fund.

72
<PAGE>

[Logo Omitted] DISTRIBUTION AND TAXES
Each Fund pays shareholders dividends from its net investment income and
distributions from its net realized capital gains at least once a year, if
available. These dividends and distributions will be reinvested in the Fund
unless you instruct the Fund otherwise. There are no fees on reinvestments.
Alternatively, you may elect to receive your dividends and distributions in cash
in the form of a check, wire or ACH. Unless your investment is in an IRA or
other tax-exempt account, your dividends and distributions will be taxable
whether you receive them in cash or reinvest them. Dividends (including
short-term capital gains distributions) are taxed at the ordinary income rate.
Distributions of long-term capital gains are taxable at the long-term capital
gains rate, regardless of how long you have been in the Fund. Long-term capital
gains tax rates are described in the table below. A sale or exchange of a Fund
may also generate a tax liability unless your account is tax-exempt. There are
two types of tax liabilities you may incur from a sale or exchange. (1)
Short-term capital gains will apply if you sell or exchange a Fund up to 12
months after buying it. (2) Long-term capital gains will apply to Funds sold or
exchanged after 12 months. The table below describes the tax rates for each.

TAXES ON TRANSACTIONS
--------------------------------------------------------------------------------
The tax status of your distributions for each calendar year will be detailed in
your annual tax statement from the Fund. Because everyone's tax situation is
unique, always consult your tax professional about federal, state and local tax
consequences.

--------------------------------------------------------------------------------
TAXABILITY OF DISTRIBUTIONS

Type of Tax rate for Tax rate for
Distribution 15% bracket 28% bracket
--------------------------------------------------------------------------------
Dividends Ordinary income rate Ordinary income rate

Short-term
Capital Gains Ordinary income rate Ordinary income rate

Long-term
Capital Gains 10% 20%

73
<PAGE>
[Logo Omitted] FINANCIAL HIGHLIGHTS

A Fund's financial highlights help you understand its recent financial
performance. The total returns represent the rate that you would have earned or
lost on an investment in the Fund, assuming you reinvested all Fund
distributions. PricewaterhouseCoopers LLP has audited the information contained
in these financial highlights. Its report and the Fund's financial statements
are included in the Fund's Annual Report to Shareholders, which is available,
free of charge, upon request. Financial highlights are not included for the
Global Technology & Communications Fund because it did not commence operations
until June 1, 2000.

For a Share Outstanding Throughout each Fiscal Year or period ended March 31:

Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets
Value Investment Unrealized from Net from Value End
Beginning Income Gains or (Losses) Investment Capital End Total of Period
of Period (Loss) on Securities Income Gains of Period Return (000)
------------------------------------------------------------------------------------------------------------------------------
-----------------
PBHG GROWTH FUND
-----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2 $24.51 $(0.33) $36.14 -- $(1.59) $58.73 148.57 $6,465,234
1999 2 28.23 (0.24) (3.48) -- -- 24.51 (13.18) 3,228,740
1998 21.06 (0.26) 7.43 -- -- 28.23 34.05 % 5,338,380
1997 25.30 (0.10) (4.14) -- -- 21.06 (16.76)% 4,634,138
1996 16.70 (0.06) 8.66 -- -- 25.30 51.50 % 3,298,666

PBHG ADVISOR CLASS
2000 2 $24.35 $(0.42) $35.85 -- $(1.59) $58.19 147.98 % $ 143,937
1999 2 28.12 (0.30) (3.47) -- -- 24.35 (13.41)% 66,235
1998 21.03 (0.15) 7.24 -- -- 28.12 33.71 % 89,227
1997 1 25.42 (0.06) (4.33) -- -- 21.03 (17.27)%+ 12,991

--------------------------
PBHG EMERGING GROWTH FUND
--------------------------
PBHG CLASS
2000 2 $20.61 $(0.21) $20.76 -- $(1.16) $40.00 101.33 % $1,336,938
1999 2 25.83 (0.18) (4.96) -- (0.08) 20.61 (19.91)% 736,008
1998 19.26 (0.24) 6.81 -- -- 25.83 34.11 % 1,404,157
1997 23.07 (0.11) (2.87) -- (0.83) 19.26 (13.71)% 1,195,620
1996 16.10 (0.07) 8.03 -- (0.99) 23.07 50.16 % 689,705

---------------------------
PBHG LARGE CAP GROWTH FUND
---------------------------
PBHG CLASS
2000 2 $24.57 $(0.23) $21.32 -- $(7.29) $38.37 98.60 % $ 256,965
1999 2 22.69 (0.16) 3.53 -- (1.49) 24.57 15.90 % 144,089
1998 14.26 (0.19) 8.82 -- (0.20) 22.69 60.80 % 145,662
1997 14.53 (0.05) (0.21) -- (0.01) 14.26 (1.77)% 119,971
1996 4 10.00 (0.03) 4.97 -- (0.41) 14.53 50.47 %* 53,759

------------------------
PBHG SELECT EQUITY FUND
------------------------
PBHG CLASS
2000 2 $25.93 $(0.34) $58.71 -- $(6.49) $77.81 240.82 % $1,691,298
1999 2 24.15 (0.21) 1.99 -- -- 25.93 7.37 % 235,904
1998 15.91 (0.44) 8.68 -- -- 24.15 51.79 % 336,076
1997 17.27 (0.13) (1.03) -- (0.20) 15.91 (6.94)% 372,486
1996 4 10.00 (0.05) 7.68 -- (0.36) 17.27 77.75 %* 202,796

----------------------
PBHG CORE GROWTH FUND
----------------------
PBHG CLASS
2000 2 $14.06 $(0.20) $16.39 -- -- $30.25 115.15 % $ 166,099
1999 2 13.53 (0.14) 0.67 -- -- 14.06 3.92 % 86,485
1998 10.34 (0.33) 3.52 -- -- 13.53 30.85 % 165,510
1997 11.82 (0.09) (1.39) -- -- 10.34 (12.52)% 283,995
1996 3 10.00 -- 1.82 -- -- 11.82 18.20 %+ 31,092

------------------
PBHG LIMITED FUND
------------------
PBHG CLASS
2000 2 $11.95 $(0.12) $15.20 -- $(3.92) $23.11 137.27 % $ 155,130
1999 2 14.08 (0.10) (1.45) -- (0.58) 11.95 (11.01)% 108,011
1998 9.05 (0.10) 5.53 -- (0.40) 14.08 60.78 % 178,168
1997 6 10.00 0.02 (0.93) $(0.03) (0.01) 9.05 (9.15)%+ 137,520
</TABLE>

<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Ratio Income to Average to Average
of Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers) Waivers) Rate
------------------------------------------------------------------------------------------------
-----------------
PBHG GROWTH FUND
-----------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C>
2000 2 1.23% (0.90)% 1.23% (0.90)% 107.73%
1999 2 1.32% (0.99)% 1.32% (0.99)% 80.51%
1998 1.26% (0.74)% 1.26% (0.74)% 94.21%
1997 1.25% (0.69)% 1.25% (0.69)% 64.89%
1996 1.48% (0.79)% 1.48% (0.79)% 44.64%

PBHG ADVISOR CLASS
2000 2 1.48% (1.15)% 1.48% (1.15)% 107.73%
1999 2 1.57% (1.24)% 1.57% (1.24)% 80.51%
1998 1.51% (1.02)% 1.51% (1.02)% 94.21%
1997 1 1.53%* (1.11)%* 1.53%* (1.11)%* 64.89%

--------------------------
PBHG EMERGING GROWTH FUND
--------------------------
PBHG CLASS
2000 2 1.24% (0.76)% 1.24% (0.76)% 141.81%
1999 2 1.34% (0.80)% 1.34% (0.80)% 101.53%
1998 1.27% (0.80)% 1.27% (0.80)% 95.21%
1997 1.28% (0.36)% 1.28% (0.36)% 47.75%
1996 1.47% (0.42)% 1.47% (0.42)% 97.05%

---------------------------
PBHG LARGE CAP GROWTH FUND
---------------------------
PBHG CLASS
2000 2 1.17% (0.79)% 1.17% (0.79)% 184.36%
1999 2 1.25% (0.71)% 1.25% (0.71)% 46.16%
1998 1.22% (0.79)% 1.22% (0.79)% 46.56%
1997 1.23% (0.47)% 1.23% (0.47)% 51.70%
1996 4 1.50%* (0.66)%* 2.07%* (1.23)%* 116.75%

------------------------
PBHG SELECT EQUITY FUND
------------------------
PBHG CLASS
2000 2 1.18% (0.68)% 1.18% (0.68)% 200.56%
1999 2 1.34% (0.90)% 1.34% (0.90)% 56.59%
1998 1.35% (1.15)% 1.35% (1.15)% 72.16%
1997 1.26% (0.76)% 1.26% (0.76)% 71.70%
1996 4 1.50%* (0.74)%* 1.73%* (0.97)%* 206.22%

----------------------
PBHG CORE GROWTH FUND
----------------------
PBHG CLASS
2000 2 1.33% (1.02)% 1.33% (1.02)% 312.32%
1999 2 1.45% (1.16)% 1.45% (1.16)% 120.93%
1998 1.35% (1.07)% 1.35% (1.07)% 72.78%
1997 1.36% (0.77)% 1.36% (0.77)% 46.75%
1996 3 1.50%* (0.18)%* 2.92%* (1.60)%* 17.00%

------------------
PBHG LIMITED FUND
------------------
PBHG CLASS
2000 2 1.32% (0.76)% 1.32% (0.76)% 107.78%
1999 2 1.40% (0.81)% 1.40% (0.81)% 111.07%
1998 1.40% (0.72)% 1.40% (0.72)% 81.36%
1997 6 1.42%* 0.33 %* 1.42%* 0.33 %* 75.46%
</TABLE>

Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets
Value Investment Unrealized from Net from Value End
Beginning Income Gains or (Losses) Investment Capital End Total of Period
of Period (Loss) on Securities Income Gains of Period Return (000)
-------------------------------------------------------------------------------------------------------------------------------
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2 $24.10 $(0.25) $26.26 -- $(5.77) $44.34 117.88 % $1,083,460
1999 2 15.98 (0.12) 8.46 -- (0.22) 24.10 52.52 % 603,077
1998 9.25 (0.07) 6.80 -- -- 15.98 72.76 % 192,631
1997 7 10.00 (0.01) (0.73) $(0.01) -- 9.25 (7.40)%+ 69,819

---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000 2 $16.47 $(0.71) $85.60 -- $(3.17) $98.19 529.94 % $ 355,600
1999 10 13.52 (0.01) 2.96 -- -- 16.47 21.82 %+ 16,742

-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000 $13.85 $0.12 $1.78 $(0.08) $(3.70) $11.97 14.25 % $ 32,922
1999 13.01 0.08 2.45 (0.10) (1.59) 13.85 20.29 % 44,922
1998 10.11 0.02 3.84 (0.06) (0.90) 13.01 39.47 % 76,476
1997 8 10.00 0.02 0.09 -- -- 10.11 1.10 %+ 26,262
------------------------
PBHG MID-CAP VALUE FUND
------------------------
PBHG CLASS
2000 2 $15.09 $(0.02) $5.03 -- $(6.28) $13.82 42.21 % $ 60,690
1999 15.30 -- 0.92 -- (1.13) 15.09 8.35 % 56,981
1998 9 10.00 (0.01) 6.00 -- (0.69) 15.30 61.06 %+ 54,173

-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000 2 $11.38 $(0.08) $7.45 -- -- $18.75 64.76 % $ 92,634
1999 2 15.38 (0.09) (3.06) -- $(0.85) 11.38 (20.93)% 69,787
1998 9 10.00 (0.03) 6.15 -- (0.74) 15.38 62.27 %+ 125,834

-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
PBHG CLASS
2000 2 $10.46 $(0.01) $8.93 -- $(0.87) $18.51 89.17 % $ 22,556
1999 10 10.32 -- 0.14 -- -- 10.46 1.36 %+ 3,658

-----------------------
PBHG INTERNATIONAL FUND
-----------------------
PBHG CLASS
2000 2 $11.60 $(0.08) $2.30 -- $(0.88) $12.94 19.29 % $ 11,382
1999 11 12.04 (0.14) 0.29 $(0.17) (0.42) 11.60 1.42 % 12,220
1998 11.26 (0.03) 1.83 -- (1.02) 12.04 17.46 % 20,905
1997 10.55 -- 0.71 -- -- 11.26 6.7 % 21,265
1996 9.13 (0.04) 1.46 -- -- 10.55 15.55 % 11,243

-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000 $ 1.00 $0.05 -- $(0.05) -- $ 1.00 4.81 % $ 579,458
1999 1.00 0.05 -- (0.05) -- 1.00 4.84 % 144,239
1998 1.00 0.05 -- (0.05) -- 1.00 5.13 % 117,574
1997 1.00 0.05 -- (0.05) -- 1.00 4.89 % 341,576
1996 4 1.00 0.05 -- (0.05) -- 1.00 5.24 %* 99,001
</TABLE>

<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Ratio Income to Average to Average
of Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers Waivers Rate
---------------------------------------------------------------------------------------------
----------------------
PBHG LARGE CAP 20 FUND
----------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C>
2000 2 1.23% (0.82)% 1.23% (0.82)% 147.35%
1999 2 1.27% (0.64)% 1.27% (0.64)% 76.41%
1998 1.41% (0.79)% 1.41% (0.79)% 98.27%
1997 7 1.50%* 0.17 %* 1.50%* 0.17 %* 43.98%

---------------------------
PBHG NEW OPPORTUNITIES FUND
---------------------------
PBHG CLASS
2000 2 1.34% (1.15)% 1.34% (1.15)% 668.31%
1999 10 1.50%* (0.80)%* 1.59%* (0.89)%* 109.43%

-------------------------
PBHG LARGE CAP VALUE FUND
-------------------------
PBHG CLASS
2000 1.11% 0.71% 1.11% 0.71% 1018.03%
1999 1.01% 0.59% 1.01% 0.59% 568.20%
1998 1.17% 0.98% 1.17% 0.98% 403.59%
1997 8 1.50%* 1.61%* 1.74%* 1.37%* 0.00%
------------------------
PBHG MID-CAP VALUE FUND
------------------------
PBHG CLASS
2000 2 1.44% (0.15)% 1.44% (0.15)% 742.57%
1999 1.33% 0.01% 1.33% 0.01% 732.73%
1998 9 1.47%* (0.17)%* 1.47%* (0.17)%* 399.96%

-------------------------
PBHG SMALL CAP VALUE FUND
-------------------------
PBHG CLASS
2000 2 1.50% (0.56)% 1.58% (0.64)% 352.85%
1999 2 1.48% (0.71)% 1.48% (0.71)% 273.87%
1998 9 1.49%* (0.52)%* 1.49%* (0.52)%* 263.04%

-----------------------
PBHG FOCUSED VALUE FUND
-----------------------
PBHG CLASS
2000 2 1.50% (0.10)% 1.55% (0.15)% 853.36%
1999 10 1.50%* 0.09%* 2.67%* 1.08)%* 173.09%

-----------------------
PBHG INTERNATIONAL FUND
-----------------------
PBHG CLASS
2000 2 2.00% (0.62)% 2.00% (0.62)% 90.17%
1999 11 1.97% (0.35)% 1.97% (0.35)% 59.74%
1998 2.00% (0.13)% 2.00% (0.13)% 85.94%
1997 2.22% (0.32)% 2.22% (0.32)% 74.82%
1996 2.25% (0.22)% 3.03% (1.00)% 140.26%

-----------------------
PBHG CASH RESERVES FUND
-----------------------
PBHG CLASS
2000 0.69% 4.78% 0.69% 4.78% n/a
1999 0.70% 4.72% 0.70% 4.72% n/a
1998 0.68% 5.00% 0.68% 5.00% n/a
1997 0.68% 4.79% 0.68% 4.79% n/a
1996 4 0.70%* 5.05%* 0.88%* 4.87%* n/a
</TABLE>

Net Net Net
Asset Net Realized and Distributions Distributions Asset Assets
Value Investment Unrealized from Net from Value End
Beginning Income Gains or (Losses) Investment Capital End Total of Period
of Period (Loss) on Securities Income Gains of Period Return (000)
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C> <C>
2000 2 $27.59 $(0.54) $62.84 -- $(4.87) $85.02 233.99 % $3,843,946
1999 2 19.27 (0.19) 8.80 -- (0.29) 27.59 45.33 % 536,405
1998 14.63 (0.23) 5.72 -- (0.85) 19.27 38.29 % 495,697
1997 12.48 (0.05) 2.55 -- (0.35) 14.63 19.59 % 493,156
1996 5 10.00 (0.02) 2.50 -- -- 12.48 24.82 %+ 61,772

---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000 2 $ 10.54 $(0.13) $10.18 -- $(1.25) $19.34 99.74 % $ 75,225
1999 2 12.89 (0.11) (1.78) -- $(0.46) 10.54 (14.52)% 48,029
1998 8.86 (0.11) 5.01 -- (0.87) 12.89 56.54 % 111,983
1997 8 10.00 -- (1.14) -- -- 8.86 (11.40)%+ 61,382
</TABLE>

<TABLE>
<CAPTION>
Ratio
Ratio of Net
of Net Ratio Investment
Investment of Expenses Income (Loss)
Ratio Income to Average to Average
of Expenses (Loss) Net Assets Net Assets Portfolio
to Average to Average (Excluding (Excluding Turnover
Net Assets Net Assets Waivers Waivers Rate
----------------------------------------------------------------------------------------------
-------------------------------------
PBHG TECHNOLOGY & COMMUNICATIONS FUND
-------------------------------------
PBHG CLASS
<S> <C> <C> <C> <C> <C> <C>
2000 2 1.19% (0.96)% 1.19% (0.96)% 362.38%
1999 2 1.34% (0.96)% 1.34% (0.96)% 276.07%
1998 1.30% (0.91)% 1.30% (0.91)% 259.89%
1997 1.33% (0.59)% 1.33% (0.59)% 289.91%
1996 5 1.50%* (0.50)%* 2.00%* (1.00)%* 125.99%

---------------------------------
PBHG STRATEGIC SMALL COMPANY FUND
---------------------------------
PBHG CLASS
2000 2 1.50% (0.93)% 1.55% (0.98)% 240.55%
1999 2 1.50% (0.97)% 1.54% (1.01)% 140.89%
1998 1.45% (0.92)% 1.45% (0.92)% 215.46%
1997 8 1.50%* 0.18 %* 1.50%* 0.18%* 88.88%

<FN>
* Annualized
+ Total returns and portfolio turnover have not been annualized.
1 The PBHG Growth Fund Advisor Class commenced operations on August 16, 1996.
2 Per share calculations were performed using average shares for the period.
3 The PBHG Core Growth Fund commenced operations on December 29, 1995.
4 The PBHG Large Cap Growth Fund, the PBHG Select Equity Fund, and the PBHG
Cash Reserves Fund commenced operations on April 5, 1995.
5 The PBHG Technology & Communications Fund commenced operations on September
29, 1995.
6 The PBHG Limited Fund commenced operations on June 28, 1996.
7 The PBHG Large Cap 20 Fund commenced operations on November 29, 1996.
8 The PBHG Large Cap Value Fund and the PBHG Strategic Small Company Fund
commenced operations on December 31, 1996.
9 The PBHG Mid-Cap Value and the PBHG Small Cap Value Funds commenced
operations April 30, 1997.
10 The PBHG New Opportunities Fund and the PBHG Focused Value Fund commenced
operations on February 12, 1999.
11 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.

FOR MORE INFORMATION

THE PBHG FUNDS, INC.
--------------------------------------------------------------------------------
SEC FILE NUMBER 811-04391

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

STATEMENT OF ADDITIONAL INFORMATION (SAI)
Provides more information about the funds and is incorporated into this
Prospectus by reference.

ANNUAL/SEMI-ANNUAL REPORTS
Provides financial and performance information about the Funds and their
investments and a discussion of the market conditions and investment strategies
that significantly affected each Fund's performance during the last fiscal year
or half-year.

TO OBTAIN INFORMATION
--------------------------------------------------------------------------------
BY TELEPHONE
Call 1-800-433-0051

BY MAIL
The PBHG Funds, Inc.
P.O. Box 219534
Kansas City, MO 64121-9534

VIA THE INTERNET

www.pbhgfunds.com
Text-only versions of these reports and other information about The PBHG Funds,
Inc. are available on the EDGAR database on the SEC's Internet site at
http://www.sec.gov, or by visiting the SEC's Public Reference Room in
Washington, D.C. (1-202-942-8090). Copies of this information may be obtained,
for a duplicating fee, by sending your written request to the SEC's Public
Reference Section, Washington, D.C. 20549-0102, or by electronic request at
[email protected].

INVESTMENT ADVISER
Pilgrim Baxter & Associates, Ltd.

DISTRIBUTOR
SEI Investments Distribution Co.
PBHG Prospectus -- 7/00

<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

DATED JULY 31, 2000

Fund:
THE PBHG FUNDS, INC.

Portfolios:
PBHG GROWTH FUND
PBHG EMERGING GROWTH FUND
PBHG NEW OPPORTUNITIES FUND
PBHG LARGE CAP GROWTH FUND
PBHG SELECT EQUITY FUND
PBHG CORE GROWTH FUND
PBHG LIMITED FUND
PBHG LARGE CAP 20 FUND
PBHG LARGE CAP VALUE FUND
PBHG MID-CAP VALUE FUND
PBHG SMALL CAP VALUE FUND
PBHG FOCUSED VALUE FUND
PBHG INTERNATIONAL FUND
PBHG CASH RESERVES FUND
PBHG TECHNOLOGY & COMMUNICATIONS FUND
PBHG STRATEGIC SMALL COMPANY FUND

PBHG GLOBAL TECHNOLOGY & COMMUNICATIONS FUND

Investment Adviser:
PILGRIM BAXTER & ASSOCIATES, LTD.

This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of The
PBHG Funds, Inc. (the "Fund" or "Registrant") and the Portfolios named above. It
should be read in conjunction with the Prospectus for the Portfolios' PBHG Class
shares dated July 31, 2000 and with the Prospectus for the Advisor Class of the
PBHG Growth Fund shares dated July 31, 2000. The Prospectuses may be obtained
without charge by calling 1-800-433-0051.

The Annual Report for each Portfolio, except for pages 1 through 7 thereof, is
incorporated herein by reference and made a part of this document. The Annual
Report may be obtained without charge by calling 1-800-433-0051.

<PAGE>

TABLE OF CONTENTS

Page
THE FUND............................................ 3

DESCRIPTION OF PERMITTED INVESTMENTS................ 3

INVESTMENT LIMITATIONS............................ 16

DIRECTORS AND OFFICERS OF THE FUND................ 22

5% AND 25% SHAREHOLDERS........................... 25

THE ADVISER....................................... 30

THE SUB-ADVISERS.................................. 33

THE DISTRIBUTOR................................... 36

THE ADMINISTRATOR AND SUB-ADMINISTRATOR........... 37

OTHER SERVICE PROVIDERS........................... 38

PORTFOLIO TRANSACTIONS............................ 39

DESCRIPTION OF SHARES............................. 43

PURCHASES AND REDEMPTIONS OF SHARES............... 43

DETERMINATION OF NET ASSET VALUE.................. 51

TAXES............................................. 52

PERFORMANCE ADVERTISING........................... 58

COMPUTATION OF YIELD ............................. 59

CALCULATION OF TOTAL RETURN....................... 60

FINANCIAL STATEMENTS.............................. 61

<PAGE>

THE FUND

The Fund is an open-end management investment company which was originally
incorporated in Delaware on August 2, 1985 under the name PBHG Growth Fund, Inc.
and commenced business shortly thereafter as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
On July 21, 1992, shareholders of the Fund approved an Agreement and Articles of
Merger pursuant to which the Fund was reorganized and merged into a new Maryland
corporation, also named PBHG Growth Fund, Inc. On September 8, 1993, the
shareholders of the Fund voted to change the name of the Fund to The Advisors'
Inner Circle Fund II, Inc. On May 2, 1994, the shareholders voted to change the
Fund's name to The PBHG Funds, Inc.

This Statement of Additional Information relates to all Portfolios of the Fund.
Shareholders may purchase shares through two separate classes, i.e., PBHG Class
and Advisor Class (formerly the Trust Class) shares, which provide for
differences in distribution costs, voting rights and dividends. Except for these
differences, each PBHG Class share and each Advisor Class share of each
Portfolio represents an equal proportionate interest in that Portfolio. See
"Description of Shares." Currently only the PBHG Growth Fund offers Advisor
Class shares. This Statement of Additional Information relates to both classes
of shares of the Fund. No investment in shares of a Portfolio should be made
without first reading the Portfolio's Prospectus. Capitalized terms not defined
in this Statement of Additional Information are defined in each Prospectus
offering shares of the Portfolios.

Pilgrim Baxter & Associates, Ltd. ("Adviser") serves as the investment adviser
to each Portfolio. Pilgrim Baxter Value Investors, Inc. ("Value Investors" or
"Sub-Adviser") serves as the investment sub-adviser to the PBHG Large Cap Value,
Mid-Cap Value, Small Cap Value, Focused Value and Strategic Small Company Funds.
Murray Johnstone International Ltd. ("Murray Johnstone" or "Sub-Adviser") serves
as the sub-adviser to the PBHG International Fund. Wellington Management
Company, LLP ("Wellington Mangement" or "Sub-Adviser") serves as the sub-adviser
to the PBHG Cash Reserves Fund.

DESCRIPTION OF PERMITTED INVESTMENTS

REPURCHASE AGREEMENTS

Repurchase agreements are agreements by which a person (e.g., a portfolio)
obtains a security and simultaneously commits to return the security to the
seller (a member bank of the Federal Reserve System or primary securities dealer
as recognized by the Federal Reserve Bank of New York) at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.

Repurchase agreements are considered to be loans by a Portfolio for purposes of
its investment limitations. The repurchase agreements entered into by the
Portfolios will provide that the underlying security at all times shall have a
value at least equal to 102% of the resale price stated in the agreement. With
respect to all repurchase agreements entered into by a Portfolio, the Fund's
custodians or their agents must take possession

<PAGE>

of the underlying collateral. However, if the seller defaults, the Portfolio
could realize a loss on the sale of the underlying security to the extent that
the proceeds of the sale, including accrued interest, are less than the resale
price provided in the agreement including interest. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the Portfolio
may incur delay and costs in selling the underlying security or may suffer a
loss of principal and interest if the Portfolio is treated as an unsecured
creditor of the seller and is required to return the underlying security to the
seller's estate.

FUTURES CONTRACTS

A futures contract is a bilateral agreement to buy or sell a security (or
deliver a cash settlement price, in the case of a contract relating to an index
or otherwise not calling for physical delivery at the end of trading in the
contracts) for a set price in the future. Futures contracts are designated by
boards of trade which have been designated "contracts markets" by the
Commodities Futures Trading Commission ("CFTC").

No purchase price is paid or received when the contract is entered into.
Instead, a Portfolio upon entering into a futures contract (and to maintain that
Portfolio's open positions in futures contracts) would be required to deposit
with its custodian in a segregated account in the name of the futures broker an
amount of cash, or other assets, known as "initial margin." The margin required
for a particular futures contract is set by the exchange on which the contract
is traded, and may be significantly modified from time to time by the exchange
during the term of the contract. Futures contracts are customarily purchased and
sold on margin that may range upward from less than 5% of the value of the
contract being traded. By using futures contracts as a risk management
technique, given the greater liquidity in the futures market than in the cash
market, it may be possible to accomplish certain results more quickly and with
lower transaction costs.

If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the Portfolio. These subsequent payments called "variation
margin," to and from the futures broker, are made on a daily basis as the price
of the underlying assets fluctuate making the long and short positions in the
futures contract more or less valuable, a process known as "marking to the
market." A Portfolio expects to earn interest income on its initial and
variation margin deposits.

A Portfolio will incur brokerage fees when it purchases and sells futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by a Portfolio will usually be liquidated in this manner, a
Portfolio may instead make or take delivery of underlying securities whenever it
appears economically advantageous to that Portfolio to do so. A clearing
organization associated with the exchange on which futures are traded assumes
responsibility for closing out transactions and guarantees that as between the
clearing members of an exchange, the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.

SECURITIES INDEX FUTURES CONTRACTS. Purchases or sales of securities index
futures contracts may be used in an attempt to protect each of the Portfolio's
current or intended investments from broad fluctuations in securities prices. A
securities index futures contract does not require the physical delivery of
securities, but

<PAGE>

merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading day
to the respective accounts of the parties to the contract. On the contract's
expiration date a final cash settlement occurs and the futures positions are
simply closed out. Changes in the market value of a particular index futures
contract reflect changes in the specified index of securities on which the
future is based.

By establishing an appropriate "short" position in index futures, a Portfolio
may also seek to protect the value of its portfolio against an overall decline
in the market for such securities. Alternatively, in anticipation of a generally
rising market, a Portfolio can seek to avoid losing the benefit of apparently
low current prices by establishing a "long" position in securities index futures
and later liquidating that position as particular securities are in fact
acquired. To the extent that these hedging strategies are successful, a
Portfolio will be affected to a lesser degree by adverse overall market price
movements than would otherwise be the case.

LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS. A Portfolio will not
purchase or sell futures contracts unless either (i) the futures contracts are
purchased for "bona fide hedging" purposes (as that term is defined under the
CFTC regulations) or (ii) if purchased for other than "bona fide hedging"
purposes, the sum of the amounts of initial margin deposits on a Portfolio's
existing futures contracts and premiums required to establish non-hedging
positions would not exceed 5% of the liquidation value of that Portfolio's total
assets. In instances involving the purchase of futures contracts by a Portfolio,
an amount of cash or other liquid assets, equal to the cost of such futures
contracts (less any related margin deposits), will be deposited in a segregated
account with its custodian, thereby insuring that the use of such futures
contracts is unleveraged. In instances involving the sale of futures contracts
by a Portfolio, the securities underlying such futures contracts or options will
at all times be maintained by that Portfolio or, in the case of index futures
contracts, the Portfolio will own securities the price changes of which are, in
the opinion of its Adviser expected to replicate substantially the movement of
the index upon which the futures contract is based.

For information concerning the risks associated with utilizing futures
contracts, please see "Risks of Transactions in Futures Contracts Options"
below.

OPTIONS

Options are contracts that give one of the parties to the contract the right to
buy or sell the security that is subject to the option at a stated price during
the option period, and obligates the other party to the contract to buy or sell
such security at the stated price during the option period. The types of options
transactions that each Portfolio may utilize are discussed below.

WRITING CALL OPTIONS. A call option is a contract which gives the purchaser of
the option (in return for a premium paid) the right to buy, and the writer of
the option (in return for a premium received) the obligation to sell, the
underlying security at the exercise price at any time prior to the expiration of
the option, regardless of the market price of the security during the option
period. A call option on a security is covered, for example, when the writer of
the call option owns the security on which the option is written (or on a
security convertible into such a security without additional consideration)
throughout the option period.

A Portfolio will write covered call options both to reduce the risks associated
with certain of its investments and to increase total investment return through
the receipt of premiums. In return for the premium income, a Portfolio will give
up the opportunity to profit from an increase in the market price of the
underlying security above the exercise price so long as its obligations under
the contract continue, except insofar as the premium

<PAGE>

represents a profit. Moreover, in writing the call option, a Portfolio will
retain the risk of loss should the price of the security decline. The premium is
intended to offset that loss in whole or in part. Unlike the situation in which
a Portfolio owns securities not subject to a call option, a Portfolio, in
writing call options, must assume that the call may be exercised at any time
prior to the expiration of its obligation as a writer, and that in such
circumstances the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing market
price.

A Portfolio may terminate its obligation under an option it has written by
buying an identical option. Such a transaction is called a "closing purchase
transaction." A Portfolio will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by the
Portfolio. When an underlying security is sold from a Portfolio's securities
portfolio, that Portfolio will effect a closing purchase transaction so as to
close out any existing covered call option on that underlying security.

WRITING PUT OPTIONS. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. A Portfolio when
it writes a put option will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash, or
other liquid obligations having a value equal to or greater than the exercise
price of the option.

A Portfolio may write put options either to earn additional income in the form
of option premiums (anticipating that the price of the underlying security will
remain stable or rise during the option period and the option will therefore not
be exercised) or to acquire the underlying security at a net cost below the
current value (e.g., the option is exercised because of a decline in the price
of the underlying security, but the amount paid by such Portfolio, offset by the
option premium, is less than the current price). The risk of either strategy is
that the price of the underlying security may decline by an amount greater than
the premium received. The premium which a Portfolio receives from writing a put
option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to that market
price, the historical price volatility of the underlying security, the option
period, supply and demand and interest rates.

A Portfolio may effect a closing purchase transaction to realize a profit on an
outstanding put option or to prevent an outstanding put option from being
exercised.

PURCHASING PUT AND CALL OPTIONS. A Portfolio may purchase put options on
securities to protect its holdings against a substantial decline in market
value. The purchase of put options on securities will enable a Portfolio to
preserve, at least partially, unrealized gains in an appreciated security in its
portfolio without actually selling the security. In addition, a Portfolio will
continue to receive interest or dividend income on the security. A Portfolio may
also purchase call options on securities to protect against substantial
increases in prices of securities that the Portfolio intend to purchase pending
its ability to invest in an orderly manner in those securities. A Portfolio may
sell put or call options it has previously purchased, which could result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction cost paid on the put or call option
which was bought.

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SECURITIES INDEX OPTIONS. A Portfolio may write covered put and call options and
purchase call and put options on securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
the Portfolio's securities or securities it intends to purchase. A Portfolio
will only write "covered" options. A call option on a securities index is
considered covered, for example, if, so long as the Portfolio is obligated as
the writer of the call, it holds securities the price changes of which are, in
the opinion of the Adviser, expected to replicate substantially the movement of
the index or indexes upon which the options written by the Portfolio are based.
A put on a securities index written by a Portfolio will be considered covered
if, so long as it is obligated as the writer of the put, the Portfolio
segregates with its custodian cash or other liquid obligations having a value
equal to or greater than the exercise price of the option. Unlike a stock
option, which gives the holder the right to purchase or sell a specified stock
at a specified price, an option on a securities index gives the holder the right
to receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the underlying stock
index on the exercise date, multiplied by (ii) a fixed "index multiplier." A
securities index fluctuates with changes in the market value of the securities
so included. For example, some securities index options are based on a broad
market index such as the S&P 500 or the NYSE Composite Index, or a narrower
market index such as the S&P 100. Indexes may also be based on an industry or
market segment such as the AMEX Oil and Gas Index or the Computer and Business
Equipment Index.

OVER-THE-COUNTER OPTIONS. A Portfolio may enter into contracts with primary
dealers with whom it may write over-the-counter options. Such contracts will
provide that the Portfolio has the absolute right to repurchase an option it
writes at any time at a repurchase price which represents the fair market value,
as determined in good faith through negotiation between the parties, but which
in no event will exceed a price determined pursuant to a formula contained in
the contract. Although the specific details of the formula may vary between
contracts with different primary dealers, the formula will generally be based on
a multiple of the premium received by a Portfolio for writing the option, plus
the amount, if any, of the option's intrinsic value (i.e., the amount the option
is "in-the-money"). The formula will also include a factor to account for the
difference between the price of the security and the strike price of the option
if the option is written "out-of-the-money." Such Portfolio has established
standards of creditworthiness for these primary dealers, although the Portfolio
may still be subject to the risk that firms participating in such transactions
will fail to meet their obligations. In instances in which a Portfolio has
entered into agreements with respect to the over-the-counter options it has
written, and such agreements would enable the Portfolio to have an absolute
right to repurchase at a pre-established formula price the over-the-counter
option written by it, the Portfolio would treat as illiquid only securities
equal in amount to the formula price described above less the amount by which
the option is "in-the-money," i.e., the amount by which the price of the option
exceeds the exercise price.

For information concerning the risks associated with utilizing options and
futures contracts, please see "Risks of Transactions in Futures Contracts and
Options" below.

RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND OPTIONS

FUTURES. The prices of futures contracts are volatile and are influenced, among
other things, by actual and anticipated changes in the market and interest
rates, which in turn are affected by fiscal and monetary policies and national
and international political and economic events.

Most United States futures exchanges limit the amount of fluctuation permitted
in futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of a
trading session.

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Once the daily limit has been reached in a particular type of futures contract,
no trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.

Because of the low margin deposits required, futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the futures contract is deposited as margin, a subsequent 10%
decrease in the value of the futures contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the futures contract were closed out.
Thus, a purchase or sale of a futures contract may result in losses in excess of
the amount invested in the futures contract.

A decision of whether, when, and how to hedge involves skill and judgment, and
even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior, market trends or interest rate trends. There are
several risks in connection with the use by a Portfolio of futures contracts as
a hedging device. One risk arises because of the imperfect correlation between
movements in the prices of the futures contracts and movements in the prices of
the underlying instruments which are the subject of the hedge. The Advisers
will, however, attempt to reduce this risk by entering into futures contracts
whose movements, in its judgment, will have a significant correlation with
movements in the prices of the Portfolio's underlying instruments sought to be
hedged.

Successful use of futures contracts by a Portfolio for hedging purposes is also
subject to the Portfolio's ability to correctly predict movements in the
direction of the market. It is possible that, when a Portfolio has sold futures
to hedge its portfolio against a decline in the market, the index, indices, or
instruments underlying futures might advance and the value of the underlying
instruments held in that Portfolio's portfolio might decline. If this were to
occur, the Portfolio would lose money on the futures and also would experience a
decline in value in its underlying instruments.

Positions in futures contracts may be closed out only on an exchange or a board
of trade which provides the market for such futures. Although a Portfolio
intends to purchase or sell futures only on exchanges or boards of trade where
there appears to be an active market, there is no guarantee that such will exist
for any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
at such time, and, in the event of adverse price movements, the Portfolio would
continue to be required to make daily cash payments of variation margin.
However, in the event futures positions are used to hedge portfolio securities,
the securities will not be sold until the futures positions can be liquidated.
In such circumstances, an increase in the price of securities, if any, may
partially or completely offset losses on the futures contracts.

OPTIONS. A closing purchase transaction for exchange-traded options may be made
only on a national securities exchange. There is no assurance that a liquid
secondary market on an exchange will exist for any particular option, or at any
particular time, and for some options, such as over-the-counter options, no
secondary market on an exchange may exist. If a Portfolio is unable to effect a
closing purchase transaction, that Portfolio will not sell the underlying
security until the option expires or the Portfolio delivers

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the underlying security upon exercise.

Options traded in the over-the-counter market may not be as actively traded as
those on an exchange. Accordingly, it may be more difficult to value such
options. In addition, it may be difficult to enter into closing transactions
with respect to options traded over-the-counter. The Portfolio will engage in
such transactions only with firms of sufficient credit so as to minimize these
risks. Such options and the securities used as "cover" for such options may be
considered illiquid securities.

The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by a Portfolio will not exactly match the composition of
the securities indexes on which options are written. In the purchase of
securities index options the principal risk is that the premium and transaction
costs paid by a Portfolio in purchasing an option will be lost if the changes
(increase in the case of a call, decrease in the case of a put) in the level of
the index do not exceed the cost of the option.

An exchange may establish limitations governing the maximum number of calls and
puts in each class (whether or not covered) which may be written by a single
investor or group of investors acting in concert (regardless of whether the
options are written on the same or different exchanges or are held or written in
one or more accounts or through one or more brokers). It is possible that the
Portfolio and clients advised by the Adviser or the applicable Sub-Adviser may
constitute such a group. An exchange may order the liquidation of positions
found to be in violation of these limits, and it may impose certain other
sanctions. These position limits may limit the number of options which a
Portfolio can write on a particular security.

INVESTMENT COMPANY SHARES

Investment company shares that each Portfolio may invest in are limited to
shares of money market mutual funds, except as set forth under "Investment
Limitations" below. Since such mutual funds pay management fees and other
expenses, shareholders of the Portfolios would indirectly pay both Portfolio
expenses and the expenses of underlying funds with respect to Portfolio assets
invested therein. Applicable regulations prohibit a Portfolio from acquiring the
securities of other investment companies that are not "part of the same group of
investment companies" if, as a result of such acquisition; (i) the Portfolio
owns more than 3% of the total voting stock of the company; (ii) more than 5% of
the Portfolio's total assets are invested in securities of any one investment
company; or (iii) more than 10% of the total assets of the Portfolio are
invested in securities (other than treasury stock) issued by all investment
companies. Each Portfolio has no current intention, in the foreseeable future,
of investing more than 5% of its assets in investment company securities.

ILLIQUID INVESTMENTS

Illiquid investments are investments that cannot be sold or disposed of in the
ordinary course of business within seven (7) days at approximately the prices at
which they are valued. Under the supervision of the Board of Directors, the
Adviser or Sub-Advisers determine the liquidity of the Fund's investments and,
through reports from the Adviser or Sub-Advisers, the Board monitors investments
in illiquid instruments. In determining the liquidity of a Portfolio's
investments, the Adviser or Sub-Advisers may consider various factors including:
(i) the frequency of trades and quotations; (ii) the number of dealers and
prospective purchasers in the marketplace; (iii) dealer undertakings to make a
market; (iv) the nature of the security (including any demand or tender
features); and (v) the nature of the market place for trades (including the

<PAGE>

ability to assign or offset a Portfolio's rights and obligations relating to the
investment). Investments currently considered by a Portfolio to be illiquid
include repurchase agreements not entitling the holder to payment of principal
and interest within seven days, over-the-counter options, and non-government
stripped fixed-rate mortgage backed securities. Also, the Adviser or
Sub-Advisers may determine some government-stripped fixed-rate mortgage backed
securities, loans and other direct debt instruments, and swap agreements to be
illiquid. However, with respect to over-the-counter options a Portfolio writes,
all or a portion of the value of the underlying instrument may be illiquid
depending on the assets held to cover the option and the nature and terms of any
agreement a Portfolio may have to close out the option before expiration. In the
absence of market quotations, illiquid investments are priced at fair value as
determined in good faith by a committee appointed by the Board of Directors. If,
through a change in values, net assets or other circumstances, a Portfolio was
in a position where more than 15% of its net assets were invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.

RESTRICTED SECURITIES

Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, as amended (the "1933 Act"), or in a registered public offering.
Where registration is required, a Portfolio may be obligated to pay all or part
of the registration expense and a considerable period may elapse between the
time it decides to seek registration and the time a Portfolio may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, a Portfolio might obtain a
less favorable price than prevailed when it decided to seek registration of the
security. Moreover, investing in Rule 144A securities (i.e., securities that
qualify for resale under Rule 144A under the Securities Act of 1933) would have
the effect of increasing the level of a Portfolio's illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing these securities. Also, restricted securities may be difficult to
value because market quotations may not be readily available. Each Fund limits
the amount of total assets it invests in restricted securities as follows:
Emerging Growth, Large Cap Growth, Select Equity, Core Growth, Limited, Large
Cap 20, New Opportunities, International, Cash Reserves, Technology &
Communications, Global Technology & Communications: 10% and Large Cap Value,
Mid-Cap Value, Small Cap Value, Focused Value, Strategic Small Company: 15%. The
Growth Fund is not currently permitted to invest in restricted securities.

FOREIGN CURRENCY TRANSACTIONS

A Portfolio may hold foreign currency deposits from time to time, and may
convert dollars and foreign currencies in the foreign exchange markets. Currency
conversion involves dealer spreads and other costs, although commissions usually
are not charged. Currencies may be exchanged on a spot (i.e., cash) basis, or by
entering into forward contracts to purchase or sell foreign currencies at a
future date and price. Forward contracts generally are traded in an interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers. The parties to a forward contract may agree to
offset or terminate the contract before maturity, or may hold the contract to
maturity and complete the contemplated currency exchange.

A Portfolio may use currency forward contracts to manage currency risks and to
facilitate transactions in foreign securities. The following discussion
summarizes the principal currency management strategies involving forward
contracts that could be used by the Portfolios.

<PAGE>

In connection with purchases and sales of securities denominated in foreign
currencies, a Portfolio may enter into currency forward contracts to fix a
definite price for the purchase or sale in advance of the trade's settlement
date. This technique is sometimes referred to as a "settlement hedge" or
"transaction hedge." The Adviser or the applicable Sub-Advisers may enter into
settlement hedges in the normal course of managing the Portfolio's foreign
investments. A Portfolio may also enter into forward contracts to purchase or
sell a foreign currency in anticipation of future purchases or sales of
securities denominated in foreign currency, even if the specific investments
have not yet been selected by the Adviser or the applicable Sub-Adviser.

A Portfolio may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency. For example, if a
Portfolio owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound's value. Such a hedge, sometimes referred
to as a "position hedge," would tend to offset both positive and negative
currency fluctuations, but would not offset changes in security values caused by
other factors. A Portfolio could also hedge the position by selling another
currency expected to perform similarly to the pound sterling - for example, by
entering into a forward contract to sell Deutschemark or European Currency Units
in return for U.S. dollars. This type of hedge, sometimes referred to as a
"proxy hedge," could offer advantages in terms of cost, yield, or efficiency,
but generally would not hedge currency exposure as effectively as a simple hedge
into U.S. dollars. Proxy hedges may result in losses if the currency used to
hedge does not perform similarly to the currency in which the hedged securities
are denominated.

Under certain conditions, guidelines of the Securities Exchange Commission
("SEC") require mutual funds to set aside appropriate liquid assets in a
segregated account to cover currency forward contracts. As required by SEC
guidelines, each Portfolio will segregate assets to cover currency forward
contracts, if any, whose purpose is essentially speculative. A Portfolio will
not segregate assets to cover forward contracts entered into for hedging
purposes, including settlement hedges, position hedges, and proxy hedges.

Successful use of forward currency contracts will depend on the skill of the
Adviser or the applicable Sub-Adviser in analyzing and predicting currency
values. Forward contracts may substantially change a Portfolio's investment
exposure to changes in currency exchange rates, and could result in losses to a
Portfolio if currencies do not perform as the Adviser or the applicable
Sub-Adviser anticipates. For example, if a currency's value rose at a time when
the Adviser or Sub-Adviser had hedged a Portfolio by selling that currency in
exchange for dollars, a Portfolio would be unable to participate in the
currency's appreciation. If the Adviser or a Sub-Adviser hedges a Portfolio's
currency exposure through proxy hedges, the Portfolio could realize currency
losses from the hedge and the security position at the same time if the two
currencies do not move in tandem. Similarly, if the Adviser or the applicable
Sub-Adviser increases a Portfolio's exposure to a foreign currency and that
currency's value declines, the Portfolio will realize a loss. There is no
assurance that the use of forward currency contracts by the Adviser or the
Sub-Advisers will be advantageous to a Portfolio or that it will hedge at an
appropriate time.

AMERICAN DEPOSITARY RECEIPTS ("ADRS"), EUROPEAN DEPOSITORY RECEIPTS ("EDRS") AND
GLOBAL DEPOSITARY RECEIPTS ("GDRS")

ADRs are securities, typically issued by a U.S. financial institution (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. EDRs
are receipts issued by non-U.S. banks or trust companies and foreign branches of
U.S. banks that evidence ownership of the underlying foreign securities. GDRs,
which are sometimes referred to as

<PAGE>

Continental Depositary Receipts ("CDRs"), are securities, typically issued by a
non-U.S. financial institution, that evidence ownership interests in a security
or a pool of securities issued by either a U.S. or foreign issuer. ADRs, EDRs,
GDRs and CDRs may be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the receipt's underlying security. Holders of an unsponsored
depositary receipt generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through to the holders of the receipts voting rights with
respect to the deposited securities.

BANKERS' ACCEPTANCE

A bill of exchange or time draft drawn on and accepted by a commercial bank. It
is used by corporations to finance the shipment and storage of goods and to7
furnish dollar exchange. Maturities are generally six months or less.

CERTIFICATE OF DEPOSIT

A negotiable interest bearing instrument with a specific maturity. Certificates
of deposit are issued by banks and savings and loan institutions in exchange for
the deposit of funds and normally can be traded in the secondary market prior to
maturity. Certificates of deposit generally carry penalties for early
withdrawal.

COMMERCIAL PAPER

The term used to designate unsecured short-term promissory notes issued by
corporations and other entities. Maturities on these issues typically vary from
a few days to nine months.

CONVERTIBLE SECURITIES

Securities such as rights, bonds, notes and preferred stocks which are
convertible into or exchangeable for common stocks. Convertible securities have
characteristics similar to both fixed income and equity securities. Because of
the conversion feature, the market value of convertible securities tends to move
together with the market value of the underlying common stock. As a result, a
Portfolio's selection of convertible securities is based, to a great extent, on
the potential for capital appreciation that may exist in the underlying stock.
The value of convertible securities is also affected by prevailing interest
rates, the credit quality of the issuer, and any call provisions.

DEMAND INSTRUMENTS

Certain instruments may involve a conditional or unconditional demand feature
which permits the holder to demand payment of the principal amount of the
instrument. Demand instruments may include variable amount master demand notes.

MORTGAGE-BACKED SECURITIES

Securities that include interests in pools of lower-rated debt securities, or
consumer loans or mortgages, or complex instruments such as collateralized
mortgage obligations and stripped mortgage-backed securities.

<PAGE>

The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers, and the creditworthiness
of the parties involved. Some securities may have a structure that makes their
reaction to interest rates and other factors difficult to predict, making their
value highly volatile. These securities may also be subject to prepayment risk.

RECEIPTS

Separately traded interest and principal component parts of U.S. Treasury
obligations that are issued by banks or brokerage firms and are created by
depositing U.S. Treasury obligations into a special account at a custodian bank.
The custodian bank holds the interest and principal payments for the benefit of
the registered owners of the receipts. The custodian bank arranges for the
issuance of the receipts evidencing ownership and maintains the register.

TIME DEPOSIT

A non-negotiable receipt issued by a bank in exchange for the deposit of funds.
Like a certificate of deposit, it earns a specified rate of interest over a
definite period of time; however, it cannot be traded in the secondary market.
Time deposits with a withdrawal penalty are considered to be illiquid
securities.

U.S. GOVERNMENT AGENCY OBLIGATIONS

Certain Federal agencies such as the Government National Mortgage Association
("GNMA") have been established as instrumentalities of the United States
Government to supervise and finance certain types of activities. Securities
issued by these agencies, while not direct obligations of the United States
Government, are either backed by the full faith and credit of the United States
(e.g., GNMA securities) or supported by the issuing agencies' right to borrow
from the Treasury. The securities issued by other agencies are supported only by
the credit of the instrumentality (e.g., Tennessee Valley Authority securities).

U.S. GOVERNMENT SECURITIES

Bills, notes and bonds issued by the U.S. Government and backed by the full
faith and credit of the United States.

U.S. TREASURY OBLIGATIONS

Bills, notes and bonds issued by the U.S. Treasury, and separately traded
interest and principal component parts of such obligations that are transferable
through the Federal book-entry system known as Separately Traded Registered
Interest and Principal Securities ("STRIPS"). Under the STRIPS program, a
Portfolio will be able to have its beneficial ownership of securities recorded
directly in the book-entry record-keeping system in lieu of having to hold
certificates or other evidences of ownership of the underlying U.S. Treasury
securities. When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the stripped coupons are sold separately or
grouped with other coupons with like maturity dates and sold in such bundled
form. The principal or corpus is sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on the security and
does not receive any rights to periodic interest (cash) payments. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the securities that the Treasury sells itself. Other
facilities are available to facilitate the transfer of ownership of non-Treasury
securities by accounting separately for the beneficial ownership of

<PAGE>

particular interest coupon and corpus payments on such securities through a
book-entry record-keeping system.

VARIABLE AND FLOATING RATE INSTRUMENTS

Certain of the obligations purchased by a Portfolio may carry variable or
floating rates of interest, may involve a conditional or unconditional demand
feature and may include variable amount master demand notes. Such instruments
bear interest at rates which are not fixed, but which vary with changes in
specified market rates or indices, such as a Federal Reserve composite index.
The interest rates on these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on interest rate
changes. There is a risk that the current interest rate on such obligations may
not accurately reflect existing market interest rates. A demand instrument with
a demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such securities.

WARRANTS

Instruments giving holders the right, but not the obligation, to buy shares of a
company at a given price during a specified period.

WHEN-ISSUED AND DELAYED-DELIVERY SECURITIES

When-issued and delayed-delivery securities are securities subject to settlement
on a future date. For fixed income securities, the interest rate realized on
when-issued or delayed-delivery securities is fixed as of the purchase date and
no interest accrues to a Portfolio before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and will
have the effect of leveraging a Portfolio's assets. The Portfolios are permitted
to invest in forward commitments or when-issued securities where such purchases
are for investment and not for leveraging purposes. One or more segregated
accounts will be established with the Custodian, and the Portfolios will
maintain liquid assets in such accounts in an amount at least equal in value to
each Portfolio's commitments to purchase when-issued securities. Only the Small
Cap Value, Mid-Cap Value and Large Cap Value Funds are permitted to invest in
these securities. These Funds use segregated accounts to offset leverage risk.

SMALL AND MEDIUM CAPITALIZATION STOCKS

Investments in common stocks in general are subject to market risks that may
cause their prices to fluctuate over time. Therefore, an investment in each
Portfolio (other than the Cash Reserves Fund) may be more suitable for long-term
investors who can bear the risk of these fluctuations. The Emerging Growth Fund,
Limited Fund, New Opportunities Fund, Small Cap Value Fund and Strategic Small
Company Fund invest extensively in small capitalization companies. The Mid-Cap
Value Fund invests extensively in medium capitalization companies. In certain
cases, the Growth Fund, Core Growth Fund, Select Equity Fund, Focused Value
Fund, Technology & Communications Fund and Global Technology & Communications
Fund invest in securities of issuers with small or medium market
capitalizations. While the Adviser and Value Investors intend to invest in small
and medium capitalization companies that have strong balance sheets and
favorable business prospects, any investment in small and medium capitalization
companies involves greater risk and price volatility than that customarily
associated with investments in larger, more established companies. This
increased risk may be due to the greater business risks of their small or medium
size, limited markets and financial resources, narrow product lines and frequent
lack of

<PAGE>

management depth. The securities of small and medium capitalization
companies are often traded in the over-the-counter market, and might not be
traded in volumes typical of securities traded on a national securities
exchange. Thus, the securities of small and medium capitalization companies are
likely to be less liquid, and subject to more abrupt or erratic market
movements, than securities of larger, more established companies.

OVER-THE-COUNTER MARKET

Each Portfolio (except the Cash Reserves Fund) may invest in over-the-counter
stocks. In contrast to the securities exchanges, the over-the-counter market is
not a centralized facility which limits trading activity to securities of
companies which initially satisfy certain defined standards. Generally, the
volume of trading in an unlisted or over-the-counter common stock is less than
the volume of trading in a listed stock. This means that the depth of market
liquidity of some stocks in which each Portfolio invests may not be as great as
that of other securities and, if the Portfolios were to dispose of such a stock,
they might have to offer the shares at a discount from recent prices, or sell
the shares in small lots over an extended period of time.

FOREIGN SECURITIES AND EMERGING MARKETS

Each of the Portfolios may invest in foreign securities. Investing in the
securities of foreign issuers involves special risks and considerations not
typically associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries and potential
restrictions on the flow of international capital and currencies. Foreign
issuers may also be subject to less government regulation than U.S. companies.
Moreover, the dividends and interest payable on foreign securities may be
subject to foreign withholding taxes, thus reducing the net amount of income
available for distribution to a Portfolio's shareholders. Further, foreign
securities often trade with less frequency and volume than domestic securities
and, therefore, may exhibit greater price volatility. Changes in foreign
exchange rates will affect, favorably or unfavorably, the value of those
securities which are denominated or quoted in currencies other than the U.S.
dollar.

The International Fund and Global Technology & Communications Fund's investments
in emerging markets may be considered speculative, and therefore may offer
higher potential for gains and losses than investments in developed markets of
the world. With respect to any emerging country, there may be greater potential
for nationalization, expropriation or confiscatory taxation, political changes,
government regulation, social instability or diplomatic developments (including
war) which could affect adversely the economies of such countries or the value
of the International Fund and Global Technology & Communications Fund's
investments in those countries. In addition, it may be difficult to obtain and
enforce a judgment in the courts of such countries. Further, the economies of
developing countries generally are heavily dependent upon international trade
and, accordingly, have been and may continue to be adversely affected by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.

INVESTMENTS IN TECHNOLOGY COMPANIES

Each Portfolio (except the Cash Reserves Fund) may invest in equity securities
of technology companies. Such securities have tended to be subject to greater
volatility than securities of companies that are not

<PAGE>

dependent upon or associated with technological issues. The Technology &
Communications Fund and Global Technology & Communications Fund are
non-diversified, which means they will invest a higher percentage of their
assets in a limited number of technology stocks. As a result, the price change
of a single security, positive or negative, will have a greater impact on each
Fund's net asset value and will cause its shares to fluctuate in value more than
it would in a diversified fund. In addition, the Technology & Communications
Fund and Global Technology & Communications Fund are concentrated, which means
they will invest 25% or more of their total assets in one or more of the
industries within the technology and communications sectors. Many of these
industries share common characteristics. Therefore, an event or issue affecting
one such industry may have a significant impact on these other, related
industries and, thus, may affect the value of the Technology & Communications
Fund and Global Technology & Communications Fund's investments in technology
companies. For example, the technology companies in which the Technology &
Communications Fund and Global Technology & Communications Fund invest may be
strongly affected by worldwide scientific or technological developments and
their products and services may be subject to governmental law, regulation or
adversely affected by governmental policies.

EUROPEAN ECONOMIC AND MONETARY UNION

Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The
Netherlands, Portugal and Spain are presently members of the European Economic
and Monetary Union (the "EMU"). The EMU adopted the "euro" as a common currency
on January 1, 1999 and subordinated the national currencies of each country
until such time as the national currencies are phased out entirely. The euro
could adversely affect the value of securities held by the Portfolio because as
the euro is implemented as the common currency, there may be changes in the
relative value of the U.S. dollar and other major currencies, as well as
possible adverse tax consequences. In addition, the introduction of the euro may
affect the fiscal and monetary levels of participating EMU countries and may
also increase price competition among business firms within EMU countries and
between businesses in EMU and non-EMU countries. These uncertainties raise the
possibility of increased volatility in the financial markets of the affected
countries.

<PAGE>

INVESTMENT LIMITATIONS

FUNDAMENTAL POLICIES

Each Portfolio has adopted certain investment restrictions which, in addition to
those restrictions in the Prospectus, are fundamental and may not be changed
without approval by a majority vote of the Portfolio's shareholders. Such
majority is defined in the 1940 Act as the lesser of (i) 67% or more of the
voting securities of the Portfolio present in person or by proxy at a meeting,
if the holders of more than 50% of the outstanding voting securities are present
or represented by proxy; or (ii) more than 50% of the outstanding voting
securities of the Portfolio.

PBHG Growth Fund

The PBHG Growth Fund may not:

1. Make loans, except that the Portfolio, in accordance with its investment
objective and policies, may (i) purchase debt instruments, and (ii) enter into
repurchase agreements, provided that the Portfolio will not make any investment
in repurchase agreements maturing in more than seven days if such investments,
together with any other illiquid securities held by the Portfolio, would exceed
15% of the value of its net assets.

2. Act as an underwriter of securities of other issuers, except as it may be
deemed an underwriter under the 1933 Act in connection with the sale of
portfolio securities.

3. Purchase or sell commodities or commodity contracts, except that the
Portfolio, in accordance with its investment objective and policies, may enter
into futures contracts and options thereon.

4. Purchase or sell real estate, or real estate investment partnerships.

5. Issue senior securities (as defined in the 1940 Act) except as permitted in
connection with the Portfolio's policies on borrowing and pledging, or as
permitted by rule, regulation or order of the SEC.

7. Pledge any of its assets, except that the Portfolio may pledge assets having
a value of not more than 10% of its total assets in order to (i) secure
permitted borrowings, or (ii) as may be necessary in connection with the
Portfolio's use of options and futures contracts.

8. Purchase securities of other investment companies except as permitted by the
1940 Act and the rules and regulations thereunder.

9. Invest in interests in oil, gas or other mineral exploration or development
programs.

10. Purchase or write puts, calls or combinations thereof, except that the
Portfolio may invest in and

<PAGE>

commit its assets to writing and purchasing only put and call options that are
listed on a national securities exchange and issued by the Options Clearing
Corporation to the extent permitted by the Prospectus and this Statement of
Additional Information. In order to comply with the securities laws of several
states, the Portfolio (as a matter of operating policy) will not write a covered
call option if, as a result, the aggregate market value of all portfolio
securities covering call options or subject to put options for that Portfolio
exceeds 25% of the market value of that Portfolio's net assets.

11. Invest 25% or more of its total assets at the time of purchase in securities
of issuers (other than obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations) whose principal business activities are in the same industry.
For purposes of this investment limitation, state and municipal governments and
their agencies and authorities are not deemed to be industries; utility
companies will be divided according to their services (e.g., gas, gas
transmission, electric, electric and gas, and telephone) and financial service
companies will be classified according to end use of their service (e.g.,
automobile finance, bank finance, and diversified finance).

12. Borrow money (other than pursuant to reverse repurchase agreements) except
for temporary or emergency purposes and then only in amounts up to 33 1/3% of
the total assets of the PBHG Growth Fund. The temporary borrowing will include,
for example, borrowing to facilitate the orderly sale of portfolio securities to
accommodate substantial redemption requests if they should occur, to facilitate
the settlement of securities transactions, and is not for investment purposes.
All borrowings in excess of 5% of the Portfolio's total assets will be repaid
before making additional investments.

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 Large Cap
Value Fund, PBHG Mid-Cap Value Fund, PBHG Small Cap Value Fund, PBHG
International Fund, PBHG Cash Reserves Fund, PBHG Technology & Communications
Fund, PBHG Strategic Small Company Fund, PBHG Global Technology & Communications
Fund.

Each of the foregoing Portfolios may not:

1. Make loans, except that each Portfolio, in accordance with that Portfolio's
investment objectives and policies, may (i) purchase or hold debt instruments,
and (ii) enter into repurchase agreements. In addition, the PBHG Limited Fund,
the PBHG Large Cap 20 Fund, the PBHG Large Cap Value Fund, the PBHG Mid-Cap
Value Fund, the PBHG Small Cap Value Fund, the PBHG International Fund, PBHG
Strategic Small Company Fund and the PBHG Global Technology & Communications
Fund may each lend its portfolio securities in an amount not exceeding one-third
the value of its total assets.

2. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under the 1933 Act in connection with the purchase and
sale of portfolio securities.

3. Purchase or sell commodities or commodity contracts, except that a Portfolio,
in accordance with its objectives and policies, may: (i) invest in readily
marketable securities of issuers which invest or engage in such activities; and
(ii) enter into futures contracts and options thereon.

4. Purchase or sell real estate or real estate partnership interests, except
that this limitation shall not prevent a Portfolio from investing directly
or indirectly in readily marketable securities of issuers which can invest
in real estate, institutions that issue mortgages, or real estate
investment trusts that deal with real

<PAGE>

estate or interests therein.

6. Purchase more than 10% of the voting securities of any one issuer or purchase
securities of any one issuer if, at the time of purchase, more than 5% of its
total assets will be invested in that issuer, except with respect to the
Portfolio, up to 25% of its assets may be invested without regard to these
limits. This limitation does not apply to the PBHG Large Cap 20 Fund, the PBHG
Technology & Communications Fund, PBHG Global Technology & Communications Fund
or the PBHG Cash Reserves Fund.

In addition, for purposes of this investment limitation, the term "issuer" does
not include obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements collaterlaized by such
obligations.

7. Invest 25% or more of its total assets at the time of purchase in securities
of one or more issuers (other than obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities and repurchase agreements
collaterlized by such obligations) whose principal business activities are in
the same industry. For purposes of this limitation, supranational organizations
are deemed to be issuers conducting their principal business activities in the
same industry; state and municipal governments and their agencies and
authorities are not deemed to be industries; utility companies will be divided
according to their services, for example, gas distribution, gas transmission,
electric and telephone will each be considered a separate industry; and
financial service companies will be classified according to the end users of
their services (e.g. automobile finance, bank finance and diversified finance).

With respect to the PBHG Technology & Communications Fund and the PBHG Global
Technology & Communications Fund, up to 50% of the Fund's assets may be
invested without regard to these limits.

8. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of total assets (except not exceeding 33
1/3% of the value of total assets with respect to the PBHG Mid-Cap Value Fund
and the PBHG Small Cap Value Fund). This borrowing provision is included solely
to facilitate the orderly sale of portfolio securities to accommodate
substantial redemption requests if they should occur and is not for investment
purposes. All borrowings in excess of 5% of the Portfolio's total assets will be
repaid before making investments.

9. Invest in companies for the purpose of exercising control.

10. Pledge, mortgage or hypothecate assets, except: (i) to secure temporary
borrowings permitted by each Portfolio's limitation on permitted borrowings; or
(ii) in connection with permitted transactions regarding options and futures
contracts and, except for the PBHG Mid-Cap Value Fund and the PBHG Small Cap
Value Fund, in aggregate amounts not to exceed 10% of total assets taken at
current value at the time of the occurrence of such pledge, mortgage or
hypothecation.

11. Make short sales of securities, maintain a short position or purchase
securities on margin, except that each Portfolio may: (i) obtain short-term
credits as necessary for the clearance of security transactions; and (ii)
establish margin accounts as may be necessary in connection with the Portfolio's
use of options and

<PAGE>

futures contracts.

12. Purchase securities of other investment companies except as permitted by
the 1940 Act and the rules and regulations thereunder.

13. Invest in interests in oil, gas or other mineral exploration or development
programs and, except for the PBHG Mid-Cap Value Fund and the PBHG Small Cap
Value Fund, invest in oil, gas or mineral leases.

PBHG Focused Value Fund and PBHG New Opportunities Fund

Each of the foregoing Portfolios may not:

1. Make loans except that each such Portfolio, in accordance with its investment
objective and policies, may (i) purchase debt obligations, (ii) enter into
repurchase agreements and (iii) lend its portfolio securities.

2. Act as an underwriter of securities of other issuers, except as it may be
deemed to be an underwriter under the 1933 Act in connection with the purchase
and sale of portfolio securities.

3. Purchase or sell commodities or commodity contracts, except that each such
Portfolio, in accordance with its investment objective and policies, may: (i)
invest in readily marketable securities of issuers which invest or engage in
such activities; and (ii) enter into forward contracts, futures contracts and
options thereon.

4. Purchase or sell real estate, or real estate partnership interests, except
that this limitation shall not prevent any such Portfolio from investing
directly or indirectly in readily marketable securities of issuers which can
invest in real estate, institutions that issue mortgages, or real estate
investment trusts which deal with real estate or interests therein.

This limitation does not apply to the PBHG Focused Value Fund. For purposes of
this investment limitation, the term "issuer" does not include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
and repurchase agreements collateralized by such obligations.

7. Invest 25% or more of its total assets at the time of purchase in securities
of issuers (other than obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities and repurchase agreements collateralized by
such obligations) whose principal business activities are in the same industry.
For purposes of this investment limitation, state and municipal governments and
their agencies and authorities are not deemed to be industries; utility
companies will be divided according to their services (e.g., gas, gas
transmission, electric, electric and gas, and telephone) and financial service
companies will be classified according to end use of their service (e.g.,
automobile finance, bank finance, and diversified finance).

20
<PAGE>

8. Borrow money (other than pursuant to reverse repurchase agreements) except
for temporary or emergency purposes and then only in amounts up to 33 1/3% of
the total assets of the PBHG Focused Value Fund and the PBHG New Opportunities
Fund. The temporary borrowing will include, for example, borrowing to facilitate
the orderly sale of portfolio securities to accommodate substantial redemption
requests if they should occur, to facilitate the settlement of securities
transactions, and is not for investment purposes. All borrowings in excess of 5%
of a Portfolio's total assets will be repaid before making additional
investments.

The foregoing percentages will apply at the time of each purchase of a security
(except with respect to borrowings in excess of limitation 8 above which will be
reduced consistent with the requirements of Section 18(f) of the 1940 Act).

NON-FUNDAMENTAL POLICIES

In addition to the foregoing, and the policies set forth in each Portfolio's
Prospectus, each Portfolio has adopted additional investment restrictions which
may be amended by the Board of Directors without a vote of shareholders.

The PBHG Growth Fund may not:

1. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of the its net assets. This limitation does not include any Rule 144A restricted
security that has been determined by, or pursuant to procedures established by,
the Board, based on trading markets for such security, to be liquid.

2. Invest in the securities of foreign issuers if, at the time of acquisition,
more than 15% of the value of the Portfolio's total assets would be invested in
such securities.

3. Make short sales or purchase securities on margin; but it may obtain such
short-term credits as are necessary for the clearance of purchases and sales of
securities.

PBHG Large Cap Growth Fund and PBHG Select Equity Fund, PBHG Core Growth Fund,
PBHG Limited Fund, PBHG Large Cap 20 Fund, PBHG Large Cap Value Fund, PBHG
Mid-cap Value Fund, PBHG Small Cap Value Fund, PBHG International Fund, PBHG
Cash Reserves Fund, PBHG Technology & Communications Fund, PBHG Strategic Small
Company Fund, PBHG Global Technology & Communications Fund.

Each of the foregoing Portfolios may not:

1. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of its net assets (except not exceeding 10% of the value of net assets with
respect to the PBHG Cash Reserves Fund). This limitation does not include any
Rule 144A restricted security that has been determined by, or pursuant to
procedures established by, the Board of Directors, based on trading markets for
such security, to be liquid.

2. Purchase puts, calls, straddles, spreads, and any combination thereof, except
to the extent permitted by the 1940 Act or the rules or regulations thereunder.

<PAGE>

The foregoing percentages will apply at the time of each purchase of a security.

PBHG Focused Value Fund and PBHG New Opportunities Fund

Each of the foregoing Portfolios may not:

1. Pledge more than 10% of it's total assets, except that each such Portfolio
may pledge assets to the extent permitted by the 1940 Act in order to (i) secure
permitted borrowings or (ii) as may be necessary in connection with the
Portfolio's use of options and futures contracts.

2. Purchase or hold the securities of an issuer if, at the time thereof, any
such purchase or holding would cause more than 15% of the Portfolio's net assets
to be invested in illiquid securities. This limitation does not include any Rule
144A security that has been determined by, or pursuant to procedures established
by, the Board, based on trading markets for such security, to be liquid.

3. Purchase or sell puts, calls, straddles, spreads, and any combination thereof
except that each such Portfolio may, in accordance with its investment objective
and policies, write covered call options with respect to all of its portfolio
securities, write covered put options and enter into closing purchase
transactions with respect to such options, engage in put and call option
transactions and engage in interest rate and stock index futures contracts and
related options transactions.

4. Purchase securities of open-end or closed-end investment companies, except
to the extent permitted by the 1940 Act.

5. Invest in companies for the purpose of exercising control.

6. Purchase securities on margin, except that each such Portfolio may: (i)
obtain short-term credits as necessary for the clearance of security
transactions; and (ii) establish margin accounts as may be necessary in
connection with the Fund's use of options and futures contracts.

7. Invest in interests in oil, gas or other mineral leases, exploration or
development programs, except that this shall not prevent a Portfolio from
investing in readily marketable securities of issuers that invest or engage in
oil, gas or other mineral leases, exploration or development programs or issuers
secured by interest in such activities.

The foregoing percentages will apply at the time of each purchase of a security
(except with respect to the limitation on investments in illiquid securities).

SENIOR SECURITIES

The term ""senior security", as defined in Section 18(g) of the Investment
Company Act of 1940, means any bond, debenture, note, or similar obligation or
instrument constituting a security and evidencing indebtedness, and any stock of
a class having priority over any other class as to distribution of assets or
payment of dividends; and "senior security representing indebtedness" means any
senior security other than stock.

<PAGE>

The term "senior security" shall not include any promissory note or other
evidence of indebtedness issued in consideration of any loan, extension, or
renewal thereof, made by a bank or other person and privately arranged, and not
intended to be publicly distributed; nor shall such term include any such
promissory note or other evidence of indebtedness in any case where such a loan
is for temporary purposes only and in an amount not exceeding 5 percent of the
value of the total assets of the issuer at the time when the loan is made. A
loan shall be presumed to be for temporary purposes if it is repaid within sixty
days and is not extended or renewed; otherwise it shall be presumed not to be
for temporary purposes. Any such presumption may be rebutted by evidence.

TEMPORARY DEFENSIVE POSITIONS

Under normal market conditions, each Portfolio expects to be fully invested in
its primary investments, as described above. However, for temporary defensive
purposes, when the Adviser or a sub-adviser, as appropriate, determines that
market conditions warrant, each Portfolio may invest up to 100% of its assets in
cash and money market instruments (consisting of securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities; certificates of
deposit, time deposits and bankers' acceptances issued by banks or savings and
loan associations having net assets of at least $500 million as stated on their
most recently published financial statements; commercial paper rated in one of
the two highest rating categories by at least one NRSRO; repurchase agreements
involving such securities; and, to the extent permitted by applicable law and
each Portfolio's investment restrictions, shares of other investment companies
investing solely in money market securities). To the extent a Portfolio is
invested in temporary defensive instruments, it will not be pursuing its
investment objective.

PORTFOLIO TURNOVER

Portfolio turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. A higher turnover rate (100% or more)
increases transaction costs (e.g., brokerage commissions) and increases realized
gains and losses. The portfolio turnover rate for the fiscal year or period
ended March 31, 2000 for each of the Portfolios is specified in the Financial
Highlights table. High rates of portfolio turnover necessarily result in
correspondingly greater brokerage and portfolio trading costs, which are paid by
the Portfolio. Trading in fixed-income securities does not generally involve the
payment of brokerage commissions, but does involve indirect transaction costs.
In addition to portfolio trading costs, higher rates of portfolio turnover may
result in the realization of capital gains. To the extent net short-term capital
gains are realized, any distributions resulting from such gains are considered
ordinary income for federal income tax purposes.

The Large Cap Growth, New Opportunities, Select Equity, Core Growth, Large Cap
20 and Large Cap Value Funds experienced increased turnover in fiscal year 2000
as compared to the prior periods. This increase in turnover occurred primarily
for three reasons. First, because of the market's volatility in 1999,
particularly in the fourth quarter, the portfolio managers were able to employ a
strategy of selling into strength and buying into weakness more often than in a
typical year with less volatility. Second, macro economic changes caused some
companies to have different intrinsic values than they had in more favorable
market conditions. The portfolio managers responded by re-allocating the Fund's
assets in light of the changed economic conditions. Third, the portfolio manager
changes in the Large Cap Value, Core Growth, Large Cap 20, Large Cap Growth
and Select Equity Fund's resulted in certain turnover by the new portfolio
managers.

<PAGE>

DIRECTORS AND OFFICERS OF THE FUND

The management and affairs of the Fund are supervised by the Directors under the
laws of the State of Maryland. The Directors have approved contracts under
which, as described above, certain companies provide essential management
services to the Fund. The Directors and executive officers of the Fund and the
principal occupations for the last five years are set forth below. Each may have
held other positions with the named companies during that period. Each Director
serves as a Director and each officer serves as an officer in a similar capacity
for The PBHG Insurance Series Fund, Inc., a registered investment company
advised by the Adviser.

Name, Address, and Age

Position Held with the Fund

Principal Occupation(s) During Past 5 Years
-------------------------------------------
John R. Bartholdson,
1255 Drummers Lane, Suite 200,
Wayne, PA 19087 (55)

Director

Chief Financial Officer and Director,
the Triumph Group, Inc. (manufacturing since 1992.

--------------------------------------------------------------------------------
Harold J. Baxter*,
825 Duportail Road,
Wayne, PA 19087, (53)

Chairman of the Board and Director

Chairman, Chief Executive Officer and Director, the Adviser since 1982. Trustee,
the Administrator since May 1996. Chairman, Chief Executive Officer and
Director, Value Investors, since June 1996. Trustee, PBHG Fund Distributors
since January 1998. Director, UAM since 1996.

--------------------------------------------------------------------------------
Jettie M. Edwards,
76 Seaview Drive,
Santa Barbara, California 93108, (53)

Director

Consultant, Syrus Associates since 1986. Trustee, provident Investment Counsel
Trust (investment company) since 1992. Trustee, EQ Advisors Trust (investment
company) since 1997l.

--------------------------------------------------------------------------------
Albert A. Miller,
7 Jennifer Drive,
Holmdel, New Jersey 07733, (65)

Director

Principal and Treasurer, JK Equipment Exporters since 1995. Senior Vice
President, Cherry & Webb, CWT Specialty Stores since 1995, Advisor and
Secretary, the Underwoman Shoppes Inc. (retail clothing stores) since 1980.
Merchandising Group Vice President, R.H. Macy & Co., 1958-1995 (retired).

--------------------------------------------------------------------------------
Gary L. Pilgrim,
825 Duportail Road,
Wayne, PA 19087, (59)

President

President, Chief Investment Officer and Director, the Adviser since 1982.
Trustee, the Administrator since May 1996. President and Director, Value
Investors since June 1996.

--------------------------------------------------------------------------------
Lee T. Cummings
825 Duportail Road,
Wayne, PA 19087 (36)

Treasurer, Chief Financial Officer, Controller

Director of Mutual Fund Operations, the Adviser since 1996. Treasurer, the
Administrator since May 1996. President, the Distributor since December 1998.
Investment Accounting Officer, Delaware Group of Funds, 1994-1996. Vice
President, Fund/Plan Services, Inc., 1992-1994.

--------------------------------------------------------------------------------
Matthew R. DiClemente,
825 Duportail Road,
Wayne, PA 19087, (30)

Assistant Secretary

Legal Assistant, the Adviser since 1998. Fund Accountant, the Adviser,
1996-1998. Fund Accountant, J.P. Morgan & Co., 1993-1996.

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

<PAGE>
--------------------------------------------------------------------------------
John M. Zerr,
825 Duportail Road,
Wayne, PA 19087, (37)

Vice-President and Secretary

General Counsel and Secretary, the Adviser since November 1996. General Counsel
and Secretary, Value Investors since November 1996. General Counsel and
Secretary, the Administrator since January 1998. General Counsel and Secretary,
the Distributor since January 1998. Vice president and Assistant Secretary,
Delaware Management Company, Inc. and the Delaware Group of Funds, 1995-1996.
Associate, Ballard Sphr Andrews & Ingersoll (law firm), 1987-1995.

--------------------------------------------------------------------------------
Meghan M. Mahon
825 Duportail Road,
Wayne, PA 19087, (32)

Vice President and Assistant Secretary

Counsel, the Adviser since April 1998. Assistant Vice President, Assistant
Secretary and Counsel, Delaware Management Company Inc. and the Delaware Group
of Funds, 1997-1998. Associate, Drinker Biddle & Reath, LLP (law firm)
1994-1997. Associate, McAleese, McGoldrick & Susanin (law firm) 1993-1994.

--------------------------------------------------------------------------------
James R. Foggo,
One Freedom Valley Road,
Oaks, PA 19456, (36)

Vice President and Assistant Secretary

Vice President and Assistant Secretary of the Sub-Administrator and the
Distributor since 1998. Associate, Paul Weiss, Rifkind, Wharton & Garrison,
1998. Associate, Baker & McKenzie, 1995-1998. Associate, Battle Fowler L.L.P.,
1993-1995.

--------------------------------------------------------------------------------
Timothy D.Barto,
One Freedom Valley Road,
Oaks, PA 19456, (32)

Vice President and Assistant Secretary

Vice President and Assistant Secretary of the SEI Investments Co. and a
Vice-President and Assistant Secretary of SEI Investments Mutual Fund Services
and SEI Investments Distribution Co. since November 1999. Associate at Dechert
Price & Rhoads from 1997 to 1999 and an Associate at Richter, Miller & Finn from
1994 to 1997.

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

Each current Director of the Company received the following compensation during
the fiscal year ended March 31, 2000:

=========================================================================================================================
Pension or Estimated Total
Retirement Annual Compensation
Aggregate Benefits Benefits from Company
Compensation Accrued as Part Upon and Company
Name of Person, from of Company Retirement Complex
Position Company Expenses Paid to Directors
-------------------------------------------------------------------------------------------------------------------------
John R. Bartholdson,
<S> <C> <C>
Director $48,000 N/A N/A $78,000
for services on two boards
-------------------------------------------------------------------------------------------------------------------------
Harold J. Baxter,
Director* N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------
Jettie M. Edwards,
Director $48,000 N/A N/A $78,000
for services on two boards
-------------------------------------------------------------------------------------------------------------------------
Albert A. Miller,
Director $48,000 N/A N/A $78,00
for services on two boards
=========================================================================================================================

</TABLE>

* Mr. Baxter is a Director who may be deemed to be an "interested person" of the
Company, as that term is defined in the 1940 Act, and consequently will be
receiving no compensation from the Company.

5% AND 25% SHAREHOLDERS

As of July 10, 2000, the following persons were the only persons who were record
owners (or to the knowledge of the Fund, beneficial owners) of 5% or more of the
shares of the Portfolios. The Fund believes that most of the shares referred to
below were held by the persons indicated in accounts for their fiduciary, agency
or custodial clients. Persons owning of record or beneficially 25% or more of
the outstanding share class of a Portfolio may be deemed to be a controlling
person of that Portfolio for purposes of the 1940 Act.

PBHG Emerging Growth Fund - PBHG Class

Fidelity Investments Institutional Operations Co 12.14%
As agent for certain employer benefit plans
100 Magellan Way
Covington, KY 41015.1999

Putnam Fiduciary Trust Company 10.50%
FBO TRW Employee Stock Ownership & Savings Plan
Putnam Investments DCPA-Location 40
PO Box 9740
Providence, RI 02940-9740

Charles Schwab & Co. Inc. 9.64%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 8.69%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Chase Manhattan Bank 8.38%
New York State Deferred Compensation Plan
Attention Gladstone Stephenson
4 New York Plz, Floor 2
New York, NY 10004-2413

PBHG Cash Reserves Fund - PBHG Class

Donaldson Lufkin & Jenrette 7.44%
Transfer Department 5th Floor
P.O. Box 2052
Jersy City, NJ 07303-2052

The Appalachain Trails LP 6.68%
C/O CPTR
30 Tower Lane
Avon, CT 06001-4231

Harold J. Baxter & Christine E. Baxter JTTEN 6.63%
1054 S Leopard Road
Berwyn, PA 19312-2027

Investec Ernst & Compnay 5.57%
088-22197-28
One Battery Park Plaza
New York, NY 10004-1405

Investec Ernst & Compnay 5.28%
One Battery Park Plaza
New York, NY 10004-1405

PBHG Growth Fund - PBHG Class

Fidelity Investments Institutional Operations Co 13.89%
As agent for certain employer benefit plans
100 Magellan Way
Covington, KY 41015-1999

Charles Schwab & Co. Inc. 10.89%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

Connecticut General Life Insurance 401K Plan M-110 8.14%
350 Church Street
PO Box 2975
Hartford, CT 06104-2975

National Financial Services Corp 6.10%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

PBHG Growth Fund - Advisor Class

The Travelers Insurance Company 82.52%
Attention: Roger Ferland
1 Tower Square
Hartford, CT 06183-0002

Wilmington Trust Company 16.24%
FBO Allied Waste 401 (k) Plan
PO Box 8971
Wilmington, DE 19899-8971

PBHG International Fund - PBHG Class

Charles Schwab & Co. Inc. 10.79%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 8.58%
For the exclusive benefit of our customers
1055 Franklin Ave Suite 100
Garden City, NY 11530-2903

PBHG Large Cap Growth Fund - PBHG Class

Charles Schwab & Co. Inc. 24.51%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 17.96%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

PBHG Select Equity Fund - PBHG Class

National Financial Services Corp 25.52%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 23.21%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Investor Services Corp 7.72%
For the exclusive benefit of our customers
55 Water Street 32nd Floor
New York, NY 10041-3299

PBHG Technology & Communications Fund - PBHG Class

National Financial Services Corp 24.59%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 22.58%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

PBHG Core Growth Fund - PBHG Class

Charles Schwab & Co. Inc. 14.68%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 14.39%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

National Investor Services Corp 9.21%
For the exclusive benefit of our customers
55 Water Street 32nd Floor
New York, NY 10041-3299

PBHG Limited Fund - PBHG Class

Charles Schwab & Co. Inc. 9.33%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

PBHG Large Cap 20 Fund - PBHG Class

Charles Schwab & Co. Inc. 26.98%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 15.07%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

PBHG Strategic Small Company Fund - PBHG Fund

National Financial Services Corp 23.57%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 13.44%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Investor Services Corp 9.84%
For the exclusive benefit of our customers
55 Water Street 32nd Floor
New York, NY 10041-3299

PBHG Large Cap Value Fund - PBHG Class

National Financial Services Corp 19.08%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 16.66%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

Bryce Douglas Investment Limited Partnership 8.62%
PO Box 672
Kimberton, PA 19447-0672

Donaldson Lufkin & Jenrette 6.10%
Transfer Department 5th Floor
PO Box 2052
Jersey City, NJ 07303-2052

PBHG Mid-Cap Value Fund - PBHG Class

Charles Schwab & Co. Inc. 29.19%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 16.82%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

National Investor Services Corp 9.70%
For the exclusive benefit of our customers
55 Water Street 32nd Floor
New York, NY 10041-3299

Donaldson Lufkin & Jenrette 8.11%
Transfer Department 5th Floor
PO Box 2052
Jersey City, NJ 07303-2052

PBHG Small Cap Value Fund - PBHG Class

Northern Trust Co 40.88%
FBO Arthur Anderson LLP US Profit Sharing and 401 (k) Trust
PO Box 92956
Chicago, IL 60675-2956

Charles Schwab & Co. Inc. 15.61%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 11.49%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

PBHG Focused Value Fund - PBHG Class

Charles Schwab & Co. Inc. 24.10%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

National Financial Services Corp 17.76%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

FTC & Company 12.60%
Attention Datalynx - House Account
PO Box 173736
Denver, Co 80217-3736

PBHG New Opportunities Fund - PBHG Class

National Financial Services Corp 14.56%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 9.22%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

PBHG Global Technology & Communications Fund - PBHG Class

National Investor Services Corp 12.14%
For the exclusive benefit of our customers
55 Water Street 32nd Floor
New York, NY 10041-3299

National Financial Services Corp 11.76%
For the exclusive benefit of our customers
PO Box 3908
Church Street Station
New York, NY 10008-3908

Charles Schwab & Co. Inc. 9.65%
Reinvest Account
Attention Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122

The Directors and Officers of the Fund collectively owned less than 1% of
the outstanding shares of each portfolio at July 10, 2000, except that the
Directors and Officers collectively owned 6.67% of the PBHG Cash Reserves
Fund, 1.43% of the PBHG Large Cap Value Fund, 1.37% of the PBHG Small Cap
Value Fund, 2.67% of the PBHG Focused Value Fund and 1.89% of the PBHG New
Opportunities Fund.

THE ADVISER

The Fund and Pilgrim Baxter & Associates, Ltd. have entered into an advisory
agreement with respect to each Portfolio (the "Advisory Agreement"). The
Advisory Agreement provides certain limitations on the Adviser's liability, but
also provides that the Adviser shall not be protected against any liability to
the Fund or each of its Portfolios or its shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard of its obligations or duties thereunder.

The sole shareholder of the Adviser is United Asset Management Corporation
("UAM"), a New York Stock Exchange listed holding company principally engaged,
through affiliated firms, in providing institutional investment management
services and acquiring institutional investment management firms. UAM's
corporate headquarters are located at One International Place, Boston,
Massachusetts 02110. PBHG Fund Services, the Fund's Administrator, is a wholly
owned subsidiary of the Adviser (See "The Administrator" for more detial on PBHG
Fund Services). PBHG Fund Services also serves as administrator to PBHG
Insurance Series Fund, Inc., an investment company also managed by the Adviser.
The Adviser currently has discretionary management authority with respect to
over $20 billion in assets. In addition to advising the Portfolios, the Adviser
provides advisory services to pension and profit-sharing plans, charitable
institutions, corporations, trusts and estates, and other investment companies.
The principal business address of the Adviser is 825 Duportail Road, Wayne,
Pennsylvania 19087.

The Advisory Agreement obligates the Adviser to: (i) provide a program of
continuous investment management for the Fund in accordance with the Fund's
investment objectives, policies and limitations; (ii) make investment decisions
for the Fund; and (iii) place orders to purchase and sell securities for the
Fund, subject to the supervision of the Board of Directors. The Advisory
Agreement also requires the Adviser to pay its overhead and employee costs and
the compensation and expenses of all its partners, officers and employees who
serve as officers and executive employees of the Fund. The Advisory Agreement
provides that the Adviser is not responsible for other expenses of operating the
Fund (See the Prospectuses for a description of expenses borne by the Fund).
From time to time, the Adviser or a company under common control with the
Adviser may make payments to broker-dealers for the promotion of the sale of
Fund shares or for their own company-sponsored sales programs.

The continuance of the Advisory Agreement after the first two years must be
specifically approved at least annually (i) by the Fund's Board of Directors or
by vote of a majority of the Fund's outstanding voting securities and (ii) by
the affirmative vote of a majority of the directors who are not parties to the
agreement or interested persons of any such party by votes cast in person at a
meeting called for such purpose. The Advisory Agreement may be terminated (i) at
any time without penalty by the Fund upon the vote of a majority of the
directors or by vote of the majority of the Fund's outstanding voting securities
upon 60 days' written notice to the Adviser or (ii) by the Adviser at any time
without penalty upon 60 days' written notice to the Fund. The Advisory Agreement
will also terminate automatically in the event of its assignment (as defined in
the 1940 Act).

For its services, the Adviser is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of: 0.85% of each of the Growth, Emerging
Growth, Select Equity, Core Growth, Large Cap 20, Mid-Cap Value, Focused Value
and Technology & Communications Funds' average daily net assets; 0.75% of the
Large Cap Growth Fund's average daily net assets; 0.65% of the Large Cap Value
Fund's average daily net assets; 1.00% of each of the Limited, New
Opportunities, Small Cap Value, International and Strategic Small Company Funds'
average daily net assets; 1.50% of the Global Technology & Communications Fund's
average daily net assets; and 0.30% of the Cash Reserves Fund's average daily
net assets. The investment advisory fees paid by certain of the Portfolios are
higher than those paid by most investment companies, although the Adviser
believes the fees to be comparable to those paid by investment companies with
similar investment objectives and policies.

In the interest of limiting the expenses of the Portfolios during the current
fiscal year, the Adviser has signed expense limitation contracts with the Fund
("Expense Limitation Agreements") pursuant to which, with respect to the PBHG
Class shares, the Adviser has agreed to waive or limit a portion of its fee and
to assume other expenses in an amount necessary to limit total annual operating
expenses to not more than 1.50% of the average daily net assets of each of the
Core Growth, Limited, New Opportunities, Large Cap 20, Large Cap Value, Mid-Cap
Value, Small Cap Value, Focused Value and Strategic Small Company Funds, to not
more than 2.15% of the average daily net assets of the PBHG Global Technology &
Communications Fund 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 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% (or
2.15% for the Global Technology & Communications Fund 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% (or 2.15% for the Global
Technology & Communications Fund 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.

With respect to the Advisor Class shares of the PBHG Growth Fund, the Adviser
has entered into an Expense Limitation Agreement with the Fund. Pursuant to such
Expense Limitation Agreement, the Adviser has agreed to waive or limit its
advisory fees and to assume other expenses of the Advisor Class shares of such
Portfolio to the extent necessary to limit the total operating expenses
(exclusive of Rule 12b-1 expenses) to 1.50% of average daily net assets of the
Portfolio. Reimbursement by the Portfolio of the advisory fees waived or limited
and other expenses paid by the Adviser pursuant to the Expense Limitation
Agreement may be made at a later date when the Portfolio has reached a
sufficient asset size to permit reimbursement to be made without causing the
total annual expense ratio (exclusive of Rule 12b-1 expenses) of the Advisor
Class shares of the Portfolio to exceed 1.50%. Consequently, no reimbursement by
the Portfolio will be made unless: (i) the Portfolio's assets exceed $75
million; (ii) the Portfolio's total annual expense ratio (exclusive of Rule
12b-1 expenses) with respect to the Advisor Class shares is less than 1.50%; and
(iii) the payment of such reimbursement was approved by the Board of Directors
on a quarterly basis.

For the fiscal years and periods ended March 31, 1998, 1999, and 2000 each of
the other Portfolios paid or waived the following advisory fees:

=================================================================================================================================
Portfolio Fees Paid Fees Waived
---------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth $47,429,208 $34,407,239 $32,748,339 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth $12,965,521 $8,746,681 $7,263,497 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities * $15,512(2) $1,418,924 * $1,340 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth $1,014,896 $1,056,270 $1,148,240 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Select Equity $3,228,253 $2,394,153 $4,326,181 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Core Growth $2,095,945 $972,422 $941,429 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Limited $1,658,981 $1,399,136 $1,142,585 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20 $924,747 $3,317,545 $5,274,451 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value $371,529 $459,033 $245,217 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value $207,661(1) $551,502 $364,163 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value $501,946(1) $1,023,869 $702,546 $0 $0 $57,833
---------------------------------------------------------------------------------------------------------------------------------
PBHG Focused Value * $2,796 $48,688 * $2,796 $2,849
---------------------------------------------------------------------------------------------------------------------------------
PBHG International $210,622 $159,777 $116,700 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Cash Reserves $559,846 $393,152 $582,869 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Technology & Communications $5,105,411 $3,440,370 $12,141,268 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company $1,029,083 $730,370 $537,130 $0 $27,500 $24,537
=================================================================================================================================
</TABLE>

* Not in operation during the period.

(1) For the period from April 30, 1997 (commencement of operations) through
March 31, 1998.

(2) For the period February 12, 1999 (commencement of operations) through March
31, 1999.

THE SUB-ADVISERS

PILGRIM BAXTER VALUE INVESTORS, INC.

The Fund, on behalf of each of the PBHG Large Cap Value Fund, PBHG Mid-Cap Value
Fund, PBHG Small Cap Value Fund, PBHG Focused Value Fund and PBHG Strategic
Small Company Fund, and the Adviser have entered into sub-advisory agreements
(each, a "Sub-Advisory Agreement") with Pilgrim Baxter Value Investors, Inc.
("Value Investors"), a wholly owned subsidiary of the Adviser. Each Sub-Advisory
Agreement provides certain limitations on Value Investors' liability, but also
provides that Value Investors shall not be protected against any liability to
the Fund or its shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.

Each Sub-Advisory Agreement obligates Value Investors to: (i) manage the
investment operations of the relevant Portfolio and the composition of the
Portfolio's investment portfolios, including the purchase, retention and
disposition thereof in accordance with the Portfolio's investment objective,
policies and limitations; (ii) provide supervision of the Portfolio's
investments and to determine from time to time what investment and securities
will be purchased, retained or sold by the Portfolio and what portion of the
assets will be invested or held uninvested in cash; and (iii) determine the
securities to be purchased or sold by the Portfolio and will place orders with
or through such persons, brokers or dealers to carry out the policy with respect
to brokerage set forth in the Portfolio's Prospectus or as the Board of
Directors or the Adviser may direct from time to time, in conformity with
federal securities laws.

The continuance of each Sub-Advisory Agreement after the first two years must be
specifically approved at least annually (i) by the Fund's Board of Directors or
by vote of a majority of the outstanding voting securities of the Portfolio and
(ii) by the affirmative vote of a majority of the Directors who are not parties
to the agreement or interested persons of any such party by votes cast in person
at a meeting called for such purpose. Each Sub-Advisory Agreement may be
terminated (i) by the Fund, without the payment of any penalty, by the vote of a
majority of the Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the relevant Portfolio, (ii) by the Adviser at
any time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the other parties, or (iii) by Value Investors
at any time, without the payment of any penalty, on 90 days' written notice to
the other parties. Each Sub-Advisory Agreement will also terminate automatically
in the event of its assignment (as defined in the 1940 Act).

For the services provided and expenses incurred pursuant to the Sub-Advisory
Agreements for the Large Cap Value, Mid-Cap Value, Small Cap Value, Focused
Value and Strategic Small Company Funds, Value Investors is entitled to receive
from the Adviser a sub-advisory fee with respect to the average daily net assets
of each Portfolio that is computed daily and paid monthly at annual rates of
0.40%, 0.50%, 0.65%, 0.85% and 0.30%, respectively.

MURRAY JOHNSTONE INTERNATIONAL LTD.

The Fund, on behalf of the PBHG International Fund, and the Adviser have entered
into a sub-advisory agreement (the "Sub-Advisory Agreement") with Murray
Johnstone. The Sub-Advisory Agreement provides certain limitations on Murray
Johnstone's liability, but also provides that Murray Johnstone shall not be
protected against any liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from a breach of fiduciary duty with respect to the
receipt of compensation for services thereunder.

The Sub-Advisory Agreement obligates Murray Johnstone to: (i) manage the
investment operations of the PBHG International Fund and the composition of the
Portfolio's portfolio, including the purchase, retention and disposition thereof
in accordance with the Portfolio's investment objectives, policies and
limitations; (ii) provide supervision of the Portfolio's investments and
determine from time to time what investments and securities will be purchased,
retained or sold by the Portfolio, and what portion of the assets will be
invested or held uninvested in cash; and (iii) determine the securities to be
purchased or sold by the Portfolio and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in the Portfolio's Prospectus or as the Board of Directors or the
Adviser may direct from time to time, in conformity with federal securities
laws.

The continuance of the Sub-Advisory Agreement after the first two years must be
specifically approved at least annually (i) by the Fund's Board of Directors or
by vote of a majority of the Fund's outstanding voting securities and (ii) by
the affirmative vote of a majority of the Directors who are not parties to the
agreement or interested persons of any such party by votes cast in person at a
meeting called for such purpose. The Sub-Advisory Agreement may be terminated
(i) by the Portfolio at any time, without the payment of any penalty, by the
vote of a majority of Directors of the Fund or by the vote of a majority of the
outstanding voting securities of the Portfolio, (ii) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the other parties, or (iii) by Murray Johnstone at any
time, without the payment of any penalty, on 90 days' written notice to the
other parties. The Sub-Advisory Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).

For the services provided pursuant to the Sub-Advisory Agreement, Murray
Johnstone receives a fee from the Adviser at an annual rate of to 0.50% of the
Portfolio's average daily net assets. Murray Johnstone recieves no fees directly
from the Portfolio.

WELLINGTON MANAGEMENT COMPANY, LLP

The Fund, on behalf of the PBHG Cash Reserves Fund, and the Adviser have entered
into a sub-advisory agreement (the "Sub-Advisory Agreement") with Wellington
Management. The Sub-Advisory Agreement provides certain limitations on
Wellington Management's liability, but also provides that Wellington Management
shall not be protected against any liability to the Portfolio or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from a breach of fiduciary duty
with respect to the receipt of compensation for services thereunder.

The Sub-Advisory Agreement obligates Wellington Management to: (i) manage the
investment operations of the PBHG Cash Reserves Fund and the composition of the
Portfolio's portfolio, including the purchase, retention and disposition thereof
in accordance with the Portfolio's investment objectives, policies and
restrictions; (ii) provide supervision of the Portfolio's investments and
determine from time to time what investments and securities will be purchased,
retained or sold by the Portfolio, and what portion of the assets will be
invested or held uninvested in cash; and (iii) determine the securities to be
purchased or sold by the Portfolio and will place orders with or through such
persons, brokers or dealers to carry out the policy with respect to brokerage
set forth in the Portfolio's Registration Statement or as the Board of Directors
or the Adviser may direct from time to time, in conformity with federal
securities laws.

The Sub-Advisory Agreement will continue in effect for a period of more than two
years from the date thereof only so long as continuance is specifically approved
at least annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated with respect to the Fund (i) by the Fund at any
time, without the payment of any penalty, by the vote of a majority of Directors
of the Fund or by the vote of a majority of the outstanding voting securities of
the Fund, (ii) by the Adviser at any time, without the payment of any penalty,
on not more than 60 days' nor less than 30 days' written notice to the other
parties, or (iii) by Wellington Management at any time, without the payment of
any penalty, on 90 days' written notice to the other parties. The Sub-Advisory
Agreement shall terminate automatically and immediately in the event of its
assignment as defined in the 1940 Act.

For the services provided and expenses incurred pursuant to the sub-advisory
agreement, Wellington Management is entitled to receive from the Adviser a fee,
computed daily and paid monthly, at the annual rate equal to 0.075% of the
Portfolio's average daily net assets up to and including $500 million and 0.020%
of the Portfolio's average daily net assets over $500 million, but subject to a
minimum annual fee of $50,000.

THE DISTRIBUTOR

SEI Investments Distribution Co. (the "Distributor"), One Freedom Valley Road,
Oaks, PA 19456, a wholly owned subsidiary of SEI, and the Fund are parties to a
distribution agreement (the "Distribution Agreement"). The Distributor does not
receive any compensation for the distribution services it provides with respect
to either class of shares.

Under the Distribution Agreement, the Distributor is contractually required to
continuously distribute the securities of the Fund. The Distribution Agreement
is renewable annually. The Distribution Agreement may be terminated by the
Distributor, by a majority vote of the Directors who are not interested persons
and have no financial interest in the Distribution Agreement or by a majority
vote of the outstanding securities of the Fund upon not more than 60 days'
written notice by either party or upon assignment by the Distributor.

The Fund has adopted a Service Plan pursuant to Rule 12b-1 under the 1940 Act to
enable the Advisor Class shares of the PBHG Growth Fund to directly and
indirectly bear certain expenses relating to the distribution of such Shares.
Pursuant to such Service Plan, the Fund shall be entitled to pay to financial
intermediaries, plan fiduciaries, and investment professionals ("Service
Providers") a shareholder servicing fee at the aggregate annual rate of up to
0.25% of such Portfolio's average daily net assets attributable to Advisor Class
shares. The shareholder servicing fee is intended to compensate Service
Providers for providing to shareholders or the underlying beneficial owners of
Advisor Class shares: (i) personal support services; (ii) distribution
assistance and distribution support services; and (iii) account maintenance
services. In addition, insurance companies or their affiliates may be paid a
shareholder servicing fee described for providing similar services to variable
annuity or variable life insurance contract holders ("Contract Holders") or
their participants for which such insurance companies are not otherwise
compensated by Contract Holders or participants.

The Distributor shall prepare and deliver written reports to the Board of
Directors of the Fund on a regular basis (at least quarterly) setting forth the
payments made to Service Providers pursuant to the Service Plan, and the
purposes for which such expenditures were made, as well as any supplemental
reports as the Board of Directors may from time to time reasonably request.

Except to the extent that the Administrator, Sub-Administrator or Adviser may
benefit through increased fees from an increase in the net assets of the Fund
which may have resulted in part from the expenditures, no interested person of
the Fund nor any Director of the Fund who is not an interested person of the
Fund had a direct or indirect financial interest in the operation of the Service
Plan or any related agreement.

No compensation was paid to the Distributor for distribution services for the
fiscal years ended March 31, 1998, 1999and 2000. For the fiscal year ended March
31, 2000, $227,597 was paid to Service Providers pursuant to the Service Plan
for the Advisor Class shares of the PBHG Growth Fund.

THE ADMINISTRATOR AND SUB-ADMINISTRATOR

The Fund and PBHG Fund Services (the "Administrator") entered into the
Administrative Services Agreement (the "Administrative Agreement") on July 1,
1996 pursuant to which the Administrator oversees the administration of the
Fund's and each Portfolio's business and affairs, including regulatory reporting
and all necessary office space, equipment, personnel and facilities, as well as
services performed by various third parties. The Administrator, a wholly-owned
subsidiary of the Adviser, was organized as a Pennsylvania business trust and
has its principal place of business at 825 Duportail Road, Wayne, Pennsylvania
19087. The Administrator is entitled to a fee from the Fund, which is calculated
daily and paid monthly at an annual rate of 0.15% of the average daily net
assets of each Portfolio. The Administrative Agreement provides that the
Administrator shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which the
Administrative Agreement relates, except a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Administrator in the
performance of its duties. The Administrative Agreement shall remain in effect
until December 31, 2000, and shall thereafter continue in successive periods of
one year, unless terminated by either party upon not less than 90 days' prior
written notice to the other party.

The Fund, the Administrator and SEI Investments Mutual Funds Services (formerly
SEI Fund Resources) (the "Sub-Administrator") entered into the
Sub-Administrative Services Agreement on July 1, 1996, as amended, pursuant to
which the Sub-Administrator assists the Administrator in connection with the
administration of the business and affairs of the Fund. Prior to July 1, 1996,
the Sub-Administrator served as the administrator of the Fund. The
Sub-Administrator is an indirect wholly-owned subsidiary of SEI Investments
Company ("SEI"). The Sub-Administrator was organized as a Delaware business
trust, and has its principal business offices at One Freedom Valley Road, Oaks,
Pennsylvania 19456. The Sub-Administrative Services Agreement provides that the
Sub-Administrator shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
the Sub-Administrative Agreement relates, except a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Sub-Administrator in the
performance of its duties. The Sub-Administrative Agreement shall remain in
effect until December 31, 2000, and shall continue in successive periods of one
year, unless terminated by either party upon not less than 90 days' prior
written notice to the other party.

Under the Sub-Administrative Services Agreement, the Administrator pays the
Sub-Administrator fees at an annual rate based on the combined average daily net
assets of the Fund and PBHG Insurance Series Fund, Inc., calculated as follows:
(i) 0.040% of the first $2.5 billion, plus (ii) 0.025% of the next $7.5 billion,
plus (iii) 0.020% of the excess over $10 billion.

For the fiscal years and periods ended March 31, 1998, 1999 and 2000 each of the
other Portfolios paid the following administration fees:

=================================================================================================================================
Portfolio Fees Paid Fees Waived
---------------------------------------------------------------------------------------------------------------------------------
1998 1999 2000 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PBHG Growth $8,369,860 $6,054,219 $5,779,119 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth $2,288,033 $1,543,532 $1,281,794 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities * $2,327(2) $212,839 * * $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth $202,979 $211,254 $229,648 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Select Equity $569,691 $422,498 $763,444 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Core Growth $369,872 $171,604 $166,135 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Limited $248,847 $209,870 $171,388 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20 $163,191 $585,449 $930,786 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value $84,777 $103,870 $56,588 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value $36,646(1) $97,324 $64,264 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value $75,292(1) $153,580 $105,382 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Focused Value * $493(2) $8,592 * $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG International $31,592 $23,997 $17,505 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Cash Reserves $279,921 $196,574 $292,681 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Technology
& Communications $900,954 $607,124 $2,142,577 $0 $0 $0
---------------------------------------------------------------------------------------------------------------------------------
PBHG Global Technology
& Communications * * * * * *
---------------------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company $154,362 $109,556 $80,569 $0 $0 $0
=================================================================================================================================
</TABLE>

* Not in operation during the period.

(1) For the period from April 30, 1997 (commencement of operations) through
March 31, 1998.

(2) For the period February 12, 1999 (commencement of operations) through March
31, 1999.

OTHER SERVICE PROVIDERS

THE TRANSFER AGENT AND SHAREHOLDER SERVICING AGENTS

DST Systems, Inc., P.O. Box 419534, Kansas City, Missouri 64141-6534 serves as
the transfer agent and dividend disbursing agent for the Fund under a transfer
agency agreement with the Fund. The Administrator serves as shareholder
servicing agent for the Fund under a shareholder servicing agreement with the
Fund. UAM Shareholder Service Center, Inc. ("UAM SSC"), an affiliate of the
Adviser, serves as sub-shareholder servicing agent for the Fund under a
sub-shareholder servicing agreement between UAM SSC and the Administrator. The
principal place of business of UAM SSC is 825 Duportail Road, Wayne,
Pennsylvania 19087. 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, such as
participants in 401(k) plans. These services may include, among other things,
sub-accounting services, answering inquiries relating to the Fund, delivering,
on behalf of the Fund, proxy statements, annual reports, updated Prospectuses,
other communications regarding the Fund, and related services as the Fund or the
beneficial owners may reasonably request. In such cases, the Fund will not
compensate such third parties at a rate that is greater than the rate the Fund
is currently paying the Fund's Transfer Agent for providing these services to
shareholders investing directly in the Fund.

CUSTODIANS

First Union National Bank, 123 S. Broad Street, Philadelphia, Pennsylvania
19109, serves as the custodian for the Fund and each Portfolio other than the
International Fund and the Global Technology & Communications Fund. The Northern
Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675 serves as the
custodian for the International Fund and the Global Technology & Communications
Fund (together, the "Custodians"). The Custodians hold cash, securities and
other assets of the Fund as required by the 1940 Act.

COUNSEL AND INDEPENDENT ACCOUNTANTS

Ballard Spahr Andrews & Ingersoll, LLP serves as counsel to the Fund.
PricewaterhouseCoopers LLP serves as the independent accountants of the Fund.

PORTFOLIO TRANSACTIONS

The Adviser or Sub-Advisers are authorized to select brokers and dealers to
effect securities transactions for the Portfolios. The Adviser or Sub-Advisers
will seek to obtain the most favorable net results by taking into account
various factors, including price, commission, if any, size of the transactions
and difficulty of executions, the firm's general execution and operational
facilities and the firm's risk in positioning the securities involved. While the
Adviser or Sub-Advisers generally seek reasonably competitive spreads or
commissions, the Fund will not necessarily be paying the lowest spread or
commission available. The Adviser or Sub-Advisers seek to select brokers or
dealers that offer the Portfolios best price and execution or other services
which are of benefit to the Portfolios. Certain brokers or dealers assist their
clients in the purchase of shares from the Distributor and charge a fee for this
service in addition to a Portfolio's public offering price. In the case of
securities traded in the over-the-counter market, the Adviser or Sub-Advisers
expect normally to seek to select primary market makers.

The Adviser or Sub-Advisers may, consistent with the interests of the
Portfolios, select brokers on the basis of the research services they provide to
the Adviser or Sub-Advisers. Such services may include analyses of the business
or prospects of a company, industry or economic sector, or statistical and
pricing services. Information so received by the Adviser will be in addition to
and not in lieu of the services required to be performed by the Adviser under
the Advisory Agreement. If, in the judgment of the Adviser or Sub-Adviser, a
Portfolio or other accounts managed by the Adviser or Sub-Adviser will be
benefited by supplemental research services, the Adviser or Sub-Advisers are
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. These research services include advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing of
analyses and reports concerning issuers, securities or industries; providing
information on economic factors and trends; assisting in determining portfolio
strategy; providing computer software used in security analyses; and providing
portfolio performance evaluation and technical market analyses. The expenses of
the Adviser or Sub-Advisers will not necessarily be reduced as a result of the
receipt of such information, and such services may not be used exclusively, or
at all, with respect to the Portfolio or account generating the brokerage, and
there can be no guarantee that the Adviser or Sub-Advisers will find all of such
services of value in advising the Portfolios.

It is expected that the Portfolios may execute brokerage or other agency
transactions through the Distributor, which is a registered broker-dealer, for a
commission in conformity with the 1940 Act, the Securities Exchange Act of 1934,
as amended, and rules promulgated by the SEC. Under these provisions, the
Distributor is permitted to receive and retain compensation for effecting
portfolio transactions for the Portfolios on an exchange if a written contract
is in effect between the Distributor and the Portfolio expressly permitting the
Distributor to receive and retain such compensation. These rules further require
that commissions paid to the Distributor by the Portfolio for exchange
transactions not exceed "usual and customary" brokerage commissions. The rules
define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." In addition, the
Adviser or Sub-Advisers may direct commission business to one or more designated
broker-dealers, including the Distributor, in connection with such
broker-dealer's payment of certain of the Portfolio's or the Fund's expenses. In
addition, the Adviser or Sub-Adviser may place orders for the purchase or sale
of Portfolio securities with qualified broker-dealers that refer prospective
shareholders to the Portfolios. The Directors, including those who are not
"interested persons" of the Fund, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.

Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. ("NASD") and subject to seeking best execution and such other
policies as the Board of Directors may determine, the Advisers may consider
sales of the Portfolio's shares as a factor in the selection of broker-dealers
to execute portfolio transactions for the Portfolio.

The Fund's Board of Directors has adopted a Code of Ethics governing personal
trading by persons who manage, or who have access to trading activity by the
Portfolio. The Code of Ethics allows trades to be made in securities that may be
held by the Portfolio, however, it prohibits a person from taking advantage of
Portfolio trades or from acting on inside information. In addition, the Fund's
Board of Directors reviews and approves the codes of ethics of the Adviser,
Sub-Advisers and Distributor and any material amendments thereto. The Board also
reviews annually reports on issues raised under the Adviser and Distributor's
codes of ethics during the previous year.

For the fiscal year and periods ended March 31, 2000, 1999, and 1998, for each
of the other Portfolios paid brokerage fees as follows:

================================================================================
Portfolio
Total Amount of Brokerage
Commissions Paid
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C>
PBHG Growth $1,637,800 $4,483,812 $6,867,275
--------------------------------------------------------------------------------
PBHG Emerging Growth $528,249 $1,199,910 $822,133
--------------------------------------------------------------------------------
PBHG New Opportunities $259,969 $3,859(2) *
--------------------------------------------------------------------------------
PBHG Large Cap Growth $289,133 $153,260 $124,206
--------------------------------------------------------------------------------
PBHG Select Equity $433,169 $189,316 $355,670
--------------------------------------------------------------------------------
PBHG Core Growth $303,739 $219,995 $336,589
--------------------------------------------------------------------------------
PBHG Limited $34,782 $123,471 $81,540
--------------------------------------------------------------------------------
PBHG Large Cap 20 $777,791 $452,760 $167,891
--------------------------------------------------------------------------------
PBHG Large Cap Value $858,386 $795,638 $490,469
--------------------------------------------------------------------------------
PBHG Mid-Cap Value $861,814 $1,099,445 $301,165(1)
--------------------------------------------------------------------------------
PBHG Small Cap Value $730,543 $769,954 $407,791(1)
--------------------------------------------------------------------------------
PBHG Focused Value $131,357 $14,330(2) *
--------------------------------------------------------------------------------
PBHG International $57,436 $69,525 $110,586
--------------------------------------------------------------------------------
PBHG Cash Reserves $0 $0 $0
--------------------------------------------------------------------------------
PBHG Technology
& Communications $2,444,485 $1,115,574 $773,750
--------------------------------------------------------------------------------
PBHG Global Technology
& Communications Fund * * *
--------------------------------------------------------------------------------
PBHG Strategic Small Company $237,611 $279,693 $361,158
================================================================================
</TABLE>

===================================================================================================
Portfolio Percent of Aggregate Amount
Percent of Total Amount of of Transactions Involving
Brokerage Commissions Paid Payment of Commissions
to the Distributor to the Distributor
---------------------------------------------------------------------------------------------------
1998+ 1999+ 2000+ 2000
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Growth 3% 3% 7% 69%
---------------------------------------------------------------------------------------------------
PBHG Emerging Growth 7% 4% 7% 79%
---------------------------------------------------------------------------------------------------
PBHG New Opportunities2 * 0% 1% 25%
---------------------------------------------------------------------------------------------------
PBHG Large Cap Growth 2% 3% 1% 56%
---------------------------------------------------------------------------------------------------
PBHG Select Equity 2% 6% 5% 52%
---------------------------------------------------------------------------------------------------
PBHG Core Growth 1% 1% 1% 50%
---------------------------------------------------------------------------------------------------
PBHG Limited 12% 6% 17% 42%
---------------------------------------------------------------------------------------------------
PBHG Large Cap 20 3% 4% 3% 64%
---------------------------------------------------------------------------------------------------
PBHG Large Cap Value 1% 0% 0% 81%
---------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value1 1% 0% 0% 66%
---------------------------------------------------------------------------------------------------
PBHG Small Cap Value1 1% 0% 0% 53%
---------------------------------------------------------------------------------------------------
PBHG Focused Value2 * 0% 0% 56%
---------------------------------------------------------------------------------------------------
PBHG International 0% 0% 0% 0%
---------------------------------------------------------------------------------------------------
PBHG Cash Reserves 0% 0% 0% 0%
---------------------------------------------------------------------------------------------------
PBHG Technology
& Communications 3% 1% 1% 42%
---------------------------------------------------------------------------------------------------
PBHG Strategic Small Company 1% 0% 0% 55%
===================================================================================================
</TABLE>

* Not in operation during the period.

+ These commissions were paid to the Distributor in connection with repurchase
agreement transactions.

(1) For the period from April 30, 1997 (commencement of operations) through
March 31, 1998.

(2) For the period February 12, 1999 (commencement of operations) through March
31, 1999.

DESCRIPTION OF SHARES

The Fund may increase the number of shares which each Portfolio is authorized to
issue and may create additional portfolios of the Fund. Each share of a
Portfolio represents an equal proportionate interest in that Portfolio with each
other share. Shares are entitled upon liquidation to a pro rata share in the net
assets of the Portfolio available for distribution to shareholders. Shareholders
have no preemptive rights. All consideration received by the Fund for shares of
any Portfolio and all assets in which such consideration is invested would
belong to that Portfolio and would be subject to the liabilities related
thereto.

VOTING RIGHTS

Each share held entitles the shareholder of record to one vote. Shareholders of
each Portfolio will vote separately on matters relating solely to it, such as
approval of advisory agreements and changes in fundamental policies, and matters
affecting some but not all Portfolios of the Fund will be voted on only by
shareholders of the affected series. Shareholders of all series of the Fund will
vote together in matters affecting the Fund generally, such as the election of
Directors or selection of independent accountants. Shareholders of the PBHG
Class of the Fund will vote separately on matters relating solely to the PBHG
Class and not on matters relating solely to the Advisor Class of the Fund. As a
Maryland corporation, the Fund is not required to hold annual meetings of
shareholders but shareholder approval will be sought for certain changes in the
operation of the Fund and for the election of directors under certain
circumstances. In addition, a director may be removed by the remaining directors
or by shareholders at a special meeting called upon written request of
shareholders owning at least 10% of the outstanding shares of the Fund. In the
event that such a meeting is requested, the Fund will provide appropriate
assistance and information to the shareholders requesting the meeting.

PURCHASES AND REDEMPTIONS OF SHARES

Purchases and redemptions may be made on any day on which the New York Stock
Exchange is open for business. Currently, the following holidays are observed by
the Fund: New Year's Day, Presidents' Day, Martin Luther King, Jr.'s Birthday,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Shares of the Portfolios are offered on a continuous basis.

PURCHASES

You may purchase shares of each Portfolio directly through DST Systems, Inc.,
the Fund's Transfer Agent. Shares of each Portfolio are offered only to
residents of states in which such shares are eligible for purchase.

You may place orders by mail, wire or telephone. If market conditions are
extraordinarily active, or if severe weather or other emergencies exist, and you
experience difficulties placing orders by telephone, you may wish to consider
placing your order by other means, such as mail or overnight delivery.

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

Neither the Fund nor the Transfer Agent will be responsible for any loss,
liability, cost or expenses for acting upon wire instructions, or telephone
instructions that it reasonably believes to be genuine. The Fund and the
Transfer Agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine including requiring a form of
personal identification prior to acting upon instructions received by telephone
and recording telephone instructions.

Each Portfolio reserves the right to reject any purchase order or to suspend or
modify the continuous offering of its shares. For example, the investment
opportunities for small or medium capitalization companies may from time to time
be more limited than those in other sectors of the stock market. Therefore, in
order to retain adequate investment flexibility, the Adviser may from time to
time recommend to the Board of Directors of the Fund that a Portfolio which
invests extensively in such companies indefinitely discontinue the sale of its
shares to new investors (other than directors, officers and employees of the
Adviser, each of the sub-advisers and their affiliated companies). In such
event, the Board of Directors would determine whether such discontinuance is in
the best interests of the applicable Portfolio and its shareholders. Shares of
the PBHG Limited Fund are currently offered only to existing shareholders of the
PBHG Class shares of the Portfolio. Shares of the the PBHG New Opportunities
Fund are currently offered only to the following: (a) subsequent investments by
persons who were shareholders on or before November 12, 1999 (Closing Day); (b)
new and subsequent investments made by discretionary advised clients of the
Adviser and its affiliates and by employees of the Adviser and its affiliates;
and (c) new and subsequent investments by pension, profit-sharing or other
employee benefit plans created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code (the Code) or plans under Section 457 of the Code, or
employee benefit plans created pursuant to Section 403(b) of the Code and
sponsored by nonprofit organizations defined under Section 501(c)(3) of the
Code. The PBHG Limited Fund and the PBHG New Opportunities Fund may recommence
offering their shares to new investors in the future, provided that the Board of
Directors determines that doing so would be in the best interest of the
Portfolio and its shareholders.

MINIMUM INVESTMENT

The minimum initial investment in each Portfolio (other than the New
Opportunities Fund, Limited Fund and Strategic Small Company Fund) is $2,500 for
regular accounts and $2,000 for traditional or Roth IRAs. The minimum initial
investment in the New Opportunities Fund is $10,000 and in the Limited Fund and
the Strategic Small Company Fund is $5,000 for regular accounts and $2,000 for
traditional or Roth IRAs. However, investors who establish a Systematic
Investment Plan, as described below, with a minimum investment of $25 per month
may at the same time open a regular account or traditional or Roth IRA with any
Portfolio with a minimum initial investment of $500. There is no minimum for
subsequent investments. The Distributor may waive the minimum initial investment
amount at its discretion. No minimum applies to subsequent purchases effected by
dividend reinvestment. As described below, subsequent purchases through the
Fund's Systematic Investment Plan must be at least $25.

INITIAL PURCHASE BY MAIL

An account may be opened by mailing a check or other negotiable bank draft
payable to The PBHG Funds, Inc. for at least the minimum initial amount
specified above for regular and IRA accounts, and a completed Account
Application to THE PBHG FUNDS, INC., P.O. BOX 219534, KANSAS CITY, MISSOURI
64121-9534. The Fund will not accept third-party checks, i.e., a check not
payable to The PBHG Funds, Inc. or a Portfolio for initial or subsequent
investments.

ADDITIONAL PURCHASES BY PHONE (TELEPHONE PURCHASE)

You may purchase additional shares by telephoning the Transfer Agent at
1-800-433-0051. THE MINIMUM TELEPHONE PURCHASE IS $1,000, AND THE MAXIMUM IS
FIVE TIMES THE NET ASSET VALUE OF SHARES HELD BY THE SHAREHOLDER ON THE DAY
PRECEDING SUCH TELEPHONE PURCHASE FOR WHICH PAYMENT HAS BEEN RECEIVED. The
telephone purchase will be made at the offering price next computed after the
receipt of the call by the Transfer Agent. Payment for the telephone purchase
must be received by the Transfer Agent within seven days. If payment is not
received within seven days, you will be liable for all losses incurred by the
Fund as a result of the cancellation of such purchase.

INITIAL PURCHASE BY WIRE

If you have an account with a commercial bank that is a member of the Federal
Reserve System, you may purchase shares of the Portfolios by requesting your
bank to transmit funds by wire. Before making an initial investment by wire, you
must first telephone 1-800-433-0051 to receive an Account Application and be
assigned an account number. The Account Application must be received prior to
receipt of the wire. Your name, account number, taxpayer identification number
or Social Security Number, and address must be specified in the wire. All wires
must be received by 2:00 p.m. Eastern time for the Cash Reserves Fund and 4:00
p.m. Eastern time for all other Portfolios to be effective on that day. In
addition, an original Account Application should be promptly forwarded to: The
PBHG Funds, Inc., P.O. Box 219534, Kansas City, Missouri 64121-9534. All wires
must be sent as follows: United Missouri Bank of Kansas City, N.A.; ABA
#10-10-00695; for Account Number 98705-23469; Further Credit: [name of
Portfolio, your name, your social security number or tax id number and your
assigned account number].

ADDITIONAL PURCHASES BY WIRE

Additional investments may be made at any time through the wire procedures
described above, which must include your name and account number. Your bank may
impose a fee for investments by wire.

PURCHASE BY ACH

If you have made this election, shares of each Portfolio may be purchased via
Automated Clearing House ("ACH"). Investors purchasing via ACH should complete
the bank information section on the Account Application and attach a voided
check or deposit slip to the Account Application. This option must be
established on your account at least 15 days prior to your initiating an ACH
transaction.
The maximum purchase allowed through ACH is $100,000.

GENERAL INFORMATION REGARDING PURCHASES

A purchase order will be effective as of the day received by the Transfer Agent
if the Transfer Agent receives sufficient information to execute the order and
receives payment before 2:00 p.m. Eastern time for the Cash Reserves Fund and
4:00 p.m. Eastern time for all other Portfolios. Payment may be made by check or
readily available funds. The purchase price of shares of a Portfolio is the net
asset value per share next determined after a purchase order is effective.
Purchases will be made in full and fractional shares of a Portfolio calculated
to three decimal places. The Fund will not issue certificates representing
shares of the Portfolios.

In order for your purchase order to be effective on the day you place your order
with your broker-dealer or other financial institution, such broker-dealer or
financial institution must (i) receive your order before 2:00 p.m. Eastern time
for the Cash Reserves Fund and 4:00 p.m. Eastern time for all other Portfolios
and (ii) promptly transmit the order to the Transfer Agent. See "Determination
of Net Asset Value" below. The broker-dealer or financial institution is
responsible for promptly transmitting purchase orders to the Transfer Agent so
that you may receive the same day's net asset value.

If a check received for the purchase of shares does not clear, the purchase will
be canceled, and you could be liable for any losses or fees incurred by the
Fund. The Fund reserves the right to reject a purchase order when the Fund
determines that it is not in the best interests of the Fund or its shareholders
to accept such an order.

REDEMPTIONS

Redemption orders received by the Transfer Agent prior to 2:00 p.m. Eastern time
for the Cash Reserves Fund and 4:00 p.m. Eastern time for each of the other
Portfolios on any Business Day will be effective that day. The redemption price
of shares is the net asset value per share of a Portfolio next determined after
the redemption order is effective. Payment of redemption proceeds will be made
as promptly as possible and, in any event, within seven days after the
redemption order is received, provided, however, that redemption proceeds for
shares purchased by check (including certified or cashier's checks) or by ACH
will be forwarded only upon collection of payment for such shares; collection of
payment may take up to 15 days.

You may also redeem shares of each Portfolio through certain broker-dealers and
other financial institutions at which you maintain an account. Such financial
institutions may charge you a fee for this service.

In order for your redemption order to be effective on the day you place your
redemption order with your broker-dealer or other financial institution, such
broker-dealer or financial institution must (i) receive your order before 2:00
p.m. Eastern time for the Cash Reserves Fund and 4:00 p.m. Eastern time for each
other Portfolio and (ii) promptly transmit the order to the Transfer Agent. See
"Determination of Net Asset Value" below. The financial institution is
responsible for promptly transmitting redemption orders to the Transfer Agent so
that your shares are redeemed at the same day's net asset value per share.

It is currently the Fund's policy to pay all redemptions in cash. The Fund
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Portfolios
in lieu of cash. Each PBHG Fund has made an election pursuant to Rule 18f-1
under the 1940 Act by which such Portfolio has committed itself to pay in cash
all requests for redemption by any shareholder of record, limited in amount with
respect to each shareholder during any 90-day period to the lesser of (1)
$250,000 or (2) one percent of the net asset value of the Portfolio at the
beginning of such 90-day period. Shareholders may incur brokerage charges on the
sale of any such securities so received in payment of redemptions. In addition,
in-kind distributions may include illiquid securities which shareholders may be
unable to dispose of at the time or price desired.

The Fund reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Portfolio's securities is not reasonably practicable,
or for such other periods as the SEC has by order permitted. The Fund also
reserves the right to suspend sales of shares of a Portfolio for any period
during which the New York Stock Exchange, the Adviser, the Administrator,
Sub-Administrator, the Transfer Agent and/or the Custodian are not open for
business.

You may receive redemption payments in the form of a check or by Federal Reserve
wire or ACH transfer.

BY MAIL

There is no charge for having a check for redemption proceeds mailed to you.

BY TELEPHONE

Redemption orders may be placed by telephone, provided that this option has been
selected. Shares held in IRA accounts are not eligible for this option and must
be redeemed by written request. Neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for acting upon wire
instructions or upon telephone instructions that it reasonably believes to be
genuine. The Fund and the Transfer Agent will each employ reasonable procedures
to confirm that instructions communicated by telephone are genuine, including
requiring a form of personal identification prior to acting upon instructions
received by telephone and recording telephone instructions. If reasonable
procedures are not employed, the Fund and the Transfer Agent may be liable for
any losses due to unauthorized or fraudulent telephone transactions.

If market conditions are extraordinarily active, or other extraordinary
circumstances exist and you experience difficulties placing redemption orders by
telephone, you may wish to consider placing your order by other means, such as
mail or overnight delivery. The Fund will not accept redemption requests for an
amount greater than $50,000 by telephone instruction, except for cases where the
proceeds of the redemption request are transmitted by Federal wire to a
pre-established checking account. Such redemption requests must be received in
writing and be signature guaranteed.

BY WIRE

The Transfer Agent will deduct a wire charge, currently $10.00, from the amount
of a Federal Reserve wire redemption payment made at the request of a
shareholder. Shareholders cannot receive proceeds from redemptions of shares of
a Portfolio by Federal Reserve wire on federal holidays restricting wire
transfers.

BY ACH

The Fund does not charge for ACH transactions; however, proceeds from such
transactions will not be posted to your bank account until the second Business
Day following the transaction. In order to process a redemption by ACH, banking
information must be established on your account at least 15 days prior to
initiating a transaction. A voided check or deposit slip must accompany requests
to establish this option.

CHECK WRITING (CASH RESERVES FUND ONLY)

Check writing service is offered free of charge to shareholders of the Cash
Reserves Fund. If you have an account balance of $5,000 or more, you may redeem
shares by writing checks on your account for $250 or more. To establish this
privilege, please call 1-800-433-0051 to request a signature card. Once you have
signed and returned a signature card, you will receive a supply of checks. A
check may be made payable to any person, and your account will continue to earn
dividends until the check clears. Because of the difficulty of determining in
advance the exact value of your account, you may not use a check to close your
account. Your account will be charged a fee for stopping payment of a check upon
your request, or if the check cannot be honored because of insufficient funds or
other valid reasons.

SIGNATURE GUARANTEES

A signature guarantee is a widely accepted way to protect you by verifying the
signature on certain redemption requests. The Fund requires signature guarantees
to be provided in the following circumstances: (1) written requests for
redemptions in excess of $50,000; (2) all written requests to wire redemption
proceeds; (3) redemption requests that provide that the redemption proceeds
should be sent to an address other than the address of record or to a person
other than the registered shareholder(s) for the account; and (4) redemptions
requesting proceeds to be sent to a new address or an address that has been
changed within the past 30 days; (5) requests to transfer the registration of
shares to another owner; (6) written requests to add telephone exchange and
telephone redemption options to an account; and (7) changes in previously
designated wiring instructions. These requirements may be waived or modified
upon notice of shareholders. Signature guarantees can be obtained from any of
the following institutions: a national or state bank, a trust company, a federal
savings and loan association, or a broker-dealer that is a member of a national
securities exchange. The Fund does not accept guarantees from notaries public or
organizations that do not provide reimbursement in the case of fraud.

SHAREHOLDER INQUIRIES AND SERVICES OFFERED

If you have any questions about the Portfolios or the shareholder services
described below, please call the Fund at 1-800-433-0051. Written inquiries
should be sent to DST SYSTEMS, INC., P.O. BOX 219534, KANSAS CITY, MISSOURI
64121-9534. The Fund reserves the right to amend the shareholder services
described below or to change the terms or conditions relating to such services
upon 60 days' notice to shareholders. You may, however, discontinue any service
you select, provided that with respect to the Systematic Investment and
Systematic Withdrawal Plans described below, the Fund's Transfer Agent receives
your notification to discontinue such service(s) at least ten (10) days before
the next scheduled investment or withdrawal date.

SYSTEMATIC INVESTMENT AND SYSTEMATIC WITHDRAWAL PLANS

For your convenience, the Fund provides plans that enable you to add to your
investment or withdraw from your account(s) with a minimum of paperwork. You can
utilize these plans by simply completing the appropriate section of the Account
Application.

(1) SYSTEMATIC INVESTMENT PLAN. The Systematic Investment Plan is a convenient
way for you to purchase shares in the Portfolios at regular monthly or quarterly
intervals selected by you. The Systematic Investment Plan enables you to achieve
dollar-cost averaging with respect to investments in the Portfolios despite
their fluctuating net asset values through regular purchases of a fixed dollar
amount of shares in the Portfolios. Dollar-cost averaging brings discipline to
your investing. Dollar-cost averaging results in more shares being purchased
when a Portfolio's net asset value is relatively low and fewer shares being
purchased when a Portfolio's net asset value is relatively high, thereby helping
to decrease the average price of your shares. Investors who establish a
Systematic Investment Plan may open an account with a minimum balance of $500.
Through the Systematic Investment Plan, shares are purchased by transferring
monies (minimum of $25 per transaction per Portfolio) from your designated
checking or savings account. Your systematic investment in the Portfolio(s)
designated by you will be processed on a regular basis at your option beginning
on or about either the first or fifteenth day of the month or quarter you
select. This Systematic Investment Plan must be established on your account at
least 15 days prior to the intended date of your first systematic investment.

(2) SYSTEMATIC WITHDRAWAL PLAN. The Systematic Withdrawal Plan provides a
convenient way for you to receive current income while maintaining your
investments in the Portfolio(s). The Systematic Withdrawal Plan permits you to
have payments of $50 or more automatically transferred from your account(s) in
the Portfolio(s) to your designated checking or savings account on a monthly,
quarterly, or semi-annual basis. The Systematic Withdrawal Plan also provides
the option of having a check mailed to the address of record for your account.
In order to start this Plan, you must have a minimum balance of $5,000 in any
account using this feature. Your systematic withdrawals will be processed on a
regular basis beginning on or about either the first or fifteenth day of the
month, quarter or semi-annual period you select.

EXCHANGE PRIVILEGES

Once payment for your shares has been received (i.e., an account has been
established) and your payment has been converted to Federal funds, you may
exchange some or all of your shares for shares of the other Portfolios of the
Fund currently available to the public. However, if you own shares of any
Portfolio other than the Cash Reserves Fund, you are limited to four (4)
exchanges annually from such Portfolio to the Cash Reserves Fund. Exchanges are
made at net asset value. The Fund reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or to terminate the
exchange privilege, upon sixty (60) days' notice. Exchanges will be made only
after proper instructions in writing or by telephone are received for an
established account by the Transfer Agent.

The exchange privilege may be exercised only in those states where the shares of
the new Portfolio may legally be sold.

TAX-SHELTERED RETIREMENT PLANS

A variety of retirement plans, including IRAs, SEP-IRAs, 401(a) Keogh and
corporate money purchase pension and profit sharing plans, and 401(k) and 403(b)
plans are available to investors in the Fund.

(1) TRADITIONAL IRAS. You may save for your retirement and shelter your
investment income from current taxes by either: (a) establishing a new
traditional IRA; or (b) "rolling-over" to the Fund monies from other IRAs or
lump sum distributions from a qualified retirement plan. If you are between 18
and 70 1/2 years of age, you can use a traditional IRA to invest up to $[CHECK]
per year of your earned income in any of the Portfolios. You may also invest up
to $[CHECK] per year in a spousal IRA if your spouse has no earned income. There
is a $10.00 annual maintenance fee charged to traditional IRA investors. If you
maintain IRA accounts in more than one Portfolio of the Fund, you will only be
charged one fee. This fee can be prepaid or will be debited from your account if
not received by the announced deadline.

(2) ROTH IRAS. Roth IRAs are similar to traditional IRAs in many respects and
provide a unique opportunity for qualifying individuals to accumulate investment
earnings tax-free. Contributions to Roth IRAs are not tax-deductible (while
contributions to traditional IRAs may be), however, if you meet the distribution
requirements, you can withdraw your investments without paying any taxes on the
earnings. In addition to establishing a new Roth IRA, you may be eligible to
convert a traditional IRA into a Roth IRA. Maintenance fees charged for Roth
IRAs are similar to those for traditional IRAs.

(3) SEP-IRAS. If you are a self-employed person, you can establish a Simplified
Employee Pension Plan ("SEP-IRA"). A SEP-IRA is designed to provide persons with
self-employed income (and their eligible employees) with many of the same tax
advantages as a Keogh, but with fewer administrative requirements.

(4) 401(A) KEOGH AND CORPORATE RETIREMENT PLANS. Both a prototype money purchase
pension plan and a profit sharing plan, which may be used alone or in
combination, are available for self-employed individuals and their partners and
corporations to provide tax-sheltered retirement benefits for individuals and
employees.

(5) 401(K) PLANS. Through the establishment of a 401(k) plan by a corporation of
any size, employees can invest a portion of their wages in the Portfolios on a
tax-deferred basis in order to help them meet their retirement needs.

(6) 403(B) PLANS. Section 403(b) plans are custodial accounts which are
available to employees of most non-profit organizations and public schools.

OTHER SPECIAL ACCOUNTS

The Fund also offers the following special accounts to meet your needs:

(1) EDUCATION IRAS. Education IRAs allow you to save for qualified higher
education expenses of designated beneficiaries. Like traditional and Roth IRAs,
Education IRAs provide an opportunity for your investment to grow tax-free until
distributed. Contributions to an Education IRA are not tax deductible, however,
distributions from an Education IRA which are used to pay qualified higher
education expenses are tax-free. You may contribute up to per year for the
benefit of each prospective student under the age of 18. There is a $7.00 annual
maintenance fee charged to Education IRA accounts. The fee can be prepaid or
will be deducted from your account if not received by the announced deadline.

(2) UNIFORM GIFT TO MINORS/UNIFORM TRANSFERS TO MINORS. By establishing a
Uniform Gift to Minors Account/Uniform Transfers to Minors Account with the Fund
you can build a fund for your children's education or a nest egg for their
future and, at the same time, potentially reduce your own income taxes.

(3) CUSTODIAL AND FIDUCIARY ACCOUNTS. The Fund provides a convenient means of
establishing custodial and fiduciary accounts for investors with fiduciary
responsibilities.

For further information regarding any of the above retirement plans and
accounts, please call toll free at 1-800-433-0051. Retirement investors may,
however, wish to consult with their own tax counsel or adviser.

MINIMUM ACCOUNT SIZE

Due to the relatively high cost of maintaining smaller accounts, the Fund will
impose an annual $12.00 minimum account charge and reserves the right to redeem
shares in any non-retirement account if, as the result of redemptions, the value
of any account drops below the minimum initial investment amount, specified
above, for each Portfolio. See "Minimum Investment" and "Systematic Investment
and Systematic Withdrawal Plans" for minimum investments. You will be allowed at
least 60 days, after notice from the Fund, to make an additional investment to
bring your account value up to at least the applicable minimum account size
before the annual $12.00 minimum account fee is charged and/or the redemption of
a non-retirement account is processed. The applicable minimum account charge
will be imposed annually on any such account until the account is brought up to
the applicable minimum account size.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of each Portfolio, other than the Cash Reserves
Fund, is determined by dividing the total market value of the Portfolio's
investments and other assets, less any liabilities, by the total outstanding
shares of the Portfolio. Net asset value per share is determined daily, normally
as of the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) on any Business Day. The net asset value per share of each
Portfolio, other than the Cash Reserves Fund, is listed under PBHG in the mutual
fund section of most major daily newspapers, including The Wall Street Journal.

The securities of each Portfolio are valued by the Sub-Administrator. The
Sub-Administrator will use an independent pricing service to obtain valuations
of securities. The pricing service relies primarily on prices of actual market
transactions as well as trade quotations. The procedures of the pricing service
and its valuations are reviewed by the officers of the Fund under the general
supervision of the Directors.

Portfolio securities listed on an exchange or quoted on a national market system
are valued at the last sales price. Other securities are quoted at the last bid
price. In the event a listed security is traded on more than one exchange, it is
valued at the last sale price on the exchange on which it is principally traded.
If there are no transactions in a security during the day, it is valued at the
most recent 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 obligations are valued at amortized cost. Securities for
which market quotations are not readily available and other assets held by the
Fund, if any, are valued at their fair value as determined in good faith by the
Board of Directors.

Foreign securities are valued on the basis of 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 net asset value per share of the PBHG Cash Reserves Fund is calculated by
adding the value of securities and other assets, subtracting liabilities and
dividing by the number of outstanding shares. Securities will be valued by the
amortized cost method which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which a security's value, as determined by this method, is higher or
lower than the price the Fund would receive if it sold the instrument. Net asset
value per share is determined daily as of 2:00 p.m. Eastern time on each
Business Day. During periods of declining interest rates, the daily yield of the
PBHG Cash Reserves Fund may tend to be higher than a like computation made by a
company with identical investments utilizing a method of valuation based upon
market prices and estimates of market prices for all of its portfolio
securities. Thus, if the use of amortized cost by the PBHG Cash Reserves Fund
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the PBHG Cash Reserves Fund would be able to obtain a somewhat
higher yield than would result from investment in a company utilizing solely
market values, and existing investors in the Portfolio would experience a lower
yield. The converse would apply in a period of rising interest rates.

The use of amortized cost valuation by the PBHG Cash Reserves Fund and the
maintenance of the Portfolio's net asset value at $1.00 are permitted by
regulations set forth in Rule 2a-7 under the 1940 Act, provided that certain
conditions are met. Under Rule 2a-7 as amended, a money market portfolio must
maintain a dollar-weighted average maturity in the Fund of 90 days or less and
not purchase any instrument having a remaining maturity of more than 397 days.
In addition, money market funds may acquire only U.S. dollar denominated
obligations that present minimal credit risks and that are "eligible securities"
which means they are (i) rated, at the time of investment, by at least two
nationally recognized security rating organizations (one if it is the only
organization rating such obligation) in the highest short-term rating category
or, if unrated, determined to be of comparable quality (a "first tier
security"), or (ii) rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated, determined to be of
comparable quality ("second tier security"). The Adviser will determine that an
obligation presents minimal credit risks or that unrated instruments are of
comparable quality in accordance with guidelines established by the Directors.
The Directors must approve or ratify the purchase of any unrated securities or
securities rated by only one rating organization. In addition, investments in
second tier securities are subject to the further constraints that (i) no more
than 5% of a Portfolio's assets may be invested in such securities in the
aggregate, and (ii) any investment in such securities of one issuer is limited
to the greater of 1% of the Portfolio's total assets or $1 million. The
regulations also require the Directors to establish procedures which are
reasonably designed to stabilize the net asset value per share at $1.00 for the
Portfolio. However, there is no assurance that the Fund will be able to meet
this objective. The Fund's procedures include the determination of the extent of
deviation, if any, of the Portfolio's current net asset value per unit
calculated using available market quotations from the Portfolio's amortized cost
price per share at such intervals as the Directors deem appropriate and
reasonable in light of market conditions and periodic reviews of the amount of
the deviation and the methods used to calculate such deviation. In the event
that such deviation exceeds 1/2 of 1%, the Directors are required to consider
promptly what action, if any, should be initiated. If the Directors believe that
the extent of any deviation may result in material dilution or other unfair
results to shareholders, the Directors are required to take such corrective
action as they deem appropriate to eliminate or reduce such dilution or unfair
results to the extent reasonably practicable. In addition, if any Portfolio
incurs a significant loss or liability, the Directors have the authority to
reduce pro rata the number of shares of that Portfolio in each shareholder's
account and to offset each shareholder's pro rata portion of such loss or
liability from the shareholder's accrued but unpaid dividends or from future
dividends.

TAXES

The following summary of federal income tax consequences is based on current tax
laws and regulations, which may be changed by legislative, judicial or
administrative action. No attempt has been made to present a detailed
explanation of the federal, state or local income tax treatment of the
Portfolios or their shareholders. Accordingly, you are urged to consult your tax
advisors regarding specific questions as to federal, state and local income
taxes.

FEDERAL INCOME TAX

The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.

QUALIFICATION AS A REGULATED INVESTMENT COMPANY

Each Portfolio is treated as a separate entity for federal income tax purposes
and is not combined with the Fund's other Portfolios. Each Portfolio intends to
continue to qualify as a "regulated investment company" ("RIC") as defined under
Subchapter M of the Code. In order to qualify for treatment as a RIC under the
Code, each Portfolio must distribute annually to its shareholders at least the
sum of 90% of its net interest income excludable from gross income plus 90% of
its investment company taxable income (generally, net investment income plus net
short-term capital gain) ("Distribution Requirement"). In addition to the
Distribution Requirement, each Portfolio must meet several other requirements.
Among these requirements are the following: (i) each Portfolio must derive at
least 90% of its gross income in each taxable year from dividends, interest,
certain payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies and other income
(including but not limited to gains from options, futures or forward contracts
derived with respect to the Portfolio's business of investing in such stock,
securities or currencies) (the "Income Requirement"); (ii) at the close of each
quarter of the Portfolio's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. Government securities,
securities of other RICs and securities of other issuers, with such securities
of other issuers limited, in respect to any one issuer, to an amount that does
not exceed 5% of the value of the Portfolio's assets and that does not represent
more than 10% of the outstanding voting securities of such issuer; and (iii) no
more than 25% of the value of a Portfolio's total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Portfolio controls and which are engaged in the same or similar trades
or businesses (the "Asset Diversification Test").

For purposes of the Asset Diversification Test, it is unclear under present law
who should be treated as the issuer of forward foreign currency exchange
contracts, of options on foreign currencies, or of foreign currency futures and
related options. It has been suggested that the issuer in each case may be the
foreign central bank or foreign government backing the particular currency.
Consequently, a Portfolio may find it necessary to seek a ruling from the
Internal Revenue Service on this issue or to curtail its trading in forward
foreign currency exchange contracts in order to stay within the limits of the
Asset Diversification Test.

For purposes of the Income Requirement, foreign currency gains (including gains
from options, futures or forward contracts on foreign currencies) that are not
"directly related" to a Portfolio's principal business may, under regulations
not yet issued, be excluded from qualifying income.

If a Portfolio fails to qualify as a RIC for any taxable year, it will be
taxable at regular corporate rates on its net investment income and net capital
gain without any deductions for amounts distributed to shareholders. In such an
event, all distributions (including capital gains distributions) will be taxable
as ordinary dividends to the extent of that Portfolio's current and accumulated
earnings and profits and such distributions will generally be eligible for the
corporate dividends-received deduction.

PORTFOLIO DISTRIBUTIONS

Notwithstanding the Distribution Requirement described above, which requires
only that a Portfolio distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Portfolio will be subject to a nondeductible 4% federal excise tax to the extent
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that calendar year, plus certain
other amounts. Each Portfolio intends to make sufficient distributions prior to
the end of each calendar year to avoid liability for the federal excise tax.

Treasury regulations permit a RIC in determining its investment company taxable
income and undistributed net capital gain for any taxable year to elect to treat
all or part of any net capital loss, any net long-term capital loss, or any net
foreign currency loss incurred after October 31 as if it had been incurred in
the succeeding year.

Each Portfolio will distribute all of its net investment income (including, for
this purpose, net short-term capital gain) to shareholders. Dividends from net
investment income will be taxable to shareholders as ordinary income whether
received in cash or in additional shares. Dividends from net investment income
will qualify for the dividends-received deduction for corporate shareholders
only to the extent such distributions are derived from dividends paid by
domestic corporations. It can be expected that only certain dividends of a
Portfolio will qualify for that deduction. Any net capital gains will be
distributed annually and will be taxed to shareholders as long-term capital
gains, regardless of how long the shareholder has held shares and regardless of
whether the distributions are received in cash or in additional shares. The
Portfolios will make annual reports to shareholders of the federal income tax
status of all distributions, including the amount of dividends eligible for the
dividends-received deduction.

Certain debt securities purchased by the Portfolios (such as U.S. Treasury
STRIPS, defined in "Glossary of Permitted Investments" below) are sold with
original issue discount and thus do not make periodic cash interest payments.
Each Portfolio will be required to include as part of its current net investment
income the accrued discount on such obligations for purposes of the distribution
requirement even though the Portfolio has not received any interest payments on
such obligations during that period. Because a Portfolio distributes all of its
net investment income to its shareholders, the Portfolio may have to sell
portfolio securities to distribute such accrued income, which may occur at a
time when the Adviser or sub-adviser would not have chosen to sell such
securities and which may result in a taxable gain or loss.

Income received on direct U.S. obligations is exempt from income tax at the
state level when received directly by a Portfolio and may be exempt, depending
on the state, when received by a shareholder as income dividends from a
Portfolio provided certain state-specific conditions are satisfied. Not all
states permit such income dividends to be tax exempt and some require that a
certain minimum percentage of an investment company's income be derived from
state tax-exempt interest. Each Portfolio will inform shareholders annually of
the percentage of income and distributions derived from direct U.S. obligations.
You should consult your tax advisor to determine whether any portion of the
income dividends received from a Portfolio is considered tax exempt in your
particular state.

Dividends declared by a Portfolio in October, November or December of any year
and payable to shareholders of record on a date in one of those months will be
deemed to have been paid by the Portfolio and received by the shareholders on
December 31 of that year, if paid by the Portfolio at any time during the
following January.

WITHHOLDING

In certain cases, a Portfolio will be required to withhold, and remit to the
U.S. Treasury, 31% of any distributions paid to a shareholder who (i) has failed
to provide a correct taxpayer identification number, (ii) is subject to backup
withholding by the Internal Revenue Service, or (iii) has not certified to the
Portfolio that such shareholder is not subject to backup withholding.

REDEMPTION OR EXCHANGE OF SHARES

Upon a redemption or exchange of shares, a shareholder will recognize a taxable
gain or loss depending upon his or her basis in the shares. Unless the shares
are disposed of as part of a conversion transaction, such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term or short-term, depending upon the
shareholder's holding period for the shares. Any loss recognized by a
shareholder on the sale of Portfolio shares held six months or less will be
treated as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.

Any loss recognized on a sale or exchange will be disallowed to the extent that
Portfolio shares are sold and replaced within the 61-day period beginning 30
days before and ending 30 days after the disposition of such shares. In such a
case, the basis of the shares acquired will be increased to reflect the
disallowed loss. Shareholders should particularly note that this loss
disallowance rule applies even where shares are automatically replaced under the
dividend reinvestment plan.

INVESTMENT IN FOREIGN FINANCIAL INSTRUMENTS.

Under Code Section 988, gains or losses from certain foreign currency forward
contracts or fluctuations in currency exchange rates will generally be treated
as ordinary income or loss. Such Code Section 988 gains or losses will increase
or decrease the amount of a Portfolio's investment company taxable income
available to be distributed to shareholders as ordinary income, rather than
increasing or decreasing the amount of the Portfolio's net capital gains.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Portfolio would not be able to pay any
ordinary income dividends, and any such dividends paid before the losses were
realized, but in the same taxable year, would be recharacterized as a return of
capital to shareholders, thereby reducing the tax basis of Portfolio shares.

HEDGING TRANSACTIONS

Some of the forward foreign currency exchange contracts, options and futures
contracts that the Portfolios may enter into will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as if
they are sold for their fair market value on the last business day of the
taxable year, regardless of whether a taxpayer's obligations (or rights) under
such contracts have terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
combined with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. The net amount
of such gain or loss for the entire taxable year (including gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is deemed to be
60% long-term and 40% short-term gain or loss. However, in the case of Section
1256 contracts that are forward foreign currency exchange contracts, the net
gain or loss is separately determined and (as discussed above) generally treated
as ordinary income or loss.

Generally, the hedging transactions in which the Portfolios may engage may
result in "straddles" or "conversion transactions" for U.S. federal income tax
purposes. The straddle and conversion transaction rules may affect the character
of gains (or in the case of the straddle rules, losses) realized by the
Portfolios. In addition, losses realized by the Portfolios on positions that are
part of a straddle may be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income for the taxable year in
which the losses are realized. Because only a few regulations implementing the
straddle rules and the conversion transaction rules have been promulgated, the
tax consequences to the Portfolios of hedging transactions are not entirely
clear. The hedging transactions may increase the amount of short-term capital
gain realized by the Portfolios (and, if they are conversion transactions, the
amount of ordinary income) which is taxed as ordinary income when distributed to
shareholders.

Each Portfolio may make one or more of the elections available under the Code
which are applicable to straddles. If a Portfolio makes any of the elections,
the amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Transactions that may be engaged in by certain of the Portfolios (such as short
sales "against the box") may be subject to special tax treatment as
"constructive sales" under section 1259 of the Code if a Portfolio holds certain
"appreciated financial positions" (defined generally as any interest (including
a futures or forward contract, short sale or option) with respect to stock,
certain debt instruments, or partnership interests if there would be a gain were
such interest sold, assigned, or otherwise terminated at its fair market value).
Upon entering into a constructive sales transaction with respect to an
appreciated financial position, a Portfolio will be deemed to have
constructively sold such appreciated financial position and will recognize gain
as if such position were sold, assigned, or otherwise terminated at its fair
market value on the date of such constructive sale (and will take into account
any gain for the taxable year which includes such date).

Because application of the straddle, conversion transaction and constructive
sale rules may affect the character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the affected straddle or
investment positions, the amount which must be distributed to shareholders and
which will be taxed to shareholders as ordinary income or long-term capital gain
may be increased or decreased as compared to a fund that did not engage in such
transactions.

Requirements relating to each Portfolio's tax status as a RIC may limit the
extent to which a Portfolio will be able to engage in transactions in options
and futures contracts.

STATE TAXES

Distributions by a Portfolio to shareholders and the ownership of shares may be
subject to state and local taxes.

FOREIGN INCOME TAX

Investment Income received by the PBHG International Fund may be subject to
income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on the Portfolio's securities. Tax
conventions between certain countries and the United States may reduce or
eliminate these taxes. Foreign countries generally do not impose taxes on
capital gains with respect to investments by foreign investors. If the PBHG
International Fund meets the Distribution Requirement and if more than 50% of
the value of the Portfolio's total assets at the close of its taxable year
consists of securities of foreign corporations, the Portfolio will be eligible
to file an election with the Internal Revenue Service that will enable
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign and U.S. possessions income taxes paid by the Portfolio
with respect to income derived from securities for which applicable holding
period requirements have been satisfied (the "Foreign Tax Credit Election").
Pursuant to the Foreign Tax Credit Election, the Portfolio will treat those
taxes as dividends paid to its shareholders. Each shareholder will be required
to include a proportionate share of those taxes in gross income as income
received from a foreign source and must treat the amount so included as if the
shareholder had paid the foreign tax directly. The shareholder may then either
deduct the taxes deemed paid by him or her in computing his or her taxable
income or, alternatively, use the foregoing information in calculating the
foreign tax credit against the shareholder's federal income tax. However, there
are certain holding period requirements that must be satisfied by a shareholder
before such shareholder will be allowed a deduction or credit. If the Portfolio
makes the Foreign Tax Credit Election, it will report annually to its
shareholders the respective amounts per share of the Portfolio's income from
sources within, and taxes paid to, foreign countries and U.S. possessions.

FOREIGN SHAREHOLDERS

Dividends from a Portfolio's investment company taxable income and distributions
constituting returns of capital paid to a nonresident alien individual, a
foreign trust or estate, foreign corporation, or foreign partnership (a "foreign
shareholder") generally will be subject to U.S. withholding tax at a rate of 30%
(or lower treaty rate) upon the gross amount of the dividend. Foreign
shareholders may be subject to U.S. withholding tax at a rate of 30% on the
income resulting from a Portfolio's Foreign Tax Credit Election, but may not be
able to claim a credit or deduction with respect to the withholding tax for the
foreign taxes treated as having been paid by them.

A foreign shareholder generally will not be subject to U.S. taxation on gain
realized upon the redemption or exchange of shares of a Portfolio or on capital
gain dividends. In the case of a foreign shareholder who is a nonresident alien
individual, however, gain realized upon the sale or redemption of shares of a
Portfolio and capital gain dividends ordinarily will be subject to U.S. income
tax at a rate of 30% (or lower applicable treaty rate) if such individual is
physically present in the U.S. for 183 days or more during the taxable year and
certain other conditions are met. In the case of a foreign shareholder who is a
nonresident alien individual, the Portfolios may be required to withhold U.S.
federal income tax at a rate of 31% unless proper notification of such
shareholder's foreign status is provided.

Notwithstanding the foregoing, if distributions by the Portfolios are
effectively connected with a U.S. trade or business of a foreign shareholder,
then dividends from such Portfolio's investment company taxable income, capital
gains, and any gains realized upon the sale of shares of the Portfolio will be
subject to U.S. income tax at the graduated rates applicable to U.S. citizens or
domestic corporations.

Transfers by gift of shares of a Portfolio by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax. An
individual who, at the time of death, is a foreign shareholder will nevertheless
be subject to U.S. federal estate tax with respect to shares at the graduated
rates applicable to U.S. citizens and residents, unless a treaty exception
applies. In the absence of a treaty, there is a $13,000 statutory estate tax
credit.

The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisors with respect to the
particular tax consequences to them of an investment in any of the Portfolios.

MISCELLANEOUS CONSIDERATIONS

The foregoing general discussion of federal income tax consequences is based on
the Code and the regulations issued thereunder as in effect on May 31, 1999.
Future legislative or administrative changes or court decisions may
significantly change the conclusions expressed herein, and any such changes or
decisions may have a retroactive effect with respect to the transactions
contemplated herein.

Prospective shareholders are encouraged to consult their tax advisors as to the
consequences of these and other U.S., state, local, and foreign tax rules
affecting investments in the Portfolio.

PERFORMANCE ADVERTISING

From time to time, each Portfolio may advertise its yield and total return.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made regarding actual
future yields or returns. For Portfolios other than the Cash Reserves Fund,
yield refers to the annualized income generated by an investment in the
Portfolio over a specified 30-day period. The yield is calculated by assuming
that the same amount of income generated by the investment during that period is
generated in each 30-day period over one year and is shown as a percentage of
the investment.

Each Portfolio may periodically compare its performance to that of other mutual
funds tracked by mutual fund rating services (such as Lipper Analytical
Services, Inc.) or by financial and business publications and periodicals, broad
groups of comparable mutual funds, unmanaged indices which may assume investment
of dividends but generally do not reflect deductions for administrative and
management costs and other investment alternatives. Each Portfolio may quote
services such as Morningstar, Inc., a service that ranks mutual funds on the
basis of risk-adjusted performance, and Ibbotson Associates of Chicago,
Illinois, which provides historical returns of the capital markets in the U.S.
Each Portfolio may use long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios and could include the
value of a hypothetical investment in any of the capital markets. Each Portfolio
may also quote financial and business publications and periodicals as they
relate to fund management, investment philosophy, and investment techniques.

Each Portfolio may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data and
cannot be calculated precisely.

The performance of the Fund's Advisor Class shares will be lower than that of
the Fund's PBHG Class shares because of the additional Rule 12b-1 shareholder
servicing expenses charged to Advisor Class shares.

COMPUTATION OF YIELD

From time to time the PBHG Cash Reserves Fund may advertise its "current yield"
and "effective compound yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of the
PBHG Cash Reserves Fund refers to the income generated by an investment in the
PBHG Cash Reserves Fund over a seven-day period (which period will be stated in
the advertisement). This income is then "annualized." That is, the amount of
income generated by the investment during that week is assumed to be generated
each week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated similarly but, when annualized, the income
earned by an investment in the PBHG Cash Reserves Fund is assumed to be
reinvested. The "effective yield" will be slightly higher than the "yield"
because of the compounding effect of this assumed reinvestment.

The current yield of the PBHG Cash Reserves Fund will be calculated daily based
upon the seven days ending on the date of calculation ("base period"). The yield
is computed by determining the net change (exclusive of capital changes and
income other than investment income) in the value of a hypothetical pre-existing
shareholder account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing such net change by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7). Realized and unrealized gains and losses are not included
in the calculation of the yield. The effective compound yield of the PBHG Cash
Reserves Fund is determined by computing the net change, exclusive of capital
changes and income other than investment income, in the value of a hypothetical
pre-existing account having a balance of one share at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = ((Base Period Return + 1) 365/7) - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.

The yield of the PBHG Cash Reserves Fund fluctuates, and the annualization of a
week's dividend is not a representation by the Fund as to what an investment in
the PBHG Cash Reserves Fund will actually yield in the future. Actual yields
will depend on such variables as asset quality, average asset maturity, the type
of instruments the PBHG Cash Reserves Fund invests in, changes in interest rates
on money market instruments, changes in the expenses of the PBHG Cash Reserves
Fund and other factors.

Yields are one basis upon which investors may compare the PBHG Cash Reserves
Fund with other money market funds; however, yields of other money market funds
and other investment vehicles may not be comparable because of the factors set
forth above and differences in the methods used in valuing portfolio
instruments.

For the 7-day period ended March 31, 2000, the yield for the PBHG Cash Reserves
Fund was 5.51% and the 7-day effective yield was 5.65%.

CALCULATION OF TOTAL RETURN

From time to time, each of the Portfolios may advertise its total returns. The
total return refers to the average compounded rate of return to a hypothetical
investment for designated time periods (including, but not limited to, the
period from which the Portfolio commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
designated time period as of the end of such period.

Based on the foregoing, the average annual total returns for each of the
Portfolios (other than the Cash Reserves Fund) from its inception through March
31, 2000, and for the one, five and ten year periods ended March 31, 2000, and
the aggregate total returns for the Portfolios since inception, were as follows:

=======================================================================================================================
Portfolio Average Annual Total Return Aggregate Total Return
One Year Five Year Ten Year Since Inception Since Inception
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PBHG Growth(1) (Advisor) 147.98% n/a n/a 26.96% 137.55%
-----------------------------------------------------------------------------------------------------------------------
PBHG Growth(1) (PBHG) 148.57% 29.54% 26.15% 23.23% 1878.03%
-----------------------------------------------------------------------------------------------------------------------
PBHG Emerging Growth(2) 101.33% 22.88% * 26.34% 390.29%
-----------------------------------------------------------------------------------------------------------------------
PBHG New Opportunities1(3) 529.94% * * 505.56% 667.39%
-----------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Growth(3) 98.60% * * 40.59% 445.09%
-----------------------------------------------------------------------------------------------------------------------
PBHG Select Equity(4) 240.82% * * 55.98% 814.37%
-----------------------------------------------------------------------------------------------------------------------
PBHG Core Crowth(5) 115.15% * * 29.78% 202.50%
-----------------------------------------------------------------------------------------------------------------------
PBHG Limited(6) 137.27% * * 34.93% 208.40%
-----------------------------------------------------------------------------------------------------------------------
PBHG Large Cap 20(7) 117.88% * * 64.99% 431.63%
-----------------------------------------------------------------------------------------------------------------------
PBHG Large Cap Value(8) 14.25% * * 22.58% 93.79%
-----------------------------------------------------------------------------------------------------------------------
PBHG Mid-Cap Value(12) 42.21% * * 36.51% 148.18%
-----------------------------------------------------------------------------------------------------------------------
PBHG Small Cap Value(12) 64.76% * * 24.22% 111.41%
-----------------------------------------------------------------------------------------------------------------------
PBHG Focused Value(13) 89.17% * * 77.76% 91.73%
-----------------------------------------------------------------------------------------------------------------------
PBHG Internationa(l9) 19.29% 11.87 * 8.52% 60.65%
-----------------------------------------------------------------------------------------------------------------------
PBHG Technology
& Communications(10) 233.99% * * 66.99% 901.97%
-----------------------------------------------------------------------------------------------------------------------
PBHG Strategic Small Company(11) 99.74% * * 30.39% 136.82%
-----------------------------------------------------------------------------------------------------------------------
PBHG Global Technology
& Communications(14) * * * * *
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

* The Portfolio was not in operation for the full period.

(1) The PBHG Growth Fund commenced operations on December 19, 1985. The Advisor
Class shares of this Portfolio commenced operations on August 19, 1996.

(2) The PBHG Emerging Growth Fund commenced operations with its predecessor on
June 15, 1993.

(3) The PBHG Large Cap Growth Fund commenced operations on April 5, 1995.

(4) The PBHG Select Equity Fund commenced operations on April 5, 1995.

(5) The PBHG Core Growth Fund commenced operations on January 2, 1996.

(6) The PBHG Limited Fund commenced operations on July 1, 1996.

(7) The PBHG Large Cap 20 Fund commenced operations on December 1, 1996.

(8) The PBHG Large Cap Value Fund commenced operations on January 1, 1997.

(9) The PBHG International Fund commenced operations on June 14, 1994.

(10) The PBHG Technology & Communications Fund commenced operations on October
2, 1995.

(11) The PBHG Strategic Small Company Fund commenced operations on January 1,
1997.

(12) The PBHG Mid-Cap Value Fund and the PBHG Small Cap Value Fund commenced
operations on May 1, 1997.

(13) The PBHG New Opportunities Fund and the PBHG Focused Value Fund commenced
operations on February 19, 1999.

(14) The PBHG Global Technology & Communications Fund commenced operations on
June 1, 2000.

Quotations of total return, which are not annualized, represent historical
earnings and asset value fluctuations. Total return is based on past performance
and is not a guarantee of future results.

FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP ("PWC") located at 2400 Eleven Penn Center,
Philadelphia, Pennsylvania, serves as the independent accountants for the Fund.
PWC provides audit services, tax return review and assistance and consultation
in connection with review of SEC filings.

The audited financial statements for the fiscal year ended March 31, 2000 and
the report of the independent accountants for that year are included in the
Fund's Annual Report to Shareholders dated March 31, 2000. The Annual Report,
except for pages one through seven thereof, is incorporated herein by reference
and made a part of this document. These financial statements have been audited
by PricewaterhouseCoopers LLP and incorporated by reference into the Statement
of Additional Information in reliance on the report of PWC, independent
accountants, given on the authority of that firm as experts in auditing and
accounting.

<PAGE>
PART C: OTHER INFORMATION

ITEM 23. EXHIBITS:

Each of the following exhibits was filed under The PBHG Funds, Inc.'s
registration number 2-99810.

(a) Articles of Restatement of the Registrant filed January 21,
1999. Incorporated herein by reference to Post-Effective
Amendment No. 36 to Registrants Registration Statement on
Form N-1A filed on May 28, 1999 ("PEA No. 36").

Articles of Amendment filed April 4, 2000. Incorporated herein
by reference to Post-Effective Amendment No. 39 to the
registrants registration statement filed on June 30, 2000
("PEA No. 39").

(b) Amended and Restated By-Laws of the Registrant adopted effective
April 9, 1998. Incorporated herein by reference to
Post-Effective Amendment No. 34 to Registrant's Registration
Statement on Form N-1A filed on June 1, 1998 ("PEA No. 34").

(d) Investment Advisory Agreement dated April 28, 1995 and Schedule
A dated April 1, 1997, by and between the Registrant, on behalf
of each portfolio of the Registrant, and Pilgrim Baxter &
Associates, Ltd. Incorporated herein by reference to
Post-Effective Amendment No. 30 to Registrant's Registration
Statement on Form N-1A filed on May 20, 1997 ("PEA No. 30").

Form of Amendment to Investment Advisory Agreement between
Pilgrim Baxter & Associates, Ltd. and the Registrant.
Incorporated herein by reference to Post-Effective Amendment
No. 35 to Registrant's Registration Statement filed on November
23, 1998 ("PEA No. 35").

Schedule A dated December 3, 1998 to Investment Advisory
Agreement dated April 28, 1995 by and between the Registrant and
Pilgrim Baxter & Associates, Ltd. Incorporated herein by
reference to PEA No. 36.

Schedule A dated January 25, 1999 to Investment Advisory
Agreement dated April 28, 1995 by and between the Registrant and
Pilgrim Baxter & Associates, Ltd. Incorporated herein by
reference to PEA No. 36.

Schedule A dated April 4, 2000 to Investment Advisory Agreement
dated April 28, 1995 by and between the Registrant and Pilgrim
Baxter & Associates, Ltd. Incorporated herein by reference to
Post Effective Amendment No. 38 to the Registrant's
Registration Statement filed on April 6, 2000 ("PEA No. 38").

Investment Sub-Advisory Agreement by and between the
Registrant, on behalf of the PBHG Cash Reserves Fund, Pilgrim
Baxter & Associates, Ltd. and Wellington Management Company
dated April 4, 1995 Incorporated herein by reference to
Post-Effective Amendment No. 23 to Registrant's Registration
Statement on Form N-1A filed on May 1, 1996 ("PEA No. 23").

Investment Sub-Advisory Agreement by and between the
Registrant, on behalf of PBHG Focused Value Fund, Pilgrim
Baxter & Associates, Ltd. and Pilgrim Baxter Value Investors,
Inc. dated December 3, 1998. Incorporated herein by reference
to PEA No. 36.

Investment Sub-Advisory Agreement between and among the
Registrant, on behalf of the International Fund, Pilgrim Baxter
& Associates, Ltd. and Murray Johnstone International Limited
dated June 30, 1995. Incorporated herein by reference to PEA
No. 23

Investment Sub-Advisory Agreement by and between the
Registrant, on behalf of PBHG Large Cap Value Fund, Pilgrim
Baxter & Associates, Ltd. and Newbold's Asset Management, Inc.
dated December 16, 1996 (as revised effective May 1, 1997).
Incorporated herein by reference to PEA No. 30.

Investment Sub-Advisory Agreement between and among the
Registrant, on behalf of PBHG Strategic Small Company Fund,
Pilgrim Baxter & Associates, Ltd. and Newbold's Asset
Management, Inc., dated December 16, 1996. Incorporated herein
by reference to PEA No. 30. Investment Sub-Advisory Agreement
by and between the Registrant, on behalf of PBHG Mid-Cap Value
Fund, Pilgrim Baxter & Associates, Ltd. and Newbold's Asset
Management, Inc. dated April 1, 1997. Incorporated herein by
reference to PEA No. 30.

Investment Sub-Advisory Agreement by and between the
Registrant, on behalf of PBHG Small Cap Value Fund, Pilgrim
Baxter & Associates, Ltd. and Newbold's Asset Management, Inc.
dated April 1, 1997. Incorporated herein by reference to PEA
No. 30.

(e) Distribution Agreement between the Registrant and SEI Financial
Services Company dated July 1, 1996 and Schedule A dated April
1, 1997. Incorporated herein by reference to PEA No. 30.

Schedule A dated April 4, 2000 to Distribution Agreement dated
April 1, 1997 by and between the Registrant and SEI Financial
Services Company. Incorporated herein by reference to PEA No.
38.

(f) Not Applicable

(g) Custodian Agreement between the Registrant and The Northern
Trust Company. Incorporated herein by reference to PEA No. 30.

First Amendment to Custody Agreement between the Registrant and
The Northern Trust Company dated June 4, 1998. Incorporated
herein by reference to PEA No. 35.

Custodian Agreement between the Registrant and CoreStates Bank,
N.A. and Schedule A dated April 1, 1997. Incorporated herein by
reference to PEA No. 30.

<PAGE>

Schedule A dated January 25, 1999 to Custodian Agreement dated
April 1, 1997 by and between the Registrant and First Union
National Bank. Incorporated herein by reference to PEA No. 36.

(h) Administrative Services Agreement between the Registrant and
PBHG Fund Services dated July 1, 1996 and Exhibit A dated April
1, 1997. Incorporated herein by reference to PEA No. 30.

Schedule A dated April 4, 2000 to Administrative Services
Agreement dated July 1, 1996 by and between the Registrant and
PBHG Fund Services. Incorporated herein by reference to PEA No.
38.

Sub-Administrative Services Agreement between the Registrant and
SEI Fund Resources dated July 1, 1996 and Schedule A dated April
1, 1997. Incorporated herein by reference to PEA No. 30.

Amendment dated May 1, 1998 to Sub-Administrative Services
Agreement between the Registrant, PBHG Fund Services and SEI
Fund Resources dated July 1, 1996. Incorporated herein by
reference to PEA No. 35.

Schedule A dated April 4, 2000 to Sub-Administrative Services
Agreement dated July 1, 1996 by and between the Registrant, PBHG
Fund Services and SEI Fund Resources. Incorporated herein by
reference to PEA No. 38.

Schedule A dated April 4, 2000 to Agency Agreement dated January
1, 1998 by and between the Registrant and DST Systems, Inc.
Incorporated herein by reference to PEA No. 38.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Core Growth Fund
dated September 24, 1996. Incorporated herein by reference to
Post-Effective Amendment No. 25 to Registrant's Registration
Statement on Form N-1A filed on October 2, 1996 ("PEA No. 25").

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Limited Fund dated
September 24, 1996. Incorporated herein by reference to PEA No.
25.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Large Cap 20 Fund
dated November 24, 1996. Incorporated herein by reference to
Post-Effective Amendment No. 27 to Registrant's Registration
Statement on Form N-1A filed on February 6, 1997
("PEA No. 27").

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Large Cap Value
Fund dated December 16, 1996. Incorporated herein by reference
to PEA No. 27.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Strategic Small
Company Fund dated December 16, 1996. Incorporated herein by
reference to PEA No. 27.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG International Fund
dated March 6, 1997. Incorporated herein by reference to PEA
No. 30.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Mid-Cap Value Fund
dated April 1, 1997. Incorporated herein by reference to PEA
No. 30.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Small Cap Value
Fund dated April 1, 1997. Incorporated herein by reference to
PEA No. 30.

Form of Expense Limitation Agreement between the Registrant and
Pilgrim Baxter & Associates, Ltd on behalf of each Portfolio
with respect to its Advisor Class shares. Incorporated herein
by reference to Post-Effective Amendment No. 31 to Registrant's
Registration Statement on Form N-1A filed on July 21, 1997.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Focused Value Fund
dated December 3, 1998. Incorporated herein by reference to PEA
No. 36.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG New Opportunities
Fund dated January 25, 1999. Incorporated herein by reference
to PEA No. 36.

Expense Limitation Agreement between the Registrant and Pilgrim
Baxter & Associates, Ltd. on behalf of PBHG Global Technology &
Communications Fund dated April 4, 2000. Incorporated herein by
reference to PEA No. 38.

Shareholder Services Agreement between the Registrant and PBHG
Fund Services dated January 1, 1998. Incorporated herein by
reference to PEA No. 35.

Schedule A dated April 4, 2000 to Shareholder Services
Agreement dated January 1, 1998 by and between the Registrant
and PBHG Fund Services. Incorporated herein by reference to PEA
No. 38.

<PAGE>

(i) Opinion of Counsel. Incorporated herein by reference to PEA
No. 39.

(j) Consent of Independent Accountants. Incorporated herein by
reference to PEA No. 39.

(k) Financial Highlights incorporated herein by reference to
Prospectus dated July 31, 2000.

The following financial statements are incorporated herein by
reference to the Annual Report of The PBHG Funds, Inc. (the
"Fund") dated March 31, 2000:

Statement of Net Assets as of March 31, 2000 Statement of
Operations for the period ended March 31, 2000 Statement of
Changes in Net Assets for the period ended March 31, 2000
Financial Highlights for the fiscal year or period ended March
31, 2000 Notes to Financial Statements as of March 31, 2000

The following financial statements (unaudited) are incorporated
herein by reference by reference to the Semi-Annual Report of
the Fund dated September 30, 1999:

Statement of Net Assets as of September 30, 1999 Statements of
Assets and Liabilities as of September 30, 1999 Statements of
Operations as of September 30, 1999 Statements of Changes in
Net Assets as of September 30, 1999 Financial Highlights for
the fiscal year or period ended September 30, 1999 Notes to
Financial Statements as of September 30, 1999

(l) Letter from Philadelphia Life Insurance Company to the
Registrant with respect to the initial capitalization of the
Registrant. Incorporated herein by reference to Pre-Effective
Amendment No. 2 to Registrant's Registration Statement on Form
N-1A.

(m) Plan pursuant to Rule 12b-1 with respect to Advisor Class
shares. Incorporated herein by reference to Post-Effective
Amendment No. 21 to Registrant's Registration Statement on Form
N-1A.

(o) Rule 18f-3 Multiple Class Plan dated November 20, 1995 and
Schedule A dated April 1, 1997. Incorporated herein by
reference to PEA No. 30.

Schedule A dated January 25, 1999 to Rule 18f-3 Multiple Class
Plan dated November 20, 1995 by and between Registrant and
Pilgrim Baxter & Associates, Ltd. Incorporated herein by
reference to PEA No. 36.

(p) Code of Ethics of Registrant. Incorporated herein by reference
to PEA No. 38.

Code of Ethics of Pilgrim Baxter & Associates, Ltd. Incorporated
herein by reference to PEA No. 38.

Code of Ethics of Pilgrim Baxter Value Investors, Inc.
Incorporated herein by reference to PEA No. 39.

Code of Ethics of Murray Johnstone International Limited.
Incorporated herein by reference to PEA No. 39.

Code of Ethics of Wellington Management Company LLP.
Incorporated herein by reference to PEA No. 39.

Code of Ethics of SEI Investments Distribution Company.
Incorporated herein by reference to PEA No. 38.

24 (a) Directors' Power of Attorney. Incorporated herein by
reference to PEA No. 34.
(b) Officers' Power of Attorney. Incorporated herein by
reference to PEA No. 34.

<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

There are no persons that are controlled by or under common control with the
Registrant.

Item 25. INDEMNIFICATION

The Articles of Incorporation of the Registrant include the following:

ARTICLE VII

7.4 Indemnification. The Corporation, including its successors and assigns,
shall indemnify its directors and officers and make advance payment of related
expenses to the fullest extent permitted, and in accordance with the procedures
required, by the General Laws of the State of Maryland and the Investment
Company Act of 1940, as amended ("1940 Act"). The By-Laws may provide that the
Corporation shall indemnify its employees and/or agents in any manner and within
such limits as permitted by applicable law. Such indemnification shall be in
addition to any other right or claim to which any director, officer, employee or
agent may otherwise be entitled. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise
or employee benefit plan, against any liability (including, with respect to
employee benefit plans, excise taxes) asserted against and incurred by such
person in any such capacity or arising out of such person's position, whether or
not the Corporation would have had the power to indemnify against such
liability. The rights provided to any person by this Article 7.4 shall be
enforceable against the Corporation by such person who shall be presumed to have
relied upon such rights in serving or continuing to serve in the capacities
indicated herein. No amendment of these Articles of Incorporation shall impair
the rights of any person arising at any time with respect to events occurring
prior to such amendment.

The Amended and Restated By-Laws of the Registrant include the following:

ARTICLE IX
INDEMNIFICATION AND ADVANCE OF EXPENSES

Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify its officers to the same extent as its
directors and to such further extent as is consistent with law. The Corporation
shall indemnify its directors and officers who, while serving as directors or
officers, also serve at the request of the Corporation as a director, officer,
partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, real estate investment trust, trust, other
enterprise or employee benefit plan to the fullest extent consistent with law.
The indemnification and other rights provided for by this Article shall continue
as to a person who has ceased to be a director or officer, and shall inure to
the benefit of the heirs, executors and administrators of such a person. This
Article shall not protect any such person against any liability to the
Corporation or any stockholder thereof to which such person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such person's office
("disabling conduct").

Insofar as indemnification for liability arising under the Securities Act of
1933, as amended ("1933 Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suite or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.

To the extent that the Articles of Incorporation, By-Laws or any other
instrument pursuant to which the Registrant is organized or administered
indemnify any director or officer of the Registrant, or that any contract or
agreement indemnifies any person who undertakes to act as investment adviser or
principal underwriter to the Registrant, any such provision protecting or
purporting to protect such persons against any liability to the Registrant or
its security holders to which he would otherwise by subject by reason of willful
misfeasance, bad faith, or gross negligence, in the performance of his duties,
or by reason of his contract or agreement, will be interpreted and enforced in a
manner consistent with the provisions of Sections 17(h) and (i) of the 1940 Act,
as amended, and Release No. IC-11330 issued thereunder.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

The list required by this Item 26 of officers and directors of Pilgrim Baxter &
Associates, Ltd. and Pilgrim Baxter Value Investors, Inc., together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors during the past two
years, is incorporated by reference to Schedule A of the respective Forms ADV,
filed by Pilgrim Baxter & Associates, Ltd. and Pilgrim Baxter Value Investors,
Inc. pursuant to the Investment Advisers Act of 1940, as amended ("Advisers
Act"), (SEC File Nos. 801-48872 and 801-33560 respectively).

The list required by this Item 26 of officers and directors of Murray Johnstone
International Limited, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers and directors during the past two years, is incorporated by reference
to Schedules A and D of Form ADV, filed by Murray Johnstone International
Limited pursuant to the Investment Advisers Act of 1940, as amended ("Advisers
Act"), (SEC File No. 801-34926).

The list required by this Item 26 of officers and directors of Wellington
Management, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of Form ADV, filed by Wellington Management pursuant to the Advisers Act
(SEC File No. 801-15908).

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Registrant's distributor, SEI Investments Distribution Co., acts as
distributor for:

SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFund May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
STI Classic Variable Trust August 18, 1995
Ark Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
The PBHG Funds, Inc. June 1, 1996
PBHG Insurance Series Fund, Inc.
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
Highmark Funds February 15, 1997
Armada Funds March 8, 1997
Expedition Funds June 9, 1997
TIP Institutional Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
Amerindo Funds July 13, 1999
CNI Charter Funds April 1, 1999
Parkstone Advantage Funds April 1, 1999
Huntington VA Funds October 15, 1999
Friends Ivory Funds December 16, 1999

SFS provides numerous financial services to investment managers, pension plan
sponsors, and bank trust departments. These services include portfolio
evaluation, performance measurement and consulting services ("Funds Evaluation")
and automated execution, clearing and settlement of securities transactions
("MarketLink").

The principal business address of each person named in the table below is SEI
Investments Distribution Co., One Freedom Valley Road, Oaks, Pennsylvania 19456

<TABLE>
<CAPTION>
Positions and
Offices with
NAME POSITION AND OFFICE WITH UNDERWRITER REGISTRANT
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman -
Of Board of Directors
Mark J. Held President & Chief Operating Officer -
Robert M. Silvestri Chief Financial Officer & Treasurer -
Carmen V. Romeo Director & Executive Vice President -
Gilbert L. Beebower Executive Vice President -

Dennis J. McGonigle Executive Vice President -
Richard B. Lieb Executive Vice President, President - -
Investment Services Division

Leo J. Dolan, Jr. Senior Vice President -
Carl A. Guarino Senior Vice President -
Jack May Senior Vice President -
Hartland J. McKeown Senior Vice President
Kevin P. Robins Senior Vice President
Patrick K. Walsh Senior Vice President -
Robert Crudup Vice President & Managing Director -
Vic Galef Vice President & Managing Director -
Kim Kirk Vice President & Managing Director -
John Krzeminski Vice President & Managing Director -
Carolyn McLaurin Vice President & Managing Director
Paul Lonergan Vice President & Managing Director
John D. Anderson Vice President & Managing Director
Scott W. Dellorfano Vice President & Managing Director
Steven A. Gardner Vice President & Managing Director
Wayne M. Withrow Senior Vice President & Managing Director -
Robert Aller Vice President -
Todd Cipperman Senior Vice President & General Counsel
Barbara Doyne Vice President -
Jeff Drennen Vice President -
Kathy Heilig Vice President -
Jeff Jacobs Vice President -
Samuel King Vice President -
Joanne Nelson Vice President -
Mark Nagle Vice President -
Cynthia M. Parrish Vice President & Secretary -
Rob Redican Vice President -
Maria Reinehart Vice President -
Steve Smith Vice President -
Daniel Spaventa Vice President -
Ellen Marquis Vice President
Kathryn L. Stanton Vice President
S. Courtney Collier Vice President & Assistant Secretary -
Lydia A. Gavalis Vice President & Assistant Secretary -
Greg Gettinger Vice President & Assistant Secretary -

Timothy Barto Vice President & Assistant Secretary Vice President &
Assistant Secretary
Richard Deak Vice President & Assistant Secretary
James Foggo Vice President & Assistant Secretary Vice President &
Assistant Secretary
Christine McCullough Vice President & Assistant Secretary
Lori White Vice President & Assistant Secretary -
</TABLE>

c. None.

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS:

Books or other documents required to be maintained by Section 31(a) of the 1940
Act, and the rules promulgated thereunder, are maintained as follows:

(a) With respect to Rules 31a-1(a), 31a-1(b)(1), (2)(a) and (b), (3), (6), (8),
(12); and 31a-1(d), the required books and records are maintained at the
offices of Registrant's Custodians:

First Union National Bank The Northern Trust Company
530 Walnut Street 50 South LaSalle Street
Philadelphia, PA 19106 Chicago, IL 60675

(b) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4); (5);
(6); (8); (9); (10); (11) and 31a-1(f), the required books and records are
currently maintained at the offices of Registrant's Sub-Administrator:

SEI Fund Resources
One Freedom Valley Road
Oaks, PA 19456

(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Adviser or Sub-Adviser:

Pilgrim Baxter & Associates, Ltd. Murray Johnstone
825 Duportail Road International Limited
Wayne, PA 19087 11 West Nile Street
Glasgow, Scotland G12PX

Wellington Management Company, LLP Pilgrim Baxter Value Investors, Inc.
75 State Street 825 Duportail Road
Boston, MA 02109 Wayne, PA 19087

ITEM 29. MANAGEMENT SERVICES:

None

ITEM 30. UNDERTAKINGS:

Not Applicable
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 40 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Wayne,
and Commonwealth of Pennsylvania on the 28 day of July, 2000.

THE PBHG FUNDS, INC.
Registrant

By: /S/ HAROLD J. BAXTER
Harold J. Baxter
Chairman and Director

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.

SIGNATURE TITLE DATE

/S/ HAROLD J. BAXTER Chairman and Director July 28, 2000
----------------------- --------------------
Harold J. Baxter

* Director July 28, 2000
---------------------- --------------------
John R. Bartholdson

* Director July 28, 2000
---------------------- --------------------
Jettie M. Edwards

* Director July 28, 2000
---------------------- --------------------
Albert A. Miller

/S/ GARY L. PILGRIM President July 28, 2000
---------------------- --------------------
Gary L. Pilgrim

/S/ MEGHAN M. MAHON Vice President & July 28, 2000
------------------- Assistant Secretary --------------------
Meghan M. Mahon

/S/ LEE T. CUMMINGS Treasurer, Chief Financial July 28, 2000
--------------------- Officer and Controller --------------------
Lee T. Cummings

* By: /S/ JOHN M. ZERR
John M. Zerr
Attorney-in-Fact
<PAGE>

<PAGE>

As filed with the Securities and Exchange Commission
on July 28, 2000

Registration Nos. 2-99810
811-04391

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment [ ]
Post-Effective Amendment No. 40 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 38 [X]

(Check appropriate box or boxes.)

THE PBHG FUNDS, INC.
(Exact name of registrant as specified in charter)

825 DUPORTAIL ROAD
WAYNE, PENNSYLVANIA 19087

(Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code (800) 433-0051

HAROLD J. BAXTER
PILGRIM BAXTER & ASSOCIATES, LTD.
825 DUPORTAIL ROAD
WAYNE, PENNSYLVANIA 19087
(Name and Address of Agent For Service)

Copies to:
William H. Rheiner, Esq. and to John M. Zerr, Esq.
Ballard Spahr Andrews & Ingersoll Pilgrim Baxter & Associates, Ltd.
1735 Market Street, 51st Floor 825 Duportail Road
Philadelphia, PA 19103-7599 Wayne, PA 19087
(215) 864-8600 (610) 341-9000

<PAGE>
Approximate Date of
Proposed Public Offering:

As soon as practicable after the effective date of this Filing.

It is proposed that this filing will become effective (check appropriate box)

If appropriate, check the following box:

| | this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

Title of Securities Being Offered: Common Stock

<PAGE>